Glasgow City Council
Pathfinder for Cultural and Leisure Services
Outline Business Case

8. Key Risks

1. HMRC
Formal approval has yet to be received from HMRC in respect of the VAT model applied in this model

2. OSCR
There is a risk that OSCR will be unable to process the application for charitable status within the required timeframe or may take exception to certain features of the company structure or wider framework. The risk has been judged as low having regard to informal discussions that have already taken place with OSCR.

3. State Aid/ Procurement
There may be a challenge raised on the grounds of alleged infringement of EU state aid and/or procurement principles. To mitigate this risk Bumess will be structuring the documents relating to the flows of funds from the Council to the company in such a manner as to support a reasonably sustainable position with regard to state aid (covering both payments from the Council and the issue of peppercorn rent for all properties) and procurement

4. Due Diligence Process
The relatively short timescate available for gathering copy documentation/ information for legal due diligence has meant that the legal due diligence process is less comprehensive than it might otherwise have been. In order to ensure proper focus and balance, Bumess developed, in conjunction with the project team, a detailed due diligence checklist to guide the due diligence work, and the interim due diligence report issued by Bumess on 6 December was reviewed by the project team so as to identify areas where further documentation should be collected and/or further detailed reporting was appropriate.

5. Licences
There is a risk that the Charity's application for licences relating to public entertainment etc. will not be granted in the necessary timescales. However the timing of the licence application is partly within the Council's control and the Council has undertaken to process these licences as expeditiously as possible.

6. Leases
There is a risk that the leases for the properties (allowing for processing of the application for s74 consent) will not be in place by 1 April 2007. To mitigate this risk an interim licence to occupy will be put in place allowing the Charity to begin operations

7. Collections
There is a risk that trustees of a major trust or major donors decline to sanction the Collections Agreement, or raise a challenge in respect of the Agreement. The likelihood of a challenge being raised is considered by the Council to be relatively tow.

This is a high level list of risks that may have a major impact on the progression of the OBC. There is a formal risk register that has informed the identification of the above risks.

9. Timetable

Following on from the work performed for this OBC and that of the appointed lawyers, Bumess, the proposed timetable for the Charity to be operational is outlined below:

DECEMBER 2006

1. Draft Memorandum and Articles of Association together with supporting documentation to OSCR for application for charitable status.

2. Further/Legal due diligence exercise to continue:
a. Reports on titie (properties)
b. Existing contracts (general, property-related, funding)
c. Trusts & bequests
d. Archives
e. Membership schemes
f. Data protection
g. IPR
h. Computer systems
i. Employment
j. Pensions

3. Development of key features of contractual framework between the Council and the Charity.

4. Incorporation of the Charity and its subsidiary.

January 2007

1. Review of outcome of legal due diligence process and consideration of key points arising.

2. Completion of reports on title (property).

3. Further development of key features of contractual framework between the Council and the Charity.

4. Due diligence to be carried out on the services transferring from other Council departments such as golf and outdoor recreation.

5. Further work on various legal strands including employment law, pensions, intellectual property, ICT, trust/bequests etc.

6. Applications for s74 consent in relation to grant of leases.

7. Draft submission to HMRC re. request for ruling

February 2007

1. Executive Committee 2 February 2007 - Approval to proceed.

2. Ensure effective management of communication and consultation with staff and Trade Unions

3. TUPE consultations with trade unions.

4. Shadow board and management team established,

5. Detailed business plan, including five-year projections, developed.

6. Corporate governance structures agreed.

7. Draft Services Agreement between the Council and the Charity in relation to the services to be provided by the Charity to the Council.

8. Draft SLAs between the Charity and individual Council departments to be developed.

9. Draft Collections Agreement between the Charity and the Council.

10. Draft model Lease (and ancillary documentation) to be developed.

11. Draft Transfer Agreements to be developed.

12. Applications for consent in relation to transfer of major contracts, intellectual
property rights, major trusts, landlords etc; applications for transfer/new statutory licences; arrangements for insurances etc.

13. Application to pension fund to be made.

14. External legal advisers for the Charity appointed.

15. Reply received from OSCR.

16. Training for Charity's Board of Directors.

MARCH 2007

1. Finalise business plan.

2. Agree business plan and year one funding with the Council.

3. Completion of charity recognition process

4. Due diligence update

5. Finalisation of suite of legal documentation (including the Transfer Agreements, the SLAs and the Collections Agreement)

6. Completion of all operational arrangements.

7. TUPE transfer of Staff.

8. Admission to Strathclyde Pension Fund.

9. Charity and trading subsidiary up and running.

In order to achieve this ambitious timetable of the end of March 2007 there are a number of key steps that need to be taken by both Cultural and Leisure Services and the Council:

1. Appointment of a shadow board and management team.

2. Corporate governance arrangements agreed.

3. Decision on precise scope of transfer, including definitive list of properties.

4. Agreement on the key features of the Transfer Agreements, the Services Agreement, the Collections Agreement and the SLA's between the Charity and the Council.

5. Agreement on the key features of the model Lease and associated documentation, including approach to be taken on major repairs, capital works/investment programme, baseline condition surveys etc.

6. Decision on the value at which the depreciating assets that are to transfer.

7. Agreement on approach to be taken on statutory licences, insurances, administration/monitoring of grants, various partnership arrangements, trusts/bequests and other matters

8. Initial contact with trustees of major trusts, landlords, major service providers, grant funders etc to prepare ground for formal applications for consent

Cultural and Leisure Services, in light of the conclusions reached on the points listed above, will require to update and finalise its business plan.