The Rules for the Birmingham Municipal Bank
, made under the Birmingham Corporation Act, 1919 (and approved by the City Council on
July 29th 1919) contained the following provision concerning the auditing of the Bank's accounts:
14 Audit of Accounts
of Management shall appoint annually one or more chartered or incorporated accountants, but not out of their own body, as auditor
or auditors, to audit and examine once at least in every half year the books, securities, and vouchers of the Bank, to certify as
to the correct amount of the assets and liabilities of the Bank, and to report in writing to the Committee of Management the result
of such audit as and when directed by the Committee of Management. Such auditor or auditors shall inter alia compare with the ledgers
the pass books of depositors, as presented to them, so that the number of comparisons made in the year be not less than ten per cent.
of the total number of books extant at the time, and shall examine an extracted list of depositors' balances made up every year. A
book containing such extracted list of every depositors' balance, omitting the name but giving the distinctive number and separate
amount of each, and showing the aggregate number and amount of the whole, checked and certified by such auditor or auditors, shall
be open at all times during the hours of business for the inspection of any depositor respecting his own account. Such auditor or
auditors shall, when required, render to the Committee of Management a list of work done in the course of audit. This rule shall apply
to the books and accounts of the Housing Department, as well as to the other books and accounts of the Bank. The auditor or auditors
shall examine and compare all securities and title deeds of property mortgaged to the Bank with the register of securities and title
deeds at least once in every year.
The Birmingham Municipal Bank Regulations, 1925, amended the above rule (as Regulation 72)
so that the requirement to 'examine once at least in every half year the books' etc was eased to be 'once at least in every year'.
Birmingham Municipal Bank Regulations, 1930, amended the penultimate sentence of Regulation 72 to be 'This regulation shall apply
to the books and accounts of the house purchase department and the allotment purchase department, as well as to the other books and
accounts of the Bank.'
Surprisingly, the arduous requirement of the auditors to examine 'not less than ten per cent. of the total
number of books extant at the time' was retained; by the 1950s, this would have meant examining over 70,000 passbooks. The Auditors'
Report in the published Annual Accounts up to 1971 never quantified their responsibility in this respect, but merely stated that they
had 'compared many of the Depositors' Pass Books with the corresponding accounts in the Ledgers'.
The Regulation's requirement
to examine at least 10% of passbooks was examined by the Bank's Finance & General Purposes Sub-Committee in a report dated January
17th 1938 entitled 'Inspection of Pass Books':
Consideration has been given to the question of the inspection of pass books
by the Auditors. The Regulations of the Bank require the Auditors to compare during the year at least 10% of the total pass books
extant at the time with the Ledger accounts. The Auditors find it impossible to obtain that percentage by the method now adopted,
which is for their representative to attend at Bank counters during the business hours and to check such pass books as are presented.
After considering the observations of the General Manager and the views of a number of Trustee Savings Banks with whom he has communicated,
your Sub-Committee were of the opinion that the solution to this problem was for the Auditors to supply a sufficient staff at convenient
times in order to obtain the requisite number of pass books; and that it might be possible to relieve the Auditors in the matter of
checking withdrawal receipts, which could be carried out by the Bank's audit staff.
It is therefore recommended that the Auditors
be informed that the difficulties in question have been met elsewhere by the Auditors employing an increased staff for the purpose
of checking Pass Books and it is suggested that the Bank's Auditors should make similar arrangements.
The Auditors have forwarded a
list of pass books at the Hockley Branch which they wish to examine. The only ways to obtain these books are by a written request
or by personal call on the depositors. From the experience of other Savings Banks in this connection, it appeared that the calling-in
of a large number of pass books without a special reason, was undesirable. Your Sub-Committee therefore considered that the position
could be met by authority being given to the General Manager to communicate as from time to time required with depositors whose pass
books have not been presented in the ordinary course of business for two years, requesting them to send in their pass books, when
the double purpose of inspection and insertion of interest due could be served, and your Sub-Committee recommend accordingly.
it seems unlikely (perhaps because the intervention of the Second World War resulted in less staff being available) that this recommendation
was ever carried out. In 1972, the Auditors' Report stated that: 'During the year 14,440 of the Depositors' pass books have been compared
with the ledgers and found to agree therewith; of these 7,653 have been certified to us as having been examined by the Bank's Branch
Inspectors.' The 14,440 accounts represented approximately 1.9% of the total Open Accounts.
