South Ribble Council chief quits and authority admits "significant breakdown in governance"

The chief executive of South Ribble Borough Council has resigned, just over a year after being put on ‘special leave’.

Tuesday, 16th June 2020, 9:33 pm
Updated Friday, 19th June 2020, 1:36 am

Details of Heather McManus’ departure emerged as the authority began to digest a damning internal audit report, published in recent days, detailing how rules and procedures at the district council have been “consistently breached” – often by its most senior staff.

The reasons for Ms. McManus’s resignation were initially unclear, but the Post has learned that a case against the authority has been lodged under so-called ‘whistleblowing’ legislation. The matter is awaiting a listing date at the Manchester Employment Tribunal, after a preliminary hearing was postponed late last month.

It is also understood that Ms. McManus has brought a constructive dismissal case against the council.

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An internal audit report has rocked South Ribble Borough Council

South Ribble Borough Council has confirmed that it is aware of the proceedings and will be defending the claims.

The audit report reveals a culture “arising from the top of the organisation” in which officials “disregarded the systems of checks and balances put in place to protect the [council] and its officers”.

The Post understands that Ms. McManus quit her role within the last month after three years in the job, but will continue to be employed for the duration of her notice period until late August – while remaining on leave.

She has not been in charge at the council since May 2019 when she was moved from her day-to-day duties within weeks of a change of political control at South Ribble, after a minority Labour administration took over from the Conservative group which had governed the borough for 12 years. It is understood that Ms. McManus has been on full pay – on a wage scale of between £103,000 and £122,000, according to council documents – ever since.

Heather McManus took the top job at South Ribble Borough Council in July 2017

At the same time, the authority’s two deputy chief executives – Tim Povall, who was responsible for resources, and regeneration and growth boss Gregg Stott – were also put on special leave. They left just over a month later to “seek opportunities elsewhere”, with the authority thanking them for their work during little more than six months in their jobs.

A series of searing audit assessments – which were presented to a meeting of the authority’s governance committee on Tuesday evening – were sparked after concerns were raised over last year’s annual governance statement. That document sets out the policies which enable the council to ensure decisions are being taken transparently and in the best interests of residents and the public purse.

While the 2019 version claimed that to be the case in South Ribble, the statement was never formally signed off after what the authority now describes as “longstanding governance failings” came to light – more of which have been uncovered in the wide-ranging audit investigation which has taken place since.

Council leader Paul Foster has previously said that the authority has been dealing with “legacy issues”. These have now been laid bare, with audit reports offering only “limited assurance” that things are being done properly in five areas of the authority’s operations – and no assurance whatsoever that the correct procedures are being followed in a further two.

The documents provide a blow-by-blow account of a breakdown in some of the key controls which were actually in place at the council – but often not adhered to.

Amongst the areas singled out for criticism is governance of the project to create a new leisure campus in Leyland.

As costs increased by, at one point, almost £10m on the proposed £15m scheme, no update on the escalating price tag was brought to cabinet for formal consideration.

The awarding of the contract to form the design team on the project went to a bidder whose services were twice the price of the only other company which entered the race – and yet auditors were unable to find any written evidence of a “detailed evaluation” of the two proposals.

So far, £200,000 has been written off on the leisure campus project and it is one of the two areas of the council’s work to receive the lowest “no assurance” rating.

The other is for the allocation of a major gas and electricity contract at the authority, which was found to have breached both the council’s own contract procedure rules – and regulations set by the European Union.

The manager in charge of the arrangements was new in post and left without training or support to undertake the role. As a result, the council was left “open to severe reputational, financial and legislative harm”, auditors found.

A separate electrical services contract was allowed to run on for almost two years after its official end date, with no fresh procurement exercise undertaken, even as costs increased unchecked.

Elsewhere, auditors discovered that the council was exposed to the “potential risk of fraud and error” due to weaknesses in systems allowing staff to make invoice payments significantly above the value of orders placed – and that a number of officers are permitted to override budget limits for goods and services, without any monitoring of the facility to do so.

