Report criticises 'lack of due diligence' over King's Lynn Innovation Centre
A report into West Norfolk Council's handling of the project to build a Lynn business hub has concluded the authority was naive and failed to complete proper checks.
The document, published today, has been compiled by a cross-party group of councillors who have spent months investigating affairs relating to the King's Lynn Innovation Centre (KLIC).
The group was formed after the centre's operator, NWES, failed to repay loans worth £2.75 million when they were due to in November 2018.
And the report, which is set to be debated at a meeting of the authority's audit committee on Monday, says more should have been done earlier to stop the scheme running into trouble.
It said there was a "sense of misplaced trust" in NWES, who "was perceived as not being subject to failure."
The report concluded: "Whilst the project appeared to be a good concept, there was a lack of due diligence.
"There was a degree of naivete demonstrated by both officers, who had no experience of partnership working on a high profile project, and elected members, nearly 40 per cent of whom were newly elected when the project was in its infancy."
The document highlights 11 weaknesses with the project and makes eight recommendations for how similar schemes may be handled in the future.
But it raises particular concerns about a £250,000 loan made by the council to NWES in September 2016, at a time when the operator was experiencing cashflow problems.
The money was provided on top of an initial £2.5 million borrowing commitment sourced to help build the centre.
The working group said the loan was of "special concern" and argued it was wrong for the council's ruling cabinet to decide whether to provide the additional funds.
The group wrote: "It is worrying that such an investment was made without taking into account either the counterparty's creditworthiness or any other form of security to ensure repayment would be made, except by virtue of the value of the building, which we now know to be insufficient."
The paper also raises questions about what the working group says were "several conflicts of interest" between the council and NWES from the beginning of the project.
It points out that Nautilus, the company appointed to project manage the scheme had a director who was also a director of NWES.
And it also highlighted that the former council leader, Nick Daubney, was also appointed to the board as a director of NWES.
The report said: "Legal advice has recently been provided to the effect that anyone so appointed must, first and foremost, consider the interests of the company. This then potentially causes an elected member not to prioritise the interests of the council."
But the working group said it acknowledged the difficulties that arose from such an appointment and could not quantify its advantages and disadvantages.
The report added that minutes of a steering group set up to oversee the project suggested "a personality dominance" on the part of NWES representatives.
It claimed that the council's position was weakened by the regular absence of its then chief executive, Ray Harding, and called for a senior official to be appointed as project manager for any other major schemes in future.
The publication of the document comes just days after one Lynn businessman heavily criticised the running of the centre as he announced his firm was leaving it.
Peter Lawrence, of Human Capital Development, claimed there was a string of problems with the hub. Council officials say they are being addressed.