Councils to create new company to cut costs
AN innovative partnership between councils allowing for economies of scale looks set to take a fresh direction with the establishment of a new company for the provision of audit, counter fraud and information governance services.
North Yorkshire Council’s executive will on Tuesday be asked to approve a business case for the creation of NewCo, some 15 years after its internal audit team merged with City of York Council’s to create Veritau Limited.
While details of the business case are not being released, the meeting will hear creating NewCo, which will also owned by Middlesbrough Council and Redcar and Cleveland Council, would open the door for the company to grow and invite more member authorities to join as owners of the company.
The range and scope of work undertaken by the Veritau Group is independent and extensive, and touches on all council service areas to varying degrees.
In 2018, North Yorkshire County Council was condemned after it emerged the authority was not planning to tell elected councillors for 11 months about the findings of a highly critical report by Veritau stating it was failing to be sufficiently open with residents.
Last autumn, Veritau revealed Redcar and Cleveland Council had received 41 referrals of suspected fraud in the previous 12 months and how 20 investigations were completed as a result relating to social care fraud, misuse of disabled blue badges, debt evasion, abuse of small business rate relief and alleged covid-19 business grant fraud.
More than £25,000 worth of funds fraudulently obtained by members of the public were identified for potential recovery by the council.
In addition to providing assurance services to its four local authority members, the Veritau Group now provides assurance services to over 700 other clients.
However, to qualify for an exemption from public procurement fortheawardofcontractsbyapublic authority to a separate entity, the firm’s commercial work must amount to less than 20 per cent of the overall work of the company, which is restricting the growth opportunities of the Veritau Group.
An officer’s report to the meeting said: “The shared service model continues to attract interest from other councils.
“The existing corporate structure for both Veritau Limited and Veritau Tees Valley does not allow new local authority members to be easily admitted due to the need to issue additional shares, and the impact this has on existing shareholdings.”
The report states each member authority of NewCo will be required to pay a one-off subscription fee to join to cover set-up costs, working capital and contingencies.
Nevertheless, the report concludes should the company be wound up, the future liability of the member authorities would be capped at an agreed value of no more than £10.
Veritau say that when it was formed in 2009, shared services were relatively uncommon among local authorities. After close collaboration between their two internal audit teams, North Yorkshire County Council and City of York Council came together in an innovative partnership.