Local authorities recover ‘tiny proportion’ of DCLG-estimated £147m on double-paying
By Tim Wood | 23 February 2016
“These are implausibly small sums for organisations that process hundreds of thousands of supplier invoices each year” – Andrew Rowson, former auditor
Local councils in England admitted to making £11 million in duplicate payments to suppliers in each of the last two financial years, Exaro can reveal.
But Andrew Rowson, a former PwC auditor and an expert in financial business systems, said that this was a “tiny proportion” of double payments by councils, pointing to an estimate of £147 million a year across England by the Department of Communities and Local Government (DCLG).
“This is a tiny proportion of the money that is out there waiting to be retrieved,” said Rowson, who has worked as a consultant for several local authorities.
“Most councils are not tackling the issue of duplicate payments. Many claim that their IT systems and procedures effectively eliminate the risk, but there is little evidence to support that view. Duplicate payments are unavoidable.”
Mistakenly paying a supplier’s invoice twice can account for between 0.05 per cent and 0.1 per cent of a typical organisation’s annual spend, according to the Institute of Internal Auditors.
The DCLG highlighted the problem of duplicate payments by local authorities in a report in 2012 entitled, “50 ways to save”. It produced the report as the department and its agencies embarked on real-terms cuts of 44 per cent.
The report said that Experian, which helps businesses manage credit risk, “estimated that councils waste up to £147 million a year on duplicate payments, by paying bills more than once.” The DCLG said that Leeds city council had identified and recovered £500,000 in overpayments. Internal auditing of Islington borough council’s top 30 suppliers revealed overpayments of £55,000 “on that small sample size alone”.
Exaro and Rowson made requests under the Freedom of Information Act (FOIA) to England’s 112 largest local authorities for details of how much they had identified and recovered in duplicate payments. These local authorities spend just over 80 per cent of expenditure by England’s local councils.
Their responses show a total of £21.85 million for the 2013-14 and 2014-15 financial years, an annual average of just over £10.9 million.
The equivalent across all local councils in England for each of the last two financial years is £13.5 million, but it suggests that such authorities have a long way to go to find the DCLG’s estimated on the scale of overpayments.
Richard Bacon, a Conservative MP on the House of Commons public accounts committee, said: “Councils need to take this more seriously. This is not a small amount of money. It would pay for the budget of a primary school in my constituency for the next 280 years.
“If councils start thinking what they would do with this money if they had it, they might do rather a better job on behalf of the taxpayers they serve.”
A DCLG spokesman said: “Duplicate payments are a serious issue that all local authorities should tackle.”
Three-quarters of local authorities said in response to the FOIA requests that they had recovered less than £100,000 in overpayments in the last two years. Rowson said: “These are implausibly small sums for organisations that process hundreds of thousands of supplier invoices each year, totalling hundreds of millions of pounds.”
One local authority said that it had recovered £65,000 in duplicate payments over the last two years.
But Rowson said that he analysed this council in 2012 and found more than £1.1 million of duplicate payments over four years of accounts.
And 40 local authorities even said that they had identified no duplicate payments in the past two years.
Birmingham city council, the largest local authority in the UK, has an annual budget of more than £3 billion, and found by far the most in duplicate payments – £8.6 million over two years.
Rowson is due to speak about the issue at a meeting in Parliament tomorrow, organised by Whistleblowers UK, the campaign group, where he works as operations manager. David Davis, Conservative MP, is hosting the event, which will highlight the importance of whistleblowing.
Rowson added: “Overpayment-recovery audits are not disruptive and carry none of the commercial risks of some other savings schemes, such as out-sourcing and shared services. Many cash-strapped councils are ignoring the opportunity of recovering useful six- and seven-figure sums.”