Checks on whether ring-fenced money was spent correctly at Northamptonshire County Council

KPMG has requested evidence from the council to ensure that all terms and conditions for the funding streams have been adhered to.

It comes after the authority ‘misappropriated’ more than £8m of public health grants to support schemes that didn’t meet the correct criteria.

The county council spent the sums of £3.49m in 2015/16, £3.763m in 16/17 and £784,000 in 17/18, but has now pledged to Public Health England to reinvest £7.9m in public health activities in instalments over the next five years.

On Tuesday the stricken authority issued its second section 114 notice prohibiting any new spending, with the first having been ordered in February. For context, only four have ever been issued since 1988.

And now the external auditors - who confirmed the latest set of council accounts would not be signed off by the end of July deadline - is running the rule over other ring-fenced sums to see if they have been spent correctly.

Outgoing chief finance officer Mark McLaughlin, who only joined in December, said: “Fundamentally the decision was made to use this money inappropriately, probably on purpose. It was wrong to do and it is quite right that the auditors are looking at all ring-fenced money.”

There are also concerns over the possible inappropriate use of section 106 money. The funds, which comes from developers to finance ring-fenced projects for the community, could possibly have to be repaid by the county’s future unitary authorities if such concerns are found.

In May 2017 the council’s cabinet approved the use of £9m of section 106 funds, which had been set aside to fund future educational improvements, to be ‘re-financed through council borrowing’ to enable the authority to mitigate the demand on children’s services.

A further £4.5m of section 106 money was used in the 2017/18 accounts.

In its latest report to the county council’s audit committee this afternoon (July 26), KPMG writes: “The authority has yet to provide sufficient and appropriate evidence that it has reviewed the terms and conditions of each individual section 106 contribution, and assessed whether this meets the criteria which would allow a more general utilisation of the funds. It has also yet to provide evidence on the specific items to which this ‘borrowed’ funding was spent on.”

The authority acknowledged in the report that it ‘deliberately looked for monies with long repayment periods’, which pushed back the risk of a challenge from developers and the potential to borrow to top the balance back up.