Agenda item

This draft investigation report - BCP FuturePlaces Ltd (FPL) covers scope areas 1 to 8 (all scope areas).

 

This A&G Committee meeting will be the second meeting on this matter. The Committee has previously reviewed an initial part A which covered scope areas 1 to 4 at a meeting on 24 September 2025. The meeting only managed to review scope areas 1-3.

 

To allow the Committee sufficient time to digest and review the findings to determine next steps there may be a need for a least one further meeting.

 

At the conclusion of this investigation there may still be gaps in understanding, and the Committee may or may not decide that further investigation through other means is required.

 

NOTE:

 

In relation to the confidential Appendix (Section F of the report), should the Committee wish to discuss the content, it is asked to consider the following resolution: -

 

‘That under Section 100(A)(4) of the Local Government Act 1972, the public be excluded from the meeting for the following item of business on the grounds that it involves the likely disclosure of exempt information as defined in Paragraphs 1 and 2 in Part I of Schedule 12A of the Act and that the public interest in withholding the information outweighs such interest in disclosing the information.’

 

The Committee considered the report of the Head of Audit and Management Assurance (HAMA), a copy of which had been circulated to each Member and a copy of which appears as Appendix 'A' to these Minutes in the Minute Book.

 

This was the second committee meeting to consider the draft Internal Audit investigation report on BCP FuturePlaces Ltd (FPL). This report covered scope areas 1 to 8 (all scope areas). The Committee had previously reviewed an initial part A which covered scope areas 1 to 4 at a meeting on 24 September 2025. It was noted that there may be a need for a least one further meeting to allow the Committee sufficient time to digest and review the findings to determine next steps. At the conclusion of the investigation there may still be gaps in understanding, and the Committee may or may not decide that further investigation through other means was required.

 

The Chair explained that the Committee would pick up where it left off on 24 September at the end of Scope Area 3, continuing to make comments and identify areas where clarification was needed and/or where further consideration may be required. She also suggested that members send any further questions to her and the HAMA, she would then compile these into a list to aid discussion at the next meeting.

 

The Chair and members thanked the HAMA for the amount of work taken to produce a report of such depth and breadth.

 

Scope 4. Detailed expenditure incurred by BCP FuturePlaces Ltd

 

4.1 Provide details of where the money went / what expenditure did BCP FuturePlaces Ltd incur. (a schedule).

 

• The HAMA’s recommendation at 4.1.2 regarding Council Teckal companies filing Profit and Loss (P&L) accounts was noted

 

4.1.6 Drilldown A – Consultancy Fees (Outsourced - cost of sales) £3,146,410:

 

• Members commented that ‘where the money went’ was now very clear, with consultancy fees accounting for over 40% of FPL total expenditure.
• A member suggested that the list of consultants seemed very long and commercial in nature. It was noted that this may be what one would expect in the private sector. It may be useful to seek examples of comparative fees for regeneration work.
• A member commented that the wide range of consultants could indicate a scattergun approach and a lack of focus. Also it seemed that some consultants appeared to provide similar expertise to FPL.
• Members queried tendering procedures and whether value for money (VFM) was achieved. Members were referred to Section 4.2 of the report which set out the arrangement for procuring suppliers.
• The HAMA was unable to locate any working paper to account for the manual adjustment of £8,467, despite best endeavours.
• The potential link between some consultants and the Stewardship Initiative was flagged – see also 5.3 below.

 

Areas for consideration:

• Whether to undertake a benchmarking exercise on consultancy fees for regeneration work
• Whether more information is required on the approach taken to appointing consultants and whether VFM was provided

 

4.1.7 Drilldown B – Director’s salaries (inc. NED’s) £789,531

4.1.8 Drilldown C – Staff salaries £1,319,976

4.1.9 Drilldown D – Sub-contractor costs £707,897

 

• A Member commented that the salaries seemed ‘eyewatering’ and VFM was again questioned.
• It was noted that the approach to the recruitment and payment of FPL staff had been a conscious decision. It was clarified that the various ‘set up’ reports to Cabinet and Council stated that Council did not have the appropriate staffing capacity to lead FPL from within.

 

4.1.12 Drilldown G – Legal Fees £96,728

 

• Members noted the lack of clarity identified by the HAMA regarding the payments of £10,000 and £10,125 to Knight Frank for commercial reviews of the Stewardship Model for the URC.
• Members also noted a payment of £19,995 for a further stewardship model review by Castletown Law.

