People’s Audit Eight – GOVERNANCE: “LAMBETH UNDER-DECLARED PAYMENT TO TfL SUBSIDIARY BY NEARLY £8.7 MILLION”
Lambeth’s annual governance statement says, “The council’s governance arrangements aim to ensure that it sets and meets its objectives and responsibilities in a lawful, timely, open, inclusive and honest manner and that its public money and resources are safeguarded, properly accounted for and used economically, efficiently and effectively.”
Governance should be about making sure that processes are in place to ensure that money is properly accounted for. Our findings below show this not to be the case.
PAYMENTS WITHOUT BUDGET OR AUTHORISATION
On 19th August 2016, just a few weeks after we started our audit, Lambeth issued an internal report requesting retrospective authorisation for the payment of nearly £400,000 paid over the previous two years to a tree surgery company.
It is highly irregular that such a large amount of money could be paid without authorisation. The Peoples’ Audit Team had been asking questions about this company and we have little doubt that Lambeth’s report was issued as a result of our investigation.
All of this raises real questions as to whether Lambeth have set up the appropriate systems to prevent financial mismanagement and fraud.
UNDECLARED EXPENDITURE: “LAMBETH UNDER-DECLARED PAYMENT TO TfL SUBSIDIARY BY NEARLY £8.7 MILLION”
The Local Government Transparency Code 2015 requires Local Authorities to publish all individual items of expenditure exceeding £500.
The aim of the Code is to “meet the Government’s desire to place more power into citizens’ hands to increase democratic accountability and make it easier for local people to contribute to the local decision making process and help shape public services.”
During our audit we discovered multiple instances where the invoices published on Lambeth’s website did not match what the suppliers had actually been paid.
For example, we examined what Lambeth claimed they had paid to Transport Trading Ltd (a wholly owned subsidiary of TfL) in 2015/2016 and what they had actually paid them.
The difference was nearly £3.2m under-declared by Lambeth. BOLD In fact in the last five years Lambeth have under-declared the amount they paid to Transport Trading Ltd by nearly £8.7m.
Such inaccuracies highlight serious deficiencies in Lambeth’s reporting systems and would certainly give the impression that they don’t have control of what they are spending. It furthermore undermines the purpose of publishing the list of expenditure in the first place, which is to provide the public with transparency as to how their money is spent.
CONTRACT WAIVERS “LAMBETH HAVE BEEN IGNORING STANDING ORDERS ON RE-TENDERING ON AN INDUSTRIAL SCALE.”
Lambeth’s standing orders, which govern how works are procured, require that works should be competitively tendered unless there are exceptional circumstances, there is only one supplier who can carry out the work or it is demonstrably to the council’s benefit not to tender the works.
If one of these exceptions can be demonstrated then a waiver to the Standing Order procedures needs to be issued.
The Peoples’ Audit discovered that Lambeth have been ignoring these standing orders on an industrial scale when it comes to re-tendering existing contracts.
An appendix to our report shows contracts that we discovered that have been extended rather than re-tendered, necessitating the issue of a waiver.
This is not a comprehensive list as we did not set out to find every contract which had been extended.
In many instances the contracts have not been extended for any of the reasons noted in the Standing Orders. In some instances they have been extended purely because a replacement contract has not been put in place.
The worst example of this relates to a staff agency that Lambeth uses. The contract in place terminated on 1st January 2016. On 4th February 2016 a Lambeth report requested an extension to the contract for 8 months in the sum of £30M “whilst competition for the replacement of this service is completed”.
Then on 22nd December 2016 a further report was issued requesting a further eight-month extension in the sum of £27M as the contract expires on 31st December 2016 and there is no new contract in place.
The extension has therefore been requested to ensure business continuity “whilst a new service is procured”. BOLD This has meant that £57M of services were bought without a tender because Lambeth have taken over two years to procure a replacement service.
APPEARANCE OF PRICE FIXING
We reported to the external auditor two instances of what we have good reason to believe is evidence of price fixing between some of Lambeth’s contractors.
In the first instance all four tenderers on a £1.3M project were within seven per cent of each other. It is unheard of in the building industry for tenders on this size of project to be so close to each other.
In the second instance two of the tenderers had identical prices for several items. It is simply unheard of for two contractors to offer identical prices on individual items. (Source: Lambeth Peoples’ Audit report).