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Auditor accuses Northants of downplaying budget overspend

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Northamptonshire CC may have downplayed its forecast overspend for 2017-18 when presenting budget information to senior councillors, according to local authority’s external auditor.

The council reported an underlying forecast overspend of £16.7m in its revenue finance report to cabinet, published last month. However, auditor KPMG said its analysis “suggests that the underlying forecast overspend is £59.6m and not £16.7m as reported to cabinet.”

While there is no suggestion Northamptonshire failed to balance its budget, KPMG criticised the county council for a culture of inaccuracy and opacity in relation to its unclear financial reporting, going back a number of years.

In KPMG’s interim report, which will go before members of the county council’s audit committee on Thursday, the auditor said: “It is more important than ever that those charged with governance are able to make properly-informed decisions based on clear and robust information. It is unclear how the finance reports currently provided to cabinet fulfil this function.”

In reviewing financial reports submitted to cabinet in 2017-18, the auditor found they were “unclear and lack details”, describing the narrative as “often vague and written in dense management speak”.

While acting leader in March Matthew Golby (Con) said in March the council would “effectively exhaust” its general and earmarked reserves to meet the statutory requirement of balancing the budget. The forecast overspend of £16.7m was to be paid using the council’s total reserves of £16.9m, he said.

Yet the interim report said the council did not report other “one-off” financial measures made to balance the books for the year. These included the use of capital receipts, section 106 funds, and other “one-off managed savings and interventions”, KPMG said.

According to the interim report: “In order to achieve a ‘balanced outturn’ for 2017-18, the authority has again placed significant reliance on one-off measures… Taken together, this means that the underlying year-end position is an overspend of £59.6m.”

A Northamptonshire CC spokesman said: “KPMG are commissioned as our auditors to carry out robust and impartial analysis of our finances and governance on an ongoing basis. Their reports, as well as the findings of the government’s best value inspection, have helped to inform our improvement programme to address previously-highlighted issues with the council’s financial management and governance.

“Among the improvements already implemented, a new review process for expenditure has been introduced and all spend above £1,000 must now be approved by the chief executive approval panel to ensure that the expenditure is necessary, delivers best value for money and helps to achieve the council’s objectives.

“The government-appointed commissioners are now working with us to continue to improve our finance and governance processes to ensure they are as robust and transparent as possible.”

Meanwhile, it has emerged in KPMG’s report that an investigation into whether the county council used ringfenced public health grant funding to prop up other services relates to £16m spending - £6m more than was previously estimated - and £3m of that was spent in 2017-18.

LGC previously reported how this is being investigated by Public Health England. KPMG’s report said: “We will request regular updates on this and consider the impact this may have on the authority’s reported financial statements.”

This story was updated at 14.16 on 22 May to include the comment from Northamptonshire CC.

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