No business can expect to survive for long if it doesn’t collect the money it's owed and any business which doesn’t bother to chase up its debts deserves to go bust.
Birmingham Council, as we know, went bankrupt because it had an equal pay liability of maybe £750 million and an £80 million overspend on its Oracle computer system.
Perhaps even these disasters need not have doomed the council if it were not for the fact that it is apparently incapable of collecting the money it’s owed.
The commissioners sent to restore order from chaos reveal in their third letter to the Government, published this month, just how incapable the council really is.
What with unpaid council tax, unpaid business rates, over-paid housing benefit and so on, the council – which wrote off £30 million in bad debts last year – is chasing an astonishing £650 million it’s owed.
The commissioners say: ‘There is effective senior leadership of the finance function, which is a positive starting point; however, the structure below the Director still has a significant number of temporary staff and there are capability deficiencies in some key functions. The Council has a plan to address these staffing inadequacies, and it is important that this is resolutely applied.
‘To demonstrate the scale of the task, one area that requires modernisation is in respect of ‘accounts receivable’. Debt levels remain high at c.£650m and whilst there is a programme to improve the position, the long legacy of poor or non-existent debt collection in some service areas means that this will be a resource-intensive multi-year programme.’
I did ask the council how much of that £650 million it realistically expected to recoup (no response) but I reckon we can all guess the answer.
This, surely, is an even greater scandal than its ludicrous over-spending on computers or its failure to deal with Tony Blair’s time-bomb legislation on equal pay. No wonder the commissioners don’t plan to give up their lucrative part-time work for another three years.
https://www.birmingham.gov.uk/news/article/1686/third_birmingham_city_council_commissioners_letter_published
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