Birmingham City Council’s financial chaos continues, with Audit Committee being told the Labour-run Council will not only miss the backstop date by which they legally have to publish their accounts for the 20/21, 21/22, and 22/23 financial years but also be unable to declare any of the three years accounts as “true and fair”. This means the Council is unable to say if serious fraud took place nor even how much money should be and is in their accounts.
We understand that Birmingham City Council is now the first local authority ever to not be able to present true and fair records for their accounts. Even in Slough where the Council had a disclaimed set of accounts, they were able to say their accounts were “true and fair”.
The Council report is clear that the issues over these three years are local issues specific to Birmingham, namely Labour’s Equal Pay crisis and botched Oracle rollout.
For 2020/21 and 2021/22, this is due to the long delay in the Administration resolving the issue of Equal Pay, caused by decisions they took in 2017. A failure to properly recognise that liability within those years’ accounts means they are likely to be materially understated and work is ongoing to confirm the exact size of the liability in each year.
For 2022/23, as well as the continuation of the equal pay issue, the council has the added problem of its disastrous handling of the implementation of its new financial system from April 2022. This has meant the Senior Financial Officer has been effectively blinded as to the state of the council’s ledger and is unable to place any assurance on this data. This leaves the council in the unprecedented position of being unable to produce any accounts at all for this year, with no obvious prospect for doing so. As well as a blow to transparency and accountability, this also creates issues for financial management going forward with closing and opening balances uncertain and no way of knowing that fraud has not taken place.
Cllr Richard Parkin (Con, Sutton Reddicap) said:
The publishing of reliable accounts on time and in good order is essential to the effective functioning of any organisation. Where taxpayers’ money is involved this becomes even more important for accountability. It is a shocking state of affairs that Birmingham Labour has brought the Council to a position where they cannot produce a statement of what has happened to the billions of pounds of public money they are entrusted with.
The backstop date for publishing accounts was implemented through a 2024 amendment to the Accounts and Audit Regulations in order to address a national issue with a backlog of unaudited accounts. This backlog was caused by a shortage of qualified auditors and changes to regulations around property valuation that required substantially more work. However, these are not cited as a reason in Birmingham’s case which has been locally driven and which puts the council in a substantially worse position than anywhere else. Once the backstop date is reached it is expected that a large number of local authorities will have accounts on which their auditors have not been able to complete their work and the LGA have said it is important that councils are not unfairly judged for something outside of their control. In Birmingham though the issue is much more pronounced and entirely down to local issues, with the council unable to even produce accounts that auditors can review.
Cllr Parkin continued:
Whilst acknowledging national challenges, what we are seeing in Birmingham is the direct result of years of dysfunctional leadership and woeful project management from the Labour Administration. For a limited company, failing to produce accounts would be a criminal offence, for Birmingham Labour it seems to be just another marker of their inability to effectively manage their responsibilities.
