Herculean: when Richard Ennis ACMA arrived at the London Borough of Lambeth, his mission to balance its books was the accounting equivalent of mucking out the Stygian stables. Camilla Berens finds out how he reversed more than two decades of financial mismanagement at the council within two years.

Career challenges come in several different forms. Many people want to live up to their employer's expectations and climb the corporate ladder. Alternatively, there's the challenge of moving to a new employer with a whole new culture to absorb and, ideally, enhance. Then there's the type of challenge that Richard Ennis accepted. If he'd sat tight, he could now be in charge of the finances of one of the UK's most prestigious local authorities with all the benefits of a well-resourced and highly efficient administration. But in March 2003 he walked away from his job as assistant director of finance at Westminster City Council to work with one of the most notorious local authorities ever to have hit the headlines.

Westminster's own history is not entirely free of controversy, but its problems are mere hiccups compared with the political machinations, fraud and incompetence that have blighted the reputation of its neighbour, the London Borough of Lambeth. To be fair, by the time Ennis crossed the Thames to become its executive director of finance, efforts were already being made to drag Lambeth out of the mire, both internally and under the guidance of a monitoring board set up by the Office of the Deputy Prime Minister. But, although the executive will was there, attempts to breathe new life into the council's services were being hindered by its 20-year legacy of mismanagement.

When Ennis moved south of the river it must have felt more like a different continent. Since the mid-eighties Lambeth council had become a byword for failure in the public sector and, from the tabloid press's perspective, the gold standard for looniness. When Margaret Thatcher became prime minster in 1979, the council had been a Labour stronghold. As her Tory government turned its attention to local authority reform, Lambeth dug in for a protracted campaign of trench warfare. A key flashpoint came in 1986 when the council became a major pocket of resistance against the government's controversial poll tax. After refusing to set a rate within the government's guidelines, council leader "Red" Ted Knight was eventually banned from holding public office and the borough was left facing huge surcharges and legal costs.

The council's defiant stance might have won more support if it hadn't been failing its own community at almost every level. By the mid-nineties rent and tax arrears had reached more than 200m [pounds sterling] and fraud was rife. One investigation estimated that 500 council officers were illegally claiming housing benefit. Another revealed that subcontractors were using the borough as a cash cow. One firm was found to have charged more than 70,000 [pounds sterling] to replace two gas fires in a pensioner's flat, while more than a million bricks--enough to build 2,000 homes--were stolen from council depots. Behind the political posturing, the borough was blighted by soaring unemployment and crime rates, neglected housing and underperforming schools. By 1995 the situation had got so bad that council leaders felt they had no option but to open Pandora's box. They commissioned Elizabeth Appleby QC to take a long, hard look at the state Lambeth was in.

It was no great surprise when she summed it up as "an appalling mess". Council leaders had long blamed the council's poor performance on a lack of funding from central government, but Appleby pointed the finger at local mismanagement. In the decade since her report was published, successive chief executives tried to rebuild Lambeth's rickety infrastructure. By Ennis's arrival in 2003, it was certainly leaner and cleaner, but poor financial stewardship was still a major problem.

Ennis's CV belies both his talent and his toughness. He cut his teeth with the Post Office and later with Slough Unitary Council. But it was clear that he had an ambitious streak and a thirst for new challenges that ultimately put him on the spot. On the same day he was offered the position at Lambeth, his boss at Westminster resigned. The glamour job would almost certainly have been his. A weaker man might have taken the soft option, but that wasn't for Ennis. What tougher challenge than to try and succeed where others had failed?

"I have to admit that it wasn't an easy decision," he says. "But for me it's about working in an area where you can make a big difference to people's lives."

In his new role he inherited a general fund deficit of 28m [pounds sterling] and a long-term debt exceeding 850m [pounds sterling]--more than three times the level that most local authorities would find acceptable. "Lambeth was bordering on bust," he says. "Even the government wasn't showing much sign of wanting to take it on."

Some of his darkest days were spent tracing back 17 years of qualified accounts. On top of this, there were no fewer than seven outstanding section 11 recommendations--statements issued by the district auditor highlighting concern worthy of public note and needing remedial action.

Two years on, Ennis has achieved a turnaround that has been described by the chairman of the monitoring board as "phenomenal". Not only has he reversed the deficit, but by the end of this year the general account should show a surplus of around 24m [pounds sterling]. Largely through the sale of underused properties, 130m [pounds sterling] in long-term debts have been cleared, saving more than 6m [pounds sterling] a year in interest payments. "I don't think anyone expected to make quite so much progress so quickly," he says.

Ennis is quick to praise his finance team for ensuring that his tough targets were reached, but admits he wouldn't have got anywhere without the full backing of the council's leaders. When the joint LibDem-Conservative administration took over in 2002 it knew it had to tackle the money problems first. "They took the view that 'it doesn't matter what else we do--if we don't sort out the finances, nothing will work'," Ennis explains.

From the outset the new FD pulled no punches. "Everyone needed to know how bad the finances were and we all had to be ready to make sacrifices," he explains. "On the positive side, we were a new team, so we were able to put all of the problems on the table without feeling responsible for previous errors."

Almost all the assistant directors in the finance department had been consultants working on costly short-term contracts. Ennis quickly recruited a new permanent team mostly comprising executives from high-performing boroughs. "That meant upping the salaries a bit," he says. "But it also meant that I had a department of people who knew how to get results."