 

Area for consideration: Whether further information is required to clarify the purpose and outcome of the Knight Frank and Castletown Law reviews of the Stewardship model

 

4.1.13 Drilldown H – Consultant £76,852

• Comments included that the FPL structure looked top heavy and that there would have been less need for consultants if more staff with relevant expertise been recruited.
• The HAMA explained that as part of the decision to create FPL, it had been clearly stated that FPL would grow incrementally and would need to rely considerably on consultants in the interim period.

 

4.1.14 Drilldown I – Management fees - BCP Council services to FPL £319,061

• The HAMA explained that the £0.00 entries for some Council services were FPL’s P&L figures. These did not tally with the Council’s recharges and did not reflect the actual amounts paid.
• It was noted that FPL staff had been located in Council premises without charge for approximately nine months. In principle this was contrary to Government guidance, although in practice as the sole entity, there was no competitive advantage for FPL to gain.

 

4.1.15 Drilldown J – FPL Sales to BCP Council (Turnover for FPL)

• The HAMA clarified the process followed for the subject matter expert (SME) review by Council staff which resulted in the summary financial position shown in Appendix B.
• Members discussed if there was value in seeking further information from SMEs on how they assessed the value of work FPL proposed transferring to the Council on each project.
• If work was classed as useful to the Council it was paid for, if not useful it was written off. Members noted that ultimately the cost to the taxpayer was the same, the Council ultimately funding all £7.2M of gross FPL costs. It was also noted that some data was of use to the Council even if projects would never be progressed.
• The HAMA confirmed that all the work undertaken was still available.

 

Area for consideration: Cost-benefit of seeking further information from SMEs on how value of project work was assessed

 

4.2 Review the commissioning, procurement, and contract management processes for any outsourced work.

 

• It appeared that procurement was reviewed by the FPL Board at each meeting.
• Members noted the tension which existed between FPL and Council procurement staff, as identified in 4.2.9. This was partly attributed to the lack of a Resource Agreement and a lack of clarity on the respective roles and responsibilities of FPL and the Council.
• A Member commented that the procurement seemed too broad
• It was noted that FuturePlaces Studio was separate, unrelated entity.

 

4.3 Detail where possible the projects this (expenditure) was spent supporting.

 

• Members were advised that this information was theoretically available but not in a readily accessible form and would require a significant amount of time to complete fully and accurately. Some details were already available in section 4.1.15 of the report.
• It was suggested that it may be helpful to provide details for one project/business case as an example. Some members felt this would aid transparency in the public arena, others felt that it would use additional time and resource to establish what was already known.

 

Area for consideration: Cost-benefit of seeking further information to detail expenditure on an example project/business case

 

4.4 Detail which projects produced Initial and Full Business Cases.

 

• Members questioned the outline business case (OBC) for Poole Civic Centre in terms of the amount paid for the OBC and whether the proposal for a boutique hotel on that site was realistically deliverable, particularly in view of the £52 million total project cost.
• It was noted that the Big Plan had included initial plans to invest an additional £2 million a year (from revenue budget) in regeneration and a £50 million ‘Futures Fund’ for infrastructure investment.
• In view of this, Members questioned what had motivated FPL to pursue a project with a total cost of £52 million. Had the risks been considered and did this reflect a lack of understanding of Council finances and the political environment?
• It was acknowledged that there had been a different financial climate at that time, the cost of borrowing had been extremely low and the then Administration had a different approach to risk and the debt ceiling.
• It was pointed out that there was a need for context and objectivity. It may not necessarily be helpful to draw comparisons between what was considered acceptable then and now, rather the committee should focus on questions of clarification.
• A Member cautioned against speculation when information was incomplete and suggested that it may be necessary to question the FPL MD, FPL COO and other parties to ensure a balanced outcome.

It was noted that the HAMA had indicated in his report some areas where this input may be sought if the committee so wished.

 

Area for consideration: Whether more information is required to gain a  better understanding of why the total project costs shown in section 4.4.5 of the report were considered acceptable

 

4.5 Was any expenditure or activity incurred by BCP FuturePlaces Ltd outside the stated company’s terms of reference (initial or as amended).

 

• Members questioned whether project scope creep was inevitable
• With regard to the meeting with KPMG, it was noted that the FPO COO had indicated that in his view his attendance at that meeting was due to his previous experience in banking rather than his role with FPL.
• Members were advised that as the detail of this communication was not in the public arena, it may be a matter for the committee to follow up with the FPO COO so it could be placed on public record.

 

4.6 Was there a deliverable plan for BCP FuturePlaces Ltd to repay the working capital loan.

 

• It was noted that the initial working capital loan agreement set up for £400,000, was in line with other council companies precedent.
• The £5,000 transaction in Year 1 was a test to ensure direct debit payment could be made from FPL’s new bank account.
• Members agreed that Section 4.6.4 was clear in specifying the amounts borrowed, repaid and written off
• The HAMA confirmed the dates each loan agreement was signed.

