Awema: Action being taken on grants, says government
The Welsh government's top civil servant says action is already being taken to improve the management of grants to third sector organisations.
A Wales Audit Office (WAO) report into race equality body All Wales Ethnic Minority Association (Awema) found officials failed to act on warnings over a decade of a funding scandal.
The body was wound up in February after "significant and fundamental failures".
Permanent secretary Derek Jones said grant management was being improved.
The auditor said the report represented its 19th warning over grants management at the Swansea-based organisation.
However, some civil servants were said to be worried about accusations of racism if they tackled Awema.
Mr Jones outlined the action the Welsh government had already taken prior to the publication of the report, but admitted more needed to be done.
"Grants form one of the Welsh government's most important mechanisms for delivering ministerial priorities and are making a real difference to the lives of people in Wales," he said.
"The Grants Management Project was established to deliver improvements across the Welsh government.
"The Wales Audit Office is represented on the project board and we are working closely with them to achieve these improvements.
"As the new Permanent Secretary, I am determined we further build on this work to improve our capacity and capability in grants management."
Awema, set up in 1999 to promote racial equality, was at the centre of controversy earlier this year following claims of financial mismanagement.
Administrators were called in to wind up the charity's affairs after a Welsh government report said there was a "fundamental lack of control".
It said charity funds were used to pay for gym membership for staff worth £2,120, rugby and cricket tickets totalling £800, and a £110 parking fine for former chief executive Naz Malik.
South Wales Police are waiting for a decision by prosecutors following an investigation into allegations of dishonesty by Awema personnel.
A spokesman said a file had gone to the Crown Prosecution Service.
The latest WAO report criticises the Welsh government's management of the £7.15m of public money given to Awema.
A further £3m was committed in principle by the time public funding was terminated but never handed over.
And about £500,000 given to the organisation late last year is highly unlikely to be recovered, the report says.
The report also says officials failed to heed a number of warnings over a decade about the way Awema was run.
Mr Malik was an active Labour Party member, but the party suspended him and his daughter, who also worked at Awema, earlier in the year.
In its report, the WAO said it "found no evidence of inappropriate ministerial influence - on party-political or other lines - in the Welsh government's decisions about Awema's funding".
Where ministers were involved their actions were consistent with the formal advice provided by officials, including in cases where bids from Awema were declined, it says.
However, the report added that the "full basis of some of the Welsh government's funding decisions remains unclear and we have concluded that the Welsh government's management and coordination of its grant funding to Awema between July 2000 and December 2011 had often been weak".
Assistant Auditor General Anthony Barrett said the Welsh government responded robustly to concerns about Awema last December.
The report identifies eight warnings to the government about Awema, the first coming in 2001 just two years after it was established.
Despite a number of critical internal and external reports, public money, including EU funding, continued to flow.
The report reveals frantic attempts within the government in mid-December 2011 to stop agreed grant payments of more than £500,000 being transferred to Awema after its finance director raised serious financial concerns in an email to a minister.
The money was transferred, although auditors found that if similar information provided in November had been acted on, it could have been stopped.
Mr Barrett said: "While the outcome of the liquidation process is not yet known, it is clear that the Welsh government will not recover most of the £545,966 debt it now believes it is owed by Awema as this far exceeds the amounts available to reimburse creditors."
Speaking to BBC Radio Wales he said there was a "weakness" in Welsh government around its management of its grant schemes.
"For example there wasn't a clear picture of how much money had been paid over to Awema and we found evidence of, on one occasion, in response to a written question the minister provided an answer based on information that was provided to her by the equalities unit which was inaccurate and incomplete," he said.
"There were other examples of reviews being carried out and there wasn't any testing of arrangements that were in place with Awema - the arrangements were just documented and then there were no follow ups on the recommendations from those reports to say they had been implemented."
Mr Barrett said the "key issue" was that the Welsh government did not communicate.
"I think it's fundamental the Welsh government needs to change its approach to grants management," he said.
Asked by auditors why repeated warnings were not acted on, some officials said they feared personal or public criticism for being seen to discriminate against Awema.
A Welsh government spokesperson said: "We welcome this report, which was requested by the Welsh government, and have co-operated fully with the Wales Audit Office in its preparation.
"The report has confirmed there is no evidence that ministers exerted any inappropriate political influence over funding decisions and always acted in accordance with advice from officials.
"It also highlights the swift and robust action the Welsh government took to suspend funding to Awema while protecting those who were delivering programmes through Awema.
"The Welsh government is already acting on the lessons contained in the report which will build on the work under way to improve the future management of our grants programme."
Conservative finance spokesman Paul Davies said the loss of £500,000 would be a "disgrace".
"This is a titanic public funding disaster that could have been avoided if proper action was taken many years ago," Mr Davies said.
Welsh Liberal Democrat AM Peter Black accused the Welsh government of "negligence".
The chair of the assembly's public accounts committee, Darren Millar, said the report revealed an "alarming catalogue" of weaknesses in the Welsh government's handling of funding.