The Government is set to control Croydon Council at arms length by agreeing the capitalisation loan request to achieve a balanced budget, overseen by a three person Improvement &Assurance Board panel meeting in secret, and with the threat of the appointment of commissioners if the Council does not carry out the required reforms and make the cuts.
This strategy follows the recommendations of the Independent Review Panel which submitted its report to the Secretary of State for Housing, Communities and Local Government submitted in November and was published by him on Monday.
Review Team Recommendations
Agreement for a capitalisation loan, backed by the threat of the appointment of commissioners to run the Council, are the two key recommendations of the review team.
They state: ‘We recognise that owing to the Council’s poor track record in financial management, that this decision carries with it some risks i.e., the Council may fail to solve its financial crisis. Therefore, our recommendations seek to mitigate this risk through proposing continued oversight and scrutiny of the Council’s progress with regular updates to your department.’
‘It is our view that there is no credible alternative option to capitalisation. We gave consideration to the phasing of capitalisation consents but felt this not possible as the Council has a substantial budget gap in the current financial year. In order to set its budget in February for 21/22 it will need to have knowledge of the availability of capitalisation going forward. Given the scale of the capitalisation sought we recognise that this is going to be exceptionally difficult for the Treasury, at a time when demands on Government spending and borrowing are so high.’
The team recommends ‘some short to medium term milestones ….that the Council should be expected to meet. If it fails significantly in meeting these milestones, (particularly managing within budget) then we would recommend that you intervene by installing a Commissioner or team of Commissioners as appropriate, to take over decision-making in key areas.’
Detailed Review Recommendations
‘a) The Council should produce a single detailed improvement plan in response to all external and internal recommendations and that this should be in place by no later than Dec 15th, 2020.
b) The Council should appoint an independent panel of specialist non-executive advisers, who should remain in place for a minimum of 3 years to advise and oversee progress on the improvement plan.
c) The Council’s budget for 21/22 should receive the scrutiny of the Council’s Finance Review Panel, prior to being presented to the Cabinet and Council and the comments of the Panel should be presented with the budget report.
d) The CEO should produce a revised organisational structure which ensures:
• the Section 151 officer reports directly to the CEO;
• that the executive leadership of the Council is strengthened and has sufficient capability, capacity and experience to lead the recovery;
• that there are officers at senior level with sufficient commercial experience and expertise to properly oversee the Council’s commercial investment portfolio;
• this revised structure should support the establishment of a programme management back office resource which is of sufficient capacity to properly enable and oversee the successful implementation of the single improvement plan; • the Council’s Finance Team should be strengthened both in terms of expertise and capacity;
• the Leader and interim CEO should produce a timetable for key executive posts to be filled permanently.
e) The Council should immediately strengthen its oversight of Brick by Brick by improving communication, monitoring contract information and development milestones and having experienced Non-Execs on the BBB board to ensure:
• the appointment of a Director of Finance;
• robust BBB financial (P&L and Cashflow) forecasts;
• further asset review work to test asset values;
• a State Aid compliant capital structure (possibly involving equity as per the original business plan); • a review by the new Finance Director of 3rd party future funding avenues to avoid premature value destruction;
• restoration of a collaborative relationship to meet (at least some of) the original goals of providing affordable housing and value creation. f) The Council should urgently consider and implement alternative uses for the Croydon Park Hotel, including the recent business case to use it for Emergency Temporary Accommodation.
g) The Council review its Assurance process and produce a more robust Assurance Framework to ensure that the checks and balances that should be in place to anticipate, alert and escalate any significant potential failings are effective. This Assurance Framework should be agreed with the Council’s budget for 2021/22. Within this the Council should give consideration to appointing a Chair from outside the majority group to its General Purpose and Audit Committee.
h) The Council should adopt the practice of the annual external audit report being reported to full Council and should formalise the facility for the CEO, Monitoring Officer and the Section 151 officer to meet with the key audit partner at least annually.
i) The Council should undertake a review within 6 months of the implementation of its integrated social care IT systems (ControCC and Liquid Logic) intended to link activity to Finance.
j) The Council should undertake a comprehensive review of its eligibility Criteria for Adults Services within 12 months.
k) The Council should identify opportunities to generate capital receipts to fund capitalisation in lieu of borrowing where possible. It should also review its capital programme to reduce the need for additional borrowing more generally and thereby reduce the pressure on the revenue budget.’
The Team suggests that there are 6 priority areas for action:
‘a) The Leadership Team needs to be strengthened.
b) The executive senior management needs to have within its rank’s commercial expertise.
c) The Finance Service – it must be strengthened as a priority (recognising that some temporary strengthening has already taken place).
d) The section 151 officer must report directly to the CEO.
e) A central programme office – this resource needs to be put together urgently to track and progress chase the planned changes.
f) The Council must immediately strengthen its oversight of Brick by Brick.’
Jenrick Appoints Improvement & Assurance Board/Panel
In a letter thanking Chris Wood and his two colleagues for their work Robert Jenrick says:
‘Having carefully considered your report, I agree that in view of the past failings of the Council, the size of the challenge it currently faces as a direct result, and in the context of the very considerable financial support that it is seeking from my Department, the Council should be the “subject of continued monitoring and scrutiny”. As such, I have appointed an Improvement and Assurance Panel, led by Tony McArdle who will be supported by members with specialist expertise in finance and commercial asset management. I have also asked the Council to submit the next iteration of their Improvement Plan to me before the end of this month. The first task of the Panel is to provide me with an independent view of the Council’s Exceptional Financial Support request and their revised improvement plan.’
Improvement & Assurance Board/Panel
Jenrick appointed Tony McArdle as Chair of the Improvement and Assurance Board/Panel on 18 February. This will involve:
• ‘Providing regular advice and challenge to the Council on the full range of their improvement activities.
• In the first instance, the Panel is asked to provide an initial assessment of the Improvement Plan incorporated into the Council’s EFS request (received 15 December 2020) by early February 2021.
• The Panel will also work with the Council to develop a clear assessment of its current assets and, where appropriate, a disposal strategy.
• More generally, the Panel will provide an assessment of on delivery against the milestones set out in the Council’s Improvement Plan which draws on the recommendations of the non-statutory report and reports from other reviews commissioned by the Council and which are identified as part of the Exceptional Financial Support that is being offered to the Council by central government.
• Providing written commentaries on the Council’s progress to the Secretary of State each quarter, including recommending the use of Best Value powers (such as the appointment of Commissioners) if the Council fails to demonstrate progress. These commentaries will be published.
Jenrick makes it clear that Panel meetings will be held in private and any minutes produced will not be published.
The members are:
Tony McArdle (ex-CEO of Lincolnshire CC and currently Lead Commissioner at Northamptonshire CC)
Margaret Lee (currently Executive Director, Corporate and Customer Services and previously CFO, Essex CC Independent external member (finance lead)N
Phil Brookes (Crown Representative, worked on Nottingham rapid non-statutory review) Independent external member (commercial and asset disposal)
The Purpose Of The Panel
• ‘To provide external advice, challenge and expertise to the London Borough of Croydon in developing and implementing their Improvement Plan; and
• To provide assurance to the Secretary of State of the London Borough of Croydon’s progress in delivering this Plan’.