Monitoring officer at Birmingham "under investigation" despite no evidence she gave incorrect legal advice, external auditors reveal
Birmingham City Council's monitoring officer is subject to an investigation in relation to the provision of legal advice amid "strained" member-officer relations at the financially-beleaguered council, the authority's external auditors have revealed.
The request for an investigation into Janie Berry, City Solicitor and Monitoring Officer, came from "some senior politicians” at the council, according to Grant Thornton in a report published late last week (29 September) making statutory recommendations under Schedule 7 of the Local Audit and Accountability Act 2014.
The auditors’ report noted, however, that: “As far as we are aware, the Council had not […] commissioned or received legal advice that indicated that the Monitoring Officer had provided incorrect legal advice (noting in particular that the LGA was not commissioned to give legal advice to the Council but was rather offering a mediation and support role)."
Grant Thornton said that "certain senior politicians have requested that statutory officers are subject to investigation for making notes of meetings, and for providing a record of some meetings to external audit.
"We note that we would expect officers to make notes of internal meetings and that the Council was legally obliged to provide information to us insofar as we had made a request under Section 22 of the Local Audit and Accountability Act 2014 and that section applied."
The Grant Thornton report also revealed that Berry had told auditors that she had been "frustrated" in her ability to carry out her roles on several occasions.
According to the report, Berry's advice regarding a council decision on its equal pay system was not followed and "additional external legal advice has been needed to move matters forward".
Berry issued a section 5 report under the Local Government and Housing Act 1989 on 21 September over the council's failure to make a decision relating to a job evaluation (JE) programme. Birmingham's section 151 officer, Fiona Greenway, simultaneously issued a second section 114 notice.
Her statutory report came three days after the council leader, Cllr John Cotton, informed the three statutory officers that he was reluctant to make a decision on the JE programme without the involvement of Commissioners.
In September Levelling Up Secretary Michael Gove announced that he was "minded to" intervene at Birmingham and local government troubleshooter Max Caller was named as the preferred candidate for Lead Commissioner.
Berry issued the s5 report based on legal advice that suggested the council's failure to come to a decision constituted an act of omission leading to a likelihood of illegality, unlawful expenditure and a loss or deficiency.
According to the external auditors, members had been hesitant to follow Berry's advice until the council received an additional opinion from King’s Counsel. All KC opinions supported Berry's initial advice, according to the report.
A decision on the JE process is yet to be made, but the Local Government Association has been facilitating mediation between the statutory officers and Birmingham's political leadership to explore a "potential compromise" on the matter.
Commenting on communication and relationships at the local authority, the external auditors concluded that "the process has not been collaborative".
The report read: "We would normally expect that the three statutory officers and the People and Corporate Services Director would be involved throughout the decision-making process. In response to audit queries, we have been informed that some of these officers have been excluded from certain meetings with members.
"We note that the relationship between senior officers and some key members has become strained during the process and has undermined the process to choose a JE option."
The report also alleged that a senior politician had said they had lost confidence in the three statutory officers.
The external auditors raised concerns about legal professional privilege after hearing of a "number of matters" that indicated legally privileged information might have been provided by individuals within the council to third parties in circumstances which called for the oversight or agreement of the monitoring officer, according to the report.
"We note that, if this is the case and absent justification, that this would be a significant failure in the Council's governance," Grant Thornton added.
The external auditors called on Birmingham to urgently investigate the issue, including whether due process was followed in receiving and considering legal advice as part of the process.
One of the statutory recommendations contained in the report (the full list is set out below) said: "The Council should commission an independent review of the process for receiving and considering legal advice, including consideration of whether the Monitoring Officer's advice was appropriately taken into account and followed, and whether access to legally privileged information was appropriately safeguarded.
"If the local inquiry outlined by the Secretary of State does proceed this should be part of the wider inquiry."
Outside of member-officer relations and legal professional privilege, the report raised concerns over the churn in the council's senior management in recent years.
"In our opinion, the high turnover of such officers has significantly diluted the 'corporate memory' within this key group," the report stated.
"In addition, the relatively short tenure that these and other senior officers have had, has meant that they have not fully been able to add the value to the business of the Council that would otherwise have been the case."
A spokesperson for Birmingham City Council said: “The council acknowledges the statutory recommendations produced by the External Auditors. They will be considered carefully and debated at an Extraordinary Meeting of City Council on 12 October.”
