Agenda item

This report provides the Committee with an update on i4B Holdings Ltd’s (i4B) recent performance, audit arrangements, and risk register.

This report provided the Audit and Standards Advisory Committee with an update on i4B Holdings Ltd’s (i4B) recent performance, audit arrangements, and risk register.  Martin Smith (Chair of i4B) introduced the report and drew the Committee’s attention to the following aspects of i4B performance:

·             As of April 2020, 254 Brent families, including 623 children had been housed in i4B properties, the breakdown for which had been set out within Table 1 of the report.  The benefits envisaged in the business model were now flowing through in a regular way.

·             In view of the prevailing housing market conditions, i4B had adapted its purchasing priorities to fit in with its business model.

·             The purchase of the Quitain block for key workers, completed on 20^th February 2020 that would provide 153 units of 1 and 2 bedroom apartments for key workers and would be let at 65% of market rate plus service charge. He considered that this would be a significant asset, enhancing the Council’s ability to recruit and retain key workers within the Borough.

·             Because of Covid-19, the building contractor, Wates, had served a notice on Quintain stating that practical completion of the Quintain block project (due in October 2020) had been delayed. The construction project was progressing, albeit at a slower rate and i4B was awaiting further information from Quitain about the length of the delay. He added that the delay was not likely to be critical to the company’s business model and drew Members’ attention to the risk register as set out within the report.

The Chair thanked Martin Smith for his presentation and invited comments from Members with the following issues raised:

(a)    Members sought further detail about the company’s performance figures for 2019/20 (budget against actual). Martin Smith clarified that the spend on maintenance resulted mainly because i4B were buying properties which required refurbishment to a higher standard.  The company (i4B) achieved a reduction in insurance fees through partnership arrangement with the Council in purchasing insurance cover, resulting in economies of scale.  The increased loss for the year to budget resulted from interest cost and finance charges for the Quintain block for key workers, which totalled over £800k and had not been included in the original budget.

(b)    In response to questions about the company’s operating losses and future prospects, Martin Smith stated that the financial modelling covered a 30-year period.  The operating losses at early years were in line with expectation but over time and with fixed interest rates and stable flow of rental income, i4B would move into surplus and if property prices should rise, the company’s balance sheet would improve accordingly.

(c)    Members heard that i4B was not as susceptible to interest rate movements as the interest on loans from the Council was fixed.  Martin Smith added, however, that in the current circumstances it was difficult to predict the path of interest rates.

(d)    In response to questions about the choice of business name and rationale for the councillor representation on the i4B Board, Martin Smith stated that the choice of name was to give the company a minor commercial advantage in not being directly associated with any other large organisation.  Carolyn Downs (Chief Executive) advised that the decision to include a non-Executive member on the Board had been taken in order to avoid any conflict of interest with also serving as a member of Cabinet, given the Councils’ role as shareholder.

(e)    Members considered the report to be encouraging but sought assurances on the agility of i4B to react to business opportunities and asked about the valuation of i4B’s property portfolio.  Martin Smith stated that i4B had a dynamic business model with due diligence in place that allowed the company to react to opportunities as they arose.  He added that the company revalued its property portfolio annually as a normal commercial arrangement.

(f)     With reference to the Quintain block property, a member sought the definition of a Key Worker in this context.  The Chief Executive clarified that the council had adopted the legal definition of a key worker but had applied additional criteria in order to reflect local needs and build in appropriate flexibility.

As no further issues were raised, the Chair thanked Martin Smith and the Chief Executive for the responses and updates provided. It was RESOLVED that the Committee note the following:

(1)        The current performance of i4B and update to their risk register.

(2)        The update on recent i4B audits, and progress towards implementing previous audit recommendations.

(3)        The impact of Covid-19 on i4B’s operations and business objectives.