Bruising reports remind Council’s Statutory Officers of contract & financial irregularities as a major issue as council face £18.5m deficit

They are without doubt, three remarkable, wise women. Each is able, each is a professional, and each is full of “intent, a clear intent” to instill compliance of contract standing orders, and financial procedure rules into all their officers.

They are intent on stamping this requirement into the forefront of the minds of budget holders, and all other officers. Mandatory training for all 464 members of staff, at Folkestone & Hythe District Council, for compliance with Contract Standing Orders and Financial Procedures, is being rolled out.

Much of what was said in three reports mentioned herein, we have raised time and again. Noncompliance with Contract Standing Orders, noncompliance with financial procedure rules, and the ongoing issues of financial irregularities and contractual irregularities.

At Audit & Governance Committee, on 7 Dec 2022, the three statutory officers endured a brutal encounter with on the ball Cllrs (except one), doing a good job on holding them to account.

There will be mandatory training of officers to ensure, that the body of the council will comply with “due process“, with regards to the contract standing orders, and financial procedure rules, to prevent a potential Judicial Reviews & other legal challenges.

The council have shown a transparent willingness to publish the names of companies; to which officers have a connection to, without identifying the officers, so as to comply with Data Protection and UK GDPR.

And another headline before the detail, two audits on the council accounts will be signed off in January. This means that early next year the 2021/22 accounts will be open for inspection, near five months after they should have been.

There is more but, the three statutory officers have thrown down the gauntlet by spelling out clearly, as the council has a projected £18.5m deficit across four years, further lax compliance with financial procedure rules and contract standing orders, by officers, will not, NOT be tolerated.

This cultural change will cascade down through officers washing them clean of the reported bad practices;  which some officers had fallen into. Call it a baptism, a cleansing of bad habits.

The three statutory officers of Folkestone & Hythe District Council are.

Head of Paid Service & Chief Executive  Dr. Susan Priest

Director Corporate Services & Chief Finance Officer (S151) – Charlotte Spendley

Assistant Director Governance & Law – Monitoring Officer – Amandeep Khroud

They are responsible by statute, regulations and other legislation.

At last nights meeting – three sizable and weighty documents, or rather gifts, were brought before three wise women. Cllrs saw the light leading them to the wise women. They duly set about them seeking assurance they can put an end to the lax non-compliance; which has resulted in four people leaving the building so far.

These were

The Report Number AuG/22/22 – Subject: The Audit Findings for Folkestone & Hythe District Council and FHDC AUDIT FINDINGS REPORT 21-22

Quarterly Internal Audit Update Report from the Head of East Kent Audit Partnership

Governance Update

All Cllrs on the Audit & Governance Committee held on 7 Dec, 2022, have been mentioned in dispatches, for addressing the three reports and there contents. They as elected members wish to be able to look the electorate square in the eye, come May, and be able to say, that we as residents are not being short changed by officers lax non-compliance.

In the External auditors – Audit Findings Report 21/22 it make clear in Appendice A

Grant Thorton  identified that Otterpool loan was held at cost of £1.25m, however the Otterpool Park LLP net asset position as at 31/03/2022 was £0.537m. We challenged management that if Otterpool Park LLP was no longer a going concern the maximum recovery in respect of the loan for the Council would be £0.537m. 

This cost of loss to the Council was £712,000. This matter has been rectified.

When a local authority such as ours,  has material interests in subsidiaries, associates and/or joint ventures, (think Oportunitas Ltd, Otterpool Park LLP) it is required to produce group accounts.

The Council’s group accounts according to the external auditor Grant Thornton

noted that the short-term debtors balance of £4.132m for Management response: 2020-21 in the Group Balance Sheet was incorrect and should be £17.442m

Put simply this means the short term debt was underestimated by 322%. This has been rectified. But it is demonstrable evidence of noncompliance; which made £13.3m disappear from the balance of short term debtors. You don’t lose that down the back of the sofa. We know the council have been capable of magic.

