Thursday, 21 September 2017

Nothing to worry about: Audit, in the age of Capita, continued - or: Something may turn up ...

'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know.

Annual income twenty pounds, annual expenditure nineteen nineteen and

six, result happiness. Annual income twenty pounds, annual expenditure
twenty pounds ought and six, result misery. The blossom is blighted,
the leaf is withered, the god of day goes down upon the dreary scene,
and--and in short you are for ever floored. As I am!'

Following the calamitous interim report earlier this summer from Barnet Council's external auditors, Mrs Angry predicted that, after the initial shock felt by our muddleheaded Tory councillors, there would be a concerted effort made, before the final report, in regard to damage limitation. 

From shock, to panic - and then denial. The political cost of doing otherwise, for most of the Tories in Barnet, is too high. Next year's local elections are too close for comfort, and of course there could be a general election at any point. This perilous circumstance is having a miraculous effect, in fact: members are now taking care to refuse unpopular planning applications, for example - see the previous post, and other controversial matters, such as the Cricklewood issues discussed at another committee last night, at the same time as the Audit meeting was in progress. But they lack the ability to do anything about the biggest problem of all: the catastrophic contractual agreements with Capita, and a financial crisis that can no longer be denied.

Most of the more astute Tory councillors know that the council is up the proverbial creek, with only a cut price paddle provided by Capita, sitting in a leaking boat, slowly sinking into the swamp. But they cannot admit it. To do so would be to admit they ignored all warnings about the risk of entering into the two massive outsourcing contracts, and have failed in their duty properly to direct and monitor the performance of the delivery of those contracts. 

Mrs Angry went along last night, out of a sense of duty more than anything else: having submitted some questions, and received the usual sort of nonsensical written replies, requiring ... more questions. 

Out of a sense of duty, and despite feeling rather unwell, after a long day locked in an overheated archive, reading through volumes of historic bank accounts, page after page of inky ledgers, money paid in, and money paid out: pretty straightforward, said the archivist, pointing at the annual and six monthly balances, which showed an alarming level of expenditure, set against a sometimes risky level of income. Yes: easy enough, audit, historical or otherwise: profit and loss, money in, and money out: and a final balance to tell the story. Or to show, as our latter day corporate clerks would say, 'the direction of travel'.

Audit in the age of Capita

Easy enough, with accurate accounts. But what happens when the accounts are kept by the same provider as the items and services noted in those ledgers? When the barely numerate butcher, baker and candlestick maker all get together to submit their bills and then write them up in the customer's own accounts, making lots of mistakes, but keeping the ledgers under the counter, and pretending there is nothing to worry about?

That, in effect, is what has happened here, in the London Borough of Capita. The council's accounts, which record the financial transactions of the authority's contracted services, are the responsibility of ... the same contractors who provide those services. 

So apart from the multiplicity of roles and potential conflict of interests represented by the range of Capita's grip on our local public services, there is an overarching conflict of interest that beats everything: their presentation of the annual accounts.

And as the interim external audit report showed so clearly, earlier in the summer, the annual accounts, as overseen and presented by Capita, in regard to services largely provided by Capita, were full of errors. Mistakes that have been identified by BDO include massive sums of money listed in the wrong place, or overstating or understating significant amounts of council funds - our funds: taxpayers' money.

The tone of the interim report was unequivocal: the council's accounts were a mess, and we were using up our reserves in a reckless fashion, which suggested that rather than being the rip-roaring success promised to us by our Tory members, the Capita contracts were not delivering good value for residents, but leading us into financial disaster. 

One of the Tory members of the audit committee gave an indication of the way in which the group would later try to limit the damage: turning on the auditors themselves, and castigating them for the lateness of the report, rather than the content of the report, and the implied criticism of the administration's competence. Yes, shooting the messenger.

The subsequent report from the auditors is rather different in tone, if not in content, much more of a distancing from outcome, based on the council's own rather less than convincing assurances. In other words, yes, we are teetering on the brink of disaster, but on the other hand, the council has said everything will be fine, so maybe it will, after all. 

Well: we all like a happy ending, don't we? And even auditors run out of time - and patience.

In the committee room, the meeting began with a homily from the Chair, Hendon Tory cllr Hugh Rayner. He said that after the final audit report he was happy - no, content - with the 'position' of the council, but not the 'process'. That might be interpreted as trying to encourage us to worry about the arrangement of deckchairs, rather than asking questions about the seaworthiness of the vessel, or indeed the likelihood of icebergs ahead. He graciously indicated that it was unsporting to blame the auditors for the mismanagement of the council (Yes, shooting the messenger #2) when naughty Capita might have had something to do with it. Because naughty Capita did have something to do with it, in fact, they were being slapped on the wrist with a fine, like an overdue library book surrendered by a child lucky enough to find a library from which he is not barred - £50,000. Ooh, er. Just a fraction of their daily profit from the London Borough of Broken Barnet, one imagines.

