The Great EDDC Section 106 Scandal of 2016 – and probably earlier years

Forget Jones from Reasonable Mistakes, this calls for Phelps from Plausible Excuses NOW!

OWL’S SUMMARY:  EDDC HAS NO EFFECTIVE MONITORING OF SECTION 106 PAYMENTS DUE AND OFTEN RELIES ON DEVELOPERS TO TELL THEM WHAT THEY OWE TO THE COUNCIL.  THIS IS NOT JUST A PROBLEM FOR THIS FINANCIAL YEAR BUT, ACCORDING TO EXTERNAL AUDITORS, COULD HAVE HAPPENED IN PAST YEARS TOO.

Due to the explosive nature of the report detailed below, it is hardly surprising that the Audit and Governance Committee is meeting in the afternoon on 17 November 2016 at 2 pm, while most people have to be at work.  Had it been held in the evening there might well have been some seriously embarrassing problems for the committee.  As it is, even the afternoon session is likely to throw up some VERY tough questions.

Only recently added to the EDDC Audit and Governance Committee agenda papers is this little nugget of a report – it is only 21 brief pages and deserves very focused reading.  The report is as per the link below:

KPMG: Management of s106 contributions

and boy, what interesting reading it makes!

It seems that a local elector complained to EDDC’s external auditors – KPMG, new to the job this year – that it appeared that management of Section 106 payments (the money due from developers) was, in Owl’s lay-owl opinion, not fit for purpose – as reported in recent East Devon Watch postings:

HERE and HERE

The elector concerned alleged serious mismanagement of the listing, monitoring and collection of Section 106 money – the payments due from developers as part of their requirement to mitigate any problems that the development might cause and for the provision of green, open and play spaces within and around their developments.  This was as a result of a Freedom of Information request to which EDDC responded that it did not have the information the elector required.

BEAR IN MIND THAT DETAILED BELOW ARE SUMS FOR THE LAST FINANCIAL YEAR ONLY AND THE EXTERNAL AUDITOR DID NOT EXAMINE PREVIOUS YEARS.

After a very light-touch investigation by the new auditors KPMG (which simply sampled various agreements in this financial year only rather than forensically analysing them all over a period of several years), they found:

     “As at 31 March 2016 the Council had £5.8 million of s106 contributions held on its Balance Sheet.  During the 2015/16 financial year it accounted for £1.9 million of s106 receipts.
      We found that at the Balance Sheet date there was a gross amount of £636,000 in s106 contributions due to the Council where it had not identified that conditions had been met which triggered liability for payment from the relevant developer.
     No invoices had been raised seeking payment and consequently this amount had not been included in the 2015/16 financial statements, meaning the accounts were understated.
      When other audit findings are taken into account there was a net understatement of £227,000 in the Council’s financial statements. This is because our financial statements audit work had separately identified that the Council had incorrectly accounted for an amount totalling £409,000 for a different s106 agreement which actually related to another body.
     Whilst we have not exercised formal audit powers in response to the objection, our work has indicated that the issues raised by the objector are correct and we have upheld the objection.”

Here are the external auditors findings FOR THIS YEAR ONLY in more detail:

“Our evaluation of the processes has identified the following control weaknesses.
1. An absence of summarised financial information to facilitate the monitoring of s106 contributions
The Council currently has no summarised monitoring document which shows the value of all s106 contributions outstanding at any one point, with the trigger which would lead the contribution to be payable and, if the contribution is liable to be paid, the current status of the collection process. In addition to this the Council does not currently have the information in a format which is consistent with s106 contribution triggers so it cannot determine if triggers have been met.
2. Lack of challenge or enforcement of the Cranbrook developers’ legal obligation to provide information
From our understanding there is no challenge or enforcement of the developers’ legal obligation to provide the Council with details of the number of dwellings constructed, sold and occupied, instead only information on completions is supplied. In addition this information should be received quarterly but our testing suggests that it is received on an ad hoc and untimely
basis.
3. Understanding of financial and accounting implications of triggers being met and the communication between Planningand Finance over this
It has been found that at present there is a gap in the understanding of the financial and accounting implications of a contribution trigger being met within Planning, due to an oversight in communication between Finance and Planning over the treatment.  When contributions become virtually certain to be received, but are not invoiced for practical or commercial reasons, they should be recognised as accrued income.  At current however, given this gap in understanding in the planning team, the Council’s Finance team only accounts for s106 contributions when the cash has been received or an invoice has been raised. This has led to the financial accounts having an incomplete accrued income balance on the Statement of Financial Position.
In addition to the evaluation of the s106 processes and controls, we performed testing to enable us to quantify the potential misstatement as a result of the control weaknesses found in the system.
We focused this testing on s106 agreements associated with the Cranbrook development, as these agreements (individually and in total) represented the major value of all agreements in place. We requested a listing to be prepared of all s106 contributions that the Council has in place at the Cranbrook site and found that there were nine contributions that had been triggered and are due to the Council. It was also found that there was a tenth contribution where it was uncertain if the trigger point had been met and the financial value of the contribution, this is therefore not included within the misstatement below. The contributions ranged from £5,000 to £200,000 in value individually, see page 12 for further details.
It was found that the planning Officer was aware of the individual cases, but not the aggregate position of the un-invoiced amounts. None of the contributions had been invoiced or accrued in the financial statements but as noted previously, there is no evidence of financial loss and the misstatement is one of accounting treatment. If the total value of this misstatement was recognised in the Council’s accounts,the Grants in Advance balance would increase by £636,000, as documented below.
It is noted however that this is the gross misstatement as a result of the weaknesses in the system and that our final accounts audit procedures had already identified a misstatement that overstated the Grants in Advance balance by £409,000. This was because the Council had incorrectly accounted for a s106 contribution due from a developer but payable to another body, rather than the Council itself.

