Wednesday, 23 May 2018

Physician Heal Thyself

Over the next three years Barnet is going to experience a serious financial shortfall. By 2020/21 there will be a budget gap of £32.5 million. Those aren't my figures; they are the forecasts in Barnet's Medium Term Financial Strategy (MTFS) which you can see here. To set that £32.5 million shortfall in context, the total revenue raised from council tax is around £160 million so the shortfall is around 20% of the total council tax revenue.

Part of the problem is the cuts from central government. However, Barnet have insisted on a policy of council tax freezes since 2010 which has stored up a massive problem that will now be coming home to roost. The cynic in me thinks that the Conservatives didn't take a council tax rise in April (other than the social care precept) because they thought Labour would win and be forced to increase council tax, labelling them as the tax raising party. Barnet could have increased the council tax element by the 2.99% allowed. Many councils have taken that rise knowing that come 2020/21 there is going to be a meltdown in local authority finances.

This year there will be £9 million of service reductions and next year that rises to £12 million but come 2020/21 who knows what cuts will be made? They will have to be huge. A very bleak outlook.

So that leads me back to the title of this blog. Barnet are making cuts to lots of services. They, or rather Capita who run the finance function in Barnet, are reviewing all of the contracts and services to see where savings can be made. However, one of the largest contracts seems to be exempt from this process and that is Capita. Well that's no surprise; why would Capita look at saving money on its own contract; Turkeys, Christmas and all that?

If you look how much money we have paid Capita since the start of the contract it is a somewhat shocking £335 million.  The CSG contract contains an indexation clause which means it automatically rises each year and because services are contractually specified it is very hard to make savings by reducing the service Capita provide.


If we look at the CSG contract, Barnet say they have made savings on the core contract. The problem is we are paying a fortune for everything else. Set out below is a chart that shows how those savings have been eroded even before you add in the massive payments for special projects, charged at consultancy rates which we are forbidden to know.


According to the Council's figures, the savings to date on the core contract are £17.2 million, which looks good, but then you have to deduct all the elements which Capita claim back from Barnet. The scale of contract variations illustrate the complexity of the contract, the problems of missing out elements and the fact that with such a long contract period (10 years with the option to extend for another 5 years) means that requirements will inevitably change.

The gainshare on reducing the number of people claiming the Single Person Discount and additional council tax income seems strange to me as Capita are already being paid to provide those services. So in effect we are paying for poor service and rewarding them extra for delivering the service we have every right to expect in the first place.

I haven't seen the specific details of what they have generated on the additional income but Capita are allowed to offset all of their costs before claiming a share. As a result, they take 47% of the additional income generated and that doesn't seem fair to me.

On the procurement gainshare I have blogged about this repeatedly. I have challenged with the external auditor the right of Capita to claim gainshare on framework contracts (contracts that are available to public sector organisations) and which could have been accessed by Barnet council staff.
In total Capita are forecast to claim £23.4 million in procurement gainshare and "Agreed Procurement Price Recovery".

There is then additional work. For example, last year Capita claimed £428,267 for additional caseload on revenues and benefits work. Every element of work in the contract has a volume attached to that and if we go over that limit we pay extra. I thought the number of people claiming benefits was going down but apparently not in Barnet.

From my perspective, the payments to Capita at £335 million should be one of the first areas Barnet looks at to save money if there is any chance of meeting the £32.5 million shortfall come 2020/21. But because the outsourcing programme is so high profile there seems a complete reluctance to look at any possible changes. Barnet need to be brave and look at their contract with as much rigor as they are for other vital services, such as Children's Services and Adult Social Care. So to Capita I would say - Physician Heal Thyself .

Saturday, 12 May 2018

Lots more senior staff in Barnet plus some big pay rises

I like to keep an eye on Barnet senior salaries which are published on a monthly basis; you can read them here. The list looked longer than I was expecting so I investigated a bit further.

Last August a number of staff got some very large pay rises so I compared the May 2018 senior salaries list to the same list from December 2017.

A few things that I identified:
  • 21 new post (excluding one temporary post covering maternity leave);
  • 6 posts removed so a net increase of 15 new posts;
  • a net additional cost of  £1.1 million per annum;
  • 8 staff received pay rises ranging from a rather modest £1,189 to a very sizeable £12,500 with the majority of rises £8,000 per annum;
  • 1 staff member did get promoted to a new role and got a £21,000 pay rise.
With so much talk about cuts to services it does seem rather strange so many new posts have been created and such substantial pay rises have been pushed through. In terms of the new posts I suspect that part of this increase is merely a reflection of the reduction in interim and agency staff whereby interim staff are being taken off agency status and taken on as full time staff due the tightening up of tax rules for the self employed by HMRC.

