Dawnus and Jistcourt collapses prompt call for tighter controls
Councillors in Powys have vowed to keep closer tabs on major building contracts after two construction firms went bust.
Dawnus had been due to build three new schools, while Jistcourt was hired to deliver new council flats in Newtown.
The county's audit committee has called for ongoing monitoring of contracts, and wants to force firms to alert them to any financial problems.
Members have previously criticised the Welsh Government for not revealing it had given Dawnus a loan.
Councillors heard that vetting of Dawnus began in February 2018 and was based on company accounts for 2015 and 2016, which gave no hint of any problems.
When rumours about the firm reached the council in July 2018, it asked for the 2017 accounts.
Audit committee vice chairman John Brautigam said at this point a "big red flag" should have been put up, and that council officers should have delved deeper.
"The 2017 accounts had zero money left in the bank and tremendous amounts of debtors and creditors. Profit had become a loss," he said.
Dawnus had also borrowed £7m from the Welsh Government and the HSBC bank, partly secured by mortgaging its heavy equipment.
"I just can't conceive how, given that background, we actually signed off [the contract in late July 2018]," he said.
Treasury manager Ann Owen said it was not unusual for a big construction company to post a loss, as they could have been investing in the business.
However, she added: "When you mention the Welsh Government, none of that information was shared. If we had that information we would have looked at it differently."
Councillors were told the Welsh Government had declined to reveal details of the loan on the grounds of commercial confidentiality, according to the Local Democracy Reporting Service.
The Welsh Government has defended its actions, saying it "worked hard" with HSBC and the Development Bank of Wales to ensure Dawnus continued to operate.