States of Jersey Development Company (R.56/2020): Executive response

STATES OF JERSEY

STATES OF JERSEY DEVELOPMENT COMPANY (R.56/2020): EXECUTIVE RESPONSE

Presented to the States on 29th July 2020 by the Public Accounts Committee

STATES GREFFE

2020  R.56 Res.

FOREWORD

In accordance with paragraphs 64-66 of the Code of Practice for engagement between Scrutiny Panels and the Public Accounts Committee' and the Executive', the Public Accounts Committee (PAC) presents the Executive Response to the Comptroller and Auditor General's (C&AG) Report on the States of Jersey Development Company (SOJDC)

The Public Accounts Committee will publish its opinion on the Executive Response in due course.

Senator S.C. Ferguson

Chairman, Public Accounts Committee

Page - 2

R.56/2020 Res.

The Chief Executive and Director General, Treasury and Exchequer's response to Comptroller and Auditor General's review: States of Jersey Development Company

July 2020

Glossary of Terms

C&AG – Comptroller and Auditor General

CAMB – Corporate Asset Management Board

DG – Director General

KPI – Key Performance Indicator

MoU – Memorandum of Understanding

RSG – Regeneration Steering Group

SMART – Specific, Measurable, Achievable and Timebound

SOJDC – States of Jersey Development Company

T&E – Treasury & Exchequer

.

Chief Executive/Treasurer/Director General's Response:

Review title: C&AG Review: States of Jersey Development Company - Executive Response to PAC by Friday 24th July 2020 (extra time allowed for Covid-19 prioritisation).

Summary of response

1. INTRODUCTION

The C&AG's report "States of Jersey Development Company" was published on 5th June 2020. The report evaluates the extent to which the following comply with the principles set out in the original proposition establishing The States of Jersey Development Company Limited ("SoJDC") that was adopted by the States:

• the internal operations of SoJDC;

• the operation of the shareholder function by Government;

• the arrangements for transfer of land from the Government to SoJDC;

• the arrangements for wider accountability of SoJDC.

The report also identifies the scope for improvements in these arrangements. This document provides the Chief Executive and Director General ("DG") of the Treasury and Exchequer's (T&E) response to the review's recommendations.

The C&AG notes that T&E has initiated a review of the Memorandum of Understanding ("MOU") of all States Owned Entities - including SoJDC. Both the Chief Executive and Director General of Treasury and Exchequer are pleased to note that many of the C&AG's recommendations will be addressed as part of this review of the MOU.

In preparation of this response the DG has consulted with other government departments responsible for the coordination and delivery of initiatives referred to in the C&AG report. The DG has engaged with the States of Jersey Development Company in relation to the findings which relate directly to the company itself. The responses of the SoJDC are included in this response.

2. SUMMARY OF THE MAIN FINDINGS

The C&AG concludes:-

• That the Government does not yet have an integrated strategic framework for asset management and regeneration but acknowledges that progress is being made on this;

• That since the establishment of SoJDC, the Government has not undertaken a formal review of the role of SoJDC to satisfy itself that the outcomes to date are meeting the objectives set out in the original proposition and whether any changes could enhance delivery of Government property objectives;

• That as the key political group to steer regeneration, the Regeneration Steering Group (RSG) has not functioned as intended but progress has been made in 2019;

• That despite the proposition stating that SoJDC will procure development schemes in conjunction with the private sector unless there are specific reasons for direct development, all but one of the developments to date have been undertaken directly by SoJDC;

• That the MOU between the Government and SoJDC lacks clarity in places but acknowledges that a new MOU is due to be issued this year;

• That the shareholder function has developed and improved since SoJDC was established but concludes it requires further development;

• That there is some scope to improve the SoJDC governance arrangements, in particular remuneration policies and transparency in reporting results and achievements;

• That there is scope to improve internal controls within SoJDC to ensure procurement tender exercises comply with the requirements of the original Proposition P.73/2010 and the supporting MOU.

The C&AG makes 23 Recommendations, 13 of which are for the Government with the balance for SoJDC.

3. FACTORS THAT CONTRIBUTED TO THE FINDINGS

The report from the C&AG highlights that following the States Assembly's decision to establish SoJDC in 2011 there has been no formal review of the role of the company and that the outcomes to date are meeting the objectives set in the original proposition.

The finalisation and implementation of a coherent Estates Management strategy within Government will address some of the factors which contributed to the report's findings. This, coupled with RSG starting to operate more effectively, will facilitate a strategic review to determine whether SoJDC is meeting Government objectives and whether the current delivery model is the most appropriate. This will be delivered with a OneGov approach, and will be enabled by effective partnership working between the shareholder function in the Treasury and Exchequer and other departments responsible for policy development.

The Shareholder function has been strengthened as part of the implementation of the Treasury and Exchequer Target Operating Model. The additional resources in the team will provide more time to focus on strategic matters such as policy development and the implementation of the review recommendations.