In terms of the pay rises, last time I raised this with Richard Cornelius he said it was necessary to stop staff from leaving. Maybe the Council should look a little deeper as to why staff want to leave?



Tuesday, 1 May 2018

Year End Supplier Payments - Where All The Money Is Going

Today Barnet have published the March 2018 supplier payments which give us a complete picture for the financial year.



In March Capita were paid £7.3 million and Re were paid £1.04 million with Comensura receiving just under £2 million.

Other interesting payments include £101,202.76 to Blue 9 Security. It would be helpful to understand how much of that is for the additional security staff at our "unmanned" libraries.  By way of comparison in the financial year 2014-15 Blue 9 Security were paid £581,632 but this financial year, 2017-18, they were paid £1,149,873. So in three years the cost of security have doubled with the only significant variable being the introduction of security staff at libraries.

We paid PA Consulting £219,950 for "IT & Comms". Now we have Capita who are supposed to run the council's IT services so what are we paying an external consultancy £219,950 for and who authorised it?

Albeit a more modest sum, we paid an organisation called Policy into Practice £20,317. One of the services they provide is Council Tax reduction modelling; you can see what they provide here. I don't know if that is what they helped with but it does seem to coincide with Barnet's plans to increase the amount the poorest families in Barnet have to pay towards their Council Tax next year see here.

So as we are at the year end I thought it would be helpful to summarise the key spending this year. Set out below is the chart showing the top 10 supplier payments for 2017/18.


Other than the Barnet Group and the Greater London Authority the three largest supplier payments are to Re, Capita and Comensura all of which deserve greater scrutiny. One thing to bear  in mind with the Capita payments is that we made a large advance payment last year which is why payments this year have been lower - although I don't think that will be happening again any time soon.

Set out below is the year end summary of the Capita and Re contracts. From this you can see that the contracted value to date of the two contracts is £211 million but, in addition to that contracted value, we have paid a further £124 million for all the extra services, special projects, contract variations, excess charges and gainshare. When Richard Cornelius keeps saying this contract is saving Barnet residents £1 million a month, perhaps you can understand why I find that hard to believe. Yes the core contract may be saving money but we are paying a fortune for the extras and that seems to more than cancel out any potential savings. As yet I still haven't had a resolution to my objections to the accounts for 2016/17 in relation to gainshare payments to Capita and we are now a month into 2018/19.


We also pay a fortune to a company called Comensura who supply the council with agency and interim staff. Having hit a high water mark of almost £20 million last year there was a concerted attempt to make inroads into that figure in 2017-18. Sadly the reduction has only been around 10% so we are back to where we were in 2015/16 but still at more than double the spend of 2011/12. In the 12 months prior to the commencement of the Capita contract, the council used significantly more agency staff. This was because many staff were leaving the council to avoid being made redundant and it was almost impossible to recruit new staff as they knew they would soon find themselves out of a job. Yet nearly five years into the contract with Capita we are still using large numbers of agency staff in far fewer service areas. That indicates to me an organisation that has lost its way, that can't hold a fixed workforce, that isn't doing its utmost to engage, motivate and retain its most valuable resource, its employees.

It is time for a change in Barnet and on Thursday Barnet residents can use their vote to bring about that change. Please make that vote count.




Friday, 20 April 2018

Enough is Enough - Time to Sack Capita

Between the two contracts, CSG and Re, we have paid Capita £327 million. Let that sink in for a minute; £327 million to a private company from just one London Borough. Ever since the contract was proposed I have challenged how such a pervasive outsourcing programme can work in the best interests of Barnet residents.

I have always made it clear that, ideologically, I have no problem with outsourcing so long as it is being done for the right reasons. Typically this is where it involves very specialist, non core activities where technical expertise may be difficult to secure and retain in house. In Barnet's case this outsourcing programme covered so many services which were core to the running of the council and which in 2010 were rated as 4 star (good). Barnet has been an experiment in mass outsourcing and almost five years in, it appears to be a failure.

Last night's audit committee was a litany of service problems, system failures, lack of controls, under performance, a major fraud. Internal audit saying issues were a problem, Capita saying they weren't.

