Agenda item

(a)       That the Committee is assured by the explanations given over the purpose of using consultants, the control of total cost and how value for money is obtained from current Council commissioning and contract management practice;

(b)       That the officers provide the Committee with details of the expenditure between the £2.831m coded as consultancy spend in 2014/15 and the £0.433m figure from the procurement classification; and 

(c)        That an analysis of the expenditure on consultants, to provide assurance on Value for Money, be submitted to the June meeting of the Committee and thereafter on an annual basis. 

The Chief Executive introduced a report to explain Council practice in the use of consultants and how value for money was obtained from commissioned consultancies. 

                        The Chief Executive asked that the Committee review his report objectively and keep the issues in proportion.  The report from the Audit Committee on 27 January 2016 was attached as an appendix; at that meeting it had been agreed that an update report on controls would be submitted to the July Audit Committee meeting.  He commented on the use of consultants in the public sector for areas where specific expertise was not already available within those organisations, and gave details of the definition of a consultant compared with an agency worker or interim manager. 

It was acknowledged that the issue of financial coding had been a concern and it was difficult to correctly ascertain the cost of properly defined consultants for previous years.  The report to Audit Committee had reported a cumulative expenditure of £2.831m coded as consultancy spend in 2014/15.  The report had also identified figures shown as consultancy under the procurement classification codes for business and management consultancy and project management services to only be £0.433m for 2014/15; the four known consultants over £25,000 contract value were detailed.  The table in the report showed a current total of £431,906 for consultancy costs for 2015/16 along with details of the projects that the consultants were working on. The Chief Executive explained that all of these appointments were supported by written business cases. 

The previously used definitions of consultants had been too general in their wording, leading to a range of expenditure, which should not have been recognised as consultancy, being allocated to the consultancy codes in the general ledger.  A list of expenditure that had been incorrectly coded to consultancy codes in recent years was reported in paragraph 2.02.  New controls had been put in place where Chief Officers could approve agency spend up to £25,000 but approval of a business case for any new consultancy work of a value of £25,000 or more would need to be given by the Chief Executive. 

The Corporate Finance Manager had been invited to make a formal statement on cost control in his capacity as Section 151 Officer and this was reported in paragraph 2.04. 

The two types of consultancy used were ‘fee based’ or ‘risk and reward’ and details of ‘live’ consultancies within Streetscene & Transportation, Social Services and Corporate Services were reported.  The Chief Executive explained that consultancies were funded from one of three areas which were (i) core budget, (ii) through ‘invest to save’ options or (iii) through Welsh Government/other grant funding.  There was strong evidence that skills and knowledge had been transferred from the consultants to the Council to make the organisation more self-sufficient for the future and examples of this were detailed in the report.  The Council was not too over-reliant on consultants.  He explained that whether ‘value for money’ was obtained from a consultant was a judgement best made by weighing up whether a competitive price for the work was obtained, whether the project was completed on time and budget and whether the Council had achieved its organisational objectives by engaging the consultant. 

It had been difficult to obtain reliable comparable data from other councils but four had been able to supply a total figure for all expenditure coded as consultancy and this was reported with three having a higher spend than Flintshire.  He commented on the ‘risk and reward’ basis that some councils used to engage consultants and gave details of the equivalent level of employee that could be employed for a £50,000 or £25,000 consultancy cost.  The Chief Executive advised the Committee that the Technical Finance Manager and her team were undertaking a significant amount of work to ensure the coding was correct and therefore there would not be any coding issues for 2016/17 onwards. 

                        The Chief Officer (Governance) advised that he and the Chief Executive were working closely with the Internal Audit Manager to ensure appropriate systems were followed.  He explained that the focus for this Committee was the issue of ‘value for money’ whilst Audit Committee would consider the process and whether it was working or not. 

                        Councillor Aaron Shotton welcomed the opportunity for the report to be debated at this Committee and reiterated the earlier comments that Audit Committee would receive an update report in July 2016.  He referred to the significant concern at the costs of consultants (£1.6m for 146 consultants) that had been reported to the Audit Committee in 2011 and indicated that the accuracy of the data had been questioned at that time.  The current amount of 14 consultants at a cost of £0.433m was significantly lower than in 2010/11 but Councillor Shotton reminded the Committee that the two figures could not be compared as the £1.6m was for a six month period and the £0.433m was for a ten month period.  He referred to recent reductions in senior and second tier management posts and felt that it was acceptable that the Council would need to seek expert advice for some of the significant projects it was undertaking such as the Strategic Housing and Regeneration Programme (SHARP).  However, he added that it was important to ensure that the knowledge of the consultants was passed on to the staff in post.  He said that there had been a reduction in consultancy costs but more work was required such as addressing the issue of incorrect coding.