His new team quickly unearthed an ugly selection of financial gremlins. "We found some awful things," Ennis chuckles. "There were lots of items on the balance sheet that were unsupported; there were huge debts that were simply uncollectable; and there were various funds that weren't adequately provided for. My heart was in nay mouth every time I lifted a stone. You knew there was going to be something bad under there, but it was always worse than you thought."

The team quickly got down to the task of creating a robust financial framework. "Lambeth didn't really have a budgetary process in place when I arrived," he explains.

As the starting point, Lambeth adopted Westminster's model for budget implementation. This included the introduction of a leader's speech--a public airing of the authority's three-year spending plan--and a "star chamber" at which individual departments present their strategies.

"There's a lot of scrutiny in this process," he says. "Our service professionals present their views and then we have to push back and find something financially acceptable."

Keenly aware of Lambeth's poor record on delivery, Ennis set up a system that would create a results-driven culture. "It was all about delivery at Westminster. If you failed to deliver, you were pushed out of the door," he says. "At Lambeth we wrote a clear financial plan detailing what we were going to do and when. We also made it clear that failure wasn't an option."

Outside the finance function, the whole council had to adapt to the new culture, which was driven by financial prudence rather than political ideology. "One of the biggest challenges was getting people to understand how important finance was in everything they did," Ennis continues. "Simply writing a report that says 'this is a wonderful idea' is no good if you don't have the funds to do it, or if it means taking money from another area. Every time a report without clearly stated financial implications turned up, it had to be redone. It took a few months for the departments to adapt, but the message got through."

Another of Ennis's missions has been to end the borough's entrenched culture of non-payment. A major breakthrough came when he improved the council's relationship with collection agency Capita. "In the past its work for Lambeth was always put at the bottom of the pile. Capita had done good work in Westminster, so I knew it could provide a good service here," he explains. "Now it lists us as one of its key clients."

When Ennis started, the council tax collection rate was 87 per cent. This was a major improvement on the rate in the early nineties, when less than half of the borough's council tax dues reached the council's coffers. With careful management, the figure has now risen to 93 per cent, but he's aiming higher than that. He points out that the national average is 95 per cent and that every percentage-point increase brings in an extra 1m [pounds sterling]. "The culture of non-payment still exists in some places," he admits. "But now we make sure that there's nowhere to hide. It's chase-up letters and then court. Lambeth is no longer a soft touch."

The question now is whether all the belt-tightening will be detrimental to the council services. "There have been some areas where we've had to look at efficiency savings, but we've tried to consider areas where the negative impact will be lightest in terms of services, Ennis says. "Most of the focus has been on reorganisation and looking for extra income."

The next big task is to shake up the housing department--a notoriously poor service provider in the past. It means doubling the number of staff under Ennis's control and it will undoubtedly provide some new headaches, but it's proof of the council's faith in his ability to deliver. Councillor Ashley Lumsden, executive member for finance, sums up Ennis's tenure so far: "We value his achievements, and those of his team, highly."

Ennis's efforts have also been acknowledged in the wider arena. In the past year he and his team have been honoured with three industry awards. Although two of them were for his work as FD, he's proudest of the collective prize. "I've driven the changes, but my team is vital," he says. "You need your staff to reinforce the message of improvement and delivery."

Lambeth is still a long way from Westminster's envied position at the top of the local authority league table, but the Audit Commission's most recent assessment makes encouraging reading. Its 2004 report acknowledges significant progress in areas such as leadership, management and financial stability. Such achievements, it concludes, have allowed Lambeth to move from crisis management to planning for the medium and long term. Could it soon be functioning like a normal local authority? The accounts are certainly far healthier these days. The 2002-03 submission received only one qualification dating back to the early nineties and last year's submission was unqualified for the first time in decades. Yet Ennis is not resting in his laurels, as the hardest part may still be to come. "To get two years of clean accounts is one thing," he says. "But to keep up that record indefinitely is another big challenge."

In the short term he has three main targets: to continue improving collection rates; to comply with all the auditor's recommendations on time; and to increase the council's reserves from six per cent to ten per cent to broaden the comfort zone.

"There's always something out to get you: either a change in government rules or some huge demand on a service that you weren't aware of when you set the budget," he says. "There are areas where we can generate income, but that's regulated, so it's hard to make a profit. There are always pressures, so you need a decent reserve to ensure that you don't get thrown off course."

Ennis also stresses the need for realistic planning. "We have ambitions, but they have to be based in the real world," he says. "Our target for the end of this year is to be promoted to the third-division category of 'fair' in the league tables and to reach the second-division category of 'good' by 2008."

Ennis's success in the longer term may hinge on his stamina. The heavy workload and long hours that come with the territory mean that he rarely sees his three young sons in the week.

"Everything a local authority does has a financial impact, so the FD needs to be involved in almost every aspect of its activity," he explains. "There are a lot of evening meetings--I left work just before midnight on the day we set the last council tax rate. My wife says that she sometimes feels like a single parent."

Ennis's concerns about the stresses of the job extend beyond his own situation. He is worried about the number of London boroughs currently without a permanent FD and believes that something must change if such a crucial role is to remain an attractive career prospect. But, in typical Ennis style, he's trying to find a solution on his own doorstep by working with council leaders to develop a "new ways of working" strategy that will review the timing and co-ordination of meetings and facilitate succession planning in the finance function. If it's anything like his other initiatives, it's bound to succeed.