AN INDEPENDENT external auditor has warned BCP Council faces “significant challenges” in relation to its financial sustainability.

Peter Barber, director of Grant Thornton, told councillors he would expect to see “significant improvements” in arrangements going forward.

He warned that if this was not realised, the auditor could be forced to issue a statutory recommendation, which he described as a “nuclear option” only used in worst case scenarios.

As reported, Grant Thornton’s annual value for money (VFM) report for 2020/21 made four key recommendations to BCP Council. Three of these related to the financial sustainability area.

Mr Barber told the council’s audit and governance committee: “As a result of those four key recommendations we are essentially concluding that we don’t think you have appropriate arrangements in place for financial sustainability and we also don’t think you have appropriate arrangements in place for economy, efficiency and effectiveness, and that is a concern.”

He said the council’s now scrapped beach hut capitalisation plan was “innovative” but “high risk”.

“I think the council threw all their eggs into one basket so to say and despite the noises and there was unease for sometime from DLUHC (the Department of Levelling Up, Housing and Communities) regarding the use of the flexible capital receipts at the council, you continued down that route with no lower risk alternative implemented or available should you be unsuccessful,” Mr Barber said.

The council is now considering selling “non-strategic assets” to plug a funding gap in the current financial year having previously obtained a “minded to” approval from government for a capitalisation direction to borrow £20million.

Mr Barber said all financial options on the table had “pitfalls”, but he added the money was required for transformation which had to go ahead.

Referencing the latest medium-term financial plan report, which went to cabinet on October 26, Mr Barber said it was “very promising” to be seeing savings and efficiency plans although he did not underestimate the challenge of delivering them.

“The ability to deliver savings after so much austerity is really hard and there are some pretty large numbers in there,” he told the committee.

Liberal Democrats councillor Mike Cox and David Brown raised concerns about the local authority’s governance arrangements.

“I think the governance in this council is shockingly poor and your report needs to pick up on that,” Cllr Brown said.

Mr Barber said: “I am not aware of any breaches of the constitution in terms of any decision made within BCP.

“Having looked at the arrangements overall that is my judgement. It may well differ from others but as your independent auditor that is my prerogative to make my judgement.”

Christchurch Independents councillor Margaret Phipps asked if the report showed an extreme decline in the financial sustainability, the governance and the efficiency and effectiveness of this council from the previous year.

Mr Barber said: “I do because last year we did not give a significant weakness under financial sustainability.

“The three Es (economy, efficiency and effectiveness) were significant weakness last year and this year and when I say last year and this year you need to have regard to the fact that actually we are talking about 19/20 and 20/21 here. One of the things we will be looking to do is ensure the 21/22 VFM report is delivered in a more timely manner than this report.”

Cllr Laurence Fear (Conservative) said the report ensured that “all the cobwebs" were blown clear.

He asked if Mr Barber was confident the council was on track and sailing in the right direction now.

“I don’t think I would say I am confident,” Mr Barber said. “I think far from that.

"I have said I have seen over the past six to eight weeks a clear shift in focus of the approach to budget setting for 23/24 and beyond.

“I think there is an awful long way to go and you have got some significant challenges ahead of you in the area of financial sustainability.”