Wednesday 27 February 2019

Supplier payments for January - have we got a clear picture of agency costs?

The biggest issue in the latest set of supplier payment figures is the inconsistency in the interim and agency staff costs. I have been concerned that since the change over in contracts from Comensura to SCM Matrix we aren't getting reliable cost figures. In December the bills from Matrix were £824,900, much lower than I would have expected. However in January the bill was £1,413,389, almost £600,000 more. We have yet to see the breakdown of the costs and which departments increased their use of agency staff but such large fluctuations seem indicative of wider issues. In fact the January figures are the highest since last August.

I would also point out that there are also significant payments to two other staff agencies for what appears to be two members of staff. In January Barnet paid Gatenby Sanderson £18,731.31 and Hampton's Resourcing £11,363.64 and the total payment to the two agencies since January 2018 is £425,536. As far as I am aware this payment is for just two members of staff and if anyone from Barnet Council would care to correct me, please let me know how many staff are involved. What I would also say is that at these sort of salaries, these staff members should be listed in the senior staff salaries list which Barnet are obliged to publish by law and which you can read here.

In total, the agency costs excluding the two above are so far at £13.49 million with two months to run before the financial year end. I am still not convinced the cost includes all the agency staff recruited to sort out the mess on the refuse service but we have to wait another couple of weeks before we get a scale of the problems there.

The Capita and Re payments this month were just under £2 million this month once credits of £147,063 were included. However I haven't seen any details of the £4.12 million Capita are supposed to be refunding and which should have gone through in January.
The running total for payments to Capita & Re are set out below:

The top ten suppliers chart show that yet again the biggest slug of money is going to the Barnet Group; Conway Aecom have the highways contract and John Graham Construction are building the two new leisure centres at Copthall and Victoria Recreation Ground.
 As always, I will continue to monitor Barnet's spending.

Saturday 23 February 2019

No Policy No Resources - a Council in Denial

"No we haven't agreed a lease termination on Barnet House yet". "No we don't know the scale of abortive costs"...on the new Thameslink station that Government may claw back. "It's not just about the money"... when talking about why it's difficult to recruit and retain care staff on the minimum wage of £7.83/hr. These are just a few of the comments that came out under questioning at the recent Policy & Resources committee meeting. I had asked 21 questions and Barbara Jacobson, a local resident and assiduous scrutineer of Barnet's finances had asked 14 questions. You can read the questions and non answers (because Barnet never give you a straight answer) here.

I had several major concerns linked to Brexit and which are also linked to council funding. The first was about the construction of new homes. Barnet have been receiving around £10 million a year from central government in the form of new homes bonus. Barnet are forecasting that we will receive £54 million over the next 5 years and are critical in order to meet the budget. I raised the concern London’s construction sector has an ageing workforce that is heavily reliant on migrant labour. EU nationals make up 30 per cent of the 300,000-strong workforce, while just half are UK-born. Of the UK-born workers in the capital, 38,500 (12 per cent) are set to retire in the next 5-10 years. Yet it is estimated that 60,000 more construction workers are needed in London and the South East in 2017 to keep up with demand. There have also been articles documenting the slow down in the construction market in London; just one of the articles about it you can read here. As such I was concerned that if the number of new houses built in Barnet failed to meet the threshold to trigger the New Homes Bonus, this could have significant financial impact on Barnet. What reinforced my concern was that Barnet set a target of 3,100 new homes to be built in 2018/19 which would more than meet the New Homes Bonus threshold. However, in the first 3 quarters of 2018/19 only 553 had been completed (according to Barnet's own performance figures) significantly below the threshold. The response was, we think we will make the threshold and if we don't achieve it we will have to update the budget. That strikes me as incredibly complacent especially as there are concerns (detailed in the Municipal Journal) that the local government minister, Rishi Sunak may not honour £500m of New Homes Bonus payments due to councils. If these payments dry up the level of additional cuts that would be necessary to balance the budget are very large.