 

Scope 5. Items requiring specific assurance

 

5.1 Staff bonuses - What was the justification for payment – who approved the payment was this in line with the shareholder agreement.

 

• The HAMA’s recommendation on Reserved Matters was noted.
• Bonuses had formed part of a package to attract staff from the private sector.  Although Members acknowledged this was normal in the private sector, it was problematic in a public funding context.
• It was confirmed that the working capital costs of the loan agreement could be used for the payment of bonuses.
• Some members questioned the justification for the bonus payments.
• There was no record found of how the rationale for paying bonuses was agreed, however this did not necessarily mean it didn’t exist.
• Members noted that it appeared that the Board and the shareholder representative were aware there was an approval process to follow as a reserved matter. Sections 5.1.12 and 5.1.13 of the report explained how this was dealt with in 2022/23.
• It was difficult to make any comparisons regarding bonuses with other Teckal companies as none had a structure like FPL

 

Area for consideration: Whether any further clarification is required on the process followed for agreeing bonus payments

 

5.2 Were fees paid to head-hunters for their support in appointing executive directors, non-executive directors and staff.

 

• A headhunter had been appointed to recruit non executive directors at a cost of £13,000. Again it was noted that this was common practice for established companies in the private sector but caused tension here.

 

5.3 Were any declarations of interests made including disclosable pecuniary interests in respect of BCP FuturePlaces Ltd activities.

 

• It was acknowledged at the time that councillors serving on the FPL Board was not ideal, that a conflict would exist regardless of any training provided.
• Although this was only meant to be a temporary arrangement, a Member commented that the perceived need to establish FPL at pace led to this conflict.
• It was noted that these issues had subsequently been addressed in the DLUHC governance review (linked to Best Value Notice) and Council owned companies Shareholder governance review (see Scope section 3.2)
• It was noted that the FPL MD was a co founder of the Stewardship Initiative (SI) with two individuals who worked for companies which later gained business from FPL. While this information was in the public domain, the lack of any formal declaration meant that no measures were able to be considered to address this.
• It was also unclear whether the Council was aware of the apparent proposal of FPL to adopt the SI “kitemark”, which may have resulted in 1% contribution to fund stewardship support and compliance (although any funding model would have required Council approval)

 

Areas for consideration:

• Whether there is a need to ask those involved how any conflicts of interest were managed
• And specifically, whether further information is required on any potential conflicts of interest in relation to the Stewardship Initiative – whether these were identified at the time and if so, how they were managed

 

5.4 Were any declarations of interests made regarding personal friendships and business associations in respect of the recruitment of staff to BCP FuturePlaces Ltd.

 

• It was noted that the committee had the option of seeking clarification from FPL MD and FPL COO regarding the appointment of the Strategic Engagement Director if it so wished.

 

5.5 In respect of BCP FuturePlaces Ltd rent of offices in Exeter Road, why was council space not utilised, and should any existing or former councillors have made any declarations.

 

• It was unclear what options for potential premises the former Leader of the Council looked at between the Board meeting in May 2022 and the securing of premises at Bourne House in July 2022.
• There was no evidence to suggest that the eventual acquisition, by the former Leader, of Hinton Road Investment Ltd (HRIL) had any influence on FPL initially occupying Bourne House, Exeter Rd.
• It was likely that whilst being a councillor, in the lead up to the elections, the former Leader would have been in discussions to acquire HRIL but at that stage there was no pecuniary interest to declare. It was noted that a declaration, that the councillor was in negotiations, may have been prudent in the circumstances.
• Members asked why FPL did not use Council premises. It was explained that FPL felt the lack of confidential space was incompatible with how they wanted to work and the Council did not feel it was appropriate to make an exception for FPL.
• The Board was advised that it could not exercise the break clause until rent payment was brought up to date. It decided to pay the first six months of the second year’s rent and exercise the break clause. This saved FPL (and ultimately the public purse) £27,000 minimum.
• The nature of the FPL COO’s whistleblowing disclosure and the HAMA’s findings at section 5.5.33 of the report was noted.
• It was noted that a third party referral to the Police regarding the former Leader of the Council’s ownership of HRIL was closed without any further action necessary.

 

ACTION: Monitoring Officer to seek clarity on when exactly a councillor’s term of office ends after an election.

 

Areas for consideration: Does the committee need any further information on i) how the premises were acquired, (ii) whether a declaration should have been made when negotiating the purchase of HRIL and (iii) the rationale for the rent payment in September 2023.

 

At that point the Chair concluded the meeting, indicating that a further meeting would be arranged to consider the rest of the report.