Lancashire CC’s finances are currently at a “tipping point”, according to auditors Grant Thorton which have issued a warning over the county’s continued use of reserves.
To increase stability the council will need to take “some difficult decisions” and deliver on savings in 2018-19 and beyond.
The report, which went before the council’s audit, risk and governance committee on 30 July, said: “The council’s financial position is at a tipping point and continuing reliance on reserves is seen as unsustainable. The need for a more transformational and rigorous savings programme needs to be delivered during 2018-19 and beyond. There will be some difficult decisions to be made during 2018-19 to ensure this happens.”
Estimated cuts are projected to be worth an estimated £135m between 2017-18 and 2021-22, according to the report. However, it said £57.1m reserves were needed in 2017-18, while a further £42m are expected to be used in 2018-19.
“The council has identified that this is not a sustainable approach but has sufficient reserves to meet its obligations up until 2019-20 and part of 2020-21,” auditors said in their report.
The council’s medium term financial strategy, updated in February, found a cumulative funding gap of £330.6m between 2019-20 and 2021-22. Grant Thornton said this represented a “significant challenge” for the council.
Auditors acknowledged the appointment of Angie Ridgwell as interim chief executive and other members to the senior management team. There is also a “revised operational plan” for the council.
The report said: “These changes are crucial to delivering medium term financial and operational sustainability. Whilst changes are in train, it remains too early to judge their success as detailed savings options have yet to be put before members. The plans being developed and the pace with which they are actioned will be crucial to the future success of the organisation.”
A spokesman for the council said: “The authority has presented a presented a balanced budget for 2018-2019 and has already reduced the £200m deficit in the medium term budget by more than 25%.
“The council is looking to identify more savings and reduce its planned use of reserves in 2019-20 and beyond so it is no longer reliant on reserve funding.”