Item no 7.4 + + EDI N BVRG H THE CITY OF COUNCIL Report no cq3I \lO-ll\ 9s

Implications of Audit ’s Report on ‘’

The City of Edinburgh Council 16 September 2010

Purpose of Report

1 To refer to the Council the attached report by the Chief Executive on Audit Scotland’s review report on ‘The Gathering 2009’.

Main Report

2 On 31 August 201 0, the Policy and Strategy Committee considered the attached report by the Chief Executive detailing the implications for the Council of Audit Scotland’s review report on ‘The Gathering 2009’.

3 The Committee agreed to refer the report to the Council without recommendation.

Recommendation

4 That the Council considers the attached report by the Chief Executive on the implications of Audit Scotland’s report on ‘The Gathering 2009’.

AI astair Maclean Head of Legal and Administrative Services

Appendix Report no PS/50/10-11/CE by the Chief Executive Contactltel Rhona Sinclair lit 529 4238; €3 [email protected] Wards affected All

Background None Papers Item no EDIN BVRGH Report no THE CITY OF EDINBURGH COUNCIL

Implications of Audit Scotland’s report on ‘The Gathering 2009’

Policy & Strategy Committee 31 August 2010

1 Purpose of report

1.I On the 23 June 2010 Audit Scotland published its review report on the Gathering ‘2009. On that date, the Council Leader requested that I provide within two cycles :-

e a report on Audit Scotland’s review;

e the implications for this Council of Audit Scotland’s recommendations; and

0 an explanation of why this Council agreed to settle one of The Gathering 2009 Ltd’s debts to a creditor. 2 Background

2.1 The Gathering 2009 Ltd has been the subject of considerable scrutiny, primarily by MSP’s in the . Initially this matter was raised in Parliamentary question and answer sessions and latterly in the Public Audit Committee where the Auditor General for Scotland’s report on the Gathering was considered on 23 June 2010. The report was commissioned by the Auditor General and undertaken by Audit Scotland following media coverage of the Gathering 2009 company’s financial situation and enquires from MSPs.

2.2 The full report is available at www.audit-scotland.gov.uk but for ease of reference i have attached a copy of the Summary and Recommendations as Appendix 1.

3 Audit Scotland’s Review

3.1 The key objectives of Audit Scotland’s review were to:

0 review the governance arrangements of the Gathering event;

0 evaluate the event’s financial management arrangements; and

1 0 review the basis of the decision to write off the public sector monies owed by the Gathering 2009 Ltd including both monies to fund the event and the services provided.

3.2 The report explains that the idea to establish 2009 as a year of celebration was originally initiated by the Scottish Executive in 2003 with a commitment to celebrate the 250th Anniversary of the birth of . The years celebration was branded as .

3.3 In February 2007 a private company, The Gathering 2009 Ltd was established to design, organise and develop what became a signature event in the Homecoming Scotland 2009 programme. On 13 March 2007 the Executive of the Council approved the recommendation of a mernber/officer working group, chaired by the then Council Leader (Councillor Anderson), in support for Homecoming Scotland 2009.

3.4 The Gathering 2009 Ltd immediately approached Events Scotland, Scottish Enterprise, Edinburgh and Lothians (now Scottish Enterprise) and the City of Edinburgh Council to seek funding support for the event. In June 2007 a business plan was submitted seeking a f300k grant split equally between the bodies and phased over two years. The first payment was made by Events Scotland in October 2007.

3.5 It is the Council's normal practice to work closely with partner agencies on major projects such as this. The collaborative approach is mutually beneficial; it secures efficiency through sharing due diligence responsibilities wherever possible and enables funders to reach agreement on what projects to support, the level of that support and the associated terms and conditions of support.

3.6 The three public sector funders formed a Steering Group to work alongside Homecomeing Scotland and the Company's Directors and this group first met in February 2008. The role of the Group was advisory only but it provided a forum through which funders were able to receive information on developments and to ask questions about the decisions which were being taken by the Company Directors.

3.7 This was an effective way of maintaining an oversight of the development of the event and enabled partners to offer advice and, where necessary, challenge the Company Directors.

3.8 In June 2008 the Company submitted a business plan for further funding from the towards improving the content of the event. An additional €1OOK was awarded by them to the Company at that time.

