The company balance sheet at social enterprise law firm LGSS Law is being restructured with an injection of £1.425m of equity capital, shared equally between its three shareholding authorities, Northamptonshire County Council, Cambridgeshire County Council and Central Bedfordshire Council.
A report prepared by Central Bedfordshire’s Head of Governance, Jonathan Partridge, for the council’s Corporate Resources Overview and Scrutiny Committee (CROSC) at Central Bedfordshire said the move was “part of the planning for a successful future”.
The Treasury Management Strategy for 2020/21 for Northamptonshire revealed that as the council had already provided finance to LGSS Law with a historic loan of £0.950m for cash flow purposes, its injection of £0.475m equity capital would be offset by a reduction in this loan to the same value, meaning no additional finance was committed.
The Central Bedfordshire CROSC report said that cash flow loans were also being restructured so that each shareholder provides finance in line with its share of turnover.
The report concluded that:
- The arrangements to deliver legal services through LGSS Law – Central Bedfordshire joined the ABS in April 2016 – had been “successful to date”;
- Efficiency savings had been demonstrated and there was high client satisfaction;
- There had been some concerns regarding the financial performance of the company itself;
- New management was in place and all issues were being resolved and improvements were being made across the board;
- The company was trading profitably throughout 2019/20 and fully expected to make a profit for the full year.
It also revealed, amongst other things, that over the first three years a saving of £926,000 had been achieved (the target was £937,000).
The cost of legal work going outside the arrangement had reduced from £600,000 prior to LGSS Law being the provider, to £460,000 in the 2018/19 financial year, principally for counsel in an increased volume of care proceedings.
“Thus it can be seen that the underlying savings have in fact been significantly greater than originally anticipated,” the report said.
End of case surveys were running at 95% ‘satisfied’ or better, although a number of issues were identified that primarily related to the legal advice to the council’s planning team. These had been addressed by collaborative working, the report said.
“It should be noted that many of these were issues with the old in-house service, but that a key ‘value add’ for the shared service was to improve on this. A Service Improvement Plan has been developed with LGSS Law to drive up performance in these areas.”
The report noted the £1.3m loss that LGSS Law reported for 2018/19. It said there were three principal reasons for this:
- very considerable activity and resources were invested in trying to bring forward a merger with three London councils. “For reasons on both sides, this was not successful and the costs incurred have been written off.”
- staff resourcing issues had led to the employment of more interim staff at higher cost than budgeted. “The firm has seen a reduction in locums over the last 12 months, to 9 locums, down from 30.”
- problems with accuracy of billing to clients had led to additional resourcing being required to sort out queries.
The report revealed that whilst not an issue of profitability, there were concerns over the level of debt owed by some of the shareholder councils. “These have all been resolved now and debt is little more than the current monthly billing runs," it said.
Debbie Carter-Hughes, Executive Director of LGSS Law, said: “LGSS Law Ltd has undertaken major changes in the last 12 months and it is reporting a trading profit this financial year. It was also recognised by our three shareholders that the firm could grow and develop and all were prepared to invest further in the firm providing it with a more stable footing for the future”.