A 'sea of red' in auditor's latest report on RBWM's financial arrangements

A ‘failure’ of leadership and governance and ‘cuts to capacity’ have left RBWM in its current position says the council’s chief executive.

On Monday, external auditors for the Royal Borough’s finances, Grant Thornton took councillors through their interim annual report at an Audit and Governance committee.

Concerns surrounding reserves, staffing and ‘recording of the true financial picture’ were initially laid out in a letter to the council in September.

The council’s financial monitoring for 2023/24 indicated a projected service overspend of around £10.4million and there was ‘limited room for manoeuvre’ due to low reserves.

But an ‘already challenging situation’ was made worse by ‘weaknesses’ in the council’s financial governance, said an interim report published on December 2.

Auditors provide commentary on the council’s ‘value for money’ arrangements in delivering services across three areas: financial sustainability, governance and the three E’s – economy, efficiency and effectiveness.

Using a traffic light system, Grant Thornton rated all three areas ‘red’ meaning the council’s arrangements have ‘significant weaknesses’ and need ‘key recommendations’.

The 2023/24 report said the council must now ‘urgently establish corporate grip’ after identifying five weaknesses in financial sustainability, three in governance and one for the three E’s.

“That's a very large number and a lot more than I would find at other similar councils,” said Peter Barber from the auditing company.

“What you will see…is a sea of red because we are concluding that…in each of those three areas, we do not think you have effective arrangements in place for the period in question.”

Chief executive Stephen Evans said there is ‘massive tension’ in the council’s capacity due to this being ‘stripped out’ over many years by budget reductions.

“Putting capacity back in requires money and we don't have any, so that's going to be a difficult challenge which we will continue to work through in a systematic way," he told the committee.

Mr Evans attributed the council's current 'position' to a few factors. 

“A failure of leadership going back many years, a failure of governance compounded by cuts to capacity and I think a lack of appreciative inquiry and a lack of scrutiny at leadership levels," he said.

“We're doing a lot to work [to] improve the culture of the organisation. I think as everybody knows culture is the thing which will enable us to improve for the better.”

Grant Thornton said delays in Value for Money audit work by previous external auditors Deloitte, meant they couldn’t report on progress in implementing recommendations from 2020 and 2023.

“It is a very detailed report…and we make no apologies for that,” added Mr Barber.

He said ‘statutory recommendations’ are a ‘rare, nuclear’ option now increasingly given to high-profile councils by their auditors, but the RBWM is not there yet.

Instead, the Royal Borough has been designated ‘the next level down’ and nine weaknesses have been identified in the report, with nine key recommendations to address them.

Mr Barber said they recognise leadership in the council has changed and there is an ‘aspiration’ to address faults but told councillors: “Please do not underestimate the challenge that you face, and the work required ahead to turn this around.”