3.9 Part of the additional grant was awarded to support an education programme (f20K) and the Council, in support of that programme, applied to the Heritage Lottery Fund (HLF) for further funding, This bid was successful and the HLF awarded E10.5K. The Council forwarded the grant payment to the Company. This brought the total public sector funding to f410.5k.

3.10 In April 2009 the Company Directors reported to the Scottish Government that they were encountering cash flow problems.

2 3.1 1 These had arisen as a result of a number of unforeseen difficulties associated with contractual arrangements and with the impact of the recession on sponsorship and supplier credit.

3.1 2 In order to address this situation, the Scottish Government offered the company a short term interest free loan of f180K in June 2009 which was accepted. 3.13 At the same time the Steering Group was becoming increasingly concerned about the evolving financial circumstances of the Company. The Group increased its scrutiny of the financial projections provided by the Company and the frequency of meetings with the Company increased from monthly to weekly.

3.14 Additionally, to assist with the cash flow problem, the public sector funders in the Group agreed to adjust their payment schedules but they were not aware of the loan which had been agreed between the Company and the Scottish Government.

3.1 5 It is self evident that the Governance arrangements associated with this event were compromised to some extent by the absence of a major funder from membership of the Steering Group. Despite this, the Steering Group was able to influence the content of the event and did secure a greater focus on maximising income and keeping costs down.

3.1 6 At about the same time as the Scottish Government approved the loan to the Gathering 2009 Ltd, Events Scotland agreed to provide a further grant of f80K to assist with additional marketing. This reflected the public sector bodies’ concerns with the ticket sales position and brought the overall public sector grant support to f490.5k.

3.1 7 Despite the injection of additional funds for marketing the event, ticket sales remained much lower than had been anticipated and income generally was well short of even the most pessimistic projections.

3.1 8 It should be noted that the Company Directors considered that a loss would be acceptable in the first year of an event which was expected to be repeated and this was understood and accepted by the funders. However, it subsequently became apparent that the financial position of the company was untenable.

3.19 The event generated a much higher than expected economic impact for both Edinburgh and Scotland. The net additional expenditure of f8.8m in Edinburgh and €10.4m in Scotland represented a return on the public sector investment of 1:I8 at the Edinburgh level and 121 at the Scottish level. These figures are significantly better than for most comparable events.

3.20 The Scottish Government was keen to find ways of protecting the reputation of the event to enable it to be repeated, whilst at the same time to protect the interests of the many creditors. State Aid rules and the Companies Act precluded direct intervention by the Scottish Government and this triggered the discussions with the Council and others in October 2009 which are referred to in section four below.

3.21 After lengthy and detailed discussions between the Scottish Government and the Council and despite the recognition that we had common cause, a solution 3 could not be found. On 26 January 2010 the Scottish Government was informed that the Council was unable to take this matter further. The Company was placed in liquidation on the same day.

3.22 The list of creditors stands at f726k. This is made up of f382k owed to six public sector bodies and E 344k owed to 103 private sector organisations. The Council is owed f24k and a claim has been submitted to the liquidator for the amount. However, the debts of the company far exceed the value of any assets and the prospect of ordinary creditors being paid a dividend is remote. Consequently, the debt to the Council has been written off under the approved Scheme of Delegation.

4 Why this Council agreed to settle one of the Gathering 2009 Ltd’s debts

4.1 On 12 October 2009 The First Minister called a meeting with Council members and officers together with representatives of several public bodies to discuss the emerging financial difficulties facing The Gathering 2009 Ltd. 4.2 At that meeting it was suggested that the Edinburgh Tattoo might consider taking over the Gathering. A series of meetings took place during the next few days between the various parties resulting in;

(i) clarification that the Tattoo did not wish to take over responsibility for the Gathering; and

(ii) a proposal that Destinations Edinburgh Marketing Alliance (DEMA) take on the Gathering.

