The House of Commons Welsh Affairs Select Committee agreed that I could submit a further memorandum surrounding three points:

A.  The Steps that Denbighshire County Council took to obtain information from the outgoing Councils

B.  Specific Observations from Mr Lloyd Conaway

C.  The Mark Lewis memorandum.

  The following is my additional response.

A.  THE STEPS THAT DENBIGHSHIRE COUNTY COUNCIL TOOK TO OBTAIN INFORMATION FROM THE OUTGOING COUNCILS

INTRODUCTION

  Following the Welsh Affairs Committee's fact finding exercise in Rhyl Town Hall on 22 March, I was invited to make some additional observations on the liaison arrangements which prevailed between the former Rhuddlan Borough Council and the Shadow Authority. Below I provide additional detail showing that liaison was not superficial but was appropriate and adequate to the situation which the Authority was being presented with. I would however like to make some preliminary observations regarding the context.

CONTEXT

  Members of the Committee need to be aware of the restrictions on liaison between the two authorities arising from reorganisation.

—  Officers appointed to this authority during the shadow year, apart from two employees, were appointed on a part time basis. They had to carry out their existing duties as well as prepare for the new authority. In all cases they were doing so very much on their own as supporting staff had not been appointed and very often there were depletions in the former authorities' staff arising from appointments elsewhere.

—  The handful of officers appointed to Denbighshire prior to April 1996, therefore, had to be very economical with their time and deploy their resources rationally. It would not have been logical to focus on areas where the assurances given repeatedly by the Chief Executive and Section 151 Officer of the former Rhuddlan Borough Council described a satisfactory and problem free situation.

—  Time had to be spent where problems had been identified and in this connection I would advise the Committee that I was appointed to an authority whose transitional bodies had undertaken no preparation work with regard to the political or internal management arrangements. As my appointment was also late in the series of appointments of Chief Executives, subsequent Director and Heads of Service appointments were also made later. The Authority started its life therefore with a certain disadvantage with respect to the preparation time available before reorganisation.

—  Also with the benefit of hindsight, decisions regarding the capital programme which had a significant effect upon the size of the Rhuddlan inheritance all appear to have been taken prior to the setting up of the Shadow Authority. The largest single contributory factor to the £3.9 million of unfinanced debt as my earlier memorandum states was taken in March 1995.

  In consequence the Authority lacked any information which would have suggested that a greater scrutiny was required and when it did receive the information, beginning of April 1996, it was too late to enable other options to be fruitfully explored.

CO -OPERATION AND LIAISON WITH THE FORMER AUTHORITY BY DENBIGHSHIRE COUNTY COUNCIL

Chief Executive Level

  It has to be remembered that the important liaison would have been between the relevant officers taking over the specific responsibilities. This is where the level of detail would have been discussed enabling a clear picture of the responsibilities to emerge.

  My main concern was in setting up the new authority, getting the staff in place, designing and producing the service delivery plan, and liaising with the various authorities on transfer arrangements as well as in setting the budget for the Authority's first year. Regular meetings with the former Chief Executives were not therefore a pressing concern or even a necessity once an agreement on co-operation on staffing matters had been achieved. On the issue of the level of commitment I was given to understand by the former Rhuddlan Chief Executive at a meeting on 12 July 1995 and again on 8 September 1995 that the level of commitment was in the region of £300,000. As can be seen below and in my Memorandum, this figure was within a range which was consistently supplied to officers of this Authority.

  Over staffing appointments co-operation was achieved at my very first meeting with the Denbighshire Shadow Authority secretariat in 17 July 1995, comprising the Chief Executive of Rhuddlan Borough Council, Glyndwr District Council and the Deputy Chief Executive of Clwyd County Council. Mr Lake explicitly advised that he would give full permission for staff appointed to Denbighshire from his authority to focus on Denbighshire work, albeit on a part-time basis. He stated that he saw little point in meeting of the Secretariat and stated that his responsibility would be to manage Rhuddlan until reorganisation date. Similar assurances were received from the other members of the Secretariat. Overall arrangements with regard to staffing were dealt with on an inter authority basis and became increasingly the responsibility of the Head of Personnel once he was appointed in September 1995.

  Given that little work appeared to have been done by the Shadow Authority secretariat up to my appointment on the financial base of the new authority, sought a secondment from both Glyndwr and Rhuddlan authorities financial departments so as to prepare for the new authority's first financial year. And in the case of Rhuddlan Gail Shaw was nominated by Mark Lewis, Rhuddlan Borough Council's Director of Finance for this task.

