SUMMARY/PURPOSE
1.
All
members of the Council have received a copy of the Interim Audit letter which
was received by the Council in December.
The letter and this report is brought before the Executive to allow
there to be public discussion of the issues raised in the report and the action
that the Council has so far taken by way of response.
BACKGROUND
2.
Neil
Childs’ Interim Audit letter focuses on the Decision Making and Corporate
Governance implications of the 2002 and 2003 music festivals. The Council had earlier commissioned a
report by Neil Newton into what it recognised were a number of deficiencies in
the way in which the 2002 festival had been agreed and then actioned. In the light of that report, Neil Childs, as
our then District Auditor, carried out some further investigations to assess
the response the Council had made to that report.
3.
During
the course of discussions with Mr Childs, he raised concerns about whether the
Council had acted within its powers.
Council Officers were confident that the Council had done so and took
Counsel’s opinion on this issue. Counsel advised that the decisions the Council
had made were within its powers although Counsel felt, as does Mr Childs, that
the resolutions passed by the Executive were open to ambiguity.
4.
The
District Auditor considered whether his comments to the Council should be made
through a statutory Public Interest Report, which would have required formal
consideration by the whole Council. As
his report makes clear, he has decided against such a step in view of the fact
that some significant changes have already been made.
5.
The
Council is not required to publicly debate the report, but will do so as a
further demonstration of the Council’s wish to be seen to be an open and
accountable organisation. All Members of the Council have been invited to
attend and participate in the meeting of the Executive.
6.
The
majority of the Auditor’s comments relate to the 2002 festival but he also
deals with some concerns relating to the 2003 festival. For ease of reference these are taken in
turn with commentary on the steps that have been or will be taken to deal with
each issue raised.
THE 2002 FESTIVAL
7.
The
Auditor’s report identifies four areas of concern in the Council’s Corporate
Governance arrangements:
(a)
lack
of discipline in reporting and decision making processes.
The report which proposed the
contractual arrangements for the 2002 festival was drafted only a few days
before the Agenda was dispatched for the meeting of the Executive in November
2001. The report was drafted without sufficient time to allow for legal and financial
implications to be included and meant that financial advice had to be given
orally at the meeting. This process
rightly draws criticism from the Auditor and led directly to a number of the
criticisms that are made in the report.
The introduction of the Forward Plan, the scrutiny of Executive reports by the Directors Group and improved understanding by Portfolio Holders of their accountabilities have significantly altered the way in which such matters are now dealt with. These changes have been recognised by Auditor who comments that “Officers had agreed action on priority issues within a month of the (Neil Newton) report and this has already led to some significant changes in the way the Council is managed”.
(b)
poor
understanding of new constitutional processes and lack of clarity over
functions and roles.
This is a reference to the
confusion that existed at both member and officer level of the roles and
function of the different parts of the new constitution arrangements that the
Council had adopted. The specific
reference (which is dealt with in some detail in the Neil Newton report) is to
the scrutiny group established to oversee the delivery of the festival which,
at times, appeared to be seeking to make decisions rather than to scrutinise
progress.
Arising from the earlier Neil Newton report, the Monitoring Officer has provided a series of training courses for Officers and Members with a view to providing a clearer understanding of the constitutional arrangements. This course has so far been utilised by a wide range of staff and, to date, 18 elected members. It is clearly extremely important that all elected members, and in particular those in a decision making role, undertake this course and the Executive is asked to confirm the need for all members to make this a priority in the very near future.
(c)
inadequate
performance management system and culture.
The Auditor’s concern here is that there was no corporate overview of the delivery of the festival and in particular it’s financial situation, that task being left with specific officers liaising with a small number of elected members.
The Auditor additionally raises
the concern, again reflected in the Neil Newton report, of the failure of
officers to take an effective corporate management role in relation to Wight
Leisure.
It is clear that a number of senior officers and a few Members were briefed on a regular basis as the planning for the festival unfolded but due to weaknesses in the Council’s systems this information was not conveyed to either the directors or the Executive.
The Council’s performance management systems were found to be deficient during the Comprehensive Performance Assessment undertaken in the summer of 2002. Since then, considerable corporate activity has been committed to establishing a completely new performance management system, which results in a quarterly report to the Executive. Had such a system existed in the early part of 2002, then it would have enabled a more satisfactory corporate approach to this key event.
The management arrangements for Wight Leisure and the processes adopted pursuant to the externalisation process are the subject of a separate report to the Executive on the Agenda. The Auditor comments in similar vein to the comments from Tony Hall (in relation to the externalisation report) and further action is clearly needed to provide appropriate corporate management arrangements for Wight Leisure. This process will be started during the first three months of 2004 alongside the structural review of the Education Directorate arising from the decision of the Executive to establish a new Children’s Services Directorate.
(d)
poor
understanding of appropriate procurement techniques.
