Agenda item

This paper is to update the Committee on progress against the recommendations of the 2022 Commercial Property Audit which provided Nil Assurance and the subsequent 2023 Commercial Property Audit which provided Limited Assurance. 

Andrew Meek and Sarah Lavery to present.

Mr Jonathan Kirby, Director of Capital Projects & Property, introduced the report.

The meeting heard: 

·      In terms of focusing some of the resource in order to deliver the priority recommendations, the team had looked to do this efficiently. Part of it was also about the usefulness of the data. As much resource as possible could be put into this, but if the data was not present, it was about being able to compile it or create it. One of the recommendations in the report was about management systems and digitalisation systems which would provide greater ability to clear some of the priority 1 recommendations.

·      A project plan to capture the data had been put in place and was subject to wider governance as the Council reviewed its financial position. The process cost money and because of the data issues, it would not be possible to express what the overall cost saving would be. This had been presented to Corporate Leadership Team and an outcome was awaited.

·      Digitalisation of lease reading through AI was one such potential progress.

·      The future of the property review was about the form and how the Council would look to do the delivery. One of the issues faced in the past in terms of reviews was systems being able to communicate to each other. There was a huge dependency with the financial reporting systems as much as the asset part. These needed to be aligned. Some reliance may be needed on use of spreadsheets in the meantime.  A lot of it also was about timing. If budget efficiency was needed in delivering the project property review, priority would have to be given to certain properties. This would take longer than the wider five-year program. A risk-based review would be taken for the highest risk sites which needed attention. This would have a red, amber, green (RAG) rating system.

·      As part of the team’s response to the Council's financial constraints, it was in the process of reviewing all properties and whether or not they provided wider value to Haringey or if the Council should look to change and have a much more efficient portfolio. This would though, take longer.

·      In relation to adapting the culture, the Council had brought all of the property figureheads together such as Facilities Management, Property and Asset Management. Attempts were being made to promote cross-working. There was still a long way to go, but some progress had been made on showing the benefits of collaboration and minor behavioural changes. There had been a marked improvement in this. The first recommendation that came through from the external property review was about creating a corporate property model - a corporate landlord approach through the Property Compliance Boards. Internal Audit attended these meetings due to the revised government structure so there was more ‘holding to account’ that took place. 

·      The priority ratings were from the audit via Mazars. They had provided the one, two three rating. Health and Safety was important as was the financial situation. In commercial property, there were currently 17 vacant properties, however, they were all part of the property life cycle. There were two under agreement for lease, others on the market and some that were being intentionally held vacant pending renovation of the particular properties. There was a technical difference between void and vacant properties. There were a very limited number of void properties, three were being held ‘intentionally void’ pending renovation. The remainder were all part of the wider letting cycle. Therefore, they were either on the market, about to go on the market or under offer.

·      The debt in the audit report was a snapshot in time of June 2023. The debt had not been neglected. This was high at the top of the wider property agenda as this was seen as important. The Committee would be informed of the arrears.

·      There were not leases that the Council did not know about, but as of March of last year, the Council had only manually reviewed 480 of the circa 1,200 leases. The Council was just under 50% of the way through this. Some of the lease review that had been completed were relatively easy to complete. The more complex leasing was taking a longer time. As issues had been found within the leases, the Council sought to rectify them or put management in place. This process had slowed down naturally as the Council looked to tackle the problems as found rather than just to document them.

·      The Strategic Asset Management and Property Improvement Plan (SAMPIP) would be re-submitted to Cabinet in April 2025. 

·      A query was raised that the Council had reported a 100% fire compliance without actually having it. Also, given the Council's financial constraints, the Council had resolved to complete all property review within 24 months. In response, the meeting heard that the reviews had started, but given the current position, some of the proposals may have to come under review. In future reports, if it was possible to find a way of delivering this within five years, that would be what was done. In relation to the priority points, if the level of resource meant that the Council had to focus on the priority 1s more than the others, then this would have to be done.

·      It was not being stated that an extra 24 months would be needed to complete the review. A risk was being highlighted that it was not yet an issue, but given the financial situation, a review would be needed on what any mitigations would be. There were three years remaining to complete the review to get to the 100% mark on the items. This did not mean that nothing had started until the end point. There would be a constant improvement throughout.

