Agenda item

This report is a summary of the BCP FuturePlaces Ltd (FPL) investigation process initiated by the Audit & Governance (A&G) Committee.  

 

The A&G committee agreed a scope and then considered the findings of a detailed investigation led by Internal Audit.  The Committee considered the investigation report over three public meetings. One non-public financial focused briefing also took place.   

 

The Committee, via the Chairperson, asked a series of follow up bespoke questions to seek the perspectives from several relevant stakeholders. 

 

The Committee agreed that the Chairperson would write a forward statement to summarise the investigation and provide an overview of what the Committee considered, including the perspectives of stakeholders, drawing the investigation to a conclusion.

 

 

NOTES:

 

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.’

 

A copy of the Committee FPL action log is also included with these papers for information.

The Head of Audit and Management Assurance (HAMA) and Chair of the Committee presented a report, 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.

 

The report was a summary of the BCP FuturePlaces Ltd (FPL) investigation process initiated by the Audit & Governance (A&G) Committee. The A&G committee agreed a scope and then considered the findings of a detailed investigation led by Internal Audit. The Committee considered the investigation report over three public meetings. One non-public financial focused briefing also took place. The Committee, via the Chairperson, asked a series of follow up bespoke questions to seek the perspectives from several relevant stakeholders. The Committee agreed that the Chairperson would write a foreword statement to summarise the investigation and provide an overview of what the Committee considered, including the perspectives of stakeholders, drawing the investigation to a conclusion.

 

The Chair thanked the HAMA for all his work in pulling the recommendations together and advised the Committee that she hoped her foreword, whilst it may not express the views of all Committee Members, adequately addressed the main themes which had been considered during the Committee’s meetings regarding FuturePlaces.

 

The Committee considered the Future Places report and acknowledged it as a thorough piece of work, with discussion focusing on the need for clearer accountability, stronger actions arising from the findings, and consideration of wider lessons for the Council’s long-term approach to regeneration. 

 

Members discussed the strategic context of regeneration activity over a number of years, noting concerns about changing delivery models, the cost of unsuccessful projects, the need for a clear and consistent regeneration strategy, and the importance of maintaining cross-party support for major regeneration schemes over successive administrations. 

 

It was suggested that the wider lessons from the investigation should be reflected in the minutes and considered through future work relating to regeneration, although views differed on whether these issues should form part of the report’s recommendations. 

 

Discussion took place regarding the Chair’s foreword to the report, with comments made about the interpretation of evidence received, the treatment of stakeholder responses, and whether factual inaccuracies or omissions may exist within the foreword. 

 

A member advised that they had received correspondence from former stakeholders raising concerns about aspects of the foreword and sought to raise these matters during the meeting. Members discussed the appropriateness of introducing this information at this late stage of the process. 

 

The Monitoring Officer advised that it was a matter for the Committee to determine what information it wished to consider, although legal advice could be provided regarding any issues of privilege or defamation if required. 

 

Members expressed differing views on the handling of the additional correspondence, with some emphasising the importance of correcting factual inaccuracies and others highlighting concerns about the late presentation of evidence and the need for proper process.

 

Following further discussion, the Chair proposed a short adjournment to allow the correspondence referenced to be considered by her before the Committee resumed its consideration of the matter.

 

The Committee adjourned at 7:17pm and returned to session at 7:33pm.

 

The Committee resumed following the adjournment and the Chair reported that the information shared regarding alleged inaccuracies in the foreword had been reviewed. The Chair concluded that the matters raised reflected differences of opinion and emphasis rather than factual inaccuracies, although a clarification was provided regarding references to Mr Beavers and Smart Growth Associates. It was Mr Beever’s assertion that he had never been formally associated or employed by Smart Growth Associates and the Local Government Association, Councillors Forum Report, available on their website, suggesting he may be assicated or employed was incorrect. The Chair was happy to accept Mr Beevers clarification as fact.  

 

The Committee then considered proposed additional recommendations arising from the investigation. A proposal was made for a statement of accountability to accompany the report to provide a concise summary of responsibility and key findings for the public. 

 

The Monitoring Officer reminded members that the investigation had not made findings of wrongdoing against any individual and that it was not the role of the Committee to do so.

 

Members discussed accountability for the Future Places arrangements, with differing views expressed on the extent to which responsibility should be attributed to individuals, senior leadership, governance structures, or the wider system of decision-making that was in place at the time. 

