Agenda item - Public Interest Report

Agenda item

Public Interest Report

Report of the Director of Legal and Governance

For discussion

Minutes:

In a change to the order of the published agenda the committee agreed to take item 9, Public Interest Report as the next item.

 

Councillor David Mellen, Leader of the Council presented the report detailing the findings of the External Auditor’s report in the Public Interest and the Action Plan created by Nottingham City Council to address the recommendations made. He gave a presentation outlining the findings, recommendations and action plan:

 

(a)  The role of the Audit Committee in monitoring of the response of this report and the action plan that has been developed in response will be an important one;

 

(b)  The Report in the Public Interest focused on the governance of Robin Hood Energy and highlighted the following points:

·  Governance arrangements were not strong enough and there were inadequacies in holding the company to account.

·  A lack of clarity on roles in governance.

·  An insufficient understanding of risk, and financial positon of the company and expertise to recognise it on the Board.

·  An inappropriate balance between holding the company to account and allowing it freedom to operate commercially.

·  The Council needs to learn from this experience, not just in relation to Robin Hood Energy, but the overall governance of companies and the Council its self needs to be renewed.

·  Challenge and check should not be viewed as a negative, but should be welcomed as healthy and enabling a greater awareness and understanding of risk.

 

(c)  There are 13 recommendations made within the report, these are summarised below:

·  Review the position of Councillors as Board members, and ensure a full understanding of the role of and legal requirements for Board members.

·  Urgently determine the future of RHE, taking into account the current financial position of the Council. 

·  Ensure that the Board (both councillors and non Councillor members) have the experience and knowledge to challenge the management, particularly when operating in a specialised sector.

·  Ensure Councillors are provided with the sufficient and appropriate training that is updated regularly.

·  Ensure good definition of roles within the governance structure and ensure that people understand their roles.

·  Scope for conflict of interest is minimised and that there is a clear divide between people in roles of Board members and those who have the responsibility for holding them to account.

·  Risks from companies are included in the overall risk management process for the Council.

·  Consider the appropriateness of the definition of the shareholder role to ensure the Council’s financial interests are protected.

·  The Companies Governance Sub Committee (CGSC) continues to meet with companies and that financial information is provided and understood by members and others involved with holding companies to account. If this information is not provided that robust action, with oversight of the s151 officer is taken.

·  Responsibilities for scrutiny and risk are given sufficient prominence, including giving Audit Committee explicit responsibility for scrutiny of governance and risk management.

·  Learn lessons from RHE and undertake a further review of company governance arrangements in particular, to ensure that risks are appropriately flagged and managed and implementation of the more robust monitoring agreed by CGSC.

 

(d)  The Report in the Public Interest was discussed at the Council meeting on 27th August 2020. An Action Plan was agreed at this meeting and the Council’s response to the report was published;

 

(e)  The Leader of the Council has met with the Chairs and chief officers of all of the Council’s companies. Part of the specialist training required for board members can only be done by those companies and so early engagement has been important to start to set this in motion;

 

(f)  The Leader has met with the Chairs of both Audit Committee and Overview and Scrutiny Committee to discuss the roles these Committees will have in the implementation of the action plan;

 

(g)  The action plan covers the thirteen recommendations made by the report and includes three additional actions added by the Council:

·  Conclude the strategic Review of RHE and produce a report on the lessons learned.

·  Commit to learn from best practice from partners, and other successful council owned companies and national bodies.

·  Review of the use of Councillors on boards.

·  Ensure training is provided so that board members have sufficient knowledge and experience to challenge management.

·  Seek external advice on best practice models of Council ownership of companies. There will be an oversight Committee/Board that will oversee the Governance improvements with external members.

·  Ensure risks related to companies are considered within the Council’s risk management process.

·  Review current training for board members ensure all board members, councillor or non-councillor, have refresher basic training, specialist training where necessary and regular refresher training as regulations change.

·  Review the scheme of delegation in place within the Council to ensure effective governance.

