Where's the Money Gone?
On his Heyhouses Ward Conservatives blog we saw Councillor
Coombes has an article called "Where Does all my Money Go!!??"
and in case he really doesn't know, we simply couldn't resist responding to show where at least some of the £1,200,000 of our savings he has spent and in case he really doesn't know, we simply couldn't resist responding to show where at
least some of the £1,200,000 of our savings he has spent (over and above what he said he would spend) this finanial year has actually gone. So our piece is called Where's the Money Gone.
In No Accounting for Fylde back in August 2007 we explained how Fylde Council delayed completing its final accounts for a month, missing the statutory deadline. Then it circulated them to Councillors late on the
night before the meeting, only to issue new final accounts with different figures when Councillors arrived for their 2:00pm meeting the following day.
We explained that much of the problem was down to a new computer system Fylde had tried, and spectacularly failed, to implement, (even after borrowing a finance expert from Wyre Council). They had two incompatible computer systems running
concurrently, and neither could produce true spending figures.
We also said at that time: "We are also hearing stories that spending departments were being asked how much they think they have spent, because their accountants can't get at the figures! Big spending departments, like Dim Tim's 'Street Scene' were
not actually sure whether they were solvent or bankrupt, because no one knew."
Later, in 'Two's? Company' we highlighted the creation of a shell company owned by Fylde Council, which intended to trade in vehicle maintenance in the private sector, but which had not been able to trade because
Fylde didn't get a good enough rating from the Audit Commission. This disallowed it from trading commercially. We warned about the possible effects of this company saying "Either way, it's a dangerous animal and needs to be watched."
At the time, even we didn't realise how true that warning would come..
Then, in 'Incompetence or Fraud?' in January 08, we broke the news that the Street Scene department had overspent by £609,000, and under-produced on its expected income by another £100,000.
This overall deficit of £709,000 is the lion's share of the £1,000,000 million that the Commissar overspent in 2007/08, and it forced the new finance chief Bernard Hayes to smash open our reserve piggy-bank and empty out £1.2 million of spending that
was planned for other things, to cover the 2007/08 overspend by the Commissar..
The information about the huge losses had been buried in a report called the 'Medium Term Financial Strategy' which was presented to Cabinet on 16 January 2008.
A month later, in February, we heard that an officer of the Council had been suspended, pending further enquiries.
There has been no official statement as to which officer has been suspended but is widely believed to be the officer at the head of the Street Scene department, who would (nominally at least) be in charge of the overspending department.
We also heard the North West Employers Organisation (NWEO) had been called in by Fylde Council to look into the problem. NWEO is an interesting choice for an investigator of overspending. Normally for a financial problem, you'd call in accountants and
auditors. NWEO is the 'employers association' - a sort of trade union for employers - and typically, they advise on staffing matters rather than financial problems.
Privately we had heard about problems in Street Scene's accounts last November. Our information came as unconfirmed gossip, so we didn't feel able to publish at that time. We were told about it shortly after the new Finance Officer was appointed. We
heard he had been horrified by what he found in Fylde's accounts and had set about banging heads together to get them straightened up. We understood there had been a "full and frank exchange of views" (as they say) between him and the Street
We need to make clear at this point, as we have done elsewhere, none of this reflects badly on the new finance man, Bernard Hayes. Quite the opposite. it was his diligence and ability that found the mess and has cleaned it up.
So if it's not his fault, who is responsible??
Well, in practical terms, and assuming we are right that it is the Street Scene supremo who has been suspended, the probability is that he and his staff actually committed and spent the money. So that might seem the first port of call. However, it may
not be so clear-cut, and we'll return to this aspect later.
The responsibility for oversight of all officers rests with the Chief Executive, so he may have some questions to answer.
But the primary responsibility comes back to Councillors..
Historically, it would have been a collective responsibility of all the Council, because they used to make all the decisions. But under the brave new world of the Politburo Cabinet, ultimate responsibility for day to day control of departments rests
with the Leader, Councillor John Coombes, but also, in our view, more especially with the Councillors he hand-picked to run to the various Portfolios (as they are now called).
