Green Party councillors’ statement regarding the loss of £6m pounds by Labour council-run company.

29 May 2020

Leader of the Green Party group on Norwich City Council, Martin Schmierer, said, “£6m of taxpayers’ money appears to have been wasted due to the ineptitude of Labour cabinet members, who have been trying to run a property development company despite seemingly having little or no expertise in how to do so.

“From the start, a blatant conflict of interests meant that the company was not properly scrutinised and had no independent oversight. The same Labour councillors who are on the company’s board are also members of the Labour cabinet, which had an exclusive role to flag up any problems and to make decisions about lending money to the company.

“This was despite an audit report clearly criticising the governance and operation of the company[1]. Did those Labour councillors really have the skills to run such a company?

“The final problem is that all of this happened in secret. As the opposition, Green Party councillors repeatedly raised concerns about the risk associated with this companybut our requests for further insight were refused [2]. We also consistently argued that key decisions that involve taxpayers’ money should be discussed in public. The council should have nothing to hide and be open about how they invest the people's money.”

Green Party councillor Paul Neale added, “It is important that the council continues to build high quality houses for Norwich residents. But it is important that this is done right, and with decisions made in a transparent way. Recently, the company has already undergone major changes and it is encouraging that some of the improvements that we have asked for have now been implemented.

“If this company continues to run in order to build more houses and recoup the lost money, this needs to be done in an open way. The company needs to be overseen by an experienced and independent board that the public can have confidence in, as is standard for similar organisations.

“In addition, there needs to be an independent review into the running of the company so we can be sure that the council achieves its aim of building high quality housing without jeopardising public money.

“We need to be sure that residents get value for money and that the company is not taking unnecessary risks.

“Going forward, the council needs to learn serious lessons from this. The EDP was right to say that there is no place for 'arrogance and naivety' when dealing with taxpayers’ money.”

Notes to editors

1)      The agenda of the Norwich City Council audit meeting on 21 January 2020, p.14, states: “As detailed above, internal audit has not had any assurance from management that the recommendations made following the review of Norwich Regeneration Ltd (reported to Audit Committee in March 2019) have been fully implemented. In addition there has been no confirmation that arrangements for an independent internal audit of the Company has have been made. Without these key recommendations being implemented the Council has no reliable assurance that outcomes expected of the Company are being achieved (or indeed reasons why outcomes are not as expected) nor any assurance that those governance arrangements and practices operating within the Company are in line with those expected by the Council.”

 

2)      The minutes of the Norwich City Council audit meeting on 11 June 2019,state, “Discussion ensued on the group accounts and some members concerns that as the company expanded it would put the council at greater risk. The chair and Councillor Wright, as chair of scrutiny committee, proposed that the audit committee reviewed the audited NRL accounts and that the company established its own internal audit. The chief finance officer said that NRL was a separate company, albeit a wholly owned company by the council, and its accounts contained commercial information and were not subject to publication like the council’s or the group accounts. A summary of the NRL accounts would be available at Companies House. The chair also said that whilst an external auditor audited the NRL accounts there was no internal audit process of NRL on the council’s behalf. He considered that this was important as the growing company was the largest inherent risk to the council within its control. The chief finance officer said that the group accounts were part of the statement of accounts which was subject to external audit and referred to the governance arrangements for the NRL board and operation of the company, which were agreed and monitored by the cabinet. The assistant head of internal audit (LGSS) said the authority should have assurance that the governance arrangements for NRL were fit for purpose and it was for members to take a view on the inherent risk to the council. In reply to a question, the strategic finance business partner said that this was the second year that group accounts were required. The cabinet member for resources and the chief finance officer explained that it was a growing company which did not require an external auditor of its own at this point or for its accounts to be considered at this committee. These arrangements would be reviewed as the company grew. The chair said that whilst it was a fledgling company it still was liable for large sums of money and asked how the threshold would be determined for its own internal audit. He considered that it was prudent to put mechanisms in place now before the business expanded.”






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