Taunton Deane charged £15k for 'widespread' accounting failures relating to SW One

BBC Somerset are reporting that Taunton Deane have been charged an additional £15k by the Audit Commission for widespread failures relating to the Southwest One contract.  SCC are also due to receive a "charge" for the same reason; the fee has yet to be decided.  I've included the main body of the report below the break along with some thoughts on Southwest One. 

A Somerset council has defended the company that provides its accounts, despite auditors saying the system it used was a "widespread failure".

Taunton Deane Borough Council was charged an extra £15,000 by the Audit Commission to go through its accounts which are managed by Southwest One. The Tory-run council said the problems were because the system was new and its accounts were passed "unqualified".

Southwest One said it was a matter for the council.

In its report, the commission said it took longer to go through the accounts as there was a "widespread failure to operate key controls" in the new system.

'Earthquake proportions'

Council leader John Williams said it was not paying for the company's mistakes but admitted the money would be taken away from services.  He said: "Southwest One is delivering huge savings, we get money back from this contract every year. I'm confident that it is now settling in."

"We are going through a change of earthquake proportions; all the staff have to use different systems but the bottom line is I don't think it's a question of the outsourcing company leaving us with a bill.*"

The company - which is 75% owned by IBM - runs the council's IT and benefit systems.
It also runs Avon and Somerset Police and Somerset County Council's IT systems.
The commission has also charged Somerset County Council extra for going through the accounts, however a figure has not yet been agreed upon.

The police has not yet had its accounts audited since its deal with Southwest One.

*Note to self - must use earthquake more often in sentences when talking to the media and I'm trying to project the impression to the staff and the public that I'm in complete control.

This is yet another episode in the ongoing saga of the Southwest One contract with IBM.  For a more colourful back story on how we got to where we are now I'd suggest a trip into the outer darkness and visiting Iain Liddell-Grainger's blog in which he goes into exhaustive detail on the various shenanigans that have gone on over the years - and it's a murky tale indeed.  Be careful as it’s almost as revealing about the way Liddell-Grainger’s mind works as it is about SW One.  Less is always more with choice of fonts - I was beginning to get a headache reading it!  

The Southwest One contract is the sort of issue that ought to be a major doorstep topic in Taunton and Somerset if only we had a local media worthy of its name.  Unfortunately we don't, and most members of the public are blissfully unaware of where their local authorities, under both the Lib Dems & Tories, have spent millions of pounds of their taxes. This ignorance makes it difficult to turn it into an election issue that we can use.  Standing at a front door explaining from scratch the convoluted history of what is essentially an IT and support services project is not an easy sell if the media have not primed the electorate before hand.  To give you a flavour one recent highlight, amongst many, was the resignation of the chief exec, Richard Jones, in November last year after a first year loss of £2.5million.  I’m no titan of industry but I’m fairly sure the chap who is supposed to be running the business jumping ship in the first year is rarely a good sign.

There are some serious broader points related to Southwest One and how it came into being that may become more important nationally over the next few years as more local authorities follow the example of the Tory run Suffolk County Council.  It has recently mooted outsourcing all of its services to contractors in an effort to drive down costs and, as it's a mad Tory authority, shrink the scope of local government services to the barest minimum on purely ideological grounds.  Barnet Council in London has in the past two years gone down a similar route.  The so called ‘easyCouncil’ planned to reduce it’s services to a 'no frills', core level and allow service users to purchase additional services as they needed.  An article in the Guardian last week reported that nearly two years after the project began the leadership of the council has still failed to come up with a proper business plan.  Auditors have serious question marks over the plans and questioned the councils mandate to make such sweeping changes.  To give you an idea of the scale of the changes proposed Barnet Council would go from 3,500 staff to just 300 directly employed, mainly in contract management and policy areas.  Putting aside for a moment its merits as a project I pity the staff of Barnet Council having this hanging over them for the past two years – it really is an appalling way to treat your employees.  The one ray of sunshine is that it was something of a flagship project for Tory Party Central Office and there does now seem a possibility it may be running out of steam in no small part due to the fierce opposition of the Labour Group on the council.   