4.3 The likelihood of DEMA becoming involved with the Gathering became the subject of a press release on 15 October 2009. 4.4 On 16 October, the day following the press release, one of the Directors of the Gathering 2009 Ltd contacted the Council’s Director of Finance seeking immediate assistance. One of the creditors of his Company had indicated their intention to commence winding-up proceedings against the Company unless their outstanding debt was paid immediately. 4.5 The Director of Finance also received a call from a senior civil servant emphasising the sensitivity of the situation with a number of creditors contemplating taking action to recover sums owed while, at the same time, there were ongoing discussions taking place with the purpose of avoiding the Gathering 2009 Ltd going into receivership. The Director of Finance wrote to the creditor stating that the Council would underwrite their debt until such time as the Gathering transferred to DEMA and settlement could commence.

4.6 This temporarily satisfied the creditor and provided time for the possible involvement of DEMA to be fully explored. However, on 23 December 2009 the creditor lodged a claim in court against the Council for recovery of the debt owed to them. 4.7 They contended that the Director of Finance’s letter of 16 October 2009 amounted to a guarantee and that they had acted in reliance upon this letter in refraining from pursuing the Gathering 2009 Ltd to their prejudice. 4 4.8 The Directors of Corporate Services and Finance considered the options available to the Council and determined to instruct the Council Solicitor to enter into discussions with the Company with a view to negotiating a confidential settlement. This was agreed extra-judicially on Friday 26 March 2010 and the Court action was discontinued.

4.9 This decision was based on firm legal advice that this action would not provide a basis for other creditors of the Gathering 2009 Ltd to recover the debts owed to them by the company.

4.1 0 These decisions and actions were taken by senior officers without recourse to elected members.

5 Press Release - 15th October 2009

5. I Following their consideration of the Audit Scotland report, I received a formal request from the Convener of the Public Audit Committee, dated 1 July 201 0, for clarification on:

(i) the clearance procedures for the press release issued by DEMA on 1 October 2009 relating to 'The Gathering' and, specifically who cleared the release and in what order:

(ii) whether this release followed the Council's normal clearance procedures; and

(iii) what risks were identified and considered in relation to the decision to issue the press release prior to the conclusion of the due diligence work on the Gathering 2009 Ltd and prior to the Council commissioned independent valuation of the intellectual rights of the company.

5.2 I provided the Public Audit Committee with a detailed explanation of the circumstances surrounding the press release in my response to the Convener which is attached at Appendix 2.

5.3 In that letter I emphasise that there was a very real risk that creditors would take action which could have forced the Gathering 2009 Ltd to cease trading before the possibility of any rescue package could be considered and developed.

5.4 I indicated that the preparation and issuing of the press release was well intentioned and based on the long term economic interests of the city. It was hoped to be able to protect the interests of the many small, mainly local business creditors and the future of the Gathering 2009 Ltd.

6 Implications of the Audit Scotland Recommendations for this Council

6.1 In parallel with the Scottish Parliament's consideration of the Gathering report, the Council received and responded to several Freedom of Information requests. In addition a Notice of Motion for debate was raised at the Council meeting on 1I March 2010.

5 6.2 Copies of both the Motion and the Council’s decision, having considered the Motion, are attached for ease of reference at Appendix 3.

6.3 As part of the Council’s decision it was agreed that a members briefing note would be the most appropriate way to deal with this issue and a copy of that document, Members Briefing 187 which was issued on 15 April 201 0 is attached for information at Appendix 4.

6.4 Audit Scotland’s recommendations in relation to this project relate primarily to the governance of inter agency working and lessons that can be learned for the future. Shown as Appendix Iof this report they refer to the roles, membership and reporting line of steering groups, clear remits and communications processes, accountability for spending public money, financial reporting and related KPls.

6.5 In this case the three original public sector funders (EventScotland, the Council and SEEL) formed a steering group with the Company Directors to allow them to maximise the economic benefit of the event and look after their interests. Unfortunately, the Steering Group had a purely advisory role.

6.6 Whilst financial projections were provided to the regular meetings of the Group, the quality of the financial information could have been better, particularly in relation to actual income and expenditure to date.

6.7 In May 2009 the Company directors informed ministers that the Company was experiencing cash flow difficulties. In response, the Scottish Government provided support in the form of a short term loan of E180,000to be repaid by 31 August. The Steering Group was not told of this loan and at the same time the public sector funders represented on the Group also brought forward grant payments to alleviate the cash flow problems.