Consequently, when concluding effect of these misstatements on our audit opinion, we were able view the impact at 31 March 2016 as a net understatement to the balances is £227,000.  This was reflected in our reporting to the Council’s Audit & Governance Committee in September 2016.

Whilst neither the gross or net misstatement were considered individually material to the financial statements, they are nevertheless significant sums. Given the weaknesses identified in the Council’s controls, it is possible that understatements of a similar scale or even larger could be apparent at any point in time.”

 

Don’t ask NHS employees or patients what’s wrong – ask consultants (in secret)

“NHS plans that could lead to hospital and A&E closures have been kept secret from the public and barely involved frontline staff, a thinktank has said.

NHS England has told local health leaders not to reveal the plans to the public or the media until they are finalised and have been approved by their own officials first, according to published documents and a new analysis by the King’s Fund.

The national body even told local managers to refuse applications from the media or the public to see the proposals under the Freedom of Information Act.

Local managers accused NHS England of being intent on “managing the narrative” about the plans.

The sustainability and transformation plans (STPs), some of which have been published or leaked, could see some hospitals, A&E units or maternity units close, and other services merged.

The proposal for Cheshire and Mersey includes the downgrading of at least one A and E department, while in south-west London the number of acute hospitals could be cut from five to four.

In north-west London there are plans to reduce the number of sites offering a full range of services, while Birmingham and Solihull’s STP proposes a single “lead provider” for maternity care.

NHS England and some health experts say the changes will improve patient care and are necessary to fulfil the plan of the health secretary, Jeremy Hunt, for full seven-day services. Opponents argue they are just a way of cutting services.

Some councils have objected so strongly to the lack of public involvement that they have ignored NHS England’s demand to keep the documents private until a later stage and have published them on their websites.

The report from the King’s Fund, based on a review of plans and interviews with local managers, says NHS England set very tight timescales, which is partly to blame for patients and doctors being shut out.

Expensive management consultants have been brought in but clinical teams and GPs have often been only “weakly engaged in the process”, it says.

The report says: “It is clear from our research that STPs have been developed at significant speed and without the meaningful involvement of frontline staff or the patients they serve … Patients and the public have been largely absent from the STP process so far.”

One local manager said of the lack of public involvement: “I’ve been in meetings where I’ve felt a little bit like, you know, where are the real people in this?” Another described the secrecy demanded by NHS England as “ludicrous”.

The report says: “As well as the timeline creating a barrier to meaningful public engagement, national NHS bodies had also asked STP leaders to keep details of draft STPs out of the public domain. This included instructions to actively reject Freedom of Information Act requests (FoIs) to see draft plans.”

On management consultants, the report says some leaders “felt that STPs had ‘created an industry’ for management consultants – and questions were raised about why money is being invested in advice from private companies instead of in frontline services”.

However, the King’s Fund said STPs still offered the “best hope” of improving health and care services.

Sustainability and transformation plans are ‘least bad option’ for NHS
Chris Ham, chief executive of the thinktank, said: “The introduction of STPs has been beset by problems and has been frustrating for many of those involved, but it is vital that we stick with them.

“For all the difficulties over the last few months, their focus on organisations in each area working together is the right approach for improving care and meeting the needs of an ageing population.

“It is also clear that our health and care system is under unprecedented pressure and if STPs do not work then there is no plan B.”

Ham said it was a “heroic assumption” to say out-of-hospital services and GPs could take on more of the work currently done by hospitals, given how under pressure they were.

He said there was “mixed evidence at best” that moving services closer to home improved care.

The NHS medical director, Prof Sir Bruce Keogh, defended the plans. “Advances in medicine mean it is now possible to treat people at home who would previously have needed a trip to hospital. It also means those with the most serious illness need to be treated in centres where specialist help is available around the clock,” he said.

“So this is not a moment to sit on our hands. There are straightforward and frankly overdue things we can do to improve care. We are talking about steady incremental improvement, not a big bang. If we don’t, the problems will only get worse.”

http://www.theguardian.com/society/2016/nov/14/patients-and-staff-shut-out-of-nhs-transformation-plans-says-thinktank?CMP=Share_iOSApp_Other