Northampton Financial Crisis – Shared Services Operation Part of the Problem?

We wrote on Tuesday about the problems at Northampton County Council, which has in effect run out of money to deliver all but essential services. The Council is blaming central government funding, but as we pointed out in the previous article, this is not a particularly “deprived” area, and there are serious questions to be asked about the competence and even the ethics behind certain actions that have been taken.

The council has pursued a strategy of setting up a range of quasi-independent organisations to deliver various services. Some are social enterprises, some are still council-owned, some are joint ventures. Some have failed already, including a social care venture. Another is LGSS – Local Government Shared Services, which delivers back-office shared services for Northampton, but also for Milton Keynes and Cambridgeshire councils.

Now there is nothing intrinsically wrong with this strategy; we have written previously for instance about the successful procurement shared service which Surrey and East Sussex set up, which has expanded into other services and other councils now as Orbis.  But there are various aspects of LGSS that look rather odd.

For this analysis, we have Andrew Rowson to thank again – we mentioned him in our first article and he has been digging through data and FOI (freedom of information) answers to piece together some concerns about LGSS. He found that the financial information being quoted by Northampton was very unreliable  – LGSS has no legal identity and no bank account, he claims, and does not appear to issue invoices for instance to the councils it works for, which seems odd. The suspicion is that LGSS has been used somehow to camouflage what is really going on with the finances.

There are also operational concerns about the organisation. A major Agresso Unit4 systems implementation – a shared ERP system for the three councils - appears to be at least a year behind schedule, and future benefits from the programme have been re-stated upwards in an attempt to make the business case still stack up despite the higher costs. That’s always a warning sign of a programme in trouble, in our experience!

New ERP systems implementations, particularly with a new tech provider, are rarely simple, and an implementation across three councils seems fraught with inherent difficulties. Has LGSS bitten off more than it can chew?  Council minutes say “In June 2017 the forecast total cost of the programme through to the October 2017 was £7.138m. As a result of the further rescheduling, the latest forecast of the total costs of the programme taking it to April 2018 is £8.709m”.

An external review of the programme by Agilisys also suggested some major failings.

“… plans and related documentation that exist are inadequate to manage a programme that with the addition of Milton Keynes Council joining the programme subsequently became more complex”

“… LGSS does not currently have an adequate overarching programme plan…”

“…it is difficult to see how the programme will go-live in April 2018 with a high degree of certainty at this stage”.

Rowson also uncovered a case where a senior executive in LGSS took redundancy, then was immediately re-engaged (for a long-term assignment) on a generous daily rate. LGSS spent over £200,000 on her services over 13 months; yet there was no competitive process for her appointment, there would seem to be some IR35 questions too, and the whole way in which redundancy was followed by re-employment smacks of dubious practice. LGSS also had to make a “pension strain” payment of over £200K to the local government pensions scheme because she took her pension sooner than expected, according to Rowson.

This individual’s role also seems to be involved with the late-running systems programme too, just to compound the whole situation! All of this seems to suggest that at the very least, LGSS has not been a well-run organisation that cared as much as it should about public money. So assuming the work is done properly, then the investigation into Northamptonshire ordered by local government minister Sajid Javid should make interesting reading.

And some late news – a Northamptonshire MP, Philip Hollobone, raised a question in parliament this week, which included this comment – “May I urge the inspector to look at the opaque accountancy in the local government shared services model at the county council, which is where a lot of the problems may lie?”

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