Local authorities warned after council's £11m energy ALMO debacle
Published by Max Salsbury for 24dash.com in Local Government
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A council's arm's length management organisation scheme has ended up landing the local authority with an £11.5 million bill.
Highland Council set up ALMO Caithness Heat and Power in 2004 but the venture ran into major problems and had to be taken back in-house only four years later.
A highly critical report for the Accounts Commission in June 2010 revealed fundamental failings in the way the project was structured and managed.
A second report in February 2011 identified serious weaknesses in governance and accountability. At that time, the council estimated that the total cost of its involvement in the project would be £15.4m.
In its latest findings the Accounts Commission says all councils can learn from the project, and that it is essential that any new ALMO has robust governance and accountability arrangements from the outset with clear lines of responsibility for councilors.
Highland Council's project originally started in 2002 as a community venture to provide wood-fired heat and hot water to homes in Wick.
But it hit early problems after risks were not identified and warnings went unheeded. Spending checks or controls have also been slammed as inadequate.
However, the Commission said it was encouraged by the council’s efforts to sort out the legacy of the project and reduce overall costs. Equipment and assets were sold to a private company which now provides services to more than 160 homes. The council had also reviewed its approach to ALMOs.
Accounts Commission chair Douglas Sinclair said: “Serious deficiencies in the governance of the project have led to significant loss of public money.
“Highland Council has learned an expensive lesson but there are lessons for all councils to learn from this project.”