Thursday 9 May 2019

Joint Post from the Barnet Bloggers

Capita - “Not Minded”

At the Barnet Council Audit Committee on 1 May the external auditor from BDO made some very worrying and serious statements about the controls systems in place. This follows a £2 million fraud last year, and pervasive problems with the pensions and payroll administration.

“You don’t have a particularly strong control environment”, the auditor reported, and then stated that Capita were “not minded” to provide assurance over systems running processes on Barnet Council’s behalf.

This is an astonishing response from Capita.

Responsibility for assurance of these systems, run from Capita’s offices around the United Kingdom, falls to Barnet Council’s Internal Audit Team.

As the External Auditor made clear, the Internal Audit team is doing good work “but it doesn’t give you that level of assurance that you would expect with so much of the service outsourced”.

Given that Capita provide so many of Barnet’s back office systems this is a very serious situation, especially as the external auditor raised this problem two years ago, before the £2 million fraud was discovered.

As bloggers who have closely followed and reported the story of Barnet’s partnership with Capita, we are deeply concerned about this situation and alarmed that neither the auditor nor committee members were aware that assurance of Capita’s systems is a contractual requirement, and not something that could be provided at their discretion.

We ask the following questions of the Council:

·             Why were the audit committee not made aware of the auditor’s concerns when they were raised two years ago?
·             Why are Capita “not minded” to provide assurance over their systems when the contract appears to indicate that they must provide that assurance?
·             Why did Grant Thornton not pick this matter up when they were the Council’s External Auditors or as part of their contract review following the fraud?
·             Why have the Council’s contract monitoring officers not identified this problem before now?
·             If BDO are saying the Council does not have a strong control environment, what are the risks of another fraud or systems failure happening?

And finally,

·             How can Capita continue to retain the confidence of the Council without such assurances?

We ask that the Council arranges for a forensic review/audit of both Capita contracts to address the contractual failures raised by the External Auditor as a matter of the utmost urgency, to be paid for by Capita, before any further decisions are made on what services Capita will continue to provide. Failure to do so can only have the most serious consequences for the financial security of this borough, and the well being of all residents.


Derek Dishman
John Dix
Theresa Musgrove
Roger Tichborne

Sunday 5 May 2019

Yet Another Audit Meeting Fiasco - Capita Fails Again

Last Wednesday I attended what I think must rank as one of the most chaotic, depressing and shocking Audit meetings. I would normally recommend people to listen to the podcast of the meeting but for some reason the first 64 minutes of the meeting, including the section on public comment and questions, does not appear to have been recorded. Convenient, most definitely, because it was during this first hour that the appalling quality of service provided by Capita was discussed.

One of the reasons I was attending and asking questions was because the Schools Payroll Service, provided by Capita, had been given a No Assurance rating by internal audit, the worst rating it can receive. The issues around control, reconciliation of payments and many people authorised to access the system, were very similar to those identified by Grant Thornton in their investigation of how the £2 million fraud by a Capita employee was able to take place.

What became apparent during the questioning was that the written answers given don't always give an accurate picture of the situation. For example, I asked:

"Given you keep discovering these similar problems, is there a fundamental flaw in the way these systems were set up in the first place, what are the risks that similar issues exist in other parts of the council, and to what extent does the geographical dispersal of departments exacerbate the problems?"

The response was: "The Council does not believe there is a fundamental flaw in the setup of the systems", so my supplementary question was "Who in the Council does not believe there is a fundamental flaw, Internal Audit, Finance, who?"

At this point there were a number of embarrassing looks at one another and a deafening silence. No one was prepared to say they agreed with the response to my question. This is what worries me. The people who are qualified to answer that question are either Internal Audit or Finance - no one else. This is PR management at its extreme and it is a dangerous route to take.

