Thursday 25 July 2013

A fuller conversation: audit, and the new age of transparency in Broken Barnet

Mrs Angry does not engage in any form of sporting activity, except baiting Tory councillors, and also usually avoids watching any form of sporting activity, with a few exceptions. 

Those exceptions are usually sport whose rules are a complete mystery, and thereby reduce the watching of it to a zen like experience, that transcends the need for explanation, or meaning. 

Rugby. Cricket. Golf. Not tennis, because it is too easy, backwards, forwards, in the net, out. Not football, because any woman understands the offside rule, but cannot understand why anyone thought it up to spoil an other wise tolerable game. 

And the same rule applies to council meetings.

Mrs Angry does not have the slightest understanding of the rules of audit, or accountancy. She is practically disnumerate, and has the mathematical ability of a six year old. However: she is an expert auditor because she comes to the game as an absolute innocent, not knowing the rules, and relying entirely on an innate gift for detecting the presence of bullshit.

There is plenty of bullshit in the committee meetings of the London Borough of Broken Barnet - and last night's audit meeting was the perfect example.

Mrs Angry felt an impending sense of doom as she took her place in the public seats. There was no one else, apart from the comforting presence of Mr Shepherd, and his bag of clippings: no other blogger. This was a dreadful thing, because it meant she had to listen to the meeting and pay attention all the way through

Public questions: there were three, but one of those was from Mr Reasonable, and he was skiving. Mrs Angry therefore took her seat at the table, with question number one: 

In relation to Agenda item 6 and 7:

I refer the Chair to Appendix A - ISA draft report, Other Communication Requirements, Issue 2, Annual Governance Statement:

We have reviewed the Council's Annual Governance Statement to confirm is complies with the requirements of 'Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007 and the disclosures made are consistent with our knowledge of the Council and its key strategic risks. We have no matters to report in this respect.

Since this draft was compiled, Mr Hughes, as External Auditor, has received complaints about the governance of the Council, in regard to serious allegations made by Councillor Brian Coleman, claiming that scrutiny and other meetings of the Council are 'entirely whipped'. In his response to me, Mr Hughes has rather bafflingly stated the matter does not come under his remit as auditor, and that it is a matter of investigation for 'council management'. I entirely reject this assertion.

Ms Salter, the Monitoring Officer, rather than instigate an investigation has responded that it can only be referred to her as a member complaint, which clearly is completely inappropriate.

I ask the Chair therefore if he agrees that he should refer the matter to the External Auditor as a matter of risk to the proper governance of the Council and to refuse to accept the draft report in regard to the findings on governance until this matter is resolved.

The written response was as follows:

The external auditors have already shared an Audit Commission document with Mrs Angry which sets out her rights as an elector and the limitations of the role of the external auditor. Although external auditors consider governance arrangements as part of our VfM conclusion work, the Audit Commission Code of Audit Practice is clear that these arrangements (and reporting on them) are the audited body’s responsibility. External auditors only review them as part of gaining assurance over use of resources and the external auditors have obtained sufficient assurance for the purpose of their VfM conclusion for 2012/13.

This issue is currently with Council management for investigation, which is the most appropriate route. Should anything significant arise from the investigation then external audit will consider this in the context of their overall responsibilities as part of the 2013/14 audit.

The Council has received a formal complaint from members of the public into the allegations of Member conduct regarding scrutiny committees.  At this stage this is only an allegation. An investigating officer has been appointed and will follow the process as approved by Full Council. This is entirely appropriate.

I can assure Mrs Angry that, far from being ignored, at this stage the matter is being investigated and it would be inappropriate at this stage to make conclusions for inclusion within the annual governance statement. 

Mr Hughes, from Grant Thornton, sat opposite her at the other end of the table, with an interesting look on his face.Time for the supplementary question.

It was hard to see, reflected Mrs Angry, how the auditors can gain assurance of value for money if the decision making procedures of the council have been put in question, but - how can the council be expected to investigate its own failures? How can it investigate itself? You say you will investigate anything 'significant' that might emerge, but nothing significant is likely to emerge unless it is independent, is it?

Mr Hughes did not wish to comment, and it was left to the Chair, Libdem councillor Lord Palmer, to respond. He had received assurances about the terms of the investigation, which would be carried out by officers from Harrow Council. That might sound acceptable, but, as Mrs Angry commented, avoiding the bemused gaze of the lawyer from Harrow sitting at the table, with respect - Harrow provides our legal services, and it will therefore hardly be an independent undertaking.

