Tuesday, 26 June 2018

Financial Performance in Barnet - Some very serious questions

Next Monday is the first meeting of the newly restructured Financial Performance and Contracts Committee. You can view the committee papers here but I warn you they are a long read. This committee last met on 27 February, 4 weeks before year end. At that point no significant mention was made of the poor financial performance. Four months is far too long to wait for a committee dealing with such important matters. Maybe it was because Barnet or Capita were too ashamed of the results.

CSG run by Capita had a dismal performance including failing 18 contract indicators. But not to worry. The footnote makes it clear that although they had all these failures, none of them count as a contract failure so that's Capita off the hook. I absolutely despair of Barnet's ability to enforce performance on these contracts.
Capita run Re also turned in an appalling financial performance. At the committee meeting on 27 February they showed a net overspend of £285,000. By financial year end, 4 weeks later that had increased to £6.7 million. Someone somewhere was not doing their job to have such a massive change in financial performance in the last 4 weeks of the financial year. I would also draw your attention as to how they change the format between reports to make comparison a bit more confusing.

Of critical importance at this meeting is the dire financial situation and what it means for Barnet residents. This financial year Barnet has to make an additional £9.5 million of savings. That is on top of the £9.9 million of savings they have already budgeted (but may fail to achieve). What is worse is that while the reports detail the failings there is no clear indication of how these problems will be resolved. The reports also uses positive narrative and spin to make the situation less serious than it really is, a worrying approach if councillors aren't super vigilant in interpreting what they are being told. Last year Barnet had to use £21 million from reserves and balances to fund the overspend, a situation which is entirely unsustainable but I see no prospect of how they are going to close the  budget gap this year.

Set out below are questions I have submitted to the committee. As always I have low expectations of whether they will be adequately answered. I will update you after the meeting.

