WARRINGTON Borough Council has instigated an independent external review to assess the overall affordability and sustainability of its capital strategy and debt levels as auditors prepare to issue an “Adverse Value for Money Conclusion,” against the 2017/18 accounts.
With the council’s debt burden one of the greatest amongst unitary authorities in England and the highest in its peer group, the auditors believe there is great financial risk and concern over the ability to repay a £1.6 billion debt over the long term.
Opposition Tories say Warrington’s Labour-led Council has found itself in more difficulty following the publication of a report by its External Auditors, Grant Thornton, who intend to issue the “Adverse Value for Money conclusion” in relation to their audit of the council’s 2017/2018 accounts, which are still waiting to be signed off. These accounts are the first of the four “open years” to be nearing a point where the financial reports can be signed off.
Tory spokesperson Cllr Ken Critchley says “The Value for Money findings make very difficult reading for the Council’s Labour leadership” with the Auditors concluding: “Based on the work we performed to address the significant risk, we were not satisfied that the Council had proper arrangements for securing economy, efficiency and effectiveness in its use of resources.”
The Auditors’ report went on to say “The Council’s debt burden is one of the greatest amongst unitary authorities in England and is the highest in its peer group. We believe this is one indicator of greater financial risk and we are concerned about the Council’s ability to repay this debt over the long-term, especially given its original MRP policy stance.”
“We remain of the view that debt of over £1.6 billion, as well as the limit of 23.3% on commercial income as a percentage of budget is not affordable, prudent and sustainable over the long-term for the Council.”
As a result, Conservative Councillors on the Audit and Corporate Governance Committee last Thursday, voted against accepting the Accounts and its Annual Governance Statement. The Conservatives believe that the Council was not taking the implications of the damming Grant Thornton Audit Findings Report seriously enough.
“For the External Auditors to be questioning the decision-making, control and oversight of the Council raises very serious questions. For the External Auditors to also conclude that the Council’s high borrowing is neither affordable, prudent or sustainable is a huge warning that the current reckless borrowing of the Council must finally be brought under control.”
In response, Deputy Leader Cllr Cathy Mitchell said: “We recognise that whilst we are ultimately a step closer to closing our 2017/18 accounts, the situation has caused prolonged uncertainty.
“We have, throughout the entire and incredibly complex process, continued to engage positively with our auditors on all matters related to our accounts. There have been challenges for us, which are highlighted in this latest report, but we have made a number of changes and improvements – many a long time before the publication of this report – to ensure that our processes have improved.
“For example, the report notes the difference of opinion in how the council should treat minimum revenue provision (MRP), but this has been addressed and the council approved, at its meeting in February 2022, an updated policy in line with the latest guidance.
“We are already commissioning an independent external review to assess the overall affordability and sustainability of our capital strategy over the long-term, and to evaluate our debt levels and commercial income as a percentage of the budget. We are confident in our commercial approach and that it provides value for money-generating £20 million a year to invest in vital frontline services – but welcome external review and scrutiny as part of this process.
“We also must acknowledge that a number of auditing regulations and standards, in respect of Local Authorities, have changed since 2017/18, which has required a lot of retrospective work between us and our auditor, to ensure that these changes have been applied to our 17/18 accounts.
“We now expect these accounts to be signed off, once an issue relating to highways infrastructure assets (eg roads, traffic lights), which is currently affecting all English councils, is resolved. Following this, it is of the utmost importance that we work cooperatively with our auditors to agree and sign off our 18/19 accounts as quickly as possible.”
Meanwhile, local Lib Dems have described the situation as a “sorry state of affairs” and no one has come out of it well.
“We have the strange situation that what the Council has done after the end of 2018 has an impact on the audit for 2017/18. Changes to accounting standards since the year end has also forced time-consuming retrospective adjustments to be made. Grant Thornton acknowledges that the Council has taken independent Queen’s Counsel legal advice and accounting and tax advice. The Auditors too have taken independent legal advice but the problem is that the sets of experts have come to different conclusions about the rights and wrongs, so there has been a stand-off.
“An adverse Value for Money statement from Grant Thornton is unwelcome even though it applies to four years ago. No one comes out of this well and reputations have suffered. The Conservatives have never told us how they would have done things differently to safeguard services in the face of sustained government cuts. There has been a large cost to Council Tax payers and we must ensure nothing like this ever happens again.”