Councillor Tim Ashton has the Street Scene Portfolio, and is thus accountable for the spending..
Councillor Paul Rigby has the Finance and Efficiency Portfolio, and he is responsible for the accounting and financial processes to produce the information about spending and its monitoring.
Speaking of which, you might wonder how it could get to 10 months into a 12 month year for someone to notice a £700,000 black hole had been created in the Council's spending. We wonder how that could happen as well, especially when there are supposed
to be three monthly monitorings of spending to date.
'Finance' and 'Efficiency' don't seem to be easy bedfellows in Councillor Rigby's portfolio.
So what has the 'overspent' money actually been spent on..
Well, the answer is we haven't had all the details yet, but thanks to cogent questions asked at the last Politburo Cabinet meeting (14 February 08) by Paul (The Mauler) Hayhurst, we saw Dim Tim pushed into answering.
In answer to "What does the anticipated deficit on fleet costs relate to?" the answer from Dim Tim was: "It is with a heavy heart I answer this question, and I can assure the Council that I am taking all actions to make sure this doesn't
He went on to say there were three main elements..
Firstly, they couldn't trade using (what he described as) "spare capacity", and they had predicted £140,000 in income.
£100,000 of this was income expected from private work that was not achieved. (The mind boggles at having 'spare capacity' that is more than twice what you actually need, but perhaps that's just his way of running a business)
Secondly they budgeted for £432,000 in fuel costs, and the actual cost has risen to £580,0000
Thirdly, the cost of servicing and spares for the vehicles was estimated at around £800,000 and they spent £1.1 million.
They also had "some uninsured losses following a fire at the Poulton Depot" (actually we believe this was at a depot in Fleetwood Road, Thornton but that might have been a slip of the tongue for poor Cllr Ashton)
Now, using that answer, and our calculator, that means that the "uninsured losses" arising from the fire, must have been around £161,000.
Next, Cllr Hayhurst asked when they first knew about it.
The answer was December 2007 and it was reported to Cabinet in January 2008. So from April, all through the summer to the middle of winter, no warning bells were sounded about overspending.
Cllr Ashton did say that he would ensure the overspend would be "managed down" to £500,000 for each of the next three years.
But unless he is planning to have a fire and another uninsured loss each year, this means he's actually expecting to increase the overspend by £52,000 each year.
Our logic here is that an overspend of £609,000, less the fire loss of £161,000 comes out at £448,000. But he is planning to spend an EXTRA £500,000 in next year's accounts and in each of the following two years as well.
So in reality, he isn't managing the overspending down at all. He is increasing it.
So much for his assurance he was "taking all actions to make sure this doesn't happen again"
At the moment we can't say exactly what caused the fuel increase. Yes, there has been a rise in fuel prices, but moving the vehicle maintenance depot from Heeley Road St Anne's to depots in Poulton and Thornton will have played its part as well. They're
at least 15 miles further from St Anne's.
Neither do we know at present whether any rent or lease was actually paid on the Wyre depots. Fylde had wanted to declare the Heeley Road depot redundant, so it could sell it off to Muir Housing to become a hostel for the transient homeless (and upset
the whole neighbourhood). Heeley Road Vehicle Maintenance Unit had been in Fylde's ownership for years. It had no lease or rent that would actually have had to be paid out, so it may have been a cheaper option overall.
Nor do we know much about the extra £300,000 that was spent on "spare parts and servicing". These figures may come out in more detail later on.
But we do wonder about what's going on here.
Given that the Street Scene dustbin contract (which covers both Fylde and Wyre) had been running for at least two years already, typically those running it would have a good idea of how much to expect the costs of spare parts and servicing to be
for each of those years. They would have built those costs into the contract, and will have allowed for cost increases each year.
So to spend an EXTRA £300,000 - when your budget is only £800,000, is very exceptional.
Something doesn't add up, and we think we are being spun the run-around by Dim Tim.
According to the Gazette's report of the fire in 15 January 07, the fire totally destroyed five vehicles and caused damage to eight others. They said "The cabs of three vehicles have been destroyed and a fourth have been completely gutted. Several
other vehicles on the site have been damaged."
