A district council has dropped plans for a joint finance function with a neighbour amid concerns over whether shared services are achieving value for money.
In 2015, South Cambridgeshire District Council (SCDC) agreed to create a shared finance service with Cambridge City Council to reduce costs, improve services and enable better staff retention.
However, a major review of South Cambridgeshire’s organisational structure, carried out by consultants, this week revealed that the council has now decided to reverse that decision.
The report said that “despite shared resource being accessed through informal arrangements, this has not mitigated the wider issues in finance”.
It continued: “On this basis, a decision has been taken not to proceed with the shared finance service, as SCDC’s priority is to stabilise the service.”
Issues identified with the finance department include the failure to close accounts on time four years running, a lack of adherence to rules on authorising spending and over-optimistic investment return projections.
However, bringing finance services completely back in house, the report concluded, presents a short term risk because “some of the experienced and skilled finance resource it relies upon to deliver the service is employed by the city council and is working without a formal sharing agreement”.
The report, by consulting firm Castlerigg – set to be presented to councillors next week – raises major questions about the benefits of shared services.
Currently, the authority provides 40% of services – 23 out of 58 services (40%) through shared services with Cambridge and Huntingdon District Council.
These make up 55% of the council’s annual budget, the report found.
“With limited objective management information on the performance of many of the current shared services, and an absence of formal specification on the agreed scope and standards expected, it is challenging to assess the value and alignment to council requirements of existing shared service arrangements,” the report said.
South Cambridgeshire is effectively subsidising partner councils in shared services where it is the lead authority, the report said.
“The interim chief financial officer has highlighted that the full cost to serve for shared services is unclear and that no applicable central support costs are recharged to partners,” it concluded.
Service level agreements or memoranda of understanding for shared services are either not in place, not yet agreed or not fit for purpose, the consultants’ study said.
“This can make it difficult to hold services to account against defined quality and performance metrics or assess whether the services are actually meeting the council’s requirements given these are not defined,” it said.
Some council departments were considering procuring legal services from external sources, due to dissatisfaction with the shared function, the report added.
The report added: “Recent outages in the ICT shared services has resulted in serious ICT functionality and performance issues which have had a major impact on business continuity for SCDC.
“However, with no contract of service level agreement in place there is limited ability to hold suppliers to account.”
Business cases for the development of a number of the shared services are “not robust or not sufficiently clear”, according to the report.
It said: “Broad statements and assumptions such as ‘economies of scale’ were used to justify the establishment of shared services and describe benefits without explaining how the benefits could be realised.”
The report’s conclusions are in line with the stated scepticism towards shared services from the Liberal Democrat regime that took control of the council last year.
In her first speech after assuming office in May last year, council leader Bridget Smith said that while shared services bring “many benefits, it does mean that the running of the services becomes more distant and unaccountable.
“It is crucial that we find new and effective ways of managing these services.”
The next phase of the authority’s reorganisation project will see the development of a programme plan and the identification of resources required to carry it out, according a report set to go before councillors next week.
