Where does the buck stop for Croydon’s damning audit report?

Last week, Mike Fisher, the leader of the Conservative group which controls Croydon Council, said: “It is important for us to ensure all necessary lessons are learned, and that public money is better safeguarded in the future. This needs to be a transparent process…”

Work continues apace on Croydon Council’s new headquarters building. Mike Fisher’s council has refused to release details of the building’s cost. We know that almost £1m-worth of furnishings are being bought this year

Sadly, for Croydon, Councillor Fisher was not talking about some of the woeful wastes of public money at the Town Hall over which he has some control, but about the overspend by the NHS locally. Fisher wants a review to find out what went wrong.

There was no call by Fisher for a review into the running of his council, even after the annual report from the Internal Auditor was presented to the council’s Audit Committee last week.

To the untrained eye (that’s anyone who isn’t an auditor), this report is hardly a riveting read. But hidden within its pages are further shocking tales of the council failing to learn from the past and repeating the same mistakes.

A bit of background first. During the year, the council’s auditors look at various things  across the council and in our schools, and they revisit areas that were weak when audited previously. The auditors give an overall rating for the council.

They also highlight any really serious problems which, in councilspeak, they call “significant control weaknesses” – basically, that means there’s no proper control over spending because the basic processes aren’t in place. If things have a “significant control weakness” tag, then they are big issues, not just a simple failure to keep a particular record up-to-date or misplacing an invoice.

The 2010 Croydon audit gave a poor report on several schools in the borough and was critical of big corporate areas such as staff agency spending, payroll and parking, which all failed to impress the auditor with the systems they had in place.

Croydon Council was given a “satisfactory” overall rating in 2010. But in 32 per cent of the audits carried out, it was found to have failed by having no or poor procedures in place – what the auditor calls “nil or limited assurance”. On schools, 53 per cent were rated as “nil or limited assurance”.

The school audits did get local press attention and as a result of follow-up work, last year the council’s overall figure had improved to 16 per cent rated as “nil or limited assurance”, while 23 per cent of schools received that audit rating.

This change in fortune inspired our council to enter for a national award for its corporate governance arrangements, which included audit and risk. It didn’t win the award.

That’s probably just as well, when the audit report for this year was considered at the Town Hall last week.

The 2012 audit report shows 30 per cent overall failing by either “nil or limited assurances” in the management of Croydon Council.

In Croydon-run schools, 43 per cent of schools were found wanting, having poor practice such as buying things without invoices and not having proper financial checks in place.The schools audited in this latest exercise are different from those who got such a poor rating in 2010.

That is a damning verdict on the management of our schools and on Croydon as an education authority. But, of course it’s bigger than that.

Take a look at some of the areas of Croydon Council business which the auditors say are failing, through lack of proper, rigorous financial controls and proper practice. You might assume that the auditors have been reading Inside Croydon… :

• the employment of interims and consultants
• management of car parking (this is the third successive year that this area has been deemed to fail)
• community care payments
• Procure to Pay (in plain English, procedures for buying goods and services and the payment of bills)

Four areas of Croydon Council business that the audit found to have serious weaknesses were:
• non-compliance with the council’s procurement and payment requirements and policies
• the appointment and payment of consultants and interims (an area where Croydon Council spent £20 million in 2011, and which plans to spend a similar amount in 2012)
• Audits conducted in the Children’s, Families and Learners Department highlighted weaknesses in relation to contract monitoring and management in the following teams: SEN transport, UASC and Access to Resources (children’s social care)
• More than 40 per cent of the schools audited during 2011-2012 were given only a “limited assurance” rating.

Basically, the latest audit shows that the financial management at Croydon Council is about as reliable as Barclays Bank.

Croydon CEO Jon Rouse: where does the buck stop for the council’s failings?

Given the huge council budgets in these serially failing areas, the auditor’s ultimate “satisfactory” rating given to Croydon for its overall management seems to be a generous one.

After all, the four “areas of concern” involve almost every element of the council’s activities. While they only make up one-third of the audits, they are in critical areas – the procurement and payment function affects how the entire council buys its services and the checks and balances that exist in one big department.

“What we see is a complete failure of financial management, woefully weak corporate governance and an apparently ineffective external audit,” Mike Fisher said. He might have been speaking about the very organisation over which he holds political responsibility.

Even the effectiveness of these annual audits can be called into question, since each year they appear to highlight the same failings in the same broad areas of the council’s operations.

In one case, 83 per cent of the audit’s recommendations were adopted, but there was no further action recommended by the auditor.

Such a laissez faire attitude can lead to massive financial consequences for the council, and Council Tax-payers. Last year’s budget (which has also just been published) highlights a variance of £903,000 in figures for parking, due to a loss in pay and display income. Parking has received damning audit reports for its financial management for each of the past three years, yet no action appears to have been taken with the directors responsible in that department at Taberner House.

The children’s department does seem to be the weak link:

• In 2011 the report highlighted it as a serious weakness and described it as having significant overspends resulting from a failure in budget management
• In 2012 the report highlighted weaknesses in relation to contract monitoring and management in several teams

The combination of poor procurement and a particularly poor audit for this department might explain why the council is recruiting another Category Manager in the children’s department, just months after advertising for around a dozen similar, mainly £50,000 pa jobs in the procurement team. Maybe the director responsible, Sarah Ireland, a confidante of the council’s deputy chief executive, Nathan Elvery, could be asked to explain?

Similarly, the audit report is most unimpressed with the lack of controls on the council’s multi-million spending on the hiring of temporary agency staff and consultants, and the management of its payroll. Much of this falls under the control of Jon Rouse, the council’s chief executive, and finance director Elvery.

Among Elvery’s many responsibilities is the efficiency in collecting Council Tax, though as those figures, published last week, demonstrated, while there has been a modest improvement in the collection rate, the amount of uncollected Council Tax in Croydon is among the worst in England, and by far the worst of all outer London boroughs.

At Barclays, the chairman has today resigned, with further leading figures expected to take responsibility for their failings and corporate mismanagement. When might the buck stop at Croydon Council?

  • Inside Croydon: For comment and analysis about Croydon, from inside Croydon. Not from Redhill.
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About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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