Category Archives: Audit (EDDC)

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13 Dec 2016

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Accountability, Audit (EDDC), EDDC, Exmouth, Knowle/Honiton/Exmouth relocation, Richard Cohen

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Knowle relocation: more public statements come back to bite councillors on their …

This passage didn’t get much noticed at the time, in a report to Cabinet March 2015:

‘The market value of the Honiton new build is estimated to be £3.25m in 2017 and Exmouth Town Hall had a site value estimated in 2013 as £0.9m. The sites are determined primarily on the basis that they make better financial sense than the Knowle and are located for operational rather than investment purposes.’

This appears to confirm that the value of the new build is much less than the cost of its construction. Way less. Only £3.25 million, forward dated to 2017. So about £8 million less than the cost of build. Plus, don’t forget that the Honiton site, with or without the Business Centre, is worth at least £0.75 million, so the added value arising from construction, costing £11 million, is £3.25 – 0.75 million. Just £2.5 million. What a terrible investment.

Moreover, the sentence, presumably composed by Richard Cohen, seems to suggest that the Town Hall will not receive any benefit from the refurbishment, as it is deemed to have only ‘site value’ at £0.9 million.

Councillors … wool … eyes … pulled over?

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11 Dec 2016

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Accountability, Audit (EDDC), EDDC, Knowle/Honiton/Exmouth relocation, Transparency

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Knowle relocation – the estate agent’s view?

The views below are those of an expert correspondent. Owl, needing only the branch of the nearest tree to call it home, is no expert and is happy to hear from others with different views

The build cost of the new building at Honiton must have increased: there is no way they will build it for less than £7 million.

But the big ‘economy with the truth’ is that relocation will be achieved for less than £10 million, because the costs of moving will be very high, not least for compensation to staff for having to travel further to work. Steve Pratten (the relocation consultant) alone is going to cost £1 million by the time the project ends and then there is all the officer time (never, ever costed by EDDC), and legal fees.

The real numbers, in my personal opinion (writes the correspondent) are likely to be:

Exmouth refurbishment:
£2 million

New Build at Honiton:
£11 million
(West Dorset’s new HQ was smaller three years ago and cost £10 million +)

Steve Pratten:
£1 million

Staff Compensation:
£1 million

Officer Time:
£2 million

Legal and other consultants:
£1 million

The move itself (physically relocating, plus things like new notepaper, equipment, etc):
£2 million

And, significantly, the immediate loss in asset value (the new building will only have a value of £2-3 million).

So subtract that figure from the asset value of Knowle (£7.5 million ):
loss of £5 million

Total: £25 million.

The improvements at Exmouth might give a modest boost to the value of the building, say £0.5 million, so a total cost of £24.5 million.

These figures are conservative. In truth, the ultimate cost is probably going to be higher. The ‘officer time’ figure of £2 million looks very low for example. It would not be at all surprising if the ultimate cost is of the order of £30 million.

The refurbishment of the modern buildings at Knowle was estimated at less than £2 million, which looks incredibly good value by comparison.

The refusal of the Pegasus application, together with the current upheaval over local government reorganisation in Devon, offer a clear opportunity to think again.

Cabinet on Wednesday might see the first signs of cracks appearing.

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10 Dec 2016

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Accountability, Audit (EDDC), Austerity cuts, EDDC, Exmouth, Knowle/Honiton/Exmouth relocation, KPMG, Transparency

Those relocation numbers STILL don’t add up (bigly) EDDC!

25 March 2015 extraordinary Meeting regarding Relocation:

‘Councillor Moulding emphasised the cost savings that would be achieved and highlighted key figures:

• The Knowle Site offer price agreed is £7-8m • Exmouth Town Hall modernisation will cost in the region of £1m • New Offices at Honiton will cost in the region of £7m • The Council will secure relocation in total for under £10m’

So it’s a £669,000 increase, not £408,000.

A 69% increase in costs in less than two years, without a brick being laid!

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10 Dec 2016

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Accountability, Audit (EDDC), EDDC, Knowle/Honiton/Exmouth relocation

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EDDC progress: move from an old building – to an old building!

