CROYDON IN CRISIS: Auditors step in with damning Report in the Public Interest over the way in which the council’s finances had been mishandled.
By STEVEN DOWNES
Council staff were summoned into a meeting at barely 10 minutes notice this morning, as the interim chief executive Katherine Kerswell laid out what she described as a report from the council’s auditors “raising serious concerns about how decisions have been taken about our finances and how they have been managed over recent years”.
The auditors, from Grant Thornton, are to publish a Report in the Public Interest, thought to be only the second time this has been necessary among local authorities in England.
The accountants have been poring over the council’s books since May, when they were called in urgently as the costs of managing the coronavirus pandemic pushed the cash-strapped local authority closer to bankruptcy.
Among their findings, the auditors say that Croydon Council suffered from “corporate blindness” to the seriousness and urgency of its financial situation. They say that £50million of “transformation money” that has been spent in the past three years, largely in retrieving children’s services for its “Inadequate” Ofsted report, has failed to deliver any real change.
And the auditors say that in the “Place” department at the council, which under former chief executive Jo Negrini handled housing, regeneration and the Brick by Brick development company, there had been investment “without addressing if that investment was delivering the intended outcomes”.
The auditors were also scathing about the political approach of ex-leader Tony Newman and his tendency to blame government for all Croydon’s problems. “Financial governance has been focused on lobbying government for additional funding and not supported by actions to contain spending within available funding,” the auditors say.
The auditors pin the responsibility firmly on the leadership of Negrini and Newman: “Numerous opportunities have been missed in recent years to tackle the council’s financial position.”
Senior figures from Grant Thornton who have been working at Fisher’s Folly for the past six months have been threatening to issue a Report in the Public Interest, a rarely-used piece of legislation under which certain activities of councils can be highlighted or even wound-up if the auditors are not satisfied that the activities in question represent best-value for Council Tax-payers.
The last time a Report in the Public Interest was issued was in August at Nottingham City Council, when their auditors, also Grant Thornton, shut-down a poorly managed energy subsidiary which the council had set-up.
Nottingham’s interim chief exec at that time was… Katherine Kerswell.
This morning, just before 10am, Kerswell sent this email to Croydon Council staff:
Very shortly, an independent report by the council’s auditors will be published raising serious concerns about how decisions have been taken about our finances and how they have been managed over recent years. The report makes a series of recommendations on what has to change.
I know that a lot of you will quite rightly be upset and concerned about this, because this just isn’t the situation that we want Croydon to be in. As soon as I receive the full report I will share it with you all so you can read it for yourself and see exactly what has been said. But, while we’re waiting for it to be published by our auditors, I wanted to take a moment to give some background, an overview of what’s said and outline what happens next.
Every council has an external auditor that looks over their finances and can hold the organisation to account to make sure public money is dealt with correctly and act if they feel decisions need to be challenged. As part of their role auditors can issue a report if they come across things that they think should be made public (known as a ‘Report in the Public Interest’). A public interest report has now been put together for Croydon Council, in which our auditors – Grant Thornton – raise serious concerns about the council’s financial situation.
As an organisation there have been lots of discussion around our finances. This report goes in to detail about a number of decisions that have been taken over the years and the council’s finances. It also clearly lays out what must urgently be done to move forward.
The auditor’s comments will include:
• There has been “corporate blindness” to the seriousness and urgency of the financial situation
• There is little evidence that £50m of transformation money has reduced demand, delivered savings or reduced costs in children’s or adults’ social care
• The council has focused on service improvement without sufficient attention to controlling overspends
• There has been investment in the “Place area” without addressing if that investment was delivering the intended outcomes
• Financial governance has been focussed [sic] on lobbying government for additional funding and not supported by actions to contain spending within available funding
• Numerous opportunities have been missed in recent years to tackle the Council’s financial position
The report also states that several of these issues have been raised with the council in the past and that we still haven’t resolved them. Most recently, looking at the budget year that we are currently in, it notes how more was needed to be done to tighten financial controls and processes. Delays meant our problems became much worse when the pandemic hit.
All of the details, including historic figures, can be found in the report itself, which will also be published on our website as soon as it’s made available to us.
It goes without saying that this isn’t where we want to be or who we want to be as a council, and many of you will feel frustrated and let down. But, I also think it’s important that we see this as a chance to acknowledge and accept where things went wrong and commit to being part of putting it right.
Looking at what happens next and where we go from here, I can say a number of the auditor’s recommendations are very much underway and I hope we can swiftly resolve things. If you heard our new leader’s speech last night at full council, you will see that is her complete determination as well.
Lots of things have changed in recent months – I have really felt that since I’ve joined everyone has to come together to put our energy and focus into understanding where we fell short, what we can do to change that, and what must happen to secure Croydon’s future and the financial support we need to be a sustainable, stronger and better council for the borough. This is not something I, [the executive leadership team] or [councillors] can sort on our own – we need you in this!
As you may know we are developing the Croydon Renewal Plan to deliver a balanced budget, change our council and are working on our plans for financial support from government. The staff workshops which are underway play an important part in us all understanding how our council currently works and what we need to do to make it more effective. Please do consider attending and if you can’t please do complete the staff survey and let me know what you think.
I understand that you might have questions about all of this, if so please do speak to your head of service or director. You can also contact me directly by emailing firstname.lastname@example.org
I will keep you updated with developments as they happen – sharing the full report as soon as possible – and am in the process of setting up all staff webinars, invites to which will be sent to you next week (I’ll make sure the recordings are published on the intranet for anyone that’s on leave or unable to attend).
Thank you all for the work you are doing in these very difficult times with the public health crisis. I really am sorry that this report has had to be published, but please do know that we will do everything possible to make sure this is made right.
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