Agenda item

To consider a report by the Corporate Director: Economic and Community Ambition (copy enclosed), which reviews the circumstances pertaining to Clwyd Leisure Services.

 

A report by the Corporate Director; Economic and Community Ambition (CDECA) had been circulated previously.

 

The CDECA introduced the report which reviewed the circumstances leading up to Clwyd Leisure Ltd (CLL) ceasing to trade in 2014, and identified the lessons learned to minimise the risk of similar circumstances occurring in the future.

 

Cabinet had requested an internal review of the creation, management and monitoring of the company with a view to understanding what happened, confirming whether safeguards were now in place to prevent recurrence and identifying any further improvements needed.  The Head of Internal Audit (HIA) had reviewed the arrangements for governing and monitoring performance of arm’s-length organisations.  The report set out the findings, conclusions and recommendations from the review commissioned by Cabinet, set within the recommendations made by the HIA to improve overall governance of arms-length organisations.  A timeline of the history of CLL had been set out within the review report.

 

The CDECA explained that at the inception the legal paperwork establishing CLL had not covered how to address problematic situations, and there had been a clear absence of performance expectations and clarity.

 

The original decision to set up CLL had been based on an options appraisal based on a number of key assumptions.  However, the review concluded that this was not followed through into the formal documentation establishing the company or its relationship with the Council, and this had contributed to weaknesses in monitoring and scrutiny arrangements and made it difficult for the Council to manage its relationship with the Company.  It was felt that scrutiny and monitoring arrangements had been confused and multiple reporting lines were likely to have contributed to a lack of follow through.

 

The Head of Communication, Marketing and Leisure (HCML) outlined the reason why the Company had been the subject of so many conflicting scrutinies.  He explained that the arms-length arrangements and indeed Leisure had been passed around the Authority on several occasions during the term of the company, which had resulted in various Heads of Service having responsibility and consequently having to report to different Scrutiny Committees.  The HCML expressed the view that the problems had resulted from the subject and responsibility following Heads and Directors to different Scrutiny Committees.  He felt that the new scrutiny arrangements would ensure this did not happen in future as they were not directorate based, and agendas would be monitored and discussed by Chairs and Vice Chairs.

 

More recently within the Council a more robust approach to business case development and project and risk management had been introduced, making it unlikely that similar circumstances would occur again.  Risk management was now firmly embedded within the Council with a clearer focus on performance management being routine.  In the latter stages, the relationship with CLL had been more robustly managed, with regular monitoring in place and improvement actions identified and followed up.  The decisions made by Cabinet in January and March, 2014 had been significantly informed as a result of the more robust approach.  It was emphasised that the current Scrutiny system minimised potential risks and that the Chairs and Vice Chairs Group provided a way of managing any such cross over which had not been available at the time, and this provided an additional control in the system.

 

The CDECA explained that recommendations for further improvements had been set out in the review report which were linked to the HIA’s overall review of arrangements for ensuring appropriate governance and performance monitoring of arms-length organisations more generally.  The report included recommendations to improve Council oversight, scrutiny and monitoring avoiding reliance on Council-appointed board directors as the sole means of governance and nominating relevant Committees within the Council to consider the governance and performance of arms-length relationships.

 

The Chair felt that the issues arising from the deliberations and conclusions should be forward focused.  However, he felt it would be important to consider the timeline of events    and lessons learned.

 

Councillor P.C. Duffy thanked the Head of Communication, Marketing and Leisure (HCML) for the work he had undertaken.  He expressed concern that there had been no meaningful business plan or lease agreement in place at the inception, and made reference to a lack of scrutiny, intervention or checks in respect of performance over a lengthy period of time.

 

The HLHRDS responded to questions from Members and explained that the funding aspect of the agreement made been the most inappropriate aspect of the documentation.

 

The CDECA explained that there had appeared to be no clear lines of responsibility, and while concerns were raised respective Committees appeared to have been satisfied with assurances received regarding the operation of the Company.  In reply to concerns expressed by Members, she outlined the difficulties confronted by Council appointed Directors of the Board.  The review had included recommendations to improve Council oversight, scrutiny and monitoring to avoid reliance on Council appointed board directors as the sole means of governance and nominating relevant Committees within the Council to consider the governance and performance of such arms-length relationships.  The CDECA explained that there were benefits to appointing Councillors as Directors to the Boards of arms-length Companies, however, not as a sole means of monitoring the performance and finance aspects of a Company.  Councillor H.Ll. Jones, Lead Member for Tourism, Leisure and Youth, felt the Scrutiny Chairs and Vice Chairs Group could contribute to the process of scrutinising arms-length Companies.  Reference was made to the roles and responsibilities of Councillors, Directors of the Board and Cabinet Members.  The CDECA highlighted the importance of the need to manage any conflict of interest which might arise, and reference was made to the statutory duty of Directors of Companies.

 

The difficulties encountered by officers in addressing the problems experienced were outlined by the HCML, particular reference being made to the political aspect of the process.  He also provided details of the implications and outcomes arising from the recommendations in the Wales Audit Report of 2008.

 

In response to a question from the Chair, the CDECA agreed to provide details of the criteria and process for assessing the rateable, and commercial rental value, of buildings such as the Nova Centre, Prestatyn.

 

The Committee endorsed a request by the Chair for the submission of a report to the May, 2015 meeting of the Committee to include:-

 

·                 The reinforcement of the role of Elected Members on the Boards of arms-length Companies and the inclusion of the work undertaken by the HLHRDS and HIA, in respect of arms-length Companies.

·                 The work undertaken by the HIA, to include the framework to be implemented in July, 2015, with an update of the pending implementation of the agreed recommendations.

·                 An update by the HLHRDS on the role of Members on the respective Boards of arms-length Companies.

 

Members also highlighted the need for the provision of Member training in relation to arms-length Companies.  The HCML highlighted the need for nominees to the respective Boards to possess the necessary skill sets and understanding to meet and undertake the required demands of the post.

 

The Chair referred to the importance of the need to ensure the role of the respective Scrutiny Committees in monitoring arms-length Companies was reinforced.  The Committee agreed that this matter be referred to the Scrutiny Chairs and Vice Chairs Group for consideration.

 

RESOLVED – that, subject to the above, the Corporate Governance Committee:-

 

(a)            receive and note the contents of the report.

(b)            agree that a further report be presented to the May, 2015 meeting of the Committee, incorporating the information and detail requested by Members.

     (IB and GW to Action)