Mrs Angry objects: a response from Mr Hughes, of Grant Thornton

Audit in the twenty first century

*Update - dear, dear: another conflict of interest story? See below.

So: within half an hour of publishing the letter to Barnet's auditor yesterday, Mrs Angry at last received a response from Mr Hughes, which you will find below.

Citizens of Broken Barnet may care to consider whether this response, in their view, reassures them about the nature of the audit process in this borough. Read on, why don't you?

Mrs Angry will be replying to Mr Hughes, but in the meanwhile ... her comments in red.

"Dear Mrs Angry

London Borough of Barnet: audit of accounts for the year ended 31 March 2012

Thank you for your letter dated 17 July 2012 in which you said that you want to make an
objection to the Council’s accounts in relation to a number of matters, namely (your words in italics throughout):

1. The obstruction of the right of electors to view the accounts of the authority.
2. The use of the authority of ‘interim consultants’ in senior posts paid through private companies.
3. Risk management and the One Barnet programme of outsourcing.

a. The risk posed by an inadequate management of the potential conflict of interest in regard to senior officers of the authority and their connections with companies directly involved in the tender process for £1 billion of council services

b. The risk posed by the lack of an adequate consideration of, or any proper consultation in regard to, the One Barnet scheme and the need for an Equalities Impact Assessment

c. The risk posed by the total lack of consideration of any alternative option to One Barnet, either as an in house comparator proposal, or as a solution in the case of partial or total failure in any agreed strategic partnership.

d. The risk posed by a lack of scrutiny by members: the One Barnet scrutiny committee was abolished last year, preventing any proper process of overview by the elected members of the authority

e. The risk posed by the depth of almost total incompetence in the management of procurement, tendering and contractual regulations and processes that has been revealed, and continues to be exposed even now, more than a year since the MetPro Audit

f. The risk posed by a lack of an independent risk assessment by an external body.

Decision on whether to accept your letter as a notice of objection

I have considered your letter carefully. However, I cannot accept your letter as a notice of objection.

This is because it does not meet the requirements of section 16 of the Audit Commission Act 1998 and regulation 17 of the Accounts and Audit Regulations 2003 because it does not set out an objection to the legality of a specific item of expenditure nor does it mention the failure of the Council to bring income due into account. It also does not appear to have been sent to the Council.

If you want to pursue this matter as an objection, please send me a notice of objection which meets the requirements of the Act and Regulations. If I do not hear from you by 17 August I do not intend to take any further action on the basis that this being an objection.

Clearly Mrs Angry does her best, as a disnumerate citizen journalist and armchair auditor, wrestling with the complexities of statutory audit procedures, but one might have hoped that a rejection based on technical grounds would have been sent before the end of 16 days, a reminder, and a blogpost. Well done on avoiding the need to respond to a formal objection, however. So far, Mr Hughes ...

Consideration other matters raised in your letter (outside of the strict interpretation of an objection)

At any time, you can give the auditor information that is relevant to their responsibilities. For example, you can tell the auditor if you think that something is wrong with the accounts or about waste and inefficiency in the way the Council runs its services. The auditor does not have to give you a detailed report of any investigation into the issues you have raised, but will tell you the general outcome if appropriate.

Therefore, aside from the consideration of an objection, I refer below to a the issues raised in your letter.

1. Your complaint about the redaction of information from documents provided by the Council and demand that I see that this is investigated.

As discussed when we met on 17 July, the general rule is that the auditor does not have a role to play in any dispute between a member of the public and the audited body regarding the right of inspection. This includes the matter of redaction of information regarded as commercially sensitive.

However, where information identifies a particular individual, or enables a particular individual to be identified, I have a role in determining whether or not this information should be inspected or disclosed.

As clearly set out in the Audit Commission Act 1998 (as amended), for information which specifically relates to a member of staff then the right of inspection does not arise. For individuals not employed by the Council (e.g. individual named consultants working for suppliers) I have considered whether there is any reason why this information should not be disclosed. In line with guidance from the Audit Commission, this has involved consideration of weighing the rights of an individual to inspect information against the nature of the information and the potential consequences of disclosure on individuals who can be identified from it.

How very interesting that the council has seized this very limited power to redact personal information not even relating to council officers, or even, one notes here, ordinary individuals working for suppliers but 'individual named CONSULTANTS' (yes, Mrs Angry's loud emphasis) ... why, one wonders, must we be so dreadfully worried about naming any CONSULTANTS who may be working as 'INTERIMS' for several years, and now possibly officially provided by an agency?

If they are senior officers working in a public sector post, and in receipt of money from the public purse, or working on Barnet projects in a position of responsibility for policies which have direct impact on council expenditure, it is surely reasonable for these individuals to be accountable to the public, just as they would if they were on the payroll? In my view, if this is the correct interpretation of Mr Hughes response, it is a simply outrageous situation and in absolute conflict with the policy of localism and the principles of transparency and accountability.

Also: compare this answer to the one given by senior finance officer John Hooton on 23rd July, Mrs Angry's emphasis in red:

Section 15 (3) and (3A) removes, from the right of an elector to inspect the accounts and documents relating to them, accounts or document which contain personal information, being information which identifies a particular individual or enables a particular individual to be identified and the auditor considers that the document(s) should not be inspected or disclosed.

I confirm that the external auditor has approved the Council’s approach of redacting such information and further confirm that the relevant information has been redacted on this basis.

In addition, Section 15 (3) and (4) removes the right of interested persons to inspect the Council’s accounts to be audited and all books, deeds, contracts, bills, vouchers and receipts relating to them and to make copies of all or any part of the accounts and those other documents where the accounts or other documents contain information about a member of staff and the, remaining, requirements of Section 15 (4) (a) and (b) are met.
Again, I confirm that redaction of documents has taken place, on the basis of this provision.

You will note that Mr Hooton does not mention 'consultants' working for suppliers. And this argument is anyway completely irrelevant, as explained below ...

The factors I have considered and reached a view on are:

• the relevance of the names of individuals within suppliers to the ability for electors to exercise their inspection rights, i.e. does the absence of a specific named person impair an elector's ability to understand the substance of the transaction in question? My view is that the absence of individuals details would not impair this ability.

• whether the individual identified has chosen to place themselves in the public domain (or could reasonably expect to have their information disclosed). In my view, whilst companies supplying councils can reasonably expect their names to be in the public domain, individuals working within those companies would not necessarily expect that their personal details would not be disclosed and I do not see it as the role of the auditor to facilitate the publication of individual's personal details.

In addition to the above considerations, I have also considered the potential consequences for individuals if information pertaining to them is disclosed, i.e. the likelihood of their personal information being published and commented on more widely. Based on relevant local experience, in my view it would be possible that individuals would be named and commented on in blogs and other media to an extent and in a manner that could result in personal consequences for them.

In my view, the right to inspect is outweighed by these other factors so I would conclude that
information relating to individuals working for suppliers should not be disclosed. As you are already aware, I have provided this view to the Council.

Again: this is all a red herring: most of the redacted information in the documents we asked to see was NOT personal information at all, and when we protested about the redacted material we were told, and this is a matter of record, that it was on the basis of alleged 'commercial sensitivity'.

Furthermore, we can prove that Barnet did NOT ask Mr Hughes to approve any redaction until AFTER our visit, and therefore his limited approval was retrospective: see the email sent to Mr Mustard at 1.14pm on July 13th, by Mr Hughes, in response to his enquiry specifically about this point:

"The understanding you obtained from officers was correct, in that I was not involved in any discussions about providing or withholding information."


2. The use of the authority of ‘interim consultants’ in senior posts paid through private companies.

It is for the Council to determine the employment arrangements for postholders, provided that these arrangements are lawful.

Although, as you indicate in your letter, the use of ‘interim consultants’ is a matter of public debate, there has been no ruling from HMRC to prevent public sector bodies from engaging postholders in this way. We previously discussed this matter with senior management and established that the key reasons are around retaining flexibility during a period of significant council transformation and on the basis that it is financially advantageous for the Council. The extent of any financial consequence of a change in HMRC rules would not pose any significant issue for the Council’s financial health and is not a matter that is of concern for our value for money conclusion.

Residents and taxpayers - and probably the Secretary of State for Communities and Local Government, and no doubt the Chair of the House of Commons Public Accounts Committee will no doubt form their own views on whether or not the long term employment of so many very highly paid 'interim consultants' really is financially advantageous for the council. In truth, it may well be advantageous for the council's senior management team and Tory leadership - the real question is whether it is financially advantageous for the electorate on whose behalf we were raising our objections. I would have thought that it is pretty clear that the answer is no, it is not?

3. Risk management and the One Barnet programme of outsourcing.

a. The risk posed by an inadequate management of the potential conflict of interest in regard to senior officers of the authority and their connections with companies directly involved in the tender process for £1 billion of council services.

Although not a matter for the audit of the 2011/12 accounts, we will review this matter as part of our 2012/13 audit and report back to management and the Audit Committee in due course.

This is, in Mrs Angry's view, a scandalously inadequate response to a very serious issue of public interest: what do you think? Let's look at the context of this particular issue, and the urgency of the matter.

I have been trying to raise the issue of the failure to manage the conflict of interest in regard to senior officers for more than a year now. This response will effectively mean that no action will be taken until at least May 2013, long after the completion of the One Barnet competitive dialogue process, one in which there is clear evidence to suggest that it has been compromised by inadequate provision to mitigate the conflicts presented by officers failing to declare interests which have arisen as a result of former and consequent employment.

If any resident or councillor reading this post thinks that this is not a serious matter, I should like to hear your explanation of why that is so, because I'll be damned if I can see how such a situation could ever be considered to be acceptable, and in the middle of a £1 billion programme of outsourcing ... just incredible.

b. The risk posed by the lack of an adequate consideration of, or any proper consultation in regard to, the One Barnet scheme and the need for an Equalities Impact Assessment.

Equalities Impact Assessments do not fall within the remit of our audit responsibilities so I do not plan to take any action on this point.

EIAs as such may not fall within the remit of audit, but surely the adequate consideration of risk presented by failing to consider such issues does?

c. The risk posed by the total lack of consideration of any alternative option to One Barnet, either as an in house comparator proposal, or as a solution in the case of partial or total failure in any agreed strategic partnership.

Strategic options appraisal and alternative solutions is a matter for the Council to determine. We will, however, take your point into consideration as part of our 2012/13 audit.

When it will be too late. Marvellous. Thanks.

d. The risk posed by a lack of scrutiny by members: the One Barnet scrutiny committee was abolished last year, preventing any proper process of overview by the elected members of the authority.

The detail of how the Council organises its scrutiny function is a matter for the Council to decide upon. We will, however, take your point into consideration as part of our 2012/13 audit.

As above, Mr Hughes.

e. The risk posed by the depth of almost total incompetence in the management of procurement, tendering and contractual regulations and processes that has been revealed, and continues to be exposed even now, more than a year since the MetPro Audit.

In our 2010/11 report to those charged with governance we reported on our work on this matter and concluded that the issues were not sufficient to result in a qualified value for money conclusion. We have kept up to date with the Council’s progress in resolving this issue during the year, including through reviewing internal audit work and through regular updates provided by management and internal audit to the Audit Committee. We are satisfied that the Council continues to make progress in addressing the identified control issues but will continue to monitor and report on progress over the coming year.

FFS.

