KPMG offices


Nick Kempe – 26th May 2022

Why has the Scottish Government continued to allow KPMG to design the National Care Service?

It’s been a bad couple of weeks for KPMG, appointed by the Scottish Government on 13th December to develop the broad outlines of a National Care Service at a cost of £546k.  

First, the Financial Reporting Council, best known for its failures to take action, fined KPMG £14.4m  for providing false and misleading information to its review of their audit of Carillion’s accounts in 2016.  The fine was simply for deliberately misleading the regulator – including altering meeting minutes and the information in spreadsheets – not for any of the harm that was done to the public as a result of the collapse of Carillion which had contracts with government worth £450m

Then, yesterday, the FRC announced it had issued another £3.37m fine to KPMG, for “conspiracy to corrupt and a failure to prevent bribery in the Rolls Royce bribery scandal.”  

These are but the latest in a long series of scandals.  The tribunal that led to the Carillion fine noted that, since 2018, KPMG had been reprimanded by the regulator on ten separate occasions, receiving cumulative fines in excess of £36m.  For example, in August 2021, KPMG was fined £13m for its conflict of interest in the sale of Silentnight in 2011 and then lying about this – the highest ever fine  imposed on an accountancy firm in a non-audit case.

After KPMG announced just before Christmas that they had withdrawn from bidding for UK contracts because of concerns from the Cabinet office, a series of Freedom of Information requests from the Care Reform Group established that Scottish Government officials had been notified of those concerns on 26th November.  One of the FOI responses from the Scottish Government provided an extract from a note of this meeting which stated “They [KPMG] need to provide us with evidence to show they are on path to recovery”.  What evidence, we wondered, had KPMG submitted to the Scottish Government to persuade them to award the National Care Service contract on 13th December?  

Another FOI response last week revealed that the Scottish Government has not been provided with evidence from KPMG about how they were addressing concerns.  The response clarified that the note of the meeting had been taken by the UK Cabinet Office and the requirement that KPMG show it was on the “path to recovery” only applied to UK contracts, not those with the Scottish Government.  Staggering!

It was only after questions were asked in the Scottish Parliament about the award of the NCS contract in January and yet another scandal – on 19th January KPMG was fined £3m for failures in its audit of Bargain Booze owner conviviality – that it was announced KPMG was also withdrawing from bidding for Scottish Government contracts. Clearly the NCS contract should never have been awarded to KPMG in December.

What now needs to be established is whether the Scottish Government officials who were alerted to the concerns about KPMG in November kept this to themselves – in which case Scottish Ministers need to order an independent investigation into the procurement failures – or whether they only did so after consulting others, including Scottish Ministers.  In which case, resignations would be appropriate.

The Care Reform Group’s concerns about the appointment of KPMG, however, go far deeper than how the contract was awarded and related to the whole process by which the NCS is being designed .  Following a recent meeting that the CRG had with Scottish Government officials it is now clearer that this has two stages.  The first, which is concerned with developing the Business Case, describing the Current Operating Model and agreeing the Target Operating Model (TOM) –i.e what care should be about – is what KPMG has been tasked with developing.  The second stage, which has not yet started, is supposed to be about co-design.  Selected stakeholders will be asked by the Scottish Government design team to come together to help design the services which will deliver the Target Operating Model.

We have two major concerns about this process.  The first is that although the Scottish Government says it wants to involve stakeholders in developing a National Care Service, there has been almost no consultation about the TOM. While the members of the NCS Reference Group were given an update about the development of the TOM, the papers for their last meeting (available through link above) said nothing about what was actually proposed. The only consultation we know of to date was with the Alliance, an organisation funded by the Scottish Government, who were given just a few days to respond. Whatever Target Operating Model emerges this summer will not have been co-designed but produced by KMPG, a company which happens to have one of the most appalling tracks records in the UK and with a vested interest in outsourcing services. 

Second, whatever model of care the Scottish Government adopts in the “TOM” will effectively decide what a future NCS will do and how it is structured.  For example, if the TOM is built on the neo-liberal political assumption that resources available to government should be limited, the potential for stakeholders to co-design services that address unmet need or the pay and conditions of the social care workforce will also be strictly limited and barriers like eligibility criteria for services will remain integral to the care system.  We fear that the TOM will preclude the sort of vision for a NCS we set out in Caring for All and will serve as a means for preventing debate on the sort of radical reforms that our care system needs

At stake is whether we have a NCS based on a KPMG designed operating model which follows government imperatives, subsumes care to health and centralises power with Scottish Ministers or whether we have a NCS that is properly resourced and designed and controlled from the bottom up.  It is time that civil society – citizens, people with care needs, carers, the workforce, local communities – got together with the Scottish Parliament and tried to force the Scottish Government into a re-think.

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