County council owned This Land says the departure of former Tory MP Steve Norris as chairman, is unconnected with a report raising questions about the company’s financial stability.

Mr Norris will step down after three years at the end of what the company says is his agreed term of office.

But the announcement comes in the same week as a county council externally commissioned report into This Land’s finances was released.

And it makes unsettling reading.

Council leader Lucy Nethsingha said: “The lack of real scrutiny of the company under the previous administration has left the council facing significant risks.”

She said: “Weaknesses and shortcomings have been identified which need immediate attention.

“We are determined to hold This Land to account on the areas where they need to make improvements.”

The council says consultants Avison Young (AY) who conducted the review had pointed out “a tension” between the firm’s objectives and what subsequently happened.

Cllr Nethsingha added: “We do have confidence that - with more robust scrutiny by the council - these areas can be addressed.”

Deputy council leader Elisa Meschini said: “There are significant decisions facing us in the immediate future to determine what to do to maximise the return on our investments on behalf of Cambridgeshire taxpayers.”

Recommendations include setting up a ‘mirror board’ to take place before This Land meetings and to ensure the company’s direction is in line with the council’s “new political objectives”.

Meanwhile Mr Norris said: “I’m proud of what we’ve achieved and am confident the company has a bright future looking ahead”.

David Lewis acting CEO of This Land said the company has “ambitious plans and is at an important point in its evolution”.

Tom Kelly, chief finance officer of the county council, says the AY report “is the most thorough overview since the company commenced operations”.

As at January 2022, he said, the council had made long term loans of £11.851m to This Land and a further £5.851 as an equity stake.

“This Land’s accounts confirm the group had net liabilities on its balance sheet of £14.1m as at March 2021,” he said.

“It will be evident that, therefore, the council has significant financial exposure to the company and is invested in its business success.

“Diminution of the investment value or returns from This Land, or divergence from the long-term plan for overall profitability are a recognised risk in the council’s corporate risk register.”

Mr Kelly says that although the council has received revenue interest to date (and a £6m net contribution remains expected this financial year) there have been concerns about This Land’s operations in its early years.

In particular, he says, over the pace of housing delivery which is crucial to the company’s commercial success.

Mr Kelly referred to a “general comment” by Avison Young that there were “gaps in the information held by the company and the completeness of replies”.

There anomalies or omissions identified on individual sites and some non-standard approaches to accounting for costs (such as for marketing and contingency).

He also cites “unusual” accounting principles, lack of “site-specific” risk registers, and lack of any discussion by the board on risk management.

And he refers to the This Land board working without “a mitigation plan for adverse scenarios”.

Of the 2021 business plan of This Land, he concludes that “in several respects this is superficial and lacks detail about downside and upside of actual and projected financial performance.

“Effectively there has not been a full business plan review for more than 18 months.”

With a nod to likely expectations of the rainbow alliance now in charge of the council, he says that “opportunities exist for emphasis on broader objectives (e.g., affordable and key worker housing) and greater contribution towards net zero carbon homes target”.

But he warns that “these opportunities are likely to come at the cost of a negative impact on the financial return received by the council and increased delivery risk.

“They will need to be considered in the context of the commercial constraints the company faces.”

Overall, he concluded, there is a “lack of visibility and robustness” in several areas.

The AY report is being discussed by the strategy and resources committee on January 27.