Liverpool Council shares concerns with its auditors over the scale of its financial challenges on the horizon.
The city’s new assistant mayor and finance lead, Cllr Paul Brant, said the council accepted the “magnitude of the scale” it faced in the coming years in the face of ever widening budget forecasts. Cllr Brant’s remarks came as auditors Grant Thornton presented their interim value for money report on the local authority for 2020/21 to its audit committee.
The report has provided an initial set of findings as the auditors await the outcome of an external investigation of the council they themselves requested. Law firm TLT LLP has been tasked with leading a scope into the local authority’s records to establish whether there is any evidence of “improper influence in the council’s decision making arising from the actions of the former Mayor and former senior officers.”
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Grant Thornton said they cannot sign off on Liverpool Council’s books for 2019/20 until the work is completed. Director Andy Smith told committee members the firm had identified risks of significant weakness in respect of financial sustainability, governance and economy, efficiency and effectiveness, as in the Caller Report and Mazars investigation.
Mr Smith said the auditors remained concerned about the medium term financial strategy and it would require a multi-year transformation. It was revealed last week how the auditors warned the council that changes need to be made if it is to become financially sustainable.
With potential deficits rising to £86m in 2024/25, Grant Thornton said the council faced a “large scale transformation” to achieve sustainability. Cllr Brant, who was appointed to his role amid the fallout from the highly expensive energy contract foul up, said the authority’s leaders were in agreement over the nature of the challenges ahead.
He said: “When you’re mentioning the impact going forward, that is reflected in the comments about the medium term financial strategy and the budget gap we as a council are going to face in the next couple of years. I think you’re absolutely right that the magnitude of the scale we have, the challenge we’re facing is the challenge local government is facing across the country.
“The reality is inflation is causing much greater concern to us than we had even anticipated at the time you are dealing with in your report and it is one of the reasons the medium term financial strategy is identifying a much larger gap now than was forecast. Yes you are right to highlight the problems, yes we share your concern, it is partly a reflection of the greater degree of risk and the higher level of inflation feeding through the system that we have to cope with.”
Grant Thornton analysts said in their initial findings that there is a “high challenging savings target for 2022/23 based on current assumptions and there will be significant reliance on the council’s ability to deliver savings in year, which, at the time of our review, have yet to be fully developed.” The council’s levels of reserves was said to be “comparatively low” against other core cities “and therefore there is limited scope for non-delivery of saving in future.”
This is despite the council agreeing to increase its reserves by £10m earlier this year as part of the budget setting process. The move caused a rift in the ruling Labour group and the creation of an independent group of councillors.
Cllr Brant said: It’s a constant, and rightly, issue of debate within the council about the amount of earmarked reserves that we have. If you’d been here at budget meetings, you’d have heard challenges from people who are arguing that in fact the level of un-earmarked reserves is too high at the relevant time.
“The reality is, we live in an uncertain world.”
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