Agenda item

a)    To authorise the Head of Finance to extend the period of assurance previously given to Byw'n Iach Cyf up to the end of the 2022/23 financial year, and confirm that if the Covid-19 crisis continues, that Gwynedd Council will support the company financially until at least 31/03/2023.

b)   That a further review of the company's business plan is submitted to the Cabinet within 6 months

The report was submitted by Cllr Ioan Thomas    

DECISION

a)            To authorise the Head of Finance to extend the period of assurance previously given to Byw'n Iach Cyf up to the end of the 2022/23 financial year, and confirm that if the Covid-19 crisis continues, that Gwynedd Council will support the company financially until 31/03/2023 at least.

b)            That a further review of the company's business plan is submitted to the Cabinet within 6 months.

DISCUSSION

The report was submitted highlighting that an accounting technical matter was the basis of the report. In accordance with the requirements of international audit standards, it was explained that an external auditor had to express and independent opinion about companies' ability to continue to trade for at least 12 months. In the context of Byw'n Iach, which was a limited company, external auditors were required to give assurance of the viability of the business when providing an opinion on the company's accounts.

When considering the options, it was reported that maintaining an arms-length company under the Council's control to run the County's leisure facilities currently remained as the most suitable from a financial perspective, and mainly because of the advantages of non-domestic rates. However, it was highlighted that there was nothing in the administration agreement between the Council and the Byw'n Iach company noting that the Council would give automatic indemnity to the company from financial losses - this would not be expected as the company was expected to maintain itself in a normal period.

It was noted that this was the third report of its kind to be submitted to the Cabinet since the beginning of the pandemic and it was highlighted that the Welsh Government's Hardship Fund and the Westminster Government's Furlough Scheme had supported Byw'n Iach financially over the past two years. For 2022/23, Gwynedd Council would need to shoulder the financial burden itself as the Government schemes had come/were coming to an end.

When approving the 2022/23 Budget, it was stated that the Council had approved an additional £1.4m to a fund to cope with the side-effects of the pandemic (although it was noted at the time that it was not expected to be sufficient in itself). It was added that a Covid Recovery Fund had also been established when the 2020/21 accounts were closed to this end, and the Financial Strategy Reserve could be used if necessary. Although a figure for the need for support could not be provided, it was expected for it to be significantly lower than the 2021/22 contribution.

The Head of Finance Department noted that he was convinced, at present, that the Covid-19 crisis was the reason for the need to support Byw'n Iach and as Finance officers collaborated with the company's officers on financial projections for the coming year, he highlighted that the number of Byw'n Iach service users would remain lower than they were right before the pandemic.  When planning for the new financial year, it was added that public confidence, and therefore the number of users, would gradually increase during the year.  It was emphasised that it was not anticipated that the submission of a report similar to this one would become an annual arrangement - this would raise questions about the long-term viability of the company - in normal times, it would be expected for the company's auditor to be able to provide viable business assurance for Byw’n Iach based on the robustness of its business plan without the need for a safety net by the Council.

Should the recommendation be approved, the Head of Finance Department would consult with the Head of Legal Services and the Head of Economy and Community Department to draw up a letter before sending it to the Chair of the Company.

Observations arising from the discussion

·                     The impact of Covid was clear.

·                     The confidence of Leisure Centre users needed to be restored.

·                     Byw'n Iach had had to survive the substantial impacts of Covid  after only one year since its establishment.

·                     The Leisure Centres were now open and use was increasing.

·                     Accepted that drawing comparisons with the pre-pandemic period should not be done - it had to be accepted that social behaviour had changed substantially.

·                     A suggestion to amend the year 1 business plan to correspond with the change - consider outdoor activities and on-line gym exercises.

·                     Eager to provide financial assurance to Byw'n Iach.