I then asked about the risks that insufficient care workers can be recruited and retained to meet the needs of the sector. Bear in mind Barnet is the largest London borough and has more care homes than any other borough. It also affects the care workers who support people at home. Again a high proportion of care workers are EU nationals and after Brexit it may become even more difficult to recruit staff. The question I asked was as follows:
"The risk register identifies the issues related to adult social care staff recruitment and retention. However, it does not address explicitly/quantify the financial impact on Barnet if, for example wages rates for carers are forced to increase significantly to attract and retain staff. What studies have Barnet carried out or commissioned to specifically quantify the financial impact of an increase in carer pay rates?"
Now I think that is a sensible question to be asking but Barnet's response was:
"The council has existing contracts with providers for the delivery of services which commit the council and the supplier to a set fee for services. The council continues to work closely with the local market at both a borough and regional level to assess the ongoing risk and impact of salary requirements within the workforce and ensure that rates remain sustainable and competitive". What they are saying in effect is - not our problem. The reason I am particularly concerned about this issue is that very recently a care home near to me, Apthorp House, received an inadequate rating from the CQC.  This care centre is run by Fremantle to whom Barnet outsourced their care services to back in the early 2000's and who last year were paid £3.7 million by Barnet. You can read the full CQC report here but I warn you it makes distressing reading. One of the quotes from the summary was as follows:
"There were not enough staff deployed to meet people’s needs. People told us they had to wait to receive care, and we saw people’s dignity was compromised as there were not enough staff available to support them in a timely manner. Bathrooms were dirty and this exposed people to the risk of harm due to poor infection control practice. Risks to people were not always identified, and risk assessments were not always followed. Medicines were not managed in a safe way".

Now, looking on line I noticed that Apthorp are advertising for care staff but at the national minimum wage of £7.83/hr rising to £8.28 /hour after a probation period and care certificate. It is all very well Barnet saying we have a fixed price contract with care homes like Apthorp but if that means they can only afford to pay minimum wage and that isn't enough to attract and retain staff then we have the risk of a major problem which might ultimately lead to the closure of the centre. From my perspective we need a grown up conversation which may mean increasing the amount paid to care homes on the basis that care staff are offered London Living Wage as a minimum. Unfortunately when I asked the director of Adult & Communities (salary £148,099/annum) if they had considered the London Living Wage they said "It's not all about the money". Well I'm afraid to say that if you are on £7.83/hr, the money is pretty blinking important and an extra £2.72/hr (the difference between National Minimum Wage and London Living Wage) could make a huge difference to the ability to recruit and retain care staff. However, it will cost more money and Barnet say they don't have any. Barnet are also looking to review people who receive care at home and if the cost is higher than putting them into a care home then they will be moved into a care home. This is not about what is best for the individual, it is about what is cheapest and that seems brutal.

Next financial year Barnet have to make a further £20 million of savings topped up with £5.35 million from reserves. This is an incredibly tough budget and many people will blame central government and that is true. But Barnet can't relinquish all responsibility as they have chosen to freeze council tax for the last 7 years, only taking social care precept rises. Before the last election any sensible person would have seen the additional massive cuts coming and taken a 2.99% council tax rise but Barnet Tories chose to freeze council tax again. Some people may say they don't want to pay any more for council tax but ultimately you have to take a rational view; do I pay what is needed or do I bury my head in the sand and wait for the crisis to happen. Well it's happening and it will get much, much worse. My thoughts are that we need to take a big tax rise this year, say, 6%. Based on my calculations this would add an extra £6.8 million this year and every year going forward, so it would help to cut the savings target over the next five years from £65 million to £31 million, still a stretch, but would allow for some of the risks on wage pressures and reduction in new homes bonus. It would make up for the freeze last year and would at least mean that we stand a bit of a chance in delivering some services to a reasonable standard. It would require a referendum of Barnet residents but I genuinely believe that if you explain to people what the consequences will be of not taking this extra increase they will agree - so long as the money isn't squandered on non essential activities.

That's not to say that Barnet can't make savings elsewhere. Barnet are spending £50 million to relocate to a new office building at Colindale. It is overdue and they are now looking at May for a moving in date. I asked about the lease on Barnet House and whether they had agreed a termination of the lease but the answer was "no not yet". That means we risk having the building standing empty but still shelling out rent of £65,000 each month until the lease termination is agreed. 

Barnet have also made huge financial commitment to fund the new Thameslink Station at Brent Cross which is anticipated to cost £365 million. Originally it was planned to ringfence the business rates from the expansion of the Brent Cross shopping centre to fund the interest payments. However, with the decision of Hammerson to pause the extension Barnet have been negotiating with Government as to a different funding model. This has been identified as a potential risk for the council so I asked the following question:
"OP27 (of the risk register) identifies the risks associated with the affordability of the Thameslink project and in particular the risk that Government may claw back grants leaving Barnet liable for the abortive costs. What is the scale of the abortive cost liabilities and when will a final decision be made as to whether this project will be aborted?" Not surprisingly Barnet did not give any indication of the scale of costs so I asked a supplementary question asking whether the scale was half a million or £5 million or £20 million or £50 million. The answer was "we don't know at the moment". That is an answer I find terrifying and utterly unacceptable especially as the sum could be huge.
As the Finance Director pointed out the budget is finely balanced and there is little room for manoeuvre. I forecast that the financial position will only get worse next year as wage pressures increase, it becomes impossible to deliver all of the £20 million of budget savings and government puts more financial pressure on Councils.
We should be talking directly about the reality of a council tax increase above 2.99% and the need to catch up for the seven years of freezes. Now is not the time for political point scoring if we are to avoid a major financial and social crisis. I just hope there are a few more sensible voices out there.

