Scottish Canals told to improve how value of country’s waterways is worked out

The organisation which runs Scotland’s canals has been told it must urgently improve the financial reporting around the valuation of its assets, after auditors found a “significant number of errors”.

Since becoming a public body in April 2020, Scottish Canals has spent £500,000 on consultants to support its requirement for asset valuation.

A report from Audit Scotland noted that this work had proved difficult, as the organisation has a wide portfolio of about 4,000 assets ranging from the 200-year-old Avon Aqueduct, near Linlithgow, to the Kelpies sculptures in Falkirk.

Nevertheless, the auditors found insufficient evidence to support the claimed valuation of £407 million.

This included errors in the assumed lifespan of some assets and potential problems with classifying certain spending as capital or revenue.

It means that Audit Scotland has published a Section 22 report on Scottish Canals, drawing Parliament’s attention to issues they have identified.

Stephen Boyle, auditor general for Scotland, said: “Scottish Canals urgently needs to develop an effective plan to resolve these ongoing issues relating to the valuation of its assets.

“Senior leaders also need to ensure they have the right staff and expertise to draw on in order to meet their financial reporting responsibilities in a way that provides value for money.”

As well as the £500,000 already spent on consultants, a further £100,000 has been budgeted for this in the current financial year.

Audit Scotland’s report said the overall methodology behind the valuation work was sound but there were a “significant number of errors”.

Scottish Canals’ finance director, Sarah Jane Hannah, said the Section 22 report was “naturally disappointing”, as it is the second disclaimer around their accounts in two years.

She said: “Scotland’s canal network has a combined length of 140 miles with over 2,500 supporting infrastructure assets, such as dams, weirs, bridges, and reservoirs.

“Many of those assets are more than 200 years old, and unlike the road, rail and council infrastructure networks, there has been no established agreed and previously audited methodology for the valuation of a canal network.

“Neither has there been generally accepted and audited historical cost data on record to use as the basis of the valuation.”

She continued: “With audit work taking up a considerable period from October 2022 to May 2023, additional work can now continue to improve the valuation records and establish a full fixed asset register before our audit for the 2022/23 financial year begins.

“We look forward to working closely with our new auditors, Audit Scotland, to agree the judgments and estimates in the valuation are reasonable and meet reporting requirements.

“We are incredibly grateful to our teams across the organisation who have worked hard over the last year to make significant progress with this complex piece of work.”