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Page last updated at 10:27 GMT, Thursday, 2 October 2008 11:27 UK

Arts venue cost plan 'was flawed'

Poor record-keeping by the assembly government added to a lack of understanding of Wales Millennium Centre finances, said the Wales Audit Office.

A 13.5m bail-out of the Wales Millennium Centre followed "severe deficiencies" by the assembly government, an official report says.

"Wholly inadequate record-keeping" by assembly government officials added to a lack of understanding of the venue's finances, said the Wales Audit Office.

But Labour former Culture Minister Alun Pugh claims he inherited a "flawed" plan from his Lib Dem predecessor.

The assembly government said it would consider the report into the venue.

The Queen, accompanied by the Duke of Edinburgh and Prince of Wales, officially opened the 109m performing arts centre in November 2004, when it was described as an icon for Wales.

Three years later there were warnings from auditors that it was in danger of insolvency.

The assembly government announced in 2007 that as well as clearing the centre's debt it was also trebling its annual revenue funding from 1.2m to 3.7m.

Now Auditor General Jeremy Colman's report has said the assembly government's failure in record-keeping meant it only became fully aware of the risks involved in funding the centre at that time.

The centre, in Cardiff Bay, had become reliant on a loan from HSBC, originally 10m and intended for the building work, which it became unable to repay.

The report notes that officials lacked the records needed to properly understand the assembly government's financial exposure.

The Queen signs the visitors' book at the Royal Gala concert
The Queen officially opened the Cardiff Bay venue in November 2004

The report states: "In particular, in 2005 and 2006 the assembly government continued to extend its loan guarantee [to HSBC] without fully assessing whether the WMC could pay back the loan, despite the fact that the WMC was incurring much larger than anticipated losses".

Mr Colman notes that after clearing the debt and increasing the subsidy for the venue, officials then failed to examine the WMC's audited accounts for 2006, which were available to the public.

The lack of information obtained by officials also extended to details of ticket sales.

The assembly government claimed the centre refused to provide it with the details because it was worried that commercially confidential information could then be revealed to anyone requesting it using the Freedom of Information Act.

However, the WMC disputes this version of events.

It said its "trustees and management have always understood the considerable risks facing this unique new business, both prior to opening, now and in the future.

"Throughout, we have kept WAG (Welsh Assembly Government) officials and ministers fully appraised of our financial position. Officials of both WAG and the Arts Council of Wales have attended all board meetings since 2000 and were in possession of all board papers."

Mr Pugh also denied he had been frustrated in trying to obtain key figures such as ticket sales.

He told BBC Radio Wales: "In fact we had regular details, of not just of the overall top line figure of the budget in terms of ticket sales, but at the level of individual shows.

"We knew exactly which shows were selling well, which shows weren't doing particularly well.

"I had a very good working relationship with the chair and chief executive. We knew what the problems were. The problems were that original business plan simply wasn't capable of being delivered."

The assembly government did carry out detailed reviews of the WMC's business plans, which highlighted several key risks... but crucially, it then stopped short of assessing and addressing these problems

Paul Davies AM, Conservative

Mr Colman said: "The standard we would expect the assembly government to come up to would be that of any prudent business person with that kind of financial exposure.

"If you have lent someone or guaranteed a loan of 10m, that's a lot of money and you'd expect to be keeping a close eye on the situation."

Mr Colman did praise the handling of the centre's construction.

Mr Pugh, who was the minister when the venue opened, put the blame on his predecessor, Lib Dem AM Jenny Randerson, the minister in the former Lab-Lib Dem coalition.

Mr Pugh said: "The original business plan, that's the one that the whole assembly voted on, and the one that the previous culture minister recommended to the assembly, was inherently flawed: you could not run the centre at that level of cost that was in the plan."

'Fair and accurate'

Mr Pugh denied that he did not act earlier for political reasons, with an assembly election on the horizon.

He said: "Absolutely not. The issue was I didn't have 16m spare money sitting round in the arts budget.

"There was certainly no way I going to raid community arts venues in the valleys or, for example, re-impose admission charges in Welsh museums."

WMC chief executive Judith Isherwood said the report was "a fair and accurate picture of the facts as they relate to Wales Millennium Centre's business".

Conservative culture spokesman Paul Davies said: "This is a damning report that highlights in no uncertain terms the failings of the assembly government.

"The report clearly states the assembly government did carry out detailed reviews of the WMC's business plans, plans which highlighted several key risks.

"But crucially, it then stopped short of assessing and addressing these problems. This beggars belief."

He said the assembly government "effectively washed their hands" of the centre once it had been built, and added: "The assembly government have now got some very difficult questions to answer."

An assembly government spokesperson said: "The Minister for Heritage [Alun Ffred Jones] will consider the Wales Audit Office report on the Wales Millennium Centre, and the recommendations made, and will respond in due course."

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