Medway Council's auditor has used its legal powers over a £26.7m forecast overspend and reserves of 1.9% of budget. Councillors must respond on 15 October.
Medway Council’s external auditor has used its legal powers to issue two formal recommendations about the council’s finances. Grant Thornton says the council’s forecast deficit and very low reserves put its financial sustainability at risk.
The recommendations were made under section 24 of the Local Audit and Accountability Act 2014 and sent to the council on 1 October. The law says full council must consider them in public within a month. That will happen on Thursday 15 October (council report).
What the auditor found
The figures are all from Grant Thornton’s statutory recommendations letter:
- £26.7 million forecast overspend for 2026/27, reported to Cabinet in August, and that is after £16.1 million of savings actions
- adult social care is forecast to overspend by £18.7 million this year, and children’s services by £5.2 million
- the general fund balance is £10.0 million, which is 1.9% of the net budget against a “generally recognised” prudent minimum of 5%
- borrowing rose by £130 million in 2025/26, £50 million more than budgeted, and interest costs ran £5.9 million over
- no spending control panels were in place in 2025/26
The council holds £33.9 million in other earmarked reserves. The auditor says most of it cannot be used to manage risk, because it is ringfenced for schools, the dedicated schools grant and developer contributions.
Living on emergency support
Since 2024/25 the council has balanced its budget with exceptional financial support (EFS) from the government. That lets it pay some day-to-day costs from capital, usually by borrowing.
The 2025/26 budget needed £18.2 million of EFS. The outturn needed a further £9.8 million, so the total was £28.0 million. That compares with £20.2 million in 2024/25. The 2026/27 budget already relies on £9.8 million, and the auditor says there is “a significant risk” that more will be needed.
Savings are being made. The council delivered £30.4 million of savings and extra income in 2025/26, against a target of £28.8 million. But the auditor says transformation “is not delivering savings at the scale and urgency required”.
No clean audit since 2020/21
The second recommendation is about the council’s accounts. The last set to get an unmodified audit opinion covered 2020/21, and that opinion was not issued until October 2023.
Every year since, the auditor has “disclaimed” its opinion. That means it could not get enough assurance that the accounts were true and fair before the national deadlines. Grant Thornton expects to disclaim 2025/26 as well. The draft accounts were published on 29 July, almost a month after the 30 June legal deadline.
The auditor says some areas lack the technical knowledge in-house to answer its questions. These include the group accounts and the value of loans to the council’s own companies. It warns that if these were accounted for wrongly, the council’s position could be worse than reported.
What the auditor wants
The council must, by the end of March 2027:
- update its medium-term plan with worked-up plans to close the budget gaps
- rebase adult social care and other demand-led budgets so they match real demand and cost
- set up a Capital Board to cut the capital programme and its reliance on borrowing
- build a multi-year pipeline of savings
- bring in measures such as spending control panels to tackle this year’s overspend
It also wants more finance staff, more training, and a structured plan for the accounts and audit by the end of 2026.
What the council says
The council accepts both recommendations (management response). It says:
- a Capital Board will hold its first monthly meeting at the end of October
- a corporate vacancy panel, tighter placement panels and more procurement scrutiny are being introduced
- it has appointed a new Chief Finance Officer and a new Head of Financial Planning, and hired two former council finance directors on fixed-term contracts
- property sales have raised £19 million so far, with £40 million more expected, which will go towards paying down EFS borrowing
On the accounts plan, the council admits it “cannot guarantee” it will be fully in place by December, and says March 2027 “feels more realistic”.
The council’s report also points to a separate review by CIPFA, published in August. It quotes CIPFA’s view that “overall, financial management and the management of risk in Medway Council is good”, while flagging adult social care as the main pressure (council report).
What it means for you
A section 24 recommendation does not mean the council is bankrupt, and services do not stop. It is a separate power from a public interest report, and the council has to answer it in public.
It does make next year harder. The council’s own Medium Term Financial Outlook already shows a £65.9 million gap for 2027/28. The draft budget goes to Cabinet in November and the final budget to full council in February. That is when decisions on council tax and services will be made. You can check your band and current charges on our Medway council tax bands page.
Full council meets at 7pm on 15 October at the St George’s Centre, Chatham Maritime. The meeting is open to the public, and the papers are on the meeting page.
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