Agenda item

To consider the report of the Chief Executive & Growth Director.

The Director Finance presented the report, which advised the Audit and Governance Committee of the Council’s risk management process and presented the updated Corporate Risk Register, which the Committee was responsible for the monitoring and reviewing of the council’s risks.

It was noted that the Strategic Management Board (SMB) were currently working with Zurich Municipal to refresh the Risk Register and look at the wider landscape and ensure all of the risks that are potentially impacting on the Council were included. It was anticipated that the updated Risk Register format would be presented to the next Audit and Governance meeting in March. He did not expect any of the current risks to be removed, but it was about identifying any other matters that should be on the agenda going forward. The first meeting had taken place with further work anticipated over the next few months with a revised Risk Register being available to consider at the next Audit and Governance meeting in March.

The Director Finance would report back the following comments to SMB and Zurich Municipal:-–

• whether to request the Executive to reconsider the achievability of the challenge of the delivery of achieving the carbon neutral aspirations by 2030 for the Exeter area. The reliance, interrelationship and cooperation of other bodies such as Devon County Council was needed and they have set a different timetable. The Member found the separate register for the Council’s own aspirations to be acceptable as that target can hopefully be reached.

• there should be more specific detail of the targets being set and the narrative in relation to the mitigation controls offered, as there was no detail on the measures and targets, or whether any controls or mitigations were on target or effective.

• that an assessment of progress including over what period of time with a reference to the carbon budget included.

• although the Risk Register was not the Roadmap or the Net Zero Plan for implementation, the risks that might be encountered in implementation should still be noted. Measurable outputs and indicators were needed for the Net Zero Plan with reports back to the Scrutiny Committee. The Risk Register set out the potential barriers that could impact the delivery and the mitigation column could be refined to include those barriers, rather than set out the actual roadmap objectives.

The Director Finance responded to a Member’s comment on Risk 6 – in relation to the Brownfield Release Fund, One Public Estate and the Department for Levelling Up, Housing and Communities (DLUHC) which will have time limits on their availability, but which may be negotiable. He explained the funding process, and stated it was important to mitigate any risk of how the funds used would be repaid. He would raise a point with the risk owner relating to the Exeter Development Fund, where an inability to offer funding for the infrastructure had not been identified as a risk.

The Director Finance also provided, as an invitation to the Strategic Management Board to provide further information on individual risks under their area of responsibility. He explained the financial risks associated with Risk 4, maintaining the financial sustainability of the Council and Risk 5, increased costs of all capital building projects, in more detail.

In respect of Risk 4 there were factors mainly outside of the Council’s control that could have a significant impact on the funding available to deliver Council services. Most funding was set by Central Government, which limited the Council’s ability to increase income streams and manage service levels. Mitigation included a professionally qualified finance team to guide and support Members as the decision makers. External Audit also had a role in providing assurance and monitoring the financial position of the Council.

Reference was also made to the Medium Term Financial Plan (MTFP), Capital Programme and borrowing requirement, and the Council’s spending pressures of inflation and in particular energy costs. An independent assessment from the Local Government Association has been made of the Council’s MTFP as the impact was likely to be so great and the feedback reflected as an adjustment. He further explained the financial position for the coming year and referred to the One Exeter Programme which had identified changes to a number of work streams for consideration to help balance the Council’s budget.

He responded to the following Members’ questions:-

• a number of local authorities have significant financial challenges.
• there has been a pause in a review of the funding formula being undertaken, but they await any opportunity to feed back the comments made by a Member over the unfairness of inadequate restitution from Government in respect of council tax exemptions.
• a review of commercialisation opportunities for the Council will be undertaken. Some of the elements in the initial Commercial Strategy have either not been successful or were not progressing for a variety of reasons. Opportunities to deliver additional income to the Council were still being explored and some will come forward as proposals for balancing the budget and future ideas through a different mechanism. The Commercial Strategy did need a refresh in the light of some of the recent challenges, and he assured Members that work was ongoing to identify income opportunities which were now more often at a service level.

In respect of Risk 5 which relates to the Capital Programme. It was acknowledged that much of the risk lay outside of the Council’s control and following the end of Covid and the current volatility of the economy particularly, has resulted in a shortage of materials and labour in the country to deliver construction projects. Mitigation was limited due to the global economic conditions and labour challenges, but the Council’s Capital Programme will be reprioritised to make it more affordable. The approach to borrowing had changed with the Council’s own internal resources used where appropriate over the next two to three years until the interest rates reduce to a reasonable level.

The Council’s current borrowing was all for a long term period of 25 and 50 years, with no short term refinancing needed. There was, however, also a tranche of borrowing with the assets financed through using the Council’s own internal cash resources, which remained manageable.

The following responses were given to Members’ questions:-

• the condition survey was being reviewed and prioritised. The Member’s suggestion for an internal company to carry out the Capital Programme works was not needed, as the Council could legitimately maintain a work force but finding the necessary labour remained a challenge. A number of sectors, particularly property and engineering, were facing challenges in recruitment.

• a pipeline of sales of assets was in place with the sales receipts financing shorter dated assets, such as vehicles, and borrowing against longer term assets was more appropriate to offer the best financial outcome for the council tax payer.

The Audit and Governance Committee reviewed and noted the updated Corporate Risk Register and presentation by the Director of Finance.