Councillor Khatri, the now independent councillor for Mill Hill, deselected by the Conservative group, gave a quiet and persuasive evisceration of the Capita contract. He has long been a sceptic of the Capita contract believing that it does not offer value money for residents. Cllr Khatri is no fool, with an MSc and 34 years government experience in Export Credits Guarantee Department he is a shrewd and analytical person with great experience of business.

Some people have said that this contract is too large to fail, too large to bring back in house, so we are stuck with it no matter how poorly it performs. Unsurprisingly, I have a different view.  I believe that with a properly planned programme, the service can be brought back in house efficiently and cost effectively. We have an opportunity to redesign the council to ensure that departments deliver excellent service. This will allow a large number of senior commissioning posts to be removed saving millions.

The first phase will require Finance, Pensions Administration, IT, HR and Procurement to be brought back in house. These are the key levers by which you can control the business. It provides you with the information you need to understand which parts of the business are performing well or badly. The next phase is to set up a call centre in Barnet to deal with customer enquiries and the revenue and benefits service. Staff 100 or 200 miles away working for a number of councils simply don't have the local knowledge required to quickly deal with problems.

In terms of the Re contract that is a joint venture between Barnet and Capita. It just doesn't seem to work  as was exemplified last night at the audit committee. The CEO of Barnet who is a board director of Re has failed to get Capita to agree to new KPI's to more effectively manage the Highways contract. This has been dragging on for a year and there is still no clear outcome. There is what I described as a contractual gordian knot with exceptionally complex contractual relationships between Barnet and the companies that actually deliver services. This means that contracts aren't being effectively monitored and managed. I have yet to see any real financial benefits of the Re relationship - they have failed to sell services to other councils. This is a contract that can be brought back in house very rapidly simply by dissolving the JV and transferring staff back into the council. It cuts out the middleman of Capita and the profit they extract from the arrangement.

It can be done and it should be done. It is time to part company with Capita and take control of how Barnet operates.


Wednesday, 18 April 2018

Something Very Wrong in Barnet

Back in January I wrote a series of blogs about the very serious concerns regarding the gainshare arrangements in Barnet. In particular, I wrote about an energy contract on which Capita had claimed a gainshare of £313,215 which appears to be entirely unjustified. You can read about it here but in simple terms we paid an energy supplier a premium to, in theory, save money on overcharges by having a fully managed service. As I understand the contract, we pay a premium of approximately 1.5% on our energy charges for this service. Now here is the rub. Capita say they helped to secure this contract - even though it seems to have come via the London Electricity Project, a London Councils' initiative. As a result they are claiming they made the savings on the potential overcharges and want a third of them over a three year period, all in a single upfront payment.

To me and, I think, any rational human being this seems like a false claim. As a result I lodged an objection to the accounts on the basis that this money should not have been paid to Capita. That was on the 14 July 2017. Nine months later BDO, the external auditor, has still not resolved this matter.  I get the impression that no one actually believes that Capita deserves this money but because the correct boxes have been ticked they have been paid.

Frankly this disgusts me. Services are being cut, money is incredibly tight but because Barnet signed up to a contract which no councillors read in detail, we are being stuffed. This is nothing short of a scandal.

Last week I was at last given the details of the guaranteed procurement savings that Capita have to make for the rest of the contract. These savings are net of a further payment to Capita of something called the Agreed Procurement Price Recovery which is still redacted. Between now and the end of the contract they have to make over £43.7 million of procurement savings of which they keep around £13.5 million. The problem will be whether they can make real tangible savings or whether we will get further repeats of "contract savings" like this energy deal.

Barnet Supplier Payments for February

I had prepared the supplier payments for April and passed them on to a fellow blogger but forgot to publish them here, so the full detail is set out below.


While payments to Capita and Re look relatively modest that is because of the large advance payments paid last year which you can see more clearly in the chart below:


Comensura is still receiving large sums of money and while this month that was "only" £1.15 million, to date we have paid Comensura £16 million with one month of the financial year remaining as you can see in the chart below:


I will update at the end of the month when we will have the final year end spend by supplier.


Monday, 16 April 2018

Questions to the Audit Committee

I have submitted the following questions to the forthcoming audit committee this Thursday. I hold out little hope of getting appropriate answers.


