LGA Corporate Peer Challenge: East Hampshire District Council

Corporate Peer Challenge (CPC) is a highly valued improvement and assurance tool that is delivered by the sector for the sector. It involves a team of senior local government councillors and officers undertaking a comprehensive review of key finance, performance and governance information and then spending three days at East Hampshire District Council (EHDC) to provide robust, strategic, and credible challenge and support.

CPC forms a key part of the improvement and assurance framework for local government. It is underpinned by the principles of Sector-led Improvement (SLI) put in place by councils and the Local Government Association (LGA) to support continuous improvement and assurance across the sector. These state that local authorities are: responsible for their own performance, accountable locally not nationally and have a collective responsibility for the performance of the sector.

CPC assists councils in meeting part of their best value duty, with the UK government expecting all local authorities to have a CPC at least every five years.

Peers remain at the heart of the peer challenge process and provide a ‘practitioner perspective’ and ‘critical friend’ challenge.

This report outlines the key findings of the peer team and the recommendations that the council are required to action.

We were very pleased to be invited by EHDC to deliver its Corporate Peer Challenge. We received a very warm welcome from everyone we met at the council. The organisation had been due to have a CPC in 2020 but this was postponed because of the Covid pandemic.

We found a well-run and very competent council that is strong and sustainable. There are positive officer and member relationships that are clearly based on trust and mutual respect. The leader and chief executive are aligned with a good working relationship. Staff are motivated, passionate and focused on delivery.

There are no major governance issues at EHDC, although there is scope to improve the overview and scrutiny (O&S) process. The coalition arrangement of Conservative and Independents which has been in place since 2023 seems to be working well. Feedback from councillors suggests that communication with them could be improved. Work has already started on a member development programme which can address this issue as well as considering how to secure greater member engagement with their own development.

Since separating from shared management and service arrangements with Havant Borough Council in 2020, EHDC has been on a significant journey of internal change and transformation. Transformation has been well managed and there has been extensive governance of the process by senior leaders. We are confident that going forward the council’s leadership will continue to transform the organisation’s strategy, structure, services and culture to be fit for the future. Internal reporting around transformation has been complex, but this is recognised and the council has begun to make the process including reports more transparent and user friendly.

Significant transformation achievements include moving to the new council offices at Monterey House, completing a senior leadership team restructure, bringing IT in-house and updating the IT estate and undertaking significant service redesign including the introduction of a case management system. Although not the main driver for the transformation programme, there have been substantial savings achieved through this. The separation from Havant in 2022 was cost effective leading to savings of around £500k. The senior leadership restructuring process will also bring savings of around £280-320k per annum.

Transformation has impacted every employee and councillor of the council. There is some “transformation fatigue” in evidence but despite this staff remain committed and keen to continue improving services for residents

The council is still undergoing change. It is currently embarking on the second phase of the transformation programme called Shaping East Hampshire’s Future (SEHF2) The programme is clearly linked to the MTFS and the Corporate Strategy 2024-28 whilst also expected to deliver savings.

The council’s financial management and planning processes and governance are sound and robust and demonstrate good practice to deliver the corporate strategy priorities. However, we do not feel that the estimated size of the deficits the council is facing annually and cumulatively up to 2029/30 is sufficiently clear and transparent from the financial reports. The annual budgets in each of the years are shown with a balancing item headed ‘savings to be identified’. For transparency the estimated deficits should be identified explicitly followed by how they are planned to be eliminated. This needs to be addressed as a priority, so there is full clarity and understanding of the task ahead.

Whilst finances currently look sound there is no room to become complacent. The council’s reserves are comparatively low and it is reliant on a number of significant revenue income items that are impacted on by external economic factors. The council along with the rest of local government faces specific cost inflation and increase in service demands which it needs to accommodate each year in an environment of becoming a smaller and leaner council through its transformation programme. The council recognises that savings from within a smaller and leaner organisation will become increasingly limited over the term of the MTFS. This will require continued sharp focus and attention on the revenue income streams particularly the significant items such as from the investment property portfolio, car parking, planning, investment income.

