Authorities are:

redacting documents to “protect commercial interests”;
setting up council-owned companies that are removed from scrutiny;

failing to respond to members of the public who try to exercise their right to inspect council finances

The Local Audit and Accountability Act 2014 (LAAA) gives citizens and journalists the right to inspect the accounts and related documents of councils, police, fire and other local authorities, and to object to them if they believe something is amiss. It is an especially important right at a time when public bodies are under unprecedented financial pressure.

However, when Bureau journalists and volunteers attempted to exercise that right, some authorities withheld or heavily redacted the information. There was often little evidence that the public interest had been considered and no way of challenging the decision short of a costly court battle.

In one case, the Bureau was prevented from reading a contract because a council officer believed the company involved would sue. Another council refused access to the accounts of a company it had set up to manage a large property portfolio, raising concerns about transparency and accountability.

Duncan Hames, director of policy at Transparency International UK, said: “It’s critical that the public and press are allowed access to key documents about the finances of local authorities to ensure there is no place to hide for the misuse of public money.

“The law is clear that this financial information should be out in the open, so it is imperative that those failing to comply do not continue to withhold it from public scrutiny.”

Commercial interest over public interest

To test the law, Bureau Local volunteers submitted requests to nearly 50 local authorities asking to inspect documents — such as contracts and invoices — relating to the use of private consultants during multimillion-pound property deals, a subject the Bureau is investigating.

Peterborough council appeared to breach one of the government’s “golden rules” between 2015 and 2019 when it balanced its books by using £24 million raised from selling assets.

However, after an inquiry into this practice — prompted by the Bureau — the Ministry of Housing, Communities and Local Government (MHCLG) has decided to take no action against the council, potentially leaving the door open for other councils to do the same. The decision seems to be a U-turn, as government officials had previously told the council they disagreed with its position in correspondence seen by the Bureau.

Professor Tony Travers, of the London School of Economics, told the Bureau more local authorities may now take the opportunity to sell the “family silver” to make ends meet.

The ministry declined to comment when asked whether Peterborough’s spending was legal and if other councils are allowed to make use of the policy.

Local authorities are supposedly barred from selling their assets to plug gaps in their finances unless the money is used to fund cost-cutting measures. The regulations are designed to prevent councils becoming reliant on selling off land and buildings to pay running costs.

This is exactly the situation Peterborough finds itself in, leaving it with little of value left. It used money from selling off assets, called capital receipts, to pay what is known as the Minimum Revenue Provision charge, which is a proportion of its annual budget that has to be set aside to repay loans borrowed to fund things such as building schools.

An investigation by the Bureau found that, since 2015, Peterborough had used capital receipts totalling £23 million to meet the cost of MRP, despite guidelines which say the charge must be met from councils’ day-to-day budgets. The council’s latest accounts, released since our story was published, bring that figure up to £24 million.

This reduced the pressure on the Conservative-led council’s finances but also made it dependent on selling assets to break even – an unsustainable position in the long term, as Peterborough itself admits.

In total, Peterborough sold about 50 assets — including pubs, petrol stations, a former community college and farmland — between 2014 and July 2018. In February a further 27 sites were earmarked for sale over the next two years, including a bowling green, allotments, a library and a car park. A Labour councillor called it a “fire sale”.

After the Bureau asked the government about the situation in Peterborough, an investigation was launched. In response, the council insisted it had not broken the law, adding that its spending had been approved by auditors and other external advisers.

Speaking at a council meeting a day later, David Seaton, Peterborough’s cabinet member for resources, dismissed the story as “fake news” and said the council had sought the advice of a leading financial QC who had “given us the opinion that he cannot see Peterborough council acted illegally in any way”.

Councillors then passed this year’s budget, which includes a further £10.6 million in capital receipts to pay the MRP charge.

The allowance, which was backdated to October 2016, was approved by a previous Leader of Surrey Heath Borough Council to recognise the additional work and responsibilities undertaken by the chief executive.

The council said it had received a number of enquires on the matter.

In a statement Surrey Heath said: “At the request of the Chief Executive, the Performance & Finance Scrutiny Committee will be asked to consider the appointment of an independent investigator to examine the procedure followed to award the additional duties allowance. The Chief Executive’s basic salary for 2018/19 was £120,687 plus the additional duties allowance of £15,000.”

Cllr Richard Brooks, Leader of Surrey Heath, said: “The council is committed to openness and transparency. All councillors and officers will cooperate fully in the independent review with any recommendations taken to full council.

The penalties imposed mark a significant rise from the £13m in fines handed out by the Financial Reporting Council over the 2017-18 financial year.

The total would have reached £42.9m in the year to March 2019 if the FRC hadn’t offered discounts to firms that volunteered to settle cases early.

The rise in fines follows a series of accounting scandals at companies, such as Patisserie Valerie, which has put the work of auditors under heightened scrutiny and attracted criticism from politicians and regulators.

The accounting watchdog said the rise in penalties last year was partly due to more cases coming to a close over the period, as well as a rise in serious misconduct by accountants and the size of the auditing firms involved. The “big four” accounting firms – KPMG, Deloitte, PwC and EY – accounted for six of the nine fines imposed.

The big four have attracted heavy criticism over the quality of their audit work, particularly following the Carillion collapse.

Critics said KPMG should have spotted the construction firm’s problems sooner, and claimed auditors were prioritising profits over proper company scrutiny.

The FRC itself has been criticised for failing to keep close enough tabs on the industry, and is now set to be replaced with a new regulator.