Agenda item

To receive and consider a report from the Director of Law and Governance outlining details of a call-in received on the Shareholder Board Decision taken on Companies Audited Accounts (Report No.178)

The decision that has been called in was a Shareholder Board Decision taken on 29 January 2019 and included on the Publication of Decision List No: 47/18-19(List Ref: 1/47/18-19) issued on 31 January 2019.

It is proposed that consideration of the call-in be structured as follows:

· Brief outline of the reasons for the call-in by representative (s) of the members who   have called in the decision

· Response to the reasons provided for the Call-in by a Cabinet Member responsible for taking the decision

· Debate by Overview and Scrutiny Committee and agreement of action to be taken

The Committee received a report from the Director of Law and Governance outlining details of a call-in received on the Shareholder Board decision taken on Companies Audited Accounts. The Shareholder Board Decision was taken on 29 January 2019.

The Chair invited Councillor Laban to outline the reasons for call-in. 

Councillor Laban highlighted the following:

• The decision had not given full details regarding the loss shown in the audit accounts for Independence and Wellbeing Enfield (IWE) of £3.7m.
• Directors of the Company were also on the Shareholder Board.
• The decision had not gone into full details of what consolidation would look like.
• It had not put forward an action plan regarding the pension liability to show how the company is to return to profitability.
• It was not known if leasing expansion would affect service delivery.
• She wondered why the loss had not been foreseen?
• She asked why had the Shareholder Board met only twice in the last year and why were the accounts not available for the October Board meeting.

The Chair invited Matt Bowmer (Interim Director of Finance), to respond to the points raised. Councillor Levy said one of the key points appears to be about whether it was correct to assume that the loss shown for the Independence and Wellbeing Board appears to be a technical rather than a service issue.

The following responses were given:

• That the loss of £3.7m shown for the financial year (at end of March 2018) arises from the increase in the value of pension fund liabilities. £3.2m relates to future actuarial value of pension liabilities.  The additional £503k relates to the impact of pension contributions charged against operating staff arising from the previous year’s pension fund valuation.
• The account had been prepared under an assumption that the council would not safeguard the pension liability.  However, in the autumn further assurances were given that the council would fully guarantee the pension position.  Future assets/ liabilities now show a surplus of £200k.
• For 2017/18 there was no requirement for company accounts to be consolidated within the LBE accounts and the liability would remain within LBE’s balance sheet.
• That the loss relates to the pension liabilities of the company, as opposed to service delivery issues.  This had been explored and remedied by officers for the future, and thus does not need to be resolved within the company business plan.

The following issues/ questions were raised:

• In answer to a question from Councillor Hockney, Matt Bowmer answered that this would not sit on the risk register audited accounts.  This was a relatively low risk for small companies
• Councillor David- Sanders said although it would appear this had been a technical issue, he did not think there was sufficient clarity in the documentation.  Matt Bowmer spoke of the difficulty in assessing how the stock markets may have an effect. He would ensure less jargon is used for future reports.
• Councillor Caliskan referred to the changed composition of the Shareholders Board which followed a review of the governance process. This is to ensure there is not a conflict of interest. There would also be more meetings held. Cabinet members no longer chair any of the trading companies, this position is held by non-executive councillors.  She said these are key areas and involve council money it is therefore important to maintain an oversight by the council.
• Councillor Levy welcomed the future attendance at Overview and Scrutiny Committee of our trading companies when there are matters of interest to be discussed.

Councillor Laban summed up by saying that the decision by the Shareholder Board showed a loss on the account and, as such, this needed to be scrutinized.  She welcomed changes in the governance arrangements for the Shareholder Board and our trading companies and asked that reports relating to them are set out clearer going forward.  She was content with the answers received.

Following the discussion, the Committee took a vote and unanimously voted to confirm the original Shareholder Board decision.