Decision details

The Executive Member for Finance submitted a report for Executive consideration the purpose of which was to seek Executive approval to join a new company, limited by guarantee, for the provision of internal audit and counter fraud services, as per the attached business case at Appendix one of the report.

The report also sought Executive’s approval for the payment of a dividend by VTV, which would fund Middlesbrough’s subscription to VPS. The previous company will then be wound up, as the other member Redcar and Cleveland Borough Council has already moved over to the new arrangement. A Director from the Council would need to be appointed to VPS in a similar way to that already in place for governance purposes with VTV. A senior officer would also need to be appointed to the VPS members’ committee.

VTV operated as a Teckal company (in accordance with the Public Contracts Regulations 2024 – as detailed in paragraph 4.7 of the report) and was currently owned by Middlesbrough Council, Redcar and Cleveland Borough Council (RCBC) and Veritau Limited. Veritau Limited was jointly owned by North Yorkshire Council (NYC) and the City of York Council (CYC) and was also a Teckal company. VTV provided internal audit and counter fraud services to the Council, reporting the outcomes of this work to the Leadership Management Team and Audit Committee. The work of VTV therefore formed a key part of the Council’s overall framework of governance, control, and risk management.

The business case for the establishment of VPS was attached as Appendix one of the report.

The proposal was to join a new Teckal compliant company, limited by guarantee, which would be jointly owned by the councils who bought services from it (once the Council joined VPS, its members would be NYC, CYC, RCBC, Leicester City Council, Cherwell District Council and Middlesbrough Council). The formation and operation of the new company would provide a sustainable business model, enabling VPS to continue growing and allowing further member authorities to be admitted over time, as they bought services from VPS, whilst protecting its Teckal status.

The Mayor sought, and received, clarification that the Council still had the option to purchase more time that the contract specified if necessary.

OPTIONS

Do Nothing – This was not considered to be viable as the Council’s internal audit provider would not be allowed to grow its business, otherwise it would become Teckal non-compliant under the Procurement Act 2023. The Council would then need to re-procure the services currently provided by Veritau or bring the service in-house.

As such, the alternative option was not viable, and the proposal to join the new company, limited by guarantee, remained the most appropriate solution to ensure continued Teckal compliance and growth. This was the preferred route for both Veritau and the Council.

ORDERED that Executive

a)     Approve the membership of Veritau Public Sector Limited, a company limited by guarantee, and the novation of the existing contract.

b)     Approve the payment of a dividend from Veritau Tees Valley Limited sufficient to fund the Council’s subscription to the new company.

c)     Approve a special resolution to wind up Veritau Tees Valley Limited once the Council’s membership of the new company is confirmed.

d)     Delegate the approval for the Council to enter into all other necessary agreements to participate in the new company to the S151 Officer.

e)     Approve the appointment of a director to the Board of the new company and a senior officer to the members’ committee to oversee its governance arrangements and performance

AGREED that the Business Case for Veritau Public Sector Limited and the reasons for the changes in the Veritau structure and how these impacted on the Council be noted.

REASONS

The change in the structure of the company was necessary to allow new member local authorities to join Veritau going forward.

By the Council joining VPS for internal audit and counter fraud services, this would allow the previous provider VTV to be wound up. A similar decision had already been made by Redcar and Cleveland Borough Council; the other local authority who was a shareholder in VTV.