The arms length company set up by Scottish Borders Council to take over adult social care services, and which was supposed to make profits totalling £2.2 million in its first five years ended up losing more than £7.5 million before the decision was taken in September to kill it off.
An investigation which has compared figures in the SB Cares confidential Business Plan of 2014 with the company's actual financial performance appears to show the forecasts which convinced councillors to sanction the venture were divorced from reality.
The 75-page plan, now released by SBC following a Freedom of Information (FOI) request, was drawn up by Care & Health Solutions, a firm of consultants who received more than £160,000 in fees for their trouble.
According to the Business Plan: "The Profit and Loss Account provides details as to how profitable the LLP (Limited Liability Partnership) is and how it is reducing the price charged to SBC over the 5 year period by increasing its own income streams: overall the model makes a gross contribution of £5.156 million after direct costs and provides a retained surplus of £2.257 million available to the Council for investment in other services or to contribute the savings."
SB Cares, said the consultants, was set to record annual surpluses as follows: Year one (2015/16) £265,515; year two £463,874; year three £466,906; year four £454,425; year five (2019/20) £606,243. Grand total £2,256,962.
However, the financial fortunes of the soon to be dissolved operation turned out very differently from those upbeat forecasts.
In 2015/16 there was a comprehensive (net) loss of £1.294 million. That was followed by losses of £2.676 million, £735,000 and £2.851 million in the ensuing three financial years. The combined deficits add up to £7.556 million.
SB Cares annual accounts for 2018/19 include the following observation by
external auditors KPMG:
“We draw attention to the profit and
loss account of the financial statements which indicates that the LLP incurred a
net loss of £2,851,000 for the year (2018: net loss of £735,000) and had net
current liabilities of £7,556,000 (2018 net current liabilities of £4,705,000),
and the LLP’s ability to continue as a going concern is dependent upon continued
funding from Scottish Borders Council and Borders’ Integration Joint Board,
which is in turn dependent upon the outcome of a strategic review being
undertaken within Scottish Borders Council.
"These events and conditions, along
with the other matters explained in the accounting policies, constitute a
material uncertainty that may cast significant doubt on the LLP’s ability to
continue as a going concern.”
Councillors have not called for an investigation into this worrying set of statistics, deciding instead to quietly wind up and dissolve SB Cares together with its sister company SB Supports and return the vital services to full council control.
In recommending the radical switch to a form of privatisation, the authors of the Business Case told SBC in 2014: "This is an important shift in how SBC provides social care
services and as with any Business Case the high level significant risks are
identified and what mitigations are required to minimise them.
"Not only are
significant risks identified but what would happen if the business was to fail
or if the Council wanted to exit from the arrangement. The fact that this is a
Council owned company mitigates risks as the services could be brought back into
Council if required in future.
"It is our view that the level of scrutiny of the
performance of a Council owned independent organisation is much greater than
that of any other independent provider and as partner the Council would have
plenty of warning if the LLP was not achieving its planned performance or is
likely to become unviable.
"There would therefore be an early opportunity to
implement an improvement plan to bring the performance back in to line or if it
is felt that this is unlikely, to look at the other alternatives discussed
within the exit plan. These could involve bringing the services back into the
Council, or a controlled transfer to the private market."
This high risk venture may end up costing taxpayers many millions of pounds with no benefit for adult social care's 12,000 clients. And what was the cost of staff time required to implement the flawed Business Case?
Care & Health Solutions wrote at the time: "Implementation involves a complex programme of work that
would set-up and create the new business, undertake the necessary work to
separate out and transfer a number of services, functions and ultimately staff
to the new organisation which would engage a significant number of other
Council departments in achieving it. In our experience this process takes
between seven to nine months."
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