Agenda item

The Committee received a report which detailed the work reported by in-house audit resources, as well as Mazars since the end of quarter 3, which was reported to the Committee in February. The update also included information regarding the National Fraud Initiative. The report was introduced by Minesh Jani, Head of Audit and Risk Management as set out in the agenda pack at pages 125-139.

Officers summarised the background and findings of the fact finding reviewing of the opportunity to purchase Alexandra House. It was noted that the purpose of the review was to examine the governance arrangements behind the decision, rather than the decision itself or to provide any assessment of its value. The findings of the audit were that there was no evidence of irregularity, but that the governance arrangements were weak and that this resulted in decisions being taken in an ad-hoc manner. The Committee was also advised that the audit found that there was a lack evidence around a robust business case being in place and that the organisation was not collectively appraised of the decision making process.

The following arose during the discussion of this agenda item:

1. The Committee queried whether, following this report, audit could also look into the period of time between May 2019 and March 2020 with a view to understanding why the Council changed its mind within a year and decided to purchase it after all, resulting in an additional £6m cost. A key area of investigation should be around what happened after this change of direction.
2. The Committee also queried whether a small chronology of events could be supplied as well. In particular, the Committee was keen to understand whether the developer received Planning Permission or just submitted a planning application and when this took place.  In response, officers advised that they would go away and double check the planning status. The Chair also sought clarification around whether the developer had bought the building or just exercised an option to buy. The Chair referred to anecdotal accounts that the building was only bought because the developer was able to secure a loan from the Council to the holding company. The Head of Audit and Risk Management advised that these were outside the terms of the audit and that he would ask the service to come back to Committee with a response. (Action: Minesh Jani).
3. The Committee sought clarification around there being no political involvement in the decision making process and whether the Cabinet Member was aware of the May 2019 decision, for instance. In response, officers clarified that one of the key findings was that, even before Members would have been asked to consider this, there should have been a robust business case drawn up. This was characterised as the root of the problem, even before any decision making was arrived at.
4. The Committee commented that in light of this perhaps the follow-up audit should be around whether there was a robust business case in place for the subsequent decision to purchase the property.
5. The Chair sought clarification as to whether it was a fact that there was no political knowledge of the decision being taken not to purchase Alex House, or whether it was just that the auditors couldn’t find any evidence of it. The Chair speculated that the Strategic Property Board must have been informed of the decision. Officers responded that this was a significant decision with significant financial ramifications and that it should have been considered by a number of key decision making boards. However, what the auditors found was that there was no record of the decision not to acquire the property in the minutes of any of these boards. Therefore,  there was no record through the formal channels in which decisions are recorded.
6. The Chair thanked officers for the report and commented that there were outstanding concerns and limitations to the audit, in that it stopped short of looking into why the decision was taken not to purchase and there was no definitive analysis of who authorised that decision. There were also concerns around how the Council ended up paying significantly more for it following the original decision not to purchase. The Committee agreed that they would like to see a follow-up audit around Alexandra House, looking at the decisions taken in relation to the subsequent decision to purchase the property at an additional cost. (Action: Minesh Jani).
7. The Chair agreed to email the Head of Audit and Risk Management with specific areas of concern for the Head of Audit and Risk Management to consider as part of a follow-up audit. The Chair acknowledged that, ultimately, it would be up to the Head of Audit and Risk Management to determine the terms of reference for any subsequent follow-up audit. (Chair).

RESOLVED

That the Corporate Committee noted the activities of the team.