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Last Updated: Monday, 7 February, 2005, 20:30 GMT
Euro audit finds project problems
By Bob Wylie
BBC Scotland investigations correspondent

Millions of pounds in European grants paid to the Highlands and Islands may have to be paid back.

A European Commission audit has found widespread mismanagement of projects within the region.

At least 21m may need to be repaid to Brussels but this could rise as a further 29m of funding is still be fully investigated.

Auditors recently inspected 14 projects funded by the European aid programme between 1994 and 1999.

Cairngorm Mountain Railway
The Cairngorm Mountain Railway was one of the projects investigated

All 14 of the projects failed the initial inspection which the investigators carried out.

The commission's provisional report found serious deficiencies in the effective management and monitoring of the projects and it will now carry out a secondary report.

Nationalists demanded that Enterprise Minister Jim Wallace make a statement to the Scottish Parliament.

SNP MSP Fergus Ewing said: "This is the most devastating example of financial mismanagement since devolution."

But Deputy Enterprise Minister Allan Wilson said the executive had long been aware of the issue and had "rebutted" the points raised.

He also denied the money that might require to be repaid could total as much as 21m.

Second audit

European grants have been spent on projects like the Cairngorm Mountain Railway, the docks at Nigg Bay and transport infrastructure within the Highlands.

The Scottish Executive has acknowledged there is a very real chance some grants will have to be re-paid.

A spokesman said: "After an initial audit of ERDF funding in the Highlands was unsuccessful, the European Commission will be returning to the area to carry out a full second audit shortly.

"While nothing has yet been finalised, we have informed partners that there is a very real chance that funding will be decommitted and advised them to ensure that all information is available to the commission.

"The full extent of the commission's second audit will be known later in the year."

Highlands and Islands Enterprise, which is responsible for four of the audited projects, has also admitted it is facing investigation.


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