Shooting the messenger: or - the art of audit, in the age of Capita

The night the auditors came, left: BDO's Leigh Lloyd-Thomas tells it like it is ...

Mrs Angry had more or less given up going to Audit meetings, since the Tories scrapped the principle of having an opposition member as Chair, and installed one of their own councillors to keep an eye on things. Why did they do this? Why do you think? This is Broken Barnet. If a thing ain't broke, break it, and then rewire it so it does your bidding, and doesn't provide a mechanism for the purposes of transparency, and accountability. 

When Libdem member Lord Palmer was Chair, you could at least expect a modicum of objective oversight, and criticism of council policies and performance which might result in some action - at least, until the beginning of the shotgun wedding with our contractors, Capita, when criticism of their performance was likely to be rebuffed by the administration, if not by the Audit committee.

But this week's Audit meeting, it was clear, was going to be perhaps the most important meeting since those contracts began. 

Mrs Angry turned up for this meeting because she had been alerted by Mr Reasonable, who had spotted that something was very, wrong - and so it was. Very, very wrong. (Read his typically acute report here, which has a more detailed explanation of the financial implications, and significance for all of us).

It was clear that there was a serious problem, because a major part of the agenda was missing from the website, even up to the day before the meeting. This was Item 11 - the report from our external auditors, BDO. When the report was published, at the very last minute, it was evident why there had been a delay. 

The report is a catalogue of disaster. Disastrous, in terms of the presentation and handling of the accounts - yes, the responsibility of Capita. That would be, for anyone who does not understand the extent of institutionalised conflict of interest, in  this administration, accounts produced by Capita, that reflect the financial performance of the council's services, most of which are now run by ... Capita. 

BDO had been unable to complete their annual audit because of the numerous errors in those accounts - and because of issues of concern that had arisen in the course of their inspection. 

A range of issues that were shameful enough, but of which the most significant was the identification of overspending, and that the authority is not on target to make those savings promised to us by our Tory councillors before, against all voices raised in opposition, blindly signing the contracts - without full and proper scrutiny of all the content of the agreements. 

The external auditors also point out in their report that the council had failed to create a satisfactory process for the  scrutiny of performance by their contractors- again, a point which has been made time and time again by those of us who warned them, before and after signing, of the risks to which they were exposing our public services.

On approaching Committee Room 3, Mrs Angry thought for a moment that she had gone to the wrong venue. Something was wrong: the room looked ... different. 

On entering, it was plain to see that yes, it was different: it had been cut in two, and the committee area part of the room reduced to a corner of its former footprint.

Cut in two ... reduced in size ... Do you mean ... 'refurbished', Mrs Angry? 

As in the library 'refurbishments' - applied with the help of sledgehammers, and pneumatic drills - now being implemented by the grace of Tory Cllr Reuben Thompstone, who narrowly lost a vote of no confidence a few days ago, after his latest career best, as seen in the damning OFSTED report into care services for vulnerable children? A report which in itself was enough to prevent the auditors from signing off the accounts?

Of course. Our Town Hall, like our library buildings, is virtually one in name only, now, with nothing more than a nod towards its intended purpose of public service and democracy, and the rest of the building carved up, and pimped out for hire to Middlesex University and now ... and now, readers, wait for this ... as a wedding venue. 

Yes: every woman's dream, married life beginning under the beady eyed scrutiny* of deceased Mayors in moth eaten furs, and their scowling, bespectacled - moustachioed - wives, whose fading portraits adorn the walls of the upper floor.

(*from the days when civic duty meant proper scrutiny, and not an easy life half asleep in meetings, rubber stamping officers' reports and waiting to pick up your allowance).

Sticking together in the cramped public seating area of the newly shrunken room was a small colony of Capita drones, looking, Mrs Angry noted, with some satisfaction, rather glum, and as if they had drawn the short straw in being sent to attend, when it seemed none of the most senior Capita people had dared show up. When they think things are going well, they like to engage in a spot of corporate manspreading, preening themselves in the public seats, or what used to be the public seats, when the public bit in public service had not been removed. No, not removed, Mrs Angry - 'Refurbished'.

Mrs Angry sat down next to veteran council meeting attendee, and one man chorus of disapproval, Mr Shepherd, who said he had been thinking about her ... Mrs Angry's hopes of hiring the Town Hall for her next wedding suddenly seemed more likely, for one shining moment. But then: oh. Thinking of her at the Bishopsgate Institute, when visiting an exhibition of the Morning  Star's photographs of the Brixton riots. 

Oh well. 

