A report from external auditors at Grant Thornton has revealed significant apprehensions about working conditions at Birmingham City Council, with suggestions that they considered resigning due to what they deemed ‘unacceptable’ practices. The auditors cited the implementation of extra safeguards as the sole reason for their decision to stay, indicating a high level of discomfort with the current situation.
The concerns were outlined in a report presented to this week’s meeting of the city’s Audit Committee. Grant Thornton, a globally renowned professional services and accounting consultancy firm, has faced scrutiny since Birmingham City Council issued the first of two Section 114 legal notices last summer, signalling a financial crisis.
The notices disclosed the city’s inability to balance its books, attributing the issue to liabilities for equal pay claims and an alleged £87 million financial gap. The financial turmoil has only deepened since, with the deficit now exceeding £300 million. Questions have arisen regarding Grant Thornton’s role in overseeing the council’s finances and the effectiveness of their scrutiny.
The auditors’ comments in the progress report provide insight into the strained relations between Grant Thornton and the council. The report states, “In recent weeks, concerns have arisen about certain discussions between ourselves and council officers and members. In certain instances, we consider that this has created an unacceptable working environment.”
The auditors highlight that their concerns are specific to interactions with council officers and members, excluding the finance teams where a professional relationship remains intact. To address the issues raised, Grant Thornton initiated discussions with the Chief Executive, resulting in the establishment of additional safeguards. The auditors, contingent on these safeguards being in place, have confirmed their commitment to continue as the council’s auditors.
However, the auditors also disclose a potential external threat, raising questions about their independence and objectivity. The report states, “We note that in response to our statutory recommendations and value-for-money work, an external organisation has twice raised the possibility of raising a complaint regarding our work. We are currently actively considering whether this constitutes an intimidation threat under the Financial Reporting Council Ethical Standards and whether it impacts on our independence, objectivity, and ability to continue as the council’s auditors.”
The identity of the external organisation remains undisclosed. Grant Thornton, responding to the unfolding situation, stated, “We have closely liaised with the council in recent weeks and consider that appropriate safeguards are now in place. We will continue to monitor this situation and whether these safeguards are proving effective. At present, we are satisfied that the current environment is appropriate to allow us to continue our work.”
Birmingham City Council has yet to comment officially on the matter, indicating that the issue will be addressed during the audit committee meeting. The pressure on the council is further exacerbated by the urgent need to implement £300 million in cuts before an impending budget deadline, adding a layer of complexity to an already challenging situation.
As the situation unfolds, stakeholders will be closely watching developments, considering the potential impact on the city’s financial stability and the reputation of one of the world’s leading auditing firms. The challenges faced by Birmingham City Council and Grant Thornton underscore the broader issues surrounding financial oversight and accountability in the public sector, with implications that extend beyond the immediate concerns of the council.