Bournemouth Council advised on Mouchel deal risks

Accountants James Cowper warned a “wait and see” approach could reduce the risk to taxpayers in case the firm hits further trouble.

But council officers have used the risk assessment to produce a report that sees more positives in signing up now.

Union and opposition leaders warned officers are trying to “steam roller” through the deal because they have put so much work into it.

Bournemouth is on the verge of transferring two departments to Mouchel. The cabinet will look at the risk assessment and officers’ report when it makes the decision on January 6.

David Higgins, the branch secretary for Unison, said: “Clearly the people who have written the council report want to do this because they have spent all this time working on it.

“But it’s far too dangerous to go ahead now.”

Bournemouth has already signed a 10-year deal with Mouchel worth £150 million that transferred four departments in December 2010.

Mouchel made a loss of £65 million last year and needed help from the banks to stay in business.

The risk assessment suggests the council “might well” prefer to wait and see if the firm is totally restructured before a banking deadline in July.

The council officers’ summary, in presenting the ‘wait and see’ option, makes only makes one positive point, three negative points and one that is neutral.

In presenting the option of going ahead now, it makes three positive points and one that is neutral.

The officers’ summary is in the names of chief executive Pam Donnellan and head of transformation Mike Forrester.

Cllr Anne Rey, leader of the Independent Group, said: “We are dealing with residents’ money and hundreds of staff jobs.

“It just seems the officers want to steam roller this through.”

Mr Forrester said in a statement said: “The council sought a risk assessment report on the proposed transfer of the Finance and HR Services to Mouchel and on the provisions within the current contract.

“The report explains the advantages and disadvantages of transferring these services.

“The proposal follows on from the previous transfer of the Revenue and Benefits, ICT and Facilities Management services in December 2010.

“The transfer of the four services has improved quality of service delivery and response times to the public and has resulted in significant investment in ICT Services.”

Firm has made a £65million loss

THE risk assessment produced by James Cowper notes Mouchel made a £65 million loss for the year ending on July 31.

Banks have provided emergency overdrafts to keep it going but they want to see changes to make sure they get their money back.

The overdrafts are structured to penalise Mouchel if the firm does not complete some form of restructuring before July 2012.

The restructuring could see the firm could be bought out, seek new investors in share capital or place itself into administration.

If these measures are not completed by July 31, 2012, then Mouchel would become liable for an £8 million ‘amendment fee’.

The firm has another £7.5 million to repay in January 2013.

The risk assessment says: “Pending a restructuring, clients and prospective clients might well choose to exercise caution – adopting a wait and see approach. Were Mouchel to announce a further set of disappointing results, further impairment charges could prove unavoidable.

“On balance, therefore, a takeover or placing could reduce rather than increase the financial risks for Bournemouth Borough Council.

“If, on the other hand, the council decides to press ahead with the outsourcing forthwith, it could look to mitigate any financial risks by acquiring a performance bond from Mouchel’s bankers.”

It says that if Mouchel was forced into administration it is likely the Bournemouth contract would be bought up because local government contracts are profitable.

If the contract was not bought up, the costs of taking services back in house would be “modest”. The report also warns this would need to be done at short notice and would require assistance from the administrators.