EDDC moves from Knowle because it is an old building (although most of it is modern and big enough to meet all their accommodation needs) and moves to Exmouth Town Hall – an old building – all of it old.

And the reason given why the costs are rising?

Exmouth Town Hall is … an old building.

Which begs questions:

A. Did EDDC expect costs to be higher than they estimated when making their calculations to move?

or

B. Did EDDC expect costs not to rise when they made their calculations to move?

and

which of these two scenarios is the worst one!

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10 Dec 2016

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Accountability, Audit (EDDC), EDDC, Exmouth

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What goes around comes around …. in EDDC la-la land

One of the reasons given for increased costs at Exmouth Town Hall – finding asbestos in the building.

One reason given for moving from Knowle – you guessed it – asbestos in the building.

Yes, Minister!

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10 Dec 2016

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Accountability, Asset sweating, Audit (EDDC), Austerity cuts, Council tax, EDDC, Exmouth, Knowle/Honiton/Exmouth relocation

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Who counts the pennies at EDDC?

£1.6 million (minimum) overspend on Queen’s Drive, Exmouth
£400,000 (minimum) underestimate on Exmouth Town Hall refurbishment
£300,000 (minimum) not collected in Section 106 payments

£2 million … and still a quarter of the financial year to go.

Hello, KPMG, hello …..

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9 Dec 2016

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Accountability, Audit (EDDC), Austerity cuts, EDDC, Exmouth, Knowle/Honiton/Exmouth relocation

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Extra £408,000 needed for Exmouth Town Hall refurbishment – estimate did not include things like rewiring and new boiler!

This report asks members to approve the refurbishment of Exmouth Town Hall before Gateway 7 is reached in relation to planning permission on the Knowle site. The request is for a budget of £1.669m, this is an increase of £0.408m for this part of the project but overall net costs are expected to still be within the overall relocation budget.

It is a members’ decision whether to decide to proceed and approve the expenditure of £1.669m on Exmouth Town Hall refurbishment for the operational reasons outlined in this report. This decision needs to be under the clear understanding of the financial risk involved; a worst case position of no capital receipt from the Knowle to offset capital costs and no certainty of the associated savings obtained from operating from a new building in Honiton.

The borrowing impact on the Council should no receipt be forthcoming at all would be a £1.669m loan requiring an annual payment of £69,000 over 40 years to fully cover off both the loan sum and interest.

Mitigation against this financial risk is that the Knowle site has been allocated in the Local Plan for housing thereby giving some certainty of a capital receipt, if not now but in the future. Refusal of planning permission for the Pegasus Life proposal will add delay to the project but the Knowle retains a continued Local Plan allocation and capital value as a brownfield site for residential development. On this basis a more reasonable assumption at this point would be the requirement of short-term financing until a receipt is forthcoming. On that basis assuming a 3 year period of short-term financing this would incur an annual cost of £18,000 a year being interest only, if alternatively internal funds were used this would result in a loss of interest equating to £14,000 a year. …

AND THESE ARE COSTS EDDC DID NOT FACTOR IN TO EXMOUTH REFURBISHMENT COSTS:

…  The previous figure was an estimated cost without full survey and confirmed contractor figures. The refined cost reflects the detailed building investigations, requirements of the planning authority and the actual price negotiated with the contractor.

The Town Hall is an old building combining different extensions over time. Costing the works on an existing building is less predictable than new build.

Expectations that some existing services could be retained have not been met and detailed surveys and investigations of the building have shown it to be in need of full services replacement alongside repair, redecoration and structural improvements.

Key additional cost elements are:

o Full rewiring
o Replacement of central heating and boiler system.
o Improved hot water provision
o Additional kitchen facilities on first floor
o Provision of mechanical ventilation
o Improvement of natural ventilation,
o Removal of asbestos and dealing with lead paint.
o Improved security provision.
o Better access within the building.
o Improved signage
o ETH will be refurbished to a high standard. It will be decorated and equipped in the same way as the new HQ. The reception areas in particular will have a similar look and range of facilities for our customers.

Click to access item-14-relocation-report.pdf

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30 Nov 2016

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Accountability, Audit (EDDC), Developers/ Development, EDDC, Exeter City Council, Exmouth, KPMG, Philip Skinner, Regeneration

Exmouth regeneration costs – 6 times bigger than Exeter bus station!