6.8 As has been indicated above, the governance arrangements associated with this event were compromised to some extent by the absence of a major funder from membership of the Steering Group. Despite this, the Steering Group was able to influence the content of the event and did secure a greater focus on maximising income and keeping costs down.

7 Financial Implications

7.1 The economic benefits from the event greatly outweighed Council and Public Sector contribution but creditors suffered due to the narrow base of the company’s activities and exposure to income targets. The total cost to the Council was a f 100k grant contribution and a debt-write off of f30k.

8 Environmental Impact

8.1 There are no environmental implications arising from this report.

9 Conclusions and Recommendations

9.1 While the Council along with its partners adopted good practice over the monitoring of management arrangements and the scrutiny of the business

6 decisions taken by the Gathering 2009 Ltd, there are a number of lessons to be learned from this case:

(i) Governance arrangements for events require to be formalised with clearer specifications of roles and responsibilities;

(ii) A protocol is required to guide partnership working but also to take account of working with private sector organisations in a variety of circumstances;

(iii) Post event reporting is recommended for all events and appropriate arrangements for elected member scrutiny need to be strengthened, and

(iv) More detailed risk assessment and prior consideration of the financial stability of organisations applying for grants to run events and companies formed for specific purposes must be carried out.

Tom Aitchison Chief Executive

Appendices 1 Audit Scotland Report - Summary and Recommendations 2 Response to the Public Audit Committee 3 Council Motion and Decision 4 Members Briefing 187

ContactlteVEmail Jim Inch, Director of Corporate Services - 01 31 469 3008 [email protected]

Wards affected All

Single Outcome Agreement

Background Papers

7 APPENDIX 1

Summary

Background

1. Homecoming Scotland 2009 was a Scottish Government tourism initiative. It aimed to deliver additional tourism and revenue for Scotland by encouraging people, whether at home or abroad, to join in a number of celebrations of Scotland's heritage. culture and contrjbutions to the world. Homecoming Scotland Included over 400 events, ranging in size from high-profile signature evenls to community-led events. According to an external economic assessment, Homecoming Scotland 2009 generated addltional tourism revenue of f53.7 million to the Scottish economy.'

2. The Gathering (the event) took place on 25 and 26 July 2009 comprising a clan gatherlng, and pageant. A private sector company, The Gathering 2009 Ltd (the company), developed, organised and delivered the event. Although the idea and original development of the event started before Ihe announcement of Homecoming Scotland 2009, it evolved to become one of the signature events in the programme.

3. The event had a budget of E2.4 million and attracted public sector grant funding of nearly f500,OOO from organisations including EventScotland, the City of Edinburgh Council (the council), Scottish Enterprise Edinburgh and Lothians (SEEL) and the Scottish Government, but made a financial loss of E516,OOO. This resulted in the company being unable to pay its creditors, which included a number of public seclor bodies.

4. Following media coverage of the financial situation, two MSPs contacted Audit Scotland about tha circumstances leading to this position. After consideration of the events, the Auditor General asked Audit Scotland to undertake a review of the event. The key objectives of the project were to:

. review the governance arrangements of the Gathering event evaluate the event's financial management arrangements

review the basis of the decision to write-off the public sector monles owed by The Gathering 2009 Ltd, including both monies to fund the event and the services provided.

' Homccoming Scotland 2009 Economic Impact. EKOS Economic 2nd Social Dcvelopmsnt Consullancy. March 2010.

2 5. This report concentrates on the role played by public sector bodies in the event. Our work did not include an audit or full investigation OF the financial affairs of the company, as financial matters relating to private companies are outwith the auditing powers of the Auditor General.

Key findings

’lnlelteclual property includes brands and trademarks, contact databases and the websile and interne1domain name.

3 Recommendations

4 ! i APPENDlX 2 i.

THE CITY OF EDINBURGH COUNCIL

Convener Hugh Henry, MSP Our Ref: ceo\admin\hhenryOl Public Audit Committee Room T3SO Your Ref: The Scottish Parliament EDINBURGH Date: 30 July 201 0 EH99 1SP

Dear Mr Henry

AUDITOR GENERAL FOR SCOTLAND REPORT -THE GATHERING 2009

Thank you for your letter of 1 July 201 0 regarding the above, which requested clarification on:

The clearance procedures for the press release issued by DEMA on q5 October 2009 relating to 'The Gathering' and, specifically, who cleared the release and in what order:

Whether this release followed the Council's normal clearance procedures; and

What risks were identified and considered in relation to the decision to issue the press release prior to the conclusion of the due di'ligence work on the Gathering 2009 Ltd and prlor to the Council commissioned independent valuation of the intellectual property rights of the company.

