A report into the initial funding of the Circuit of Wales (CoW) has found “significant shortcomings” in the way public money has been used in relation to the £425m project.
So far the Welsh Government has provided £9.3m to the Heads of the Valleys Development Company (HoVDC) to support the development of the new racing circuit.
However, a report from Auditor General for Wales released today (27 April 2017) has found “significant shortcomings” in the way it has managed risks to taxpayers’ money.
The report said the Welsh Government had “appropriately commissioned extensive advice and considered a range of benefits and risks” before embarking on its initial support for the project. However, “its appraisal of the information which has underpinned its funding decisions to date was flawed”.
It added that when the decision was made to provide funding the Welsh Government “did not do enough to manage public funds properly”.
The Welsh Government’s understanding of the companies involved in the project was said to be “limited”. It allowed payments of almost £1m to Aventa Capital Partners, a company run by HoVDC chief executive Michael Carrick, without enough evidence that these represented value for money.
The report also questioned the use of £300,000 in grant money to acquire FTR Moto Ltd, a motorcycle engineering company which later went into administration. It said this was “inconsistent with the grant scheme’s purposes”.
Auditor general Huw Vaughan Thomas said: “Using public money to support private infrastructure projects in Wales can help boost regeneration and economic development. In doing so, public financing needs to be managed robustly, with proper standards of scrutiny, vigilance and oversight.
“It’s unfortunate that, in the case of the Circuit of Wales, we have identified significant shortcomings and so the Welsh Government needs to learn from my report, particularly if it decides to provide any further support for the project to progress.”
However, the report also said that certain payments, believed to include work on the garden of Carrick’s Cambridgeshire garden, did not constitute the use of public funds.
A spokesman for the Heads of the Valleys Development Company, said: “The report shows that we have always operated within conventional commercial practices, ordinary company activity and standard accounting processes and, where the specific Welsh Government loan is concerned, very carefully adhered to and implemented advice on spending eligibility provided by the Welsh Government’s relevant officials.
“It is impossible to underestimate the importance of the Welsh Government loan funding. It was vital during the extended development phase and played a critical role in encouraging private sector partners to invest substantially in CoW.”
A Welsh Government spokesperson said: “We are surprised and disappointed by the decision of the Auditor General for Wales to publish this report within pre-election periods.
“We are also disappointed that a number of key concerns regarding the content and the inferences of the report have not been addressed prior to its publication.
“For example, the report makes repeated reference to our agreement to provide £16m Repayable Business Finance to HoVDC, but fails to acknowledge that we subsequently took that offer off the table for this latest proposal – despite us pointing this out to the Wales Audit Office.
“As a government, we are routinely asked to take on higher levels of risk to support companies and projects than might be acceptable to the private sector. The Circuit of Wales is a complex project, but we are satisfied that we have assessed risk against value for money for the taxpayer and have sought to secure the maximum security available from the developer.”
The Auditor General emphasised that the report did not assess the merits of further public funding being provided, the viability of the business case or claims regarding job creation and economic benefits.