 

It was highlighted that the Committee agreed scope focused on the adequacy or not of governance and lessons learned rather than attributing blame, and it was noted that the investigation had been deliberately scoped to review processes rather than individual conduct. 

 

Following discussion, the proposal for a separate accountability statement was not seconded and therefore withdrawn. 

 

The Committee agreed to proceed by considering the report recommendations individually, with any proposals for additional recommendations or amendments to be discussed alongside the relevant recommendation rather than separate motions.

 

Recommendation 1:

As a matter of formal policy, senior* company executive directors should be appointed via Council instigated open advertising, which should be live for at least 15 working days (3 weeks)

*the Council should pick a grade or £ salary banding to define senior, say above £75,000?

 

Recommendation 2:

Company executive directors should be selected using the same selection/interview process adopted for Council Corporate Directors

 

The Chair was supportive of the Recommendations however advised that a Committee Member had proposed a motion as follows:

 

1. Recommendations 1 and 2 shall be replaced with a requirement that every executive-director position, chief-officer-equivalent position, or Council-controlled company role with potential total remuneration of £75,000 or more:

• is publicly advertised for at least 15 working days;
• follows the Council’s Corporate Director recruitment and due-diligence process;
• uses a role description, person specification and scoring framework agreed before any candidate is approached;
• includes professional HR participation and at least one genuinely independent panel member;
• requires panel members and candidates to declare all relevant personal, professional, commercial and political relationships;
• requires references, employment-history checks and verification of qualifications before an unconditional offer;
• retains a complete written recruitment audit trail; and
• is not preceded by any offer, assurance, negotiation of terms or indication that a candidate has already been selected.

 

b. No Leader, Deputy Leader, portfolio holder or company director shall constitute a majority of the panel appointing a senior executive to a Council-controlled company.

 

c. Any exceptional departure from these requirements must be approved in advance by Full Council.

 

In response to the recommendations, members supported following the Council’s existing recruitment processes rather than specifying salary thresholds or remuneration levels, noting that such measures could quickly become outdated and may not accurately reflect total remuneration.

 

It was suggested that scrutiny should instead focus on reviewing the Council’s HR recruitment policies to ensure they provide sufficient oversight and capture all relevant requirements.

 

Members also noted that some recommendations appeared to reflect previous governance arrangements rather than the Council’s intended future operating model. It was clarified by the HAMA that the salary threshold included in the recommendation had been intended as an illustrative example rather than a fixed figure. Members agreed that the key requirement was to ensure the Council’s established senior staff recruitment policies were applied consistently, as this would provide a robust recruitment process and avoided the need to create separate arrangements for council-owned companies.

 

In response to clarification from the Chair, it was confirmed that the motion did not have a secondar and therefore did not progress although the Chair highlighted the importance of the Committee having drawn out the discussion.

 

The recruitment process for Council Corporate Directors was discussed further with a Committee Member highlighting that the process involved multiple panels and not just one decision making panel.

 

Following further discussion, it was felt that a briefing be arranged on the recruitment process of corporate directors, including the various interview panels to understand policies and ensure it would be applicable and appropriate for Council owned company director recruitment.  ADD TO ACTION TRACKER.

 

Recommendation 3:

Councillors who are also company directors may proffer evidence or advice to the council (when and if invited to do so) but must not be a party to (take part in voting) making a decision of the Council affecting the company. 

 

In response to a query, it was clarified that a Councillor who was also a Company Director could never exclude themselves from responsibilities of the company director role and must therefore exclude themselves from their Council responsibilities when the Council votes on matter pertaining to the company of which they were a director.

 

Recommendation 4:

For all existing Council companies ensure that the required/approved/agreed governance documents are actually in place and up-to-date.  

 

The Chair highlighted the planned briefing in September on council owned companies.

 

In response to some discussion, the HAMA clarified that he was trying to distinguish between existing and new Council companies with Recommendations 4 and 5 and that the Committee would want reassurances that existing Council owned companies had all the relevant governance documentation in place.

 

Recommendation 5:

For any new council company to be set up in future, all governance documents must be agreed and signed by the council and company representatives within six months of company incorporation date.  Any exceptions must be escalated to the Shareholder Advisory Board by the shareholder representative and company secretary.