The Chair said he had been told there would be safeguards, appointment of officers not involved in the issue etc. Mrs Angry was not convinced.

Second question:

In relation to Agenda item 7:

I refer to Appendix A -  ISA 260 draft report, Value For Money,  Key Findings, conflict of Interest Review, NSCSO, and I ask the Chair to put the following question to the external auditor, Mr Hughes:

Why did you ignore the Development and Regulatory Services (DRS) contract when undertaking this review, and take no steps to assess the level of risk regarding this enormous contract since April?

What steps have you taken to ensure that all outstanding declarations of interest are complete and satisfactory in regard to both contracts?

In view of the history of mismanagement of the conflict of interest in regard to the One Barnet procurement process, I ask the Chair not to accept these findings of the draft report if there is not a satisfactory response given to these questions.

When Mrs Angry had submitted a similar question to a previous Audit Meeting, in which a report about this issue, based on an investigation that had, too late to do any harm, been allowed into the NSCSO contract declarations, Mr Hughes, disappointingly, and for the first time, had not attended that meeting, for some reason, so Mrs Angry had been cheated of the opportunity to ask him about it. Second attempt then. Response:

Within the scope of the Code of Audit Practice, as independent statutory auditor it is the external auditor’s decision to determine what to look into. Whilst the external auditors can (and have) considered elector communications in their audit planning, external auditors’ work is not directed by members of the public and they do not have to account to them for what they have and have not covered.

However, for the benefit of the Chair, external audit have confirmed they considered the DRS contract as part of their audit risk assessment. The Council’s controls for managing conflict of interest risks is the same for the NSCSO and DRS contracts. Audit testing on the NSCSO contract confirmed the Council has appropriate controls in place to manage conflict of interest risks. External audit therefore did not consider it necessary to extend the scope of the audit to include testing of DRS contract controls.

The Council has also applied the same controls to the DRS project and contract.  We maintain a log of conflict of interest and declaration of interest forms for all who have been working on the DRS project.  We conducted an internal self-assessment in April 2013, to ensure this log is up to date and have continued to receive and record new declarations of interest forms in instances where new employees work with the DRS contract.  

Supplementary question: Mrs Angry regarded Mr Hughes with her cool blogging eye ... 

After asking you for eighteen months to look into this matter, when it was too late, you investigated the NSCSO contract declarations only, even though DRS was still in progress, and yes, the controls for DRS are the same as for NSCSO. The investigation found that there was a failure in compliance with the controls with NSCSO so all the more reason to investigate DRS, surely?

Mr Hughes refused to comment. 

Mrs Angry suggested the Labour councillors might like to pursue her line of questioning later - and they did.

Next up of note was a question from Labour's Arjun Mittra, who is new to the Audit Committee, and substituting for another councillor, but made a very useful contribution, in contrast to old timers like Tory Andreas Tambourides, who made none at all, and might as well have stayed at home.

Arjun asked about the council's policy on redacting information requested by members of the public, something which our council takes to the most ridiculous extremes, whether in response to Freedom of Information requests, or during the statutory period of the right to inspect the accounts, when bloggers have dared to ask for council documents, and been presented with blacked out pages - and escorted under armed escort to the loo, treated like prisoners on day release from Broadmoor. (Funnily enough, Mrs Angry's personal escort sat very primly beside her at last night's meeting, avoiding eye contact, and depriving Mrs Angry of the chance to ask him, as she always does, if she sees him, to take her to the ladies, during one of the more tedious stretches of the evening).

And here was a curious thing, in response to Arjun's query: the new Section 151 officer, Mr Chris Naylor, who for some reason always grins cheerily at Mrs Angry across the room, unlike his predecessor Mr Andrew 'Black Hole' Travers, who seems to be cast into deep depression at the sight of her face, had something interesting to say on the subject of transparency. No, really. He likes it. He thinks it is a Good Thing.

Mrs Angry sat up. Time stood still. A bell tolled in the distance: the cock crowed, three times - it marked the passing of an era. Broken Barnet has now moved into the twenty first century. We may only be the residents and taxpayers of this borough, but from now on, we may be allowed to know stuff. Stuff that matters. Stay tuned, more on this later. 

