Agenda item

At the request of the Chairman, Councillor Nigel Manning and in the interests of transparency, the Vice-Chairman took the chair for the consideration of this item on the basis that he had been a member of the Property Review Group when the Burchatts Farm Barn matter had been considered previously.

Prior to the Committee’s consideration of this matter, Mr Gavin Morgan, on behalf of the Guildford Heritage Forum, asked the Committee chairman (Councillor Nigel Manning) the following question:

“Does the Chairman of the Corporate Governance and Standards Committee really think it is wise for the Council to reject large parts of the KPMG report?

Section 3.6 tries reject the entire report by saying that the scope was to assess the disposal of community assets whereas Burchatts Farm Barn was an operational asset.

I think the Council is missing the point. It closed a useful community building partly because it chose to categorise it in a particular way. Maybe the categorisation was wrong. Certainly, to the average voter it is blindingly obvious that Burchatts farm Barn was a valued community building. It is an 18^th century farmhouse and barn converted for the public to hire. It is situated in a public park next to a model railway club and other community halls. The fact that the Council chose to categorise it in a particular way does not change what it was.

Next the Council denies that its financial figures were misleading and rejects the second part of Recommendation 4 on page 9 of the KPMG report. This suggests the Council’s 2017 claim that “the property is currently costing Council between £30-£70k per year” was an exaggeration. Although the Council rejects the claim its defence seems to prove that the KPMG report was correct. The Council now states that “net cost of running the asset to the Council was around £17,000 to £18,000” and not £30-£70 as stated in 2017. If it had used the lower figure back in 2017 the argument for closing the Burchatts Farm Barn would have been much weaker and possibly unsustainable.

It appears to me that Lead Councillors for Asset Management were using misleading figures that suited an agenda and were not bothered about questioning what they received from officers. If the figures used to justify the decision to close Burchatts Farm Barn were misleading then the decision itself was potentially flawed.

There is no excuse for making the financial case against heritage buildings worse than it really is and ignoring community value. And yet in discussions under the last Council about Wanborough Barn, West Lodge and Guildford Museum I heard complaints that costs were being inflated by including shared costs or once in a generation repair bills.

What I see in this report from the Council is a defensive attitude that is resistant to criticism and change. Is that the impression this Council wants to give the community?

What I want to see is a forward thinking Council eager to listen, tighten processes and continually improve. I want to see a culture where officers willingly explain the detail behind figures if asked by Councillors. I want a culture where Councillors are expected to challenge numbers that seem misleading without fear of censure, even when it is against the interests of their political party.At a time when the council is talking a lot about massive cuts we need to be confident that debates are based on accurate, clear and unbiased information rather than ballpark figures carefully selected to back up a predetermined point of view.

So I ask the Chairman, do you really think it is wise for the Council to reject large parts of the KPMG report?”

The chairman’s reply to this question was as follows:

“I do not agree that large parts of the KPMG report are rejected. Clearly there are strong views and differences of opinion on both sides of the argument for and against the leasing of Burchatts Farm Barn.  The Council is required to classify assets in its asset register in line with CIPFA guidance; it is also required by CIPFA guidance to charge support service costs, an apportionment of the Council’s overheads and any repairs and maintenance against each service.  The benefit of this accounting approach is that in making decisions as to whether to outsource a service, the decision is made based on Total Whole Life Cost of service provision rather than the annual marginal or direct costs, which may understate the true cost of asset ownership. 

The Council is required by law to comply with CIPFA guidance as it is proper accounting practice.  As set out in the report, the ‘saving’ to the Council is not just the net costs that have been reduced but also includes the additional income to the Council from leasing the asset.  In addition, whilst there are some strong views as to how Burchatts Farm Barn should or should not have been classified, the fact is that Burchatts Barn does not hold any special status and is not a nominated Asset of Community value.  As such there were no specific requirements around the leasing or disposal of the asset which the Council was required to follow apart from the requirement set out in the Council’s Constitution and the Local Government Act 1972 that the Council seeks ‘Best Consideration reasonably obtainable’ on the disposal of assets. 

Regardless of whether there is agreement or disagreement with the audit report, the Council has committed to implement the majority of the recommendations (which include the proposal to set out a community asset transfer policy) and these will be progressed. The Council is open to criticism where it considers that such criticism is valid.

I would reiterate that Burchatts Farm Barn was an Operational asset and not a Community asset and the correct disposal procedure applicable at that time was followed. The actions being progressed now include reviewing the classification of assets before any future disposals and consulting with residents’ groups and users.  These measures should protect community interests in future. As the report explains, local groups can nominate ‘assets of community value’, so that assets that are important to the community can be locally listed”.

