Thursday, 22 November 2012

One Barnet - The Unanswered Questions


Following the disclosure of two internal audit reports on the risks in the One Barnet Outsourcing project, I thought it would be useful to publish the address I made to Audit Committee in April this year. I am not surprised they didn't disclose their hidden reports at this meeting because it might have reinforced some of the comments I made. The committee failed to address my concerns at the time and today those concerns look even more serious.

"Having reviewed the CAFT (Corporate Anti Fraud Team) and Internal Audit plan for 2012-13 it strikes me that there is an enormous gap in the plans which represents a very significant risk to the Council. The Council is in the process of radical change and by 1 January 2013 the delivery of a large number of key support services will have moved to a private sector supplier. This involves hundreds of millions of pounds worth of spend and involves some of the key financial service such as revenues and benefits, procurement and the entire operation of the finance department.

Internal audit’s plan makes only passing reference to One Barnet and then only in the context of the initial commissioning process. Indeed Internal Audit have allocated less than 4% of the time to reviewing One Barnet. CAFT appear silent on One Barnet and have not allocated any time to it.

I would have expected to see a detailed report which sets out how One Barnet Outsourcing and the complete restructure of the Council to a commissioning council would impact on the operation of internal audit, CAFT, external audit and the audit committee.

For example:

Have the audit committee identified what audit rights and responsibilities they have under the new contract?

If Revs & Bens are administered by a private provider, will the CAFT team still have a role in identifying benefit fraud or will that responsibility pass to the external provider?

What audit rights will the council have over the new procurement function?

Will audit look at the contract procedures of the new provider or will audits remit be limited to examining the payment made to the new provider?

Will internal audit be expected to travel to the provider’s data centres to review procedures? Having reviewed Capita’s business centres map, it is perfectly possible that by 1 January 2013 we could see the council’s financial administration being undertaken in Mumbai, back office administration in Shepton Mallet, customer contact in Blackburn and pensions administration in Pune (in India).

How much thought has been given to the logistics and practicalities of how the internal audit function for these services will take place – if at all?

In terms of the new council structure, have the audit committee examined how they will interact with the new assurance group and with the outsource providers?

To what extent have the committee been involved in ensuring that the new assurance group will continue to provide the information and reports that the audit committee requires?

Will the audit committee be able to ask the outsourcing provider to appear before them to answer specific questions on the financial information they produce?

How will Grant Thornton’s on going external audit services be affected?
Have they provided advice on the issues arising from a commissioning council based on their experience of other local authorities?

What is their experience of dealing with a remote outsourced finance function?

It may be that all of these activities have been carried out, but if that is the case why hasn’t a report been published setting out all of these issues. What I am particularly concerned about is the audit committee are sitting in isolation whilst change is happening all around you. Failure to plan for these radical changes now will mean that you may be unable to provide the level of scrutiny you require in the future because of operational, logistical or contractual restrictions. I would like to get some reassurance from you, as a committee, that resident’s interests in the new world of “commissioning council” will be protected."

We are a week away from Councillors voting on this massive financial gamble yet all the matters I raised remain unanswered. In the commercial sector I cannot imagine any company signing up to such a radical organisational change without having addressed these issues in full, yet because politicians are in charge, they vote with what their party tells them irrespective of what makes sense. And please don't accept the myth peddled that there is not alternative. There is. I have identified savings of £9.5 million a year that could have been introduced several years ago but have been ignored because the culture of change and the influence of external consultants has prevailed. The in-house team have been prevented from submitting their proposals simply for political reasons.

If your councillor is a Conservative then ask them if any of the matters I raised have been addressed and if they can't answer the question ask them why they would vote to introduce such a radical financial gamble with so many unanswered questions.

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