And he went on to say - yes, checking my notes, that in his view, the excuse of commercial confidentiality should be challenged, and companies should be persuaded to waive such rights. 

We may not always be successful in this, he said, but we should not always accept their first refusal to agree to it. Well f*ck me, thought Mrs Angry: whatever next? Who runs this borough - oh. Yep. Capita. How did that happen?

Of course, in reality, it has often been the council rather than the company which has chosen to redact information, but still ... Mrs Angry felt a little faintheaded, and was very glad of the storm force gale electric fan blowing air through the stale air of the committee room. 

Councillor Mittra raised the issue of 'commercial sensitivity' and the One Barnet contracts. He had felt restrained about pursuing issues regarding the contracts he had seen which he felt should have been in the public domain.

Naylor said he tried to be on the side of releasing material. When an individual had asked for specific information he had tried to step back from the issue of risk to have 'a fuller conversation'. At this point, the external auditor was looking at him with perhaps a less than supportive expression on his face. The Tory councillors stared across the table, in a state of shock.

Councillor Mittra then raised a point about Mrs Angry's question, and the matter of the allegations about scrutiny meetings being whipped. 

Maryellen Salter, who is now the Monitoring Officer, and has been dealing with the demands from residents for an investigation of the allegations made by former Cabinet member Brian Coleman, said that they could not make any comment.

Councillor Mittra observed he was glad that the matter was at least not commercially sensitive.

Chair Lord Palmer said that he believed the allegations would be investigated properly. 

We learned that the 'investigation' will take about 28 days, or maybe until September, or the twelfth of never, then go to the group leaders panel  for a complete whitewash- (Mrs Angry was moaning softly over her notebook at this point: as expected, this replacement for the old standards system proved this week to be utterly impotent) - and then the result will go to full council. Where, Mrs Angry imagines, members will be whipped into dismissing the whipping allegations. 

Phew, thank God: we are still in Broken Barnet, after all, even in this new era of openness and transparency.

Business as usual, then.

Ah: now the matter of transparency over the DRS contract, and - well, something of an extraordinary statement from Tory councillor Sury Khatri.

He wanted to inform the committee that as a member of the council he was of the opinion that there had not been transparency over the DRS contract he was expected to approve.

The room fell silent. His fellow Tory councillor Hugh Rayner froze in his seat, visibly unnerved.

Councillor Khatri described the 'ridiculous' way in which he and his colleagues had been given the most minimal information, in rushed conditions, material strewn around a table,  and a couple of hours to inspect the relevant material, and pressed into agreeing something they simply had not had time to grasp.

How could that be called transparency? 

He is usually a quiet man, but is clearly very angry about this, and rightly so. He is to be commended for having the courage to speak out - although clearly this would have been more appropriate at an earlier stage. 

Hugh Rayner diverted attention quickly by asking how many ring binders had contained the contract? Ten was the answer. Even he thought this really been 'blinding with science'. Unless you have expertise, how could you not be confused by such material? You expected officers to provide members with the substantive elements. They didn't really get a grasp of NSCSO.

Mrs Angry looked on in amazement. The Tory councillors clearly have failed to understand the enormity of the massive commercial undertaking they were committing us to, and here were two of them, one complaining, so late in the day, of being excluded from a proper exercise in consultation, and here was another saying that such matters were too hard for any councillor to comprehend. Simply incredible.

Lord Palmer observed that transparency was 'not as good as it should be'. 

Labour's Geoff Cooke said that a group of six councillors were given two hours to see the one copy of the NSCSO contract.

Councillor Khatri declared then that there must be more trust of members. 

Mrs Angry tried to understand how it had come to pass that a Conservative member of the council administration was so alienated from the process of decision making, and felt he had no option but to defy the culture of omerta within this group of secretive, unaccountable Tories and make such a statement at an audit meeting. It is the sign of the fatal faultline which is opening up under the feet of Cornelius' supposed leadership, and one which he refuses to see. 

On to the annual accounts now. While Mr Shepherd sat by the electric fan, sighed and began reading 'The Economics of Capitalism, Mr Naylor talked about the successful and continuing actions of the council in making substantial savings. He thanked his staff for their efforts, and stated that we were 'on a journey to become more open and transparent ...'  And then there was nothing in the room but the sound of silence, and the whirring of the electric fan. Mrs Angry underlined the words and read them back, in wonder.

