The Local Government Association (LGA) has now published a critical Corporate Peer Challenge Report following a six-week delay as a result of the General Election Campaign.
The Team visited CEC in March and have highlighted a series of concerns that need urgent remedial action by the Council stating;
“Cheshire East Council (CEC) needs to address a number of significant issues, the most immediate being the organisation’s financial sustainability which is in jeopardy. This will require concentrated and coordinated activity to resolve challenges of capacity, governance, and organisational culture over the coming months, as well as developing long-term transformation and improvement plans”.
The peer team were already aware that the council had recently applied to central government for exceptional financial support of £17.6 million and that the council had just completed an OFSTED inspection which confirmed that services had been downgraded from Requires Improvement to Inadequate.
The peer team are seriously concerned about the immediate financial stability and sustainability of the organisation.
In 2023-2024 the council have used £11 million of their reserves to set a balanced budget and has a savings requirement of £20 million for 2024-2025. If these savings are delivered, it will still only leave the organisation with £2.1 million in reserve by the end of this financial year.
In this context of low reserves, historic departmental overspends, and a lack of organisational confidence regarding the delivery of existing saving plans, if there is not significant change at pace, it is very likely that the council will be required to issue a section 114 notice in the near future.
Whilst the council has been successful in applying for exceptional financial support for 2024-2025 (subject to development of a transformation plan), there is further work required to understand the implications of this capitalisation, including the accounting implications of the associated borrowing and increased pressure on future years’ revenue budgets.
The immediate financial challenges facing Cheshire East are compounded in the medium-term as a consequence of the council’s Dedicated School’s Grant Deficit which is currently forecast to be £89.6 million for the end of 2023-2024.
Whilst the council have engaged with the national Project Safety Valve[1] and developed a seven-year plan to address these issues, with the deadline of the national override being 2026, current assumptions would be that this issue would also require the council to issue a section 114 notice, unless the override is extended.
In this context, the Corporate Peer Challenge (CPC) report has identified 18 recommendations which if addressed, will support the organisation in managing its concurrent challenges of financial sustainability and service improvement.
CEC must now set up an Independent Assurance Peer Panel, chaired by the LGA that will support the council to develop and publish an action plan within five-months of the peer team being onsite and no later than 28 August 2024.
This action plan should provide clarity on the activity, milestones, and timelines that the council will work to in responding to the team’s findings. The action plan will also be central to the peer team’s re-engagement with the council through a Progress Review which is due to be completed in the winter of 2024.
REFERENCES:
LGA Corporate Peer Challenge Report: Cheshire East Council: Feedback report: 25-28 March 2024
https://www.cheshireeast.gov.uk/pdf/council-and-democracy/your-council/…
https://www.local.gov.uk/our-support/council-assurance-and-peer-challen…
