from Sunday Herald, 03 May 2009
Successive governments systematically flouted financial aid rules, wrongly claiming millions of pounds for a series of major telephone, transport and industrial developments in the highlands and islands, according to the European Commission.
Amongst the high-profile projects for which the Scottish government now has to pay back nearly £10 million to Brussels are the Cairngorm mountain railway, the Barmac development at Nigg dock, the Highland mobile phone network and the causeway between the islands of Eriskay and South Uist.
Other big projects for which grants have been embarrassingly bungled include the famed Hunters of Brora Woollen Mill in Sutherland, a Harris Tweed marketing scheme, the Berneray causeway, the A890 improvement near Achnasheen, the Kyle of Lochalsh sewage works and a cycleway between Forres and Kinloss.
After a heated five-year dispute with the Scottish government, the European Commission (EC) has ruled that 27 of the 40 projects it audited broke the rules governing grant aid (see panel below). A total of £48 million was given to the projects under the European Regional Development Fund between 1994 and 1999.
“The type and frequency of the errors identified indicates that systemic failures did exist in the management and controls systems in place for the programme,” the EC concluded. The checks by Scottish authorities “were inadequate to ensure proper compliance with the relevant Community rules.”
In a formal decision (12MB pdf), the EC argued that the mistakes were so commonplace that they were likely to affect other projects which they hadn’t audited. “This leads to a high risk of over-declaration of expenditure, or of declaration of ineligible expenditure, to the Commission, which entails a financial risk to the Community budget,” it said.
One of the most controversial projects for which the EC has ordered the repayment of £577,414 is the Cairngorm funicular railway. “Illegal criterion” were used for the awarding of a construction contract, it decided.
Public funding of the troubled £50 million railway is currently under investigation by Audit Scotland, which is expected to report later this year. In May last year the company which operated the funicular, Cairngorm Mountain Railway, was taken into public ownership by Highlands and Islands Enterprise to prevent it from going bust.
“It is a matter of continuing concern that hidden costs to the taxpayers of the whole funicular venture keep emerging,” said Drennan Watson, convenor of the Cairngorms Campaign, an environmental group. “What else is yet to emerge?”
The EC has also ordered £652,751 of the grant given to Barmac’s development of Nigg dock to be repaid. This expenditure is considered “ineligible” because of the lack of a detailed audit trail and proper supporting documentation.
This has angered the Scottish Nationalist MSP for the Highlands, Rob Gibson. The dock development was essential for constructing offshore wind farms but it had been “unnecessarily sterilised for years due to the audit process”, he said.
“If there are rules in Europe, it’s best to follow them. It’s a waste of money for the Scottish government to have to pay this back because of ineptitude in the 1990s. We have inherited this mess.”
The biggest repayment ordered by the EC is £3.6 million for the Highlands mobile telecommunications network because of flaws in its auditing. “The Commission attempted to audit this project on two occasions and on both occasions were denied access to the project documentation,” the EC said.
In total the EC has decided that the Scottish government must pay back £9.4 million. But the sums were disputed by Highlands and Islands Enterprise (HIE), which was responsible for many of the projects.
HIE claimed that only £909,177 was owed on the mobile network, £261,100 on Nigg dock and £105,089 on the Cairngorm railway. One problem was that it used accountant certificates to confirm expenditure on projects, wrongly believing that they would be accepted by the EC.
The Scottish government did not dispute the amounts that have to be paid back. It did point out, however, that it had managed to argue the EC down from its original demand for a repayment of £27 million.
“This follows the considerable efforts of Scottish government officials and partner organisations and constructive liaison with the auditors,” said the enterprise minister Jim Mather.
“These are issues that date from more than a decade ago, but the Scottish government takes its audit and compliance responsibilities very seriously and we have made budgetary provision to meet the repayment in full.”
Mather added: “We can now focus on the very positive role the current 2007-13 European structural funds programme can play in the highlands and islands, building on the government's economic recovery programme to help Scotland emerge stronger from the current downturn.”
The grants that have to be repaid
project / sum to be repaid to European Commission / reason
1) Highlands and Islands Mobile Telecommunications Network / £3,597,854 / no detailed audit trail
2) Eriskay and Sound of Barra Integrated Transport / £791,671 / awarding a contract without advertising
3) Barmac 2000-Nigg Dock Development / £652,751 / no detailed audit trail
4) Hunters of Brora Woollen Mill / £612,000 / failure to notify change of ownership and use
5) Cairngorm Mountain Railway / £577,414 / use of an illegal criterion in awarding contracts
6) Trunk Telecommunications Upgrade to Islands and Argyll / £432,366 / lack of supporting documentation
7) Harris Tweed Marketing Scheme / £405,946 / charging a funding levy to the project
8) Business Development Service / £162,612 / an amount charged twice
9) A9 Logie Easter to Garrick Bridge Improvement / £103,441 / lack of supporting documentation
10) Argyll and Bute Link to Education / £81,136 / incomplete audit trail
11) Berneray Causeway / £49,435 / incomplete audit trail
12) A890 Achnasheen Glencarron Road Improvement / £38.604 / lack of supporting documentation
13) Ness Island Aquadrome / £20,854 / lack of supporting documentation
14) Sutherland Partnership Economic Action Resource / £12,936 / inclusion of computer equipment delivered to another location
15) Kyle of Lochalsh Water Treatment Works / £12,330 / lack of supporting documentation
16) Provision of Improved Recycling Sites / £7,557 / lack of supporting documentation
17) A835 Moss Bridge Ullapool / £6,525 / lack of supporting documentation
18) Scalpay Bridge / £6,273 / lack of supporting documentation
19) Coastal Access Management and Facilities / £4,219 / lack of supporting documentation
20) A836 Bonar Bridge-Lairg Improvement / £4,197 / lack of supporting documentation
21) Forres to Kinloss Cycle Route / £2,595 / incomplete audit trail
22) Stornoway Ferry Terminal / £2,019 / lack of supporting documentation
23) Corran Ferry Replacement Vessel / £476 / lack of documentation
24) Information Network System for Tourist Information Centres / £350 / lack of supporting documentation
25) Arainn an t-Sabhail Mhoir / £333 / over claim for an invoice
26) Aviemore Partnership Phase 1 / £303 / lack of supporting documentation
27) Nairn Waste Water Treatment Plant / £180 / charging for a discount receivedsource: European Commission
Comments