FLAWS found in the way the public body in charge of Scotland’s inland waterways recorded and valued its assets meant auditors could not give an opinion on its accounts, Audit Scotland has said.

Scottish Canals’ status changed from a public corporation to a non-departmental public body in 2020-21. That came with a requirement to follow HM Treasury’s accounting guide, including the methodology to be used to value the canal infrastructure and inland waterways.

Audit Scotland said that although the required valuations for investment properties and land and buildings were conducted, it found Scottish Canals did not get valuations for around £51 million of specialist assets. These included dredging equipment, lock gates and canal basin widening works.

A subsequent valuation, aimed at estimating the cost of replacing these assets, then raised concerns about the accuracy of Scottish Canal’s fixed asset register, amongst other valuation flaws. This meant auditors, in a highly unusual step, had to issue a disclaimer of opinion on the accuracy of Scottish Canal’s financial statements.

Audit Scotland said turnover in Scottish Canals’ finance team during this period increased the challenge of fully adopting HM Treasury’s accounting rules. A new valuation process of the canal infrastructure estate in its entirety will now be undertaken during 2022.

Stephen Boyle, Auditor General for Scotland, said: “Scottish Canals’ core role is to manage infrastructure assets. To plan effectively for the future, it is clearly important that it has a robust record of those assets and their values.

“Scottish Canals’ Board must also be able to satisfy itself that the body has sufficient skills and capacity to deliver the valuation project, and provide the appropriate support to ensure it is delivered to plan.”

A spokesperson for Scottish Canals said: “Our external auditors, Grant Thornton, raised queries over the nature of the capital and revenue expenditure on the unique, operational, assets in our care and in the way they have been valued since we became a standalone public body in 2012.

“We are now working, with the support of Transport Scotland, Scottish Government, and Grant Thornton, to resolve this highly complex matter and agree a new way of valuing our entire asset estate. Once this is in place it will inform the way we prepare our annual report and accounts going forward.”