Concerns were also raised about recruitment to top jobs at the authority. The audit revealed that two senior roles had been created without “proper approval” – either of the posts themselves or the salaries offered. A shortlist of one was drawn up for each role and no evidence was retained to explain the resulting appointments.

Auditors found that in spite of there being “robust” rules in place at the authority, there had, in some areas, been evidence of “senior statutory officers disregarding the governance arrangements and not carrying out their duties in a manner you would expect of officers at that level”.

However, the governance failures did not just not affect the back office – some were felt on frontline services. It was discovered that the council does not have a tree inspection and maintenance strategy in place, with system issues causing a backlog of work, some of which dates back to 2016.

A backlog was also found to exist in food safety intervention inspections – although there is an adequate plan in place to manage it – while there was also no planned maintenance or inspection policy for the borough’s off-street car parks.

In its annual governance statement for 2020, the authority acknowledged that there had been a “significant breakdown in governance arrangements”, but stressed that not all of the individual controls in place had failed.

It added that the fact that issues have continued to be identified over the past 12 months is evidence of “a more challenging approach…which supports a culture of improvement”. This year’s governance statement outlines an action plan for putting the council back on the right path – including training in contract procedure rules for all staff and robust financial management procedures.

Cllr Foster said that the audit reports had made “hard reading”, adding: “This is historic stuff that we have inherited and it’s appalling.

“We have said that we will clean the place up and we will do – I will not stop until I have dealt with this appropriately.

“We are already in a far better place than we were 12 months ago – there has been significant improvement across the board, but we clearly cannot ignore what has taken place in the past.

“I hope that after we discuss this report we can see that there is a bright future for South Ribble. The important thing is that we rectify things for residents and continue to provide them with the first-class service that they deserve,” said Cllr Foster, stressing that any failings at senior manager level should not detract from the “great job” done by other council staff.

Heather McManus told the Post that she has not been in the office for over 14 months and, with regards to the audit report, it would not be appropriate to make comments about senior officers.

Cllr Margaret Smith, the leader of the previous Conservative administration between November 2018 and May 2019 – and current opposition group leader – said that the council was now “in a different place”.

“We can all learn from what went in the past and that’s part of the [purpose of] this report, so that you can document things, look at it, learn from it and move on.

“A lot of the things are historical and times have moved on and we’re in a different ball game,” Cllr Smith added.

Gary Hall, chief executive of neighbouring Chorley Council, has also been fulfilling the top job at South Ribble Council for just over a year and remains in the role.

COST CONTROL

When South Ribble Borough Council first put forward plans for a new leisure campus – close to its own headquarters in Leyland – back in January 2018, its cabinet approved a £15m budget for the purpose.

By the end of the year, a draft budget had been prepared for the project, including items for which no previous approval had been secured – bringing the total potential bill to £24.7m.

According to a draft internal audit report published last week, the breakdown of the costs comprised £18.7m on the core scheme and its management, plus just over £6m on two new items – the development of The Warren building and a link building between the proposed campus and the Civic Centre.

Auditors concluded that in the absence of any detailed records of project meetings about the campus, there was “no clear evidence available to explain how [or] why the other costs [and] areas of further work arose”.

No report outlining the ballooning budget was brought before cabinet at its January 2019 meeting. The draft audit report claims that the then chief executive advised that it was not necessary to do so.

In October 2018, cabinet agreed that any “key decision of £100,000 or more” in expenditure should be brought back to members for further approval – reiterating a rule in the council’s constitution.

The audit report states that between that date and May 2019, £683,000 in payments were made to the company which secured the contract to form the design team on the project – none of which were reported to cabinet.

When the council set its capital programme for 2019/20, the leisure campus was still listed at a cost of £14.82m – even though by that point, the latest estimates circulating within the council put it at a minimum of £23.8m.

The draft audit report states: “Despite senior officers of the council, including the Section 151 officer and senior finance staff, being aware of the increased costs, no information in this regard was included in the capital strategy.”

