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.

Barnet's Performance and Contract Management Committee - 20 Questions

On 31 May is Barnet's quarterly Performance and Contract Management Committee. The papers have been published in advance of the meeting  which you can read here. Having spent 5 hours reading all of the reports I have submitted a list of questions which I have set out below:

In relation to agenda item 8 Appendix H

• Please can you clarify how the reduction in Single Person Discount is calculated to arrive at the net figure and, for example, is a saving made in 2015/16 treated as an on-going saving for the purposes of gainshare calculation or just a one off saving for that year only. 
• Please can you clarify how the Additional Council Tax Income  is calculated to arrive at the net figure. To what extent is the additional income from the additional 2,732 households treated as part of the calculation and why is 100% of the net income paid to Capita in Gainshare. 
• Can you clarify if Capita have achieved the 98.5% council tax collection rate and how that impacted on the Gainshare payment.  
• Why did you set a guarantee target in 2015/16 that is £3.3 million lower than for 2014/15 when recurring savings on renegotiated contract continue to attract gainshare payments for Capita?

In relation to agenda item 8 Appendix H(iii)

• Please could you clarify of what the £242,615.87 true up payment comprises?

In relation to agenda item 8 Appendix I

• Who authorised the spend of £276,094 for an accelerated refresh of employee computing devices so all devices are refreshed after 18 months instead of 5 years. Was the procurement handled by Capita and did they generate a gainshare saving on this purchase?
• Please can you clarify what the £9.7 million contract true up of third party contracts comprises?
• For the library service call cost of £453,000 what does that work out per call?

In relation to agenda item 8 Appendix J

• How many letters of action have been received in the last 6 months and how does that reconcile with the risk - Resident Engagement - ORG0029 being rated as medium to low 
• Risk  - Increasing costs of Adult Social Care - ORG0042  states that there is a risk that the pressure on Adults budgets caused by increasing demographics and complexity will not be contained within existing budgets and the risk matrix suggests the probability of this happening is “unlikely”. Do you think that is an accurate reflection of the current situation

In relation to agenda item 8 Appendix J

• Do you really think that extending the NSL contract till October 2018 sends the right signal to Barnet residents given the parking contracts scores so badly on the resident satisfaction survey

In relation to agenda item 12

•  In light of the referral from Audit Committee and given that Internal Audit recently said:

a)    There is a lack of formal documentation held by the Council of the first line defence activities operating at Capita. For example, this may include access to procedure manuals to assess whether the control framework in place mitigates the Council’s key risks. This was highlighted as a finding in relation to the accounts payable process where there was no up to date procedure document in place.

b)    That currently Internal and External Audit activities provide the only evaluation of the design and operation of the controls in place within Capita processes to mitigate the Council’s key risks... These form part of the third line of defence in the assurance framework. This testing approach is generally retrospective and would only identify issues after they have occurred, possibly a significant period of time following the initial non-compliance. We did not see evidence of real time monitoring of the operation of Capita controls.

c)     Although some second line management oversight activities were found to be operating effectively, there are some second line activities which are currently recorded as the ‘first line’ of activities within the Commercial team’s analysis. These should be moved within the updated version of the assurance map.

They also noted that “performance management information is not independently validated by the Council” and that “not all SRO’s have an allocated deputy. Placing reliance on one individual may result in contingency issues when officers leave the Council either permanently or for extended periods”

On that basis are you sure that the clienting arrangements are satisfactory?

In relation to agenda item 12

• Do you think it is appropriate for Council Senior Responsible Officers to be commissioned to assess delivery of the contract against outcome specifications, method statements and contractual commitments given that they are fulfilling this role already. While it will undoubtedly be useful to take their evidence surely it would be more appropriate for someone independent such as internal audit or an external body to make that assessment of delivery?
• Please can you clarify the contents of the benchmarking survey and can you confirm that it will also include examples from private sector partnerships?
• Will any members’ working group meetings be open to the public?
• When will the public engagement take place and what steps are you going to take to ensure that the public are actively involved in the process?
• Who will be responsible for reconciling whether the commitments set out in Schedule 35 of the contract have been delivered?
• What contingency plans have been made to consider terminating part or all of the contract if the 3 year review is unsuccessful and agreement on changes cannot be reached?
• When will you be taking evidence from the Leadership Panel?
• Will you be publishing Capita’s proposals of new opportunities for improving service quality and reducing costs throughout the Contract Period?

I will update you after I receive answers to my questions.

£173.3 million paid to Capita - so where are the savings?

Updated below:
The March supplier payments have just been published and we now have a clear picture of payments for the whole financial year to Capita. Between the two contracts, CSG and Re, Capita have received a total of £66.3 million. That is up £14.5 million on last year's payments, a 28% increase.

The budgeted cost was £41.7 million so the extra £24.6 million is for other payments including special projects and gainshare.  At a recent committee meeting it was conceded that on some of the Special Projects we are paying consultancy rates for work that would have previously been done by salaried council staff. The core contract is cheaper but we pay for everything over and above that contract and that is where Capita make their money.

One of the other massive overspends is on the interim and agency staff contract with Comensura.

Back in 2012 the contract was costing us £12.5 million but it was at a time when the council was in the midst of the outsourcing process and staff were leaving to avoid being made redundant. With the appointment of Capita it was anticipated that the agency staff costs would fall but in reality they have done the opposite. This financial year they have hit an all time high of £17.9 million. Last year I said this was a contract out of control and sadly that has proved the case. To make matters worse Comensura is on of the contracts on which Capita are paid gainshare. They are supposedly saving us money for which Barnet pays them a hefty share, now in excess of £1 million.