Agenda Item 7
  • At 1.3.1 the numbers do not seem to add up. Should it read 49 high priority actions (not 45)?
  • On accounts payable the report states that “Because these controls rely on data being entered correctly, they have historically not been very successful at automatically detecting duplicates”. Is the report implying that data is not being entered correctly?
  • The reports states that “CAFT have found that the high number of false duplicates identified make it uneconomical to investigate these transactions”. When did CAFT first identify the high number of false duplicates, why has this not been raised with the audit committee before this meeting given the Integra system has been in place for 4½ years, and who made the judgement that it was “uneconomic to investigate the transactions”?
  • Given that there are no detective controls, outside of the annual National Fraud Initiative (NFI) data matching exercise, to identify potential duplicate payments made and, more seriously, that the  Accounts Payable team have not been able to perform their own review of data to identify duplicate invoices submitted for payment, what is the risk that over the last 4½ years duplicate payments have been made but not investigated.
  • Why didn’t the Accounts Payable team disclose before this internal audit that they were unable to perform their own review of duplicate payments and why didn’t the Commissioning Group Finance identify this problem before now.
  • Please can you clarify the issue relating to the BACS payment run – is it that confirmation was received for the total amount being paid but not individual payments, or that there was no audit trail to evidence the preparation of the BACS report i.e. were the BACS payments correct in the first place?
  • Will ensuring all policies and procedures are uploaded to an appropriate shared drive so employees have remote access to all relevant documents ensure that staff in Sussex and Darlington actually read or familiarise themselves with the policies and procedures. What measure are in place to ensure this is more than just a box ticking exercise?
  • In the separate 19 page Internal Audit Report it highlights a high risk problem with the Cashbook Team. The sample of 25 unallocated receipts amounted to £559,000. What is the current total of all unallocated receipts?
  • Who is responsible for the Cashbook team, Capita or LBB.
  • If 19 of the 25 unallocated receipts were not investigated at all and 6 of the 25 were partially investigated but not followed up or resolved how many residents has been hassled unnecessarily or worse, have had the matter referred to a debt collection agency when the debt had been paid?
  • In the Outstanding actions section the highways actions have been deferred yet again. On point 1 why are Re taking so long to agree additional performance indicators proposed by the Council given that Re is supposed to be a JV between the Council and Capita?
  • On point 2 if the KPIs in question will only include the elements that Re can influence yet Re are the council’s agent for monitoring the LoHAC contract with Conway, how can we have any confidence that the LoHAC work will be delivered satisfactorily and that there is a rigid monitoring system in place?
  • Given that Capita have claimed and received a large gainshare payment for the “savings” on the LoHAC contract and that Re received a large payment from Barnet for advice on the LoHAC contract, surely they should accept responsibility for the delivery of that contract and the consequent KPIs.
  • On point 3, is requesting supporting information from the contractor the most appropriate way to validate performance if you already have concerns about the performance data provided by the contractor. Surely there should be a separate third party or Council validation process?
  • At Point 21 of the completed actions I note that “arrangements to streamline and make capturing and collation of DBS data more efficient will be implemented”. However, in light of the revelations identified in the recent Private Eye article where a Capita Director allegedly stated that “in the vast majority of cases the level of check could not be evidenced and in many cases was not correct”  and that such failures “will result in the DBS considering suspension or cancellation of our registration to use the DBS service”, please can you provide some reassurance that streamlining the capturing and collation of DBS data does not render the checks invalid?
Agenda item 8
  • The CAFT report highlights an on-going financial fraud investigation case. While I understand that you do not wish to discuss the specifics of this case, I am sufficiently alarmed by shortcomings under agenda item 7  that I believe it is important that any investigation into how the system failures permitted this fraud to take place must be addressed immediately to ensure that no further fraud can take place. Please can you confirm that the systemic faults that allowed this fraud have been identified and addressed already, that you will investigate how the systemic failure were allowed to exist in the first place and why Capita, the Commissioning Finance Team or internal audit did not identify the systemic risk sooner?
Agenda item 9
  • In light of the financial fraud investigation, do you think the additional allocation of 455 days for  blue badge investigations is appropriate and that instead the additional time should be allocated to identifying and stopping staff and financial fraud?
Agenda item 11
  • I note the audit plan recognises the additional powers and duties of the external auditor and, in particular, the point that these powers allow electors to raise questions about the accounts and consider objections. What it fails to address is the time taken to address these questions and objections. As such do you think it is acceptable that it has taken the Council 9 months to provide information to the external auditor in relation to an objection to the accounts and that the objection has still not been resolved.
  • I note that the external audit will bring in specialist support to review Use of Resources. Can you provide details of the particular areas they will be examining?