Capacity issues present “significant” barrier to improving finances at Woking, Commissioners say

Woking Borough Council "remains in an extremely vulnerable position" due to massive debts and a "historical lack of rigour in its commercial activity", while its improvement is being slowed by a "significant" lack of capacity, commissioners have reported.

In their second report to the Secretary of State for Levelling Up, Housing and Communities, Michael Gove, commissioners Jim Taylor, Carol Culley and Mervyn Greer said the authority will need Government support to balance its budget by March 2024.

The commissioners, who were appointed just before the council issued a section 114 notice in June 2023, said progress "has been hampered by a significant lack of capacity and capability in the finance and commercial functions in particular, which has necessitated Commissioners taking a very hands-on approach".

Woking's section 114 notice was in response to a budget deficit of more than £1bn, a debt of £1.8bn, and just £16m in core funding available in the 2023/24 financial year.

Two large commercial schemes in the council's portfolio – Victoria Place shopping mall and a housing regeneration project in Sheerwater – account for the majority of its debt.

According to the Commissioners' second report, published yesterday (13 December), the debt now stands at circa £2 billion alongside core resources of £14.9 million. The Authority is the most indebted local authority relative to size in the UK

The report said Woking's overall budget position is: "Extremely challenging, not least because the council does not have the resources to support the high level of debt incurred.

"The finance function within the Council is still not fit for purpose and not equipped to deliver the volume and complexity of the work required."

It continued: "Under the leadership of the interim S151 Officer, there is some good input from the finance team and the interim support in place, but with the challenges in sourcing further support, there remains a significant gap in the skills and capacity required."

This, combined with the significant demands being placed on managers across the organisation, is a barrier to greater progress being made, the Commissioners said.

The report also noted that urgent progress is required in securing budget savings ahead of March 2024, but a lack of organisational experience in the delivery of large savings programmes is impeding this.

Detailing governance developments at the council, the report said a review of the council's scrutiny function is underway, and the initial audit of arrangements is now complete.

It also said that most scrutiny meetings "have been conducted well", although some have been too lengthy and would benefit from more efficient running, with one recent meeting lasting nearly four hours.

The corporate risk register has been updated in a "thorough manner", the quality of reports has improved, and the rigour required for business cases is also improving, the report added.

Three Commercial and Financial Governance Board meetings have been held so far, which have resulted in decisions to remove council officers from directorships of council-owned companies. Commissioners said this was "an important action taken to remove the significant conflict of interest when instructing companies to take appropriate steps to reduce further commercial risk to the Council".

The board has also called for the renegotiation of terms for the disposal of a significant property in the council's portfolio, which had received a below-market offer.

It has also approved and adopted a 'Companies Governance Framework' aimed at addressing weaknesses in the relationship between the council and the company boards by strengthening the shareholder representative role and setting clear rules for appointing non-executive board directors.

The report said constitutional changes are needed and specified that new financial and procurement regulations need to be reflected in the constitution along with other potential changes which should be identified as the council progresses through its improvement plan.

There is a constitutional working group which will examine the proposals.

The council's annual governance statement also needs to be developed, according to the report. A workstream on this issue has been added to the council's 'Improvement and Recovery Plan' for the coming year, which will include the creation of a quarterly governance group whose work will inform the annual governance statement.

The approach to the internal audit function is being re-evaluated with an emphasis on wider involvement in the scope of the work.

Commissioners added that there is "little" counter-fraud capacity within the team, but counter-fraud provision has now been commissioned from a neighbouring authority.

The report also reveals that Woking has made a self-referral to the Regulator of Social Housing on whether some of the council's housing stock met all relevant standards, which may result in a regulatory notice being issued. There is a significant programme of remedial work which must be completed, it said.

Following the issuance of the second report, Jim Taylor is stepping down as lead commissioner for personal reasons. He will be replaced by Sir Tony Redmond.

Levelling Up Secretary Michael Gove has also appointed Richard Carr as 'Managing Director Commissioner', following the resignation of Woking's Chief Executive, Julie Fisher.

As Managing Director Commissioner, Carr will fulfil the role of chief executive and head of paid service for Woking once the current Chief Executive departs.

Responding to the Commissioners' second report, Cllr Ann-Marie Barker, Leader of Woking Borough Council, said: “I’m pleased that the Commissioners have recognised the council’s hard work and the progress we have made in their second report, while setting out clearly the very significant challenges the council continues to face. 

“The intervention model in Woking is working well and we are fortunate that we will have the experience of Sir Tony Redmond and Richard Carr to help us. I’m delighted that Julie Fisher has kindly agreed to stay on as Chief Executive until April to ensure that the council has the senior leadership it needs over that period and to enable an effective handover to Richard. I’d like to thank Jim Taylor for his work as a reviewer in the spring and as Lead Commissioner since May.”

Directions at the council are set to remain in force until 25 May 2028.

Adam Carey