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'Weaknesses' found in Highland Council handling of city region deal with auditors highlighting £1.2m of Scottish Government money not spent on Inverness Castle redevelopment project – despite receiving it three years ago

By Andrew Dixon

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Inverness Castle.
Inverness Castle.

AUDITORS have found "weaknesses" in Highland Council's handling of the multimillion-pound Inverness and Highland City Region Deal.

The much-heralded £315 million 10-year deal, announced in March 2016, includes £135 million Scottish Government investment with the UK Government committing £53 million and Highland Council and regional partners contributing £127 million.

It is being used for high-profile projects such as trying to transform Inverness Castle into a major tourist attraction once the court service moves to the developing Inverness Justice Centre.

However, the council's internal auditors reached the opinion that "weaknesses in the system of controls are such as to put the system objectives at risk, and/ or the level of non-compliance puts the system objectives at risk".

A business case is currently being developed for the Inverness Castle project with work ongoing to explore development opportunities within the site and options for use of the castle from 2020 onwards.

Auditors pointed out delays to business cases could threaten projects.

They added: "Not all of the grant funds drawn down from the Scottish Government have been used and the council currently holds £879,257 from funds drawn down during 2016/17 and 2017/18. The services finance manager has held discussions with the Scottish Government regarding the unused grant funds and it has been agreed that they will be offset against 2018/19 grant expenditure. £1,232,351 is also held by the council from the grant award of £3 million received in 2015/16 (prior to the date of the city region deal signatory document) specifically to fund the Inverness Castle project."

Their report will be discussed by the council's audit and scrutiny committee on Wednesday.

Auditors concluded: "Although some of the crucial aspects of the agreed governance framework are in place, there are some elements which should be strengthened in order to ensure that there is an appropriate level of governance in place. The city region deal should be properly scrutinised and monitored by the member scrutiny group and environment, development and infrastructure committee given the high-profile nature of projects and the level of investment involved.

"It is essential that the reporting and governance requirements set out by the Scottish Government are adhered to.

"Although it is acknowledged that the evolving nature of these requirements makes it more challenging to meet the reporting conditions, more could be done by both the Scottish Government and the council in order to improve on the current process. The programme manager has stated that a lack of resources has contributed to the issues in this area. The particular issue that had stretched resources has been concluded and the involvement of the services finance manager and his staff, in terms of financial reporting and monitoring, will help to improve the situation and should also ensure that monies drawn down from the Scottich Government represent actual project spend.

"As the accountable body, the council is responsible for the management of grant funds and could be held liable if not managed appropriately. It is therefore critical that there is a legal agreement in place with partner organisations for all relevant projects and that tighter controls are in place to monitor adherence to the conditions set out within the agreements."

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