This change followed the coming into
operation, on October 1st 1970, of the Birmingham Municipal Regulations 1970
. Rule 23 of the new regulations largely repeated the
wording of Rule 72 regarding the Audit of Accounts, except that the requirement for the comparison of passbooks to ledger accounts
was amended to 'in every year the number of pass books so compared shall be such as the auditor or auditors may deem to be adequate
in his or their own professional judgement and shall certify the number of ledger accounts so vouched and verified when reporting
to the Committee of Management.'
In subsequent years the passbook comparison figures were:
1973: 14,304 (of which 6,025 were certified
by Branch Inspectors);
1974: 13,210 (of which 6,338 were certified by Branch Inspectors).
Each passbook comparison was certified
by an appropriate impression made by a rubber stamp against the verified balance on both documents. Often, a depositor would initially
display a look of anxiety as an auditor or inspector took his or her passbook from the cashier. This look would then be replaced by
one of relief and immense satisfaction, almost amounting to pride, when the same anxious depositor was told that the passbook had
been examined and duly stamped as part of the audit process. Many depositors were mightily impressed by this small service, which
obviously assured them that their book was in accordance with the Bank's records. (See an example in a Bournville Works
The auditors appointed at the Bank's commencement were Agar, Bates, Neal & Co., Chartered Accountants, of 110
Edmund Street, Birmingham. This firm continued as the Bank's auditors until 1974, although its address was amended to 106 Edmund Street
in 1932, and the firm's name changed to Agar, Bates, Ledsam & Co in 1967. The renamed firm continued to work from 106 Edmund Street,
Birmingham 3, until 1969 when their address changed to Edmund House, 12-22 Newhall Street, Birmingham 3.
The Bank's Annual Report
for the Year Ended March 31st 1974 contained the following paragraph:
Following the recent local government re-organisation the policy
of the District Council to employ one firm of auditors for the accounts of all Departments, brought to an end the association with
Agar, Bates, Ledsam & Co., which has existed since the inception of the Bank. The new auditors appointed as from 1st April 1974
are Price, Waterhouse & Co.
Each of the Bank's published Annual Reports for the years from 1920 to 1974 contained two reports
by the auditors. The first set of accounts (September 1st 1919 to March 31st 1920) had the following sentence annexed to the Balance
We have audited the Accounts as set out above, and we certify that, in our opinion, they represent a true and correct statement
of the affairs of the Bank.
AGAR, BATES, NEAL & CO.,
Auditors to the Bank.
110 Edmund Street,
A second Auditors' Report in the published accounts reproduced the statement that satisfied the requirement of the
Bank's Rules for the auditors to report in writing to the Committee of Management:
19th July, 1920
COMMITTEE OF THE BIRMINGHAM MUNICIPAL BANK.
We beg to report that we have completed the audit of the books of
the Bank for the period ending 31st March, 1920, and have certified the Accounts as representing, in our opinion, a true and correct
statement of the affairs of the Bank.
The Cash Balance with the Corporation at short call has been verified with the Treasurer's
Bank Pass Books, and with the certificates of the banks concerned.
We have verified the cash in hand at Head Office and Branches
by an actual count of the cash.
We have examined the lists of deposits and have certified their correctness. At each branch will
be found exhibited our certified list with the number of the Depositors' Pass Books annexed. The number of Depositors whose accounts
we have examined is 34,837.
The total amount due to Depositors on the 31st March, 1920, with interest, was £746,984 0s. 11d.
have examined the vouchers for all payments on account of management and other expenses.
