Bournemouth council lends money to local NHS

“A South West Council has agreed a £14.9m loan to its local NHS foundation trust for a new pathology centre.

Bournemouth, Christchurch and Poole Council last week agreed the loan, which, at an annual interest rate of 3.5%, will reap it £4.2m over the 15 year period of the loan.

The trust will use the cash to pay for a new pathology unit, which the trust hopes will lead to efficiency savings.

A report to councillors said that “it is important to emphasise that the Royal Bournemouth and Christchurch NHS Foundation Trusts will be required to make £993k annual capital repayments and the associated interest payment regardless of their financial position, operational performance or success of the One Dorset Pathology service”.

Foundation trusts are not legally allowed to secure a loan against operational assets, so the loan will be unsecured, the report said.

However, it would be issued based on creditor assurance as laid out in Department of Health guidance.

A risk assessment carried out the council concluded that central government would pick up any liabilities if the trust got into financial difficulties and was dissolved.

“This means that all creditors of an FT are protected and all liabilities of all FTs are safeguarded,” the report said.

The trust will make repayments of just under £1m each year.

An interest rate of 3.5% has been based on a suggested rate of 2.75% plus the 0.75% EU state aid margin rate for organisations for strong and normal levels of collateral.

The council said that it would earn £2.4m more on the loan than if it invested it at the prevailing 15-year interest rate.

A one-off upfront arrangement fee of £45,000 will also be payable to cover due diligence and monitoring work.

The council has extended its normal five-year period for investments in order to allow the loan to be made.

The new pathology facility will either be built on land owned by the Royal Bournemouth and Christchurch Hospital at Castle Land East Bournemouth or by land purchased from the Council which is currently part of an adjoining site.

The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust provides healthcare to the residents of Bournemouth, Christchurch, East Dorset and part of the New Forest. It gained Foundation status in 2005.

The council follows two others which are known to have made similar loans to NHS trusts.

In 2014, Northumberland County Council finalised a loan of £100m to a local NHS trust, which used the money to buy itself out of its outstanding PFI contracts.

In May last year, Blackpool Council agreed a loan of £27.1m to Blackpool Teaching Hospitals NHS Foundation Trust to help restructure the trust’s debt.”

Council agrees £15m loan to NHS trust

“£28m budget black hole forecast for Devon County Council”

“A report to Devon County Council’s (DCC) cabinet meeting tells councillors that the total projected budget overspend, four months into the 2019/20 financial year, is £4.3m.

However, Mary Davis the county’s treasurer, says this figure assumes a funding shortfall of £15.8m for special educational needs and disability (SEND) will not be dealt with this financial year.

It also assumes planned contributions to reserves of £8m are not made.

The report said that, without these adjustments, the projected overspend would be £28.1m.

Mrs Davis’ report added: “The Government has announced additional funding for SEND in 2020/21 but nothing as yet for the current year.

“It is suggested that the deficit is not dealt with at the end of this financial year but held on the balance sheet as a negative reserve.

“It is not a solution, but it is a mechanism that gives more time for a solution to be found.”

The cabinet are recommended to note the budget monitoring forecast position.

Councillor Alan Connett, leader of the Liberal Democrat group, said the projected £28 million shortfall highlights that Devon is being ‘short-changed’ by this Government.

He added: “More children and adults need the council’s support.

“Our schools are being cheated.

“They get around £300 per child less than the national average, and our children with special educational needs are being let down.

“Those that need our help the most are being denied by a Government that could act, but won’t.”

The cabinet agenda report says DCC could receive an extra £11.7 million next year and £9.5 million in 2021/22 for education, following the Government’s spending review, and an extra £8.6 million to help support children with special needs next year.

County council leader, Cllr John Hart, said: “We have been campaigning with headteachers, governors and parents for fairer funding for Devon’s schools and the promise to ‘level up’ under-funded areas is one I very much welcome.

“It’s also encouraging to see Mr Javid (Chancellor for the Exchequer) announcing a three-year funding cycle for education as compared to the single year for other services.”

https://www.exmouthjournal.co.uk/news/devon-county-council-budget-forecast-deficit-1-6264239

“Councils ignoring public right to audit accounts”

“Local authorities are refusing to let the public access key information on how their money is being spent, research by the Bureau of Investigative Journalism has found.

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.

Some authorities gave only restricted access to the information, or refused altogether, often on grounds that releasing the information could cause financial damage to the councils and their business partners. …”

https://www.thebureauinvestigates.com/stories/2019-09-11/councils-ignoring-public-right-to-audit-accounts

“Government turns blind eye as council sells “family silver” to pay bills”

“Publicly owned buildings and land could be at greater risk of being sold off by cash-strapped councils after a government ruling, a leading expert has warned.

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.

