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Controversial Frontierland plans would have left Morecambe Town Council with 'critically low' reserves

The boarded-up Frontierland site on Marine Road in Morecambe

Morecambe Town Council would have had 'critically low' financial reserves if controversial plans to spend £1m of taxpayers' money on a Frontierland project had gone ahead - says an auditor.

An annual internal audit of the council also found that its "system of internal controls was NOT in place, adequate for the purpose intended and effective" in 2022/23.

The auditor identified 20 'weaknesses' in Morecambe Town Council's processes for that financial year.

One of them, was that the council had inadequate reserves. Reserves are, in effect, a council's 'rainy day savings account'.

The town council has been given several recommendations on areas to improve upon, which the auditor said will be followed up next year. 

A report says the audit found "no issues related to fraud or corruption".

Under the Local Government Finance Act, councils must have enough in reserve "to meet future estimated expenditure".

The report, by independent auditors JDH Business Services Ltd, said that it was "fortunate" that in 2023, the council decided to raise an extra £1m from Council tax towards its plans for the Frontierland site - the former Wild West theme park which closed almost 25 years ago.

The council's 'Community Action Fund' - dubbed the Frontierland tax - has caused massive controversy in the town.

Many residents and Morecambe MP David Morris have called for the £1m to be returned to taxpayers in full, after the town council scrapped its plans to put forward ideas to develop the derelict former fairground site owned by Lancaster City Council (pictured below).

Read more: Row over 'Frontierland tax' escalates as MP and Morecambe Town Council clash once again - Beyond Radio

But the auditor said that the £1m ensured that "the council at least has substantial remaining reserves".

The annual audit checks that the council's accounts have been properly kept, that financial regulations have been met, that its annual share of Council tax "is the result of a proper budgetary process" and that council reserves are adequate.

The auditor said the "entire projected brought forward reserves of £105,218 plus projected income for the year of £634,000 (inclusive of the revenue precept request) was to be used to finance the planned expenditure of the year of £739,000. Therefore, in February 2023, a 2023/24 budget was set that would expend the entire general reserves of the council.

"It is fortunate that the additional earmarked precept of £1m raised for the Community Fund reserve for Frontierland is no longer to be earmarked for that specific purpose so the council at least has substantial remaining reserves.

"It is important to note that the budget document recommendation to council for the £1m was that (it) 'be collected to safeguard the former Frontierland site for community use'. Therefore, at the time of the 2023/24 precept setting there was no intention for any of the £1m earmarked precept to be transferred to general reserves.

"The council set a budget that expended all general reserves and this would have resulted in critically low levels of general reserves if the £1m community project had proceeded in full."

In reply, the council said they had put aside £40,000 in reserves for 2022/23.

But they acknowledged they made "inadequate provision" for reserves in 2023/24.

Earlier this year, the council decided to use £150,000 of the £1m to subsidise a Council tax reduction for Morecambe residents on their 2024/25 bills.

The remaining £850,000 has been transferred to town council reserves.

This, they said, "falls within the bracket of 25%-100% of anticipated annual expenditure recommended by the Joint Panel on Accountability and Governance (JPAG)."

The council's own reserves policy states that they will "at all times hold no less than 25 per cent of annual expenditure, and at all times work towards maintaining a reserve equivalent to at least 50 percent of annual expenditure".

Their predicted expenditure for 2024/25 was just over £1.1m.

Read more: "It's wrong...give people their money back" plea over Morecambe Town Council tax controversy - Beyond Radio

The report also says the council's failure to accurately predict its remaining bank balance for the end of 2022/23 "could have put the council in an adverse financial position".

The report said the council expected £105,218 to be carried over, but in actual fact transactions in March 2023 left a closing balance of £56,745.

"Not only did the council set a 2023/24 budget to expend all general reserves, but also the assumption that opening bank balances would be available of £105,218 were overstated by £48,473," said the audit.

"Therefore, in effect the council set a budget to expend all general reserves plus a further £48,473."

In response, the council said: "At the time that the council considered its budget and precept in February 2023, the council was continuing to undergo a period of evolution, changing in size, structure, and function.

"The council had difficulty in accurately assessing the remaining forecasted expenditure for the financial year, especially as it was embarking upon undertaking new service delivery (which at the time had not been fully costed, and lead-times for orders were still unknown).

"The council did spend more money than anticipated towards the end of the financial year in preparation for additional service delivery and to host a celebration for the King’s Coronation.

"However, it should also be noted that some payments (totalling £13,831.56) were refunded at the beginning of the next financial year.

"The council accepts it did not accurately estimate its predicted year end expenditure, nor make adequate provision for general reserves."

The audit also questioned the council's projected ticket sales for an event they held in November 2022 at Morecambe Winter Gardens - a world-famous display of artwork of the planet Mars (pictured below).

"The ticket sales projected for the Gaia arts project were £30,000 but only £13,983 were actually sold," said the report.

"We could not identify any underlying detailed budget assumptions to support the calculation of the £30000 figure. We were informed that ticket sales were impacted by a key staff member leaving the council before the event occurred."

In response, the council said: "Predicting income estimates for arts and culture is challenging and even regular annual events can vary greatly year on year due to unforeseen circumstances such as the weather.

"The council had initially estimated an income for Mars from ticket sales of £30,000. This figure was based on data received from the artist regarding numbers of visitors to similar exhibitions elsewhere (the Moon and Earth).

"When the council agreed the budget for the event, it was aware of the impact a lack of ticket sales may have on the annual budget. The council was aware that if anticipated ticket sales were not achieved, then expenditure for events throughout the rest of the year would need to take this into consideration, to ensure there was not a net overspend during the financial year.

"The council’s events officer also unfortunately resigned a week prior to the event and this impacted the promotion schedule, and subsequent ticket sales.

"Notwithstanding the above, the council’s decision to host an international art exhibition was not solely dependent upon revenue generation, and the council has committed funding to other large events such as Morecambe Sparkle (Baylight festival), a contribution of £20Kpa, for three years.

"The key to the future success and vibrancy of Morecambe lies in investment and regeneration, particularly in the areas of leisure and recreation. The events organised by the town council have gained Morecambe both national and international press coverage over the past 12 months - featuring on BBC, SKY, ITV, in additional to several national broadsheet newspapers including The Times, Telegraph, and Guardian."

Other issues raised in the audit included that councillors were using private email addresses for town council business, which "creates significant data protection risks".

In response, the council has created 'corporate email addresses' for all councillors.

The auditor also said the council's website needed to be kept up-to-date and comply with the publication requirements of the Local Authority Transparency Code. The council said they have "worked to increase staffing capacity to ensure the website remains updated".

The audit also found that:

  • Appropriate accounting records were kept throughout the financial year. 
  • The authority complied with its Financial Regulations, payments were supported by invoices, and all expenditure was approved and VAT accounted for.  
  • Significant risks were assessed.  
  • The asset register was complete, accurate, and properly maintained.  
  • Bank account reconciliations were carried out throughout the year. 
  • Accounting statements were prepared on the correct accounting basis and agreed to cash book, supported by an adequate audit trail from underlying records.  
  • AGAR (Annual Governance and Accountability Return) publication requirements were complied with. 

The full internal audit report and the council's response can be found HERE.

Councillors were asked to 'receive and accept' the audit, its findings and the council's responses, at their meeting held at Morecambe Town Hall on Thursday night.

WHAT HAPPENED AT THURSDAY'S MEETING

Councillor Brett Cooper, of the Morecambe Bay Independents (MBIs) (pictured below) said there were three main issues highlighted by the auditor.

Councillor Cooper said the first was that there were not enough reserves, which had now been rectified.

The second was that the council's website had not been kept up-to-date, which he said was "due to resource and because (proper officer) Luke (Trevaskis) was on his own, but now has two officers to help him with that".

He said the third was that the council actually needed to give LESS time for residents to view its accounts, having given 41 days instead of the required 30 working days. 

The council said they were "acting under the presumption that providing an extended period for inspection of accounts would help improve transparency and accountability" but would correct this in future.

Councillor Martin Bottoms, also of the MBIs, spoke about the 'Frontierland tax' money being held in reserves.

"That doesn't mean that some of that money won't be used to refund the tax payer in the next budget," he said.

Councillor Cooper said: "That reserve is still there and next budget we will take advice. There is a decision to be made as to how much if any will be refunded next year."

Councillor Margaret Pattison, from Labour, said some residents were "upset" that the full £1m had not been paid back to taxpayers.

"We had a lady upset on the doorstep about this £1m," she said.

"People are not happy."

Her colleague Councillor John Hanson agreed, saying: "I get a phone call every week more or less, asking about it, saying 'I want my money back'."

Councillor Geoff Knight of the MBIs then said: "This administration wants to get most if not all of that money back to the electorate.

"We refunded £150,000. We aim to make a similar or better contribution next year. But we have to budget very carefully."

Councillor Claire Cozler from Labour, (pictured below), chair of the town council, said: "We have to remain legal. It was the previous administration who left us without reserves."

Councillor Hanson replied: "So if we didn't have that £1m, we would be going bankrupt? That doesn't make sense to me."

Councillor Pattison said: "We can't spend money we haven't got. We need to get that money back to them eventually. We can't keep blaming the last administration."

Councillor Cozler replied: "I'm not. But due to the actions of the last administration, we have been left in a certain financial situation. You can't deny that."

Councillor Paul Hart of the Liberal Democrats (pictured below) then said: "We are where we are. What is being done is legal and proper."

Then, addressing Councillor Pattison, he said: "When they complain on the doorstep, you should apologise for voting for it, Margaret."

Councillor Pattison and Councillor Hart were among the 17 councillors who voted in favour of the 2023/24 budget, thereby establishing the £1m Community Action Fund. 

Read more: Morecambe Town Council to raise £1m from taxpayers in attempt to acquire Frontierland - Beyond Radio

Councillor Pattison has since said she wouldn't have voted for it, if she'd realised how much it would increase the town council's share of Council tax, which went up by a massive 231 per cent last year.

Read more: Row over Frontierland rumbles on as Morecambe councillor labels tax rise "disgusting" - Beyond Radio

Councillor Hart said at a meeting in February that he "accepts fully" that the public voted against the idea of raising the £1m.

In the May 2023 local elections, many Morecambe town councillors who voted for the controversial £1m tax rise lost their seats.

After the debate on Thursday, councillors took a vote on whether to accept the findings of the internal audit, and the council's responses.

Councillors Jim Pilling, Paul Hart, Monika Stenneken, John Livermore, Lee Bradbury, Martin Bottoms, Clark Kent, Kerri Gee, Jason Slater, Geoff Knight, Debbie Knight, Russell Walsh, Roger Dennison, Dan Blacow, Faye Cooper, Brett Cooper, Wayne Dixon, Claire Cozler, Joanne Ainscough, Christian Ainscough, David Whitaker and John Goodrich voted in favour.

Councillors Trish Clarke, Margaret Pattison and John Hanson abstained.

Councillor Cooper said afterwards: "The council’s finance and governance has been an historical area of weakness, which councillors and officers have been working hard to strengthen over the last few years. Best practice and guidance are constantly evolving and the internal audit is a vital process for identifying where any changes are necessary to meet them. We fully anticipated areas for improvement to be identified in the audit for Financial Year 2022/23 and will do so again in Financial Year 2023/24, but we are confident that we will deliver continual improvements year on year."

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