28 April 2006
Chief officials of Scottish Enterprise have admitted that management errors have led to it overspending by £33m.
Finance director Ian Carmichael told members of the Scottish Parliament's enterprise committee this week that there was no evidence of money having been spent recklessly, irregularly or improperly. However, there was a problem with the phasing of expenditure, for which the economic development agency regretfully had to accept responsibility.
Carmichael said problems had arisen as a result of a new system of resource accounting. He said: 'We didn't realise the serious implications of it partly because we didn't fully understand it.'
Leaders of Scottish Enterprise, including chair Sir John Ward and chief executive Jack Perry, were grilled for more than two hours at a tense meeting of the Holyrood committee in Edinburgh.
The Scottish Executive had to step in earlier this year and give the agency permission to take cash from its budget for the next financial year after the £33m overspend (6% of budget) was disclosed. The crisis led to a major political storm, culminating in a call this week from former Scottish Office minister Brian Wilson for the agency to be scrapped and its responsibilities handed over to ministers.
In a report to the enterprise committee, consultants KPMG said the agency was slow to act when it became clear that a new budget and resource allocations system had stimulated expenditure ahead of income.
In November 2005, the agency became aware of a significant overspend but action taken at the time was not sufficiently robust.
The committee was told that the overspend came about after the organisation brought in a new way of allocating cash to resources. Financial restrictions imposed by the Treasury stopped them using their own £45m reserves.
PFapr2006