The council acknowledges that it has to improve its performance management systems and is addressing how it does this. Some services have not been as good as those of its CIPFA near neighbours, particularly planning and waste. However, the performance of the planning service is improving and the need to increase recycling levels is being considered with Norse, the new waste contractors. It is important that a collection and disposal methodology for the new statutory duty to collect food waste is agreed as a priority, with an associated implementation plan put in place. There is still a need for some improved buy-in and understanding by staff and councillors of organisational wide priorities e.g. budget, waste changes and the local plan.

The council works well with local partners and this has delivered a series of successful health, environmental and infrastructure projects across its’ district. It has also worked well with Public Health Hampshire which was complementary about EHDC’s chief executive.

Due to a variety of reasons including scheduling issues, we had limited opportunities to talk to wider system partners during the peer challenge. However, those we did manage to speak to said that they wanted to work better with EHDC, although one described the council as “competent but insular”.

This is a really pivotal moment for EHDC. Transformation so far has created an internally focused council that has tended to concentrate on mainly local initiatives. We firmly believe that this would be a good time to take the next step and adopt a more strategic approach working with partners from the wider public sector. The council has great potential to develop from just being “present” at system meetings to becoming a key influencer across Hampshire and the wider region. Discussions around future local government reorganisation and devolution are starting to take place, making this change of approach even more crucial to the continued success of the District. EHDC would benefit from using data more, and developing more opportunities for partnership working with others “in the wider system”.

There are a number of observations and suggestions within the main section of the report. The following are the peer team’s key recommendations to the council:

3.1 Adopt a more outward facing system wide approach  

EHDC works well in its district. It is now well placed to start exerting its influence and take more of a place shaping leadership role at the next level with system partners in Hampshire and the wider region.

3.2 Financial planning and monitoring

(i) The council should consider a more explicit and therefore transparent identification and presentation of the in-year and cumulative budget deficits in the MTFS.

(ii)The cabinet should be provided with budget monitoring reports more frequently than currently to be able to take timely and decisive decisions.

(iii) Given the risk of lower than average reserves, while also having an investment portfolio which comes with a level of risk, the council should consider setting a policy of minimum general fund reserves with the advice of the S.151 officer.

(iv) Having decoupled from Havant Borough Council and undergone significant organisational change, The council should update its financial standing orders and regulations and the contract standing orders and regulations to reflect the new structure in respect of delegations and spending authority to ensure a robust system of internal controls and checks and therefore good governance.

3.3 East Hants Manager Programme

The programme is needed to drive forward with the next stages of transformation and improve the skills of managers to manage performance and address inconsistencies in the way workforce policies are applied and supported. The programme is in planning but must be delivered at a faster pace, with involvement of staff in the development process.

3.4 Third tier service leads

Third tier managers are a dedicated and talented group with huge potential in the organisation. They need to be empowered to meet together to address cross cutting issues and have a strong voice upward to senior managers.

3.5 Shaping East Hampshire’s future 

The Shaping East Hampshire Future Transformation highlight report is overly complicated. It needs to be simplified and reprioritised within the new directorate structure.

3.6 Staff surveys

Consider introducing regular staff pulse surveys to supplement the larger staff surveys that are run. They can be done more frequently during transformation to understand how staff are feeling and enable the council to be more agile and react to issues more quickly.

3.7 Member support and development

Continue to shape a member development programme to include councillor roles, scrutiny skills, work planning, and a buddying system. Work with the group leaders to increase engagement with training. Identify with members the areas where they feel their support from officers can be improved, including how members want to be communicated with and how their enquiries can be dealt with more timely.

3.8 ICT

Promote better understanding and use of the current capabilities of ICT systems and engage staff and councillors in developing proposals to harness digital (AI) opportunities.

3.9 Whitehill and Bordon regeneration

Consider the best approach to engage key stakeholders to refresh the vision for Whitehill and Bordon and establish clearly understood mechanisms for communication with the community and stakeholders. Clarify the roles of different councillors involved in the regeneration of the area and interrelationships with officers.