What came out a little later, raised by Cllr Alison Moore, is that there does seem to be a broader systems problem which manifested itself last week in 170 members of staff being auto enrolled in the pension scheme and payments deducted when they had already opted out of the scheme. This has hit some of the lowest paid staff in the council and affected their pay for April, a significant and unexpected financial deduction. Ironically, it transpires it also affected a number of councillors who had pension contributions incorrectly deducted from their councillors' allowance. The man from Capita, who was also taking the flak at the recent pensions fiasco meeting, said that he was new, that he was sorry that it happened and that he would get it sorted. The problem is this is a stock answer with the never ending stream of new people from Capita, but nearly six years into the contract these problems keep happening. I also got the impression that two of the new Conservative councillors who sit on the Audit Committee were deeply uncomfortable with the situation and with Capita's dismal performance.

I also asked about the budget allocation for Internal Audit. From my perspective they do a good job with limited resources but could and should be doing more. Having questioned the allocation of time, it transpired that in 2018-19 the council fraud department allocated 880 days for blue badge misuse. This compared to the entire budget for Internal Audit of 1,238 days. Don't get me wrong. I am not in any way condoning blue badge misuse but it does seem like a lot of days allocated especially when there is so much more work to do on internal audit. Apparently the blue badge misuse investigation budget is funded from the special parking account and couldn't be transferred, for example, to internal audit. It seems a crazy system but there you have it. I did get one small victory in that I asked for Internal Audit to undertake a review of the failed bin collection changes. While the problems seemed to have settled down, they have done so at a huge cost, with the latest figures showing this service is £2 million overspent. At the recent Environment Committee a detailed report was produced but with a massive omission in that there was no indication of the costs. Surprisingly, Cllr Zinkin said he agreed and that Internal Audit will be asked to review the bin collection reorganisation.

As the meeting progressed we came to the slot for the external auditor from BDO. Luckily this part of the meeting was recorded which is a good thing because what he said was shocking. The auditor from BDO said that, it was important to keep a strong control environment but they have found some challenges in this area. Unlike other organisations that provide outsource services to organisations such as the NHS, Capita “were not minded” to provide any audit assurance of the services they provide to Barnet so all the pressure fell on Barnet’s own internal audit team to check what was going on in all the remote Capita offices and that was something he had raised for the past two years. I did shout out  from the public gallery that it was a contractual obligation at which a number of councillors started asking if it was. It is, and it is included not only at numerous points within the main contract but also within the method statements for service provision which form an annex to the contract. Here are just a few examples:

In addition I specifically asked a question about this back in December 2012 when the contract decision was being made and the response I received is set out below confirming it is Capita's responsibility to undertake their own internal audit of the services they provide.

Capita is responsible for its own internal control and internal audit arrangements with regard to all the services being transferred. It is obliged to share all audit planning and activity with the Council. The Council would only undertake an audit programme itself if any of Capita’s arrangements failed to satisfy our requirements as set out in detail in the contract, and any such programme would be funded by Capita. The Council does however have the right to audit Capita’s contract delivery at any time, whether it has concerns or not.

I do sometimes wonder if I am the only person who has read the contract in detail. I was re-watching some of the fantastic recordings of Council meetings captured by the late and sadly missed Daniel Hope (Barnet Bugle). What shocked me most is how few of the councillors and officers who imposed this lousy Capita contract on us are still in post. However, three key people are still there, Mr John Hooton, now the Chief Executive of the Council, and Cllrs Richard Cornelius and Dan Thomas. So many inaccuracies were given at the time and so many concerns raised. Luckily, many of the people who challenged the One Barnet Contract at the time are still around, not least the other Barnet Bloggers and members of BAPS. The Council may have a restricted corporate memory but the residents do not. The contracts with Capita have been an expensive failure. The latest figures show that we have paid Capita £145.9 million more than the contracted sum. 
Yes, there is a limited saving on the core contract but that cannot be separated out while ignoring all the other charges and costs. I prepared a chart based on Barnet's own figures in 2018 which illustrates the point that overall the contract is costing us more money.
Once you add in the expensive special projects, including disasters such as the Mosaic IT system, which has been an operational and financial failure and which will cost us £4.6 million to sort out, the costs become massive.

It is time to say goodbye to Capita; the sooner the better.