Auditors say urgent action is needed at Wellingborough Council to stop its reliance on reserves to fund services.
The authority has been given limited assurance in a review of its financial management and reporting, with internal auditors warning the authority it needs to do a better job of forecasting what it will spend each year.
This year it had planned to use almost half a million pounds from reserves to pay for all its committed outgoings but in the end did not need to use it.
The council, which is set to be replaced by a new unitary council in May 2021, has been using reserves as a financial fallback for a number of years with its general reserves balance dropping from £8.5m in March 2012 to £5.7m in March this year.
It plans to use £729,000 this year from reserves to balance its books on a spend of just under £11m.
In the report, which will be discussed by Wellingborough councillors on the audit committee tonight (Jul23), auditors say: “Urgent action is required to address the underlying reliance on general reserves to support the revenue budget and to provide accurate forecasts on outturn during the year to the resources committee.”
The council’s annual governance report gives further detail and says: “The 2018/19 revenue budget included £456,000 planned use of reserves to provide a balanced budget at year-end. As with 2017/18, steadily worsening forecasts to the resources committee on the need to increase the budgeted reliance on general reserves were at the end of the year reversed due to previously unreported positive variances.”
In response the authority, whose managing director is Liz Elliott, says it has re-run budget clinics to review its current 19/20 budgets to identify any changes and to reduce the reliance on reserves that it has forecast this year.
Councils using reserves is well-known to Northamptonshire residents. The county council effectively went bankrupt last year because of its long reliance on using reserves to fund expenditure. Its financial mismanagement led to government inspector Max Caller suggesting the council should be abolished.
The internal audit report give the authority full assurance in just one of the 20 audited areas. Ten areas were given significant assurance, six had moderate assurance and three were limited.
Besides the financial management the authority’s homelessness and housing options and ICT were given limited assurance.
The authority, which has been spending millions in recent years on temporary accommodation for homeless households, was criticised for not having a homelessness strategy that is compliant with the homeless reduction act and was found not to be maintaining accurate records of initial assessments.
An external audit of the authority has been delayed – along with a number of other Northamptonshire councils – after newly appointed auditor Ernst Young reported staffing problems.
An appendix report with more details of the audit findings will be discussed in private with members of the public and press excluded.
A spokesman for the authority said this is being done under section 100A of the Local Government Act 1972, due to the potential implications this could cause.
“Once this matter has been resolved and there is no potential risk, this information will be published on the website.”