Area 9 Audit by KPMG ‘Project Verde’

KPMG appointed to audit Area 9 following the raising of concerns about exaggeration and misrepresentation on an industrial scale. This did not sit comfortably with us:

  • We were originally advised Grant Thornton were to undertake the audit
  • we understand KPMG worked for Highways England; where was the impartiality?

The prevarication associated with the audit allegedly being undertaken by KPMG … overseen by Damain Byrne @ KPMG … the company at the centre of the Carillion audit debacle – see below.

21/06/2017  

CMA met with HE and provided documentary evidence of dual pricing in Area 9, of the process not being consistent with the contracted methodology, of inappropriate multipliers / uplifts being applied and explained that we possessed transcripts of Court hearings where Kier, in the name of Highways England, had misrepresented facts.


02/07/2017

We received a phone call from HE who were trying to obtain information from Kier but were experiencing difficulties – they did not expect their own contractor to provide the information being sought!

HE:  “I am probably experiencing some of the frustrations you’re experiencing trying to get information out of them”

HE:  “… so again I’ve escalated that and I should have some answers to the questions I’ve been asking, funny enough since I came to see you, repeatedly, week after week, so I’ve escalated that as high as I possibly can, and I’m hoping to get something back again by the end of this week. But to be honest, on that one I’m not holding my breath.”

HE: “So …. if they, they now know that if they don’t respond then we will be doing a very detailed audit, ’cause I’ve had a look at the audit that was done previously and they said there were some gaps in it, so [inaudible 0:02:31], and so I, I actually want another audit undertaken. So  I’ll give you some news next week on that as well.”

HE: “I’ve, I’ve been reading all your emails, I haven’t been responding to them. When I say, ‘Leave it with me,’ it’s more of a, ‘Yes, I’ve got this, it’s still the same sort of reoccurring themes over and over and over that we spoke about.’  so I think  my message was, ‘I’ve got it, I’m on it, but I’m, as I say, I am experiencing the same frustrations as you

HE: “I’m hoping when I go to GLC (GLD) on Friday that I’m probably going to say to GLC that we just need to proceed on the Annex, what was it, Annex 23? Or Appendix 23?

CMA: ” … Appendix A to Annex 23.”

HE:  “23 yeah, and we’ll just proceed on those rates for now because, until then I don’t think there’s anything else we can do until [inaudible 0:03:39] work with Kier. I don’t think it’s fair to do anything else other than that.   So let me, let me come back to you after I’ve met with them on Friday and we’ll have a, hopefully a more sensible conversation at beginning of next week.


We received an update.  It appeared neither Kier nor their lawyers Corclaim were assisting Highways England.  In turn, this lack of assistance meant an audit was necessary.


We were informed Grant Thornton would undertake the audit.


HE subsequently state that they had appointed KPMG to undertake the audit.

28/09/2017 – more than 2 months after we had presented evidence the audit had still not commenced.  When speaking to Mrs green we were asked not to write  referring toGrant Thornton.  It was explained Highways England ‘ just had a blip with Grant Thornton, and if it’s not Grant Thornton it’s going to be KPMG’ adding:

“So don’t quote me that it’s Grant Thornton, because we’re just … we’re just going through a bit of a, a thing on that at the minute.”


15/11/2017

We spoke with KPMG for almost an hour taking them through the concerns – the conversation is produced here.  They asked few questions.  We explained our principle concerns which related to 3 issues, the:

  • AIW’s hourly rate was misrepresented, exaggerated
  • AIW’s shifts were misrepresented and these meant:
  • Uplifts on AIW’s hours were applied which resulted in further exaggeration

Furthermore, we were concerned that KHL were not charging in accordance with the contracted process and when demanding payment had made false statements to us, Third Parties and Courts.

All supportive evidence was then placed to the internet and KPMG provided the password for access.


