No ‘clear evidence’ council acted unlawfully over £30m bank investment

But the costs to the town’s taxpayers following a lengthy audit are expected to be ‘significant’.

In January 2017, the Labour-run council controversially agreed to pay around £30 million to buy a 33 per cent share in Redwood Bank.

But the council failed to sign off its 2017-18 statement of accounts before the deadline of July 31 in 2018 due to a valid objection questioning whether the investment was legal.

In addition, the objection – lodged by retired chartered public finance accountant Chris Haggett – asked whether it was in the public interest.

Grant Thornton is the council’s independent external auditor.

An update was provided by the auditor to the audit and corporate governance committee during its virtual meeting on Thursday, with the committee told the 2017-18 objection has now been determined.

Members were informed the auditor has concluded there is no ‘clear evidence’ that the council acted unlawfully in making the investment and it decided not to ‘seek a declaration to the court’.

Warrington Town Hall

It added it did not feel the matters at hand justified the issuing of a public interest report on the basis that it did not identify any unlawful items, any significant failings in governance or evidence of poor value for money.

However, it has made a non-statutory recommendation around some of the governance arrangements in place and to ensure any changes to decisions or investments made receive appropriate scrutiny prior to approval.

Committee member Cllr Paul Warburton (LAB – Chapelford and Old Hall) asked if the auditor will issue a clear statement about the council’s accounts now they have been resolved and that the council have been ‘cleared of any illegal acts or wrongdoings’.

He was told the objection will be referred to in a formal report which will be made to the audit committee, but a formal public statement will not be made.

Cllr Steve Parish (LAB – Chapelford and Old Hall) asked senior council officer Lynton Green: “Does that mean the accounts can now be published?”

Mr Green, deputy chief executive and director of corporate services, said it does not yet because there is still some work Grant Thornton need to do to finalise the audit of the accounts.

And he said the council knew the non-statutory recommendation was going to be made for a while and said it, along with comments made as part of the LGA peer review, link to issues the council wanted to improve around governance.

Cllr Warburton asked Mr Green to estimate the costs associated to the objection now the council has been ‘cleared of any wrongdoings’.

Mr Green says he will be able to, but not yet, as he and the auditor are still in discussions about the audit fees for 2017-18.

Mr Green added: “There are still some parts I’m challenging.”

Cllr Warburton said: “It’s also had a significant amount of demand on officer time as well, do you have an estimate of how much time this has actually cost the council in terms of officer time?”

Mr Green said: “It has been a significant amount of time – I would say at its peak it was probably taking two or three days a month of my time, possibly of Matthew as well, Matthew Cumberbatch, as well as our teams providing extra support and information in order that Grant Thornton could carry out that review?”

Lynton Green

Mr Cumberbatch is the council’s director of law and governance.

Cllr Warburton said he expects the cost to Warrington taxpayers to be ‘significant’.

Mr Green said it has ‘taken a lot longer than we would have hoped’ to get to the position of deeming what the council has done ‘was not unlawful’.

The council has issued a statement on the matter.

A spokesman said: “We welcome Grant Thornton concluding their review of the public objection to the 2017-18 accounts and are pleased to note that they have not found our investment in Redwood Bank to be unlawful.

“We were always confident that this would be the case, given our detailed due diligence and external support we received, but we are also always looking to improve our processes.

“As a result, during the period taken for this review to be completed, we have made further improvements to our internal governance processes.

“We are now hoping that Grant Thornton will be able to complete their audit of the 2017-18 accounts shortly, so that we can all concentrate our efforts on continuing to support our residents and partners through this challenging pandemic period.”

However, Mr Haggett says it is not correct to state Grant Thornton ‘have not found our investment in Redwood Bank to be unlawful’.

Mr Haggett said what Grant Thornton did say was that in its view it is not clear the council acted unlawfully in making its investment in Redwood Bank, but ‘the ultimate decision as to whether or not it is unlawful lies with the High Court’.

He stated the comment about the auditor not identifying any unlawful items, any significant failings in governance or evidence of poor value for money related to the public interest part of his objection, not the legality part.

Mr Haggett says the auditor’s decision was that ‘it was not clear the council acted unlawfully’.

“By transposition, it was not clear they acted lawfully either,” he said.

“Only the High Court can determine whether the investment was legal or not.

“My objection – which alleged that it was illegal – failed because the auditor declined to seek a declaration of unlawfulness from the High Court.

“He referred to practical reasons for not going down this route, even if it were to be found illegal.

“For completeness, I should add that Grant Thornton rejected the request in the second part of my objection for the issue of a public interest report.”

Mr Haggett also says he is surprised at the auditor’s delay in resolving the objection.

“What I am disappointed about – and bitterly disappointed – is the fact that Grant Thornton’s decision letter is apparently not going to be made public,” he said.

“Grant Thornton have said they will not be publishing it and the council – which has the legal power to consent to its publication – have not so far given that consent.

“I have been informed by Grant Thornton that I would be committing a criminal offence if I were to release details of the letter without permission.

“I find non-publication totally unacceptable and against the public interest.

“It was acknowledged at Thursday’s meeting that the cost of Grant Thornton’s investigation would be significant – I would guess it may well run into tens of thousands of pounds – and this cost will ultimately be borne by Warrington’s council taxpayers.

“Surely, they will feel understandably aggrieved if – while being required to pay for the investigation – they are denied the opportunity to read the results of it.

“The facts surrounding the Redwood investment decision are laid bare in the decision letter and should not be suppressed if the interests of local democracy are to be properly served.”

In relation to when the 2017-18 accounts will be signed off by Grant Thornton, the council said it understands the auditor hopes to conclude the audit ‘shortly’.

A spokesman for Grant Thornton UK LLP said: “We have a commitment and a responsibility to maintain the highest professional standards in our work.

“The 2017-18 audit for Warrington council is a complex and unique matter and we expect this to be completed soon.

“We are also working with the council to resolve the 2018-19 audit at the earliest opportunity.

“We can confirm that we have received an objection to the council’s 2018-19 accounts that we are currently dealing with. As a result, we are unable to comment further at this time.”

Grant Thornton said decision letters produced by an auditor in response to objections to council accounts are not intended to be public documents.

The spokesman said: “However, we have already provided permission for the objector in this case to share the information with several individuals, who cannot now share it any further without our permission.

“We have only recently received a request for the decision letter to be shared further through a media publication and are still considering this request.”

Warrington South MP Andy Carter says transparency should be at the heart of local government finances.

The Conservative politician claims the council is not being open and transparent and expressed concerns over the public only ‘hearing an interpretation of the investigation’, rather than being able to ‘read the facts for themselves’.

MP Andy Carter

Mr Carter added: “This whole issue arises simply because councillors have adopted a reckless and secretive strategy, racking up more than £1.6 billion in debt, it’s hardly surprising that local residents are questioning the approach taken by the council.

“This objection process is one of the key ways by which taxpayers in Warrington can be assured that their concerns about expenditure are investigated fully.

“The council has a duty to demonstrate that it is complying appropriately with the Prudential Framework Code, which should also be published for the purposes of transparency.

“Having raised the matter with ministers recently, I’m pleased to see that the Chancellor is currently reviewing the lending terms of the principle source of financing for local authorities.

“It appears that the Government too is concerned that councils, like Warrington, are diverting public works money into investment assets for yield.”