Friday 15 February 2019

Questions for the Policy & Resources Committee on 20 February

The agenda for the  Policy & Resources Committee on 20 February is jam packed with the papers running to over 700 pages. With enough time I suspect I could have identified 50+ questions but with so little time I managed just 21. The agenda has a number of vital reports. Brexit contingency planning could have massive implication for care staff but I don't see evidence of Barnet actively tackling these issues. The budget is also a massive issue with £20 million of cuts as well as a £5.3 million drawdown from reserves next year. Whether the saving will be achievable is another matter and my big concern is that senior managers are signing up to savings that simply aren't deliverable. It looks like there is an £875,000 overspend on streetscene who are responsible for bin collections. We have not been told the true cost of the huge number of additional agency staff and overtime, but this figure seems to suggest the cost is much higher than people were expecting.
Critically, I a still not convinced we are getting accurate cost figures. The report publishes the cost of agency staff and suggests the total cost to date is £12.05 million. However, I monitor the payments to suppliers which shows that the agency staff cost from the main supplier Matrix (and its predecessor Comensura) is £13.39 million and that doesn't include payments from some other agencies who do not operate through the Matrix contract. I have asked them about this on a number of occasions so this time I have spelled it out for them so they can see clearly where the differences exist.
I have set out my questions below - we will have to wait and see if I get any real answers.