3.10 Overview and scrutiny

Review how best to use the O&S committee’s time and work programme. Agendas need to be lighter and reports more concise so that members have time to read them more productively.

The peer team

Peer challenges are delivered by experienced elected member and officer peers. The make-up of the peer team reflected the focus of the peer challenge and peers were selected by the LGA on the basis of their relevant expertise. The peers were:

• Yvonne Rees – lead chief executive peer
• Cllr Louise McKinlay - deputy leader of Essex County Council and former leader of Brentwood Council. (Conservative)
• Cllr Emily Smith –Vale of White Horse District Council - (former leader- Lib Dem)
• Kamal Mehta – LGA finance associate
• Chris Traill - strategic director of Community and Place Delivery, St Albans City and District Council
• Craig Taylor - director of Regeneration & Neighbourhoods, Bassetlaw District Council
• Gill Elliott - Peer Challenge Manager– LGA Associate

Scope and focus

The peer team considered the following five themes which form the core components of all Corporate Peer Challenges. These areas are critical to councils’ performance and improvement.

In addition to these themes, the council asked the peer team to provide specific feedback on its transformation programme by considering how well the council is demonstrating the leadership that is necessary to transform the organisation’s strategy, structures, services and culture to be fit for the future.

1. Local priorities and outcomes - Are the council’s priorities clear and informed by the local context? Is the council delivering effectively on its priorities?& Is there an organisational-wide approach to continuous improvement, with frequent monitoring, reporting on and updating of performance and improvement plans?
2. Organisational and place leadership - Does the council provide effective local leadership? Are there good relationships with partner organisations and local communities?
3. Governance and culture - Are there clear and robust governance arrangements? Is there a culture of challenge and scrutiny?
4. Financial planning and management - Does the council have a grip on its current financial position? Does the council have a strategy and a plan to address its financial challenges? What is the relative financial resilience of the council like?
5. Capacity for improvement - Is the organisation able to bring about the improvements it needs, including delivering on locally identified priorities? Does the council have the capacity to improve?

As part of the five core elements outlined above, every Corporate Peer Challenge includes a strong focus on financial sustainability, performance, governance, and assurance.

The peer challenge process

Peer challenges are improvement focused; it is important to stress that this was not an inspection. The process is not designed to provide an in-depth or technical assessment of plans and proposals. The peer team used their experience and knowledge of local government to reflect on the information presented to them by people they met, things they saw and material that they read.

The peer team prepared by reviewing a range of documents and information in order to ensure they were familiar with the council and the challenges it is facing. This included a position statement prepared by the council in advance of the peer team’s time on site. This provided a clear steer to the peer team on the local context at EHDC and what the peer team should focus on. It also included a comprehensive LGA Finance briefing (prepared using public reports from the council’s website) and a LGA performance report outlining benchmarking data for the council across a range of metrics. The latter was produced using the LGA’s local area benchmarking tool called LG Inform.

The peer team then spent three days onsite at EHDC, during which they:

• Gathered evidence, information, and views from more than 30 meetings, in addition to further research and reading.
• Spoke to more than 100 people including a range of council staff together with members and some stakeholders. We did feel somewhat hampered by a lack of engagement with partners.

This report provides a summary of the peer team’s findings. In presenting feedback, they have done so as fellow local government officers and members.

The council’s priorities in recent years were developed in response to the position it found itself in 2020. At that time there was a financial gap in its MTFS of £1.5m. Earlier savings from the shared arrangements which had been in place with Havant Borough Council since 2009 were dwindling and more integration would be needed to realise any further savings. Due to the Covid pandemic its commercial ventures were no longer yielding the net profits expected. The council was operating from an outdated building with an expensive and poorly performing digital estate with disconnected processes that were hampering flexible and hybrid working. Better IT was essential to enable staff to work from home or deliver services in the community. Services were inefficient and the customer journey was often inconsistent mainly through poorly performing legacy contractual arrangements.