13/12/2017 – we spoke with HE:

HE:so let me, let,  audit complete, which should be completed now in the next, I’ve got a call with them on Tuesday, so I’m not going to see you this side of Christmas because I need then their, summary report, and then hopefully in the New Year we should be able to sit down, I’m confident that we can, that everything is fully explainable from what I’m seeing so far. I can’t share with you what I’m seeing so far, and I don’t want to give you half a story, so I want to come and see you with the, with the full story. And as I said before, some of it is historical, and some of it we might have to just go, ‘Okay, it’s history but, and that’s not how this is now going forward.’ But what I’m confident of is that we should be able to sit down and come to a sensible solution. “

CMA: “When you say ‘fully explainable,’ um, that almost sounds like everything they’re doing is justifiable?”

HE: “I haven’t said that.”

HE: “I haven’t even seen the draft audit report yet, but I’m hoping we should be able to explain all of that  when I see you in the New Year.”

HE: “… and then come out and, and sit down and have a conversation with you about it all.  And then we’ll fathom a way through it.

CMA: Yeah but we anticipate it’s going to be in January?

HE: Yeah, I mean there’s nothing going to happen next week. I think I’m not due the report until some point next week which, and then obviously then it’s, it’s the err, break between Christmas and New Year, so there’s nothing’ll happen now until the new Year.


04/01/2018

We spoke with another member of HE staff (internal audit, counter-fraud risk) who explained concerns had been raised by others, not just CMA adding:

HE: “I’m responsible for, for getting to the bottom of the allegations that have been raised …  and getting KPMG into positions that they are actually doing the work that I need them to do to answer those questions. What we’re straying into is the other area which is an operational issue, so I’ll have a conversation with (HE employee).

It was explained to HE that we (CMA) have claims to handle on behalf of clients.  We could not simply sit back with HE undertook their audit particularly given their lawyers had failed to place matters on hold and were progressing claims to Court. It appeared HE expected us to  let proceedings occur and progress whilst they investigated allegations we had made 6 month earlier.

We were preposterously accused of sending KPMG ‘at least 30, 40, 50 emails a day…’.

It appeared HE had gone on the offensive toward us, were prepared to make unsubstantiated, unfounded allegations about our conduct or had been provided erroneous information.

We asked HE for a SPOC (single point of contact) to progress ‘operational matters’ i.e. those claims we received and handled on a day-to-day basis.


18/01/2018 : 12:13 – we received an email from Government Legal Department (GLD):

GLD:I am instructed that (redacted – named HE employee with whom we spoke next, below) is satisfied that there is no substance to your complaint about Kier. Accordingly I am further instructed to press this claim, bringing proceedings if necessary.’

It appeared the audit had been concluded without anyone returning to us – or that the audit was a foregone conclusion. We were surprised to be notified in this fashion and reference to ‘your complaint’ (singular) did not accord with our understanding; that more than just CMA had raised the issues.


18/01/2018 – following receipt of the above email we phoned HE.

CMA: What is the present position with regard to the KPMG audit?

HE: ” I was on a call last Tuesday, was… Yesterday morning, sorry, and  they, we should be getting the initial draft of their report at some point next week.”

CMA: “Okay. are they saying that there’s no substance in my complaint about Kier?”

HE:no, they are not. To be honest, I haven’t seen the full extent of the report, so I wouldn’t like to comment, to be honest with you.”

CMA: (Government Legal Department – GLD have) written to me today, “I’m instructed that (HE) is satisfied that there is no substance to your, to your complaint about Kier. Accordingly, I am further instructed to…”

HE:I have not had that conversation.”

HE: “If you can send it (the email) to me and I’d like to respond, because that is, what he’s saying I’ve said is not what I’ve said.”

HE: “…once we get the audit report, which might be next week, hopefully it’ll be next week, I’ll come, try and down, I will come and see you at some point in February… and then, then we can just resolve as much as we can then.”

HE: “Okay, well nice to speak to you, and I’m not ignoring you on your emails, I do, look at them, but at the minute, as you know, it’s, until we get this audit out the way I can’t… And if they’re below £10,000 then, you know the situation. But … let me get the audit and let me come and see you, and then … we’ll sort it out from there”.


12/02/2018 – we again spoke with HE believing they possessed the audit report and anticipating a meeting.