They also reported that "The vehicles destroyed, which all belong to Fylde Council, were used to collect recyclable materials and will cost more than £100,000 each to replace"
Now, suppose you're a bright, young, pushy Street Scene manager keen to embrace the world of business and to show your commercial muscle. Wyre and Fylde have been persuaded to put out a single contract for emptying the bins, and you sharpen your pencil
and, encouraged by the Commissar - who sees local government as a business that doesn't make any money, you put in the lowest bid, and win the contract.
Maybe you have built in enough money to get some new vehicles that will last the term of the contract. But maybe one of the costing shortcuts you made was on the insurance.
Then you have an unexpected big fire and a lot less bin-lorries. You might not even be left with enough to fulfil your commercial obligation to operate the contract.
Panic might set in, and you might only have three options.
You could either buy new lorries (very expensive), or you might contract hire some bin lorries (less costly up front, but probably more costly in the long run), or you buy some second-hand old bangers and accept that they will cost more in
repairs and servicing. (Probably the cheapest option overall).
Now we don't know if any of this speculation is accurate, but capital charges, contract hire fees, or excessive parts costs are about the only ways we can see that would need the extra spending on the scale that Dim Tim has incurred and is now envisaging
for the foreseeable future.
Cllr Ashton did, however, say that they had made a surplus from the Wyre contract of around £300,000 over the first two or three years.
So by our reckoning, that's a cumulative £300,000 surplus, but this year a £709,000 loss, then probably another three years where he will spend an extra £500,000 extra a year.
So using those crude figures, that's a net loss to Fylde over the period of just short of £2,000,000.
Now this may not be exactly right - we don't have the exact income figures to cross check it, and there will be other things that come into the equation - such as providing for inflation price increases in the contract, and getting extra money for empting
the bins at Wyre's new houses (although Fylde has suggested they want to give Wyre a bit of a discount on those charges, so Wyre would be nice to them in the Joint Working discussions). That being the case, the extras might not produce as much
income as much as you would otherwise expect).
But you get the general idea.
If that assumption was right, (and it may not be) it would mean Fylde taxpayers could be subsidising Wyre's taxpayers to the tune of anything up to £2 million by the end of the period.
That's equivalent to around £66 per band D property in Fylde, (and co-incidentally, almost exactly the amount the Commissar is planning to charge each Band D house in Lytham, St Anne's, and Kirkham every year under his new 'Differential Taxation'
So coming back to who is responsible for all this. Our charge is that ultimately it is the Leader of the Council, Councillor John Coombes, and specifically Councillor Tim Ashton for the actual overspending, and Councillor Paul Rigby for failing to have
'Finance and Efficiency' systems in place to detect the problem before it got out of hand.
On the officer side, the picture is less clear. The Chief Executive heads the ship, and he carries the can for both the spending department and the finance department.
As for the officer that has been suspended, we suspect it may turn out not to be altogether his fault.
If the accounting system was as bad as we were led to believe, and as bad as we reported in 'No Accounting for Fylde' it is quite possible the spending officer simply didn't know how much he had spent, or how much
he had left in his budget, because the failed accounting computer system wouldn't tell him.
Although you might argue that someone running a multi-million contract ought to have some form of basic budget tracking system of his own in place, the real cause could well be Fylde's incompetent financial management which, you might argue in officer
terms, was mostly down to the former financial officer who left last autumn.
But as we said before, the Commissar, as Leader of the Council, now makes all the day to day decisions on behalf of the full Council.
We have also said this before, and we make no apologies for saying it again. The financial incompetence of this Politburo Cabinet, presided over by Councillor John Coombes is staggering.
We have no doubt the external auditors will want to look into Fylde's performance here.
At this rate, it might be cheaper to build the external auditors a local house, so they can cut their travel costs and reduce their carbon footprint.
Maybe a fitting site would be in Heeley Road St Anne's, the site of Fylde's "redundant" Central Vehicle Maintenance Unit.
Dated: 25 February 2008