In total, since the start of the Capita contracts in 2013, they have been paid a total of £173,384,365.48 Yes £173 million in just two and a half years.

Yet again, I repeat my challenge to Richard Cornelius in that I will pay £250 to the charity of his choice if he can show me how this contract with Capita is saving us money.

Kerching! £18 million for Capita

Updated 4 February 2016 see below in red

December supplier payments are out and Christmas clearly was a season to be merry. Capita billed £18,264,588.36 in December on both the Re and CSG contracts. That brings their running total for the financial year to £61.26 million, £10 million more than the whole of 2014/15 and a total of £168.3 million since the start of the contract two and a half years ago. While certain Councillors keep repeating the mantra "Capita are saving money" I keep asking them to show me the evidence because the amount of money we are paying seems immense compared to the core contract value.

Our friends Comensura were also paid £1.58 million in December bringing the total this financial year to date to £13.8 million for agency and interim staff. This remains a contract out of control although I note that they have not asked for an advance payment this year to cover the Christmas period.

There are a couple of other anomalies in the payments. The first is for a large amount of money £640,640 which was paid to the Accountant General of the Senior Court. I wonder what this is for?

I am grateful to the FOI department at Barnet Council for a very speedy and complete response. This sum is for the Compulsory Purchase of a derelict property in NW4, so whilst it is a large payment out it is now an asset of the council. Zoopla suggests that the value of the properties either side are valued at just over £1 million so let's hope this property generates a return on investment for the council.

The second payment was a much more modest amount of £1,552.11 on 15 December and was for "Equipment and Material Purchases" by the Assurance Department. Nothing strange about that you may say other than the supplier name - Haven Bistro & Bar, the very pleasant restaurant in Whetstone. You will not be surprised that I have already submitted an FOI request for the invoice. I hope this isn't a repeat of the erroneous invoice for "training" which was carried out at the Claddagh Ring pub which I blogged about here .

As always I will keep a watch on spending in Barnet.

Trust, Evidence and Scrutiny all in short supply

At last week's Performance and Contract Monitoring Committee the main topic was the performance and review of the Capita Customer Service Group contract. Mrs Angry has written, as usual, an exceptionally readable, far superior and incisive review of the meeting which you can read  here.

I had a number of questions for the Chairman. A link to the questions and responses are here but the nub of my concern was most usefully raised by Cllr John Marshall when he asked if I would agree that the Capita contract has saved Barnet money.

My response was No.

The core contract does save money, although I'm not sure if it as much as was originally envisaged simply because a number of items were overlooked when the contract was being drafted and services were omitted. Most recently we were told that we would have to pay an extra £565,000 per annum for a contract for IT systems for Revenue & Benefits "because the contract was transferred with no budget". I would also note that if Barnet had put as much investment into the in-house team, they too might have delivered comparable savings. So whether Capita has really outperformed what the in house team might have delivered will never be known because, of course, the in house team were expressly precluded from the tender process.

However, the area where we seem to be paying a fortune to Capita is in all the extras including all the special projects and share of savings. At this meeting an officer did concede, when I put one of my supplementary questions, that some of the work charged for as special projects would previously have been carried out by salaried council staff. Capita charge for all these projects at consultancy rates and they are costing millions.

Councillor Hugh Rayner actually had the measure of this before the contract was signed. Thanks to Barnet Bugle who filmed the meeting back in October 2012 - but where were you last week? Cllr  Rayner hits the nail on the head when talking about how to make more money out of contracts.




If you look at Barnet Council accounts, how much they spent in 2014/15 compared to 2013/14 they seem to have spent more even though there have been massive cuts to services. So my question to Cllr Marshall and to every other Cllr is show me the evidence - have you actually realised these mythical savings. Just repeating the phrase "we have made savings" doesn't make them happen. Someone needs to get a grip of all the money being spent on extras, on costs like the Comensura contract for interim staff which is massively overspent (Capita are responsible for HR so why haven't they come up with a strategy to reduce agency staff - but they benefit from the overspend through their gainshare payment) and start actively managing this contract.

The three year review process of the Capita contract is about to start and it already looks like a stitch up. Officers will carry out the dialogue with Capita reporting back to Cllrs and meetings will be held in private. Cllr Geof Cooke did ask  for the meetings to be held in public but Cllr Finn as Chairman of the committee refused. He said maybe one or two but we all know what that means. Put to the vote all of the Conservative Cllrs voted against Cllr Cooke's amendment and yet again some of the most important discussions about a contract costing hundred's of million of pounds will be held behind closed doors. Personally I don't think Cllrs stand a cat's chance in hell of ever getting to grips with the contract without a great deal of professional support and as such it will be a missed opportunity - yet again.

I suggested to Cllrs that they should appoint someone to help them with their review, someone with detailed contractual and accounting experience who can guide and advise them. No, came back the response we have officer for that. Yes and are those the same officer that wrote a glowing review of Capita's staff and data centre, "OUR data centre" as Cllr Cooke pointed out which of course in Capita's data centre made officer's look rather silly and  cast serious doubt over who authored the report.

Trust, Evidence, Scrutiny; all in short supply in Barnet.