DEVON County Council is at risk of becoming financially unsustainable, and may need to cut costs or increase income, according to its auditors, Grant Thornton.

The firm acknowledged the council’s “strong record of financial management”, but raised concerns about its ability to save tens of millions of pounds to balance its medium-term budget.

Its report says future cost pressures will mean just over £136 million – equivalent to about eight per cent of current expenditure – will need to be secured through a mix of savings, earnings and grant income for the authority if the council is to achieve its medium-term financial plan up to March 2028.

It said: “The high cumulative dedicated schools grant (DSG) deficit, reliance on reserves to balance the recent budget, and the required levels of savings needed into the medium term to deliver the medium-term financial strategy represent a significant risk to financial sustainability.”

Addressing the council’s audit committee, Grant Thornton’s Peter Barber said Devon’s overall audit was positive, and that there were no “statutory” recommendations, which are the most serious recommendations a council can receive.

But it received three “key” recommendations, where further action is required.

“Devon has had them in the past and continues to have them,” he said.

“In terms of the direction of travel, I think there are lots of positive things going on and there is a self-awareness, with the council seeking to address concerns.

“But this is a journey; it isn’t at the end yet, and there is a lot more to do.”

Mr Barber added that Devon is not alone in such challenges, particularly in deficits in its education budget.

Earlier this year, Devon secured £95 million from the government’s Safety Valve scheme to help plug its special educational needs and disabilities (SEND) deficit of £163 million.

But the grant comes with stipulations, including a requirement to cut costs and review processes.

“The underlying position is that you need more money than you are getting in at the moment,” Mr Barber added.

“And the only way to address that is to cut costs, which often means changing or cutting services, or generating income, or both.

“But councils often have to take decisions in year one where investments are made but the benefits materialise in later years, and that can be difficult.”

Grant Thornton also recommended the council “enhance its governance and oversight arrangements” over its children’s services.

“For each of the areas identified, there needs to be a number of actions with a lead officer, deadline, narrative of progress, a risk rating, expected outcomes and key performance indicators that are used to monitor progress,” the report said.

“Members need better assurance that the children’s services are improving and the estimated timescales for achieving an adequate rating.”

Donna Manson, Devon’s chief executive, added that the council had stabilised its children’s service.

“We have improved what we are doing for children and young people, and the business end is now coming behind that,” she said.

“It doesn’t matter what processes you put in place, they won’t work without stable leadership.”

Ms Manson added that her team’s capability to manage children in care was stable and “provides me with a level of assurance I never had before”.

“We now have the capability, project management and leadership, and we are confident in the data we have and the line of sight, and that has been a big step.”

She acknowledged SEND was a “much greater challenge” and would involved a “longer journey”.

Bradley Gerrard