Concerns over quango merger costs

Concerns over the level of savings promised after quangos were taken over by the Welsh assembly government has been raised by assembly members.

The Welsh Development Agency, Wales Tourist Board and education body Elwa were abolished two years ago.

It was said the changes would save the assembly government £10m a year from 2009.

But the assembly's Audit Committee said the savings seemed to be financial cuts rather than efficiency gains.

On 1 April, 2006, the three major agencies were abolished in a so-called "bonfire of the quangos" and brought under direct ministerial control.

At the time, the Welsh assembly government said bringing them under direct control meant democratising the quango state, with the promise too of major savings for the public purse.

While the committee's report acknowledges a number of successes in the process, the costs and savings involved seem less than convincing.

'Ongoing issues'

It raises concerns monthly bank reconciliations - checks on transactions - were not carried out on a timely basis during much of 2007.

The report also said the assembly government has encountered "post-merger difficulties" in processing the increased volume of receipts generated by the activities of the former sponsor bodies.

The reported costs of the merger programme were £14.5m, an increase of £2.6m on the projected cost of £11.9m.

Shelia Drury, the former executive chair of Elwa, which was the largest quango in terms of its turnover, said she was not surprised wit the report's findings.

"I think at the time you couldn't predict all of the implications and the outcomes, so it doesn't surprise me that some of the predicted cost savings haven't materialised," Ms Drury said.

"In Elwa we had a budget of £500m and 450 staff - putting those into the assembly wasn't just like sticking two legs bricks together at day one and feeling the job was done - there were ongoing issues."

Chair of the audit committee, David Melding AM, said it was "important" for the assembly government to strengthen its financial management processes.

"In particular the committee believes that stronger governance arrangements are necessary and we call for more external members to serve on corporate governance committees in the assembly government.

"These committees, which are essential for efficient administration, should be chaired by independent, external appointees," he added.