Birmingham City Council failed to ensure value for money last financial year and has been issued with an adverse opinion on its accounts as a result.
In the council’s annual audit letter, due to go to its cabinet this morning, auditor Grant Thornton says while the council made “progress” in developing a more realistic medium term financial plan during 2016-17, key elements of its delivery remain at risk.
The letter said: “We were not satisfied that the council put in place proper arrangements to ensure economy, efficiency and effectiveness in its use of resources during the year ended 31 March 2017. We therefore issued an adverse value for money conclusion.”
Auditors have qualified their value for money conclusion on the council’s accounts since 2012-13, largely due to concerns over children’s services and outstanding equal pay claims. However, until now they have stopped short of issuing an adverse opinion.
In 2016-17 the council overspent by almost £30m on a net revenue budget of £835m. The letter describes an “emerging trend” of under-delivery of planned savings.
Auditors found the council’s savings plans for the year “did not sufficiently take into account the impact of the level of non-recurrent savings” of £35m in 2015-16 or “adequately assess the vulnerability of the largest proposed savings scheme”, a restructuring programme known as the ‘future operating model’.
LGC reported last month how the cabinet was warned 37% of savings planned for 2017-18 across the council had been deemed undeliverable, equivalent to £31.9m. This included £14.6m of missed savings from the future operating model.
Aside from the savings programme, auditors also raised concern about the affordability of the Commonwealth Games bid to the council and the handling of exit packages during 2016-17. Birmingham spent £13.2m on redundancies during the year, including two voluntary departures worth more than £250,000 each.
The recipients of the exit packages are not named. However, former chief executive Mark Rogers left the council in February following claims that he was being forced out by the Birmingham Improvement Panel, sent in by the government in 2014 to address governance concerns. An announcement that was to take early retirement came five days after the council confirmed he would be leaving. And Birmingham’s strategic director for finance and legal, Jon Warlow, also agreed his departure during 2016-17, after eight years.
Auditors said while they were satisfied the council had taken appropriate legal and financial advice in managing the departures, the governance around them could be improved. They said this should include “re-emphasising the importance of ensuring that details of emerging exit pay arrangements are maintained in strict confidence” so the council was not exposed to the risk of “legal action by individuals who might consider that they have suffered damage by any ‘leaks’”.
It also said the council should strengthen “performance management procedures for senior officers”.