An advisory notice issued by KPMG to the council has stated Northamptonshire’s budget does not balance and therefore is in breach of the Local Audit and Accountability Act 2014.
KPMG has raised fears that budget relies too heavily on capital receipts from the sale of publicly owned assets, which Northamptonshire has valued at £40.9m.
The auditors have pointed out that this is entirely dependent on achieving the lawful sale and leaseback of the council’s new headquarters, which the local authority recently announced it would sell.
KPMG’s advisory notice said: “The authority’s reliance on one-off measures is not a sustainable strategy in the long-term and does not address the underlying reasons for the structural deficit.”
A Northamptonshire County Council spokesperson said: “We have been clear that there are risks in our budget proposals for 2018-19 given this funding position and the on-going demand pressures we face.
“Given the severity of our financial position we are having to maximise the use of capital receipts as encouraged by the government to enable us to transform and protect statutory services.”
In January 2018, communities secretary Sajid Javid sent in an inspector to investigate whether the county was failing to comply with its value to duty.
Northamptonshire issued a ‘section 114’ notice in early February, which banned expenditure on all services except those that protect vulnerable people.
Northamptonshire’s problems were thought to have stemmed from a reduction of central government funding on top of increased demand put on adult social care services.
The council will now review the advisory notice at a full council meeting on 22 February and a further extraordinary council meeting on 28 February.
Don Peebles, head of CIPFA policy & technical UK, said: “Following last month’s Section 114 notice, the accuracy and robustness of the budget Northamptonshire submits for 2018-19 is critical.”
He noted that there are three circumstances under which a notice will be issued. “All of them relate to the possibility that an unlawful action (for example unlawful expenditure) could arise. This includes any decision, course of action or an entry of any item of account.
“This also means that even though the legislative term is ‘Advisory’ the issue of the notice does have a compulsory effect.
“Following the due statutory process is essential at this time.”
Peebles said it would be “inappropriate” for CIPFA to comment on a specific council’s details. However, he added: “If a budget does not balance, a council could be unlawfully in breach of the Local Government Finance Act 1992.”