Before responding io your specific questions t have set out below some background and context to the Council's rote in discussions about the future of the Gathering.

Context

The Scottish Government made initial contact with the Council on Friday 9 October 2010, seeking the Council's assistance with an emerging problem with the Gathering 2009 Ltd. It was pointed out that the Gathering Ltd was in serious financial difficulties. During subsequent discussions and meetings Scottish Government representatives explained that while the financial difficulties were substantial, research had also confirmed that the Gathering had resulted in significant economic benefits for Edinburgh and that the potential existed for a similar event to take place in future. -2-

Over the period 12-14 October 2009, at the request of the Scottish Government, a number of exploratory discussions took place to consider options for securing the future of the Gathering. These meetings variously involved senior politicians from the Scottish Government and the Council, as welt as senior civil servants from the Scottish Government, VisitScotland, EventScotland, Historic Scotland and Directors of this Council.

The Scottish Government and the Gathering 2009 Ltd were particularly keen to avoid creditor action which could have required the company to cease trading, whilst the details of a rescue package were being considered. A solution would have potentially protected the many srnait businesses involved, the majority OF which were Edinburgh based.

At the end of these discussions, and having given consideration to a number of options, it was agreed that the Council would ask DEMA to consider taking over the future management of the Gafhering.

Press Release

A first draft of the press release was provided to the Council at 12 noon on Wednesday, 14 October 2009 by the Scottish Government’s Head of Communications.

Appreciating the difficulty which would be involved in responding to and approving such a press release quickly, the Council Leader convened a meeting in her office with myself, the Council Directors involved, the Deputy Leader and the Convener of Economic Development. At that meeting the general thrust of the changes which the Council would require to the draft press release were agreed.

At 15.57 a redrafted press release was sent back for comment to the Scottish Government, following which furkher changes were received from the Scottish Government’s Head of Communications. Relevant Elected Members and Directors within the Council also received the amended press release and ,subsequently, the draft was further amended to take account of oral and written feedback from both Council and Scottish Government personnel. A copy of the e-mail trail is attached for your information.

At 21 .OO on the evening of Wednesday 14 October 2009, the press release was finalised and was issued to the media by DEMA at 09.24 on the morning of Thursday 15 October 2009. -3-

A press release in the Council would normally be approved by the relevant political Convener and Director or senior officer. However, given the importance of this particular press release, the thrust of its content was agreed not only by the Director of City Development and the Convener of Economic Development but also, via e-mail, with the Council Leader and her Deputy, myself and the Directors of Finance and Corporate Services.

Given the criticality of the issues under consideration and the associated time pressures relating to possible creditor action, priority was given to the Scottish Government's requirements around the press release. However, it should be borne in mind that these discussions about the content of the press release were taking place alongside separate and intensive preparations for a very full Council meeting on 15 October 2009.

The Chair of DEMA was involved through e-mails and telephone discussions with the Convener of Economic Development and the Head of Economic Development during the afternoon/evening of 14 October 2010. In an e-mail at 18.01, the Council's Head of Economic Development confirmed that he had received the press release from the Chair of DEMA and at 18.02 confirmed the Chair of DEMA's agreement to a proposed change to his quote in the press release.

Whilst it may be considered now that the issuing of this press release was somewhat premature, discussions with the Scottish Government and its relevant tourism and event agencies, (with the highest level of political and officer input), coupled with the content of the Economic Impact Report, provided the Council and DEMA with a level of confidence that the details of a rescue package could potentially be agreed.

