Council overspending exhausts reserves
Failures in financial governance resulted in Town Council overspend of £100,000
Over a three-year period, Penmaenmawr Town Council spent more on the local community than it received in income. To pay for this over-expenditure, money has been drawn from the reserves, leaving the Council with almost no financial reserves. This is according to a report in the public interest, issued today (17 October 2019) by the Auditor General.
Today's report shows that the council drew heavily on its balances to fund its expenditure during 2016-17, 2017-18 and 2018-19. While precepts raised from its council tax payers were increased each year during this time, Penmaenmawr Town Council's annual expenditure exceeded the money received in every year. This level of spending was unsustainable, its ability to rely on its financial reserves was time-limited, and at 31 March 2019 the money held in the deposit bank account was almost exhausted.
The report details several failings in the council's governance which contributed to its poor financial management. This included insufficient scrutiny of the accounts, ineffective budget setting, and lack of proper understanding of the make-up of its reserves. It is also of concern that warnings from the internal auditor were ignored by the Council.
Since the period under review, the report notes that the council has put in place several changes to address the governance weaknesses, which has resulted in an increase in balances. The report makes a number of recommendations to the council, including to:
Strengthen government arrangements
Increase transparency in procurement process
Improve the availability and timeliness of information used in financial decision making
Rebuild trust and mutual respect amongst its membership
This report is issued alongside public interest reports for Llanfrothen Community Council, Llanfairpwll Community Council and Rhosyr Community Council. These reports set out failures in governance arrangements and inadequacies in financial management and internal control, which has led to qualified opinions. All three councils failed to maintain proper accounting records as required by Regulation 6 of the Accounts and Audit (Wales) Regulations 2014.
Auditor General, Adrian Crompton said today:
"Penmaenmawr Town Council's overspending is rightly a matter of public concern, and I am encouraged that the Council has since put in changes to address the weaknesses identified in my reports. It is important that all four councils learn from the findings in my reports and address the deficiencies I have identified. Council members have a responsibility to local residents to ensure the proper stewardship of public funds and that Councils live within their financial means."
Acting under delegated arrangements and on behalf of the Auditor General for Wales, the Assistant Auditor General has issued these reports under section 22 of the Public Audit (Wales) Act 2004.
The Auditor General is required to consider whether to issue a report in the public interest on any significant matter coming to his or her notice in the course of an audit, and to bring it to the attention of the audited body and the public.
It gives the Council an opportunity to explain the important steps it has taken to improve arrangements and to ensure that the risk of such failures recurring is reduced to a minimum.
Ater a report in the public interest is issued, the Council is required to consider the report at a full meeting of the Council within one month of the date of issue. At the meeting, the Council must decide whether the report requires it to take any action; whether the recommendations in the report are to be accepted; and what action (if any) to take in response to the report and recommendations.