AN auditor is considering the use of ‘wider powers’ over Warrington Borough Council’s accounts in what has been labelled as a ‘very concerning moment’.

The council paid around £30 million to buy a 33 per cent share in Redwood Bank – before investing a further £2 million this year.

But it 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.

As reported in September, auditor Grant Thornton found no ‘clear evidence’ that the Labour-run authority acted unlawfully in making the investment.

Grant Thornton is the authority’s independent external auditor.

The accounts have still not been signed off following ongoing delays.

An update was provided by Andrew Smith, from Grant Thornton, during the audit and corporate governance committee meeting at the Town Hall on Thursday.

He told members that the external audit for the years 2017-18, 2018-19 and 2019-20 remain outstanding.

Mr Smith said the reasons for the delay on the 2017-18 audit are multi-faceted and that it was partly in relation to the objection, which was concluded last year, but also due to ‘some unresolved issues’ in the accounts.

He confirmed that while the auditor has been working with the council to resolve those matters, a number of them are yet to be resolved.

Members were informed that the auditor should be able to complete the audit in the coming months, with a report hopefully coming to the committee at its meeting in September – although this depends on whether Grant Thornton receives outstanding information.

Mr Smith confirmed he wrote to the council chief executive Steven Broomhead in May 2020 setting out a ‘various number of concerns’, for which the auditor may consider using its ‘wider powers’.

They comprised issues including the adequacy of minimum revenue provision in the accounts, compliance with the prudential code which predominately relates to the council’s strategy to borrow to invest and the proportionality of that and whether some of those transactions are lawful.

The issues relate to the investment into Redwood Bank and Together Energy, as well as governance around commercial investments.

Mr Smith said the main ‘wider powers’ it would consider are a public interest report, the issuing of statutory recommendations which would mean a recommendation would have to go to full council for consideration, or it could apply to a court if it felt something was contrary to law.

The auditor also issued concerns around the council’s reserves levels.

“On some of these issues, we will be reaching our conclusions around the use of wider powers in the coming weeks,” said Mr Smith.

He also confirmed the reason dealing with the accounts has taken so long is largely due to legal complexity.

Mr Smith said the auditor has earned a £100,000 fee on the audit, but the cost of the audit to the company is ‘many multiples’ of that to date.

Furthermore, both Grant Thornton and the council are set to be met with a hefty legal bill after the matter is concluded.

Cllr Kenneth Critchley (CON – Appleton) said the update regarding the audit of the council’s accounts is ‘hugely concerning’ and ‘it is awful that we’re in this mess today’.

He added: “This is a very, very concerning moment.

“It is irrelevant now what opinion the council has – it is the auditors’ advice that they have to follow and they will have to reach the decisions that they have to reach.”

Cllr Mark Jervis (CON – Appleton) called for officers to arrange for the letter to be distributed to committee members without further delay.

He expressed concerns over the letter not being made public ahead of the election earlier this year and highlighted that it seems a ‘very material letter’ that the people of Warrington ‘should have known about well before’ last Thursday.

Mr Smith highlighted the councils’ minimum revenue provision statement, which he said have a ‘number of deviations’ to statutory guidance.

Meanwhile, it has been confirmed that there are some unfunded pension liabilities missing from the accounts, which relate to the Cheshire Pension Fund.

Former council leader Cllr Ian Marks (LD – Lymm North and Thelwall) labelled the situation over the accounts as a ‘very sorry state of affairs’ and expressed concerns over the reputational damage to council and the extra costs for the council and Grant Thornton because of legal fees.

Cllr Steve Parish (LAB – Chapelford and Old Hall) also shared his views.

He said: “I can understand members being frustrated by this, but we’ve been frustrated by it because every time we think we’re getting there you come up with something else.”

Following the meeting, Mr Broomhead took the opportunity to comment on the situation.

He says Grant Thornton is aware that the council has used external advisors for every investment and carried out due diligence.

He said: “Throughout this lengthy process, we’ve always been in step with the auditors, answering every one of their questions and every issue they raised we’ve responded to.

“It would be fair to say, as well, that Grant Thornton have had some issues on their staffing side.

“We have responded to their issues and their requests at every junction.

“On the unfunded pension issue, they only asked us about that a couple of weeks ago and we had responded.

“As regards to their powers, that’s a matter for them really and what they want to do.

“I think it’s fair to say, as a council, we’ve been very innovatory about what we’ve done in terms of our approach to entrepreneurial activity and investments.

“But all of what we’ve done, we’ve always taken professional and legal advice and the auditors are aware of that – so it’s sort of surprising that they then start to talk about their issues and their concerns. They’ve been in step with us all the time.”

Mr Broomhead also says he sent the letter to the former chair of the audit and corporate governance committee a day after he received it last May, with the council responding to the letter in early June.