 

The Committee discussed the recommendation in the context of governance arrangements for new council-owned companies. It was recognised that governance documents for existing companies should be reviewed to ensure they were up to date, while for new companies the focus should be on ensuring appropriate governance arrangements were established at the right stage of development.

 

Members expressed concern that imposing a fixed timescale, such as six months from incorporation, could be either too restrictive or too flexible depending on the nature of the company and its activities. Discussion therefore focused on linking governance requirements to business case approval, operational activity and funding commitments rather than a specific timeframe.

 

The Chair noted that some initial funding may be necessary to recruit staff and develop governance documents but considered that greater clarity was needed regarding what activity could take place before governance arrangements were fully agreed.

 

The Monitoring Officer suggested that existing shareholder governance structures could play a role in considering proposals for new companies before they progressed to Cabinet or Council as an additional safeguard. – this was not discussed again during the meeting.

 

Following further discussion around the recommendation and how to safeguard the Council and its interests, the Committee decided it wanted to add its own additional recommendation, and it was Proposed, Seconded and agreed by the Committee to add an additional Recommendation as follows:

 

Recommendation 5a:

The business case for any future Council owned company must set out what activity may take place in advance of governance documents being agreed and in advance of contractual arrangements and substantive funding commitments being made by the Council.

 

The Chair took Recommendations 6 and 7 together as follows:

 

Recommendation 6:

The Council should pre-define, in the Shareholder Agreement or other suitable governance document, what natural evolution of a project looks like and what is a more fundamental tangent sub-project (from any original Cabinet or Council agreed Commissioning Plan or Business Plan project).

 

Recommendation 7:

Further, what is the trigger that means a decision is required from councillors (Cabinet) to materially evolve a project – this could be budget increase or decrease for example as a proxy.

 

The HAMA confirmed that these recommendations had been proposed to mitigate possible ‘mission or scope creep’.  The Committee agreed to these recommendations and had no queries or additions.

 

Recommendation 8:

As a matter of formal Policy the Council should determine whether, to evidence the Teckal decisive control test, council Teckal companies should follow all Council policies (or some key Council policies or be free to operate their own policies agreed by the company board).

 

The Committee discussed the importance of demonstrating the Council’s control over its Teckal companies and ensuring that governance arrangements clearly reflected the Council’s ability to exercise decisive control.

 

It was noted that while some council policies may not always be proportionate or appropriate for smaller company structures, any departure from council policies should remain a matter for the Council to decide rather than the company itself.

 

Members expressed concern that the original wording could be interpreted as allowing company boards to determine whether council policies would apply. The discussion emphasised the need for clarity, transparency and accountability, with members agreeing that any variation from council policies should be explicitly approved by the Council.

 

Following some discussion about potential ambiguity of the recommendation, it was Proposed, Seconded and agreed to propose an amendment to the recommendation as follows:

 

Recommendation 8a:

As a matter of formal Policy the Council should determine whether, to evidence the Teckal decisive control test, council Teckal companies will follow all Council policies (unless explicitly agreed with the Council)

 

Recommendation 9:

Publish (public reports) all BCP Council Teckal company Business Plans and financial information including budgets and financial outturn.

 

A Committee Member expressed concern about reports being published in a timely manner and there was some discussion over setting a timescale for this recommendation.

 

Members also considered the publication and reporting of company business plans and financial information, highlighting the importance of regular oversight and public transparency regarding the performance of council-owned companies.

 

In response to a query, the interim Chief Financial Officer confirmed that financial information of Council Teckal companies was not currently included in the statement of accounts but could be considered as an addition should the Committee request it.

 

The Monitoring Officer advised that the Constitution already required the Shareholder Advisory Board to receive annual reports and accounts from council-owned companies, together with performance monitoring reports at least twice yearly. It was suggested that, rather than creating additional governance arrangements, a practical approach would be for the Audit and Governance Committee to receive regular reports from the shareholder representative or their delegate.

 

Members noted that the existing shareholder governance structures had been established to address governance concerns and that reporting to Audit and Governance could provide additional transparency and accountability. It was further suggested that the shareholder representative should be accountable for receiving the required reports and, where reports had not been received, provide an explanation for the Committee.  The Chair agreed it was important to have a link with the shareholder representative but felt that was a separate issue to the proposed recommendation.

 

It was Proposed, Seconded and agreed by the Committee to suggest an additional Recommendation as follows:

 

Recommendation 9a:

That the Audit & Governance Committee receive an annual report on the business plans, financial information, including budget and financial outturns of all BCP Council owned Teckal companies.

