Slough overhauls financial management to tackle ‘significant weaknesses’

Slough BC has taken on a new financial leadership team after a scathing report on its financial management procedures found “inadequate arrangements and insufficient skills and capacity” at the council to prepare reliable financial statements and supporting working papers.

The report by Grant Thornton for the year ending March 2019 also identified concerns over Slough’s financial sustainability and levels of reserves, and weaknesses in the council’s financial governance, monitoring and controls in relation to its group entities.

Slough is facing a financial shortfall of £16m this financial year and £18m next year. In February, the council requested £15.2m of exceptional financial support from the government under a capitalisation directive, which has been agreed in principle but is subject to an assurance review by the Ministry of Housing, Communities and Local Government later this year. Slough has acknowledged that this review “may pick up further issues” which will be incorporated into the council’s improvement plans.

The report points out that the council’s reserves fell from £30.9m in 2012-12 to £4.380m in 2018-19 – putting it among the lowest levels across all local authorities.

Slough’s current financial plight has been made worse by a recent tribunal decision by the Valuation Office Agency that it must repay £5.3m worth of business rates it has been claiming since 2010. The council has also just had to take on £5.5m of debt from its children’s services trust, which has just come back in house after being run by independently since 2015.

Around £2.4m of this debt will be covered by the capitalisation directive, while the Department for Education will cover the remaining deficit.

The Grant Thornton report also found “inadequate arrangements in place” in relation to Slough Children’s Services Trust – which is now renamed Slough Children First Limited – to “understand and use appropriate and reliable financial and performance information to support informed decision making and performance management”.

Grant Thornton reported “significant weaknesses in processes” for preparing both the 2017-18 and 2018-19 financial statements, resulting in “a number of material adjustments and disclosure corrections”.

The auditors anticipate issuing an adverse value for money conclusion because the council’s reserve levels are at “unsustainably low levels requiring action”, with Slough finding itself in an “increasingly challenging financial position”.

“There is no evidence that the council has properly understood the risks involved in running down reserves which are ultimately largely earmarked to support its revenue position,” it said.

Slough has reacted swiftly to the criticism by announcing “fundamental changes to its financial management”.

Its chief executive Josie Wragg said: “Put simply, our financial management has not been the quality we want and, though this has not directly affected the services we provide to residents, it is vital we make improvements and swiftly so our communities can be clear what we are spending their money on.

“We are undertaking a massive transformation journey within the council, one which we knew would expose, and bring to the fore, areas which needed improvement, so we could better serve the residents of our town.

“This journey, alongside work on the accounts for 2018-19 and related matters, has brought the fragility of our financial systems front and centre and we are taking robust action to bring about wholescale and sustainable improvements in the service.”

Slough’s financial woes are also impacted by the economic blow it has suffered due to its economy’s reliance on Heathrow airport. Centre for Cities’ recent Cities Outlook 2021 report states that “in places reliant on sectors that have been hard hit by Covid — such as Crawley and Slough where aviation is important — recovering from the economic impact of the pandemic will be harder as Covid will have a longer term effect”.

Slough’s ambitious regeneration plans have been blighted by question marks hanging over Heathrow’s plans for a third runway. The Crossrail project, which will speed up travel times from the capital to Slough, has also been beset by delays.

Council leader James Swindlehurst (Lab), who has just given himself the cabinet portfolio for financial governance, said: “We already have in place a new financial leadership team providing more robust structures and processes, bringing in the highest quality standards and many of the actions recommended in the reports are already being seen in practice.

“We will be boosting our levels of reserves, are changing our governance of our group companies and putting in place a wholescale training and development programme for our finance staff as well as prioritising the search for support for the existing team.”