Duty of Officials to Councillors

The Council’s relationship with its Arm-Length External Organisations (ALEOs) is outlined in the Tram Inquiry report and there are two recommendations (20 and 21) that relate to misleading the authority, scrutiny and challenge and the distinction in role between officer and councillors. Lord Hardie covers ALEOs extensively in his report. He focuses on control of the companies, supervision of the companies and mechanisms for scrutiny, reporting of the companies and the residual powers of the Council. He also examines the role of councillors on the boards of ALEOs.

The scrutiny of ALEOs by the Council and officers has significantly improved since the original tram project, with reports in 2012 and 2016 in particular looking at how ALEOs operate and their relationship with the Council. This has resulted in the formalisation of the Council’s observer role, increased scrutiny by Council committees and regular reporting. The 2016 report established dual reporting of the Council’s ALEOs to an executive committee and to the Governance, Risk and Best Value Committee to ensure that there was a level of consistency to monitoring and oversight of ALEOs across all Council committees. It also introduced Council ALEOs to making a submission to the Council’s annual assurance process. This requires ALEOs to highlight issues that may affect the accounts and any risks or compliance matters across the previous financial year. The Council observer role is a key element of the Council’s oversight of its ALEOs as it is the observer who acts as the first point of liaison between the Council and the ALEO and who would escalate any risks or issues to the Council.

However, despite the improvements to scrutiny since 2016, how the Council scrutinises and monitors its ALEOs can still be enhanced. Internal Audit has recommended that an ALEO framework be established which will examine and review how scrutiny can be improved and how to build on the good working relationships with ALEOs. This work is currently underway and will report in 2024. It will look to strengthen how the Council scrutinises its ALEOs both by officers and councillors, how ALEOs report to the Council, the governance documentation between the Council and the ALEO and the subsequent powers of the Council, the Council observer role and will explore Board membership.

Furthermore in recommendation 20, it specifically outlines that ALEOs should not submit false or misleading information to the Council and that information should be scrutinised and in the agreed Council motion assurance was asked to be provided on the arrangements with ALEOs in regard to recommendations 20-24 . As outlined above the scrutiny of ALEO information has increased significantly by councillors and officers. In the circumstances that misleading information was provided to the Council, then steps would need to be taken in accordance with the shareholder agreement or service level agreement (whichever was appropriate for that organisation). The Council’s ALEOs have very different arrangements in place due to their different legal statuses. This means that the mechanism for the Council to address issues such as this are different depending on whether the ALEO is a company, a charity and whether the Council wholly owns the organisation or not. This relationship though is outlined in the shareholder agreement or the service level agreements but there is currently not a consistent approach from the Council. The ALEO framework will be examining all governance documentation between the Council and its ALEOs and will be recommending that the importance of candour is formalised in this documentation so that there is clarity and consistency in the Council’s approach and an understanding of what action the Council can take.

Recommendation 21 highlights the need for local authority officials to be mindful of the distinction in roles between them and councillors. This is an important element of our governance, and the Member/Officer Protocol highlights the distinction of roles between officers and councillors. Currently training is being delivered to senior officers initially across the Council on the Protocol and this is covered extensively in the training.

Recommendation 21 also recommends that officers do not assume the accuracy of ALEO reports based upon the adoption of a ‘one family’ approach. As outlined above, the 2016 ALEO report sought to build greater controls to ensure more independent advice from Council officers through the use of Council observers and reporting arrangements. As part of the ALEO framework workstream this will be reviewed and strengthened further.

Procurement

Where a bidder fails to supply all information requested or supplies misleading information at time of tender the Council shall exclude the bidder from participation in the bidding process; where this comes to light prior to contract award and allows termination of any contract awarded as a result of that process. If this failure or misrepresentation arises after the award of contract, the Council’s standard Terms and Conditions would allow the Council to terminate for breach of contract and pursue the contractor for damages. The Council’s standard terms and conditions of contract provide that the contractor will owe the Council a 'duty of care' which should not fall below that expected of Good Industry Practice. In the event that they do, there is an indemnity and insurance requirement to address any losses suffered by the Council. This includes all actions, omissions, proceedings and costs applicable through breach of contract. For some high value, high risk projects it may be more appropriate to use bespoke Terms and Conditions.

It is recommended that the Council adopt recommendations 20 and 21.

No statement on delivery from City of Edinburgh Council has been found in the sources searched. This is separate from the response above.