Agenda item

(a)       That additional information supplied as part of the annual accounts on individual consultants should include spend on all consultants;

(b)       That officers look at the reasons for any further non-compliance with corporate requirements and procedures and check appropriate management actions and accountability; and

(c)       That a separate report outside the usual follow-up update be brought to the Committee’s meeting on 13 July 2016.

The Internal Audit Manager presented a report on the findings of the review on the Council’s use of consultants, following previous discussion by the Committee.  He gave a reminder that the scope of the review had been around the controls and processes of engaging consultants and had not looked at the need for or value of consultants.  However, during the process it became clear that the scope should be widened.

During explanation on the review, the Internal Audit Manager advised that the general ledger figure of £2.8m spend on consultants was considered inaccurate due to miscoding and misinterpretation of consultancy definitions and that this was a major factor of the report.  He provided detail on the findings, adding that a number of actions had been taken since preparation of the report, for example a working group to drive forward the actions, the implementation of new business case arrangements and communications to the Chief Officer team and management to follow-up actions.  He gave assurance on the involvement of Internal Audit as part of that work and that of the officer group on accounting codes.

The Chief Executive provided context by acknowledging the need to widen the scope of the review to include controls, adding that miscoding errors did not mean inappropriate spend, which could for example be on specialist training.  He gave a reminder that consultants were engaged (through agencies or individuals) to provide specific tasks for which the Council had no internal expertise.  He said that consultancy spend this year had decreased and that the Corporate Resources Overview & Scrutiny Committee had been satisfied with the explanations on managing risk within the Change programme.  The new arrangements for consultancy engagement meant that those under £25K would require approval by the Chief Officer (Governance) with the Chief Executive taking responsibility for all proposed consultancy spend over £25K.  Information was shared on the few consultants above this threshold who were engaged in Organisational Change, Streetscene and Social Services.  All were being monitored and had business cases on record.  For the ongoing use of consultants, officers were challenging outcomes and progress to gain assurance with the expectation for knowledge sharing.

Councillor Alison Halford referred back to when she had first raised the issue of consultants.  She spoke about the time taken to clarify definitions, the report from March 2011 which had focussed on controls rather than cost, followed up by a commitment from former Directors to share information on consultants, a further report on controls in December 2011 and work carried out by the Wales Audit Office (WAO).  She raised concerns about the four bullet-points under the audit opinion in the report, which she felt did not correlate to what the Chief Executive had said.  She went on to speak about the lack of recognition of consultancy organisations used by the Council as opposed to individual consultants and suggested that the £3m spend recorded for 2014/15 could have been much higher.  She asked about the source of the budget for consultants and went to state that the Chief Executive was not fit for purpose, as she had already said outside the meeting.

The Chairman pointed out the findings of Internal Audit around the inaccuracy of the 2014/15 figure, and asked Councillor Halford whether she wished to stand by her comments despite this.

Councillor Halford said that she had read the report and was entitled to her opinion, saying that the Cabinet Member for Finance and the Chief Executive could not keep on making mistakes and the Audit Committee take no notice.  She referred again to the explanation given in the audit opinion and added that the data released for the Freedom of Information request was inaccurate.

The Chief Executive said that this was the last time he would be undermined by Councillor Halford.  When asked if they were satisfied with the answers given to the questions, the other Members indicated their agreement.

In response to comments on the authorisation of consultancy charges raised at a recent budget meeting, the Chief Executive provided clarification on this issue which related to Alternative Delivery Models, as had been discussed at Informal Cabinet.  In respect of social care and health, the questions raised at the budget meeting had been addressed to the satisfaction of that Committee including the Chair.  Concerning the comments made, he reiterated that there had been no evidence of actual financial loss, only the risk of loss.  On controls, he had given a full explanation on those responsible for the system and the approach to engaging consultants and had taken personal responsibility to co-ordinate this with actions ahead of schedule.  Sources of funding were either from designated budgets, corporate resources for time limited tasks such as Single Status which would add value or were partly/wholly funded from grants built into the cost of delivery, eg  to support work on the Queensferry roundabout scheme with contributions from WG.

The Chief Officer (Governance) highlighted the necessity to engage suppliers of professional services such as barristers for County Court matters which differed slightly from consultants.  However, as the previous definitions had been unclear, there had been confusion about what were professional services and what was consultancy.  On the miscoding errors, other sources of information had been explored to give an indication on spend as set out in section 4 of the Internal Audit report.  With regard to the point raised about Directors sharing details of consultant engagement, this had been identified by Internal Audit as an area not working effectively and the new processes had been implemented with clarity on the definition of consultants.

In response to Councillor Halford’s concerns, the Internal Audit Manager explained that the explanation on the ‘red - limited’ assurance opinion was standard working indicating that ‘one or more’ of the bullet-points applied.  To clarify, he said that the findings met two or possibly three of the four criteria, as key controls did not exist, however there was no evidence of significant financial/other losses but there was potential for this due to the lack of controls.  As indicated in the impact, he could not say whether there had been any loss and there was a possibility of waste and damage to reputation.  In relation to the sample of invoices, he stated that the payments which were incorrectly coded as consultants were nevertheless for legitimate purposes.

