Derby City Council's Council House Photo: Eamon Curry
Auditors said failures in a job evaluation scheme at the authority had led to additional costs of £1.2m.
The evaluation programme involves the sizing of all jobs within an organisation to establish their relative importance and difficulty.
Grant Thornton said the HR consultancy Aquarius, appointed by the council, did not have the intellectual copyright to carry out the evaluations required, which are based on a evaluation format developed by the Hay Group.
A junior officer queried the decision in September 2012 but the issue was not escalated to senior management.
By June 2014 it was clear, following external legal advice, that continuing with Aquarius was untenable, although this should have been evident as early as September 2013, Grant Thornton said.
As a result of the project failings, the strategic director of resources was subject to disciplinary action and subsequently dismissed. The authority’s human resources director was also initially suspended but left the council on mutually agreed terms. Hay was then hired to complete the project, which involved repeating the work completed by Aquarius and which is ongoing.
Phil Jones, a director in Grant Thornton’s public sector assurance team in the Midlands, said: "It is widely recognised that Derby City Council has a track record of achievement. However, we have identified governance failings relating to the management of several major projects and member conduct.
“We found that the mismanagement of a major project to respond to equal pay legislation has cost the council an additional £1.2m, resulting in £5m being spent on the project to date.”
The report also highlighted a decision by members around staff pay arrangements as part of the evaluation had resulted in additional costs of £3m in the short term. However, meetings at which these matters were discussed were not minuted and not approved in writing by any committee.
Other areas of concern include doubts over the legality under European law of a £2m payment to a firm called Webhelp to enable it to occupy premises in the Pride Park area of the city in order to safeguard jobs. The support achieved this outcome, but was approved after the council’s cabinet was informed that external legal advice would be sought to confirm that the arrangement was lawful and compliant with European state aid rules. Auditors said it had been unable to locate any such advice.
Member and officer roles have been blurred and guidelines are being introduced to improve clarity about their respective roles after what the report called “fractious” politics on the authority for a number of years. Councillors have used the standards committee as a vehicle for political point scoring, the report stated.
Jones concluded: “We recognise that with a new elected leader in place from June 2014 [Ranjit Banwait] and a new management team from February 2015, Derby City Council understands that a more robust approach to governance is essential and is determined to sort out these issues.”
Derby City Council acknowledged the findings of report. The authority stated many of the matters reported occurred some time ago and numerous changes have already been put in place through a governance action plan.
“I am confident that many of the issues reported by our external auditors today are in the past; those issues that are more recent in nature are being reviewed and addressed – robust measures are already in place following an extensive overhaul of our governance framework,” Banwait added.
“Grant Thornton recognises improvements by the current leadership and senior management teams and I would like to re-assure the people of Derby that we will discharge the council’s duties with the utmost integrity.”
