The UK’s accounting watchdog has launched an investigation into an accountant at Thurrock council after the Conservative-run local authority’s failed investment spree landed it in effective bankruptcy.
The Financial Reporting Council (FRC) said its move related to an individual’s compliance with governance, reporting, regulations and professional standards at the Essex council over its operations and investment activities between March 2018 and March 2022.
It is understood the investigation concerns a former council official who is a member of a professional accountancy body, rather than an external auditor. The FRC did not name the person.
Thurrock declared itself in effect bankrupt in December 2022 after running up a deficit of £500m – among the largest losses in local government history. An official government review found the authority had recklessly gambled hundreds of millions of pounds on risky commercial investments while covering up evidence of its losses and attempting to silence critics.
Ministers hope £64bn package will stave off more local council bankruptciesRead more
The review blamed the collapse on the council leadership’s failure to challenge a series of commercial investments.
It comes as growing numbers of local authorities in England run into financial difficulties after ploughing funds into risky investment schemes, aiming to generate income to offset the impact of central government austerity.
While there have been several high-profile casualties where councils racked up massive debts to cover investments – including Woking, Slough and Croydon – leaders in local government are also warning that soaring cost pressures and years of underfunding are pushing others to the brink.
Dozens of local authorities are thought to be at risk after an unprecedented rise in councils issuing section 114 notices last year – a mechanism used to declare effective bankruptcy – including Labour-run Birmingham and Nottingham.
Nearly one in five council bosses from across the political divide believe it is “fairly or very likely” that they will go bust by next year as funding levels fail to keep pace with inflationary costs and rising pressure on services, according to the Local Government Association.
Ministers last month announced a 6.5% increase in the funding available for English councils for 2024-25, a rise of about £4bn on the amount allocated a year earlier. The LGA said the increase was not enough to meet “severe cost and demand pressures” facing councils.
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Andrew Jefferies, leader of Thurrock council, “strongly welcomed” the FRC investigation. “As a council, we recognise that things went very wrong. Our focus now continues to be on taking the necessary action to put that right,” he said.
“The announcement that the FRC will investigate the issues we’ve raised about the failings of the past is strongly welcomed by all of us working together to create a…
2024-01-03 09:29:46
Original from www.theguardian.com
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