The Auditor’s concern here was
that Solo were appointed as agents for the festival without competition and
that only belated regard was given to proper processes and standing orders
Neil Newton’s report records
that Wight Leisure did attempt albeit unsuccessfully to attract the interest of
other promoters. Solo were the only
company that responded in a positive way.
As with performance management, the Comprehensive Performance Assessment correctly identified that the Council’s procurement approach needed significant improvement. Advice has been taken from the Improvement and Development Agency during the summer of 2003 and the Council has since adopted a new gateway approach to all major procurements. Work is also underway to implement a new approach to project management throughout the whole Council. These steps will take some time to embed but should provide some reassurance that the criticisms of the Auditor about our procurement in respect of the festival are being satisfactory addressed.
THE 2003 FESTIVAL
8.
The
Auditor’s concerns in respect of the 2003 festival were in respect of different
issues. He is satisfied that the
Council has responded to the problems encountered in 2002, has sought to
minimise its exposure to financial risk and has entered an agreement that
should achieve the objectives of securing an annual event and providing a
financial return to the Council.
His investigation has covered
three areas :
(a)
The
delay in concluding terms with Solo until the last minute. The Auditor’s concern was that this left the
Council in a weak negotiating position.
Whilst this was clearly regrettable, the Council was unable to conclude
the agreement as Solo continued to seek revisions to it up until very late in
the day. In light of the stance taken
by the promoter, it is very difficult to know what other steps the Council
could have taken.
(b)
The
Auditor has examined the procedure used by the Council in reducing the call-in
period. However, having investigated
this he concludes that the Council did comply with it’s own procedures and gave
due notice.
(c)
The
third issue relates to the receipt of hospitality. The Auditor concludes that there was no conflict of interest as
the offer of hospitality was made after the agreement with Solo had been
concluded, and indeed was made by Wight Leisure on
behalf of the Portfolio Holder and not directly by Solo. However, the Auditor has expressed concern
that some members who were offered hospitality did not declare whether they
accepted or declined the invitation, as they are obliged
to do so by the Council’s procedures.
This did represent a departure from normal procedure and may, as the
Auditor suggests, provide some evidence that Wight Leisure sought to act, and
on occasion may have been treated, differently from other departments of the
council. However, as advice was taken at the time, and the anomaly acted upon a
potentially more serious breach of corporate governance was avoided.
SUMMARY
9.
Whilst
there are some points of detail where the Council takes issue with some parts of
Mr Child’s report, the main conclusions from the report should be welcomed by
the Council. The way in which the
Council dealt with the decision making process for the 2002 festival was
unacceptable and clearly fell well short of the standards that we are now
aspiring to and are achieving. Indeed,
the recommendations of the external auditor are closely aligned to those made
by Neil Newton, accepted by the Executive on 21 May 2003 and in relation
to which substantial progress has been made.
The Executive should be reassured by the changes that have taken place
since 2001, but it is important that all members of the Executive and any
officer who is preparing a report for it continues to maintain the disciplined
approach to decision making which has been implemented in the last two years.
10.
At
the same time as acknowledging the weaknesses highlighted in the report, it is
right to recognise that the Council’s actions have enabled two music festivals
to take place already with the prospect, in 2004 and beyond, of even more
successful annual events. These events, as well as providing a superb
opportunity to promote the Island in a national and international context,
offer the prospect of financial reimbursement over the next few years for the
significant investment the Council had to make in respect of the 2002 festival.
11.
For as long
as the Rock Festival, which is the main event within the two-week Festival,
continues to be delivered it should also be recognised that the contract
negotiated and agreed by the Council ensures that as the event becomes more
successful then the Council have the ability to share in that success without
bearing any significant risk.
LEGAL IMPLICATIONS
12.
As
the Interim Management Letter is not a report under S8 Audit Commission Act
1998, it is within the discretion of the local authority to debate the contents
of the report as it sees fit. Acting on
the recommendations will assist in the duty to deliver best value services in
accordance with the Local Government Act 1999.
RECOMMENDATIONS
13.
The
District Auditor makes three specific recommendations which the Executive are
asked to endorse:
(a)
That
all members should participate in the programme of training on decision making.
(b)
That
the revised arrangements by which Directors ensure that reports to the
Executive are necessary and sufficiently comprehensive should be maintained.
(c)
That
further work is required to recognise that Wight Leisure is, until or unless
externalised, an integral part of the Council.
14.
It
is therefore recommended that the Executive:
Embrace and adopt the recommendations of the
Audit Commission and, in particular, commit all members of the Executive to
participate in the decision making training programme, and urge other members
to also participate.
BACKGROUND PAPERS
Audit Commission Interim
Management Letter
Neil Newton Report
Contact Point: Mike Fisher, ( 823102, e-mail: [email protected]
|
M FISHER Chief Executive Officer |
S SMART Leader of the Council |