Agenda item

Report of the Strategic Director of Finance

Bipon Bhakri, Head of Finance – Commercial & Projects gave a presentation to the Committee on the Companies Financial Governance Framework outlining the risk management work around group companies. He highlighted the following points:

(a)  The governance framework is monitored through the Companies Governance Sub Committee (CGSC) and consists of three strands:

·  Financial Management

·  Business Management

·  Risk Management

(b)  In terms of Financial Management, each month the group companies submit a report on their financial position to the CGSC, these reports include information on profitability, cash balances and any variances identified.  The companies also report their Medium Term Financial plans (MTFP) to the Sub Committee and the implications this has for the Council are assessed. There will also be financial management training available to the committee members;

(c)  The second area, business management, includes the development of a group business strategy and business performance;

(d)  There are shareholder representatives who attend on a quarterly basis to provide a report on the business positon and governance and business performance to assure the council around protection of its investment and maximisation of returns;

(e)  Each company also provides the Sub Committee with business strategies, future plans and trading prospects alongside financial information;

(f)  Risk management at the Sub Committee includes a combined risk register, with items drawn from each company’s individual risk register to obtain a group position, a group risk plan detailing parameters within which the companies are operating and how risk is managed, alongside specific training around risk management; 

(g)  The Company Risk review process has a number of steps, initially the Company Board reviews and sign off their own key risks. There are regular meetings between the Council and Companies around identified risks and performance. This is then fed into an internal meeting with the finance and risk colleagues to establish how these risks impact on the Council and the Council’s risk via the Finance Risk register;

(h)  The Strategic Finance Director reviews these risks to decide if there is any need to escalate them and what they mean to the Council’s risk and financial position. These risks are finally presented to the CGSC in the monthly review, actions are identified and reported back to the companies to mitigate or manage the risk;

(i)  The 9 Group companies all have their own independent external auditors. Key lines of work considered during the Audits are:

·  Impact of Covid 19 and the material uncertainty of the business environment

·  Going concern

·  Internal control frameworks, and

·  Management override

(j)  The auditors findings are presented to the company as part of the end of year accounts process board and any material issues are for that board to follow up. They are then fed into the CGSC to ensure that a suitable work programme for the Sub Committee is in place encompassing appropriate support.

During discussion and questions the following points were raised:

(k)  The structure presented would benefit from Shareholder meetings, and strategic joint working that allow strategic issues to be discussed with the Council’s lead officer, Company and relevant Portfolio Holder present and ensure shared aims are being delivered. The Sub Committee is not the appropriate place for those discussions and a shareholder meeting with the company would allow that work to happen. This mechanism would also ensure that the Shareholder report to the CGSC contained a full picture;

(l)  A Committee member raised concerns around the difficulty in embedding risk management into the ways of working and regular reporting. Finance and Risk reporting/management sit together and should work together to feed into monthly reporting;

(m)The Director of Strategic Finance will expect to see a shareholder report supported by analysis of key risks, any potential for company distress will then be visible enabling action. Once the framework is embedded information will be fed into the CGSC which will allow the Council to identify if a company is entering a distressed state. This can then be used to make members aware and action to be taken. It will take a little time for this to become a systematic approach but will benefit companies and the Council.

Resolved to:

(1)  Note the use of the Companies Financial Governance Framework to support its risk management of the group companies; and

(2)  Note the Group Risk Register and its connection to the City Council Finance Risk Register.