At first glance it appeared a great story. Eighteen councils in England had nothing held over in their reserves to protect against financial uncertainty. The pressure local authorities are under is well publicised but if these figures were correct, the situation would be far worse than feared.
What gave the story credence was the source. It was not a tip-off or the calculations of the Bureau of Investigative Journalism – which has analysed this issue for LGC – but data supplied by local authorities and published by the government. It would have been a great scoop.
Only, it wasn’t. The figures were either wrong or misleading. And not just one figure. All of them. The reality was that the councils in question collectively held almost £100m in these unallocated reserves, according to their own localised records.
So it turned out the story the Bureau had was a different one entirely: the government published data that incorrectly showed more than a dozen local authorities had run out of the money they should hold over to protect from financial uncertainty.
And not only that, but that no one noticed this discrepancy. Not the councils that compiled the figures, nor the Ministry of Housing, Communities & Local Government, which vetted and then released these misleading figures eight months ago as part of a comprehensive and reliable record of local government spending.
We had come across it when fact checking for our series of deep dive pieces on council finances. And because we did, it meant we had to rigorously check each data point back to the local source of information.
The Bureau contacted the affected local authorities. The majority said the figures were not an accurate reflection of their financial position. Some said this was the result of “human error” on their part. Others, including crisis-hit Northamptonshire CC, which actually had £11.7m in this fund, could not explain what had gone wrong.
This data discrepancy, and the responses from the councils, reveals that our public record of how councils spend public money is not only inaccurate but unchecked.
Local authorities are required by law to know how much money they have in their reserves before they set their budgets. The vast majority split their ‘usable’ reserves – or ‘rainy day’ funds – between an ‘earmarked’ reserve designated for specific future use (to cover future costs such as such as redundancy payments or those related to PFI schemes, for example) and an ‘unallocated’ reserve that, crucially, helps protect against unforeseen problems.
It is this latter reserve which some local authorities are not recording correctly.
Councils said to have nothing in their unallocated reserves in 2017-18
Breckland DC *
Derby City Council
Fareham BC *
Hammersmith & Fulham LBC
Malvern Hills DC **
Northampton BC **
Ryedale DC *
South Hams DC
Taunton Deane BC
West Oxfordshire DC
West Somerset DC
*Councils told Bureau the data isn’t incorrect because they list the figure elsewhere (for example, within earmarked reserves)
** These councils provided no explanation for their figures
A finance officer at one of the councils told the Bureau the data entry process had “not been taken seriously enough”, a concern echoed by local government experts speaking to The Bureau.
Cheltenham BC said it made an error when the forms were filled out. New procedures are in place to make sure future submissions are “verified and approved” by the chief financial officer, the council said.
South Hams DC said the latest form was “completed by a new member of staff” who had omitted to include the figure in question. “We can confirm that we have put procedures in place to ensure that this anomaly does not happen in the future,” a council spokesperson said.
But the Bureau’s research shows this was not an anomaly.
A similar discrepancy had been recorded on last year’s forms as well.
Looking at the data recorded for 2016-17, there are 15 local authorities incorrectly showing nothing in these reserves, 14 of which are this year’s list – including South Hams and Cheltenham. Oddly, the years prior only showed a handful local authorities as having empty unallocated reserves.
To our knowledge, no one spotted these mistakes even though the data is supposed to adhere to the Code of Practice for Official Statistics. According to publication notes for the most recent release, this data had been subject to “rigorous pre-defined validation tests” performed by the local authority, then the ministry, as well the Chartered Institute of Public Finance & Accountancy.
The Bureau approached the ministry with our findings and asked for an explanation. A spokesperson said: “While we apply robust quality checks at all stages of the data collection and compilation process, we are ultimately reliant on local authorities to resolve data quality issues and continue to work with them on the issue.”
To make matters more confusing, three of the 18 councils did in fact have nothing in their unallocated reserves, as the data stated. They each told the Bureau they had put the money into their earmarked reserves but could not clearly explain why.