·      The service originally had very little data which still conflicted with multiple sources. The property review would help a return to ‘ground zero’ and build the data baseline ‘up from scratch’. However, a service needed to be run at the same time and there were a number of residents and business owners that relied on the Council being able to run a functional Property Service. Whilst the service was trying to prioritise tackling those most in need through the process, the length of time it took for the service to respond, make the right recommendations and make progress took longer due to the baseline data. From the commencement of the reset of the baseline data, it would take 24 months to get to that data baseline. This did not stop work in the meantime. At the end of the 24 months, progress would have to have been made. It was well recognised that the data was correct so, that the right recommendations could be made and promises could be delivered. Without it, it would still be possible to continue the work. It would just take longer.

·      The reason some of the issues had happened over numerous years was because the Council worked in a silo approach to property – it was the Council’s property - and that was how the Council had to work in looking at it. Where there had been service areas looking after property where the corporate property model was not present, an alternative may be better, may be worse or may mean that recordings were made in different ways, but trying to match all the different bits together was a big part of what the aims were.

·      It was important to have comparators. A snapshot of the figures was useful, but if the targets were not clear, it became very difficult for a committee to determine the efficiency and efficacy of the progression. It was important to make sure that the reports were complete with tangible data points.

·      The SAMPIP was submitted to Cabinet in June 2023.

·      A lot of the mistakes of the past, across all councils, had been to go out and buy a system because it looked useful, without first seeking clarity on how the Council wanted to deliver. One of the things highlighted in the plan was that if it was owned as a corporate system, it had to have links through to other Council systems, such as the financial system. A typical troubleshooting issue tended to be that baseline data was not clean and the Council was ensuring that it was cleansing data. Nothing would transfer to a new system until this had occurred. Another typical issue was that the cheapest solution would be brought. Value for money was usually about the best product. The Council was working on the scope and specification of any digital solution to ensure that it was the right solution and responded to every single need that Haringey had. A benefit of getting an off-the-shelf system rather than requiring a bespoke system was that it could keep up to date with the wider market and could adapt any legislative changes. Long sessions had been held with digital based colleagues about building against going to the market and it was determined that the Council would go to the market. It was important to forecast the absolute basic principles that was needed from a property management system so that any bespoke requirements could be delivered separately rather than trying to manipulate a property management system that was not supposed to deliver a specific thing. The key principles of clean data, value for money and making sure it was a wider corporate system so there were multiple points of accountability.

·      The team was getting closer to establishing a single source of truth regarding the data. Data on lease management was progressing well as checks were being made on the title, the lease and all associated documents to make sure that when speaking to tenants, the right data was present. Part of the problem was that there was no place to put clean data. Attempts were being made to store it in an accessible manner. Without the implementation of a property management system where all the data was clean, it could get mixed with the unreliable data.

·      The residual risk for the service listed at 12 could be higher. The risk had been listed higher before. The first audit that was assigned was given a nil assurance, so the residual risk was, at that point, very high. It had come down to a 12, but it was worth reflecting back to see if it was still appropriate.

·      Having the Committee see the progress via the statistics as opposed to saying that a lot of work had been done, helped the Committee get a better-informed decision of what the up-movement or down-movement of the residual risk was.

·      Even as a as a corporate landlord, the Council would be reviewing every property in any case. What had been set out in the SAMPIP was the way in which each property was assessed could be done for the benefit of residents and what was set out in the corporate plan. For example, the community needs and services. If any property cannot be used for any other purpose or repurposed, then it would make sense to put it up for disposal and reinvest the money in other properties.

·      The staff involved in the work had come from a very difficult position and that was why SAMPIP was put through in the first instance - to have a framework where the Council could change things. There had been progress and with the scrutiny of the Audit Committee along with the scrutiny of the of the Cabinet Lead, further progress would be made.

·      The commercial portfolio involved the voluntary and community sectors. The team would consider market values, the Council could look at best consideration through social value.

The Chair stated that since some of the recommendations had not been implemented due to the data, then this issue needed to be resolved with focus. 

RESOLVED: To note the Commercial Property audit coverage and follow up work completed.