Time for comments from the public: fellow bloggers Roger Tichborne and John Dix spoke, Mr Tichborne demanding to know how much more the delayed Audit reports had cost the taxpayer, and Mr Reasonable observing the problems deriving from the lack  of clarity over responsibility: the confusion between the roles played by Capita and LBB. He pointed out the extent to which residents were excluded from the role of scrutiny, and mentioned the very serious matter of an FOI request for details about gainshare reward payments, which is being refused on a basis he maintains is quite spurious, as the commercial confidentiality clause used to block release has expired. Who can tell us what that payment for £970,000 was for? Apparently we are not allowed to know.

'I could not receive it as a gift,' said Mr. Micawber, full of fire and

animation, 'but if a sufficient sum could be advanced, say at five per

cent interest, per annum, upon my personal liability--say my notes of
hand, at twelve, eighteen, and twenty-four months, respectively, to
allow time for something to turn up--'

A group shrug from members and officers,  and then it was time for supplementary questions to the written replies. There were some cracking lines in these responses. Mrs Angry's favourite was regarding Question 8:

Risk Management, Conflicts of interest:

3.4 Taking informed and transparent decisions
which are subject to effective scrutiny and
managing risk

Has the external auditor reviewed what appears
to be a number of significant risks raised by
conflict of interest and/or the perception of
conflict of interest posed by the multiplicity of
roles played by the councils' contractors in regard
to planning and enforcement? Is there in place a
satisfactory mitigation of those risks?


The council has satisfied itself it has effective governance processes in place and has provided information to us to be content with the Annual Governance Statement. If you have any specific concerns then you are encouraged to raise them through the escalation routes available to you to either myself or the Council depending on the nature of the concern.

The council has satisfied itself. 

And this is enough for the purposes of audit, apparently. The word of a - well not exactly a gentleman, is he, the personification of Broken Barnet? And - self satisfaction, surely, can never be enough, in the end, can it? 

Satisfaction, or at least, 'contentment', is something the Auditor values highly, however. It is his measure of success. And in answer to Qs 4, and 6, that measure of value was used to satisfy any lingering doubts about, you know, the butcher being left in charge of his customer's accounts: Capita left in charge of the books that log the transactions regarding Capita run services.

 The written answer said the auditors were 'satisfied' with the arrangement. In a state of post-audit mellowness, instead of falling asleep, or making us a cup of tea, we now hear, whispered in our ear, that the auditor is 'content'. And then again 'satisfied', by Q 6. Hmm. Oh hang on: content - or maybe just satisfied - that things will be ok until ... 2020? What happens then?

What happens then? asked Mrs Angry. After our profligate council has dipped into its reserves for the last time, and found there is nothing left? Oh, and by the way, about the change in tone from the highly critical interim report: has any pressure been brought to bear on you, by members, for example?

The auditor smiled, and hesitated. You're smiling, observed Mrs Angry, so am I right?

He murmured something about 'acting without fear of favour'. Of course. Except this is Broken Barnet, where fear and favour are the ruling principles. Or would be, if we had any.

But: and he did seem to be pleased to have the opportunity to say this - the council's arrangements, and his level of contentment/satisfaction therewith, are - oh dear - sustainable only until 2020. In the medium term. After that?

All hell will break loose. 

Or rather, as he said now, addressing the members directly, eyeball to eyeball: 

You will need a fundamental re-write

A fundamental re-write. 

Well, f*ck me. In audit speak that means: THE END IS NIGH. MAN THE LIFEBOATS.

He looked at them. They looked at him. Mrs Angry looked at a Labour councillor. He looked at Mrs Angry. The Tories looked at their shoes. 

Other questions included two on the issue of the Lodge, Victoria Park, the sale of which has been the point of formal objections to the accounts. Although as expressed in his written reply the Auditor had not found any evidence so far that the sale had been unlawful, after the planning meeting of 7th September, where development plans had been firmly quashed by Tory members, and it was recognised that the covenant still applies, he acknowledged the circumstances now may have changed and the matter may be open to review.

Oh: and here is a curious thing. The interim audit report had noted some councillors had not been making annual declarations as required. Mrs Angry had asked why the Monitoring Officer was similarly failing to note that too many members were not making declarations of Gifts and Hospitality. The Chair seemed unwilling to believe this, so Mrs Angry gave an example: having witnessed several of his colleagues disporting themselves at this slap up dinner, at possibly the most expensive restaurant in the borough - and as Mr Reasonable spotted in the accounts, at a cost of £1500. Mrs Angry had been attending a family event at the same venue that night, and was horrified to find the place stuffed full of Tory councillors. 