The risks involved in issuing the press release prior to a due diligence process being undertaken were recognised. However, the possibility of the creditors taking actbn which could have forced the Gathering Ltd to cease trading was a cause of great concern to the Scottish Government, a concern which was recognised and shared by the Council. Such action would have entirely negated the posslbllity of any rescue package,

The Scottish Government, +he Council and DEMA's actions in preparing and issuing the press release on the 15 October were well intentloned and based on the long term economic interests of the city whilst trying, if possible, io protect the interests of the many small business creditors and the future of the Gathering Lfd. Despite our best endeavours and common cause with the Scottlsh Government we were unable to find a workable solution. Subsequent discussions and investigations, including our own independentlycommissioned valuation of the Gathering Ltd, demonstrated that the assumptions on which the proposed rescue package had been based could not be validated. Once this was established, it became evident that It was impossible for DELIA to play the role envisaged in rescuing the Gathering. -4-

On 21 October 2009 fhe DEMA Board of Directors confirmed that while DEMA might, in certain circumstances, be prepared to participate in the development of a future Gathering event it was not prepared or able to take on the Gaihering 2009 Ltd liabilities. If 1 can provide any further clarification on the role of the Council in this matter please do not hesitate to contad me,

Yours sincerely i

TOM AlTCHlSON Chief Executive 20 APPENDIX 3

The City of Edinburgh Council 1I March 2010

3) To use the scheme for any other election that might take place prior to the general review being completed and subject also to any changes of a minor or emergency nature being made by the Chief Executive and Returning Officer, after consultation with the ward members.

(Reference - report no CEC/122/09-1O/CE&RO by the Chief Executive and Returning Officer, submitted.

16 The Gathering 2009 - Motion by Councillor Godzik

The following matian by Councillor Godzik was submitted in terms of Standing Order 28:

"Council recognises the on-going speculation surrounding The Gathering 2009, and possible future Gathering events in Edinburgh; believes that a number of confused and conflicting statements have been issued by the Scottish Government, CEC and DEMA OR this issue; notes the recent admission by the Council Leader that at the time of the original announcement on 15 October that "due diligence had not been completed"; also notes that the Scottish Government now claim to have "no direct discussions with DEMA" on this matter (S3W-28342).

Further notes that CEC have now been referred to the Information Commissioner after they refused to publish correspondence in response to a Freedom of Information request on the matter, and also that the Scottish Parliament Economy, Energy and Tourism Committee look set to investigate the circumstances around The Gathering 2009, including the proposed CEC/Scottish Government 'bail-out'. i As such believes that the on-going speculation and lack of transparency on this issue is damaging to the reputation of this Council, and therefore calls for a report by the Chief Executive outlining:

I) why the announcement on this matter wits made given that due diligence had not been completed

2) the role CEC played in discussions with DEMA and the Scottish Government regarding The Gathering 2009, including a record of any meetings

3) confirmation of how the debts incurred by The Gathen'ng 2009 will be settled

4) details of any plans for future Gathering events

43 21

The City of Edinburgh Council 1 IMarch 2010

5) a full timeline of discussions between CEC, the Scottish Government, DEMA, the Gathering 2009 Ltd and any other parties involved.”

Decision

I) To acknowledge that there had been speculation about The Gathering 2009 ltd but that this Council, and the Council Leader in particular, had made it clear that, while sympathising with creditors, it had no responsibility for debts and liabilities of The Gathering 2009 Ltd, the private company behind The Gathering 2009.

2) To recognise that The Gathering 2009 Ltd had gone into administration and that it was not within the Council’s competence to comment on how debts would be settled, that being a matter for the appointed administrators.

3) To note that the Council was not in a position to comment on plans for any future Gathering events.

4) To agree:

(a) that the offermade to the leader of the Labour Group for a meeting with senior Council officials to discuss this matter be repeated and extended to all Group Leaders; and

(b) that a briefing note on The Gathering 2009 to all Councillors was the most appropriate way to deal with this issue.

17 Mark Beaumont - Cycling Chalienge - Motion by Councillor Buchan

The following motion by Councillor Buchan was submitted in terns of Standing Order 28:

“Council:

i) congratulates Mark Beaumont on his latest cycling challenge, having cycled from Anchorage in Alaska through to Ushuaia in Southern Argentina, following the American Cordillera mountain range;

ii) welcomes the positive impact that Mark’s cycle challenges have on inspiring people to become more active;

iii) agrees to hold a suitable reception to welcome Mark back to Edinburgh.” ern 1 3.5 April 2010

