AUDIT WALES’ report found significant risks to the sustainability of local government finances which are likely to increase over the medium term without action to alleviate them.
Over the spring and summer of 2024, Audit Wales looked at the financial sustainability of each of the 22 councils in Wales.
They focussed on:
- the strategies to support councils’ long-term financial sustainability;
- Councils’ understanding of their financial position; and
- Council’s reporting arrangements to support regular oversight of their financial sustainability
To be financially sustainable, a council needs to provide the services required of it, by law and expectation, within its available resources over the long-term.
Given the scale of the funding pressures facing local government, many councils require a transformative shift in approach to move beyond setting an annually balanced budget to achieving value for money and financial sustainability over the medium-term. This follows a period of unprecedented financial pressures for the public sector since 2008.
Audit Wales heard from some councils that national issues or processes make financial planning more difficult. These included concerns relating to the local government funding formula and funding settlement, and the increasing responsibilities being placed on councils.
Audit Wales have also published an update to their Local Government Financial Sustainability Data Tool which includes comparative data on councils’ levels of financial reserves and borrowing.
Auditor General, Adrian Crompton said: “Councils have taken difficult decisions to manage their finances through a long period of financial constraint. But as the cumulative impact of that restraint builds we cannot assume that local government will remain financially sustainable.
“Our work shows that, while councils know the scale of their funding gaps, they do not have longer term plans in place to address them. This leaves them vulnerable to short term decision making that may not represent value for money or be in the longer-term interests of local communities.
“Put simply, local government is financially unsustainable over the medium term unless action is taken, by those who support and interact with the sector as well as councils themselves.
“Though a difficult message, I hope that this report helps councils, the Welsh Government and all of those committed to the sector, to chart a path to a sustainable future.’’
