In June of this year KPMG issued an Audit Report on
Corby Council’s project management of the Corby Cube. Some of the
findings were that:
- There was insufficient member oversight at critical periods of the schemes
- Where established governance arrangements and internal controls did exist they often did not operate as they should have done
- Financial and project management of the schemes was poor
We
have, time and again, emphasised how it is essential that Rutland
Councillors take a keen and deep interest in all projects, seeking and
reviewing all the facts, especially the financial detail and
implications, since it is we, as Councillors, that have to approve such
expenditure in light of all those facts and ultimately be held
accountable.
So take for example: On the 20th
June 2013, given that there was a “Oakham Enterprise Park Progress
Report” in the Places Scrutiny Meeting that night, I duly sent the
following email requesting information:
Dear ………………,
The Places Scrutiny Meeting tonight is considering Report 154/2013, Oakham Enterprise Park Progress Report.
I note there is no financial report or detail, which I would have considered one of the most important aspects of the project, especially given the recent criticism this week of Corby Council by its auditors, KPMG, in which I understand they were highly critical of Councillors for not being diligent enough in checking the financial situation and progress of several projects.
In the Risk Management section of the Report it notes the risk for Finance as “High”, I would therefore expect a constant financial update in Reports. Would you be good enough to send a full breakdown of the finance for this project, outlining all costs and income to date. Would it also be possible to do this showing progress against the original Business Plan.
Many thanks.
Yours sincerely,
Councillor D.Richardson
This is the reply I received from the Single Point of Contact (SPOC) (Note: as a consequence I have no idea who sent this):
“The project is being managed within the project budget and business plan expenditure forecasts/income projections as set out in previous report to Cabinet (25/9/12, Report 182/2013) as delegated by Council (Report 14/5/12, Report.98/2012).”
We
are willing to hear from anyone who finds this acceptable, since your
Conservative Councillors do. No information or detail whatsoever has
been provided. To be merely told that all is being “managed within the
project budget” of some 9 months previous, for which we have had no
interim Report, is, in our opinion, unacceptable. At the very least one
would expect a detailed Monthly financial update made available to all
Councillors and, as far as we are concerned, also published on the
Council website for the public.
However, the
Business Plan in Report 182/2013 referred to, was nothing more than a
mere half side of A4. No Bank Manager, or anyone else for that matter,
would accept such a scant Business Plan, with no detailed breakdown
whatsoever. Furthermore, this Report, in our opinion, should never have
been exempt; this is public money, your Council Tax and you have a right
to know how they plan to spend it. Worse still, the Business Plan had
changed significantly from the one of only 5 months previous referred to
of May 2012, with Income suddenly over £1M more and Capital Financing
costs nearly £1M more, with no detailed breakdown for such a substantial
change. Yet Conservative Councillors once again blindly approved this
without question. (That Capital Financing cost will impact on your
Council Tax)
We feel it is totally unacceptable
that we be treated in this manner as your representative, not providing
information when requested, when all we are trying to ensure is that
your money is spent to best effect. It is essential we are fully
informed and have detailed breakdowns of finance in any project. We do
not want Rutland Council to be on the receiving end of a KPMG report
which states:
“There was insufficient member oversight at critical periods of the schemes”
However, that oversight can only be provided if that information is forthcoming.
It will be interesting to see how Rutland Council’s Auditors view this? Especially given their Report below:
Detail of the Corby KPMG Report:
Auditors raise concerns over Corby Borough Council’s regeneration management arrangements
KPMG
LLP, the appointed auditors of Corby Borough Council, have issued a
public interest report which highlights flaws in the Council’s
arrangements for managing significant capital regeneration projects.
These are the Cube civic offices, Kingswood estate developments,
improvements to the Rockingham Triangle sports complex and the sale of
land in the St James area of the town.
The three construction
projects involved over £67 million over the last 6 years and whilst all
of them involved other organisations the Council has played the major
role in managing the projects and bearing related risks. The Council
sold the land at St James in 2010 for £3.8 million. During this period
the Council has had limited usable revenue reserves over its designated
minimum balance of £0.8 million and its external borrowing increased
from nil to a high point of £47 million in 2011/12.
The report
acknowledges the very real benefits that the regeneration projects have
brought to the residents of Corby and the surrounding areas, that
external borrowing has since reduced to £36 million and that the Council
is starting to take action on the reported weaknesses. However, KPMG found that:
·
the Council’s arrangements for managing the projects were ambiguous and
ill defined leading to uncertainty as to who should have made key
decisions
· There was insufficient member oversight at critical periods of the schemes
·
Where established governance arrangements and internal controls did
exist they often did not operate as they should have done
· Financial and project management of the schemes was poor
·
On the face of it the land at St James was sold for considerably less
than best consideration without getting the requisite statutory approval
to do so
· This was compounded because the checks and balances,
including the statutory responsibilities of key officers, which should
have alerted the Council to the failings, did not operate
The auditors conclude that these have meant that the Council:
· may have breached its statutory obligations and made decisions and against its own internal policies and procedures;
· has exposed itself to greater risk than it needed to have done; and
·
would have been in a better position to respond to the significant
financial challenges currently facing the Council if the failings had
not existed.
The report makes 18 recommendations for the Council
to consider covering governance, statutory obligations, Council policy
and procedure, financial and project management, use of professional
advice and actions of senior officers.
KPMG’s audit director Neil Bellamy said:
‘There is no doubting the very real benefits to Corby residents from
the regeneration projects considered in this report. However, these were
at the expense of good corporate and financial governance. We found
that decision making arrangements were unclear, and that there were
significant failings in the design and operation of the Council’s
governance arrangements. Together these led to the Council making
decisions when it was not fully aware of the financial impact they would
have, exposing it to unnecessary and significant financial risk, and
which led to a likely breach of its statutory obligations. In our view
these placed it in a weaker position from which to address the current
financial challenges it faces.
“On top of this it is
disappointing that the ‘failsafe’ statutory responsibilities of key
senior officers did not operate as they should have done, which would
have brought these failings to light sooner.
“It is imperative
that the Council learns from the above and that officers and members
work together to strengthen governance arrangements and establish and
embed a culture and environment where the arrangements operate as they
were intended.”
The report will be considered at a meeting of
the Council in early July, to be held in public, when the Council will
provide a response to the points raised. The Council will confirm the
date shortly.
Copies of the report are available from Corby Borough Council or from the Audit Commission website at