Over to our external auditor. Mr Hughes gave us a brisk and, what is the word, robust, or even one might say, boastful, presentation of his report. He was, he told us, a couple of days from signing off the accounts. This meant, he said, speaking very quickly, as if keen to rush home and get his pen out, we would be the first in the country to do so, quite an achievement.

Yes, thought Mrs Angry. Speed, rather than any other quality, is what the public demands of our external auditors, relying on you as we do to ensure the proper use of our taxes, and the proper governance of our local council.

It became clear that Mr Hughes had little intention of explaining that he had recently received no less than four objections to the accounts, courtesy of blogger Mr Mustard, who had raised very serious issues to do with the parking revenue and NSL contracts. see here for full details: 

To ignore these objections: would that be in compliance with the new culture of transparency?

Mrs Angry decided that it was necessary to help Mr Hughes and nudge him in the right direction. By the power of thought transference, therefore, aided by a certain amount of covert operations, she alerted Councillor Mittra to the small matter of the objections. Oh dear. This caused some inconvenience, as we shall see.

In the meanwhile, Councillor Cooke referred to Mrs Angry's question about the conflict of interest declarations. He noted that Hughes'  investigation  of NSCSO had indeed found a series of rules not enforced, and senior officers not declaring interests - this was 'disappointing' - and the investigation had not been linked to DRS. 

He also objected to a misleading claim about the council providing an increased amount of housing - the former libraries head Bill Murphy, who had left the council and, like a boomerang, immediately returned to hit the London Borough of Broken Barnet as the new head of DRS, was called to the table, but Mrs Angry did not quite understand his explanation.

Ah: Councillor Mittra had a question for Mr Hughes.

Had he received any objections to the accounts? 

Mr Hughes was obliged to admit that he had. 

Oh. Could he say how many, and indicate the areas concerned?

Well, these may or may not qualify as objections ... we need to consider them properly.

Lord Palmer asked if there was a need to look at the 2011/12 accounts? It was thought inappropriate to comment. But hold on: rescue is at hand ... 

Mr Naylor said he was very happy to explain that there were four objections, on the matter of parking, the Judicial Review and the NSL contract. Oh. Mr Hughes looked less happy than Mr Naylor about this, but explained that there was a difference between material objections and issues raised which did not present a problem when signing off the accounts. It was not established yet how the four objections would be defined.

In response to Councillor Khatri, he said that if the objections were not material he could sign the accounts, but not certify that the audit was closed.

Just to continue his theme of openness, and inclusion, Mr Naylor said, to nobody in particular, that such objections were a  'wholly reasonable' process for members of the public to undertake.

Mrs Angry is warming to Mr Naylor. This is an uncomfortable feeling, and will need correction, if Mrs Angry is to remain on course for her crusade against the evil empire of Broken Barnet. 

Of course, Naylor is clearly an intelligent man, and an intelligent man coming to work for the London Borough of Barnet as a senior officer would realise the writing is on the wall, and the walls are tumbling down, and only someone capable of adapting to a new reality, and a new administration will survive intact, and even prosper. 

Perhaps he would make a good CEO for a Labour run council? 

Just a thought. No need to pack up your paperclips quite yet, Andrew. 

On the matter of audit fees: Councillor Mittra naughtily asked if any other tenders for the contract had been considered, other than from Grant Thornton? Mr Hughes smiled a tight smile. The Chair explained that the external auditors were appointed by the Audit Commission. (From a tiny pool of four main companies, which you might reasonably conclude represents a virtual monopoly of public sector audit ...)

Lord Palmer thanked Mr Hughes for his efforts.

Mr Hughes replied, to the amusement of all, that it was 'always a pleasure'. 

Mrs Angry is not entirely sure that he was being sincere.


Mr Mustard said...

Mr Mustard being wholly reasonable eh Mrs Angry, that will cause some confusion with the real Mr Reasonable, best just call me Mr Vexatious to differentiate us.

I don't see how the Accounts can be signed off when I have raised such fundamental issues but we'll see.

Mrs Angry said...

Had it not been for my efforts, Mr Mustard, your objections would have been entirely from the record, I am certain. It will be interesting to see what happens next, won't it?