Finance—Statement by the Director of Finance

  Following my appointment in October 1995, in accordance with standard practice, I approached Gail Shaw, the Capital Accountant with Rhuddlan Borough Council to obtain the usual information regarding carry over to validate the £300,000 figure in general circulation. I was surprised that she explained that she would have to seek detailed information from the Chief Executive Officer. Although not concerned about the prima facia extent of the carry over being approximately 10 per cent of anticipated capital programme.

  By mid January I was concerned at the lack of progress by Ms Shaw and requested Mr C Taylor (Clwyd County Council) to pursue the matter on my behalf. This led directly to the fax of 24 January 1996, indicating £425,000 rollover.

  As Mr Lake was the Senior Officer in Rhuddlan Borough Council and was a qualified accountant and the Section 151 Officer, I felt entitled to rely on his information.

  In early March it is normal practice to review the capital programme with a view to fine tuning the matching of expenditure and resources and finalised estimated impact on the following year. Mr Taylor again approached Mr Lake but was informed that all the information was in the files which would be available on 1 April and not before. As there was no indication of any significant change and there was only a short time until 1 April, further argument seemed a waste of scarce time.

  On a separate matter, the debt analysis of the Welsh Office more accurately reflects the impact on the County's finances as it excludes Housing Revenue Account. By statute the HRA must be kept totally separate from County fund and it is the impact on the latter that is critical; Inclusion of the HRA figures serves only to cloud the issue of the impact of the Rhuddlan Borough Council programme.

Planning and Economic Development

  The Director of Planning and Economic Development and The Head of Economic Development met with Mr Lake on 25 January 1996. Efforts by both Denbighshire officers to arrange an earlier meeting had been unsuccessful. A presentation on the background to Rhuddlan's strategy was given together with an indication of the immediate challenges.

  Both officers began work on the immediate matters acquainting themselves with the detail of projects and arranging reports, where appropriate, to Denbighshire.

  Mr Lake invited both officers to attend the Rhuddlan Working Parties and while both indicated their willingness to attend they pointed out that they were already working for two Councils and the task of preparing for the transfer of functions was becoming more demanding. Both attended meetings on College expansion proposals and on an urban regeneration scheme but the pressure of commitments elsewhere made further attendances impossible.

  Mr Lake also indicated a rollover commitment of £320,000 for Denbighshire arising from existing commitments. He indicated that the cost of schemes had been given to Denbighshire's Head of Finance and that a further provision of £80,000 should be set aside to cover future equipment costs at Ffrith Beach. This provision was never made nor was the equipment ever provided as the reality of the final Rhuddlan became clear.

B.  SPECIFIC OBSERVATIONS FROM MR LLOYD CONAWAY

  With regard to Mr Lakes' Tourism remarks regarding liaison arrangements with Mr Lloyd Conaway, Head of Tourism and Leisure he had provided the following detailed note.

CONTEXT/BACKGROUND

  My name is Lloyd Conaway, I am Head of Tourism and Leisure with Denbighshire County Council. Prior to Reorganisation I was Assistant Chief Executive at Colwyn Borough Council, with special responsibilities for Leisure, Tourism and Economic Development. I was appointed in October 1995 and for the period November 1995 to March 1996 I worked approximately 50 per cent of my time with Colwyn Borough Council and 50 per cent of my time on Denbighshire County Council issues, there were large work load demands during this time.

  I was present at the Welsh Affairs Select Committee on Monday, 22 March 1999 and am able to chronologically set out my recollection of the issues surrounding my involvement. Fortunately, I keep my diary and record books and they have helped with my recollections.

DETAILS

  I did not meet with Mr Lake in the Autumn of 1995 as stated in his written submission. We met on Monday, 22 January 1996. The meeting was arranged over the telephone. It was a useful meeting when Mr Lake gave a brief resume of the nature of the projects and the background to the issues surrounding Rhuddlan's strategic approach. At my meeting with Mr Lake he told me that there would be about £330,000 capital required to complete the schemes from Denbighshire.

  During this meeting I felt that there was not a great deal to be gained from me spending a lot of time on the financial issues and grants partnerships. My view was that this had already been done and I was more interested in what Denbighshire was going to inherit and how this was to be managed, in particular finding tenants.

  Mr Lake agreed with this sentiment and explained to me that within Rhuddlan he regarded his job as providing the policy, visionary leadership role, securing the finance, liaising with consultants, quantity surveyors and architects and driving the projects forward. When they were finished within Rhuddlan, he would then pass them on, completed, to the Director of Tourism for him to manage. Due to the imminence of reorganisation I agreed to focus on management issues. Bearing in mind, the short time scale and work load demands, presented by having to manage Colwyn Borough Council's service and develop the new Denbighshire, this appeared to both of us a sensible way forward.

