• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Lack of transparency ‘contributed to £11.7m school overspend’

0
  • by Chris Smith
  • in 151 News · Resources
  • — 9 Oct, 2019

Optimism bias and a culture of limited transparency led to an £11.7m overspend on a new academy school in Northamptonshire, according to an internal investigation.

A report presented to Northamptonshire County Council (NCC) last week found poor budget management and a lack of transparency led to the project to build Northampton International Academy to go over its £34.7m budget. The final cost was £46.4m.

The school finally opened in September 2018 – two years later than planned – after a series of oversight failures led to costs spiralling.

Delays, including changes to a mezzanine floor, added £750,000 to the budget and generated £480,000 in additional fees to the school which was built on the site of a former Royal Mail sorting office.

The audit was launched by the council’s then-new chief executive after a resident complained in November 2018 having failed to get answers on the project despite submitting Freedom of Information requests.  

The requests had been turned down, citing commercial sensitivity.

Auditors concluded that the causes of the overspend could be traced to initial time pressures that led to an inadequate budget being set.

This was then compounded by ‘optimism bias’ within the council that overspending would be covered by the Education Funding Agency (EFA), and a lack of transparency in reporting to cabinet members.

The project began in 2014 to meet rising demand for school places and the budget was finally fixed in April 2018 – by which point the overspend had reached £11.7m.

The council concluded the extra costs were due to under-budgeting not mismanagement and there was no evidence of fraud.

The report to councillors said: “The project was always likely to overspend its original budget. 

“A project approved with an incorrect budget and/or insufficient provision for ‘unknowns’ cannot support effective financial management and in this case required funding from other NCC sources that could have been spent on other services. 

“Evidence does however support a conclusion that the project was always likely to cost its eventual cost ie. £45+m.”

The audit concluded the extra costs arose because:

  • Issues with the procurement route choice (required by EFA) which meant a build-only contract tender, with minimal risks to the contractor and all additional costs the liability of the council;
  • Shortcomings in the design and specification of works tendered which required extensive value engineering of bids received, with savings identified not being achieved and resulting in delays, with associated costs;
  • Failure to retain sufficient contingency provision, meaning extra funding would be needed for any unforeseen costs outside of the build contract price;
  • Unclear apportionment of risks between the council and the funding body, with the council anticipating extra funds when none was forthcoming.

A key factor in the problems not being discovered earlier was that reports to cabinet members did not highlight issues of concern properly, according to the investigation

The audit report said: “With the benefit of hindsight reports focused on reassuring members rather than an objective evaluation of the risks and costs arising.

“Detailed information was included, but not in narrative that would have drawn members attention to the need for their greater scrutiny.”

However, officers were not criticised for their handling of the project once the budget problems were discovered.

It said: “There is evidence to conclude, given some of the issues uncertain at the start of the project, that project management was effective in managing those issues to completion.”

The final cost overspends are currently funded from £9m Basic Needs Grant and £2.7m s106, which will put a pressure on funding new schools.

A bid for extra cash to fund the overspend was submitted to the Department for Education in July 2018 which has been unsuccessful. A final appeal against the DfE decision is being planned by NCC.

Auditors called for improvements including the creation of project milestones at the start of projects where affordability can be and reported on regularly.

The council will also assess the way its reports to cabinet members are written to ensure the right level of details being included.

A council spokesman said the overspend was approved by cabinet in April 2018 and there were no changes after that point.

The report said the way in which the council was run at the time was a key factor: “Given the high-profile nature and value of the project overspend, early / any involvement with the monitoring officer / senior information risk owner should have been undertaken and formal approval sought from the leadership team, to confirm not to release the information being requested. 

“Neither consultation nor approval was sought by the relevant officers. It is difficult to avoid the conclusion that this refusal was indicative of a culture of limited transparency across the council at the time.”

The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here. 

The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.

Share

You may also like...

  • Finance appointments, Sandwell insources finance, LGPS equity returns, Edinburgh finance officer jailed Finance appointments, Sandwell insources finance, LGPS equity returns, Edinburgh finance officer jailed 7 Jan, 2014
  • Inter-authority lending rockets by £2bn Inter-authority lending rockets by £2bn 11 May, 2017
  • New regs ‘push’ ESG on to pension trustees’ agenda New regs ‘push’ ESG on to pension trustees’ agenda 21 Jun, 2018
  • Redmond Review to probe audit approach on commercialisation Redmond Review to probe audit approach on commercialisation 17 Sep, 2019

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 1 hour ago

    ‘Chasing yield’ not the best strategy as negative rates loom: Recent speculation that the UK may be heading toward negative interest rates prompts questions for treasury officers managing local authority funds at LATIF. Speculation is rife that the UK… dlvr.it/Rr3Mrj pic.twitter.com/wtxYAB20PO

    Room151 2 days ago

    Will new public procurement rules offer the best commercial results?: The government has issued a green paper on reforming procurement rules. Helen Randall and Rebecca Rees examine the proposals and argue they may not go far enough. The Cabinet… dlvr.it/Rqtw6T pic.twitter.com/9GiVTkL08U

    Room151 1 week ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 1 week ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 1 week ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 1 week ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 1 week ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 1 week ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 1 week ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 1 week ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 1 week ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 1 week ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 1 week ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 1 month ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 1 month ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 1 month ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story PWLB rate hike sends shockwaves through council finance sector
  • Next story Sponsored: Driving regional growth through the government hub programme

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK