On Thursday 16 June 2011 the Audit Committee of the London Borough of Barnet met to discuss the internal audit report into the MetPro scandal.
The report was commissioned as a result of pressure from Barnet residents, who alerted the Council to problems with the MetPro companies that the Council’s own procedures had completely failed to identify.
While the audit committee, under the chairmanship of Lord Monroe Palmer, did an excellent job of identifying many serious problems with this vendor account, many issues which residents were concerned about were deemed out of scope of this investigation. Furthermore, the committee has no powers to impose any remedy, and can only aspire to “inspire the executive to do better” (to quote Maryellen Salter, Assistant Director - Audit).
In addition to the serious concerns about Barnet Council’s relationship with the MetPro companies, there are wider implications of this affair for the Council as a whole. The problems which remain to be addressed are:
A) Legal issues. The Council’s Internal Auditor cannot exclude the possibility that fraud may have taken place. The Director of Corporate Governance Jeff Lustig indicated that since there was no evidence of fraud, there was no need to investigate. This is a highly unsatisfactory response and appears to be in breach of the council's own policies and procedures.
The Council’s financial regulations are clear on this point:
“Any suspected irregularity involving any asset, or the exercise of any function, of the Council must be reported by the appropriate Chief Officer to the Chief Internal Auditor to inform the overall assurance that can be delivered and to the Corporate Anti Fraud Team (CAFT) Manager for investigation.”
B) Contract procurement and monitoring. Barnet Council are pushing forward with the One Barnet Programme, a major outsourcing scheme, even though the audit team has identified serious and fundamental flaws in the Council’s contract procurement and monitoring processes.
The audit report into MetPro confirmed that there had been a breach of EU procurement laws which ensure fairness and anti-discrimination as well as best value. The internal audit report is silent on compliance with procurement law; however, given that only the largest 180 contracts out of 9,700 vendors are audited, it is likely that there are other legal breaches. In view of the shocking findings of the audit report and the recognition by the Audit Committee that the focus on change and the One Barnet Programme had been a contributory factor in these failures, we believe that all but essential contract renewals should be put on hold until an effective system of contract procurement and monitoring has been put in place and tested.
The multiple failings detailed in the MetPro report and in the Internal Audit Annual Opinion must be addressed, and Council staff working in procurement fully trained in the Council’s own Contract Procedure Rules before the Council can even consider embarking on an expansion of outsourcing.
The chair of the Audit Committee said that the audit department is unable to perform its duties owing to lack of resources. Barnet Council’s audit team should be strengthened and ways found to ensure that its recommendations are carried out.
C) Project management. In 2006, Barnet Council launched a SAP system to manage procurement, at an initial estimated cost of £8 million. This was done to modernise the control of payments and purchasing.
The cost of this project has spiralled to £25 million, more than three times the original estimate. Not only has this system failed to prevent the problems demonstrated by the MetPro report, it seems that the promised benefits of automation have not materialised. MetPro invoices have had handwritten numbers and notes on them. Payments have been made to non authorised accounts, and it seems that no proper audit trail exists. How can a system that cost £25 million have failed to address all of these issues?
The SAP fiasco shows that Barnet Council cannot manage large projects, cannot control costs and cannot implement outsourcing projects that work. They should not be considering One Barnet outsourcing until they fix the problems with their project management that the MetPro scandal has highlighted.
D) Safeguarding. The issues of safeguarding raised by MetPro have not been addressed. In light of the contact with vulnerable adults and children at Barbara Langstone House by MetPro employees who were neither SIA licensed nor CRB checked, Barnet Council should investigate in conjunction with the police whether there was the potential for or actual incidents of abuse, not only in relation to MetPro, but also in relation to any other security firms engaged by the Council. In addition, Barnet Council should keep central registers of all CRB, SIA and other required checks for all people working with the Council. This issue should be addressed immediately.
Barnet Council should work with residents who were illegally filmed by MetPro at the Council meeting on 1 March to address any data protection issues that arose from that episode, and possible other actions of this nature, instead of, as it has done up until now, trying to wash its hands of all responsibility.
E) VAT and invoicing. The Council do not have procedures in place to ensure that invoices meet legal requirements. The example on the Council’s own website is deficient. It is clear that staff are not properly trained in dealing with payments. A training programme must be instituted as a matter of urgency, to ensure compliance.
F) Culture. It is of great concern that the Audit Committee has made similar criticisms in the past, yet there has been a further deterioration. This should be a disciplinary matter for senior management, since it is accepted by the CEO, Nick Walkley, that this is a widespread problem resulting from lack of proper operational management. It is clear that attempts to inspire an audit culture have failed.
There is a culture of complacency at the top of Barnet Council. Senior officers know that they will not be held to account for any failings that take place under them, and that they can expect huge payoffs if problems are detected. Senior posts are filled by contractors on short contracts, with no vested interest in the future of the Council. No effort is made to replace these interim appointments with permanent staff. Until this culture of complacency is eradicated, nothing will improve. Senior staff should not be contractors on temporary contracts with no vested interest in improving the procurement culture, since it is clear that a root and branch review is likely to uncover more issues which will require addressing.
As concerned residents, we call for all of the issues above to be dealt with immediately. We want an action plan to be drawn up, with short timescales, and published for residents’ information. Without this, the residents can have no confidence in Barnet Council, its executive or its leadership