Councillor Arnold Woolley made reference to the supplementary information on consultants considered with the Statement of Accounts 2014/15, which had amounted to £490K.  Councillor Woolley noted the correlation between that total with the indicative trend figure 2014/15 of £433K in the audit report which could give the Committee assurance that this was likely to be the more accurate figure. He noted that it differed vastly from the general ledger figure.  He said that his major concerns were on reliability rather than figures and the Committee should seek assurance on this as part of its role and accountability on spend and value for money.  He suggested that the approach should be to focus on outcomes from the actions due by the end of February and that the Committee should demand rigorous answers to any outstanding issues at that time.

The Chief Executive gave a commitment to progress actions and to use accounting data after the end of the first quarter to give assurance on improved coding.  A report on consultants would also be submitted to the Corporate Resources Overview & Scrutiny Committee on 11 February 2016.

It was pointed out by Mr. Paul Williams that the indicative spend on consultancy was likely to be higher as it did not include those on the Matrix system.  He suggested that the supplementary information in the annual statement of accounts for 2015/16 should in future reflect the full cost of consultants for the financial year, including spend on both organisations and individuals.  He welcomed the findings of the audit report but was concerned about continued non-compliance and questioned the role of the Committee and his part on it when identified issues remained ongoing without accountability.  He felt that a possible solution would be for an independent, dedicated Chief Finance Officer to drive accountability and ensure that procedures were implemented.  He went on to question whether the issue was due to failings by officers or time/resources.

These frustrations were shared by the Chief Executive, although evidence had been provided on the progress made.  In responding, he pointed out that the use of consultants was an operational responsibility for all managers with the support of Finance and other sections, and that the Finance function added value but did not deal with controls.  He referred to the two high-profile ‘strategically critical’ consultancy engagements identified in section 12 of the audit report whose work had been built into the delivery of the project plan with transfer of knowledge demonstrated.  He added that adherence to the Contract Procedure Rules was the responsibility of all accountable managers and there had been no negative feedback on the performance of the Finance function as a result of the streamlined model adopted in 2014, although capacity issues were acknowledged.

On accountability, the Chief Officer (Governance) said that the flaw in consultancy procedures was being addressed and explained more about the introduction of ‘category’ management as a single point of control for authorising future consultancy spend on the P2P system.

Mr. John Herniman advised that where repeated non-compliance existed, the consequences should be considered and the reasons established to decide on a course of action and to build this into the ethos of the Council.  The Chief Executive agreed that a harder stance could be taken on evidence of continued non-compliance to involve disciplinary procedures.

Councillor Halford stated that she wished to express her concerns.  She felt that the audit report contained some misunderstandings which did not fit in with the information given to the Committee in 2010/11 and that the action plans shared in 2011 should have been addressed by now.

The Chairman shared the frustrations but said that the report acknowledged the remaining actions to be taken and that the Committee would expect feedback in September 2016 to give some confidence on consultancy spend and adherence to procedures across the Council.  He hoped that this message would be reinforced to the workforce, with an audit trail in place to ensure value for money on use of consultants.

Councillor Halford asked if the Chairman would allow a vote on her suggestion for an external body to follow up the issue, given the concerns raised.  The Chairman stated his satisfaction at the job undertaken by Internal Audit with progress to be reported back to the Committee.

In response to the concerns raised, the Chief Officer (Governance) suggested a series of recommendations for consideration by the Committee.  These related to the provision of extra information on all consultancy spend, investigation of non-compliance with the procedures and a future update report to the Committee.

On the update report, the Chief Executive suggested an informal briefing for the Chair and Vice-Chair towards the end of the first quarter as an interim measure.  Mr. Williams asked that the Chief Executive raise the concerns with the workforce and highlight accountability on the consequences for non-compliance with the procedures.  The Chief Executive agreed to action this through the project group.

Councillor Woolley referred to other issues of non-compliance previously raised and asked whether the new structure was adequately resourced to carry out service demands.  The Chief Executive replied that all Chief Officers had conducted risk assessments on the capacity within teams but that there would always be an element of risk.  The proof was in service delivery and governance arrangements which were part of an ongoing process and were taken into consideration on restructures.

Councillor Glyn Banks wished to place on record his support for the Chief Executive and his disagreement on some of the comments which had been raised at the meeting.  Whilst acknowledging that the areas for further improvement were being addressed through actions, he felt that the Committee should be fully briefed and not just the Chair and Vice-Chair.  The Chairman requested that the update report be brought to the Committee in July rather than September.

Councillor Haydn Bateman agreed with the comments made by Mr. Williams and Mr. Herniman and acknowledged the assurances given by the Chief Executive.

Councillor Ian Roberts agreed that there was no more room for failure on this matter and that controls were needed, however this was not without risk and the Council had gone through significant change since the issue was identified in 2011.  In supporting the point made by Councillor Banks, he felt that highly personal comments had been made during the debate and urged the withdrawal of the comment about the Chief Executive.  Councillor Halford refused this request.

Following a short recess, the Committee reconvened and supported the suggested recommendations made by the Chief Officer (Governance), incorporating Mr. Williams’ comments on the need for compliance with corporate requirements and procedures and the update report to be brought forward to the July meeting.

RESOLVED:

(a)       That additional information supplied as part of the annual accounts on individual consultants should include spend on all consultants;

(b)       That officers look at the reasons for any further non-compliance with corporate requirements and procedures and check appropriate management actions and accountability; and

(c)       That a separate report outside the usual follow-up update be brought to the Committee’s meeting on 13 July 2016.