From early October 2009 until January 2010, The Gathering 2009 the Council worked with appropriate oMcers in the Scottish Government in an effort to find a At tine Council meeting on 11 March 2020, it was way though 'the complexities' of any agreed that a briefing note to all councillors was the agreement. most appropriate way to inform members about the Council's involvement with the issue of debts November incurred by the company that delivered the In early November 2009, the Scottlsh Gathering 2009. Government's Department of External Affairs and Tourism confirmed that there would be a October tevef of Government support for future In early October 2009, the Council was approached Gatherings. This support was subject to the by the Scottish Government to consider being party articulation of the benefits of the event beyond to a solution to the financial problems encountered Edinburgh, the submission of a satlsfactory by the Gathering 2009 Ltd and to help realize the business plan and the agreement of Scottish future of the Gathering as an event. The Scottish Ministers. Government arranged for the Council to be provided with documents related to the economic impact of December the event and the value of the intellectual property of Foflowfng a DEMA Board decision on 2 the Gathering Brand. December, on 3 December, the Chair of DEMA wrote to the Council Leader clarifying Following a number of officer level meetings, and an that DEMA's future involvement in any future exchange of e-mails and phone-calls, it was agreed Gathering was subject first to the resolution of with the then Chair of DEMA, and some DEMA the financial affairs of the 2009 event, in which Board members, that DEMA (or possibly a subsidiary it was not involved. DEMA made clear that company that it would establish) would take on the delivering its current objectives and business rote of managing future Gatherings and that the plan was its key priority, but that it was still Scottish Government, in liaison with the Council and happy to prepare a business plan for future DEMA, would find a way to manage the private Gatherings, along with other supporting sector liabilities of the 2009 event. organis ations ,

This tentative arrangement resulted in what was a The Scotsman on 3 December reported that premature media release issued on behalf of DEMA, "the Council had washed its hands off the by the City of Edinburgh Council, and with the full Gathering's debts"; creating further confusion agreement of the Scottish Government. The timing of by inaccurately suggesting that the Council this did not aliow time for a formal decision to be had already agreed to take on the debts of the taken by DEWor the Council. Gathering 2009 Limited.

Council was informed of the agreement to work On 23 December 2009 the Leader also together on this matter on the same day - 15 clarified the Council's position in October 2010. The Council Leader at that meeting communications with lain Smith MSP, the made it clear that none of the debts of the Gathering Convener of the Scottish Parliament's Ltd would fall to the City of Edinburgh Council. Economy, Energy and Tourism Committee.

On 28 October, the Council Leader received a letter In her letter to Mr Smith she said "I have from the First Minister expressing his appreciation of always made it clear that, while I have the Council's cooperation in facilitating discussions in sympathy for the creditors, this Council's relation to the future of the Gathering. He also financial situation precludes us taking on the acknowledged the complexities in the transaction debts of a private company." which he believed "would ensure the maximum economic benefit would be achieved for both Throughout this period, the Scottish Edinburgh and Scotland, in the years ahead." Government and Council offlcers had been keeping the Gathering 2009 Ltd abreast of developments.

THE CITY OF EDIWEURGH EOUliClt i5 April 2010

January 2010 The Council commissioned an independent evaluation of the worth of the Gathering (in intellectual property terms) from BTG Forensjc in late January 2010. As a result of that assessment the Director of Corporate Services wrote, on 26 January 2010, to the Scottish Government's Director of Culture, External Affairs and Tourism, indicating that despite the best endeavours of the Council and Scottish Government to find a satisfactory way forward the Council was unlikely to invest in the Gathering brand.

On 27 January 2009 the Council Leader issued the folfowhg statement:

"Despite the undoubted success of the Gathering 2009, in terms of economic impact, an independent assessment has indicated that the company has no share value and that its intellectual properky is worth at best Ei00,000. in short its current financial position is unsustainable.

On that basis, and despite our best endeavours, we regret that the Council has been unable to find an acceptable way in which to help resolve the company's outstanding conimitinents and to protect the Gathering brand for the future.

This is a very difficult time for the Council financially, particularly as we seek to reduce expendjture in order to achieve a balanced budget, so our options are extremely limited.

We do however remain interested in being involved in any future Gathering events."

The Gathering 2009 Lid placed itself in voluntary liquidation on 26 January 2010.

Further information

Jim Inch Director, Corporate Services