Council / Audit of SIC accounts highlights £2.4m property overvaluation error
THE AUDIT of Shetland Islands Council’s (SIC) accounts for the last financial year uncovered an overvaluation of property worth more than £2.4 million.
The issued related to valuations for the Anderson High School and the Energy Recovery Plant, which are both located in Lerwick.
In order to meet requirements, the SIC operates a five-year programme of rolling valuations for land and building assets.
Papers presented to a meeting of the SIC’s audit committee on Tuesday said valuations in 2024/25 were undertaken by an external valuer.
External auditor Audit Scotland said: “We reviewed a sample of assets revalued in year and identified an instance where the floor area used by the valuer in their calculation did not agree to data they had been provided with.
“An instance was also identified where the percentage split between structure and fixtures had been input incorrectly.”
The total overvaluation was £2.462 million.
However the external valuer subsequently reviewed data inputs used in other revaluations and confirmed that no further errors were identified.
A covering report from the SIC added: “Whilst of a large value, management concluded that the impact on the financial statements was not material, representing only a 0.48 per cent reduction in the total carrying value of property, plant and equipment.
“Consequently, no adjustment was made to the reported values.”
Audit Scotland said that as the overstatement in valuation is “below materiality, management have chosen not to amend the accounts for this”.
A recommendation was included in the SIC’s audit of accounts for 2024/25 which said that the council should carry out checking of valuation calculations.
It was confirmed that management will review a sample of asset valuations undertaken in year by the valuer to obtain “appropriate assurance on the quality of data”.
Speaking at Tuesday’s meeting, SIC finance manager Paul Fraser said this was the first year in the council’s transition from an in-house valuer to an external company.
He said the valuer was “somewhat embarrassed” by the situation, which he said related to “relatively simple” arithmetic errors.
Fraser said in one case there was a “60:40 split” but it was dealt with the wrong way around.
But he said the council ultimately felt that the errors were “not fundamental” – something which auditors agreed with.
Fraser added that property valuations are somewhat of a “theoretical construct” and that the SIC would have been more concerned if errors happened in a different area.
Following the audit process, the SIC was given an unmodified audit opinion for its 2024/25 accounts.
“This means the annual accounts for 2024/25 are free from material misstatement and present a true and fair view of the council’s financial position as at 31 March 2025,” a covering report added.
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