Meeting documents

To consider the attached report.

Contact Officer:  Kate Mulhearn (01296) 585724

A Notice of Motion in relation to the governance arrangements and operation of Aylesbury Vale Broadband Ltd had been submitted to full Council on 6 December, 2017, at which it had been resolved:-

(1)          That this Council will honour the commitment given by the Leader of the Council at the General Purposes Committee to review the position culminating in the decision to sell AVB and introduce a suitable mechanism for keeping all Members of the Council informed of the Council’s commercial activities.

(2)          That the Audit Committee be tasked with a detailed audit of the operation of AVB, as far as practicable within the timescales set out within the original Motion and to keep as much information as is possible in the public domain.

(3)          That the audit of AVB be undertaken by the Council’s externalised internal audit team (BDO) as they have experience of the governance of company structures.

(4)          That a brief for carrying out the review of AVB be agreed by Group Leaders, the Council’s Head of Internal Audit, a representative from BDO and the Chairman of the Audit Committee, with Group Leaders receiving a draft of the report prior to its submission to the Audit Committee, any such meetings involving Group Leaders to be chaired by the Deputy Leader of the Council.

(5)          That any meeting of the Audit Committee convened to consider the report findings be open to all members of the Council to attend and at the discretion of the Audit Committee Chairman, to participate in the discussions (although they would not be able to vote).

(6)          That insofar as the other commercial undertakings of the Council are concerned, reports on their activities be brought forward at regular intervals to the relevant Scrutiny Committee.

With regards to recommendation (2), the timescales set out in the original motion had asked for a review to commence no later than 1 calendar month from the sale of AVB or by 31 January 2018, whichever was sooner, and for it to report no more than 3 months after commencement, i.e. by 30 April 2018.

The Committee was informed that a timeline of events relating to this matter included:-

·                    December 2014 – Council had agreed to commit £1.536 million of New Homes Bonus funding to support the roll-out of superfast broadband across the District.

·                    March 2015 – Cabinet agreed the original AVB Business Case.

·                    April 2015 – Council approved the establishment of AVB as a limited liability company that was 95% owned by the Council and 5% owned by Ironic Thought, together with allocating £200K for a pilot project in Hogshaw, North Marston and Granborough parishes.

·                    September 2015 – AVB scrutinised by the Economy and Business Development Scrutiny Committee.

·                    October 2015 – Council approved further expenditure of £550K.

·                    March 2016 – AVB scrutinised by the Economy and Business Development Scrutiny Committee.

·                    April 2016 – Cabinet had agreed a document, "Guidance to creation and working with companies in which AVDC has a financial interest".

·                    April 2016 – Council approved further expenditure by AVB of £500K.

·                    July 2016 – Finance and Services Scrutiny Committee reviewed the appointment and remuneration terms for AVB’s Managing Director.

·                    September 2016 – Cabinet had approved a revised AVB Business Plan.

·                    September 2016 – AVB scrutinised by the Economy and Business Development Scrutiny Committee.

·                    March 2017 – Audit Committee considered internal audit review of the Council’s governance arrangements over the investment in AVB.

·                    May 2017 – internal audit review findings communicated to the Directors of AVB, along with a proposed set of actions for consideration.

·                    September 2017 – Revised AVB Business Plan due to be reported to Cabinet, deferred as the plan was being revised due to changes in the competitive landscape.

·                    November 2017 – General Purposes Committee agreed to move forward with an offer for the sale of AVDC’s interests in AVB.

·                    December 2017 – Notice of Motion submitted to full Council, as detailed above.

·                    January 2018 – Group Leaders met and agreed draft Terms of Reference to be considered by the Audit Committee on 22 January, 2018.

As detailed at recommendation (4) of the motion to the December 2017 Council meeting, a meeting of Group Leaders had been held on 8 January, 2018, which received a draft report including draft terms of reference for the review of AVB as well as a summary on the legal position in relation to the provision and sharing of information that had been prepared by the Council’s Lead Legal and Monitoring Officer.

Group Leaders had been concerned that in the spirit of the decisions reached by Council in relation to the review, as much information as possible should be kept in the public domain.  They appreciated however that the terms of the sale precluded the release of certain information which the purchaser of AVB considered was commercially sensitive to its future investment plans and which formed part of the sale conditions.  It was indicated that if, during the course of discussions between officers, Members and the auditor undertaking the review there was a reluctance to release particular information on the basis that this was commercially sensitive, this reasoning would be tested rigorously.

Group Leaders reviewed the draft scope of work for the review prepared by BDO, the Council’s Head of Internal Audit and the Chairman of the Audit Committee and, after a general discussion, Group Leaders approved it for final endorsement by the Audit Committee at its meeting on 22 January.

Prior to Members’ discussions on the terms of reference, Councillor Monger made a statement and asked Members to consider the review being undertaken in public and in a format similar to that of a Commons Select Committee.

Members discussed the objectives for the review that had been broken down into the following steps:-

·                    Inception – the Council took appropriate steps to ensure AVB was a sound investment in the run-up to establishing the company.

·                    Governance – As the majority shareholder, the Council had an appropriate level of oversight over the scope and scale of AVB’s activities in a way which gave the Council assurance over its investment in AVB but avoided conflicts of interest in the operations of AVB.

·                    Reporting – the Council received sufficient and regular reporting from AVB to allow it to take a clear view on whether AVB (and therefore the Council’s investment) was being well managed, delivering on performance objectives and financial targets according to the business plan, and to ensure transparency to members and the public.

·                    Investment – the Council’s financial and non-financial input to support AVB were clearly understood and costed.

·                    Approach – including information on the approach to be taken to complete the review, which covered issues such as people and representatives that might be interviewed and documentation that might be reviewed.  These were not exhaustive lists.

·                    Timescales and budget.

·                    Reporting – the output of the review would be reported to the Audit Committee and be published in full and in public on the Council’s website.

·                    Exclusions – the review would be limited to the Council’s relationship with AVB however, it would identify lessons learnt that could be applied to other companies.

Members commented that they believed that the proposed approach for the review to be undertaken by BDO LLP was the right one, and that this would provide an independent opinion of the Council’s governance arrangements over AVB.

The Committee also discussed that the terms of reference had been put together before the sale of AVB assets to Gigaclear had been concluded.  As such, it was agreed that an additional paragraph be added to the background, as follows:-

"On 30 December 2017, AVB’s physical assets were sold to Gigaclear, a private ISP.  The terms of asset sale are covered by a confidentiality agreement designed to protect the ongoing commercial interests of Gigaclear.  AVB remains in the ownership of AVDC.  Details of AVB’s trading history may no longer be commercially sensitive and all information that has previously been in the possession of AVDC Members and/or Officer Directors will, unless still covered by commercial sensitivity or confidentiality, be freely available to the Audit Committee and Council and will form part of this review."

RESOLVED –

(1)          That the draft scope of work and terms of reference for the review of AVB, as updated by the additional background paragraph (above), be agreed.

(2)          That any Members who wished to submit information/questions to BDO as part of the review of AVB should provide the information to the Corporate Governance Manager.

(3)          That the draft internal audit report would be submitted to a future special meeting of the Audit Committee, that would be open to all Members.