'Why wasn’t this spotted before?' Questions raised over Shropshire Council’s finances

An annual in-depth review of the authority’s financial position identified significant weaknesses in the council’s arrangements for securing value for money, particularly in financial sustainability and governance.

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Undertaken by external auditor Grant Thornton, the report contains a statutory recommendation – meaning action is legally required – calling for urgent action in four areas.

Actions include an “immediate review” of all services to identify the cost of minimum viable service provision to deliver its statutory responsibilities.

The audit report also calls for the council to develop a “realistic and deliverable plan over the medium term” to increase financial resilience and reduce reliance on temporary exceptional financial support, and to implement recommendations from a previous internal audit review immediately.

Recent figures showed the cash-strapped authority expected to overspend by £47 million by the end of the current financial year, a significant rise from previous estimations following an in-depth review of past and future spending.

At the time of writing, a report detailing the latest overspend forecast had not been published ahead of both a scrutiny and Cabinet meeting next week.

The council say the auditor’s recommendations are not unexpected due to its current financial position, and actions have already been taken in the last few months to address them. This includes setting up and independently chaired improvement board and a realistic improvement plan.

Representatives from Grant Thornton and James Walton, the Section 151 Officer with responsibility for finance at Shropshire Council, presented the report to Audit & Governance Committee on Thursday (November 27).

Councillor Duncan Borrowman (Lib Dems, Llanymynech) told them: “I heard all three [of you] say there’s nothing new here, but there is quite a big ‘new’ here.

“I want to go back to the minutes of our September meeting when it said, ‘a query was raised [from me] about the status of sigificant weaknesses and recommendations from the previous year’s audit, which clarified that, while recommendations were made regarding the financial sustainability, a worsening position meant that ongoing audit work was needed to assess the council’s response’.

“My concern then was the recommendations made previously by external audit really didn’t get to the nut of the problem.

“We now come to the evidence in the latest one. You say ‘there’s nothing new’, but it says, ‘the internal audit review commissioned by the then chief executive identified that the causes of the unanticipated deterioration in the forecast outturn between month 11 and month 12 of 2024/25.

“So my question is, why wasn’t this spotted before? Why has this now come leaping out at us in this report?

“None of this came up before, it’s come up as a result of the [Local Government Association] LGA review and the latest actions.

“None of this happened between month 11 and month 12. This is obviously a cultural and endemic issue that needs tackling.

“What needs to be done about that? Why has this never come up before? That there are these weaknesses in the reporting processes within the organisation.”

In response, Mr Walton said it was “a unique situation”.

“We went into the 2024/25 financial year with £62.5 million worth of savings to be delivered. With ‘brought forwards’ and other mitigations, that became the £90m figure that’s being quoted.

“So this was an unprecedented level of savings to be delivered over that financial year. It wasn’t until around June/July that we got a clarity of what the actual level for that year would be.

“At the same time, we were developing a new set of monitoring dashboards and approaches that would enable us to get much better visibility of the way in which we were managing our savings, and monitoring our financial position.”

Mr Walton explained that, bu the end of the financial year, there was ” a reconciliation” between the different types of dashboards, which were supposed to provide a single version of the truth.

“What it identified was there was actually a discrepancy in that report in the way in which some of the savings had been treated, so it created an anonomy,” said Mr Walton.

“That was then dealt with at the end of the year. It was only following that, that the former chief executive then requested an internal audit review to go into it in more detail and understand what that was.

“That review was done, and the management action, as a response to that, was picked up by the interim chief executive when she came into post.

“In terms of the timing, in April of this year we did not know the situation. It was only in May that this came to light through that reconciliation to get us through to that outturn position.

“It was so serious that it meant we had to change a lot in the way we worked to get that outturn position in. We had to pull out all of the stops to enable us to do that. Following that, we then undertook an objective of a ‘no holds barred’ review of that situation so we could then learn from it.

“That has taken a little bit of time to get that through, Unfortunately, with the way audit committee deadlines have fallen, that report – due to the changes of chief executives – wasn’t ready to be considered in September.

“So, that’s not really an explanation that justifies [it], it’s just an explanation in terms of setting out what we were working through at that time.

“I’m happy for you to take whatever conclusion you want from that.”