Croydon. Image © the Picture Studio, Shutterstock
Following the publication of a public interest report in October 2020, the authority commissioned local government expert Richard Penn to compile an independent report on the issues at the council.
His report, completed in March 2021 but only just published, found that the senior leadership team accepted that a small number of councillors controlled the “operational domain” of the council.
“While the council’s governance looks fit for purpose from a distance, these interviews revealed a highly dysfunctional organisation characterised by a culture of poor decision-making and conduct of some of the council’s most senior managers,” he wrote.
“This is evidenced, among other things, in the belief that needing to be ‘fleet of foot’ meant that public money could be spent without due regard to public decision-making and internal managerial and financial controls.”
He noted particular criticism around council housing subsidiary Brick By Brick, which the authority loaned £200m despite it providing no additional income.
The report said there were no formal records or details that anyone was “keeping an eye on” the £200m loaned to Brick By Brick, and ensuring that returns actually materialised – a situation Penn’s interviewees described as “inexcusable”.
It said senior officers failed to challenge the viability of the company in 2018 when it requested more money from the council, and that they seemed to have acted as “silent bystanders or had been compliant with these abnormal practices”.
The council adopted a three-year savings plan in February 2017, but this was shelved following an adverse Ofsted inspection later that year.
This led to the council diverting more funding towards children’s services, taking valuable resources away from other departments, including the authority’s finance function, Penn said.
“The finance team was under-resourced and had been reduced as part of the savings to put resources into children’s services after the Ofsted judgement in 2017,” the report stated.
“The finance team’s ability to effectively challenge and play an impartial role in the management of a £1bn annual budget was severely compromised.”
Respondents said that while the council planned to expand its commercial operation to offset funding constraints, decision-makers were not “clever enough to know what they were doing, and dissent or challenge was dismissed”.
They said senior officers and councillors, including the former chief executive, did not want to “hear any bad news, and they buried their heads in the sand”.
Croydon mayor Jason Perry, who was elected last year, said: “I made a clear commitment to publish the Penn report because it is in the public interest, and I’m pleased that we have finally been able to do so.
“The process has taken longer than anyone would have wanted and, while I respect due process, it is crucial that we now act quickly on the recommendations and hold those responsible for the financial collapse of Croydon Council to account.”
Croydon issued two S114 notices in 2020-21 – the first in November 2020 – and has so far been allowed to use £145m of capital receipts to fund revenue spending.
It issued a third notice in November, saying the authority would be unable to balance its 2023-24 budget without additional support from the government.
