I cannot overstate how important the following information is. It appears from documents on the councils own website that there is not enough cash in the reserves to meet the councils debts. In these circumstances, who pays for the financial ineptitude. It would be nice to think that the council cabinet members who created this mess (including Mike Freer and Matthew Offord who are now MP's) would be surcharged - some hope.
See link below going to Cabinet Resources Committee tonight
The first part refers to the Care Home contract. They have to fund the payment from the Reserve. However this reserve was to cover the cost of Icelandic Banks fiasco.
4.3 The arbitrator in the Catalyst dispute has found partially in favour in Catalyst. The cost to the Council to March 2010 has not been finally determined, but will be up to £6m. The cost will be funded from the risk reserve (currently £17.7m), leaving a reduced balance to
manage other risks, including Icelandic bank deposits.
If you now read the Icelandic banks bit in the same report…….
9.2 Icelandic Bank Deposits
9.2.1 The Icelandic Government has stated its intention to honour all its commitments as a result of their banks being placed into receivership. The U.K. Government is working with the Icelandic Government to help bring this about. At the current time, the process
of recovering assets is still ongoing with the Administrators. The Local Government Association is coordinating the efforts of all UK authorities with Icelandic deposits.
Members will be periodically updated on the latest developments on these efforts.
9.2.2 On 9 December 2009, Bevan Brittan, the solicitors acting on behalf of the LGA, received notification from the Glitnir Winding-up Board that they had accepted all local authority claims as general unsecured claims, rather than priority claims.
9.2.3 Bevan Brittan actively challenged this decision prior to the Creditor’s meeting on 17 December 2009, but, it was not possible to reach an agreement. A mediation process has taken place and there has been no change to the general unsecured position.
Therefore, it is now a matter for the Icelandic judicial system.
9.2.4 Without priority status local authorities are likely to get in the region of 25-30 per cent of their deposits back rather than 95% to 100% as previously assumed.
9.2.5 The 2009/10 accounts, which assume local authorities have priority status, include impairments adjustments to the General Fund as prescribed by Financial Reporting Standards and LAPP updates. The risk is managed through the Risk Reserve.
So we have a reserve of £17.7 million of which £6 million has to pay out to Catalyst leaving at best £11.7 million. The report above now suggest they will only recover 25-30% of the £24 million. Which is only about £7,200,000. This leaves a shortfall of £16,800,000 which means there is not enough in the reserves.
Who is going to pay?
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The top story on the Times website is a Top Barnet Tory stating "Barnet Council's children's department is facing 'financial armageddon" - There is a blog called Broken Barnet. Maybe this should be renamed BROKE BARNET
Word reaches the barnet eye of further enormous black holes in the finances - watch this space.