To update the Committee on the freedom of information report presented on 4 March 2013; this item was deferred at the 11 November 2013 meeting.

The Chairman reminded the Committee that this item had been carried forward from the last meeting (minute 36 refers).  He commented that, although specifically about advice previously given to the Committee about Hereford Futures Ltd, the associated issues were relevant to other arm’s length companies set up by councils. 

The Solicitor to the Council commented on the following:

a)      The matter went back to at least March 2013, when the Committee received a report entitled ‘Freedom of Information and Arm’s Length Companies’ (minute 53 of 2012/13 refers);

b)      The current report provided an opinion on the narrow technical question as to whether the Freedom of Information Act (FOIA) applied to Hereford Futures Ltd and, for the reasons set out in the report, it was concluded that it did not.

c)      It was noted that, from the questions received and comments made, there were still issues about governance and accountability.

d)      It was proposed that a further report be presented to the 10 March 2014 meeting, primarily focussing on Hereford Futures Ltd but also picking up matters of general applicability to other companies.  Issues would include: Council money invested in Hereford Futures Ltd; the support provided in terms of officer time, as far as it was quantifiable; Council liabilities going forward; and what had been achieved through mechanism of Hereford Futures Ltd.

The Vice-Chairman expressed concerns about the lack of clarity regarding the ownership and accountability of Hereford Futures Ltd.  In response to questions, the Solicitor to the Council explained that:

i)        the Chief Executive of Hereford Futures Ltd had indicated that the current members were directors of the company (further research would be undertaken to inform the next report);

ii)       companies limited by guarantee did not have shares and were owned by the members;

iii)      he did not have access to the company’s own records to enable a definitive answer to be given about ownership but it seemed that, where a council did not have a majority of directors on a company limited by guarantee, FOIA did not apply;

iv)      it was appropriate for councillors to seek assurance that public money had been properly accounted for; and

v)      the benefits of Hereford Futures Ltd would be explored in the next report.  It was noted that companies limited by guarantee in other areas had been successful in securing external funding that might not otherwise have been available to councils or council controlled companies.

The Vice-Chairman said that the latest registered accounts for Hereford Futures Ltd suggested that, for the last two years, the company had been almost entirely, if not entirely, funded by money from Herefordshire Council.  She requested that the next report consider the proportion of the funding received by the company from Herefordshire Council and from outside bodies.  The Solicitor to the Council said that details of Council funding could be provided and he would endeavour to obtain information from the company about other sources of funding.

The Committee discussed the report and related issues, the principal points included:

1)      A Committee Member commented that the position with regard to the ownership arrangements for companies limited by guarantee was relatively straightforward and should have been identified earlier.  He added that there were dangers associated with such bodies, especially if funders were unable to exert control over expenditure.

2)      A Committee Member said that there was public concern about how public money was tracked, not just in terms of Hereford Futures Ltd but also other arm’s length companies.

3)      A Member in attendance commented that questions had been raised about whether the Committee had been misled in the past by contradictory or misleading information and it was wholly unsatisfactory that there had been an extended sequences of delays, potentially giving rise to a perception of prevarication.

4)      The Chairman drew attention paragraph 7.1 of the report, where the Solicitor to the Council concluded that the advice given to the Committee on 4 March 2013 ‘…was correct in substance, but inaccurate in detail.  I am very strongly of the opinion that it was not intended to mislead the Committee’.

5)      A Committee Member emphasised that the key consideration was Council involvement with Hereford Futures Ltd and, although officers would attempt to do so, it might not be possible to obtain details of other sources of income.

The Solicitor to the Council responded to questions and comments, the key points included:

·                The Financial Statements for the year ending March 2011 had been referred to in the context of demonstrating that historically there had been other sources of funding for Hereford Futures Ltd.  However, it was acknowledged that in recent years the company appeared to be primarily, if not exclusively, funded by the Council or from assets derived from the Council.

·                As indicated by a Committee Member at 5) above, Hereford Futures Ltd was a separate legal entity and, whilst information would be requested, it would be up to the company to provide information.

·                There was no indication or evidence to demonstrate that anyone had sought to mislead the Committee, albeit there had been some unintended confusions about roles within companies limited by guarantee.

·                The next report would seek to address the outstanding matters, including the liabilities for the Council going forward.

A Committee Member noted that: the two officers identified in the report, the former Governance Services Manager and the Head of Governance, were no longer in the employment of the Council; the Solicitor to the Council was relatively new to the authority and had to report in accordance with Law Society guidelines; a number of Members felt unable to comment until a comprehensive report was available; and it would be helpful if Members notified the Solicitor to the Council of any outstanding points, so that these could be addressed in the next report.

The Leader of the Council said that he looked forward to a comprehensive report and commented that there was no evidence to support the assertion that there had been any prevarication.

A Member in attendance re-iterated his concerns about the delays in the responses provided to the Committee, especially if Hereford Futures Ltd was wound up before answers were provided to the Committee’s satisfaction.

Another Member in attendance estimated that, since 2007, the Council had provided £2.148 million to Hereford Futures Ltd in grants and Advantage West Midlands had provided £0.679 million.  He said that companies funded by public bodies on this scale should comply with FOIA, whether technically required to or not.  He emphasised the need to ensure openness, transparency and accountability for public money; he added that this would not preclude genuine commercial sensitivities from being protected.

The Vice-Chairman said that: the report before the Committee stated that ‘Of the 13 directors of the company, only two may be nominated by the council: the Leader and the Chief Executive’ but it was understood that the Chief Executive had not taken up his position on the board and it was questioned whether this meant that the Council was under-represented; she was concerned that the previous Monitoring Officer’s advice had been ‘inaccurate in detail’ given the information that should have been available; and the Council should be mindful of the recommendations of the House of Commons’ Justice Select Committee report on FOIA.

The Solicitor to the Council commented in general terms about the obligations of individuals appointed as directors by companies and the potential difficulties where, over time, the common interests of a company and of a nominating body were not wholly aligned.

The Chairman considered that there was a separate piece of work to be done on the responsibilities and accountability of Council nominated appointments to companies and outside bodies.

The Scrutiny Officer commented that Chairmen of both scrutiny committees intended to consider contract management in their respective work programmes.

RESOLVED:  That a further report be prepared for the 10 March 2014 meeting.