Since 2020 EHDC has been undergoing a significant programme of internal transformation. It’s first transformation programme Shaping East Hampshire’s Future Programme (SEHF1) delivered a number of key projects with important outcomes for the council including:

• The successful decoupling from Havant District Council which was achieved without significant impact to services.
• The move to new headquarters at Monterey House close to the centre of Petersfield – achieved savings to running costs and better carbon emissions
• Modernising and rationalising IT systems including bringing the IT service in house
• Undertaking service redesign across all services and starting to implement a new target operating model with a service case management system, which has already implemented greater efficiency for service users and savings, and which is gradually being extended across services.
• Developing a new senior management structure which will save around £280-£320k per annum.

As well as making internal transformation a priority the council has also delivered a huge range of successful projects in the community as part of its corporate strategy 2020-24. Working with partners in the community is clearly important for the council. Together with partners it has delivered some innovative projects. Some of the highlights include:

• Health and wellbeing projects: Everyone Active (free health and wellbeing activities; courses for people with diabetes; free swimming sessions for disadvantaged children) free bike hire in partnership with Cycle Sphere
• Housing: delivering homes for Afghan refugees in partnership with the MOD, housing Ukranian refugees and creating 10 modular pods for homeless people
• Mental Health initiatives: Men’s Sheds; two Dementia Festivals
• Economic projects: £1m improvements to Alton Station forecourt; new leisure centre in Whitehill and Bordon; East Hants Working Apprenticeship scheme
• £14.5m given out in community grants which helps deliver the community led services, for which the council is an enabler.
• Gaining the Armed Forces Silver Award;

EHDC is clearly a council that can deliver on its priorities and strategies. The latest corporate strategy was agreed in 2024. It will run until 2028. The strategy is closely linked to both the second stage of transformation (SEHF2) and the Medium -Term Financial Strategy (MTFS). We heard that there could have been broader internal and external engagement in the drafting/ development of the corporate strategy. The strategy is supported by a number of relevant sub strategies. Its key priorities are:

• Environmental sustainability for the district and the council
• Economic Growth and prosperity
• Thriving Communities
• Modern and efficient council

Climate change remains a key issue for the council. It declared a climate emergency in 2019 and since then has taken action itself and worked with the community to deliver some really good projects including:

• A £1m Grow up Programme – brought a fresh approach to rural and environmental economic development,
• Butser Ancient Farm; a development of a new building which has improved and expanded the experience offered to visitors.
• £250k Community Climate Action Fund which has supported solar power schemes in schools and provided loans to homeowners to install energy saving measures.
• A reduction of 75 per cent in the council’s carbon emissions as a result of the move to new modern offices. The building has 331 solar panels, heat pumps, light upgrades and 6 EV charging points.

The latest Climate Strategy 2024-29 was developed with a wide range of stakeholders and all services. It has five targets including working towards being a net zero council by 2035 and a net zero district by 2050. The focus is on reducing greenhouse gases and supporting the community to reduce energy consumption. One of the objectives is to reduce the impact of procurement on the climate. It is important that the council can demonstrate how this links to the procurement policy/strategy and Investment Strategy.

There are now opportunities for the council to move from the delivery of local projects to a more strategic alignment with external partners to develop clearly defined system outcomes. We believe that it is now crucial for the council adopt a more proactive leadership role in the wider system.

There is scope to consider and embed equality diversity and inclusion (EDI) more fully in the organisation. The equality policy dates from 2021 and needs to be updated. There are also no published equality objectives. We heard little mention of EDI from staff or managers. Equality impact assessments are undertaken but were described as being mainly a “tick box” exercise which does not adequately inform decisions at the time they are being made. When the staff survey results are analysed, they should be disaggregated to understand the views of staff with protected characteristics.

Performance

Quarterly performance reports are being produced by service departments, but these could be further improved by being produced more frequently. The development of a performance management score card system is still outstanding.

We heard that the planning team has struggled but is now improving its performance. In 2024 (Q4) 73 per cent of major planning applications were completed on time compared to an average of 89 per cent in England and 87 per cent by CIPFA neighbour councils. A backlog of planning casework has been exacerbated by staffing capacity challenges. The IDOX system for planning case management is being implemented which should also improve performance.

