Agenda item

External Auditor Appointment Process

Minutes:

 

The Committee considered a report concerning Governance arrangements for Bristol Energy.

 

The Committee received questions and answers from each of the following members of the public and Committee Members. Details of supplementary questions to the Chair and answers provided by him and other attendees are set out in each case:

 

Q2 – Councillor Jonathan Hucker

 

Q: Since there seems to have been an inadequate cash flow provision for Bristol Energy Company, was there any previous analysis of when the company would run out of cash? Why was there no cash flow statement.

 

A: Jon Roberts – Grant Thornton UK

Information had been provided on the technical arrangements. Cash flow information had been provided as part of the analysis of the investment into the company.

 

The Chair commented that it appeared cabinet was fully aware of the situation and it would have been helpful if it had been. Whilst future forecasting may have been known to some officers in Management, the governance requirements may not have been.

 

Q4 – Councillor Geoff Gollop

 

Q: Do you agree that the total loss which had occurred as a result of the situation with Bristol Energy should be relevant to stakeholders?

 

A – Chair: Yes they are. In addition, details of CEO staffing costs should be included.

 

Q: Do you agree that the full write off costs should be included in 2021 accounts?

 

A – Chair: Whilst the auditor costs were not currently included, they should be if they are not debarred from doing so.

 

Q: Will you let members of Audit Committee ask if there is certain information not inserted in the accounts before they are finalised?

 

A – Chair: Yes. The additional recommendations contained in the auditor’s report should be put before Full Council for approval, together with a feedback mechanism to ensure that the recommendations are adhered to?

 

Q5 – Clive Stevens

 

Q: In view of the importance of scrutiny operating properly with appropriate checks and balances, did Bristol have a good enough scrutiny system prior to the mayoral model?

 

A: It largely depended on what the relationship was like between the Cabinet (including the Leader) and Scrutiny. It was noted that scrutiny only worked if the information was available to it.

 

The Committee also noted the following statements concerning this Agenda Item:

 

Statement Number 1 - Clive Stevens

Statement Number 2 – Councillor Geoff Gollop

 

The Chair then asked Jon Roberts and Jeannette Beale (Grant Thornton) to present the report.

 

Jon Roberts made the following comments:

 

·       Grant Thornton might have considered that the report should be a PIR (Public Interest Report) if they did not believe the issues had been sufficiently addressed

·       The report had reflected on a number of key areas and had provided recommendations for follow up work

·       The recommendations had already been considered by Full Council and there would be an update on proposed recommendations when this item was reconsidered at future meetings

·       We had taken advice early in the process and had made the following findings (1) the options and appraisal process was not clear and strategic (2) The interaction between the energy services and energy supply process was not clear (3) scrutiny and the call in process could have been involved earlier

·       Final Stage – There had been a marked transformation in the quality of the paper trail. Advice had been given, third party experts had been brought in and the subsequent orderly dissolution of the company was set out. Grant Thornton believed this had been properly done

·       In the early stages of the discussion, the narrative of Bristol Energy had been explained

 

Committee members then made comments on the report as follows. Jon Roberts, Jeannette Beale and the Service Director (Finance) responded as indicated to questions and issues raised:

 

·       There had been informal discussions concerning the Bristol Energy Company in 2010 and 2014 which had discussed the establishment of energy services and energy supply. However, the final establishment had only dealt with the supply side. It was not clear why this was the case

 

Jeannette Beale: The majority of the advice had looked at the model of the Holding Company and supply. She was not aware that the issue of a supply company had been considered

 

·       There had been a Cabinet decision in 2010 to assist in micro regeneration in order to ensure a more efficient service and create a mechanism to help control energy bills. This allowed tariffs to be fed into the system. However, this disappeared a few years later. There needed to be an explanation as to why this had occurred

·       The sale of Bristol energy had been considered in 2017. More detail was required concerning this

Jon Roberts – Whilst this had been considered as a possible option, it had been regarded as a last resort

 

·       The liquidation of the Company had led to Recommendation 1. Until this is completed, the cost will not be known. A timeframe for this was required and what would be reconsidered at the November 2021 Audit Committee meeting

 

Jon Roberts and Service Director (Finance) – The accounts would be as explanatory as they could in the circumstances.  It was noted that the accounts were unlikely to be completed before March 2022. The report outlined the indemnity situation and the final position would be shared with the public

