Agenda item

RESOLVED

That  (i)    the recommendations set out in the Grant Thornton Public Interest Report be accepted in full;

          (ii)   the Council’s Improvement and Recovery Plan be reviewed and updated as necessary to take account of the PIR findings and recommendations;

          (iii)  the Council notes that Commissioners will consider taking forward further enquiries arising from the report;

          (iv)  the Council notes that the Chief Executive has contacted Surrey Police already to make clear that, should any evidence emerge of criminality or misfeasance in public office, this will be referred to them for investigation; and

          (v)   the Council places on record its apology to local residents for its failings in the past.

The Leader of the Council introduced the Public Interest Report which had been published by Grant Thornton earlier in November.  The report followed a year-long investigation into Woking Borough Council’s historic approach to investments and borrowing, and outlined a series of recommendations drawn up in light of the findings.

It was noted that Grant Thornton had been appointed to (i) provide a comprehensive overview of the events and decisions that had culminated in the unprecedented financial challenge facing the Council; and (ii) help the Authority ensure it addressed the fundamental weaknesses in its historic approach, so that action could be taken to rectify these to eliminate the risk of any repetition in the future.  The period reviewed covered twenty years.

Under the provisions of the Local Audit and Accountability Act 2014, the Authority had a legal duty to hold an Extraordinary Meeting of Council to consider the Public Interest Report and determine its response.  The Council and the Government appointed Commissioners would review the Authority’s Improvement and Recovery Plan to assess the degree to which it might need expanding to take into account the Report’s findings.  Furthermore, the Commissioners would consider a number of specific issues and act upon them if necessary, including the position of those named in the report. 

The Leader advised that the report before Council proposed that the recommendations drawn up by Grant Thornton should be accepted in full and that the Improvement and Recovery Plan should be reviewed in light of the report’s findings. 

The Mayor stated that, in view of the importance of the Extraordinary Meeting, she intended to move the suspension of the provision within Standing Orders that limited the number of times each individual Councillor could speak.  Members were encouraged to be succinct in their questions and avoid repeating points made earlier in the discussion. 

Accordingly the Mayor moved and the Deputy Mayor seconded the suspension of Standing Order 18.8 which limited the Councillors to speaking once on the matter before them.

The motion was agreed unanimously and it was

RESOLVED

That Standing Order 18.8 be suspended to allow Elected Members to speak more than once in respect of the Public Interest Report.

Before moving to the debate, the Mayor welcomed to the meeting Joanne Brown, Guy Clifton and Paul Dossett from Grant Thornton and invited them to introduce the Public Interest Report.

The Council was advised that the review had identified fundamental weaknesses and failure to evidence best value.  The Council had not put in place a clear corporate plan and had followed a non-strategic approach. 

The Council had pursued a long history of borrowing to fund capital projects alongside investments in loans to Council companies and a number of third parties.  Borrowing and investment activities had expanded over the years on the premise that the Council would be able to afford to pay back the loans over a longer period of time, typically up to and over 50 years.  The level of borrowing increased from £400m in 2017 to a cumulative borrowing position of £1.8b in 2022.

The scale and complexity of the investments had given rise to conflicts of interest which had not been recognised and managed, and the Council’s Leadership Team and Members had not had the required skills to manage such large scale investments.

The importance of implementing the improvement and recovery programme and focusing on securing long-term financial sustainability of the Council was highlighted.  Towards this end, the recommendations in the Public Interest Report included ensuring effective governance systems were put in place across the Council, with all future decisions to be subject to scrutiny and challenge.

Following the statement by the representative from Grant Thornton, the Mayor invited Elected Members to debate the paper and raise any questions they had with the representatives.

The Councillors raised a wide range of points and questions arising from the report.  Amongst the concerns were the lack of oversight by the Public Works Loan Board and the absence of warnings by the Council’s Auditors.  A number of Councillors felt criminal proceedings should be undertaken and noted that Grant Thornton had not indicated whether any actions had been unlawful.  The Council was advised that only a Court of Law could determine whether something was deemed unlawful.  Areas highlighted in the report, which may or may not have involved unlawful activities, included the prudential code on borrowing, the possibility that some capital funds had been used for revenue costs and the point that loans had been given to arms-length companies in order to earn an income.

