Concerns about the governance of an East Lancs council’s joint ventures for regeneration, housing and commercial property developments have been highlighted by external auditors.

Auditors Grant Thornton have produced an interim report for Pendle Council, with recommendations including for its PEARL joint venture companies, active in borough housing, office and retail developments, for 2021/22 and 2022/23.

Georgia Jones, of Grant Thornton, told a full council meeting the audit looked at whether Pendle Council had the right governance arrangements in place to judge whether it was delivering value for money.

It was not a judgement on whether value for money was achieved.

It made four key recommendations on  ‘significant weaknesses’ based over the two years. One was about budgets and financial sustainability. The others were about clarity around governance arrangements – decision-making, roles and responsibilities.

These covered the council’s planning system and role of committees, its executive and leader system, and various PEARL joint venture companies.

PEARL stands for Pendle Enterprise and Regeneration Ltd and projects include Harrison Drive in Colne, Colne’s former health centre and Shackleton Hall Arcade. Others include Quaker Heights and Spinners View housing developments and Northlight Mill at Brierfield and Nelson’s ACE Centre.

Councillors are, or have been, board members on different companies. Joint venture partners include Barnfield Construction and others.

Grant Thornton highlighted ‘risks’  and ‘significant weaknesses’ in council governance arrangements underpinning its relationships with its joint venture companies.

It said councillors who are directors of PEARL companies had not always declared any conflicts of interest. Legal agreements between the council and the companies were not up-to-date. There was also a lack of clarity about the roles of council officers.

Council officers said an independent legal advisor would look at joint venture arrangements and potential risks. Work had already started on declarations of interests, reporting, board membership and shareholder legal agreements.

Lib-Dem Cllr David Whipp, borough deputy leader, said: “Regarding joint ventures, I think I have said some of these things at other meetings that are reflected in some points here.

“There was inadequate governance at the time with certain things were being discussed that, as a councillor and member of joint ventures, I was not aware of.

“I was asking questions about where had things come from. I think this criticism is just. However, I think we have got a grip on this and governances is much stronger and properly regulated.”

Independent Cllr Asjad Mahmood, borough leader, said all the recommendations would be taken on board. He was happy to support it.

Conservative group leader Cllr Nadeem Ahmed said: “I have been aware of the conflict of interests. On the one hand, we are there to look after the local authority’s interests. That’s our responsibility. However, as councillors we may have different feelings. So there can be a real conflict of interests or difficulty.”

Fellow Tory Cllr Martyn Stone said: “There is a lack of transparency and responsibilities regarding the joint ventures. I have never heard a declaration on interest from PEARL board members.

“I’m shocked there have been incidents of councillors advocating for joint ventures which might be against the council’s interests, such as the length of time for a loan agreement. I’m sure there was no intent but perhaps it has not been recognised properly.”

“We have two cabinet members who are also members of the PEARL board, Should cabinet members be on the PEARL board?”

All councillors accepted the report.