Mrs Angry is at something of a loss to understand what on earth WOULD constitute an issue 'sufficient to result in a qualified value for money conclusion' by our auditors, if not the catastrophic state of the procurement systems of Barnet Council exposed over the last year not by any audit process, please note, but by us, the local armchair auditors and bloggers of Broken Barnet. Countless hundreds of contracts, representing many millions of tax payers money, have been found to be legally non compliant, which means that our hard earned cash has been thrown at private suppliers over a period of many years, with no evaluation of value for money, apart from all the other legal considerations.

A year after we first exposed this scandal, more non compliant contracts were being revealed by us, and the council had still failed properly to administer the new systems it had promised. A huge number of non compliant contracts were given waivers by the council only recently simply because to do otherwise, we were informed, would interfere with the smooth running of the rush to sign off the One Barnet deals with the private sector. Yet the auditors find this entirely satisfactory: do you agree with this conclusion, residents and tax payers of Broken Barnet?

f. The risk posed by a lack of an independent risk assessment by an external body.

The commissioning of any independent assessments of the projects that make up the One Barnet programme is a matter for the Council to determine. Both internal and external audit are involved in reviewing the governance arrangements for individual projects and will report to the Council if there are any significant areas of concern relevant to our respective responsibilities.


Yours sincerely

Paul Hughes, Director, Grant Thornton"


Do you know, I really wish I could believe this is the case. To be fair to Mr Hughes, I do understand that the auditor may personally be limited in the extent of his powers in certain regards. Based on the evidence of the responses given throughout this letter, however, I have no confidence whatsoever in the ability of the audit process itself, internal or external, to maintain a fair and effective scrutiny of the financial administration of this council in a way that safeguards the best interests of the electors and tax payers of this borough, and I think that would be the reasonable conclusion of anyone with any intelligence, or sense of justice.

It is interesting that in his response, Mr Hughes has chosen to ignore all reference to the Wirral case, which I feel has direct relevance to the issues of concern here in Barnet. Let's just remind ourselves what those are, as Mrs Angry explained in her letter to him last month:

"The necessity for an independent risk assessment has become more pressing in the last year as the initial findings of the MetPro audit have subsequently been found to be indicative of a much wider range of failure in the management of procurement and contractual procedures than was originally detected.

In last month’s report by the Audit Commission, Wirral Council was found to have exposed itself to significant risks in failing to demonstrate good governance and the ability to secure value for money on behalf of taxpayers in its administration of the procurement of a relatively small number of contracts. This matter was brought to the attention of the Audit Commission, with some difficulty, by concerned members of staff.

Bearing in mind the much larger scale of failure uncovered here in Barnet, it would seem logical to assume that if the Audit Commission is truly independent and seeking to protect the best interests of taxpayers, the example of the Wirral case sets a clear precedent for an independent investigation of the risks exposed on this authority not just in the ordinary management of commercial contracting, but in relation to the enormous risk about to be undertaken in the process of the £1 billion worth of outsourced services encompassed by One Barnet programme."

I suggest that any residents reading this post who want to object to the accounts, or to raise issues of concern with the external auditor, take the opportunity to do so as soon as possible. Mr Hughes may be contacted at this email address:

paul.hughes@uk.gt.com

You may also wish to read the condemnatory report undertaken by the district auditor asked to investigate allegations of a procurement scandal in Wirral Council:

http://www.audit-commission.gov.uk/SiteCollectionDocuments/PublicInterestReports/201206wirralpir.pdf

... and see how it compares to the state of things here in Broken Barnet.

And finally: Mrs Angry has just noted that the company motto for Grant Thornton is 'An instinct for growth'.

Have a nice weekend.

*Update:

Since writing this post Mrs Angry has heard from two sources that yet another former senior officer is now reported to be working for a company directly involved in the former officer's area of responsibility in Barnet. Watch this space for more on this in the near future.

Citizens may like to ask themselves if they agree with auditor Mr Hughes that waiting until next year, when One Barnet is safely signed up and delivered into the hands of the private sector is really the best time to debate the issue of risk from such apparently blatant conflicts of interest.