We have attended from time to time during
the period, without giving notice, at the Head Office and Branches, and have compared many of the Depositors' Pass Books with the
corresponding accounts in the Ledgers.
We have examined the Mortgage Deeds securing the advances made in the House Purchase Department.
have pleasure in reporting that the books of the Bank are being well and efficiently kept, and that the Manager and the members of
the Bank Staff have readily given us all the assistance, information, and explanations we have required.
We are, gentlemen,
AGAR, BATES, NEAL & CO.
The wording used in the above two reports varied little over the years from 1920
to 1974. In 1971, the report annexed to the Balance Sheet certified that the accounts gave a true and fair view, reflecting the accounting
standard at that time.
The longer report to the Bank's Committee gradually added small amendments to include certain facts, or
to reflect the current situation:
- from 1923, the actual number of Mortgage Deeds examined was stated (this figure always
agreed with the number of mortgages outstanding at the financial year-end). In the same year, an additional sentence stated: As evidence
of the satisfactory character of the borrowers, it may be mentioned that in every case, except one, repayments are proceeding satisfactorily.
From 1927 to 1940, the report was less specific in this respect, by using phrases such as: We find that the business of this Branch
[the House Purchase Department] continues to be satisfactorily carried on, and with a minimum amount of risk.
- some of
the wartime reports (1941 to 1944) included a paragraph referring to the War Damage Act, as in this example from 1942: The first instalment
of the Insurance Premium under the War Damage Act due on the 1st July, 1941, has been debited in the Income and Expenditure Account
for the year to 31st March, 1942. The 1944 report amended the usual final paragraph to include the following: We are pleased to report
that although experienced Staff have been called up, necessitating the employment of temporary officials, the Books and Records of
the Bank are being maintained in an efficient and satisfactory manner.
- in 1940, the Bank began a policy of placing all
surplus deposits with the Government, 'with a view to rendering financial help in the present national crisis' as a 'contribution
to the prosecution of the war'. From that year, therefore, increasing amounts of Government Stock, and other investments with the
Government, were shown as assets on the Balance Sheet. In 1944, the Auditors' Report began acknowledging this by stating that Stock
Certificates for the Investments shewn on the Balance Sheet totalling £24,140,000 have been produced for our inspection.
in 1958, the Report reflected the introduction that year of the No 2 Department, by inclusion of the following paragraph:
amount due to depositors on the 31st March, 1958, with Interest, was £83,649,097 11s. 5d. Included in this total sum are the Depositors'
Balances in the No. 2 Department amounting to £6,614,510 15s. 5d. This Department commenced on the 1st April, 1957 and we report that
the transactions throughout the year have been adequately recorded. It will be seen from the Balance Sheet of the Bank, that the amount
due to Depositors on No. 2 Account is represented by the sum with the National Debt Commissioners and Cash in hand. This reference
to the amount due to No 2 Department Depositors was continued until 1967, when the balance in the newly introduced No 3 Department
was also detailed. From 1968, only the total due in all Departments was quoted.
- from 1968, the Report split the value of the
Stock Certificates inspected between the No 1 and No 3 Department investments.
For many years, Agar, Bates, Neal & Co had
a member of their staff devoted for much of each financial year to auditing the Bank's books. A large part of this work would involve
visiting branches to compare passbooks with ledgers, as noted above, and attendance at the Head Office Accounts Department to examine
expenditure vouchers, etc. But, a huge volume of work was carried out at the financial year-end: March 31st, particularly in relation
to the third and fourth paragraphs of their Report regarding the Cash in Hand and the Certified Lists - both of these tasks requiring
The two year-end tasks employed large numbers of articled clerks being sent to the branches. The verification
of the accuracy of the amount of Cash in Hand required that each branch's holding should be physically counted after the close of
business on March 30th - the last day of the financial year, March 31st, all offices being closed to the public. With trainee accountants
not being used to counting large volumes of notes and coins, this was often a protracted process. From the branch manager's point
of view, it was a major concern that the amount of cash held should prove to be in accordance with the books - the prospect of a shortfall
being reported to Head Office in these circumstances was sufficient encouragement to ensure the amount was correct to a penny. Some
managers would hold their own detailed count before the auditors arrived; other tactics included exchanging on a temporary basis,
large volumes of bagged coins (always a possible source of a shortfall) with a neighbouring shop.