 

·       Any business which continued to lose money would run out of cash. It was disappointing that the issue of overheads had not been addressed as part of the attempts to turn a loss making company into one making a contribution. It seemed as if social value had been used as a reason not to take this into account

·       Although it was not currently a Public Information report (PIR), it was important to make a commitment and set a deadline for releasing information to the public since this was such a high profile issue. It was noted in the report that there had been difficulties obtaining information

 

Jon Roberts and the Service Director – Finance: The Committee needed to act in relation to sensitive information and build evidence sources. As at present, there was £42 million drawn down and no further information was yet available until further work had been carried out.

 

Recommendation 3 set out work that had taken place with consultants and a full audit trail.  However, the period in question was 10 to 15 years and the corporate memory going back this far was limited. All activity would be tracked and future recommendations made on the basis of this.

 

·       The role of Price Waterhouse Cooper needed to be clarified

 

Jon Roberts – Since Grant Thornton was the group auditor, they had received assurances from PWC but it was outside Grant Thornton’s scope to seek detail on what those assurances were

 

·       Whilst accounts indicated that Bristol City Council had sought and received assurances that Bristol Energy was a going concern, it was unclear why the political decision had been made to carry on funding it and was a key issue throughout the entire history of Bristol Energy

 

It was noted that all of the key decisions were taken in the public domain, including reporting to Cabinet when the cash envelope had been exceeded.

 

·       There needed to be a proper examination of the scrutiny process and its connection to the Audit Committee to ensure that everyone could have confidence in it

·       It was disappointing to see that the report did not have specific recommendations to address some of the previous problems such as the prevention of a call-in of a Cabinet decision

·       At the beginning of 2017, selling the company as a going concern was an option but this did not happen as there remained the hope that it would obtain a profit. It was not clear whether or not Cabinet were fully aware of the situation. In 2018, there remained some people who thought there was a future for Bristol Energy as it was considered an important element of City Leap. However, the expressions of interest for City leap did not mention Bristol Energy and it was later acknowledged that more capital was required.

·       The report needed to clarify who the shareholder was

 

Jeanine Beale – the shareholder was acting under delegated authority. The information did not always make the situation clear. It included a range of people including officers and various Independent Members.

 

·       The need for a PIR should be reconsidered. There had been attempts to launch an Independent Inquiry into Bristol energy but this had been voted down. If this had taken place, the cost to the taxpayer might have been less. Internal costs, Section 151 costs and shareholder advice costs all needed to be included in the analysis

·       Once the decision had been made, the winding down process had generally been handled well

·       It was important to note that this was originally a combined company with the intention of looking after the poorer people in Bristol. However, 80% of business ended up being from customers outside Bristol and the social value remit disappeared. Whilst the principle was important, cash flow too needed to be taken into account

 

The Committee discussed a proposal for a press release from the Committee to request that full Council endorse the Audit committee’s recommendations to communicate to the public the actions that were being taken and the reasons for them. Most members of the committee felt that this was not appropriate at this stage but might be pursued in November 2021 if action had not been taken.

 

Following discussion by the Committee concerning the need for a note in the revised accounts to confirm the extent of the loss similar to what was set out in the Grant Thornton report. The Service Manager (Finance) indicated that this would be done when the accounts were signed off as part of a balance sheet event.

Action: Denise Murray

 

It was also agreed that a mechanism was required to ensure that confidential decisions could be monitored through the Audit Committee Action: Add to November 2021 Work Programme

 

Grant Thornton confirmed that at the meeting in November 2021, there would be a formal report setting out the full response to allow a debate at Full Council.

 

The Committee also discussed whether to make  the following recommendations to the Grant Thornton report being submitted to Full Council:

 

(1)   The Committee report and any recommendations from the external auditors and internal audit should be accepted and acted upon following the appropriate meeting in November 2021

(2)   That internal audit arranges for an annual assessment of this work to be carried out by the Audit Committee

 

RESOLVED – that (1) and (2) above are agreed for recommendation to Full Council with the report.

Action: Jon Roberts/Janine Beale – Grant Thornton, Simba Muzarurwi – Internal Auditor

 

              Oliver Harrison – to refer to Full Council

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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