Peterborough City Council will need more cash from government as Covid leaves its finances in precarious state

Members of the Peterborough City Council’s Cabinet have heard the latest position of the 2020/21 budget, which has been dramatically affected by Covid-19 spending.

Cllr David Seaton, Cabinet Member for finance, speaking at the online meeting this week (November 16), said: “The Budgetary Control position for 2020/21 as at 30 September 2020, is a forecast overspend of £4.3m.

“This includes the current estimated impact of Covid-19 and the additional Covid-19 response, resulting in a forecast £38.1m of additional pressure due on the council.

“All of this has now been reported to the Ministry of Housing Communities and Local Government (MHCLG), within the October return.

“Since May, I have been bringing these reports to Cabinet covering the implications of Covid-19, and I would remind members that we’re internally tracking these figures on a weekly basis with regular updated reports passed back to the Gold Group and MPs.

“We’ve received thus far a total of £18.8m of direct funding from the government, and ring-fenced funding of £14.9m – which leaves us with my forecast deficit of £4.4m.

“As things stand at the moment, we’re now up to 88% funded against Covid-19 spending, and our updated monitoring projection across all budgets is that net overspend figure of £4.3m – which represents a £7m improvement against the August position.

“That said, I believe it is vital that this Cabinet continues to lobby the government for additional funds to offset the spending we have had to make in response to Covid-19, and I ask for your support with that today.”

Also, in attendance online, was Neil Harris from Ernst and Young, external auditors for Peterborough City Council, who added: “The reason I thought it important to join your online meeting was to set out the response from us as your external auditors.

“I also have a responsibility under the National Audit Officers code of audit practice to conclude on the council’s arrangements for securing economy, efficiency and effectiveness in its’ use of resources, which is our ‘value for money’ conclusion.

“As you would expect, I’ve had regular contact with Peter Carpenter, your Chief Financial Officer and his team, looking at the difficult steps the council has been taking in response to the Covid-19 crisis, and the current position and outlook for the medium and longer term.

“For the members of the Cabinet today, I wanted to add that in my opinion the council has taken all the significant financial steps possible to alleviate the pressures that it finds its’ self under.

“This has been done in a number ways, including regular reporting of financial statements, regular dialogue with MHCLG.

“This culminated in a letter sent to MCHLG in October outlining the council’s financial position, future challenges, as well as the risk the council was at in terms of its’ statutory responsibilities under s.114 and the delivery of a legal budget, now and in the future.”

He said this was important in the context of  audit responsibilities, and he would be presenting an audit results report to the Audit Committee of the council.

He added: “In that report we set out our conclusion of the audit of the council’s account statements, expressing an opinion of whether they represent a true and fair view expression of the council’s performance during the 2019/20 financial year.

“But we’re also asked to express a conclusion on the financial arrangements as a value for money.

“Just to put all of that into context – given the difficulties already outlined, I’m pleased to report that in the draft set of accounts that will be going to the members of the Audit Committee there is a detailed ‘going concern’ disclosure note, that I believe reflects very accurately the position the council finds itself in – which is: that the council is disclosing a material uncertainty associated with its viability position.

“That’s to say, that if the council doesn’t receive additional funding that it’s asking for, there is a risk that the council may not be able to continue to provide the current levels of services that it is providing now.

“I believe that is an appropriate disclosure; it’s one that we’re asking for consistently from all of our local authorities where we have concerns on a council’s financial position.

“Every local authority audited by Ernst and Young has been asked for details: disclosures associated with viability and liquidity, and where we have any significant concerns that can drive something called a material uncertainty that’s been fully and openly disclosed.

“Therefore, our statutory audit report will reflect my expression that the council’s accounts do represent a true and fair view; so, there wouldn’t be a qualification of the council’s accounts.

“But I will be drawing attention to the council’s disclosures associated with going concern and material uncertainty, which I think reflects perhaps proportionately a fair position on where we think the council is, relative to how open and transparent they’ve been on their disclosures.”

Cllr Wayne Fitzgerald asked: “While I note that your work is not concluded, particularly on your value for money statement, the administration of the council is being accused of financial mismanagement of the budget – would you say that was true or not?”

Mr Harris replied: “Based on our work to date, we’ve been reviewing the council’s forecasts both in terms of its ongoing budget and its medium-term financial plan, and the way it’s responded to the challenges both pre- and post-Covid-19 – and I wouldn’t reach that conclusion, no.

“What we are concluding at the moment is a review of the council’s arrangements pre-Covid-19 around it’s savings and transformation programme, and obviously I will need to see the outcome of that before I can reach a conclusion.”

Cllr Fitzgerald came back, saying: “We say that we’re in a position of challenge that’s not of our making; we say we’ve been fiscally prudent – we run things well – and it’s nothing to do with the administration in terms of decisions we’ve made, that we find ourselves short in terms of being able to satisfy the budget. Would you say that was true also?”

Mr Harris responded: “I would say that the council has taken all the appropriate steps from the evidence that I have seen, and I see no reason to issue either a statutory recommendation or a public interest report, which, had the council not taken the steps it has done at the appropriate time, I would’ve felt compelled to do so.”

Cllr Fitzgerald said: “We made a very conscious decision as a Cabinet, with our finance team led by Peter Carpenter, to be as open and up-front as possible about our position with government and MHCLG.

“So, do you have any concerns then about this administration’s capability to run the authority, led by our finance team, and that they’ve been doing the right thing so far?”

Mr Harris replied: “Yes, definitely. If there’s one thing I would look out for when we conclude our audit is more narrative commentary from us on some of the work we’ve undertaken, not just to review the robustness of the base forecast, but what we believe a stress-tested position would be, as well.

“Obviously, we’re in uncharted waters at the moment, so we’d be modelling more severe scenarios around a more protected economic recovery, with implications of longer lockdowns and what that might mean for the council’s financial position.

“While that in itself doesn’t point to any weaknesses in the way the council does things, it’s simply an exercise in stress-testing and what would the worst-case-scenario would look like from our perspective, and would also be a creditable exercise for you and your staff to undertake.”

Cabinet members thanked Ernst and Young for their attendance and received the report.