Council's financial governance flaws could be 'tip of the iceberg', auditors warn

Local Democracy Reporter James Bagley

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Flaws found in Slough Council’s financial governance in 2018/19 accounts could be the tip of the iceberg, warn auditors.

Councillors met at an annual full council meeting on Thursday, May 20, to discuss the external auditors, Grant Thornton UK LLP, two damning reports on the council’s financial governance.

In their highly critical reports, they found the council had insufficient capacity and skills within the finance department, inadequate preparation of financial statements, inadequate general and earmarked revenue reserves, and inadequate governance, monitoring, and controls over outside groups and companies.

Speaking at the meeting, Julie Masci, Grant Thornton’s associate director, revealed the council’s general fund reserves had fallen by more than £7.5 million since February to a mere £500,000 at the end of 2018/19.

This is because of the consequences of required “significant adjustments” to the accounts due to an “over accrual of anticipated profits” from one of the council’s commercial entities.

Ms Masci highlighted they still need to examine the outstanding 2019/20 and 2020/21 accounts and could affect the position of the council’s reserves.

She said: “It’s really important that members recognise the significance of this in that the undertaking of those additional audits may indeed find further concerns affecting that position.”

However, Slough Borough Council’s (SBC) new section 151 officer, Steven Mair, would not reveal a date to when the 2019/20 accounts will be produced as they want the financial statements and the report itself to be of “the highest quality”.

In Grant Thornton’s report, they found Slough Urban Renewal, which is a partnership between SBC and Morgan Sindall Investments, had three council officers on its board.

Ms Masci said: “It’s very difficult, therefore, for the council to be able to challenge the commercial operations of such companies and ensure it operates in the best interest of the council when officers are effectively fulfilling the dual role for the council and company.”

The auditor also revealed James Elliman Homes, which is wholly owned by SBC, 2017/2018 audit was never completed “for reasons that remain unclear”.

When pressed by the leader of the opposing Conservatives, councillor Wayne Strutton (Haymill and Lynch Hill), Ms Masci said there was a draft audit unsigned on the accounts and was told by officers the company and the auditors of that time had a “difficult relationship”.

Paul Dossett from Grant Thornton, warned councillors the council must not “shirk” these statutory recommendations, or else SBC faces the “risk” of further action, including a possibility of a public interest report and a revised notice about the budget if these issues are not addressed.

He said: “I think the council will find things and will find issues coming out of the management response that may be unpalatable and it will have to take hard decisions, but it’s really important that it happens.”

Mr Mair said there will be “no doubt” difficult decisions will have to be made, but are on the path to resolving these issues, such as appointing “UK leading experts” in local authority accounting, implementing training and leadership management, and introducing a ‘three stage quality insurance’ to prepare and inspect financial statements.

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