From a local perspective the experience in Somerset, both with the highways contract with Atkins back in the 1990s and more recently with Southwest One, is that there are no easy fixes and that predicted efficiencies are often illusionary (or even seemingly entirely made up).  We have no real idea what savings will be made in the end with SW One, as much was based on a headline figure (£200m) that now appears to have been highly speculative.

In addition, quite apart from a contractor failing to provide in full the services and savings that are expected, there are also bigger questions of scrutiny and democratic accountability in local government.  As there are few mechanisms for holding a majority group to account, to then throw into the mix a massive multi-national, a supine local press, as well as opaque contract negotiations and what you have is a ready made recipe for trouble.  The best I can say is that thus far it remains to be seen how Southwest One will work out over the remaining life time of the contract but it would be hard to make case that it has been a roaring success so far.  

The essential point is that the Tories are currently talking a lot about local accountability but the outsourcing of large sections of services seems to me to be the opposite of this.  How is a 10 to 20 year contract with a service company accountable?  In Somerset how is the County Council ever going to be able to apply leverage to a multi-national leviathan like IBM if the contract sours?  Having a couple of councillors sat on the board as non-exec directors is not enough control.  Even if the electorate vote out the party that brought in the contract it is almost impossible to exit the contract itself regardless of the will of the people.  SW One is almost a case study in this.  Brought in by the Lib Dems and the then chief exec at SCC, Alan Jones, we now have a Tory administration at SCC and Taunton Deane yet SW One remains in place regardless and will do so for at least one more complete election cycle.  Of note you can’t even as a member of the public look at the contract.  Any officer or councillor who does look at it becomes bound by a gagging clause and is unable to discuss its content.  Does that sound like a model of open and accountable government?

What people really want is decent, efficiently run, local services that are responsive to their needs and it seems self evident to me that this can largely be best achieved through directly run council services overseen by elected members who the electorate can turf out if they get it wrong.  It may sound terribly old fashioned in this day and age but that's what local democracy is supposed to be about.  It is self evident that inefficiencies and bureaucracy should always be kept to an absolute minimum, but it’s something of a myth that the public sector is overburdened by this anyway.  Most of the so-called bureaucracy is often as a result of statuatory responsibilities, a requirement to be accountable for public funds, and because it is a service to the public and not run as a business.  So long as it remains publicly funded by taxation there will always remain a need to account for how those funds were spent and that creates much of the 'red tape'.  Indeed, I’m told that the real reason that SW One has not made the predicted savings so far at SCC is that it was already a lean ship before they arrived.  Having acquired a four star authority status from the Audit Commission it was never the basket case that IBM clearly assumed. 

There is a place for outsourcing for specialised or short term services or where it is clearly more efficient to use a contractor – highways and landscaping contractors for example.  There are benefits to the community in employing local businesses to supply services; it supports employment along with providing many businesses with a important revenue stream.  For instance I understand that there was a clause in the most recent highways contract with Atkins requiring them to use local sub-contractors where possible for works.  The problem is when vast swathes of services are handed over to contractors, placing them out of direct council supervision and insufficient controls are put in place, particularly in the case of large service providers who may be non-UK based and have no vested interest beyond profit in the long term success of the service.            

One final point; you will note that it was the Audit Commission that picked up Taunton Deane & SCC for the failures in accounting.  It is one of the few organisations that provide any kind of external scrutiny of local government and yet Eric Pickles recently announced that this body, set up by the Tories when they were last in power to monitor local government bodies, would soon cease to exist.  This function will be handed to private sector auditors.  Is anyone detecting a pattern here?

EDIT: As I was about to post this news has come in that SW One has posted a pre-tax loss of £16.5 million for this year.  They are trying to put a positve spin on it but this is not a good result.  Although it seems this loss will not be absorbed directly by taxpayers in Somerset it does raise questions about the viability of outsourcing services to the degree that has taken place with SW One.  If IBM can't get it right then how much faith can we have in other companies to do the same?  Could a smaller company without the deep pockets of IBM absorb losses like this?  SW One was supposed to be the first phase in IBM moving into provide backroom support services for a large numbers of local authorities but that surely must be in doubt.