Janie Berry has been approached for comment.
Adam Carey
Grant Thornton’s statutory recommendations to Birmingham City Council in full
Equal pay
Statutory recommendation 1: The commencement of the job evaluation process should not be further delayed (as this would further undermine the Council’s financial sustainability). As the Addendum was not signed by 11 September 2023, the Council should apply the safeguard within the CBMC [Council’s Business Management Committee] report and should determine the job evaluation option it intends to follow at the earliest opportunity.
Statutory recommendation 2: It is important that the Council reviews its previous equal pay estimates and regularly updates its estimate of the potential future liability (at least on a quarterly basis). This updated position should be reported to members on a quarterly basis.
Statutory recommendation 3: the Council should separately report the financial impact of potentially enriched roles to members as a matter of urgency and should prioritise their assessment as part of the job evaluation process. This should include a consideration of the Council’s Best Value duty. Similarly, officers should provide monthly updates to members on the Council’s identification of roles where task and finish has been in operation and the financial impact of this practice and confirm at the earliest opportunity that these practices are no longer operated. The Council should undertake a review of all working practices within the Council and ensure that all employees comply with their terms and conditions, including working their full contractual hours.
Statutory recommendation 4: The Council should commission an independent review of the process for receiving and considering legal advice, including consideration of whether the Monitoring Officer’s advice was appropriately taken into account and followed, and whether access to legally privileged information was appropriately safeguarded. If the local inquiry outlined by the Secretary of State does proceed this should be part of the wider inquiry.
Oracle implementation
Statutory recommendation 5: The Council should set a target date for the completion of the ‘safe and compliant’ phase. We consider that this should be completed by 30 November 2023.
Statutory recommendation 6: The Council should report its outturn for 2022/23 and its current financial position by 30 November 2023. It should provide financial statements for 2022/23 for audit by 31 January 2024.
Statutory recommendation 7: The Council should consider the capacity of its senior staff to deal with the Oracle ‘safe and compliant’ and ‘re-implementation’ phases alongside the other competing pressures. Additional resources should be provided to ensure that this critical project is completed at the earliest opportunity. This may include additional internal or external IT capacity and capability. In the longer term, the Council will need to ensure that it rebuilds its own IT capacity and capability.
[The auditors report reveals that the council “has experienced significant problems during and resulting from the implementation of its new Enterprise Resource Planning (ERP) IT system, Oracle Cloud, leading to anticipated additional costs (total costs of £100 million compared to an initial budget of £38.7 million as approved by Cabinet in March 2021)”.]
Savings and other financial pressures
Statutory recommendation 8: The Council should provide an updated budget for 2023/24 that takes account of the 2022/23 outturn, its current financial position for 2023/24, its progress on delivering savings plans in 2023/24, and the other financial pressures impacting on the Council.
Financial sustainability
Statutory recommendation 9: The Council must now, as a matter of urgency fully support the Section 151 Officer in effectively responding to the s114 report and, specifically:
- give full support to the development of the mandatory spending controls and savings and recovery plan;
- identify and implement a suitable asset disposal plan; and
- continue to work with the Department for Levelling Up, Housing and Communities over the extent and timing of support that will then be required to secure the ongoing financial viability of the Council.
Statutory recommendation 10: Officers should put in place a formal and detailed cashflow model that focusses on when the payment of the Council’s liabilities will fall due against the timing of its other cash outgoings and inflows (including the estimated funds produced from asset sales). This cashflow model should predict at what point, without Government support, the Council will exhaust its usable reserves and will no longer have sufficient finances to be able to continue to operate or would be unable to meet its financial obligations when they become due.
Governance and management capacity
Statutory recommendation 11: Given the significant risks facing the Council it should ensure that it cooperates with external audit in a timely and appropriate manner, and in accordance with legal requirements.
Statutory accounts 2020/21, 2021/22, and 2022,23
Statutory recommendation 12: The EP liability model should be completed and the 2020/21 and 2021/22 accounts should be closed by 30 November 2023.
Source (click on the link to download the document): Birmingham City Council External Audit 2020-21 to 2023-24 Statutory recommendations under Schedule 7 of the Local Audit and Accountability Act 2014 – Grant Thornton.