In his supplementary question, Mr Morgan asked the Councillor Manning whether he thought that it should be a fundamental principle that financial information used to justify decisions is honest, clear and transparent, and if so how the Council can ensure that it happens?

Councillor Manning responded by agreeing with Mr Morgan that it was fundamental that accurate financial information was provided to Councillors to enable them to make correct decisions. Councillors should challenge, and have challenged in the past, figures and information provided to them where they had concerns.  Councillors relied on officers to provide the correct data upon which to make decisions.  Councillor Manning stated that he understood that the losses of £17-18,000, were an average over a four-year period and not just a loss in one year, whereas the total loss was £30 to £70,000 over that period. Although great effort was made by officers to provide correct and up-to-date information, any mistakes made were human error. Councillor Manning felt that more careful collation of information needed to be undertaken to ensure continuity in formulating reports.  He concluded by stating that Burchatts Farm Barn had been a loss making operational asset and a decision was taken by the Council to offer it for leasing in order to reverse the financial burden on the Council, and that decision went through all the proper reporting and advertising processes in place at that time.

The Committee considered the final audit report by KPMG into the review of the letting of Burchatts Farm Barn (BFB).  The purpose of the review was to look at the design of controls and associated governance arrangements around the decision- making process, compliance with the controls and governance arrangements and then to identify any learning.  The review had been commissioned by officers in January 2020 following a request from a councillor which was supported by the (then) Lead Councillor for Finance and Assets.  The request had been made to KPMG in line with the co-sourced internal audit contract.  The scope of the review, as set out in the initial terms of reference was set to focus on the internal processes rather than political decisions and allow officers to identify and learn from any gaps in processes and procedures. 

Unfortunately, the review had been delayed due to the Covid 19 pandemic and officer resources being focussed on the Council’s response to the pandemic.

The covering report to the Committee provided additional contextual information around the decision-making process undertaken in relation to BFB and how the process fitted with the decision-making framework set out in the Council’s Constitution.

The decision to lease BFB for commercial purposes was initially a decision taken by the Corporate Management Team (CMT) in consultation with the Lead Councillor for Assets following consultation with the Property Resources Group (PRG) and ward councillors.  However, confirmation of the decision was ultimately taken by full Council in February 2018 as part of the Council’s budget process following submission and consideration of a savings bid for the 2018-19 budget.  The Council was able to make a decision to lease the asset for commercial purposes as no specific designated status required an alternative approach.  The Council followed an open market tender process and leased the property to the highest bidder, demonstrating that it complied with the need to obtain best consideration as required by s123 of the Local Government Act 1972.

The decision-making process resulting in the decision to lease and the choice of tenant followed the procedures set out in the Council’s Constitution for commercial leasing of an asset under s123 of the 1972 Act.  Had the decision to lease the asset for social, environmental, or economic wellbeing of the area been taken, then a different process would have been followed. 

Concerns had been raised about the leasing process which resulted in the audit review.  The main area of concern related to the initial decision to lease the asset for commercial purposes rather than for leasing the asset for social, environmental, and economic wellbeing purposes.  In order to ascertain which of the Council’s assets should be leased for the Social, Environmental, and Economic wellbeing purposes, officers had recommended that the Council should develop a community strategy and, as part of the strategy, to undertake an audit of the need for community facilities and the facilities that were available to meet that need in different areas of the borough to identify gaps in provision.  This could then lead to the development of a community asset transfer policy, which was recommended by CIPFA in its most recent guidance on asset management in local government.

In accepting the findings and recommendations officers had acknowledged:

(1)   That the Council’s Asset management framework needed to be reviewed and updated and in doing so a more detailed disposal policy agreed formally by the Executive

(2)   That a community strategy and community asset transfer policy should be developed and adopted by the Council

(3)   That consultation with residents’ groups and users of buildings should be undertaken where it is proposed that the Council’s operational buildings are to be leased

(4)   That the Council should better promote the ability for local groups to nominate ‘Assets of Community Value’ so that assets that were important to the community could be locally listed and the Council made aware of such assets

(5)   That the provision of financial information in informal briefing notes to Councillors as part of working groups should be checked by the Council’s finance team

(6)   That the Council’s new project and programme governance framework should be used to help document decisions around the review of asset utilisation and assessment of alternative options in order to help document leasing and disposal decisions in the future

(7)   That a balanced scorecard approach to evaluating bids for property should be implemented to help record the decision-making process

(8)   That minutes of working group meetings should be clear regarding recommended courses of action

During the debate, whilst there were concerns expressed about the process by which the audit review had been undertaken, most councillors supported the eight recommendations above.  Accordingly, the Committee

RESOLVED: That the final audit report on Burchatts Farm Barn and the content of the covering report to the Committee, be noted.

Reason:

To ensure good governance arrangements and internal control by undertaking an adequate level of audit coverage