In response to a question, Grant Thornton confirmed that no-one who had been invited to interview by Grant Thornton had sought to avoid such contact or threaten the Audit Company with legal action.  All the information provided had been reviewed by Grant Thornton and over 50 stakeholders had been interviewed; the final report included examples taken from the interviews held.  Overall the study was not a forensic audit and had primarily sought to review the Council’s governance arrangements.  Grant Thornton had had to determine the appropriate scope of the review given the complexity and period of time covered.  The Council could, if considered appropriate, choose to commission further investigations, although the benefits of doing so needed to be weighed against the costs involved.

There had been a failure in leadership and Officers had been asked to manage projects for which they did not have the appropriate knowledge or experience.  The essential understanding of corporate governance had been absent, as had a comprehensive strategy for the Borough.  Work in recent years had sought to address the shortcomings in governance, and the Council now had a comprehensive Woking Strategy.  All property transactions were measured against industry standards and all costs were carefully planned. 

The impact of the Public Interest Report on the ongoing Improvement and Recovery Plan of the Council was raised and the Chief Executive drew attention to the recommendation within the report which proposed that the Plan should be reviewed and updated in light of the Public Interest Report.  The review would include the relationship with audit.

Grant Thornton noted that, whilst there was a degree of oversight by the Government, there was an ongoing debate around how such governance could be strengthened.

Councillor Rice considered that the Authority owed an apology to residents in view of the findings of the review.  Councillor Rice therefore moved and Councillor Boote seconded the addition of a fifth recommendation to this effect, namely:

“(v)    the Council places on record its apology to local residents for its failings in the past.”

The Councillors welcomed the proposal and the amendment was agreed nem con, to form part of the substantive recommendations before the Council.

The discussion continued and, in response to a question raised, the Chief Executive advised that responsibility for actions in the past lay with the Council, and it was difficult to see how compensation could be sought from third parties such as advisors.  The Council had to focus on the future and the delivery of the Improvement and Recovery Plan.  The Government appointed Commissioners would explore whether there were any further actions which would be appropriate to pursue. 

Councillor Johnson, Portfolio Holder for Housing, provided the Council with an overview of the impact of the Council’s activities on the delivery of housing for residents, including the impact on the Housing Revenue Account (HRA), the loss of rent and the loss of the investment partner status with Homes England, which had meant the Council was no longer able to bid for funding to the Government.  Improvements were being brought forward, though it was acknowledged that the speed of change was not as fast as would be hoped for by residents, Elected Members and Officers. 

Several inaccuracies within the Public Interest Report had been identified and Grant Thornton advised that there was still an opportunity for corrections to be made.

The lead Member for training and development, Councillor Leach, highlighted the elements of the report which dealt with training and proposed that the Council should ask whether the Local Government Association could support its ambitions, providing a programme of development for Councillors, ideally on an individual basis – the Council could not expect to successfully implement a ‘one size fits all’ approach.

At the conclusion of the debate, the Leader of the Council responded to the many points raised, thanking the Councillors for their contributions to the discussion.  It was essential that the Council moved forward and accepted all of the recommendations drawn up by Grant Thornton.  The Mayor therefore referred the Council to the recommendations before them, including the additional recommendation proposed by Councillor Rice.

RESOLVED

That  (i)    the recommendations set out in the Grant Thornton Public Interest Report be accepted in full;

          (ii)   the Council’s Improvement and Recovery Plan be reviewed and updated as necessary to take account of the Public Interest Report’s findings and recommendations;

          (iii)  the Council notes that Commissioners will consider taking forward further enquiries arising from the report;

          (iv)  the Council notes that the Chief Executive has contacted Surrey Police already to make clear that, should any evidence emerge of criminality or misfeasance in public office, this will be referred to them for investigation; and

          (v)   the Council places on record its apology to local residents for its failings in the past.