Concern As Financial Watchdog Uncovers Bigger-Than-Reported Year End Loss At Scilly’s Council

town hall 4The budget crisis facing Scilly’s council is deepening after its financial watchdog uncovered that their overspend last year was over ten times more than first reported to councillors in September.

It means the authority, which is already making significant cuts to its expenditure, has even less cash in reserves than it thought.

The finding was highlighted by the authority’s auditors, Grant Thornton, who reported their work in progress to members at yesterday’s Full Council meeting.

The auditors say the original deficit of £49,000, quoted in the statement of accounts for 2015/16 and published and considered by Full Council in September, was incorrect.

Instead, they say that figure could be £511,000.

It means the Council’s general reserves, essentially its rainy day account for unexpected expenditure, has fallen from a figure of around £1m reported to members in March, to half that – just over £500,000.

That sum could change again if the auditors find more errors.

In addition the auditors are also worried that the Council still doesn’t have a medium-term financial plan in place.

The situation could get worse.

Chief Executive Theo Leijser has said the Authority needs to make savings of £678,000 in the current year although there will still be a predicted deficit of £276,000 by the year-end.

If that happens the reserves could be reduced to under £300,000, which is lower than Chief Finance Officers have recommended in the past as prudent.

If the Council uses up all its reserves it could become technically insolvent.

But it’s unclear whether Mr Leijser can deliver on those savings. In public meetings held in Scilly last year, he told residents that he had set “a balanced budget” where the authority would only spend what it received in income.

So the revelation of yet another large budget deficit could be an embarrassment for Chief Executive Leijser, who has been in the top position for almost three years.

He was appointed by the then new Council Chairman Amanda Martin in late 2013, when reserves stood at just over £2m, to solve the budget crisis and modernise the Council.

However, as the financial watchdog has highlighted, the authority has failed to get its finances in order during that time and now faces serious challenges over its short-term future solvency.

The report again warns the Council that they need to make serious improvements to their financial controls.

The same warning was made in 2014 and 2015 and the auditors say the situation “remains poor.”

The auditors say the authority needs to plan and, “perform a detailed cash flow analysis for 12 months from December 2016.”

And they caution that, “for a council the size of the Isles of Scilly delivering meaningful savings is challenging and there is a risk that depleting resources further could impact on the efficient running of the Council and delivery of core services.”

The statement of accounts should have been signed off by both the external auditor and the responsible finance officer, known as the Section 151 officer – newly appointed Andy Brown from Cornwall Council – by the end of September 2016 and approved by Council at their meeting on 27th September.

That was deferred due to the problems with the accounts and the auditors say they are still not in a position to give an opinion.

In his covering report, Mr Brown writes that he and the auditor, “have agreed that January will be the final deadline for resolution and either way the statements will be produced for signing.”

And Mr Brown states that, “immediate work will begin on moving the Council’s financial systems onto the platform operated by Cornwall Council.”

He says in his report that there will be no financial implications of the move to this new system.

We contacted Council Chairman Amanda Martin yesterday to ask how the authority will be addressing the budget crisis and how this will impact on Council services.

A Council spokesperson told ScillyToday: “The budget deficit is higher than initially forecast. Specifically, debts, and therefore projected income, have been overstated by £546k and need to be restated in the accounts.

“The auditors are working with the council’s Chief Finance Officer to complete the statement of accounts by the next meeting of Full Council on 26 January 2017, by which time the exact figures will be known.”

Council Chairman Amanda Martin said “the closure of the statement of accounts for 2015/16 is of critical importance for the Council to be able to set next year’s budget. Regrettably, our local authority is facing huge budgetary pressures in common with all public authorities throughout the country and further savings will be required.”

10 Responses to Concern As Financial Watchdog Uncovers Bigger-Than-Reported Year End Loss At Scilly’s Council

  1. Adrian December 13, 2016 at 11:49 am

    Morris your perspicacity intrigues me!
    You are so right.—–It would be great to have a (private) discussion with you.

  2. 'Sinnical' Steve December 12, 2016 at 10:09 am

    So what’s new ?
    Here’s a comment from the “Scillonian” magazine of summer 1978 (P.115) :-

    “The council has got to put its house in order. There is too much acrimony nowadays – something new to us. It has got to be eradicated – quickly – or everyone loses.”

    How prophetic !

    • Morris December 12, 2016 at 11:27 pm

      Following 1978 capable, respected men and women who had business acumen, knowledge of how the Islands function and a belief in the essential value of having an independent and unique truly local “local authority”, grappled with the issues and acted to resolve as many as they could, they confronted the poor functioning of the operational leadership of the council and in time addressed it.
      There was a clearly perceived and properly observed separation between councillors who determined policy and officers who administered that policy. Now the boundary lines have been deliberately eroded. The role of officers and the direct involvement of some councillors in the day to day operation of the council is seemingly commonplace with the predictable result that the self established hierarchy of “leading councillors” can no longer afford to take the necessary and dispassionate steps to resolve issues of obvious failure because they were instrumental in the actions that resulted in that failure.

      • Jonny Exile December 14, 2016 at 10:01 am

        Yep, the Woosnam days when the council v the people stuff first manifested itself. Latter day Pat Greenlaw required to drag us out of the latest mess.

        • The Bishop's View December 14, 2016 at 2:51 pm

          Amen to that!

  3. Elderflower December 7, 2016 at 9:39 pm

    The auditors are worried that “the Council still doesn’t have a medium-term financial plan in place”, by contrast most charge-payers were long ago convinced that the present Council really doesn’t have the semblance of a clue let alone a plan about anything of value to our community. If one reflects on the shenanigans in the chamber in the bad old days, then had it been commented that a budget was at risk of being overspent by five thousand pounds it could easily have invoked a pompous theatrical oration on the many failings of the budget holder by a certain lady councillor. Fast forward to the present situation in which the council makes the bland statement that “The budget deficit is higher than initially forecast” when what they should have said is “ The budget deficit is more than ten times greater than we declared and is now in excess of half a million pounds and is likely to go up.” Perhaps councillors and officers would fare better if they were to stop thinking of the budget as their money.

  4. Jon White December 7, 2016 at 6:53 pm

    Like they say enough is enough, it’s time for the Chef Exec, his no 2 and the Council Chairman and Vice Chairman to step down, and let people who care about Scilly take charge, before we end up bankrupt.

    • Simon December 7, 2016 at 10:38 pm

      If you allow for pension contributions and national insurance costs on top of the two top officers salaries the deficit could be recouped in a couple of years if they went. Cornwall is fast being paid to do anything of consequence so what’s the Chairman waiting for? It’s not as if she isn’t used to getting rid of people, though admittedly the cast offs have normally been further down the food chain.

  5. Mike James December 7, 2016 at 2:51 pm

    It is clear that after multiple warnings from the auditor, the Council still hasn’t got a grip on its finances. This is putting the independence of our council at serious risk. It’s time for the the Chairman to take responsibility and resign – she’s had long enough to sort out the problems but instead continues to blame external forces rather than looking closer to home. Enough is enough Cllr Martin. Step aside and let someone else try to recover this mess.

    • High Lanes Drifter December 7, 2016 at 9:54 pm

      The resignation of the Chairman and the Chief Executive would be the honourable thing and consequently most unlikely to happen.