4. OUTLINE OF ACTIONS ALREADY TAKEN

Whilst concluding that the Government does not yet have a clear strategic framework for asset management with regeneration opportunities across the Island, the C&AG does note that steps have been taken or are in hand to develop this including:

• the new Island Plan 2021-2030

• the proposed Estates Management Strategy

• 5-year Asset Management Plan

• a refreshed RSG.

The C&AG further observes that from 2019 there has been significant improvement in the governance of RSG meetings, the rigour of the debate and decision making processes. Since October 2019, the RSG meeting:

• provides feedback and challenge concerning SoJDC projects that are both under way and planned, and;

• considers wider Government regeneration opportunities without SoJDC being present

The C&AG acknowledges the fact that a corporate review of the MOUs for the States' Owned Entities ("SOEs") was commissioned and completed in 2019. A new MOU framework arising from the review has been designed to improve consistency of governance and will address the anomalies and points requiring clarity in the current MOU identified by the C&AG, the Government and SoJDC.

Under the Performance review and accountability section, the C&AG report notes that information received by the Government as shareholder through the quarterly meeting schedule has improved significantly since 2016/early 2017 as detailed written reports from SoJDC are received.

5. DEPARTMENTAL PLANS FOR REMEDIAL ACTION

As mentioned in the introduction to this response, the Treasury and Exchequer has initiated a review of the most historic Memoranda of Understanding in November 2018 which is now complete and the final report has been provided. This review concludes with 26 recommendations for consideration that are designed to help to address the implementation of the C&AG's previous findings and those from follow up reports.

In summary, the review recommends that the Government consider the Memorandum of Understanding ("MOU") as a framework document' that clarifies the overall governance for States-owned entities ("SOE") and provides clarification on their roles and responsibilities. The new MOU will also include a focus on how SOEs contribute to Island outcomes by delivering the Government's policy objectives. Policy documents for each SOE are expected to be part of delivery and will be identified and referenced within the MOU to clarify what is in scope for each entity. In some cases these policy documents are still to be developed.

A process for setting Key Performance Indicators will be formalised as part of the MOU and monitoring will be included as part of a strengthened Strategic Business Plan agreement. The Key Performance Indicators will be used to monitor compliance with the terms of the MOU, and will include measures to reflect:

• How policy objectives are being met (both delivery and support) - the relevant policy owner and the Partnership team will be involved in monitoring and management

• Being a role model corporate entity

• Asset efficiency

• Compliance with and timeliness of reporting and regulatory requirements

Through these monitoring arrangements, the shareholder function will have an overview of each SOE's performance. This reflects the Government of Jersey Target Operating Model and the need for a more joined up One Government' approach to relationships with each SOE.

In the response to the C&AG's review on Remuneration of Board Members, it was proposed to establish a new Arms' Length Body Oversight Board. This Board is in the process of being set up and is expected to be the main forum for the co-ordination of joint policy delivery.

6. TIMELINE FOR DELIVERY

Five of the recommendations for the Government involve the review, drafting and implementation of the new MOU with SoJDC, which the T&E department are working towards a deadline of the end of 2020. Full detail of the activity to be undertaken against each recommendation is included in the Action Plan below. The development of the Partnership model with the SOE is a priority for 2020.

Successful delivery of the action plan is dependent upon effective working between the Treasury and Exchequer, GHE and the Office of the Chief Executive.

Action Plan

Recommendations not accepted  

Recommendation  Reason for rejection None  Not Applicable

7. CONCLUSION

The  Government  of  Jersey  welcomes  the  C&AG's  report  on  the  States  of  Jersey  Development  Company.  In  many  areas  it  makes recommendations for review which are already in the process of being addressed by Government, albeit that the recent Covid-19 pandemic has delayed the implementation of the proposed changes.

In some cases the report makes recommendations which have also featured in other associated reviews, such as those of the Shareholder function and Remuneration of Boards and implementation of recommendations contained within those reports will address several of the points raised in this review.

It is pleasing to note that the C&AG report recognises that the shareholder function has developed and improved since SoJDC was established and the additional resource within that function will continue this development and will enable specific focus to be given to the delivery of the recommendations and to ultimately address the recommendations proposed by the C&AG. Similarly, the C&AG recognises the steps being taken to develop an integrated estates management strategy and the improvements made recently to the format of the Regeneration Steering Group.

The Government recognises the important role it plays as shareholder on behalf of the public of the Island and the need to ensure that the SOEs similarly recognise the role they play as part of the wider Government family. By implementing an updated MOU to reflect the changing external governance environment and Government's own expectations, and ensuring regular reviews of these MOU take place, the Government can ensure that it clearly understands why it owns SoJDC and the contribution it is expected to make to the delivery of government policy.

It is further pleasing to note that the C&AG report has recognised that SoJDC has delivered a range of major projects for the Island with profits available for further development, public realm projects alongside the payment of dividends to the Shareholder.