                        The Chairman sought clarification on the definition of consultants and felt that ‘other goods and services’ for areas, which had been incorrectly coded as consultancy work, which could include legal fees contradicted the comment in paragraph 1.04 which indicated that consultants would normally be employed to give legal advice.  He also referred to information that was provided as additional information to the statement of accounts following a request from him on posts paid more than £60,000 per year whether these where Council employees or posts covered by interim/temporary/contract arrangements and suggested that the figure of £0.490m provided for 14/15 was different to the £0.433m figure provided to Audit and this Committee.  The Chief Executive advised that paragraph 1.04 related specifically to legal advice on the formation of Alternative Delivery Models.  The difference between the spends correctly and incorrectly coded was whether they were time limited or routine work and the Chief Executive added that the list in 2.02 was not exhaustive.  The Chief Officer (Governance) explained that an area of concern was because the organisation employed a number of senior officers to provide advice and information that officers needed and that consultants should therefore not be employed to duplicate advice that could be provided by the senior officers.  The Chief Executive gave a more detailed explanation of the definition of consultants as reported in paragraph 2.03 and added that in future the costs of consultants would be correctly coded. 

                        Councillor Nigel Steele-Mortimer referred to the difference between the figure of £2.8m originally reported for consultancy spend for 2014/15 and the amount of £0.433m now reported.  He expressed his concern at how the balance of £2.398m had been spent and referred to areas which he felt should be reported as consultants such as work on the Local Development Plan (LDP) or the seeking of Counsel’s opinion on legal issues and suggested that a breakdown should be provided.  Councillor Richard Jones proposed the request for details of how the £2.398m had been spent and this was duly seconded.  The Finance Manager advised that a list could be provided and the Chief Executive said that this would be carried out as quickly as possible.  He advised that he would make enquires about the comments on the LDP but explained that each of the consultants costs for charges over £0.025m each had a business case which had been approved and added that the practice would continue in the future. 

                        Councillor Robin Guest raised concern about the ‘premium’ costs for the use of agency workers to cover gaps that should be filled by permanent employees.  He welcomed the information on the definitions provided, the areas that had incorrectly been coded to the area of consultancy in recent years and also the request for a breakdown of the remaining £2.398m.  He also sought assurance that future coding would be correct and expressed his concern at the comments of Councillor Shotton when referring to the consultancy costs from 2011 which he felt could not be compared to the current figures.  In response, the Chief Executive spoke of the ongoing work to ensure the codes for 2015/16 were correct and of the work that was being carried out to ensure that officers were aware of the appropriate area to code particular areas of spend to. 

                        Councillor Jones sought clarification on whether interim managers were engaged through an agency and suggested that the definition provided may be incorrect.  The Chief Executive explained that there were some areas where the MATRIX system was not the best system to use to engage the level of assistance required and advised that interim and agency staff could be engaged through the same route.  He added that there was not a problem with the coding of agency workers and stated that this was a separate area of spend and was not coded as consultancy work.  In response to a further query from Councillor Jones, the Chief Executive said that both agency workers and interim managers were temporary by definition.  Councillor Jones referred to the level of consultancy spend for 2013/14 which was £2.1m and the costs for 14/15 of £2.8m and queried why there had been an increase.  The Chief Executive reiterated his earlier comments about incorrect coding in previous years and said that it was difficult to compare the two years because of coding issues. 

                        The Chairman referred to the information on agency workers referred to as part of the item on Workforce Information which was to be considered later in this meeting.  The Chief Executive advised that further information could be provided when the particular item was discussed but said that the definition of agency workers had been included because of the confusion that the Council had a number of consultants working in senior management roles; he explained that there were none currently

                        Councillor Jones referred to the importance of ensuring that the use of contractors was value for money.   

                        In response to a question from Councillor Marion Bateman about whether areas such as those shown as part of the £2.398m expenditure for types of fees, goods and services for 2014/15 would be individually coded in the future to allow the spends to be monitored, the Chief Executive confirmed that this would be the case. 

                        Councillor Shotton referred to the comments of Councillor Guest about his reference to information on consultancy figures to the Audit Committee in 2011 and added that it has since been identified that the coding issues had been a problem in previous years.  The Chief Executive said that it was extremely likely that the coding problems would have been repeated in previous years and therefore the figures referred to for 2011 had been artificially inflated.  He provided assurance that the costs for 2015/16 would be correctly coded because of the work that was being carried out and that this would continue for future years. 

                        Following earlier comments from Councillor Jones about the importance of ensuring ‘value for money’ and the request for a breakdown of the £2.398m, it was agreed that this could be submitted to the June meeting of the Committee.  The Chief Executive also suggested that a report on the assurance of Value for Money be considered by the Committee on an annual basis.                 

RESOLVED:

(a)       That the Committee is assured by the explanations given over the purpose of using consultants, the control of total cost and how value for money is obtained from current Council commissioning and contract management practice;

(b)       That the officers provide the Committee with details of the expenditure between the £2.831m coded as consultancy spend in 2014/15 and the £0.433m figure from the procurement classification; and 

(c)        That an analysis of the expenditure on consultants, to provide assurance on Value for Money, be submitted to the June meeting of the Committee and thereafter on an annual basis.