Agenda item

Reporting person: Leigh Clarke

Leigh Clarke, Director of Finance introduced this report and provided the context to the report, noting that it came from the Motion of Notice to the Council requesting and independent comprehensive review of the Council’s assets and liabilities and that EY were appointed to carry out the comprehensive review. Leigh highlighted that this was not an audit.

Darra Singh, EY, introduced himself and his colleagues Marcus Richards, Michael Clifford and Daniel Gurton. Darra highlighted than an independent approach was taken, that there was good co-operation from officers and that a range of matters were brought together to be considered in the comprehensive statement.

Marcus Richards, EY, provided back some background as to the process which was undertaken to produce the comprehensive statement. He went on to state that the work provided perspective on the Council’s position at the end of the last financial year and that the report endeavoured to provide a comprehensive and objective summary of the Council’s financial data and where possible observations on how these can be interpreted. The objective nature of the comprehensive statement and the scope of the comprehensive statement was reiterated at several points following questions from Members.

Julie Fisher, Chief Executive, welcomed the report and said that EY are continuing to support the Council in developing the medium-term financial strategy. Julie stated that the response to the Comprehensive Statement could be summarised through the following actions:

(i)            The continuation of the work to strengthen the medium-term financial strategy

(ii)           The delivery of an asset management strategy

(iii)          The vision and strategy for Town Centre

(iv)          The review of the Thameswey group of companies

Julie stated that underpinning this would be ensuring that there was the right financial and commercial capability at the Council.

Members were invited by the Chairman to ask questions. Some points discussed were: the overall picture the report presented of the Council’s financial position, the impact of Covid-19, the valuation of assets and the approach to different classes of assets, the Council’s exposure to risk, the liquidity of Council assets, the Council’s exposure to risk in retail and commercial spaces and any other risks that the Council could be exposed to but have not been looked into.

A discussion took place between Members following a point raised regarding whether the review met the criteria of the Notice of Motion and Councillor Kirby drew attention to several areas where he believed more detail was required. Darra Singh, EY, advised that from his perspective the criteria of the Notice of Motion had been met. He further commented that it was his view that further work could be carried out following the comprehensive statement and drew attention to the 4 actions summarised by Julie Fisher from the Response to the Comprehensive Statement.

The Chairman asked a question around the Government consultation around borrowing from the Public Works Loans Board. Leigh Clarke, Finance Director, said that whilst the Government continued to look at future changes, the change to PWLB borrowing rules to ensure capital borrowing is used for correct purposes had not caused any concerns for Woking.

Councillor Kirby drew attention to a point regarding the Council’s ability to repay loans from operational activity i.e. profits from companies and not additional borrowing and asked if EY can provide information on operational activity over the same time period as the data provided in figure 7 of the EY Comprehensive Statement. Marcus Richards, EY, said that he would be able to work with Council Officers to understand how that could be provided. The Chairman followed up with a question on Thameswey Milton Keynes, asking EY to provide more details on why it had been highlighted as a risk. Michael Clifford, EY, stated that it was an operational company which had a negative net asset position and there was an awareness that the forward business plan related to the speed of developments in Milton Keynes and given these developments had slowed down there was a risk that it would not happen at the speed required. Additionally it was noted that in the latest audits auditors noted there was a risk of going concern around Thameswey Milton Keynes and therefore based on this information EY viewed there was a solvency risk in the event that the pace of developments did not happen at the rate which had been forecast in the business plan.

Following several points made about the resilience of the Council Councillor Azad, Leader of the Council, highlighted that the work to build up the resilience of the Council would continue to be on-going and will be a focus for the whole of the Council going forward.

A discussion took place on what would be expected in a Council’s capability to manage risk and Marcus Richards, EY, commented that based on his observations across the sector there had been a tendency for local authorities to not have the commercial or financial expertise to accommodate the level and complexity of commercial activity that Council’ are embarking on and that it is a prevalent issue across finance functions across local authorities. Darra Singh, EY, added that it was important that the actions in the management response be seen through to a conclusion in order to manage the degree of the particular risk faced by Woking Borough Council.

The Chairman brought the discussions to a close and that the key next steps that the Committee would recommend to take forward were:

·                     Ensure the Council has the appropriate skills and capability to manage the risks arising from its investments and commercial interests;

·                     Monitor the economic outlook as applicable to Woking Borough Council;

·                     Be aware of legislation and regulatory risk;

·                     Further analysis of the operating cashflows for each of the Council’s investments and commercial interests.

Councillor Ashall, Deputy Leader of the Council, offered his thanks to EY on behalf of the administration and the Chairman offered thanks to EY on behalf of the Overview and Scrutiny and Committee.

            RESOLVED

That     (i)         The Comprehensive Statement be received

(ii)           The Response to the Observations highlighted in the statement be noted

(iii)          That the Committee recommends to the Executive the following next steps to take forward:

(a)  Ensure the Council has the appropriate skills and capability to manage the risks arising from its investments and commercial interests;

(b)  Monitor the economic outlook as applicable to Woking Borough Council;

(c)   Be aware of legislation and regulatory risk;

(d)  Further analysis of the operating cashflows for each of the Council’s investments and commercial interests.