Talks to settle dispute on millions of pounds of debts between Northamptonshire's two councils called 'too slow'

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Ongoing talks to settle a dispute on millions of pounds of debt between the West and the North Northamptonshire councils have been called “too slow” by the authorities’ external auditor.

Without an agreement on the final accounts of the former Northamptonshire County Council, the unitary authorities will not be able to sign off their audited accounts for their formative years and gain assurance on their current financial position.

Mark Stocks, an external auditor from Grant Thornton, told the West Northamptonshire Council (WNC) audit and governance committee meeting: “To be candid, I just think you’re being too slow on disaggregation.

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“We’re into year four now of the organisation’s life and we’ve not agreed a position. It’s quite a sizable chunk of cash, around £40 million, that you haven’t yet agreed with the North.

North Northants Council's Corby Cube and West Northants Council's One Angel Square.North Northants Council's Corby Cube and West Northants Council's One Angel Square.
North Northants Council's Corby Cube and West Northants Council's One Angel Square.

“I haven’t reached for statutory powers because I can see that officers are trying to find a solution for you. As soon as I think that stops then I will.

“I can’t sign the accounts until that disaggregation is resolved and it brings risk upon you.”

North Northamptonshire Council (NNC) first revealed in November of last year that they would be pursuing arbitration - a process in which an independent person makes a decision on a legal disagreement - to settle the contended accounts.

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However, both authorities have since agreed that solving the dispute between themselves and not entering a legal battle would be the best outcome. Despite this, finance bosses are still at a stalemate on where the final responsibility for the costs lies.

Mr Stocks added: “If you do end up in arbitration is that going to be three months, six months, a year before you get to a financial position?

“You are in a bit of a tough place now on disaggregation and I do think you need to drive that through as quick as you can. It makes it difficult for both myself and officers to give you a true view on what your financial position is.”

Chief finance officer for WNC, Martin Henry, replied: “We absolutely want to avoid arbitration. It will cost a significant amount of money, I would expect, and it would delay those accounts. That’s why we are working hard to get to a negotiated position with the North.

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“We accept that if we can’t agree a position with them we might have to do that, but I want to emphasise that it’s not a quick fix. From the West’s point of view, this is one of the highest priorities that we have and we are working hard to reach an agreement.”

Mr Stocks also warned the council about their financial sustainability and their level of reserves. They now stand at around £88 million and are predicted to drop to £73 million at the end of the financial year in April, which the auditor contended were too low.

He said: “It is an incredibly challenging time for local government, you’re not the only council with financial challenges. You inherited quite a difficult position from your predecessor authorities.

“I know you have at least enough money through the general fund to take at least one financial shock if something goes wrong, my concern is whether you have enough to take two or three financial shocks.”

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Mr Henry said that it was important to make the distinction between general reserves and earmarked reserves. He said the general reserves were at £35 million which he said was “almost double” what he recommended should be held.

He also added that, when looking at other similar-sized unitary authorities, WNC had higher general reserves.

“I believe they’re sufficient at the moment. If we had no other earmarked reserves, it could deal with £35 million of pressure if we did nothing else about it,” he said.

“The biggest pressure we’ve seen so far in the three years has been the Children’s Trust which was £17.5 million, mitigated through savings elsewhere. I think it could actually manage and cope with a financial shock or more than one financial shock at this time.”

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Auditors also made a series of recommendations including monitoring the Children’s Trust, which is known to be an area of high demand, and savings plans to keep reserves on track and increase the overall balance. Other key recommendations included strengthening the authority’s own internal audit and completing the last two years of financial statements that are still outstanding.