North sums gaffe may cost £108m

Sep 11 2008 by Adrian Pearson, The Journal

NORTH civil servants who messed up their sums nearly 10 years ago could cost the Government £108m as European spending chiefs consider asking for their money back.

Government officers tasked with spending vital regeneration cash from 1997 to 1999 are awaiting the findings of a European Commission inquiry into audit irregularities.

There is no suggestion of fraud involved, but the EC wants to establish why specific spending rules were not followed. In July North East civil servants were grilled by EC financial investigators in a bid finally to end the long-running dispute.

But despite the Government now having to set aside millions to pay the possible EC fines, the Department of Communities and Local Government say officers are unlikely to be dismissed or disciplined for the accounting mistakes.

If the EC decides against the Government, it will have to dig deep into money used for regeneration and council projects to pay the £108m fine.

Euro-MPs last night called for an internal review to uncover the reasons behind the “shocking incompetence”.

Euro-MP Fiona Hall said: “This represents a truly massive waste of money which could have been much better spent developing the region to its full potential, rather than serving as a reminder of how careless the Government has been.

“Everything must be done to make sure that those who are responsible for these mistakes never repeat such a terrible blunder.”

Conservative Euro-MP Martin Callanan has followed the problems with European regional funding for many years, and said that despite Government assurances that no region would be withheld cash, it was unavoidable that the North would lose out.

He said: “It’s a huge embarrassment for the region and a reflection of the incompetence of the Government Office North East (GONE).

“It’s all the more alarming because we have known for some time about more recent accounting problems over EU funds but this shows the rot was setting in more than a decade ago.

“The GONE doesn’t seem to have any answers for what has happened. I would like to think it’s only a case of organisational chaos but there may be a case for a more serious investigation.”

The accounting discrepancies cover a series of cash handouts known as the European Regional Development Funds, which allocate millions of pounds for regeneration schemes.

At the time, these were administered by staff at Government Office North East, which spent the money that is then claimed back from the EU. In effect the Government will be fined millions of pounds because North East officers did not follow a checklist of spending criteria, according to the European Commission.

The investigation has taken a decade to come to its final considerations because European watchdogs suspended the case while they looked at other funding concerns which covered most UK regions during the last five years.

Once these were resolved, the investigators turned again to older schemes in the North East and North West.

A spokeswoman for the Department of Communities and Local Government said: “We have presented extensive evidence to respond to the audit findings. The final position is still being considered.

“Unless individual projects are found to have been at fault, the cost of repayment will be met by Communities and Local Government without impact on regional programmes.”

She added that it was too early to say what, if any, action would be taken against the officers involved.