• Home
  • About
  • 151 IMPACT AWARDS
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

Impact Awards –>
  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Auditors issue Birmingham with third section 24 notice

0
  • by Colin Marrs
  • in 151 News · Resources
  • — 27 Mar, 2019

Auditors have issued a third section 24 notice in three years to Birmingham City Council, concluding the authority faces a “unique level of one-off risks”, including funding for the 2022 Commonwealth Games.

The section 24 notice, issued by auditor Grant Thornton, legally requires the council to take action on a number of areas relating to governance and finance.

In a letter to the council, the accountancy firm warned the council over its use of non-earmarked reserves, even though these currently stand at a healthy £152m.

The letter said: “While the council’s reserves, earmarked and un-earmarked, are substantial, they should be viewed in the context of the unique financial risks that the council faces, which are more considerable than those faced by most other local authorities.”

The council’s finances for this year relied on using £30.5m of reserves, while the 2019/20 budget allocates £5.9m in general reserves to support the budget, and £21.1m of earmarked and other reserves for other initiatives such as “pump-priming” savings schemes.

The letter said Birmingham is “prudent” in recognising the dangers it faces.

“However, the council in our view faces a unique level of one-off risks,” it said.

“In addition, any failure to deliver on planned savings over the next three years, could also lead to a depletion of reserves.”

According to the auditors, risks faced by the council include:

The Commonwealth Games, to which the council has committed £184.7m.

  • The project assumes partnership funding of £75m, of which £30m still needs to be agreed by partners. “Accordingly, there remains a risk that the council might have to meet further liabilities if costs are not well controlled,” the letter said.
  • Equal pay claims, “although it is difficult to quantify the extent of the risk as there are inherent uncertainties surrounding the potential volume, timing and chances of success of any future claims”;
  • The ongoing dispute with contractor Amey over a highways contract. “Negotiations are ongoing to resolve the dispute but there remains a risk that Amey could exit the contract which could result in financial liabilities accruing to the council,” according to auditors;
  • The Paradise Circus regeneration scheme, for which finances have been restructured following cost overruns of more than £50m. Grant Thornton said “strong management is needed between [the council and its partners] to ensure that no further overspends occur on the remainder of the project”;
  • Wholly-owned construction and facilities management company Acivico, which has a new management team after being “poorly managed in recent years”, leading to a £10m debt write-off.

Other risks faced by the council, the letter said, include the potential need to increase employer pension contributions, as well as additional service cost pressures, particularly in relation to social care service.

Grant Thornton also said that a lack of transformational plans within the council’s financial plan for 2019 to 2023 “will become more important in later years as it may become more difficult to achieve significant savings through less ambitious schemes”.

The statutory recommendations outlined by the auditor called for the council to:

  • reduce the likelihood of non-delivery of savings plans through “clear plans and robust programme management arrangements”;
  • broaden transformational work to deliver savings;
  • keep the potential impact of one-off budget risks under close review and develop contingency plans in case they crystallise.

Elsewhere, the report had harsh criticisms of the council’s governance, particularly in relation to the recent industrial dispute with waste workers.

It questioned how much progress had been made since a critical review of governance and organisational capabilities of the council led by former Department for Communities and Local Government permanent secretary Bob Kerslake.

Grant Thornton said: “While corporate management capability and capacity has strengthened, the council has, at times, continued to exhibit the same short-termism and tendency to avoid managing deep-rooted problems that Kerslake identified as being the biggest block to progress four years ago.”

By law, the recommendations have to be discussed by full council within a month, and are set to go before councillors at a meeting next week.

Reacting to the notice, Conservative councillor Alex Yip, said: “The council continues to have a blame culture blaming the background of national cuts, ignoring the fact that these cuts are proportionate to what every other council has faced despite which the vast majority of councils have never had a Section 24 auditors notice, and none have ever had more than one.

“It is this blame culture of the political leadership which continues to hold the city back as excuses are made for poor decisions and no one is willing to accept responsibility.”

Writing in Room151 in 2017, Chris Game, a visiting lecturer at INLOGOV (Institute for Local Government), described a section 24 notice as akin to being “required to wash your dirty linen in public”.

He said: “The recommending…may sound chummy, but it’s the bullet-shaped chumminess of a Mafia ‘message job’.

“Section 24 notices are very nasty, and happily very rare, or were.”

