The report of the Head of Business Enterprise and Commercial Services is attached.

Contact: Tim Smith (01743 258676).

51.1  The Committee received the report of the Assistant Director Commercial Services – copy attached to the signed Minutes – which gave an update on progress of audit recommendations after the unsatisfactory assurance level received following an internal audit of the Commercial Strategy and plans for 2018/19.

51.2  In response to a query, the Assistant Director Commercial Services explained that the ‘Hopper’ process was an assessment method used to appraise proposals coming forward with potential commercial prospects.  He drew attention to the key recommendations identified in the audit report, set out at paragraph 1.3 of the report, along with the actions undertaken to address these recommendations, set out at paragraph 2.1 of the report.

51.3  The risk of failure to deliver the Commercial Strategy and of the Council being unable to meet the corporate outcomes was considered quarterly by Directors and the Cabinet.  In respect of the lack of investment fund, the Assistant Director Commercial Services informed the Committee that an investment fund of up to £40m had been identified to help deliver additional revenue. Following a review of all proposed projects, three were currently being delivered, three had been approved by Council and others in the pipeline required further appraisal.

51.4  The Assistant Director Commercial Services addressed the issue of the revision of the target to deliver a minimum of £5m of new revenue income down to £2m in the revenue budget.  He explained that it had been recognised that the Council had not been on course to achieve £5m in this financial year and it had therefore been accepted that £2m would be a more realistic target.

51.5  Referring to paragraph 2.1.2 of the report, the Assistant Director Commercial Services gave an example of what had been learnt whilst going through the process of reviewing the Commercial Strategy.  An issue had been identified whereby not all the proposals had gone through the Hopper process and where the commercial opportunities had not been considered.

51.6  Concern was expressed about the financial return expected to be achieved when funding of £40m had been identified to achieve £2m of additional income.  In response, the Assistant Director Commercial Services pointed out that this was a 5% return and that currently property yields in Shropshire were around 6-7%.  20% had been an ambition but had not been achieved.  He reported that work was currently being undertaken to demonstrate how the savings target of £2m as set out in the Financial Strategy would be achieved.

51.7  The Head of Commercial Services updated the Committee in relation to the latest position with regard to the review of the Commercial Strategy and the recruitment of additional staff to the team.  She explained that other strategic objectives were also considered along with income however all projects must demonstrate that they will generate more money than they cost.  She confirmed that a more robust development appraisal procedure was currently being written.

51.8  In terms of recruitment, the Head of Commercial Services informed the Committee that a Performance Manager was currently being sought along with crucial finance posts.  Job Descriptions and Person Specifications were currently with HR and would be released the following week.

51.9  The Assistant Director Commercial Services and the Head of Commercial Services answered a number of further queries from Members of the Committee.  The Assistant Director Commercial Services explained that more work was being done with Managers to ensure they think more commercially and consider commercial opportunities before taking decisions on restructuring/staffing.

51.10In response to a query the Director of Finance, Governance and Assurance (Section 151 Officer) explained that in relation to commercial returns, as costs go up, returns come down.  There was an element of risk that things could change, for example the durability of income into the future (eg not one-off but ongoing income) that may have to be mitigated against but each project was assessed to see whether it stacked up.  He went on to say that the Council would not always need to borrow money when it had cash balances.  If returns were above 10% but there was a risk that a particular project was not viable, this would not be an issue however, at this time, there was an expectation of delivery, but if it did not stack up, the project would not go ahead.

51.11The Director of Finance, Governance and Assurance (Section 151 Officer) explained that the Financial Strategy had made an assumption of £2m over 4 years being generated from a £20m investment with the cost of borrowing being factored in.  The Financial Strategy has since been updated and this £2m removed and replaced by £2m from the Council’s property company.

51.12RESOLVED: 

          That the contents of the report be noted.