Experts have concerns over a Derbyshire council’s “significant weaknesses” relating to financial sustainability after years of turmoil.
Mazars, which audits Amber Valley Borough Council – assessing its financial security – has concerns over how the authority plans and manages its resources to ensure it can continue to deliver services.
Gavin Barker, a director at Mazars, told a borough council meeting on September 21 that two years on from raising concerns about the authority’s finances, it is still worried.
He said the council has been fortunate that it received a vast amount of Government funding during the pandemic to help it continue services – at a time when it was already succumbing to financial hardship.
Mr Barker said, although the council was recovering, “there is no room for complacency, it still has a large in-year deficit” and a further review of its plans to fully balance its budget was needed.
He shared an audit report at this week’s full council which details that finances were “better than expected” with the authority’s general reserve (its “rainy day fund”) set to sit at £5.7 million by end of March 2025.
However, he said: “The risk to this is high if savings plans cannot be delivered.”
At one stage, the council had been set to face a budget shortfall of £2.8 million, along with a warning from its outgoing executive director of resources, Sylvia Delahey, that “this is an extremely serious position for the council both financially and reputationally”.
Mr Barker’s report says: “Despite positive actions and progress, there continues to be significant weakness in the council’s arrangements for financial sustainability and this is likely to remain until the council can deliver sufficient savings to bring the annual budget deficit closer to balance.”
The council was previously urged by Mr Barker and its own executives to find ways to bring in more income and only to spend on new projects which would in turn bring in further income.
Local authorities such as Amber Valley only have two major funding streams left available to them after Government grants were gradually axed from millions down to zero – these are council tax and parking charges.
Outside of this, councils are looking to invest in business and space and housing, with sales and rent bringing in vital income, but these projects have high start-up costs.
Mr Barker wrote: “The consequences of not addressing this significant weakness could include ongoing depletion of the council’s financial reserves, putting its financial sustainability at risk and reducing its ability to invest in service priorities.
“The actions taken to date have delivered real savings to the annual budget. These savings, together with other positive outcomes in relation to income and costs, have improved the financial position of the council.”
Cllr Kevin Buttery, Conservative leader of the council, said: “The financial sustainability of this council will remain a risk, whichever political party is in control, until it balances its budget deficit.”
Cllr John Porter, Labour, said: “We are in a parlous (uncertain) state now, we are not going to hit our three-year (budget recovery) target and/or the four-year target.”
He said comments had previously been made by the Conservatives about Labour leadership “failing” when the poor financial state of the council was coming to light. He said he expected similar comments to be made now the condition was being discussed under Tory control.
During this week’s council meeting the authority also debated the ongoing hunt for a new executive director of resources, with several searches since February failing to find any suitable applicants.
It is now going to pay an “executive search company” £13,500 in a bid to fill the role.
Cllr Buttery said that the cost saving and benefit of hiring someone qualified and experienced for the vacancy would outweigh the cost of the specialist search.
Cllr John McCabe said: “People might not be applying for the job because they might think Amber Valley (borough council) will be gone in four or five years.”
This is due to the perception that local government reform may see district and borough councils absorbed into other authorities, a conversation which is now more frequent with the expected creation of an East Midlands Mayoral Combined Authority.
The combined authority is a cooperative effort from Derbyshire and Nottinghamshire county councils and Derby and Nottingham city councils.
It would receive £1.14 billion over the next 30 years, breaking down to £38 million a year.
A directly elected mayor would oversee the proposed new authority, with elections to take place in May 2024.
The leaders of the four authorities signed an agreement “in principle” to form the new super council in late August, but Cllr Buttery said “it is not a done deal”.
He admitted that “£38 million sounds like a lot, but it is not”, but said the deal would open up more access to other funding pots and a combined approach with which to lobby for more money.