  I do not recall a discussion about my getting involved in working groups, I do not recall receiving any advice or formal notice verbally or in writing as to when these working groups were taking place. With hindsight, I would not see any great benefit attending such groups in any case. As I have already highlighted above, I felt the important issue as far as I was concerned, was to look at the future management of these properties. There was no benefit in me getting involved in debates with contractors, architects or consultants on these issues, that was clearly a matter for Rhuddlan.

  Mr Lake was pleasant and helpful during the meeting and did offer his continued assistance during the lead up to reorganisation. We agreed that I should continue to discuss these issues with Rhuddlan's Director of Tourism and his Team in order for me to get a feel to understand how the existing facilities were being operated.

  From this meeting with Mr Lake up until reorganisation, (1 April 1996), I visited Russell House on many occasions speaking with various staff. There was no requirement until the end of March 1996 for me to have any office space, I simply took advantage of meeting rooms and met people in their own offices. I do not recall Mr Lake offering me secretarial support and in any case this was not required as I already had my own secretary at Colwyn.

  During the January to March period of early 1996 I met with various individuals who I believed were important to talk to, bearing in mind the imminence of taking up responsibility for managing these new facilities. During these times I had discussions and meetings with the Director of Tourism—Rhuddlan Borough Council, Leisure Services Officer—Rhuddlan Borough Council, Legal Department—Rhuddlan Borough Council, Commercial Agent (retained by Rhuddlan Borough Council) and various Council Members.

  I do not recall a verbal reminder from Mr Lake with regard to meeting him, although as I have already explained, by this time I had developed a well established network in order for me to be kept up to speed on the issues which I felt to be important. I was involved in management arrangements, for example, tenancies, advertising and promotion, lease arrangements with tenants, securing further tenants, meeting prospective tenants, that was what I concentrated upon.

  During this period, I began to meet with potential investors in the Ffrith development and the Children's Village. Discussions began to take place which involved lease arrangements, rental levels and during this period we began to make arrangements to market and advertise the sites more fully.

  I felt my single biggest responsibility was to try and drive and move these projects forward and secure tenants and make them economically viable.

  I do not believe therefore, that a valuable opportunity was lost. In fact, Mr Lake's co-operation was helpful and I took every advantage of every opportunity that was available to me to move the projects forward from a management point of view. My initial enthusiasm therefore did not evaporate, in fact, quite the contrary.

CONCLUSION

  In conclusion therefore, I strongly believe that I established, with the assistance of Mr Lake and other officers and Members within Rhuddlan, a proper and appropriate formal liaison mechanism during the January, February, March period of 1996. As I have previously stated I particularly concentrated on the future management issues as required by Denbighshire and left Rhuddlan to manage their responsibilities. My enthusiasm did not wane, I took advantage of offers made to me for assistance and on 1 April 1996 was in a reasonable position to be able to commence my duties with Denbighshire on a full-time basis.

C.  THE MARK LEWIS MEMORANDUM

The Mark Lewis Memoranda regarding financing of Rhuddlan's 1994-95 Capital Programme

  Memorandum dated 7 June 1995 from Mark Lewis, Rhuddlan's Director of Finance to the Chief Executive.

  This memo raised concern regarding the funding of Rhuddlan's capital programme and identified an estimated shortfall of £2.5 million.

  It went on to express serious concerns about the financing position for the 1995-96 programme.

  Memorandum dated 21 August 1995 to Mark Lewis, Rhuddlan's Director of Finance from the Chief Executive.

  Mr Lake's response to the 7 June memo advising accruals be made totalling £1.046 million. This left a balance of £1.5 million unaccounted for.

  The memo is silent regarding the concerns expressed about the 1995-96 programme.

  It should be noted that of the accruals made, £0.3 million related to landscaping work at the Ffrith. Expenditure on this contract was not incurred until 1995-96 and accordingly the accrual should not have been made in 1994-95.

  An accrual of £0.5 million was also made in respect of the Events Arena. The WDA approved grant for this project of £1.6 million and this sum had been taken into account in balancing the 1993-94.

  The District Auditor identified that WDA grants had been over accrued by Rhuddlan and took account of the necessity to adjust for these over-accruals in arriving at the unfinanced balance of £3.9 million at the end of 1995-96.

  Memorandum dated 31 August 1995 from Mark Lewis, Rhuddlan's Director of Finance to the Chief Executive

  This memo refers to outstanding issues concerning the capital programme for 1994-95 "to ensure that no problems occur during the Final Account Audit". In its first paragraph it indicates that ERDF grant also formed part of the means of balancing the 1994-95 programme.

24 March 1999