CROYDON IN CRISIS: The cash-strapped council is struggling to make its sums add up, reports WALTER CRONXITE
The £22.4million gap in the council budget could yet get worse, with the status of £8million of government grant made before the end of the last financial year causing “serious concern” for auditors.
That’s the stark warning provided by Lisa Taylor, the council’s finance director, in a detailed briefing to councillors this week.
The council is now more than a month past its legal deadline for publishing its accounts for the 2019-2020 financial year that ended in March.
The delay has been caused, at least in part, by an accounting issue over a £8million grant to deal with the covid-19 emergency which was unspent before the beginning of the current financial year in April. “It will absolutely be spent this financial year,” Taylor told councillors at their virtual meeting.
But the accounting status of that money could prove critical when the cash-strapped council presents its “recovery plan” to the Ministry of Housing, Communities and Local Government. If the £22.4million covid-sized hole in Croydon’s revenue budget for this year suddenly becomes £30million-plus, there is a real risk, according to Taylor, that MHCLG will turn down the council’s plan.
By law, even with a special dispensation to allow for covid-19, all local authorities in England were supposed to publish their draft accounts for 2019-2020 by September 1. With the council in turmoil over hundreds of job cuts and with the CEO leaving her job abruptly, Croydon has so far failed to publish its accounts.
When asked by Inside Croydon this week, Katherine Kerswell, the council’s interim chief executive, was still unable to say when the accounts will be published.
“I can confirm that the council is finalising its accounts and as soon as they are completed they will be published on our website and the standard public consultation period will commence,” Kerswell told Inside Croydon.
“Our auditors Grant Thornton are continuing to work with us as we complete the accounts and have given their support to this delay, whilst we undertake these final checks and review.”
Unusually for this form of council meeting, it was Taylor who made the financial presentation to the emergency council meeting on Monday, and not Simon Hall, the cabinet member for finance, something which led to opposition councillors accusing him of “hiding” behind officers.
In her PowerPoint presentation, Taylor said that the gross impact of covid-19 on the borough’s finances had reached £70million by the end of August.
After grants from central government were taken into consideration, the “net impact” was £42million.
Since May, the council’s auditors plus finance experts from other councils have been working on financial plans to dig Croydon out of its hole. With cost-cutting and job losses, they have managed to get the gap between income and expenditure down to £22.4million – what Taylor stressed was “a significant overspend”.
“The £22.4million gap could get worse,” Taylor warned. “I am hoping it will not.
“We have very low reserves,” the council’s most senior financial official said solemnly.
The council, Taylor said, had “around £20million of earmarked reserves, of which £8million was grant that was received for covid at the end of the last financial year”.
Producing a further slide which listed the risks facing Croydon, Taylor said, “We are still working on the 19-20 accounts, and we’re just doing the finalisation of those prior to submission to the external auditors.
“There could be some adjustments in there of £8million, we’re just working through at the moment.
“As a result, there’s some concern from the external auditor. Until they finish their work, we will not know for sure.”
Taylor has warned councillors previously that, without an agreement from MHCLG, it would be her legal duty to issue a Section 114 notice, effectively declaring that the council was bankrupt. It was a warning that Taylor repeated on Monday and included in her slides.
Today, a Katharine Street source said, “There’s no suggestion that this is anything other than a somewhat theoretical discussion over accounting policy, but nevertheless, if the Ministry insist that the money, received in the 2019-2020 financial year, is accounted for in that year’s accounts, then it could completely undermine the recovery plan.”
And the source added, “Given the gravity of Taylor’s financial report, how Hall and Tony Newman, the council leader, managed to survive a no-confidence vote later that evening is astonishing.”
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