A £2.6million black hole in the Active Northumberland accounts needs to be plugged to ensure it remains a going concern.
At next Wednesday’s full meeting of Northumberland County Council, members are being asked to approve additional funding of up to £2.635million to meet the 2017-18 deficit of the charitable trust which provides leisure services.
A report to councillors explains that decisions made by the local authority prior to last May have had a ‘significant detrimental impact’ on Active Northumberland’s financial position, which the arm’s-length organisation could not control.
It adds: ‘Given the current financial position, and without assistance from the council, Active Northumberland cannot be regarded as a going concern.’
In February, it was revealed that a review into Active had produced a scathing report, which was also critical of the council’s involvement, although it praised staff for their ‘extreme resilience’ despite the ‘unethical and negative organisational culture’.
A summary report of the key findings for councillors said that the review ‘identified significant failings of governance and numerous gaps in the expected level of strategic and operational capability and capacity in Active Northumberland.
‘These poor oversight arrangements have severely impacted on the organisation’s performance and day-to-day operational capability.’
Active’s budget for the 2017-18 financial year was based on the previous year, when it received a £4.7million management fee from the council plus a £1million charitable donation from Arch.
However, during 2017-18, a number of services, such as libraries and tourist information centres, were brought back in-house by the council, reducing the management fee to just over £1million.
A series of other pressures, including an unforeseen rates bill of £294,000 and an imposed savings target of £500,000, means that despite some savings – mostly achieved from significant staff redundancies and reductions in services, according to the report – there is a shortfall of £888,000.
The report to councillors says: ‘As many of these financial and service decisions were made without reference to the Active Northumberland board, they could not accurately foresee how these required financial savings could be achieved.’
Over and above the £888,000, ‘there are some additional pressures which were also agreed under the previous administration’, including hundreds of thousands of pounds of services from external companies.
Following the critical review, the council’s chief executive Daljit Lally asked the Active Northumberland board for its 2017-18 financial forecast, which resulted in the deficit figure of £2.665million. This was then revised down slightly to £2.635million.
The board also provided a commitment that it would take ‘all reasonable steps to seek to reduce the potential deficit by continuing to review budgets in order to identify savings and additional income on a monthly basis’.
Coun Nick Oliver, cabinet member for corporate services, said: “The council is committed to supporting and developing leisure services right across the county.
“Active Northumberland has found itself in a difficult financial position to March 2018 as a result of poor decisions made historically, many of which were taken without the approval of the Active board.
“Following a thorough review, the council’s cabinet is recommending to full council that an additional £2.635million is provided to ensure Active Northumberland’s sustainability.
“This council has been working closely during the last 12 months with the Active Northumberland board to ensure stronger governance arrangements and a clear business plan are in place to address these issues going forward.”
Labour, which ran the council prior to May 2017, has been approached for comment.
By Ben O'Connell, Local Democracy Reporting Service