Deal to sell timber to sawmill cost taxpayer £1m, report finds
THE public body responsible for Wales’ natural resources sold timber to sawmills for £1m less than its true value.
Natural Resources Wales has been heavily criticised for signing deals without offering the timber grown in publicly owned woodland on the open market.
A Wales Audit Office report revealed new details about the quango’s failures to listen to criticism of its failure to invite other offers when it originally signed a 10-year deal with BSW Timber.
When that £39m deal collapsed, Natural Resources Wales signed further deals without putting the timber on the open market.
In July, the body’s chairman, Diane McCrea, resigned in light of criticism from the Wales Audit Office.
In a statement, Lesley Griffiths AM said her resignation was an “appropriate response in the light of the recent WAO report which qualifies the accounts for the third time, and the concerns and criticisms from all parties in the Assembly”.
The Assembly’s Public Affairs Committee will hold hearings about the sales in September.
The committee’s chairman Nick Ramsay has written to the new chief executive of NRW, saying they need the “necessary officials” who were involved to be at those hearings.
Committee member Lee Waters AM said there can be no whitewash.
“We need the people before us who were involved in the decisionmaking process, it’s no good sending the new chief executive who will say she had nothing to do with it.
“It does seem as if there is a culture where nobody is held to account for mistakes.
“This isn’t a one-off. It is the third year in a row accounts haven’t been signed off.”
Mr Waters said that the report clearly shows legal advice was acted against.
“This is what the public affairs committee want to get to the bottom of, how the decisions were made and who was involved. The new chief executive seems to be saying the right things but we need to see the follow-through and I remain to be convinced this is down to three individuals. Three years in a row suggests there’s something far more systemic at play but that’s what we need to get to the bottom of.
“There can’t just be a whitewash where some people are made scapegoats,” he said.
The report found when NRW entered into timber contracts in 2014 it did not follow its own rules.
It was then criticised by the Assembly’s Public Affairs Committee, which said it did not think the right processes had been followed to determine that the contracts were value for money.
Part of the 2014 deal included a requirement for the sawmill operator to build a new saw line. If it was not built, the contract would be ended.
In February 2017 NRW was told by company BSW that the new line would not be built.
The following month NRW began negotiating temporary contracts to cover the period between the end of the long-term contracts and new ones being signed.
The temporary contracts were needed to ensure there was no impact on processors, customers and NRW income.
When the long-term contracts ended on March 31, 2017, 59 transitional contracts were started with three companies, BSW, Tilhill and Euroforest – in a breach of their own policies.
BSW and Tilhill – a timber harvesting company owned by it – received 21 contracts. The other 38 went to Euroforest.
The audit found:
■ Documentation of the decisionmaking process was “wholly inadequate”;
■ it was unclear who had made decisions and the rationale for the decisions;
■ contractual operations commenced in advance of written contracts being signed;
■ communications regarding the transitional arrangements, both internally and with the Welsh Government, were “incomplete and on some occasions inaccurate”;
■ the proposal to enter into transitional arrangements was both significant and potentially contentious, but was not subjected to proper scrutiny”; and
■ NRW had to act quickly, but in its haste it did not follow due process and disregarded principles of good governance, found the report.
“The urgency of the situation arose because NRW failed to properly monitor the long-term contracts and plan for the eventuality that the contracts would terminate”.
In March 2017 NRW began negotiating with the Sawmill Operator to set up short-term contracts to cover the period between the end of longterm contracts and new deals starting.
By the end of the month, NRW had an agreement in principle with the Sawmill Operator but was contacted by a separate organisation asking to be part of the contracts.
There were 59 transitional contracts awarded.
The estimated value of the contracts not properly authorised was £2.7m and NRW only received £1.8m income.
Former Auditor General Huw Vaughan-Thomas found NRW didn’t follow its own policies when it entered into the sales contracts and was unable to give “good reason” why it did so.
It could not provide “available contemporaneous documentation” about decisions taken and did not refer the decision to the Welsh Government as required.
The report says: “I have significant uncertainty as to whether NRW acted in accordance with its statutory duties, public law principles and State Aid rules”.
It adds there are “wider lessons that NRW needs to learn”.
He said when he reported on NRW’s 2015-16 financial statements he was “concerned” NRW didn’t “appear to fully accept my criticisms of their actions and sought to downplay their significance”.
That belief was found proved, he said, because of the similarities between the 2017-18 financial statements and the earlier one.
NRW has said it will commission a full review.
“The findings of the review will be used to inform changes within NRW’s timber sales and marketing arrangements to ensure the matters highlighted in my report are not repeated in the future,” Mr VaughanThomas said.
“The thing is, they’ve done it before, been caught out, and have still done it again. It is quite breathtaking.”
Speaking in relation to the most recent report, Welsh Conservative with responsibility for rural affairs Andrew RT Davies said: “When the people of Wales pay their taxes, they have the right to expect that their hard-earned money is treated properly, with care and due diligence.
“So when a public body like NRW so flagrantly breaks the rules by which it is governed in a way the Auditor General of Wales feels he cannot satisfy himself of the legality of such a decision, there must be consequences.”
BSW Timber Group said it will not comment. Euroforest was asked to comment.
Clare Pillman, chief executive of NRW, said: “These are serious findings and I am absolutely determined to get to the root cause.
“We must learn lessons and I’m committed to ensuring this never happens again, which is why I will commission independent experts to get under the skin of these findings and to make recommendations on the steps we need to take.
“Our staff continue to do a great job, and I will make sure they have the right support and protection to do the right thing in the right way in future.
“It is my priority to ensure that we address the issues and see an improvement in next year’s audit.”