Birmingham previously received two section 24 notices relating to finance and governance issues – the first in October 2016 and the second in July last year.

Get the Room 151 Newsletter

Room151 Conferences & Events

Share

You may also like...

  • Bonds agency unveils replacement for ‘joint and several guarantee’ Bonds agency unveils replacement for ‘joint and several guarantee’ 23 Oct, 2019
  • MP tables bill to ban PWLB borrowing for commercial property acquisition MP tables bill to ban PWLB borrowing for commercial property acquisition 17 May, 2018
  • Cash managers report steady MMF demand Cash managers report steady MMF demand 14 Nov, 2019
  • Asset sales to fund equal pay claims Asset sales to fund equal pay claims 9 Jan, 2013

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 4 hours ago

    Impact Awards: Cheltenham’s tech hub and Hackney’s recovery from cyber attack: The CCLA/Room151 Impact Awards spotlight  finance teams with a direct impact on their local communities and the environment. This week we explore Cheltenham Borough Council’s… dlvr.it/Rxg53h pic.twitter.com/iH8oGKOfSs

    Room151 1 day ago

    Collaboration the key to district recovery post-pandemic: Regeneration and economic growth will depend on districts’ ability to secure funding and work with public and private partners, argues Sanjiv Kohli. Covid hit us in March 2020 and immediately[...] dlvr.it/Rxb4VK pic.twitter.com/FiMynEQVPU

    Room151 5 days ago

    Impact Awards: Liverpool’s cafe culture and Warrington’s investment in homes: The CCLA/Room151 Impact Awards showcase  finance teams with a direct impact on their local communities and the environment. This week we spotlight Liverpool City Council’s… dlvr.it/RxJsKb pic.twitter.com/dEYpaz6HP0

    Room151 5 days ago

    Doing something in #localgov #finance for housing or regeneration? Check out the 'Place Shaping' category room151.co.uk/impact-awards/… sponsored by @31tenConsulting in the CCLA/Room151 Impact Awards. #timetoenter !! pic.twitter.com/dU99vE6Wws

    Room151 6 days ago

    Doing something in #localgov #finance for Adult Social Care & Health? Check out the ASC&H category room151.co.uk/impact-awards/… sponsored by Fundamentum Social Housing REIT in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 6 days ago

    Doing something in #localgov #finance for the environment? Check out the 'carbon management' category room151.co.uk/impact-awards/… sponsored by @ACSLLP in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 6 days ago

    So what are the seven categories for the CCLA/Room151 Impact Awards? Here they are room151.co.uk/impact-awards/… #localgov #finance #outcomes

    Room151 6 days ago

    Why should LGPS be concerned about rising inflation?: The impact of the coronavirus pandemic, lockdown and wider economic uncertainty created  deflationary pressures which raise important considerations for the Local Government Pension Scheme writes… dlvr.it/RxF7Fs pic.twitter.com/JlcjROBIpz

    Room151 1 week ago

    JOB ALERT: LPFA Finance Director vacancy: London Pensions Fund Authority Finance Director and s151 Officer Competitive salary and benefits The largest Local Government Pension (LGPS) provider in London with around £6.5 billion of assets and 135[...] dlvr.it/RxBdJP

    Room151 1 week ago

    Richard Harbord: Further signs that local government finance is failing: The crisis in Liverpool and a fix for education budgets are further indication that local government finance is in need of a root and branch review. Even for those students[...] dlvr.it/Rx9PSV pic.twitter.com/sAanC2gEyu

    Room151 2 weeks ago

    Impact Awards: Finance helps launch school meals company and support business during lockdown: The CCLA/Room151 Impact Awards will showcase the way finance teams have a direct impact on their local communities and the environment. This week we spotlight… dlvr.it/RwnlF4 pic.twitter.com/AJhne1MVG4

    Room151 2 weeks ago

    "This work has made a vital, practical contribution to ensuring people have been supported through the pandemic." #impact #151awards #covid #s151 room151.co.uk/treasury/impac… #impactcasestudies #councilfinancemakesadifference

    Room151 2 weeks ago

    room151.co.uk/impact-awards/ #passiton #localgov #s151 #151awards pic.twitter.com/A0uO0dwBkM

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Bonds agency set to drop collective liability requirement
  • Next story Contemplating commercialism: ask the right questions before you invest

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.