IT systems have been upgraded and are cloud based to reduce cyber security risks and include disaster recovery and resilience. A cyber security incident plan and disaster recovery plan are in place but are untested.

The property asset management system has progressed following concerns in 2019 about data. Team and service redesign has been completed and there is now robust transparent data compliant with corporate governance. The new system will also support Community Asset Transfer approach and data.

LG Inform performance data shows that EHDC performs less well than CIPFA neighbours for recycling household waste (34 per cent compared to 45 per cent) There is also a lack of clarity around the implementation timetable and collection methodology for food waste and recycling reforms associated with the Environment Act 2021. This needs to be addressed with the Project Intergra (PI) Group and the Waste Disposal Authority (WDA) as it is a potential reputational risk for the council.

Phase 1 of the transformation programme has been well managed by EHDC and this sets it in good stead for the second phase. There are clear links from the transformation programme to the budget. The transformation programme has generated savings that are required for the council be standalone following the decoupling from Havant Borough Council.

The council is in phase 2 of the transformation programme and is budgeting to achieve further savings. Governance of the programme is in place, with regular reporting to the SEHF Board. There are also a number of other sub boards for IT, accommodation, customer and directorate transformation.

The reasons for the transformation programme are generally well understood by staff and most members. They recognise that the key drivers are budget pressures and the desire to make EHDC ‘fit for purpose’ following de-coupling from Havant. We did hear from opposition councillors that they do not know enough about transformation and staffing levels, and therefore have a lack of confidence in the council’s capacity to deliver the transformation programme.

Directorate transformation plans are data driven, comprehensive and designed within a consistent framework. The IT service is well managed, with upgraded systems designed to support the transformation programme. The case management system is working well for the phase 1 services such as community development and regeneration. We were told that the “Customer front door (case management) provides effective triage”.

Going forward it will be important for the council to consider whether the voice of the resident is loud enough in the transformation process and to find ways to ensure that they understand the transformation journey that the council has been on and to engage with them when programme priorities are reviewed.

The documentation used to monitor the progress of transformation needs to be refreshed to make it simpler, more relevant and more user friendly. It is also timely to consider how it reflects the new directorate structures and how it is used for monitoring progress.

Staff reported feeling “transformation fatigue” The council needs to consider how to overcome this within the organisation and strengthen messages around the benefits and the “WHY”. It must ensure sufficient staffing resources are in place for the next transition and implementation phase.

Concerns were raised with the peer team that significant changes in staffing have resulted in a loss of corporate knowledge and gaps in understanding (internally and externally) of who does what. This should be explored further with service managers. The cost of using consultants is also a concern for staff, particularly when existing jobs are being cut. The council needs to communicate more clearly about the role of consultants in a transforming authority.

We found very positive working relationships at EHDC. The leader and the chief executive work well together. The “golden triangle” of chief executive, s.151 and monitoring officer meet on a regular basis and there is mutual respect between officers at all levels as well as between members and staff. Senior officers and political leaders are committed to staff wellbeing and preparing staff for future changes within the local government sector.

Senior leaders engage and communicate regularly with staff e.g. Kneller’s News; an online Team Talk; fortnightly email update from comms; the Big Heart staff intranet. There was some concern expressed about how staff communications and messages are landing, with a need to clearly explain the WHY. One manager said “We issue high level comms and assume high level knowledge – need a plain English approach”.

We heard mixed feedback about councillor communications, and therefore suggest councillors are asked about what information they want and how it should be communicated to them. Involving the group leaders in this would be beneficial.

Lead link officers have open and transparent relationships with partners: e.g. Norse – the waste company, “ Great relationship with Norse- you know where you stand, can’t fault them” ,Community First and Citizens Advice; Everyone Active (leisure services). There have been specific interventions to address social challenges, transport and the needs of the elderly in areas of deprivation in Alton and Marston. There has been some really innovative and efficient use of council buildings e g. re-purposing a community centre for homeless pods

The council has a good working relationship with Hampshire County Council’s Public Health team. The chief executive’s involvement is recognised as helpful and sensible. East Hants participates well in funded public health initiatives such as cardio rehabilitation and housing grants.

