A business plan prepared by a council ICT department contained flaws resulting in a failure to achieve predicted savings of £1.6m, according to a report by external auditors.

Following a complaint by a whistleblowing staff member, Herefordshire County Council appointed its external auditor Grant Thornton to conduct an investigation into the implementation of the council’s customer relationship management system, installed in December 2011.

The report, released this week, found a series of problems with the way the business case was prepared, meaning that it was unlikely that it had delivered value for money.

It said: “Our investigation suggested that the business case for the project was very ambitious and not fully owned by all parts of the council.”

The business case identified £1.6m of savings achievable through the new system, which was to be carried out in three phases. The first would see “shallow integration around existing customer service processes, strategic housing and revenues and benefits service. The second two phases would have then rolled the system out to the rest of the council departments.

However, the report said that the project subsequently failed to progress much beyond phase one, meaning benefits predicted from a reduction in staff costs were not delivered in the way envisaged.

The report said: “It does not appear that the relevant service departments, where the reductions in staff costs would arise, were properly consulted on the efficacy of the proposals or the robustness of the calculated savings, according to the staff we interviewed.”

In addition, the report said there did not seem to have been any independent report or cost-benefit analysis of the project by the council’s finance department.

“Clearly the project promised non-cashable benefits but those benefits needed to be weighed against the costs and savings arising from the project. This was not possible as the financial analysis was neither transparent, owned by all parts of the council, nor fully realistic,” according to Grant Thornton.

Other reasons that the system was not fully implemented included:

• the abolition of the local NHS primary care trust and other changes to relationships with outside contractors;
• the impact of austerity – meaning the council could no longer fully fund implementation;
• the council’s model changing demand constraint;
• insufficient corporate and departmental support.

Grant Thornton said it was “unlikely that CRM delivered all of the costs savings on which the business case was premised and the system is possibly over-engineered for its current use”.
However, it said that the procurement process itself, which saw supplier Ciber appointed to implement the CRM, had been carried out properly.

The council has agreed a five-step plan to prevent similar problems occurring in future.