Oh, but: he had something to give her. A present, from the exhibition. Hello: what's this - an award, no less: a badge - We Are Angry. 

We are.

In came the councillors. As the new Chair of Audit, Hendon Tory Hugh Rayner (yes: I know: just fancy that!) took Mr Reasonable aside for a quiet word of explanation (Mr Reasonable had, despite the last minute report that broke the deadline, submitted various pertinent questions ... Mrs Angry waved impertinently across the table at Tory member Peter Zinkin. 

Comrade Councillor Zinkin - greetings! He came over to Mrs Angry and Mr Shepherd. Would you and your fellow traveller like to have a few moments to yourselves, asked Mrs Angry, with her usual tact? He declined the offer.

Mr Shepherd, rather untactfully, then brought up the subject of Cllr Zinkin's cousin and namesake, the hero of British communism, and former editor of the the Morning Star, when it was the Daily Worker. And now look, he complained - you've gone and banned it from our libraries. 

What libraries, Mr Shepherd? 

Ah. Those former library buildings that are being  'refurbished'? No room for the Morning Star, now, I fear.

The meeting began. The Chair began the proceedings, and introduced himself, claiming the former Chair had gone on to 'greater things'. 

This was a puzzling reference, as Cllr Salinger, the former Chair, has only - at last - become Mayor, after thirty years of waiting, rather than kicked the bucket. A fate worse than death, being Mayor of Barnet, you might think: but of course this is all the Tory members care about, prancing about in the Mayoral bling, and stuffing themselves with cucumber sandwiches at Rotary Club luncheons.

Rayner apologised for the lateness of the report on Item 11, and the resulting inability of members of the public to submit questions, or indeed for all members of the committee to read and properly consider the contents. There would be another meeting, now in view of what had happened, in September. In the meanwhile discussion on the interim findings began.

Rayner cast a sympathetic look at the uncharacteristically subdued Capita drones at the back. 

Don't look so worried, he said. We will be gentle with you.

Will we? 

Why? asked Mrs Angry, and Mr Reasonable.

Well why? 

Mr Reasonable began his supplementary questions to the written answers on the issues sheet. The councillors looked on: they know now that he has a better grasp of what is going on than they do, and they pay attention to what he says, as they should have done, years ago, before they threw us into the grasping embrace of Capita. 

It emerged soon enough that as well as all the damning errors and failings identified in the course of the inspection, the auditors - external auditors - had found that seven councillors had not, as required, returned annual declarations. You might wonder why internal audit, and the Monitoring Officer, had not spotted that before it reached the point of an external audit, of course - and you should wonder. The truth is enormous laxity is given to this matter. And we heard that five members had continued to fail to make the declarations even at this stage.

So: name and shame these members, demanded Mr R.

The Chair refused. It was only - only - five, and he 'preferred' not to name them. Later that night he defended this decision on twitter, stating:

As you might imagine, Cllr Rayner's reference to the stocks led to a range of suggestions from residents keen to provide rotten tomatoes (preferably tinned) or attend a public caning. Others were not amused in the slightest, and expressed their sense of fury at the arrogance of members refusing to comply with the requirement for transparency over their interests. 

None of this appeared to worry Cllr Rayner, the new Chair of Audit, who thought it should all be handed over to the Monitoring Officer to deal with. Well no: surely he should have done so already?

The Monitoring Officer is the same one who refused to find fault when Mrs Angry complained about the Chief Executive falsely claiming no libraries had been found to have traces of legionella. And saw no problem with the 'refurbishment' banners which went up outside libraries (including a polling station) during purdah. Now it seems he has left it to the external auditors to hold councillors to account for the declarations which are presumably within his remit to manage. Or rather, to Monitor. 

And since the meeting, it has emerged that the council's MO - not named so unclear if the present or previous one - failed to inform members, as required, of a finding of maladministration by the Local Government Ombudsman.

But then so many of the issues of concern to BDO were matters which should have been picked up by the council's own procedures - were they functioning with any efficiency. The reason why the report is still only an interim one is that the annual audit inspection has met with numerous failings in process: so many that the usual length of time for inspection was simply not long enough. This is an appalling indictment of the state of incompetence for which the council, as the commissioning body, and its contractors Capita, are equally responsible.

Apart from seeking to minimise the failure by members to make declarations, it must be said, Rayner and his colleagues were evidently horrified by the tone, content and implications of the external auditors' interim report. 

As one of the men from Capita leant back against the newly partitioned wall, and yawned, the Chair apologised to members and the public for the lateness of the report and the consequent lack of time for informed discussion, or questioning of the finding. He stated himself to be shocked by the errors identified by the auditors. No bluster, or excuses: just a quiet and highly uncharacteristic reaction of - well, what? For once, when presented with a crisis, the Tories seemed utterly unsure of what to say, or do, or how to manage the political consequences.