The regeneration of Whitehill and Bordon has worked well to date, but has slowed more recently due to market conditions and some perceived uncertainty by developers about the future vision. It has attracted LEP funding and delivered £100m of physical and social infrastructure. Developers, however reported that they now perceive a void of council engagement with the public and stakeholders in Whitehill and Bordon.

EHDC is seen by partners as “quiet” at a system level. There is an opportunity now for senior leaders to take this to the next level; to be more outward facing; develop strategic partnerships across the region and influence and collaborate in the future. Officers within local government partners report that EHDC has been too internally focussed and would welcome their greater engagement within the system. “East Hampshire have been focussed on re-establishing themselves over the last few years. “It’s run like a business – sometimes forgetting the community and politics”. Local partnerships will become more important as devolution and LGR progresses.

Peers were told that the location of the new council building significantly restricts bringing partners into the building and that lack of parking can be an issue. Parking and signage both need to be addressed. Some concern was also voiced by services about the impact of removing reception services in the new office. We heard that there is a negative view of the council on social media - that it is “closed for business” because of its new location on an industrial estate and the lack of facilities for the public. This has the potential for reputational risk in the community. The council should continue to gather evidence to analyse the impact of removing reception and identify ways to ensure full accessibility for those who need it.

council input and funding for the setup of the Base Bordon Innovation Centre has been successful but a lack of “grow on” opportunities for expanding businesses is limiting the economic benefits in the District area.

The council needs to progress the local plan as a priority and maintain its profile and engagement across the whole council and with external partners. There is clear buy in at the top of the council both with cabinet and the senior leadership team, however more/better communication about the Plan would help to raise its profile as a key part of East Hampshire’s future. The council also needs to address the lack of delivery of affordable housing, especially as this is flagged in their corporate plan as one of the important local issues and for this reason cabinet has asked for all options to increase delivery to help residents in housing need.

The Leader provides a clear vision for the council. He is widely credited for his entrepreneurial approach and being effective at sharing his opinions. Following a 2020 governance review, the council continues to make improvements to its governance culture.

There are strong officer/ member relationships in the council with mutual respect. Political priorities are understood by officers. Their advice is well received and informs member decisions. Overview and scrutiny committee members said that cabinet members could answer more questions at committee meetings and defer less to officers for a response.

Cabinet and the senior leadership team have a good relationship, with the Leader having been a good influence on this. Cabinet members could develop cross portfolio working further to improve collective accountability and provide opportunities to reflect on portfolio content and lines of responsibility. The joint strategic meetings between cabinet and the strategy board could be expanded to go beyond “briefings” and cover the more “wicked” issues such as social isolation, cost of living pressures, climate change etc, but clearly this is an issue for the council to consider.

Political groups work sensibly together. There is a constructive working relationship between the two ruling groups. There are some relatively new councillors including independents and there have been good efforts made to build relationships. We heard some concern that devolution will necessitate further changes again.

The constitution has been amended to reflect recent structural changes. The Scheme of delegation does need to be fully reviewed to ensure it aligns with new ways of working and supports effective service delivery.

There is scope to improve the overview and scrutiny (O&S) process. The O&S committee is chaired by the opposition which is very positive. However, the committee needs to have a clear workplan which is reconciled with the corporate forward plan. Its’ workload and agenda could also be better managed to avoid overloading. O&S generally could be more probing and proactive. Some additional senior level support is needed to help councillors to be more focused on their scrutiny role.

Audit committee receive a good informative pack for performance, KPIs etc. They are generally confident about the quality of the reports they receive. There needs to be greater top-down corporate understanding of risk and how to use the risk register to inform decisions. The organisation may benefit from adopting an agreed position on the appetite for risk and carrying out monthly monitoring of corporate risks.

The quality and consistency of councillor training is mixed. Councillors said they do not have enough detail about the budget. Training, presentation and knowledge of the budget could be improved to facilitate this. Councillors could be encouraged to put forward amendments in good time for the budget timetable. A Task and Finish group is working on a new member development charter and programme. Planning training is compulsory and councillors must achieve a pass or re-sit to attend the planning committee.

