Derby City Council’s new external auditors, Ernst & Young, have issued a very critical interim report( 23 September 2016) about the way that the Council has been managing its finances for the year to 31 March 2016.
It has made a few significant overall conclusions:
(extracts from the report)
The absence of a Medium Term Financial Plan ( Budget) for the majority of the year leads us to conclude that the Council does not have proper arrangements in place to ensure informed decision making.
Whilst performing our audit procedures we found that some of the basic financial controls were not working as expected. For example, the regular completion and review of
reconciliations was not timely (or in some cases not performed at all). This increases the risk of fraud or errors remaining undetected. We specifically note the risk of fraud
referred to above which arises as a result of the Council not having historic records which show at month/year end a detailed breakdown of Tenant’s rents owed by
property/individual and the weak control environment noted around the management of cash which presents an opportunity for fraud with respect to rental income from Council
We are required to consider whether the Council has put in place ‘proper arrangements’ to secure economy, efficiency and effectiveness on its use of resources. This is known as our value for money conclusion.
The Council is expected to act in the public interest, through demonstrating and applying the principles and values of sound governance.
The Council has exhibited weaknesses in its Governance arrangements. These were primarily disclosed in the 13/14 annual governance statement, and again in the 14/15 annual governance statement. Investigations into historical claims of governance failings continue and the journey to good governance at Derby is ongoing.
We therefore consider that this presents a significant risk to our value for money conclusion.
It also highlights in a number of places that the lack of control in the management of the accounts increases the risk of undetected fraud.
The Council leadership keep telling the public, categorically, that the Council has no money, that they can budget to an accuracy of a few thousand pounds and convince us that modest value cuts with high impact, were absolutely necessary to balance the budget. I have always questioned the validity of these decisions as they create a sense of precision and accuracy where it doesn’t exist. It is clear that the controls and processes are not in place to make those informed decisions and that they have limited bases for ensuring best value for money
Now we know this and that what we were told was, questionable, then the time has now come to stop treating the public like fools!
This report is being reviewed at the Audit and Accounts committee this evening