Laura Sharman 09 January 2014

Councils urged to learn from Highland power project ‘failure’

Audit Scotland has warned that councils should learn from the failings of the Highland power project, which landed the council with a £11.5m bill.

The Highlands Council set up Caithness Heat and Power as an arm’s length organisation (almo) in 2004, but had to take it back ownership in 2008 when it ran into major problems. Subsequent reports found ‘serious’ serious weaknesses in governance and accountability and failings in the way it was managed and structured.

In a new report published today, the Accounts Commission said the council had managed to reduce overall costs and reviewed its approach to almos. It said councils should learn from this project and ensure all new almos have ‘robust governance and accountability arrangements’ from the start.

Accounts Commission chair, Douglas Sinclair, said: ‘Arm’s length external organisations can be an option for delivering council services but only if the necessary safeguards are built in from the start.

‘Caithness Heat and Power was an example of how not to do this. 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.’

The project was originally set up as a community venture to provide wood-fired heat and hot water to homes in Wick.

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