Members commented on the customer service they receive from officers. They feel that their enquiries are not handled in a timely enough way. Members and the public log queries via the same tool. There are no automated updates and responses are dependent on an officer replying via email.

The council’s financial management and planning processes and governance are sound and robust and demonstrate good practice with a sharp focus on delivery of the Corporate Strategy priorities.  The strategy board and cabinet consider regular reports. All reports to full council, cabinet and committees, and all executive and officer decision reports, require finance comments and sign-off. Where appropriate, these are accessible to the public via the council’s website.  However, it is considered that a quarterly reporting cycle to cabinet on financial budget monitoring adds time lags for members to be able to take timely and decisive actions to address in year budget issues as they arise including understanding the implications for future years and therefore to bring it on track.  A more frequent reporting cycle to cabinet on budget monitoring would allow it to be more agile and proactive compared to the current quarterly frequency.

The council has a five year Medium Term Financial Strategy (MTFS) that is refreshed each year during the budget setting process. This shows the budget being balanced by a combination of reducing expenditure and increasing income without drawing from general unallocated reserves to achieve balanced budgets in each of the years. We think that the presentation of the MTFS is confusing as it shows each year as a balanced budget without explicitly identifying the estimated deficits in each year and cumulatively. The net deficits are instead shown as ‘savings to be identified ‘. The council could review how this is presented for the next budget setting exercise.

The council has a high-level annual budget timetable that is developed by the finance team. The budget is linked to the council’s strategy and the delivery of the key priorities however, embedding additional income that is sensitive to factors outside of the council’s control into the base budget `is a risk.

The council’s financial plan considers the longer- term challenges and the uncertainties faced by it and is acting to be resilient in the future by not using one off grants, such as the funding guarantee grant in 2024/25 of £2.2m to support ongoing revenue expenditure. The council undertakes sensitivity analysis and scenario analysis (most likely, best, worst case) to inform its financial strategy and financial risk management.

The general reserves of £3.802m and earmarked reserves of £13.585m at 31 March 2024 were comparatively low within its CIFPA nearest neighbours. The council does not have a policy on the minimum level of reserves that it should hold. This is a risk bearing in mind the issues it has identified in respect of its investment property portfolio, comparatively high debt servicing cost and the deficits identified in the MTFS. It should therefore consider setting a minimum level of general reserves that it will hold.

Finance business partners are well regarded. Budget managers have monthly meetings with them to monitor and manage their budgets. Any significant issues are escalated and reported as part of the monthly reporting to strategy board and proposed actions required are submitted to the cabinet for approval. The budget is revised accordingly with the approved changes.

The council proactively considers its financial risks, The corporate and transformation programme risk registers identify where financial risk might arise from delayed or not achieving the savings and mitigation actions are recorded with ownership. 

The council’s audit committee approves the audit plan put forward by the head of internal audit. The council’s internal audit service is provided by Hampshire County Council under a partnership agreement and the S151 officer is the client officer.

The audit committee has received treasury management training. It receives quarterly reports on the progress of the audit plan and only ‘limited or no assurance’ audits are reported to the audit committee in full as well as outstanding audit actions from previous audits. The council should ensure that outstanding internal audit actions that management agreed are implemented to ensure strong internal control and checks and thus good governance.

The audit of council’s financial statements for 2023/24 was still in progress at the time of our visit and we were informed that it is expected to be completed by the end of February 2025. The council’s external auditor changed from KPMG to EY from 2023/24 audit.

As a result of the decoupling from Havant Borough Council and the significant organisational change, the financial standing orders and regulations and the contract standing orders and regulations should be updated to reflect the new structure in respect of delegations and spending authority to ensure a robust system of internal controls and checks and therefore good governance. 

The council has an investment property portfolio which was created primarily for financial returns to support the council’s revenue account and to keep the council tax low over a number of years.