It appears that Exeter City Council has spent “more than £500,000” on fees for its £26m bus station and leisure centre development and is getting some stick for this:

http://www.exeterexpressandecho.co.uk/council-have-spent-over-590-000-on-st-sidwell-s-point-and-exeter-bus-station-already/story-29947204-detail/story.html

What’s the fuss? EDDC has already said its costs for Exmouth regeneration (officially supposed to be developer-led and funded) will be AT LEAST £3.2 million.

Should someone be patting Exeter City Council on the back and perhaps giving EDDC some stick? And perhaps querying why the Exmouth Regeneration Board (Chair: Councillor Philip Skinner) and EDDC’s Cabinet doesn’t seem to have a handle on the expenditure.

Maybe another elector should be contacting external auditor KPMG as that seemed to get some action on the S106 crisis.

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28 Nov 2016

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Accountability, Audit (EDDC), Developers/ Development, EDDC, Section 106

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Can EDDC do basic arithmetic?

Read this first – the response to their external auditors that their Section 106 system is not working:

“An EDDC spokesman said: “We know exactly how much section 106 money is owed. “However, we only hold that information by development and do not hold a total of all monies outstanding across all developments. “This is currently being addressed.”

http://www.sidmouthherald.co.uk/news/we_know_exactly_how_much_community_cash_is_owed_eddc_1_4790645

(The rest of the press release is just as bizarre)

IT DOESN’T MAKE SENSE!!!!!

Let’s say, for argument’s sake, EDDC has 100 developments which owe Section 106 money. What they are saying is: “We know what each of the 100 developments owes but we can’t add them all up and get a total!”

Or is Owl missing something here?

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24 Nov 2016

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Accountability, Audit (EDDC), EDDC, KPMG, Section 106

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Section 106 scandal: New controls and a surprising revelation from CEO Mark Williams

S106 Funds and EDDC Audit & Governance Committee – report from an attendee:

On Thursday November 17th the Audit & Governance Committee of EDDC voted to make several changes to the Council’s finance systems which will now ensure that s106 payments will go to the local community amenities for which they are intended.

S106 payments are agreements under the Town and Country Planning Act 1990, often referred to as ‘developer contributions’ whereby developers agree to make financial contribution to the community infrastructure when they build property. These contributions are usually used to provide amenities such as playground equipment or other local projects, and usually decided with local councillors in the town or parish councils.

The recommendations to make changes in the way EDDC manages and monitors the s106 monies comes from auditors KPMG who received an objection from a local elector. KPMG mounted a financial investigation into the elector’s complaint and concluded that the council’s control systems had the following weaknesses:

1. An absence of summarised financial information to facilitate the monitoring of s106 contributions

2. Lack of challenge or enforcement of the developers’ legal obligation to provide information

3. Lack of understanding of financial and accounting implications of triggers being met and the communication between Planning and Finance over this.

EDDC Chief Executive Officer Mark Williams, at one point in the discussion, disclosed that he watches some s106 debts grow (because interest at 4%+ base rate is applied) rather than collect them when due so that the council can gain more money.

No one challenged or questioned the ethics of this as a strategy for dealing with the funds that could have gone sooner to the communities for which it is intended (or whether developers could be benefitting by delaying payments). Neither was it established whether that interest earned is applied to the s106 amenities for the community or left in the council’s general reserves.

EDDC Monitoring Officer Henry Gordon Lennox, referring to the £730,000 he had previously disclosed (through a Freedom of Information query) was owed in 2014/15 and 2015/16 for s 106 payments, interjected that the £730,000 owing had included a mistaken overstatement of £409,000. The current status of the other £321,000 was not established during the committee discussion however.

The auditors, in upholding the objection to the accounts, made Priority One recommendations to address each area of weakness because these are fundamental and material to EDDC’s systems of financial controls. The committee resolved that these should be implemented by set dates and KPMG will follow up in their next audit.

Councillors of various political parties during the discussion on this item thanked the elector for having raised the lid on this issue. Now that the previously weak system has had “a light shone on it” and addressed, the Audit & Governance Committee will be able to require regular reports on s106 monies owed and collected. They will be able to ensure that the funds are being directed to and spent on the amenities in towns and parish council communities projects for which they are intended.