The second year-end task for
the auditors was an even more labour intensive exercise. The Certified Lists were produced by each branch to show for each individual
account: the account number; the amount of principal; and the amount of capitalised interest. The auditors compared each account in
the ledgers with the list - in the last year's Report (1970) to specify the number of accounts so examined, the total had risen to
a record high:
We have examined the lists of Deposits at Head Office and each of the seventy one Branches and certified the accuracy
of the total lists. In accordance with Rule 72, these certified lists are available for inspection at the Head Office and Branches.
The total number of Depositors' and Current Account balances which we have examined is 757,923.
The total number of account balances
that Agar, Bates examined from 1920 to 1974 numbered 26,063,311.
As noted above, the auditors from April 1st 1975 were Price
Waterhouse & Co. Annexed to the Balance Sheet for 1975/76 was the following:
Certificate of Approved Auditors to the City of Birmingham
have completed the audit of the accounts of the Birmingham Municipal Bank for the year ended 31st March, 1975 set out on pages 6 to
10 in accordance with all relevant enactments and instruments. There are no matters on which we consider that we should report under
Section 157 or take action under Section 162 of the Local Government Act, 1972.
PRICE WATERHOUSE & CO.
14th October, 1975
Waterhouse audited the Bank's accounts for only two years. Upon the BMB becoming a Trustee Saving Bank, Deloitte & Co (later to
be known as Deloitte Haskins & Sells) were appointed as auditors. In general, Agar, Bates certified the Bank's accounts within
about six weeks following the financial year end of March 31st (their best performance was 1962: April 30th; the worst 1920: July
13th). The two sets of accounts certified by Price Waterhouse were dated October 14th 1975, and October 20th 1976 - over six months
after the year end. No Auditors' Report was reproduced in the Annual Accounts for these two years, as a supplement to the Certificate
of Approval described in the previous paragraph.
A 'Report of the Auditors to the Trustees' was produced by Deloittes for the
four sets of accounts they examined for the Birmingham Municipal Trustee Savings Bank. These were dated January 21st 1977 (for the
period April 1st to November 20th 1976); December 20th 1977; December 18th 1978; and January 14th 1980. The first of these was worded
We have examined the balance sheets and income and expenditure accounts of the No. 2 and Investment Departments and the
supporting information included in the period statement, set out on pages 6 to 14 which are in agreement with the accounting records
and branch returns, and have obtained all the information and explanations which we consider necessary for our audit.
In our opinion:
Proper accounting records have been kept by the Bank and proper returns have been obtained by the Bank from its Branches.
(b) To the
best of our information and according to the explanations given to us, the said accounts give a true and fair view of the state of
the Bank's affairs at 20th November 1976, and of its income and expenditure for the period ended on that date.
The securities held
and the loans made by the Investment Department have been verified.
DELOITTE & CO.
Auditors of the Savings Bank
(NOTE: the Investment Department comprised the No 1, No 3 and Current Account Departments)
Their Reports for the final
three years were much simpler, as in this example - the last produced for the Birmingham Municipal TSB prior to its amalgamation with
TSB of the Midlands:
We have examined the accounts on pages 5 to 13 which have been prepared on the basis of the accounting policies
set out on page 7.
In our opinion these accounts give a true and fair view of the state of affairs of the Bank at 20th November 1979
and of the surplus and source and application of funds of the Bank for the year ended on that date and comply with the Trustee Savings
Banks act 1976.
Deloitte Haskins & Sells,
14th January, 1980.