Agenda item - Update on Coin Co International

Report of Interim Executive Director of Finance & Resources (circulated to Members only).

(1)  That the report be noted.

22.1    The Committee considered a report of the Interim Executive Director of Finance & Resources which updated Members on the progress of company administration which was seeking to recover sums owing to secured and unsecured creditors following the failure of the cash-in-transit contractor, Coin Co International plc (CCI) with whom the council held a contract.  The council was an unsecured creditor of the company and was owed £3.243m at the time it entered administration on 27 November 2014.  The report also summarised the action being taken by the council to ensure that any learning from this event was effectively identified and reported. 

22.2    The report stated that CCI was first appointed by the council in 2008 to provide cash collection and cash in transit services. This included car parking income collection, collection of cheques and sealed containers from council premises. It was based locally in Sussex, offered significantly greater service flexibility than bigger national/global companies at a considerably better price, had a range of private and public sector clients, and had been trading for over 30 years.

22.3    It further stated that the council entered into a new framework contract with CCI on 3 February 2014. However, increasing delays in receiving payment-over of cash collected were experienced during 2014 with a maximum sum of £4.746m outstanding. Following meetings and communications with the directors of the company, this was brought down considerably but after a short period the company began to default on agreed payment arrangements and the council terminated the contract on 19 June 2014, intending to pursue sums owing through debt recovery and/or litigation processes if necessary. However, CCI subsequently entered administration owing £3.243m to the council.

22.4    The report stated that the legal costs in relation to insolvency (i.e. company administration and liquidation) can be substantial. The council is very mindful that any losses should not be compounded and will use every endeavour to challenge and minimise costs. Members should note however that the costs of company administration, being undertaken by Baker Tilley LLP, and subsequent costs of any company liquidation will normally be chargeable against any unsecured liquidated funds or assets, thereby reducing the sums available to unsecured creditors in the first instance.

22.5    The report stated that, at this time it is known that there are company assets against which there are securities, which will be available to the administrators to meet, as far as possible, the claims of the relevant secured creditors. However, in relation to unsecured creditors, of which there are hundreds worldwide including the council, the level of available company assets is not yet known and it is not clear whether or not, after taking into account the costs of company administration/liquidation, any funds will be available to be shared among unsecured creditors.

22.6    The report was presented by the Interim Executive Director Finance & Resources.         Members were informed that the former Executive Director of Finance & Resources along with the Interim Executive Director of Finance & Resources had commissioned Internal Audit, supported by external consultants to carry out a review to determine whether improvements to the Council’s procurement processes and or decision making could minimise financial risks of this nature in the future. 

22.7    The Interim Executive Director of Finance & Resources stressed that CCI were a local firm with a previous good record.  CCI had passed all the necessary checks and evaluation processes to be selected for the procurement framework. 

22.8    The Head of Internal Audit informed members that his focus was to find out why CCI went into administration.  It was important that lessons were learnt from this process. A further report would be submitted to the Committee in September 2015.

22.9    Councillor Robins expressed concern about the large amount of money that was owed to the council.    He asked what had happened to the £3.2m.  The Interim Executive Director explained that that the administrators were attempting to find the money that was outstanding but had not been able to locate the funds.  It should have been cash paid into a separate account.

22.10  Dr Horne stated that he was keen to see open local government and stressed that some sort of statement should be made available to members of the press and public on this issue.  The Interim Executive Director of Finance & Resources stated that some information had been put into the public domain. 

22.11  Dr Horne noted that information had been reported in the Statement of Accounts however it had not described the debt as an exceptional loss. There was no reference to the matter having been reported to Policy & Resources Committee.  There needed to be disclosure in the accounts.  Dr Horne asked the Head of Internal Audit to look at monetary processes. He was concerned that the contract was let in February 2014 and terminated in June.  The firm had lost £1m of council money per calendar month.   He asked if the Council was covered by insurance.  The Interim Executive Director reported that the council did not have an insurance policy. 

22.12  Paul King of EY stated that he did not consider members of the press and public were being misled by not revealing the name of the company in the Policy & Resources report.  The Governance Statement provided the necessary information.   

22.13  Councillor Morris stated that he wanted to register that he was not happy with the decision not to provide more information to the press and public.  The Interim Executive Director explained that this might be appropriate when the Committee received its final report in September.  She urged the Committee to allow the Head of Internal Audit to complete his review first.  

22.14  Councillor Druitt expressed concern that the debt had reached such a high level. He echoed the concerns about openness.   Councillor Robins also expressed similar views.

22.15  The Interim Executive Director stated that officers were still working with the administrators.  She asked the Head of Internal Audit to explain the timeline.

22.16  The Head of Internal Audit explained that he had got a long list of control monitoring emails and other documents which went back a long time.  He did not have a timeline for the administration process.

22.17  The Head of Legal & Democratic Services suggested that the Part One minute contained all information that was not prejudicial to the council.  Councillor Druitt thought this was a good suggestion but hoped that officers would not be overly cautious in what was included in the minutes.  He wanted to see the maximum amount of information in the public domain.

22.18  Councillor Cobb asked if the firm owed money to other organisations.  The Head of Internal Audit replied that a significant amount was owed to other local authorities and charities. 

22.19  The Chair stated that she supported the suggestion of the Head of Legal & Democratic Services to have detailed information in the Part One minutes.  She did not see any advantage in publishing information that could be damaging to the council.  

22.20  Councillor Robins supported this view but worried about the sheer size of the money owed to the council.  The Interim Executive Director stated that the size of the debt was the reason officers were carrying out so much work on the issue. 

22.21  Diane Bushell asked if there was a job for internal audit to ensure information provided to the council was verified when awarding contracts to key suppliers.  The Interim Director of Finance & Resources replied that internal audit could not be involved in every contract.  There were specific lessons to be learnt about the contract in question.  This was part of reason why the council were moving to cashless payments.  

22.22  RESOLVED -

(1)   That the preliminary findings and the current position regarding the administration process be noted

(2) That detailed Part One minutes be made available setting out information that is not prejudicial to the council.