It adds that the failure to bring the matter before cabinet members “demonstrates that the checks and balances put in place to support officers and enable members to make informed decisions have been totally disregarded by the people at a senior level”.

Heather McManus has told the Post that she is currently unable to comment on the issues raised in the report.

It is believed that £200,000 has so far been written off on the project, which remains part of the council’s long-term capital strategy – and for which £19m is now earmarked for the creation of the facility in 2023/24.

ELECTRIC SHOCK

For local authorities, the switching of utilities suppliers is not the quick process with which householders might be familiar.

With South Ribble Borough Council’s existing gas and electricity arrangements due to end in September 2019, the authority had to consider some 12 months earlier whether it wanted to serve notice on its current contract.

Internal auditors found evidence that officers were made aware of the need to act – but no trace of whether any action was taken.

It was well into 2019 when a recently-appointed council manager – who, according to an audit report, had received no training and “little, if any” support – was approached by a representative of an energy consultancy.

Having being told by the firm that significant savings could be secured for the authority, the manager agreed to change energy broker and, subsequently, supplier.

But the consultancy in question failed to advertise the contract for the supply of South Ribble’s utilities on the Official Journal of the European Union – in breach of EU rules for public sector contracts above a threshold value of £189,000.

Meanwhile, an advert which was placed on the government’s Contract Finder website stated that the contract was worth just £10,000 – when it was actually in excess of £500,000.

Auditors concluded that the advertised price “most likely deterred many larger suppliers [from] bidding for the work”, as did a refusal to accept tenders via email.

Ultimately, only one bid was subsequently received and auditors said they could not be assured that “best value” had been obtained for the authority.

CULTURE CHANGE?

South Ribble Borough Council embarked on the creation of a new management structure back in 2018, in response to the findings of a review by other local authority leaders into how the organisation operated.

The move followed a so-called “peer challenge” twelve months earlier which had been prompted by the emergence of significant failings in the way the authority dealt with taxi licensing in the borough during 2015/16.

However, it is now thought that attempts to make improvements at the council may well have contributed to the governance breakdown which has now been identified.

The implementation of the revamped senior officer structure took just under 12 months, ending in February 2019. But the authority’s new annual governance statement notes the lengthy process “contributed to uncertainty within the organisation [and] unclear decision-making lines due to vacant posts and increased pressure placed on those in post”.

The role of finance boss – known as the section 151 officer – was filled by four different people during 2018/19 and three in 2019/20.

Even when complete, the resultant restructure appeared not to be the right fit for South Ribble. A “blended working” approach was adopted which dispersed decision-making more widely, but caused confusion over responsibility and accountability.

The governance statement says that “culture changes were not embedded and…there was confusion over who ‘owned’ issues, with there being the opportunity to rely on a conflict between the old and new processes as a reason for no-one taking ownership”.

“The changes to the statutory officer posts both in terms of holder and position within the leadership structure undermined their ability to challenge governance failings effectively or put them in a position where challenges raised were dismissed or not taken seriously,” it adds.

Meanwhile, even the process of demonstrating the desired improvements served only to show how far some elements of the council’s culture had yet to evolve.

The authority was slapped with a so-called “statutory recommendation” in 2018 by external auditors who were unhappy with progress in implementing the findings of the peer challenge.

A cross-party improvement reference group (IRG) was established to deal with the issue and shortly before it was disbanded in February 2019, a cabinet meeting heard that the Local Government Association (LGA) – the organisation behind the peer challenge – was satisfied that “significant improvements” had been made.

It sparked a political row at the time between the then ruling Conservative and Labour opposition groups, with a heated debate over the significance of the word “significant”.

Internal auditors have now found that although seven out of eight LGA recommendations had been marked as complete, only two had been fully completed, with five others partially.

Last year, external auditors also failed to sign off the authority’s 2018/19 accounts because of some of the governance issues which are now being aired in public.