 

 

 

 

Recommendation 10:

Full P&L accounts should be filed/delivered to the registrar (Companies House) to enhance transparency and public understanding.

 

It was highlighted by a Committee Member that this was now a mandatory requirement, however it was clarified that it was not at the time of writing this recommendation. The Chair confirmed she was happy for it to be included as it was part of the findings of the investigation.

 

Recommendation 11:

Any proposal or Business Plan where any bonus payment scheme is suggested must be firstly agreed by the Shareholder Advisory Board and then by Full Council.     

 

A Committee Member requested an addition of bonus or other incentive payment scheme to be clearer in the recommendation.  The HAMA clarified that the Council should determine what the actual scheme should be.

 

The Chair stressed that it needed to be clear that it was the bonus pay scheme/structure itself which needed to be agreed by the Shareholder Advisory Board and then full Council, not the principle.

 

Recommendation 12:

Shareholder Agreement – Reserved matters pages may be enhanced by sub-sections; it may be appropriate that for certain reserved matters the approval by Full Council should apply, whereas other reserved matters may be approved by some other decision maker – proportionality being the driver for this decision.

 

The HAMA confirmed that this recommendation would mean there would not be any ambiguity on what needs to go to Ful Council as it would decide what reserve matters should be approved by Council at onset.

 

Recommendation 13:

The Council should stipulate that future declarations of interest, made by company directors, should be more than just a list of entities or bodies – the actual interest should be clearly recorded, such as a member of / director of and should include whether the interest is paid/non-paid/voluntary/on the basis of their roles (as a Councillor or MP or similar).

 

A Committee Member put forward a proposed amendment which was read out by the Chair but not Seconded at the time and therefore not progressed.

 

The Committee discussed whether declarations of interest for Directors and individuals involved in council-owned Teckal companies should be strengthened in response to concerns arising from the Future Places review.

 

It was noted that existing Council officer declaration processes already required interests to be declared in accordance with an established framework, with declarations reviewed by the Monitoring Officer and relevant officers.

 

Members considered whether additional categories of interests should be disclosed, including ongoing negotiations capable of creating future financial interests, but concerns were raised regarding proportionality, practicality and consistency with existing legal and governance frameworks.

 

The Committee agreed that a more appropriate approach would be to align declaration requirements for Teckal companies with the Council’s existing declarations of interest regime, ensuring a consistent standard applied across those acting on behalf of council-owned companies.

 

Members also discussed wider issues relating to the disclosure of interests, perceived conflicts of interest and the limitations of the current standards regime where individuals have left office and supported raising these matters through the appropriate standards channels and the Local Government Association.

 

It was Proposed, Seconded and agreed that the Committee requested the Chair write formally to Standards Committee requesting that consideration be given to the treatment of ongoing negotiations capable of creating future financial interests and the arrangement for addressing potential standards concerns after individuals have left office, with a view to informing wider discussions through the Local Government Association. ADD TO ACTION TRACKER.

 

Following further discussion regarding the most appropriate wording, it was Proposed, Seconded and agreed by the Committee to propose an amendment to Recommendation 13 as follows:

 

Recommendation 13a:

Council-owned Teckal companies must ensure that all employees and individuals otherwise engaged by the company must adhere to the BCP Council declarations of interest policy.

 

Recommendation 14:

Council companies should physically locate, as an office base, in a council owned property, the council must appropriately charge the company for that occupation.  Any proposal to occupy third party premises must be firstly approved by the Shareholder Advisory Board and then Full Council.

 

In response to a comment, it was highlighted that, where an exception to the general requirement was sought, this should be subject to consideration and approval by the Shareholder Advisory Board and then Full Council.

 

Recommendation 15:

Any Shareholder Agreement, should formally define the role of the shareholder representative.

 

A Committee Member proposed the addition of the word ‘responsibilities’ within the Recommendation to be more explicit.

 

It was therefore Proposed, Seconded and agreed by the Committee to propose an amendment as follows:

 

Recommendation 15a:

Any Shareholder Agreement, should formally define the role and responsibilities of the shareholder representative.

 

Recommendation 16:

The Council should consider whether a ‘Reserved Matter log’ be kept by the company secretary and or commissioning team which shows sequentially, by date, any reserved matter approval decisions and who or what Council entity made the decision. 

