Grant Thornton issued the warning as the council faces a multimillion-pound deficit over the next few years, reports Nick Clark, Local Democracy Reporter
Financial stability at Barking and Dagenham Council is at risk, auditors have said.
Professional services firm Grant Thornton issued the warning as the council faces a multimillion-pound deficit over the next few years.
Auditors said “rising service demands, projected funding gaps, and continued borrowing” all pose a threat to council coffers in the long-term.
Financial forecasts suggest the town hall will be £28million short of what it needs to cover its spending next year, and another £30m short the year after that.
Forecasts suggest that the total funding shortfall over the coming years will add up to £82.4m by 2030.
Leading councillors and bosses hope that plans to make the council more efficient by “transforming” how it works will bring down costs.
However, after inspecting the council’s financial management, Grant Thornton auditors said they’re not yet sure the transformation plans will work.
Speaking to councillors at an audit and risk committee on Tuesday (6th), Guy Clifton of Grant Thornton said: “There’s a significant funding gap that can only be managed through transformation, change.
“We’re not seeing evidence yet that those plans that are in place can demonstrate that that funding gap will be resolved across the medium term.”
Councils across the country are struggling to pay for rising demand for essential services such as social care, special educational needs, and homelessness accommodation, which they have to provide by law.
Grant Thornton raised concerns about whether Barking and Dagenham Council is able to accurately predict demand for services or rising costs.
It said the council’s reliance on reserves – pots of money it keeps to cover unexpected costs – showed there was “an underlying weakness in demand forecasting and/or cost control”.
Auditors also highlighted the council’s debt, last reported to be £1.6billion.
The vast majority of this was borrowed to fund housebuilding and regeneration schemes through what the council now calls its “commercial asset management framework”.
Council leaders expect the income from these schemes will be enough to pay off this debt.
However, the auditors pointed out that the council spent £10.4m more than it planned on servicing this last year.
They said that, as the repaying the debt depended on how well the council’s regeneration company Be First performs, this posed a risk to the council’s finances.
Grant Thornton’s report said: “In our view the council has not identified sufficient contingency arrangements should Be First Ltd fail to deliver, or fail to deliver quickly enough to restore the framework’s financial position.”
Clifton said the council’s financial management had improved since he began auditing the town hall three years ago.
He also said the council was in a better position than other London boroughs that needed costly support from the government to balance their books.
He said: “We note that the council, unlike many London boroughs, hasn’t had to go cap-in-hand to government to request exceptional financial support.”
The report also said the council’s plan to change “provides a credible direction of travel and identifies significant savings opportunities”.
However, it added: “It does not yet demonstrate how the full forecast funding gap will be closed.”
The report said: “Without significant transformative changes to its financial strategy, the council’s long-term financial sustainability remains at risk.”