Short-term debt is the amount of a loan that is payable to the lender within one year. The balance in the short-term debt account through the group accounts, eg Oportunitas Ltd, & Otterpool Park LLP,  is a major consideration when evaluating the liquidity of a business.

In the second document – Quarterly Internal Audit Update Report from the Head of East Kent Audit Partnership can be summed up by the chart.

The Limited Assurance opinion in the Contract Management – Controls & Governance area  is because testing identified a number of weaknesses that are considered to be as a result of officers responsible for the procurement and management of contracts requiring Contract Standing Order (and Financial Procedure Rules) awareness training. While officers were found to be aware of the existence and general principles of CSOs, most were unfamiliar with all the requirements specified in the CSOs. Testing also established that officers are unaware of the requirements to undertake a genuine pre-estimate of the contract value covering the whole life of the contract.

No reconciliation between the actual income received as recorded on the financial management system and expected income as recorded on the Garden Waste system.

There have been instances of the car park machines becoming out of service due to being full, as the cash boxes have not been pulled by the contractor.

Again the Cllrs excelled and onwards they charged

Then to the final round of a bruising encounter for the three statutory officers  – The Governance Update about which we reported on the 30 Nov 2022.

The issues raised are set out between sections 4 and section 9. There are many identified, for example,  let’s start with the Housing Planned Maintenance – Contract Management

The Audit work found that management could place No Assurance on the system of internal controls in operation around both the procurement and management of contracts in operation in the Housing Planned Maintenance section.

That is damning indeed as a no assurance audit means – Immediate action is required to address fundamental gaps, weaknesses or noncompliance identified. The system of governance, risk management and control is inadequate to effectively manage risks to the achievement of objectives in the area audited.

And

This audit has identified significant levels of noncompliance by officers with even basic procedures for the procurement and management of contracts.

Fourteen recommendations were agreed with Management, two of which were classified as critical priority and the remaining 12 were classified as high priority.

Given it is the season of Joy, might we add, the three wise women recommend some light reading to their officers over Xmas, starting with The Judge over Your Shoulder – a guide to good decision making. In taking its contents on board, officers would remember that failure to follow “due process” leaves the Council open to legal challenge.

Then the issue of Data breaches was raised, the breach lead to an investigation, or rather witch hunt, to find the moles.

“to establish facts as far as possible surrounding a leak of sensitive, confidential data to a Blog author, (We are a team not an individual) leading to a matter being published on social media.”

What simply happened, was a member of staff lost some papers on a windy day, a member of the public found them and then sent them our way.

Three management opportunities were identified to improve the handling of confidential staffing data.

Section eight  of the Governance Update is about Officers Interests; which

“identified fourteen recommendations, seven of which were classified as high priority. “

The assurance for this review was split by EKAP, they stated that management could place Reasonable Assurance regarding the policies and procedures in place and could place Limited Assurance on the system of internal controls in operation around the Officer Interest process.

The policies and procedures that are relevant to the declarations of interest [of Officers] and related party transactions require review to add clarification over the nature of the related party, i.e. individual’s name or company name and actual relationship.

The purchase orders that are recorded on the Badger system should be reviewed to ensure that the details of the purchase order are recorded within the Transparency Data on the Council’s website.

Again, Cllrs were firm in the chase for assurance the continuation of lax controls as reported, would lead to a potential larger deficit, if officers do not get their act together pdq.

We honestly believe the three wise women, the Chief Exec, Dr Susan Priest, the s151 Officer, Charlottee Spendley, and the Monitoring Officer – Amandeep Khroud, are competent enough to resolve these issues. They are strong, resilient, intelligent and professional women, with the skills sets necessary to redeem themselves, and their organisation. We can give you £18.5m of reasons why they need to use these skills sets.

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They are the proverbial three kings, bearing gifts, and the greatest of them is compliance. Let’s hope the cascading of mandatory training for officers, will cleanse them of bad habits relating to contract and financial irregularities. We will soon be into a new year. In the past year or more officers have been knocked down, but lets hope the good samiritan of mandtory training will help them get back on their feet, and make our Council, one we can all be proud of.

The Shepway Vox Team

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