It was Proposed, Seconded and agreed by the Committee to propose an amendment to the recommendation by removing ‘should consider whether’ and inserting ‘must ensure’, therefore:

 

Recommendation 16a:

The Council must ensure a ‘Reserved Matter log’ be kept by the company secretary and or commissioning team which shows sequentially, by date, any reserved matter approval decisions and who or what Council entity made the decision. 

 

Recommendation 17:

An action plan be agreed by the Shareholder Advisory Board to progress the governance reviews of council companies as agreed in respect Cabinet and Audit & Governance – the action plan should specifically include the plan to terminate councillors as company directors.

 

The Committee discussed the position regarding Councillors serving as directors of council-owned companies and noted that the Council’s agreed position was that Councillors should not normally be appointed to company boards.

 

The Monitoring Officer advised that there was no plan to terminate all Councillors as company directors, because the will of Council at the time this decision was made was that they would not normally be appointed to boards as Company Directors. It was recognised that further clarification was required on the meaning of “not normally” and the practical application of that approach and it was noted that this was being considered further by the Shareholder Advisory Board.

 

Committee Members agreed that the recommendation should be revised to focus on the role of Councillors as company directors rather than requiring their removal.

 

It was also agreed that the Shareholder Advisory Board should continue its work reviewing governance arrangements and that the issue should be revisited following the planned briefing on council-owned companies.

 

The Committee Members further requested that the matter of Councillors as Company Directors be added to the action tracker for future consideration and potential recommendations to Council following the briefing on Council owned companies in September. ADD TO ACTION TRACKER.

 

Following further discussion, it was agreed to propose an amended Recommendation 17 as follows:

 

Recommendation 17a:

An action plan be agreed by the Shareholder Advisory Board to progress the governance reviews of council companies as agreed in respect Cabinet and Audit & Governance – the action plan should specifically include the role of councillors as company directors.

 

Recommendation 18:

Shareholder Advisory Board and Shareholder Operations Board meetings (x3 per year, minimum) to be added to the corporate calendar.

 

The Committee had no discussion on this Recommendation.

 

A Committee Member highlighted that he still had motions he wished to be considered by the Committee. The Committee discussed a proposed motion to write to local MPs, the Secretary of State, the relevant Parliamentary Select Committee and the Local Government Association to highlight the findings of the review and seek consideration of any wider legislative or governance implications. While members supported ensuring that lessons learned were shared, concerns were raised that the proposal was overly prescriptive and could have unintended reputational consequences.

 

The Committee continued to discuss proposals for further external engagement, including briefing local MPs on the findings of the review and any potential legislative implications. It was agreed that MPs should be kept informed of the issues raised, while recognising that any changes to legislation would be a matter for Parliament and Government. Members were advised that any future consideration of additional actions would require further advice and discussion outside the scope of the current investigation.  ADD TO ACTION TRACKER.

 

Members noted that the governance issues identified were already recognised nationally and that the Committee’s recommendations, together with engagement through existing channels, were likely to be a more proportionate approach.

 

Members also sought assurance regarding implementation of the agreed recommendations and were advised that progress would be monitored through the existing Audit and Governance follow-up process, with lead officers required to report back on any delays in implementation. 

 

A Committee Member withdrew his final motion which was not discussed in the Committee as the Monitoring Officer advised that if it was to be discussed, it would need to be in an exempt session.  The Chair concluded by advising there would be a separate discussion with Officers to consider any next steps.

Members agreed to note the Chair’s foreword statement and the internal audit investigation findings, recommend the 18 recommendations subject to any amendments proposed and additional recommendations agreed by the Committee to Council, and to conclude the Audit and Governance Committee’s investigation.

 

One member abstained from the vote, noting support for the substantive work undertaken whilst expressing reservations about part of the composite recommendation. 

 

RESOLVED that the Audit & Governance Committee:

 

1. Notes the Chair’s forward statement, set out in Appendix 1, which pulls together a ‘wraparound’ overview of what the Committee has considered through the investigation.
2. Notes the Internal Audit led investigation findings report for scope areas 1 to 8, set out in Appendix 2.
3. Recommends to Council, the 18 recommendations, made within the Internal Audit led investigation report and adds any other recommendations that may result from perspectives received from stakeholders.
4. Agrees the investigation process initiated by the A&G Committee is concluded.

 

Voting: For 7, Abstention 1