The council has identified and recognises the major financial risks in respect of its investment property portfolio arising from a number of factors intrinsic to the portfolio. These risks if realised have the potential to have a serious to catastrophic impact on the council’s finances and therefore its overall financial standing. As a result, the council has taken actions to manage the portfolio and its performance through the implementation of improved governance arrangements and decision-making processes that link to the MTFS, asset management strategy and treasury management strategy.

EHDC has been on a journey of improvement for many years but particularly since it started its transformation programme in 2020. It is well equipped to continue that improvement. Appointments to a new senior leadership team have been completed and front-line services have been redesigned. There is further re-design needed which includes (but not limited to) key back - office teams in the Corporate Directorate including HR, finance etc will be reviewed shortly in the second phase of transformation.

The council has passionate staff, who are committed to the council and residents. Many are long serving. Service leads and team leaders are excellent. There is huge potential for them to meet as a group to discuss cross cutting issues and have a stronger voice upwards in the organisation. Service leaders and team leaders are a critical level of the organisation. Managers who want to be bolder in working with and empowering communities need to be encouraged and embraced more. The You’re a Star staff recognition scheme may not be the best or fairest vehicle to reward excellent service as some teams may be too busy to participate.

Staff have adapted well to the many changes of working practices, IT systems and office location. Monterey House is a well-liked, providing a positive working environment. Staff were also engaged with the move. The council’s hybrid working culture is valued by staff who see it as pragmatic. A new HR system has been procured with Portsmouth City Council and goes live on 1^st April.

The organisation is supportive of staff wellbeing. The 2023 local pay award was in recognition of challenges staff have faced in recent years. The leadership also want to prepare staff for working in a unitary environment in the future. There is an appraisal scheme but we were told that fewer staff are having an annual appraisal with their manager than two years ago. There are low levels of grievances and disciplinary cases and where they do occur there is some evidence of this being down to matters not being addressed in a timely way.

Reasonable adjustments are generally delivered smoothly, although managers may need more support when they are dealing with more complex adjustments such as specialist computer software.

The planned East Hampshire manager programme is recognised as necessary to address inconsistencies in the way managers approach line management, particularly 1-2-1s with staff, staff recognition and dealing with difficult staff situations.  The programme now needs to be delivered at pace.

The initial analysis of the 2024 staff survey was generally positive although a significant number of staff questioned whether the decisions being made by the council are the right ones. (only 60 per cent agreed) This suggests that whilst internal communications channels are in place, the message may not always ‘land’ e.g. use of consultants vs budget savings targets. The survey had a very high level of participation which is indicative of good engagement from staff. Further analysis of the results should provide some deeper insight into the views of different sectors of the workforce such as women, disabled employees or younger workers as well as how staff in different teams feel about the organisation. Shorter and more frequent pulse surveys would be a useful addition.

The document retention policy was highlighted as a gap with working practices therefore not being applied consistently. e.g. It was reported that this causes legal issues with leases. This leads to consideration of whether there is a need for a more systematic approach to policy review.

Transformation and service redesign has meant that there are more consultants and interim professionals working for the council. They provide skills that are not available in-house or which are more cost effective to buy in temporarily. Going forward the council will need to consider how it can embed more succession planning as well as finding ways to encourage teams with roles that are often hard to recruit to develop their own staff - in effect to “grow your own.” Staff said that they often feel “overlooked” in the rush to external recruitment.

It is recognised that senior political and managerial leadership will want to consider, discuss and reflect on these findings. The LGA will continue to provide on-going support to the council. Following publication of CPC report you need to produce and publish an Action Plan within five months of the time on site. As part of the CPC, the council are also required to have a progress review and publish the findings from this within twelve months of the CPC. The LGA will also publish the progress review report on their website. 

The progress review will provide space for a council’s senior leadership to report to peers on the progress made against each of the CPC’s recommendations, discuss early impact or learning and receive feedback on the implementation of the CPC action plan. 

In the meantime, Will Brooks, Principal Adviser for EHDC, is the main contact between your authority and the Local Government Association. As outlined above, Will Brooks is available to discuss any further support the council requires. will.brooks@local.gov.uk