To receive a report from the Internal Audit Manager, Assurance Lincolnshire.

Matthew Waller, Internal Audit Manager, Assurance Lincolnshire presented the Internal Audit Report - Lessons learnt concerning the creation of and early operation of Invest East Lindsey, pages 61 to 96 of the Agenda refers and Members were asked to consider the report and associated action plan.

Members were advised that the Council asked Assurance Lincolnshire to review the set up and governance arrangements for Invest East Lindsey Limited.  They approached the review with a strong emphasis on governance, including effective decision-making process and set up of the company.  The outcome of this audit was designed to improve the Council’s governance arrangements going forward.

The completion of this audit had been significantly delayed due to factors within the Audit team, meaning some of the findings were out of date and recommended actions were already completed.  They were kept in for transparency and management comments had been added in green boxes to show progress and clarify the current position where relevant.  Due to the delay, interim findings were provided to the Council, enabling work to start on those areas of focus.

Rebecca James, Scrutiny and Policy Officer advised Members that following the interim feedback already received, fifteen of the actions had been completed and the outstanding items were due to be completed by December 2023.

Appendix A summarised the findings within the Executive Summary Section, pages 68 to 79 of the Agenda refer.  These were also summarised into an action plan which can be found at Appendix B, pages 19 to 28 of the Supplementary Agenda refer.  It was noted by the audit team that due to the interim feedback given during the review and the delay in reporting the final audit outcomes, some of the recommendations had already been actioned.  This was highlighted throughout the report in the ‘management comments,’ which were all contained within green text boxes to make them easy to find.

The Internal Audit Manager drew Members’ attention to Paragraph 1.6, page 69 of the Agenda refers as a key statement.

The Internal Audit Manager stated that he was happy to share some examples from the action plan where the detail was to address the issues that had been raised.

The Chairman invited Councillor Richard Fry, Portfolio Holder for Finance and Chairman of the Invest East Lindsey Supervisory Board to address the Committee.

Councillor Fry thanked the Internal Audit Manager for the very valuable report and stated that from his perspective and the positions he held that he accepted the conclusions that had been drawn and was happy for the suggested improvements to be adopted and would commit to the process going forward.

Following which, Members were invited to put their comments and questions forward.

A Member queried why a Director’s Handbook had not been completed during the four years the company had been trading, Paragraph 1.22 of the report refers.  In response, the Scrutiny and Policy Officer advised Members that directors received training and copies of all of the relevant company documents and the business plans, however it was not collated into a single document.  However, comments received had been taken on board and a handbook was being developed.

A concern was raised relating to the single appointment of a director which was legal, but not considered sufficient for such a large investment.  In response, the Scrutiny and Policy Officer advised Members that this was due to the timing of setting up the company and the requirement for it to go live on 1 January 2020 to allow trading at Kingfisher Caravan Park.  Within a couple of months more appointments had been made and board meetings, followed by the shareholder supervisory board meetings commenced.

Members were advised that a scrutiny panel had just started on Invest East Lindsey with a focus on Kingfisher Caravan Park and panel members had been provided with the timeline of how the company was created.

Further to the information contained within Paragraph 1.23, a query was raised whether a whistleblowing policy was in place and considered it important for a clear policy to be in place if there were any issues with the stakeholders or directors.  In response, the Monitoring Officer advised that he would take this away to see how this fitted into the current whistleblowing arrangements that the Council had in place.

A comment was received in relation to Paragraph 1.25 with regards to best practice and providing an annual report on the company and queried whether Internal Audit considered that an annual report was not sufficient.  In response, the Scrutiny and Policy Officer acknowledged that best practice had not been followed, however more was now being done and this was reflected in the action plan.

A Member raised further concerns in relation to Paragraph 1.26 that the Council may have been ‘drip fed’ information that they needed at the time and no more as it had already been acknowledged that the business plan was not as robust as it needed to be and the initial activity of the company related to Kingfisher Caravan Park only.  It was further highlighted that based on very limited information it appeared that certain things were approved before the company actually existed.  In response, the Scrutiny and Policy Officer confirmed that decisions were not being made in 2018 but discussions had been undertaken and a process was followed, however as had highlighted in the audit this was not as robust as it could have been. 

A Member commented that she was pleased to see the sole signatory issue had been addressed, Paragraph 1.35 refers and highlighted as a priority that this must never happen again.  In response, the Scrutiny and Policy Officer advised Members that although it was a sole signatory on the account the payment had to be authorised by other directors.

A Member expressed her concern that should the Council wish to explore future company models, it was very important that this report and the lessons learned be used as this provided the perfect template of areas that needed to be considered.

A Member added that this was a good example where pre-decision scrutiny could have been used in a more effective way and felt the management response had not reflected this opportunity for the future.

A Member referred to the Shareholder Supervisory Board, Paragraph 1.24 refers and queried whether this had the full Membership of four elected Members.  It was confirmed that there were three Members currently.

The Internal Audit Manager thanked Members for their comments and advised that decision making across the Council was included in the audit plan for 2023 so Members would get further assurance around a number of the elements picked up on.

A Member agreed with comments received, however asked for assurance that this was not going to be a case of lessons learned and the report forgotten and whether this was going to be embedded in a mechanism for future business cases for Partnerships.  A secondary point was made in relation to whether IT support and procurement support could have been made available at an early stage of the company being set up to support its implementation.

A Member referred to the Committee’s terms of reference and highlighted that it referred to the Council’s financial controls and internal controls but did not refer to partnership arrangements and asked if this could be updated for future reference.  The Scrutiny and Policy Officer referred Members to Action No. 25, pages 24 to 25 of the Supplementary Agenda refer which should address this moving forward.  A Member added that the annual update in line with the company’s review of its governance documents should be added to the Committee’s work programme.

A Member stated that the Invest East Lindsey report should be presented to Council as it was highlighted that as being part of Audit and Governance Committee Minutes, Council would not give it sufficient consideration.  It was further highlighted that there was very little information on the website relating to Invest East Lindsey and requested that this be reviewed as a matter of importance, not only as the Council faced its pubic but also that an element of the money made from the company was of benefit to the public.  In response, the Monitoring Officer advised Members that he would take this away to review with the relevant people to see if the information could be made clearer or to signpost.  In terms of the Committee minutes, it was highlighted that the purpose of them being presented to Council was that Members were kept abreast of the points raised by the Committee and it provided the opportunity for all Members to ask questions to the Chairman of the Committee and raise any points.

No further comments or questions were received.

The Chairman thanked the Internal Audit Manager for a very thorough report.

Following which, it was

RESOLVED:

That the Internal Audit Report – ‘Lessons learnt concerning the creation of and early operation of Invest East Lindsey’ be noted.

N.B. Councillor Richard Fry, Portfolio Holder for Finance left the Meeting at 12.07pm.