Thursday 2 August 2012

Mrs Angry's letter to the auditor: the questions he has not answered

On July 16th, Mrs Angry and Mr Reasonable had an interview with Mr Paul Hughes of Grant Thornton, the external auditors for the London Borough of Broken Barnet, during which we raised several issues of concern in regard to the authority's accounts. Mrs Angry also gave Mr Hughes a letter in which she formally objected to the accounts, and asked him to investigate the very serious and rather urgent matter of the lack of risk assessment of the One Barnet programme of outsourcing.

After two weeks without any response Mrs Angry asked Mr Hughes to reply to her letter. He said that he would reply today, but he has not. Mrs Angry's patience has run out, and she is now publishing her letter in full, so that the issues raised are in the public domain, where they belong.

Dear Mr Hughes

I am writing to you in your capacity as District Auditor of the London Borough of Barnet in order to draw to your attention the following matters:

1. The obstruction of the right of electors to view the accounts of the authority.

On the 6th July, with two other residents and another interested party, I came to the council offices at North London Business Park, with an appointment to inspect some of the accounts of my local authority, under the terms of the 1998 Audit Act.

As I have already reported to you, the material we requested was not produced, but instead we were given photocopies of the original documents which were so heavily redacted as to make the information incomprehensible and totally redundant as a means to pursue the point of the legislation, which is to enable local electors and taxpayers to raise with you, as the district auditor, any issues of concern that we may have in regard to the authority’s accounts.

I complained to Mr Andrew Travers, the Chief Finance Officer, as well as to you, and the Secretary of State for Communities and Local Government. Mr Travers immediately replied that he would respond to me within a couple of days. In fact he replied only on Friday, the last day of the statutory inspection period, which conveniently prevented any further attempt at inspection of the accounts. I have forwarded to you his completely inadequate response, and my rebuttal of his explanation.

As you know, the obstruction of the right to inspect the accounts is a criminal offence and I would therefore now ask you, as District Auditor, to take action to see that this matter is investigated as such. If you refuse to do so, I would like to have your reasons in writing as soon as is reasonably possible, as I will then be obliged to report the matter myself.

Ref: Para 3 under section 15 of the Audit Commission Act 1998 states: “A person who has the custody of any such document and—
(a) obstructs a person in the exercise of a right under this section to inspect or make copies of the document, or
(b) refuses to give copies of the document to a person entitled under this section to obtain them,
is guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale”.

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

As you must be aware, and as was discussed at yesterday’s Public Accounts Committee at the House of Commons, the London Borough of Barnet is currently employing a high number of so called ‘interim’ consultants in posts which are paid via private companies, in some cases via an agency, and may be considered to be arrangements calculated to avoid paying PAYE and tax.

These arrangements, some dating from at least the beginning of 2009, generally would appear to be for posts that are not short term agreements but extended without limit, and often seemingly without following any real procurement process. Does this not expose the council to the risk of a large bill for unpaid tax, and do such arrangements, at such high rates of pay really represent best value for money for Barnet taxpayers?

Ref: Para 5 under section 15 of the Audit Commission Act 1998 allows inspection of “payments made or benefits provided to an individual in respect of an office or employment include any payment made or benefit provided to him in respect of his ceasing to hold the office or employment”.

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

I would like to make a formal complaint to you about the failure of the London Borough of Barnet adequately to address the risks presented in regard to the One Barnet programme of outsourcing, and the competitive dialogue process that is currently in hand: I believe that these failures in risk management make it clear that a halt should be put to the One Barnet programme of outsourcing, and I ask that you conduct an urgent investigation on the grounds of public interest into the authority’s management of the risks associated with the programme, as exemplified below:

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:

Last year I raised with you concerns over a related matter, which comes under your area of responsibility as auditor, that is to say the scrutiny of the declaration of interests, gifts and hospitality of senior officers of the authority. The issue raised last year received no real response, which is regrettable.

In the last year it has become apparent that there is serious risk of conflict of interest in regard to the One Barnet competitive dialogue process. It has emerged that one senior officer directly involved in the process left the authority and immediately went to work for one of the companies currently one of the two short listed bidders for the CSO tender, and another senior officer was working on the process, having come from the other company now shortlisted, and immediately left to work for a third company which was also one of the tendering companies, but subsequently not successful. Other senior officers have, after persistent FOI requests, been revealed to have had links with companies involved in the dialogue. I am happy to forward the appropriate details separately to you.

