Northamptonshire CC failed to secure value for money for council tax payers in 2016-17, one of four reports highly critical of its financial affairs has found.
This finding came from auditor KPMG whose annual audit letter goes to next week’s audit committee meeting along with a Local Government Association peer review - delivered last month - which concluded “time is running out” for Northamptonshire whose financial situation was “very serious”.
The third report found that Northamptonshire failed to collect almost £2m from its highways contractor and the fourth that a council-owned company was run in a manner “unlikely to meet the Nolan standards for public life”.
Northamptonshire’s financial woes are so severe that leader Heather Smith (Con) said in September she would seek government permission to overspend its annual budget provided it achieves balance within five years. Chief executive Paul Blantern left last month.
KPMG did not qualify Northamptonshire’s accounts, but said in its letter for 2016-17: “We are not satisfied that during the year the authority had proper 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.”
It said 54% of savings proposals were rated ‘red’ or ‘amber’ risks and overspends in children’s and adult services had been £18.1m and £16.9m respectively.
Last year auditors issued the council with an adverse opinion on its accounts after finding the value of savings deemed at risk of not being realised during 2016-17 significantly exceeded the council’s available reserves.
The LGA peer reviewers’ report said they “got the sense” Northamptonshire was relying on the assumption the government would be forced by 2019-20 into a general bail-out of councils.
“The council’s future financial plans appear to be built with a very optimistic bias as to what can be achieved in general savings and by transformation through the ‘next generation council’ model”, the review noted.
‘Next generation’ is a programme involving shifting services to independent council trading units
It went on: “The degree of reliance on savings from transformation requires close questioning as recent experience does not suggest that plans will be delivered.”
Reviewers said the county had “a historic problem of non-delivery of ongoing savings and this is having a cumulative effect on its financial position”.
An internal audit report on Northamptonshire’s highways contract with KierWSP found only 2.5 staff were engaged on managing it, against nine when it began in 2008, and “a great deal of reliance is placed upon KierWSP to accurately claim costs incurred in delivering this contract and properly report actual performance”, the report said.
It further noted there was no evidence of an independent check on costs charged nor any formal verification of performance information.
Failure to claim payments meant £1.9m had accumulated, which was kept off balance sheet by the council without apparent authorisation.
The report stressed KierWSP was not at fault, but noted: “Had these monies been repaid promptly to the council they would have been available…to prioritise it towards pressures other than this highways contract”.
Northamptonshire had lost interest on the money and its off balance sheet status made Northamptonshire’s financial statements inaccurate, the report said.
A further internal audit found while council-owned company NEA Properties had spent money properly, “documentation/governance within the company was found to be minimal, board minutes and core governance policies…could not be provided”.
It said Northamptonshire should have defined the scope of the company’s activities “as opposed to rely upon generic ‘off the shelf’ company articles”.
The audit committee will consider the reports on 16 November.
In a statement the council said: “These reports are all part of the process that ensures that the county council is heading in the right direction, acting within due process and ensuring maximum value for money for the taxpayer.
“The reports contain a number of recommendations which we are now addressing. Shortly a peer review action plan will be published, along with a refreshed council plan, which will not only help us address our financial challenges but also enable us to provide efficient, quality services for the people of the county.”
*This story as updated on 10 November to include a comment from the council