  1. London’s construction sector has an ageing workforce that is heavily reliant on migrant labour. EU nationals make up 30 per cent of the 300,000-strong workforce, while just half are UK-born. Of the UK-born workers in the capital, 38,500 (12 per cent) are set to retire in the next 5-10 years. Yet it is estimated that 60,000 more construction workers are needed in London and the South East in 2017 to keep up with demand. Given that Barnet have budgeted to received £54 million in New Homes Bonus (NHB) over the next 5 years what steps have been taken to understand whether that bonus can be delivered if there are fewer construction workers, whether the NHB estimates should be revised downwards and what are the budget implications if the number of new houses are not delivered?
  2. The risk register identifies the issues related to adult social care staff recruitment and retention. However, it does not address explicitly/quantify the financial impact on Barnet if, for example wages rates for carers are forced to increase significantly to attract and retain staff. What studies have Barnet carried out or commissioned to specifically quantify the financial impact of an increase in carer pay rates?
  3. What other measures have Barnet considered to attract and retain care staff?
  4. To what extent has the Barnet Observatory* provided economic and socio economic intelligence and foresight to the Brexit planning and risk register? (*Barnet Observatory was a Capita promise in their original bid specifically to address these types of issues)
  5. The report notes at 1.5.18 that the Council’s failure to increase council tax in line with inflation means that we will be  collecting on average £150 a year less from each household by 2024. If Barnet had taken a 1.99% increase each year we would now be collecting approximately £20m more next year which closely mirrors the level of cuts to vital services which are budgeted. What consideration has been given to try to make up some of this shortfall by increasing council tax by more than 2.99% next year and what were the outcomes of any  financial modelling over the next 5 years on that basis, even taking into account the cost of a referendum?
  6. Even after budget savings of £19.965 million we still need to draw £5.357 million from reserves. What happens if theme committees are unable to deliver the savings as was the case this year and last year and what cumulative impact will that have for future years in the MTFS?
  7. The risk register identifies at STR033 the risk of savings not being delivered and suggests Monthly Budget Monitoring as mitigation. However the Financial Performance and Contracts committee only meets quarterly which means that there may be significant deviations from the budget before Councillors are made aware. Given that this is such a critical area for the Council what consideration has been given to scheduling a Monthly Budget Monitoring sub-committee with a very specific focus and brief to ensure that there is a much closer scrutiny by Councillors and the public of budget performance?
  8. Risk STR022 discusses the risks and liabilities associated with Barnet House. Back in 2014 Barnet paid £62,500 to secure an option to purchase the freehold of Barnet House. Did the option lapse, should it have been extended, and to what extent will additional office space be required, other than Colindale, if more Capita services are brought back in house?
  9. STR032 Identifies the issues around the changes to the waste collection routes. Given that there has been no transparency on the costs of agency staff and overtime and a significant number of new refuse vehicles have been purchased to try and overcome the problems what confidence can we have that a residual risk score of 12 is appropriate?
  10. STR025 identifies the risks associated with contractual disputes due to underperforming commissioned services and has a risk score of just 6. However the recent performance data identifies that both user satisfaction and commissioner satisfaction with commissioned service is poor and declining. How was this score developed and did it consider the current poor user/commissioner satisfaction scores as part of that assessment?
  11. PI022 identifies the risks associated with the company that that controls the street lighting management system Harvard Technology going into administration. Given the company went into administration on 10 December and Grant Thornton have been appointed as the administrator, what further updates are available to clarify the potential financial or operational impact and will this have any impact on the current proposal to upgrade to LED lights?
  12. OP27 identifies the risks associated with the affordability of the Thameslink project and in particular the risk that Government may claw back grants leaving Barnet liable for the abortive costs. What is the scale of the abortive cost liabilities and when will a final decision be made as to whether this project will be aborted.
  13. At page 4 in the report is states that there is an adverse movement due to £0.340m increase in gain share contractual payments and other areas of Managed Budgets. Can you clarify how Capita can be entitled to contractual gain share costs linked to the increase in anticipated Housing Benefit Overpayment recoupment given that Capita have responsibility for administering Benefits and how that is reconciled with the statement that no further gainshare payments would be made following the £4 m payment from Capita agreed at the Urgency Committee?
  14. The £875,000 of additional overspend on streetscene is attributed to the delay in implementation and the changes to the collection rounds. How can we be confident that this is an accurate figure, why has it been allowed to grow so large and what is the forecast carry over into next year’s budget?
  15. The HB Law contract continues to be overspent and has done since the contract started. What are the risks that it will be overspent again next year and what specific measures have been put in place to ensure it is delivered on budget?
  16. Yet again Table 8c does not reconcile with the figures published on the suppliers payments. Set out below is a comparison between the table and the data published on the Barnet website. Which figures should I believe and why are there such significant difference?
  17.  At 1.74 the report notes a dispute with the builder about the final fit-out and costings has the potential to impact on the completion date and office move. Please can you clarify the cost of this delay and what is the revised date to move staff into Colindale?
  18. Why are the Appendices exempt when you have already published details of 146 of the properties in delegated reports. What specifically makes the information unsuitable for publication and who determined that it is not in the public interest to provide details of a massive asset transfer from the Council?
  19. TBG Opendoor is forecast to lose £4.247 million over the next 5 years and the business is not forecast to break even until 2034/35. What will be the cumulated losses up to 2034/35 and what risks have been identified that might occur over the next 15 years to influence that break even target date?
  20. Appendix B contains a five year business plan summary (excluding TBG Open Door) which shows a forecast profit for the 5 years of £680,000. Last year at this committee the forecast for the same period was a profit of £1,342,000. What has caused the profitability to halve in 12 months and are there any other risks such as those identified in the Brexit Impact Log that could turn TBG into a significant loss making business.
  21. I am concerned to read at 1.10 that the £319.5m grant would be partly repayable by the Council, recognising that a business rate ringfence is currently in place around the shopping centre but that the ISC were not content with the proposal to extend the ringfence, and therefore asked for further work to agree an appropriate repayment model. What is the extent of the grant repayment for which Barnet may become liable, when will the negotiations on an appropriate repayment model be concluded and has ministerial support now been secured?

Thursday 14 February 2019

Capita are not performing well in Barnet - But look who is saying that.

On Monday, Barnet Council published the latest performance data. It is not easy to read or understand and encompasses a range of performance targets. However there were 10 performance targets that caught my eye. These are the User Satisfaction and Commissioner Satisfaction targets. Now these are 'Users' are in fact council users of the IT, HR, Finance, Procurement and Estate services all provided by Capita. The 'Commissioners' are the senior managers within the council who are responsible for commissioning and monitoring the services from Capita.
Last year Capita failed to meeting user and commissioner performance targets and were forced to pay Barnet £399,513.29 in what they call service credits, a sort of fine for poor performance. This was in addition to service credits of £67,935 for failing to meet resident KPI's.
So this year I was expecting to see a change as promises were made to improve performance. However it didn't come as any great surprise that when I looked at the figures they didn't live up to the promises.