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22 Nov 2016

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Accountability, Audit (EDDC), Austerity cuts, Health and Social Care (local), NHS (local)

National Audit Office slams NHS ” transformation” plans

Owl’s summary: you haven’t done your homework, your models are untested, you don’t understand what you are doing and the NHS is underfunded NOT overspent!

Some quotes:

17. Plans to close the estimated £22 billion gap have not been fully tested.

“The Department, NHS England and NHS Improvement used a financial model to estimate the gap between patients’ needs and resources by 2020-21, and the savings their programmes need to achieve to close this gap. We found limited testing by the Department, NHS England and NHS Improvement of their estimates of how much they expect to generate from their savings programmes.

This raises concerns about whether planned savings can be achieved. For example, plans assume that growth in trusts’ acute activity (including specialised acute services) will be reduced from 2.9% to 1.3% through transformation and efficiency programmes such as Right Care, new care models and the Urgent and Emergency Care programme. However, NHS statistics show this will be challenging as hospital admissions, a key driver of activity, grew by 2.8% a year between 2013-14 and 2014-15 (paragraphs 2.4 to 2.7).”

18. The NHS is implementing its plans to make the NHS financially sustainable from a worse than expected starting point.

Plans to achieve financial sustainability were based on trusts ending 2015-16 with a combined deficit of £1.8 billion. The fact that trusts ended the year with an even larger deficit means that the level of deficit to be recovered is significantly greater than expected. This means that the trusts affected will need to catch-up by making more savings than planned to reach the intended starting position. For example, trusts with deficits greater than expected at the end of 2015-16 will need to make operational efficiencies above the 2% savings level applied to all providers of healthcare services in 2016-17 or subsequent years (paragraphs 1.8 and 2.8).

19. National bodies have not assessed the impact of all the wider cost pressures faced by local NHS organisations in plans for achieving financial sustainability.

The Department, NHS England and NHS Improvement expect trusts and commissioners to invest in transformation programmes. But they do not yet know what level of investment is required or whether local bodies will be able to make the changes at the scale and pace needed.

Furthermore, the government has made a commitment that the health and social care system in England will be fully joined together by 2020. We have previously reported that local authority spending on adult social care fell by 10% in real terms between 2009-10 (£16.3 billion) and 2014-15 (£14.6 billion). The accounting officer for NHS England told the Committee of Public Accounts that “over the next two or three years, there is likely to be a widening gap between the availability of adult social care and the need for social care. That, will, inevitably show up as delayed discharges and extra pressure on hospitals.” However, in our review of the plans for financial sustainability, we did not see any estimate of the impact of pressures on social care spending on NHS bodies (paragraphs 2.6 to 2.13).

24. The National Audit Office (NAO) perceives differences in the position articulated by the Department – which views the funding for the NHS as having been adequate over the last few years, and in line with what NHS England set out it would need to deliver the NHS Five Year Forward View – and NHS England itself. Confronted as NHS England is by the pressures of rising demand for services, these signs of differences do not help build a confident feel about the future of the NHS.

https://www.nao.org.uk/report/financial-sustainability-of-the-nhs/

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21 Nov 2016

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Accountability, Audit (EDDC), Developers/ Development, EDDC, Exmouth, Philip Skinner, Regeneration, Transparency

Save Exmouth Seafront meeting – 1 December 2016, 7.30 pm Harbour Cafe

see:

https://www.eastdevonalliance.org.uk/event/save-exmouth-seafront-ses-meeting/

and Exmouth Splash Facebook page

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10 Nov 2016

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Accountability, Audit (EDDC), EDDC, KPMG, Scrutiny, Transparency

EDDC 2015/2016 accounts still not signed off by external auditors

Report from external auditors KPMG (page 10 of agenda papers). The auditors original statement was that they hoped to have concluded the outstanding matter by the end of October 2016. This has obviously not been possible.

“We received an objection to the Authority’s financial statements from a local elector. We are currently concluding the outcome of our work on the matters raised and, until this is completed, we are unable to issue our certificate. Once issued, the certificate will confirm that we have concluded the audit for 2015/16 in accordance with the requirements of the Local Audit & Accountability Act 2014 and the Code of Audit Practice.
We will report separately on the outcome of the objection to the Authority’s Audit & Governance Committee.”