·  Review the roles of Executive Board, CGSC, Overview and Scrutiny and Audit Committees to ensure clarity and accountability, the Chairs will be fully involved in the review.

·  Review the appointment process of Councillors onto company boards

·  Refine the high level Risk Register to include company risks and review regularity of reporting to Audit Committee, Overview and Scrutiny Committee and Executive Board.

·  Review the wider governance arrangements within the Council taking advice from the LGA and other external bodies.

·  Refresh the Medium Term financial strategy.

 

Committee members asked a number of questions and the following additional information was highlighted during discussion:

 

(h)  Challenge needs to be seen as healthy, this will require a cultural change. There have been elements of how business is completed that can discourage that check and challenge.

 

(i)  It is necessary for Councillors to recognise the transition from political candidate to a Councillor serving the City. There is a balance to be struck between being a political person and being responsible for the council. More training on this point will be necessary;

 

(j)  The Leader of the Council has met with the leaders of the two opposition parties and has taken on suggestions around strengthening the action plan;

 

(k)  Within the report and action plan there is a lot of emphasis on Councillor culture, there needs to be equal emphasis on Officer culture too. Officer culture did at times appear to block action which is not highlighted within the report;

 

(l)  It is essential that Officers are able to perform their statutory roles. Both the s151 Officer and the Monitoring Officer fulfilled their statutory powers under very difficult circumstances. Moving forward work will need to focus on ensuring that all individuals, Councillor and Officers carry out their duties within these company arrangements;

 

(m)If external members are appointed to a Board to provide specialist knowledge within a field, they need to be able to challenge the management without concerns about losing their position if they raise difficult issues. External members also need to be able to adjust to Local Government culture and finance, they will also require training. Both independent members and Councillor members of a board need to have a remit to challenge and actively participate in the business of the Board and the governance of the company;

 

(n)  Share holder meetings are essential, the CGSC needs to ensure that the meetings are held and are properly conducted with standard reporting and formal minutes. The issue of Share holder representatives need to be resolved to allow officers enough time to fulfil their duties as Shareholder Representative;

 

(o)  There is a lot of work to do and actions have been identified with deadlines, some of which are very short. Capacity has to be found to progress the actions. There is a need for pace to the response the Council provides to ensure that other companies are run appropriately and Councillors are supported in their roles;

 

(p)  Value for money is key, consideration will be given to the suggestion that a Value for Money statement should be required when contracts are awarded to Council owned companies without a tender process first taking place;

 

(q)  Chairs of companies do not need to have specific legal or accountancy qualifications. Chairs across the council owned companies have various strength, regardless of their formal qualifications. Technical and sectoral experience is also important as is the ability of the Chair to develop a positive culture of challenge within the Board;

 

(r)  The strategic review of Robin Hood Energy is not yet completed. The recommendation in the report to determine the future of the company has been completed. The customers will be sold to other companies and this process is underway. There is ongoing consultation with the staff group, and there are legal and other arrangements to be completed, which should be completed by the end of the year or soon after that. There are regular update reports to the Robin Hood Energy Steering group;

 

(s)  The use of Gateway and Phase reviews on Capital projects can be looked at and ensure that their use is in place and consider whether Audit Committee should receive a schedule of reviews. The programmes that are being taken forward are being regularly monitored. Again culture and integrity of the review structure is important to ensure that outcome is not dictated prior to the review happening;

 

(t)  Independent members of governing bodies and company boards need to add value, not just through their experience. There were periods of time when there were no experts on the RHE board and since the employment of an industry expert the Board has had more confidence to navigate the difficult phase in a better ways than without that expertise;

 

(u)  The culture within an organisation is driven by leadership. Leadership needs to drive the change in the culture going forward and councillors and officers need to consider how change can best be driven.

 

The Chair thanked Councillor Mellen for his attendance and the Committee noted the presentation and points made in the discussion that followed it.

Supporting documents: