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Auditors highlight value for money concerns at 30 councils

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Auditors have raised value for money issues at 30 councils in relation to 2016-17, the Public Sector Audit Appointments’ annual report reveals.

The report, published today, says the latest results show a “solid position” for most councils, with general high standards of financial reporting being maintained “despite the financial and service delivery challenges currently facing local government”.

But the report reveals that auditors issued three adverse options and 27 qualifications in relation to authorities’ value for money arrangements. The previous year there were three adverse opinions and 24 qualifications. 

An adverse value for money opinion means auditors were not satisfied that the council “made proper arrangements to secure economy, efficiency and effectiveness in its use of resources”, while a qualified conclusion is issued by an auditor when they have found a significant weakness or weaknesses that warrants reporting. 

Bristol City Council was issued with an adverse report after auditor BDO found weaknesses in financial planning partly contributed to an overspend of £10.5m in 2016-17, with a risk there could be a further overspend in 2017-18.

It highlighted an independent review commissioned by the council which reported in February that there had been a “collective failure in leadership” to address its financial deficit and drew attention to significant weaknesses in financial reporting.

BDO added the council had invested in an energy company in 2015 and 2016 which has revised its business plan to reflect a delay in the achieving profitability. It said it had not seen evidence that the risks and potential financial losses of this investment were fully understood by the council when the investment was made.

In conclusion BDO said: “These issues are evidence of significant weaknesses in proper arrangements for the financing of sustainable outcomes and informed decision making by the council.”

The other two councils to receive an adverse opinion were Birmingham City Council and Northamptonshire CC. As LGC has previously reported Birmingham was issued with an adverse report after auditor Grant Thornton said earlier this month it was not satisfied that the council had put in place arrangements to “ensure efficiency and effectiveness in its use of resources during the year ended 31 March 2017”. Northamptonshire CC was received an adverse report as auditor KPMG said it was not satisfied the council had arrangements in place to “take informed decisions and deploy its resources to achieve planned and sustainable outcomes for taxpayers and local people…and maintain statutory functions.”

Of the 27 councils issued with qualifications in relation to their value for money arrangements, 19 are upper-tier.

Both Manchester City Council and Surrey CC were issued with qualifications in relation to their efforts to improve children’s social care services, which have been rated inadequate by Ofsted.

Grant Thornton said “ongoing action” to address Ofsted’s concerns in relation to Manchester City Council’s  improvement plan, established following an inadequate rating in 2014, is “evidence of weaknesses in proper arrangements for planning, organising and developing the workforce effectively to deliver strategic priorities during the year.”

As Surrey auditor, Grant Thornton said that further required improvements identified by Ofsted since an inadequate rating in 2015 is evidence of “weaknesses in proper arrangements for understanding and using appropriate and reliable financial and performance information to support informed decision making and performance management, and for planning, organising and developing the workforce effectively to deliver strategic priorities.”

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