Agenda item

To receive a report on the governance of Stone Circle companies.

The attached report will be considered by Cabinet on 27 September 2021.

The Chairman invited Perry Holmes, Director, Legal and Governance to present the Stone Circle Reports.

The officer explained that in 2019 Wiltshire Council had set up the Stone Circle Companies in order to deliver housing which people could rent. The aim was that these would fall somewhere between Council properties and private rentals.

Wiltshire Council would lend money to the companies which would acquire properties and rent them, which was less risky but had a lower yield, and use Council owned land to build properties to rent or sell. That came with more risk but also more reward.

In February 2021 Cabinet had asked for a review of how the companies were set up and the reports were considered at Cabinet in September. The reports looked at best practise elsewhere and made some recommendations which were detailed in full at pages 133 and 134 of the agenda. In summary these were:

1.    Improving the Business Plan

2.    Quarterly reporting to Wiltshire Council

3.    Creating a shareholder group as a sub-committee of Cabinet

4.    Introducing a 3 year term for the Chair

5.    Reviewing appointments to the Board

6.    Developing and implementing an appropriate staffing structure

7.    Annual presentation of governance arrangements to the Audit and Governance Committee.

The role of the Audit and Governance Committee was to seek assurance that there was an appropriate framework of governance in place for the companies. There should be a report regarding the governance of the companies presented to the Committee annually. It was hoped that representatives of the companies may be able to attend to when the reports came so they could present details such as returns and risks.

In response to a question regarding whether the Committee could make recommendations to the companies that would be implemented, the officer explained that whilst the companies were a separate commercial entity, we did have to account for public funds being spent on it, so we did have an element of control. The Committee could make recommendations via the Cabinet sub-committee back to the board, but it would be up to the board whether to implement them.

Some Members raised concerns regarding the risk involved with the Council moving into private sector areas which they had little knowledge of and referenced problems faced by Croydon Council when they bought a hotel.

The officer explained that the governance review of the companies, detailed by the flowchart at page 153 of the agenda, implemented processes to provide transparency on the risks. Stone Circle were revising their business plans in response to the recommendations by Cabinet and everything would be kept under review and stress tested. The officer stated that he was happy with the level of risk at present and the organisation as a whole was cognisant of the risk. If at any point things changed and he was no longer happy with the level of risk, a follow up report would come to Committee. 

In response to a question from Members the officer highlighted the different roles of the Audit and Governance Committee and the Financial Planning Task Group (FPTG). Whilst Wiltshire Council were not overseeing the running of the companies, interactions with the companies would come to the FPTG who would look at the business plan and challenge numbers, returns and debts et cetera. The Audit and Governance Committee was to seek assurance that the governance framework was fit for purpose. If the Committee were unhappy with the governance framework in place, they could make recommendations for changes and it would be reviewed annually.

Commercial transparency between Wiltshire Council and the Stone Circle companies was highlighted by Members as an area they were slightly uneasy with. Officers highlighted the shareholder group, through which everything would flow and referenced the Chinese or ethical walls principle which was an information barrier protocol within an organisation designed to prevent the exchange of information or communication that could lead to conflicts of interest.

The Chairman proposed a motion, seconded by Cllr Chuck Berry and it was,

Resolved:

·       To note the Governance of Stone Circle Companies report

·       That the Committee would receive an annual presentation on the governance arrangements of Stone Circle Companies.