  1. On 27 February 4 weeks before year end this committee was made aware of an overspend after adjustments from reserves of £4.232 million. In 4 weeks that overspend almost doubled to £7.885 million. Why was there such a serious under reporting of the financial position at the last meeting?
  2. Given that this committee was not alerted to the scale of the  financial overspends at the 27 February meeting, 4 weeks before year end, and only discovered in May when the year-end accounts were being closed, how confident are you that this report provides you with an accurate picture of current financial performance?
  3. Do you think that the net draw on reserves and balances for 2017/18 of £21.148m is either acceptable or sustainable and what steps are you going to take to ensure this huge draw on reserves and balances does not occur again this year.
  4. 1.2.3 implies that the Policy and Resources committee were aware and approved of all the drawdown on reserves and balances which they were not at their meeting on 13 February, 6 weeks before year end. Do you think the wording of this section should be changed to reflect the fact that such a large shortfall was only identified after year end accounts were closed.
  5. In the report it states that the overspend was reduced following drawdown from reserves. This is entirely misleading as the overspend was not reduced. Should the report be corrected to say the overspend was offset following drawdown from reserves as that is a more accurate description of the situation.
  6. At this meeting in February most of the budget overspends were identified with one significant exception which is the Re budget. In February the Re budget outturn was forecast at £611,000 with reserve movements of £241,000. On that basis paragraph 1.2.18 entirely misrepresents the situation by saying that the budget was overspent by £3.954 million. Can you confirm that the budget was overspent by £6.7 million of which only £290,000 was identified at 27 February.
  7. Of the two overspend items in the Re budget, is the £4.5 million guaranteed income the same element that was identified by the external auditor last year and on which the Audit committee were given solid reassurances by the Director of Resources that they would be recovered?
  8. Will you be asking the Director of Resources why they gave such a reassurance last year that has failed to materialise?
  9. Please can you explain why it took from July last year until after year end before this committee were made aware that this amount was not recoverable?
  10. Please can you clarify specifically what you mean by the sum being “accounted for within the HRA budget” given that this sum is not reflected in the HRA budget outturn at Table 3?
  11. Can you clarify specifically what the legal advice said as to why the “guaranteed income” should not be included in the General Fund revenue account?
  12. If the other major Re overspend of £2.647 million was a contractual liability, why was it not recognised in the performance figures sooner so that other budgets could be adjusted before year end to reflect the liability?
  13. At 1.2.23 the report states that “net pressure” is £9.5 million. Can you confirm that this is in addition to the planned savings already forecast of  £9.932 million meaning that total savings required this year are £19.432 million?
  14. Given that we are three months into this financial year what is the latest update on the realisation of this £19.432 million of savings?
  15. How confident are you that the narrative in this report is balanced and that it provides a true picture of performance?
  16. At 1.6 in the report it states that six performance indicators were not met yet at  1.7 the report states that Cambridge Education only failed to meet one contract indicator. Does that mean that the commissioning and corporate plan indicators are not the contractual responsibility of Cambridge Education?
  17. The report identifies indicators not met but no reassurance is provided as to how they will be met in the future. How can we be sure that these indicators will have been met when they are next reviewed?
  18. At 1.8 no mention is made of the massive financial fraud that took place last year and which it appears was able to take place as a result of failing in the internal financial controls which are the responsibility of CSG. Can you tell me why this was not included in the report?
  19. The report states that “a review of internal financial controls was undertaken and improvement implemented”. Is this the Grant Thornton Project Rose study, and if so when were these improvements implemented and will the report either be made public or circulated to members of this committee in private session/ “blue papers”.
  20. The report notes that a gainshare working group was set up to review the application and reporting of procurement gainshare. Please can you provide me with more details as follows: what are their terms of reference; who attends the working group; how many times have they met so far; do they publish minutes; what is the timescale for producing a defined output; do Capita attend these meetings; will you be taking public evidence; and will the findings be made public?
  21. How confident are you that the gainshare savings stated are real and specifically as a result of Capita expertise or could they have been achieved using standard framework contracts available to local authorities?
  22. When I checked on the 23 May 2018, the contracts register for 2018/19 was on line and showed  that 112 contracts had expired before the start of the 2018/19 financial year. On 23 June 2018 the data set had been removed from the Barnet Open data portal. What is going on, it the contract register being maintained up to date, how many contracts are currently being used that have expired?
  23. For 2017/18 I understood that the in-year Council Tax and NNDR collection rate were guaranteed at 98.0%. On that basis why is the in-year council tax collection rate shown as only 96.02%  and only 96.89%  for NNDR and will CSG be making up the shortfall?
  24. There are a large number of KPI’s not being met or performance is worsening yet the report does not appear to identify what steps are being taken to ensure they situation improves. How can we have any confidence that these matters are being adequately addressed and that this time next year the situation will have improved?
  25. Do you think it would be helpful to inform committee members that the caseload charges over and above the core fee for 2017/18 were £190,953 and that CSG customer service volume excess charges were £247,000?
  26. Given that the council has now introduced monthly financial reporting can you include in the terms of reference that the quarterly financial reports must reflect a rolling quarter’s data i.e. the three months figures immediately prior to the committee meeting as a way on ensuring you get the most timely and accurate information.
  27. When the report says the CFO’s report will give a “broad look” at financial performance it creates ambiguity and risks failing to provide you with important detailed information.  Given the content of the report are listed do you agree that the term “broad look” should be deleted and include the words “and any other information the committee deems important for the monitoring of financial performance”?
  28. Do you think it would be advisable to add in the following phase: “The report must be provided in a consistent format which not only allows immediate transparency but facilitates the easy identification of trends in performance over a period of time”?
  29. Will this report include details of the Budget Recovery Plan, progress on non-essential discretionary spend controls and any SPIRs that have been frozen?
  30. Will the report give details of the Capita contract negotiations – even if they are provided in private session/within confidential “blue” papers?
  31. Given that staffing and agency costs are a major source of budget overspends surely this committee should receive details of  staffing, incl. headcount, FTE, agency and sickness absence as these are financial performance issues not policy issues?
  32. For the avoidance of doubt, who is the Chief Finance Officer as there is no such post in the LBB senior management structure; are they a Capita employee, the Head of Finance or the Director of Resources/S151 Officer.
  33. Will the S151 Officer attend these meetings?
  34. Why are we waiting until September to get a report on agency spend when it represents such a major cost to the council given that we will be half way through the financial year at that stage and have less opportunity to act on the findings before year end?

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