Education quango's 'major failings'

Brian Meechan
BBC Wales political reporter

Elwa was seen as the flagship for post-16 education and training

Wales' biggest quango failed to protect the interests of taxpayers, according to the government's financial watchdog.

The National Audit Office has highlighted a serious and fundamental breakdown in the controls that should have been operated by Elwa, the organisation responsible for post-16 education.

The report says that almost every aspect of the quango's handling of the Pop Centre Café project in the Rhondda, south Wales, was flawed.

Many of these "major failings" were repeated in other projects.

The audit also found that Elwa failed to get approval from the Welsh Assembly Government for their payments to training providers.

The public body has appointed an independent investigator to look into disciplinary proceedings against individual employees.

The Chair of the organisation, Enid Rowlands, announced in June that she was standing down.

Elwa had been reorganised a few months before - effectively being split in two.

The Auditor General for Wales, Sir John Bourn, says the contract between the quango and Learn to Live Ltd, who run the Pop Centre Café, failed to "provide an adequate safeguard for public funds or a sound basis for the management of the project".

There were no clear measures for judging the Pop Centre Cafe's performance, it's financial viability or the risks attached to it, the report said.

Almost £2m was given to the company running the project without any business case being made for the advance, which breaches the rules for public bodies.

Elwa says it is taking action to correct the problems

The deal may also have broken European Union laws, because the equipment bought with the money from Elwa was used for commercial profit.

This was allowed under the contract agreed by the quango, but could fall foul of EU rules on state aid being given to companies.

This catalogue of errors was repeated in 17 other Elwa funded projects in 2001 and 2002, with some contracts being based on the one drawn up with the Pop Centre Café.

The monitoring of projects was described in the audit report as weak and the quango was said to have had little regard for how they would turn out.

Of the projects currently underway, Elwa's own review found similar problems in many of them. It says it's taking action to correct these.

Early payments

In March 2002, Elwa made payments of almost £3.7m to training providers across Wales, which would normally have gone through in the following month.

This reduced the cash held in its bank account at the end of the financial year and stopped it breaching it's limit on the amount it can carry over between financial years.

The Welsh Assembly Government was not asked to approve this.

The assembly's audit committee will begin hearing evidence from some of those involved in Elwa's decisions on Thursday.

'Serious deficiencies'

In a statement, Elwa said it acknowledged that the errors made were "unacceptable".

It added: "The National Council - Elwa accepts that there have been serious deficiencies in the operation of the organisation's financial and management control systems.

"The report identifies major failings in the management of a number of projects, most notably the Pop Centre MP3 Café initiative which was intended to bring accessible learning opportunities to one of Wales' most deprived areas.

"These errors, and those which occurred in 17 other projects in 2001-02, are not acceptable and the organisation has been working to strengthen its internal control framework to ensure that these mistakes are never repeated.

"It is particularly unfortunate because, as stated in the Auditor General for Wales report, the projects themselves are expanding and improving learning opportunities significantly."