HE: “So, where we currently are is that the… So we had a draft audit report that went to our audit committee last Wednesday, and they have asked for some further work to be undertaken … the audit highlighted a few things and they said, “Well actually, I want to check out this this, that and [the extra 0:03:38].” So, the audit, as we stand here today, is therefore not complete.”

So that work will take place now over the next  few weeks, so, and I’m not going to obviously be able to sit down and discuss anything with you because it, it’s not completed yet.

And as soon as we’re in a position to do that then, as I say, I will do.

And that’s probably as much as I can tell you on, on the audit right now.

It’s not helpful.

The conversation concluded with the exchange:

CMA:  Brilliant. what shall I do? Diary it forward for 1st March to touch base?

HE:  Give me three weeks…  yeah, ’cause the 5th of March I’m up in Penrith in Cumbria doing something up there, so it’ll be the following week, but um, I’ll come and see you … even, even if it’s to buy you a cup of tea and a cake.  I will come and see you.


28/02/2018

CMA: “Do we have a date for the meeting?”
HE: ” ….  no, I’ll chase that in a minute … ’cause … I think I’ve got a call on Friday, but yeah, I’ll, speak to somebody in a minute.”

CMA ” … hear from you late, late Friday?

HE: Yeah, and that’ll be [inaudible 0:10:58]. If, if not I’ll drop you a note and let you know when it will be. Let me just make a few calls.


02/03/2018 – we received no call Friday .  We waited, but received no call, no email, no update.


later during 03/2018 – having heard no further, we phoned Highways England.  No reply.  When we did manage to speak with HE they were about to go into a meeting and would call us back.  We received no call.


22/03/2018 – we spoke with HE and they refused to discuss the issues with us.


22/03/2018 @ 16:30 – we received an email from Highways England’s General Counsel which included the statement:

‘We are investigating your allegations in relation to Kier charges for sub-threshold green claims. This takes time, and we are not yet in a position to come back to you in relation to the issues you raise. When we are able to, we will.’

The email contained a threat – click here


The reference to ‘sub-threshold’ matters is curious; HE had previously said that the one under £10k are ‘out of their control‘ (13/12/2017) additionally ‘…literally we do not get involved at all. Nothing passes this door for anything under 10k.’

Investigations do take time, but the evidence presented in 06/2017 is straightforward, corroborated.  Indeed, information was presented to HE in late 2015 following which the General Counsel (who had emailed above) organised an audit which we explained was flawed and which HE have more recently stated had ‘holes in it’.

It is the same General Counsel who 05/04/2016 wrote that Highways England pay ‘AIW staff hourly rate: £70.32’ – they do not.

The additional, documentary evidence was provided to HE 9 months ago.  Subsequently, HE instructed lawyers acting for them to stop issuing proceedings, the instruction was not complied with. Highways England are unable to control the lawyers acting for them – click here.

Since 06/2017, 1,000’s of exaggerated invoices have been issued by Kier Highways to Third Parties.


04/04/2018 – It appears the audit is a sham, going through the motions and the outcome predetermined; that there is no desire to address the concerns that drivers, fleets and insurers are being overcharged by a profiteering contractor using a process enabled by Highways England.

Whilst the contractor appears to owe £millions in overstatement, it seems Highways England have either been negligent in failing to identify the process or have turned a blind eye.

The suspicion is that Highways England do not wish the issues to be aired but are seeking to drag the ‘inquiry’ out until such time as the process is either superseded or forgotten; there is no end in sight … and it appears unlikely we will see a cup of tea and piece of cake from Highways England.


Of KPMG an MP says “I wouldn’t trust you to audit the contents of my fridge” with regard to the Carillion collapse – Independent.

Whilst we originally understood Grant Thornton had been instructed, 11/2017, KPMG were appointed to audit Kier Highways Area 9 but has this stalled, stopped or been shared?  The outcome appears predetermined and to have been leaked.

 

06/2018 – ‘KPMG’s audit work unacceptable, says watchdog‘.


19/01/2019 – KPMG has suspended the audit partner for failed outsourcing company Carillion after discovering issues with documentation provided to the Financial Reporting Council (FRC).

Peter Meehan and three other employees have been suspended as part of an investigation into an audit quality review by the accountancy watchdog in 2017.