In the months that followed the council was asked by the government to explain its position. The Bureau obtained copies of correspondence between the council and MHCLG under freedom of information laws. In the most recent letter obtained by the Bureau, dated May 16, a government official made clear to the local authority that the way it spent capital receipts did not fall within the legislation. …”

https://www.thebureauinvestigates.com/stories/2019-09-09/government-allows-peterborough-council-to-sell-family-silver-to-pay-bills

“Councils face bankruptcy after Tory cuts open £25billion black hole in finances”

“Council leaders say government funding cuts will leave a £25billion black hole and plunge stretched local authorities into worse debt.

Research by the TUC and New Economics Foundation think-tank shows the plans will lead to greater suffering and even council bankruptcies.

Grants will fall almost to zero and plans to let councils keep income from business rates will not match the shortfall.

Nationwide, £16billion has been taken from the Local Authority Grant since 2010, equivalent to 60p in each £1.

Labour ’s Paul Dennett, leader of Salford Council, said this summer that
3,000 children in his area were given emergency food vouchers, police numbers have been cut by 2,000 and new foodbanks have been opened.

“Local government is on its knees,” he said.

“Without serious investment, we will soon see more bankruptcies in local councils, as has happened in Conservative-run Northamptonshire.”

The TUC report shows ringfenced government grants to councils have fallen from £32.2billion in 2009-10 to £4.5billion in 2019-20, and are expected to be cut further by 2024-25.

TUC General Secretary Frances O’Grady warned: “A colossal hole will be left in local budgets and the poorest communities face the biggest shortfalls.”

https://www.mirror.co.uk/news/politics/councils-face-bankruptcy-after-tory-19843933

“40% of local government audits were not completed by 31 July”

“The pressure has been on external auditors this Summer. The first year of the new Public Sector Audit Appointments (PSAA) contracts, with fees cut by 23%, reshuffled appointments, and firms starting work in regions where they previously had no presence. The second year of an over-tightly compressed audit season. The hot breath of regulators on the necks of those firms whose commercial colleagues have been involved in recent headline audit failings.

It has therefore been expected for some time that in August we would be talking about failures to meet the target date for the publication of the audited statement of accounts. But the news that 40% of local government audits were not completed by 31 July is still something of a shock.

It is important to confirm that an authority missing the 31 July target date has not broken any laws. Regulation 10 of the 2015 Accounts and Audit Regulations says that where an audit has not been concluded before 31 July, an authority must proceed to:

publish on its website a notice stating that it has not been able to issue the audited statement of accounts, and the reasons for this

when the auditor’s final findings from the audit have been received, follow the procedures for publication that would have applied before 31 July.

In both cases, the actions are required to be carried out as soon as reasonably practicable, so there is no need to rush to convene an emergency meeting for member approval of the finalised accounts. If key members and officers have booked holiday or there is difficulty fitting a committee meeting into the council calendar, then reasonable time can be taken to sort everything out.

There is no sanction for missing the target date. The worst that will happen is that an authority will become part of the statistics in PSAA’s annual report on the results of auditors’ work (but unlikely to be named and shamed unless the accounts are still not published by 30 September, if the approach in the 2017/18 report is followed for 2018/19).

There is also a risk of local reputational damage, but this can be limited if delay is not the authority’s fault by a precisely worded notice explaining why publication has not taken place.

But timeliness has not been the only audit issue in 2018/19. Our experience in providing technical accounting support to a number of authorities of all sizes across the country (and involving all the firms with PSAA appointments) has been that the burden of audit has increased in three areas:

the firms are becoming increasingly dogmatic about the technical treatments that they will accept

there is an increasing burden for authorities in training auditors in local government accounting

more work is being carried out to meet the demands of regulators rather than because it is necessary for an audit compliant with the Code of Audit Practice.

The common approach over the summer has been for auditors to inform authorities of the position they take on a technical issue and to expect authorities to comply with it, often under the threat of a qualified audit opinion if they don’t.

The problem here is not just that this is an inversion of the expected order of things – it is an authority’s responsibility to prepare the statement of accounts, making the judgements that it considers it needs to in meeting statutory requirements; the auditor’s role should then be to consider the reasonableness of what the authority has done. Where there is an issue that permits a plurality of possible viewpoints, the auditor’s job is to see whether they can construct a fence robust enough to be sat on so that they can admire the view on all sides.

The impact of the McCloud judgement is a good example. An insistence by auditors that the potential cost should be accrued in the financial statements. Reasonable arguments that the extent to which authorities might be required to fund remedies necessitated by government discrimination is too uncertain to allow any reliable estimates to be made being dismissed with a reiteration of the auditor’s expectations. Repeat of Step 2 with more reasonable arguments. Authorities agreeing to end the debate by amending the accounts, with little conviction that it is the right thing to do.”

Stephen Sheen: The state of local government audit