The matter is now pushed on to the next Audit and Governance Committees on 5 January 2017. (page 42 of agenda):

Click to access 171116combined-a-and-gagenda.pdf

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5 Nov 2016

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Accountability, Audit (EDDC), Austerity cuts, Council tax, Developers/ Development, Greater Exeter, Planning System, Sidmouth/ Sidford/ Sidbury, Sustainability, Transparency

Black holes and green fields

Comment reproduced from post below:

The leaderships approach to finances over the last decade or more has been driven by a single-minded dogma to avoid any rise in council tax, even to match inflation. They have achieved this by relying not only on the government’s normal grant, but also on the government’s New Homes Bribe (ooops, Bonus – which gives payments for 6 years for each house built) which in turn has driven the mind-boggling growth numbers in the East Devon Local Plan which could easily see overall growth of more than 35% – YES THAT IS NOT A TYPO, I DO MEAN GROWTH OF HOMES OF MORE THAN A THIRD – over the period of the current Local Plan.

(Imagine all the buildings in East Devon – in Exmouth, Budleigh, Sidmouth, Seaton, Axminster, Honiton, etc. etc. – all lumped together – that’s a lot of land built on. Now take a third of that huge area, and imagine all the green fields in East Devon that will need to be built upon to make that happen, a lot of which will be in our AONBs. That is the EDDC Conservative vision for East Devon.)

Anyway, back to the finances. So EDDC’s future financial plans were predicated on large income from the New Homes Bonus. But George Osborne introduced an austerity regime which decided to abolish not only the normal grant but also the New Homes Bonus, so now the EDDC’s finances have a huge hole in them (made worse of course by the vanity projects they are undertaking like the no-longer-cost-neutral move from the Knowle).

And that is why we have seen a 4% increase in Council tax this year, and likely to see further increases in council tax way above inflation in the next few years.

Fortunately (????!!!!!), the government has thrown EDDC a lifeline by deciding to allow councils to keep all the local business rates as revenue – so we are now seeing EDDC allowing dubious business developments approved (like the recent Greendale application – submitted by a generous donor to the local Conservatives) and we should expect this to ramp up as the cash flow from the New Homes Bonus runs down.

Now back to the mental picture of 1/3 growth in homes – take the amount of land you have pictured for new homes, and add to it a significant growth in industrial buildings (like Sidford and Greendale). Terrifying isn’t it.

Of course, if you take have been watching EDDC’s actions, you will know that they have already rationalised this by joining (without any consultation with the public or indeed councillors) with Exeter City Council and Teignbridge District Council to form so called Greater Exeter. Think of Greater London and Greater Manchester and you will get the picture – huge sprawling joined up conurbations, with extensive suburbs to feed the businesses in the city centre. We are already seeing assaults on the green wedges that separate our towns and villages – so this is not as far from reality as you might think.

So there you have it. A double whammy – huge increases in Council Tax whilst rampant developments start to cover our beautiful countryside and Exeter grows exponentially in order to meet the huge Local Plan targets for new homes.

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15 Oct 2016

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Accountability, Audit (EDDC), EDDC, Freedom of Information Act, KPMG, Section 106, Transparency

External auditor holding up EDDC final accounts

“Whilst our audit work on the financial statements and VFM conclusion is almost complete, as set out above, we have received a formal objection from a local elector.

We are in the process of considering this objection, which relates to the Council’s approach to recording and obtaining receipt of monies due to it from developers through agreements under s106 of the Town & Country Planning Act 1990.

If we are able to conclude this work before the end of the month then, subject to the outcome of this, we anticipate issuing our audit report by the 30th September for the Council to publish audited financial statements.

If, however, the work extends beyond this timescale then we will have to withhold our audit certificate within the audit report until the work on the objection has been completed.”

Click to access 220916-agenda-item-8-combined-reports.pdf

(pages 121 and repeated on page 131)

Almost certainly related to this:

https://eastdevonwatch.org/2016/09/13/eddc-and-its-section-106-black-hole/