THE public body running Scotland’s historic canal network has been told to improve its finances “as a matter of urgency” after auditors twice refused to endorse its accounts.

Scottish Canals, which is responsible for the Kelpies and other attractions along 140-miles of waterways, was rebuked after putting an unreliable value of £407million on its assets.

Auditors checking the £20m-a-year quango’s 2021/22 accounts found “a significant number of errors” and “insufficient evidence” to support the figure, undermining the entire document.

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The Auditor General for Scotland said the importance of the assets to the body’s strategic objectives left the auditors unable to “provide assurance on the use of public money”.

The watchdog said: “The auditors have been unable to provide an opinion on the 2021/22 financial statements of Scottish Canals, due to a lack of sufficient and appropriate audit evidence. This reflects ongoing issues around the valuation of Scottish Canals’ assets.

“These issues are significant enough to impact the financial statements as a whole. 

“This means there is a lack of public assurance over Scottish Canals’ financial position and performance, and the regularity of its transactions.”

It was the second year in a row that the auditors have been forced to issue a disclaimer on their opinion of Scottish Canals’ accounts.

Last year, watchdogs said there had been a £51m “flaw” in the bookkeeping and they could not rule out “material misstatements”.

Scottish Canals runs Scotland’s five canals and associated assets, providing boating and leisure facilities, moorings and licences, and land and property rentals.

Its money problems flow from its switch from a public corporation to a non-departmental public body in 2020, which imposed a new accounting regime.

This meant it had to value its assets and infrastructure, some of which were 200 years old and had few comparators, raising concerns about accuracy and a lack of detail. 

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The quango has so far spent £500,000 on consultants to help it value some 4,000 assets, with auditors raising doubts about values, ownership and life span.

Publishing a so-called Section 22 report drawing the Scottish Parliament’s attention to the issues, Audit Scotland said Scottish Canals management had tried to address concerns.

But progress had been “limited”, and there remained “underlying issues with the accuracy of Scottish Canals’ documentation and data”.

Auditor General for Scotland Stephen Boyle 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.”

Scottish Canals’ finance director, Sarah Jane Hannah, said the Section 22 report was “naturally disappointing”.

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.”