As she reminded them, passing through the bar, when they greeted her long suffering brother, who worked for them in governance for 30 years, yes, you made him redundant a few years ago, remember? And then, when Tory leader came over to say hello to the long suffering brother, the brother's fearless niece, Miss Angry, demanded that Cornelius should tell her if we, the taxpayers, were paying for his dinner. Mrs Angry's heart swelled with maternal pride, as you may imagine.

Cornelius, clearly terrified by yet another Angry woman holding him to account, meekly admitted that, yes, that was the case. Yet there appear to be no declarations from those present of their attendance at this bash, enjoying the hospitality of you and me, the tax payers of Broken Barnet, and indeed some Tory members have made no G&H declarations at all. *Does this matter? I think it does: it is yet another mark of the indifference shown by our elected members for the principles of transparency, and accountability - and reminds us that austerity, at a time when vital public services are being cut to the bone, does not apply to them.

*Updated: according to the Monitoring Officer (yes, apparently there is one, somewhere) it is his view such jollies do not have to be declared, even though the Labour members did, as you and I are footing the bill. Of course any hospitality paid for by us, without our consent or knowledge, is never going to influence their opinion in any way, so this is, clearly, perfectly proper).

Now, as the Suits from Capita sat back in the seats they had annexed from the front of the public seating area, members listened to the auditor present his report, and then ask questions. 

One of the revelations of the audit was the questionable status of the Pension Fund, which appeared to have been overstated, by, oh, a mere £92 million ... . Not for the first or last time that evening, Mrs Angry wondered why the internal audit process had not already identified such a glaring error. 

But such concerns were not of interest to the Tory members. Councillor Finn, who is the Chair of the Committee tasked with overseeing the scrutiny of contractual performance, was very worried about something else. He was bewildered by the colouring system of the audit report. There were too many colours, he complained. What did it all mean? The auditor tried to explain the subtle variation in opinion that the colours represented: wasted on the Tory members who can grasp only that ... red means danger. Especially the red flag of socialism.  The Chair intervened to apologise, at this point, to members of the public whose copies of the report were only in, oh dear - black and white. 

Councillor Finn

Oh dear, again. Along came another massive question in regard to the accounts. The matter of a £4.6 million debt, from Capita Re, in regard to underperformance of contracted income, that should have been recovered, but had not. Why not? One of the Capita Suits, a Mr Mark Dally, lounging in the public gallery, wasn't that bothered. He was invited to sit at the table, to sit up, and explain ... why he wasn't that bothered. 

Mr Dally, who according to his Linkedin profile, is - excuse me - a 'Change Maker'  (God help us all) who works as a regional director for Capita Local Government, smiled and described the debt as 'disputed'. An agreement would be reached soon. Oh. Well, what is £4.6 million of taxpayers' money, after all? Neither here, nor there. Yes, it might help safeguard vital services, prevent the terrible cuts in the library budget etc, but ... let us not stand in the way of Change, Capita style. Can't have enough of that, in Broken Barnet, can we?

Yes, the debt was owed by Re (the Capita joint venture with Barnet) and appears in the accounts presented by ... Capita, but: meh. Might be paid, might not be. #conflictofinterest, tweeted Mr Reasonable.

At this point, Mrs Angry decided she felt too unwell to stay any longer. She made her excuses, and left. It had been a long day.

Those who remained continued tweeting: 

Cllr Arjun Mittra‏ @ArjunMittra

Cllr Finn says "we should be proud of accounts" "nothing to worry about". This is of course the man chaired the scrutiny of the contracts.

And the man who is Chair of the Performance and Contract management committee, who thinks scrutiny should always be positive, not critical, and wants everything to be 'hunkydory'. Still, as Micawber always believed - 'something may turn up', a miracle, to keep the bailiffs from the door. And, in the absence of surcharges, rather than see our elected representatives end up in a debtor's gaol, it will be the taxpayers of Broken Barnet who bear the consequences of this authority's financial mismanagement.

Thinking back to the hours spent reading through those accounts in the archive earlier in the day, following the ebb and flow of financial activity in the life of one particular figure, left an undeniable sense of historical, or at least fictional, perspective: and the voice of one of the characters created by him. 

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

No colours needed here. Cllr Finn: profit or loss: that is the only measurement, in the end, that counts. The Micawber guide to accountancy. But when you surrender control of the books to the tradesman, and surrender common sense to the rule of political dogma, or party loyalty - all measure is lost, and we are lost with it. 

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