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Row over confidential Liverpool BT report

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A Liverpool City Council scrutiny hearing was denied full information on the council’s plan to take over a joint venture co-owned with BT, an opposition councillor has claimed.

Richard Kemp (Lib Dem), former leader of his party’s LGA group, made the complaint after a meeting of the mayoral select committee this week reviewed the transfer to the council of the Liverpool Direct joint venture.

He told LGC that his proposal to adjourn scrutiny until full information from accountant KPMG was available was rejected by six votes to five.

A summarised KPMG report on the transaction was made public, but according to Cllr Kemp, elected mayor Joe Anderson (Lab) had said the full KMPG report on the transaction was confidential and not even the cabinet had seen it.

Cllr Kemp said: “We have agreed to take over 600 staff [from Liverpool Direct] on the basis of a four-page report from officers and without seeing the full KPMG report.”

A Liverpool spokesman confirmed the vote at the meeting, but said KPMG had required the full report to be kept confidential.

Liverpool agreed with BT in March to end their joint venture, which has since 2001 provided human resources, payroll, information technology, revenue and benefits and customer contact services. The contract was initially for 17 years.

A report on the ownership transfer process by Liverpool City Council chief executive Ged Fitzgerald, approved last week by Liverpool’s cabinet, said the council would bring the work in-house and wind down Liverpool Direct’s operations by March, after which its chief executive David McElhinney’s “post will be disestablished” and other management positions “rationalised”.

It stated that integration of Liverpool Direct services into the council would deliver £30m in budget savings by 2017.

Mr Fitzgerald’s report said the council’s acquisition of Liverpool Direct “has been subject to a robust due diligence and validation process supported by external specialist advisers KPMG who endorse that the council is meeting its best value obligations in this regard”.

The summarised KPMG report said of the validation process: “This engagement [by Liverpool] is not an assurance engagement conducted in accordance with any generally accepted assurance standards and consequently no assurance opinion is expressed”.

It added: “We draw your attention to the significant limitations in the information available to us.”

The report said KPMG had had to assist Liverpool in commercial negotiations with BT “due to difficulties with accounting data in Liverpool Direct Limited”.

KPMG went on to note that its work on the Liverpool Direct balance sheet as at 31 March 2014, “has identified a lack of consistent accounting and record keeping”.

It said: “We carried out an assessment and found various anomalies and discrepancies in the information presented.”

These were resolved by the commercial negotiations between the council and BT, it noted. KPMG did not say that any impropriety had occurred.

Cllr Kemp said: “It is quite clear that the report from KPMG is not a due diligence report.”

Liverpool’s decision to end its partnership with BT last March came soon after Lancashire CC ended a similar arrangement with the company called One Connect. Mr Anderson said at the time that the two decisions were unrelated.

Lancashire chief executive Phil Halsall left in autumn 2013 by mutual agreement after an incoming Labour administration raised concerns about a One Connect contract.

Mr Halsall was executive director of resources at Liverpool until joining Lancashire in 2010. Mr McElhinney until August 2013 also headed One Connect part-time, as an employee of both Liverpool and Lancashire.

  • In an unrelated dispute, Cllr Kemp said he was waiting to hear whether Mr Anderson intended to re-arrange a hearing at which Mr Fitzgerald was to have been questioned by senior councillors on his role at Rotherham MBC, where he was chief executive in 2001-03.

This was part of the period in which concerns have been expressed about the council’s response to child sexual exploitation in the town. Mr Anderson said in September that he would question Mr Fitzgerald about the matter.

But Cllr Kemp and Liberal party group leader Steve Radford said in a joint letter that Mr Anderson had not named an independent chair for the meeting or made clear it would be public.

They said that since two parliamentary enquiries and a Department for Communities & Local Government investigation were being undertaken, “we believe that it would be best for group leaders to convene when the results of these enquiries and investigations have concluded”.

Mr Anderson responded in a statement: “It is regrettable that councillors Radford and Kemp have pulled out of the meeting despite the cross-party agreement we reached when we initially met.

“It is clear to me that the two minority party group councillors have already formed opinions about the matter and I fear they wanted to engage in a public show-trial for purely political purposes.”

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Readers' comments (1)

  • This is a joint venture which has charged the city more than £1 billion in fees, but which has never provided satisfactory accounts. David McElhinney was appointed as Chief Exec of the joint venture while he was also Chief Exec of the Council, for the precise period when the contract renewal negotiations were underway.

    At least £100 million of public money is unaccounted for. This isn't some trivial spat over a contract, it all looks like something vastly more significant.

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