WARRINGTON Borough Council say talks are ongoing with auditors Grant Thornton over “high risk” investments following further criticism from opposition Tories after a “difficult” meeting of the Audit and Governance Committee last week.
Tory opposition spokesman Cllr. Ken Critchley says Warrington Borough Council could face “massive costs” after the External Auditor (Grant Thornton) warned the Council had not acted prudently in their accounting for costs arising from the debt accumulated on investment properties, finance leases and private finance initiatives (PFI).
He says that during a difficult meeting of the Audit and Corporate Governance Committee, one of the Council’s key scrutiny committees at which Councillors hold the financial activities of the Council to account, Grant Thornton did not “pull any punches”.
“They reminded the Council that they were not a commercial body and that they are using public money. They said of the Council ‘this is not a commercial enterprise”, they needed to be prudent to comply with the Prudential Code, they could not pick and choose which statutory policies and guidance they decided to follow and that the Statutory Guidance on MRP (minimum revenue provision) was there to stop Councils borrowing excessively.”
Cllr. Critchley went on to say: “Responding to the question from Conservative members, “Do you consider the council’s current capital and property investment strategy to be high risk?” Grant Thorntons answered ‘Yes.’
He added: “At the Audit and Corporate Governance Committee meeting the External Auditor, Grant Thornton, dropped another bombshell that the Council had been failing to properly charge costs relating to the debt arising from, investment properties, finance leases and PFI.
After the meeting Cllr. Critchley said: “The Conservatives Group, have been challenging the investment decisions of the Council, the levels of debt and its MRP provisioning. Therefore, to hear from the External Auditor that the Council has potentially been undercharging the cost of these investments is hugely concerning and has enormous real-world implications for the residents and Council Tax payers of Warrington.
“Perhaps, finally, the Labour leadership of this Council will listen and take actions to address the financial mess that they have created for the people of Warrington.”
After questioning from Conservative members of the committee, Grant Thornton revealed that the scale of the adjustments to be potentially millions of pounds per annum, saying that the cost adjustments could be in the region of £5 – £7 Million per annum for the four accounting years still awaiting audit sign off (2017/18 to 2020/21). The impact for the current year 2021/22 could be over £7 Million.
Grant Thornton commented that they had written to the Council again in August 2021, informing the Council that they planned to issue a Statutory Recommendation in relation to minimum revenue provision in the next few weeks, subject to the Council’s response to the August letter. Grant Thornton believed that on the basis of the information made available to them, the minimum revenue provision determined by the Council is not prudent, leading to Grant Thornton’s position that additional charges were required to the accounts.
Cllr. Critchley added that during the “tough meeting” for the Labour-controlled Council, Grant Thornton also confirmed that amongst other issues relating to the still open 2017/18 accounts, the council must consider possible impairments to investments in subsidiaries and associates specifically mentioning Together Energy.
Grant Thornton also confirmed that the accounts may also be subject to revisions in relation to minimum revenue provision and technical queries relating to the treatment of their Birchwood Park investment.
The 2018/19 accounts, as well as being impacted by the minimum revenue provision issues, also required impairment reviews to ensure that assets represented “fair value.”
A Warrington Borough Council spokesperson said: “Grant Thornton have highlighted issues that remain under discussion in their report to last week’s Audit and Corporate Governance Committee.
“We continue to discuss outstanding issues with them and hope to reach a shared position to take forward, which we will then report back through our Audit and Corporate Governance Committee.”
4 Comments
It beggars belief the Labour administration led by Councillor Bowden apparently wanted to keep this situation under wraps so that it would most likely not come to light until it affected future generations of council taxpayers. Just like, but far worse than Hatters Row. There are some serious questions to be answered by those who were aware (elected and employed) why this situation was kept from the electorate before and throughout the last election
Let’s face it – nobody can believe anything mr bowden tells us . Openness honesty and accountability was his clarion call … we’ve seen nothing of it and this is yet another example of the way he works and the way things get done via mr broomhead . They should both be ashamed of their actions that are coming more and more into the spotlight . Why hide these things if you’re proud of them ? Why stifle discussion .. why hide facts from your own exec and audit group ? It’s about time labour councillors got off their knees and demanded answers .
Many members of the public, including myself, have publicly asked if the return on investments as stated by the Council are gross or net. It would now appear that the auditors are concerned that the costs of these investments have not fully been stated. If this is the case the returns as stated by the council will, in actual fact, be less than claimed. A truly disturbing situation.
Given the news this weekend concerning the slide in the value of shares in The Hut Group, now less than the offer price, it looks like the auditors will have more to consider. It is to be hoped that the assets which secure the council’s£171 million loan to the company in August prove adequate should matters continue to deteriorate.