Except for one Tory councillor. Yes: step forward Comrade Councillor Zinkin, now displaying a flair for shameless politicking worthy of the name of his illustrious revolutionary namesake. He worked himself into a fury over not the content of this most damning report, but in regard to those who had produced it, that is to say the external auditors. Everyone in the room now looked on in open mouthed astonishment as he attacked BDO for submitting their findings so late, and failing to spot any of the issues identified at any earlier stage, even the recent OFSTED report.

Why are you shooting the messenger? yelled Mrs Angry. He carried on.

He wanted letters of complaints written. To the Chief Executive. And to whatever body was responsible for appointing auditors. (Curious that he didn't know who that is.)

What about Capita? shouted Mr Reasonable, and Mrs Angry, in chorus.

The auditors looked on across the table, forced to listen to this totally unwarranted barrage of nonsensical accusations - without the chance to defend themselves. Tory members such as Cllr Finn looked embarrassed, and clearly wanted to distance themselves from such remarks - Finn openly disagreed with his colleague, and reminded the meeting that the blame rests with Capita. To be fair, he said, wryly, nothing was going 'exactly smoothly' ... 

It is true to say, of course, that Cllr Finn, as Chair of the committee that is meant to oversee the performance of the council's contractors, must share a heavy portion of the burden, as the report points out that the process of scrutiny is inadequate. 

Hoping that everything will be 'hunky dory', and maintaining as he did at one meeting that the purpose of scrutiny, 'was not to criticise. It was to make a positive contribution'. is simply not good enough.

But Finn cannot be held entirely to blame: every Tory member has played a part in the sanctioning of contractual failure, overlooking the clear warning signs of looming disaster, as in the catastrophic library IT crash, which lost a huge amount of data, and caused chaos - and the dire standard of areas such as the website and switchboard systems. 

And how curious that not only were senior Capita representatives absent, but that no senior Tory councillors were in attendance. No doubt the Tory leader Richard Cornelius is happily ensconced in his French rural retreat, but the deputy leader Dan Thomas is here. Mrs Angry caught him legging it from the Town Hall on her way in, that very evening. Can't think why he didn't stick around, can you?

Deputy leader Dan Thomas, who didn't stay for the meeting

When given the chance to speak, the men from BDO, led by Leigh Lloyd-Thomas, who has always struck Mrs Angry as an absolutely fair, honest and conscientious auditor, pointed out that they had been on site for five weeks and had had to conclude that it was not possible to sign off the accounts or to submit anything other than an interim report as there were simply too many issues to 'close down'. 

As for the terrible OFSTED children's care report, (which Tory councillors appear to want to blame on anyone but themselves, including Reuben Thompstone, the Chair of the CELS committee which should oversee the service), Mr Lloyd-Thomas had to bring to the attention of the Audit committee the fact that no one had informed him about it. 

Since last week's meetings, moreover, it would appear there are other serious errors which for some reason officers may not have informed the auditor about, including the LGO report mentioned earlier - and the recent fine from the Pensions Regulator for failing to submit information required by law. What else is there?

The auditors continued, reporting that there had been 'problems with the presentation of income' in the Capita managed accounts. And that there was not 'a robust IT platform'.

There followed a catalogue of 'errors', involving a million or so here, then another one missing there, and on and on, all which were hard for Mrs Angry to follow, but next to her, Mr Reasonable, as is his wont in committee meetings, shook his head, sighed, muttered, and fought back the angry tears of a management consultant and citizen auditor driven beyond the bounds of Reason itself.

The credit balance, for example, was wrong: by £1.6 million. Exit package payments (generous consolation prizes for senior officers who 'leave by mutual consent') - these are not being discharged when agreed, as they should be. Mrs Angry wondered whose exit package may be next up for agreement, and sincerely hoped the figure would of a size sufficient to soothe their wounded pride, and sense of pique, at being the sacrificial victim for the Tory councillors whose own responsibility is never called into question.

Labour's audit lead member, Geof Cooke, recalled the promises made at the time, or rather before the time, of signing the Capita contracts, and the boasting of their success with previous partnerships elsewhere. Four years into the contract, one year after the (frankly nominal) Year 3 review, and look where we are now. 

