Warrington Council and Their Auditor Problem

A report in the Financial Times of 11th May 2024 has revealed that a deeply indebted borough council refused to hand over key information to its auditor amid enquiries into almost £2bn of borrowing.

Warrington borough council in Cheshire had been asked by its auditor, Grant Thornton, for information relating to debts incurred in its 2018-19 financial year. However, the council refused to release this information, leading to the auditor, already delayed by five years in the compilation and publication of its report, to state in its executive summary that there was a “limitation of scope imposed by management’: Auditor-speak which makes it clear that the council refused to disclose information which was vital for the accuracy of the report and that the report could only be judged on that basis.

On 8th May, the Government appointed an inspector to investigate the council and to determine whether the council is securing what is known as ‘best value’ – a legal obligation on councils to maintain best value for the money that they spend. This decision followed a review which took place last year, which found that Warrington council had developed an investments portfolio which was described as ‘very large and uniquely complex’. This portfolio was funded by borrowing.

Warrington’s portfolio contains a smorgasbord of investments, including more than £120m linked to a Monaco-based hedge fund manager called Leee Robinson, as well as a stake in a power company called Together Energy, which went bust in January 2022 and large loans to Matthew Moulding, an ‘entrepreneur’ who used the money to fund a property deal.

Auditing in a capitalist system is vital to maintain trust, or at least as close an approximation of trust as possible. All entities, from companies to charities to trade unions all undergo audits, whereby an outside company will investigate the finances of whichever entity they are auditing and compile a full report on their findings, including an executive summary, a commentary on the state of the finances of the entity, as well as a full breakdown of the accounts, showing income, outgoings, deficits and surpluses. For many they are quite dry and boring, but for people who want to see clearly the financial state of a company, charity or trade union, they are vital information and should be taken very seriously.

Yet Warrington borough council decided that the information that it should have disclosed to its auditors for their 2018-19 audit could be held over until it published its 2023-24 draft accounts instead. Part of the information which would be included in these accounts would be the details of the council’s investment in the form of £87m in loans to solar farms.

In an article on the Class Consciousness Project website on 4th December 2023 on the collapse of Nottingham City Council into insolvency, it was revealed that councils across the length and breadth of the country, whose finances have been cut to the quick by decades of cuts from central government as well as a freeze on raising council tax bills, has resorted to borrowing money and making wild speculations on schemes including solar farms, property and holdings in companies, including energy firms. The Government has, since 2010, tacitly encouraged councils to put its money on bets no more certain than than the 3.45 at Newmarket – however as the hands of councils are tied by Environmental, Social and Governance (ESG) rules, rather than betting on horses, councils have bet their money on less likely bets such as ‘green’ technology and, in an ever-growing number of cases, coming up empty and being put into special measures by the Government.

The article on 4th December 2023 detailed the collapse of Nottingham City Council into what is known as a Section 114 notice under the Local Government Finance Act 1988. Warrington isn’t there yet, but their conduct with the auditors appointed to undertake a thorough examination of the council’s finances is yet another manifestation of the parlous state that council finances are in and the lengths that councils will go to to speculate in hair-brained schemes and to cover up their tracks when their speculations go belly-up. Things in Warrington have got so bad that the auditor has requested to be relieved of their duties.

It is clear that questions over Warrington council’s colossal debt-funded investments portfolio have been asked for at least six years, given that the council has withheld information on that very matter from their own auditors going back as far as 2018. The key to proper auditing is openness – the disclosure of all information requested by the auditor and a willingness to assist those charged with carrying out the audit in any way possible. Warrington has consummately failed in its obligations to the auditors and, more importantly, to its constituents, who will pay the price for the profligacy of the council through cuts to their services.

Those within the council responsible for wild speculations and for withholding information from the auditors should resign.