The report, published by the council last week, states that the council has overspent £39.2m on children’s and adult’s social care over the last three years.
The council overspent £8.4m on children’s social care alone in 2019/20, the report states, and is projected to overspend £16.5m on children’s social care in 2020/21 based on projections from the first quarter of this year.
“The challenges of demand led services with both children's and adult social are impacts across the local government sector and the council is not unique in facing pressures on these budgets,” the report states.
It recommends that “executive directors need to address the underlying causes of overspends in children's social care and take effective action to manage both the demand and the resulting cost pressures”.
Auditors also highlighted the council’s overspend on unaccompanied asylum seeking children which reached £8.7m on top of Home Office funding in 2019/20.
Figures show that on 31 March 2019, there were 5,070 more unaccompanied children looked-after by local authorities than the previous year. Some 265 were placed in Croydon.
However, auditors say that council members should not have signed off funding for services aimed at supporting them.
The report states: “The council, with other similarly impacted authorities, has lobbied for an increase in the rate per child.
“The latest rate was increased in June 2020 to £143 per child per night. The focus of the council's effort has been on increasing the daily rate.
“The daily cost of the services provided by the council exceeds the daily rate received. There is a need for the council to review how services can be delivered within the funding provided.
“The overspends from meeting [unaccompanied children's] needs beyond the funding provided by the Home Office have contributed to the reduction in reserves.”
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Auditors also criticised the council over mismanagement of the Dedicated Schools Grant (DSG) and funds for "transformative services".
They states that Croydon had “provided additional funding in excess of the government grant (DSG) to meet local needs” due to increasing pressures “in particular on the high needs block which covers children and young people with special educational need”.
However, they state that Croydon overspent £5.3m in 2019/20 “based on the view that the government ought to refund the excess spending rather than any evidence that this would be the case”.
Auditors have called on the council to regularly assess the progress of a three-year plan submitted to the Department for Education to address the DSG deficit.
The report adds that: “Despite applying significant amounts of transformation monies (£73m) in the past three years the council continues to experience overspends in both departments [children’s and adult’s social care] and planned significant growth funding in the original 2020/21 budget.
“There is little evidence that the transformation monies have been used to achieve the government's intended aims of...reducing demand, delivering savings or reducing costs,” it states, adding that the council's "fragile financial position have been ruthlessly exposed by the impact of the Covid-19”.
Councillor Hamida Ali, who was appointed as the new leader of the council just 24 hours before the report was published, has apologised over the findings and vowed to urgently address the areas of concern.
She said: “This report highlights serious issues with how the council has managed its finances in recent years.
“While a decade of austerity and the Covid-19 crisis have had a major impact on our finances they do not excuse the issues this report has laid bare.
“The council fully accepts the findings and recommendations of this report and the council’s new leadership will take swift and decisive action to stabilise the finances and governance. My new administration is committed to a new culture which puts transparency, accountability and value for money at its heart.”
In response to the auditor’s report and recommendations, the council says it is developing a comprehensive action plan which will be discussed at a dedicated full council meeting.
The action plan will set out how the council will significantly strengthen its financial resilience, decision-making and governance and fully address the findings of the report.
Actions in progress include:
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Delivering a £42m package of savings this financial year
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Developing the Croydon Renewal Plan which includes formally seeking a loan from the government in order to balance this year’s budget and enable the council’s transition to a sustainable budget over the next three years
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a review of the capital programme.
In its latest Ofsted report, published last year, Croydon’s children’s services was rated “good” having previously been rated as “inadequate” in 2015.