A senior officer at the table, unidentified and unaccountable to the public, tried to shift the blame regarding IT inadequacies, by claiming the council was not using Capita's system, and had inherited the old one. Other officers looked askance at this, as well they might. Mr Reasonable pointed out from the public seating that they are indeed now using 'Integra', introduced by Capita, and despite the expense of previously buying in a new SAP system. Senior officer Anisa Darr confirmed this. 

It seems particularly ironic that the failings identified by this audit are linked to a less than satisfactory IT system. 

Readers may recall that, before launching the One Barnet mass outsourcing fiasco, our Tory councillors - and senior officers of the council - stated categorically that no in house option, as an alternative to outsourcing services, could be considered because we needed the capital investment that was promised by a private contractor. 

2013, Barnet Tory leader Richard Cornelius signs away control of council services to Capita

When Capita was awarded the contract, we were promised that one of the benefits of the deal would be an 'upfront' £16 million in investment for IT systems.

It then transpired, after the signing, that not only were we not going to get this generous hand out - we were now expected to GIVE this £16 million TO Capita to spend on the necessary improvements. 

BDO were not our external auditors in this period, unfortunately - the contract then was with Grant Thornton, whose tolerance of Barnet's financial activities - and disasters such as the MetPro affair - was quite remarkable. 

One might speculate now what a different set of auditors might have made of that deal. An arrangement which has not improved the delivery of accounts, but delivered a full blown cock up of the type so often seen, in Broken Barnet. So often seen, but so seldom resulting in any censure. 

Until now.

How many times was this local authority warned of the consequences of such a radical hollowing out of council services, and the delegation of control of those services to the private sector? The theoretical model was bad enough, but the structure and complexity of the two Capita contracts, nodded through by lazy, gullible, irresponsible Tory members, without any real attempt to understand the implications, or listen to those who already understood them: this has resulted in the consequence we all predicted: a disaster, and one that affects every man, woman and child in this borough, at a time of desperate need, and unparalleled hardship.

One of the boxes containing the Capita contracts

And how many times have our dopey Tory councillors defended the Capita contracts, claiming, in the face of all argument to the contrary, that they were returning savings, and represented excellent value for money for tax payers? Despite the clear evidence that Capita is milking the contracts for 'hidden' fees and profits that go far beyond the balance of any of the strictly limited, nominal savings?

The audit report could not have been clearer. Last year the council overspent by £8.3 million. There is a massive budget gap in the years to 2020. The council's reserves are shrinking. The likeliness of any real savings throughout the life of this ten year contract is rapidly diminishing. 

Thursday's meeting was a car crash: but it was a collision that was always going to happen, as soon as the speeding Capita juggernaut could be seen hurtling towards the brick wall of an independent audit. 

The mass delusion of Tory councillors, apparently held, as one resident put it last week, in the grip of Stockholm Syndrome, mutely accepting only the version of truth supplied to them by their own contractors, cannot be sustained. They have f*cked up, good and proper, and at a time when, in terms of electoral risk, they are at their most vulnerable.

The impact of their policies, or their contractors' hijacking of services: the library cuts, the development favouring planning service, the lack of enforcement of planning breaches, parking, all of these things are losing Barnet Tories, in the council chamber, and at Westminster, the support of their own voters, in the run up to next year's local elections and when there could be another general election, at any moment, in three newly marginal constituencies.

For years Barnet's Tories have cut council taxes by token amounts, to try to sweet talk voters into returning them to office. This gesture has cost us untold amounts of desperately needed revenue, and seen the imposition of the most swingeing cuts to vital services. This year, pre-election, such a gesture would be utterly indefensible. 

But what can they do, now, to limit the damage of the inevitable consequence of their folly in promoting the easycouncil road to ruin? 

After the immediate shock has worn off, over the summer holidays, they will try to manage the political impact of this latest, largest cock up. No doubt the PR and communications team will be expanded yet again as they try to spin their way out of trouble, and convince the residents and tax payers that there is nothing wrong. 

But it won't work this time: things have simply gone beyond the point of return, and there is little they can do.

At the end of the discussion of the audit report, Mr Reasonable, Mrs Angry and Mr Mustard wandered down the steps of the Town Hall, and stood talking at the front door, where rain sodden confetti from one of the day's weddings was sticking obstinately to the flagstoned entrance. Mrs Angry suggested that her report of the evening's disclosures would be the shortest ever. Four words:

We told you so. 

More than four words, in the end: but we did. Tell you so. Over and over again, and you wouldn't listen.

Now all you can do, Tory councillors, is to apologise to the residents and taxpayers of Broken Barnet, come to your senses, and pull the plug on the Capita contracts. 

If you don't, you will be acting wilfully to put your own party interests before those of the people you claim to represent.

The choice is yours.