Last year I made a FOI request asking for details of the register of interests of senior officers. After some delay, I obtained a response which revealed that many of the officers involved in the dialogue had NOT signed the relevant forms declaring interests. The few forms which were in the register were dated very late in the process, long after the dialogue had commenced. Clearly this is either an example of incompetence or even deliberate obstruction of the need for transparency, and demonstrates that the risk of conflict of interest has not been properly managed.

In any circumstance this would be unacceptable; in the context of a £1billion tendering exercise it is utterly inexcusable and without wishing to allege any impropriety whatsoever on behalf of any individual officers, it is clear that any reasonable person would feel that the integrity of the process has been seriously compromised.

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:

The impact of the privatisation of so many council services on the most vulnerable residents of the borough is an extremely serious issue, but one which has been ignored by the proponents of the One Barnet programme. Residents have not been consulted on the wide ranging effects of the programme on their services, and the impact on the elderly, disabled, or disadvantaged members of our community has not been addressed either practically or in terms of risk management. This leaves the council open to the real risk of legal challenge in the near future by stakeholders who will be affected by the changes in the provision of services.

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:

Despite constant attempts by local union organisers to open up a process of dialogue with senior management in order to consider the alternative of an in house comparator option which would safeguard the jobs of Barnet employees, improve efficiency, make savings and represent a safer investment of taxpayers’ money, such proposals, and even the suggestion of meetings to consider such proposals, have been routinely ignored by senior management.

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.

I have attended several committee meetings where even Conservative members have complained at the lack of information given in regard to the details of the One Barnet programme: this is deeply worrying and typical of the current administration’s obsessive fear of open debate and engagement with its own members, and of course with the electorate, of matters of public interest.

No issue could be more important than the commitment of £1 billion pounds worth of council services to a programme of outsourcing, and yet the leadership and senior management team of Barnet Council have taken every effort to resist both internal and external scrutiny of the project. The little debate that has been allowed within a strictly limited number of Cabinet members has been shrouded in secrecy and the details made exempt from the public domain. This clearly raises the risk of a later challenge of the proposals, again on the basis of lack of proper consultation.

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.

Assurances to Audit committees that the authority is, in this regard, ‘travelling in the right direction’ are a totally inadequate response in the context of the pressure to continue with the massive One Barnet outsourcing dialogues. Surely it is reasonable to expect the authority to address the huge weaknesses in its financial competency before progressing with a project of such significant commitment?

Only recently the Cabinet approved the waiver of another tranche of non compliant ‘contracts’, some of them very large, using the rather astonishing argument that to do otherwise would interfere with the timetable of the outsourcing programme. This would seem to be highly irresponsible and one must question why the senior management team feels so pressed to rush ahead with the strategic partnership when there are so many fundamental internal problems that are being unaddressed.

The risk of failure set against the authority’s recent record of incompetence must be on the highest level, and it would seem obvious that the dialogue process should be halted until, and if, a proven record of substantial improvement has been established.

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

The One Barnet programme of outsourcing proposes the tendering of contracts worth £1 billion of council services to the private sector. This level and scale of outsourcing, around 70% of all services, over a lengthy period of ten to fifteen years, has never previously been attempted, and such an enterprise, set against the frequency of failure in similar, albeit less ambitious models, clearly represents a larger than average potential for risk.

The authority’s senior management team and leadership has nonetheless refused to consider commissioning any independent study that would give assurance to the electors of the borough that our investment in such a scheme is secure, and based on a high probability of success, and has a business plan that has adequately addressed the substantial and complex range of inherent risks.

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.

For the reasons outlined above, I object to the 2011/12 Accounts, under Section 16 of the Audit Commission Act 1998, which states:

“Right to make objections at audit.
(1)At each audit of accounts under this Act, other than an audit of accounts of a health service body, a local government elector for an area to which the accounts relate, or any representative of his, may attend before the auditor and (in accordance with subsection (2)) make objections—
(a) As to any matter in respect of which the auditor could take action under section 17 [F1 or 18]; or
(b) As to any other matter in respect of which the auditor could make a report under section 8.
(2) No objection may be made under subsection (1) unless the auditor has received written notice of the proposed objection and of the grounds on which it is to be made.
(3) An elector sending a notice to an auditor for the purposes of subsection (2) shall at the same time send a copy of the notice to the body whose accounts are being audited”.

I look forward to your response,
Yours sincerely,

Mrs Angry

*Update: within half an hour of publishing this letter, Mrs Angry received a response from Mr Hughes: to be published in a separate post ...

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