As you can see from the table above nine of the ten satisfaction ratings were classified as red, as in failing, and one classified as amber. Compared to last year, seven out of the ten satisfaction ratings are actually worse than last year. This tells me that Capita's performance isn't getting better, it is getting worse. Most alarmingly is the fall in Commissioner Satisfaction on the finance function which has fallen by 31% since last year. Finance is a business critical function - if we don't get good quality, accurate and timely financial information it becomes almost impossible to make clear and informed decisions on how the council is run. I have raised the issue of poor quality financial data on numerous occasions and I think it is still a massive problem. No doubt the fact that the financial function allowed the £2 million fraud to go unnoticed with 62 false transactions which only came to light when the fraudsters bank thought something was amiss and called the council. We also had the financial black hole which didn't come to light until after the elections in May last year.

There will be a response to say that Barnet are planning to bring back in house the finance function and HR but some elements of the finance payments will be left with Capita. In addition Estates, IT/IS, and Procurement are going to remain with Capita in the short to medium term and may well stay with Capita for the remaining 4.5 years of the contract (plus a further five years of the contract extension).

So next time someone says how well Capita are performing tell them they are not and that the Council's own senior managers are saying that.

Wednesday 6 February 2019

The Tail Wagging the Dog: Capita and Barnet

A Joint Blog from the Barnet Bloggers

Barnet's Conservative led administration has never been so divided.

Since the local elections last May, new members of the Tory group have been confronted with the legacy of their longer serving colleagues’ failure in office: the crisis over the Capita contracts, a massive budget deficit, and the exposure of fraud by a Capita manager, enabled by a failure to put in place any adequate system of financial controls.

Members of the previous administration appear not to have grasped the seriousness of the situation, or at least are reluctant to acknowledge the extent of the problems facing this borough.

After receiving payment of a paltry £4 million from Capita in ‘compensation’, Tory councillors have now voted to delay any immediate severance of ties, in favour of a long drawn out process of assessment, during which time Capita will continue its contractual partnership with this borough, and our services will continue to be left in their control.

We believe this is quite wrong, and, it seems, so do some Tory members.

At last week's Audit meeting, for example, it was revealed that BDO, the authority's external auditors, are now obliged to visit Capita's offices in Darlington, where their administration of Barnet's Local Government Pension Scheme is based. This extra work will incur an additional charge on top of the audit fee. Capita continue to administer this scheme, despite very serious concerns about standards of performance.

Also at last week's Audit meeting, there was discussion about why new systems that should have been implemented following the £2 million fraud by a Capita employee were not in use.

Grant Thornton, Internal Audit, Senior Council Officers and Capita’s Partnership Manager in Barnet had all agreed these control systems should be implemented immediately. A Capita employee, however, based in Chichester, where these payments are handled, had taken it upon themselves not to implement this critical system, a failing only identified when Internal Audit carried out a follow up check.

At least one of the Tory members had grave misgivings about the continuing partnership with Capita.

Councillor for Hale, Laithe Jajeh, said at the meeting, “I find it really worrying that someone from Capita (can do this)’s almost the tail wagging the dog …’ He also commented on twitter that assurance from Capita on implementation of Grant Thorntons’ recommendations was ‘not reassuring whatsoever …’

He added that Capita’s performance was not good enough and that he was not confident that promised dates for completion would be met.

At a further point in the audit meeting it was identified that 51% of the internal audit recommendations were not completed, the majority of which were the responsibility of Capita. Labour councillor Alison Moore suggested that such a high level of actions not implemented was a sign of an unhealthy organisation. The Head of Assurance said it was a very serious matter from the officers’ perspective.

The Committee Chairman, however, wanted to take a ‘positive’ view of the situation and suggested that we do not look at criticisms. There was a clear consensus, however, that Councillors, both Conservative and Labour, were not satisfied.

At last there is an acknowledgement, at least from councillors who were not involved with the original outsourcing exercise, that the partnership with Capita may not be the great panacea we were promised, under the lure of ‘Better services for less money’.

We are facing a review of the contract in February, yet there is a very real concern that decisions have already been made.

The dispersed structure of the contract, with Capita offices situated all around the country, makes it hard to implement change, hard to control, and hard to monitor. Different reporting lines in different organisations mean that it is difficult to pin down responsibility for actions or inaction. This exacerbates and complicates the failure in accountability between the management of local services, and the local community itself.

We call upon the council to make the outsourcing review as open and unbiased as possible, held in public, with full and meaningful consultation with residents - and with key roles for some of the new Conservative members such as Cllr Jajeh, and Cllr Prager, who seem to have a more clear sighted view of Capita’s performance - and we urge all members to look at how quickly services can be brought back to Barnet, where they can be properly managed, monitored and controlled. 

Derek Dishman
John Dix
Theresa Musgrove
Roger Tichborne