Quango doled out millions of taxpayers' cash without proper checks

Published on 03/03/2010 21:55

A PUBLIC agency was determined to push through the controversial Cairngorm funicular project at any cost and without properly regarding the risk to the public purse, according to MSPs.

The mountain railway opened in 2001 nearly 5 million over budget and funding to date is 12m more than originally expected. Another 4m is planned to be spent on the facility.

Yesterday, the Scottish Parliament's public audit committee published a highly critical report on the role of Highlands and Islands Enterprise (HIE) in the project.

It follows a previous critical report last year from Robert Black, the Auditor General for Scotland, who said HIE had ignored financial risks during the planning of the railway.

HIE subsidised the building of the funicular, but in 2008 had to step in to take over the operators, CairnGorm Mountain Ltd (CML), which had debts of more than 400,000.

The committee said HIE failed properly to evaluate a number of significant risks, including the viability of CML and the possibility of a decline in skier numbers, at the outset of the project.

Additional risks emerged after the project was approved, but, says the committee, HIE's failure to review and adjust the business case before construction began in 1999 reflected "bad practice and was unacceptable". The cost of building the funicular was put at 14.87m in 1997, but this rose to 19.54m. With other support provided to CML since 2001, the total cost was 26.75m, of which 23m came from the public sector.

HIE has since said it plans to retain ownership of the mountain railway for another two to three years, before seeking a new operator or buyer.

In the meantime, it will spend up to 4m on repairs, maintenance and upgrades.

In its report, the committee said: "Failure to take account of the risk associated with trends in visitor numbers at the point of commitment to the project is indicative of the determination locally to proceed with the project and the political interest in the local economy which existed at the time.

"The combination of these factors meant that the project was pushed forward without proper regard to the risk to the public purse."

MSPs on the committee also criticised the "inadequate and unrealistic" contingency for the project. It was originally set at 645,000, but reduced to 7,667 following the higher than anticipated cost of the buildings.

The report says

a new business model must be developed for the funicular, with plans "based on sound, realistic performance information and employ rigorous financial control measures".

Sandy Brady, HIE's acting chief executive, said the agency stuck to Scottish Executive guidelines at the time, but it accepted that "good practice in project appraisal and management has improved significantly since the early 1990s".

He added: "HIE is committed to its responsibility to maintain the safe infrastructure of the facility and to put in place a financially sustainable business model which enables the resort to continue increasing its contribution to the local, regional and national economy."