Welsh Government’s environmental regulator lost £1m through improper timber sales

Natural Resources Wales has had its accounts qualified three times over “unlawful” contracts with a sawmill

The regulator’s accounts were qualified over timber sales from woodland it owned. Credit: Geoff Caddick/PA 

By Mark Smulian

09 Aug 2018

Natural Resources Wales (NRW) lost £1m through a series of improper timber sales contracts, auditors have found.

Wales’ auditor-general Adrian Crompton said in a report to the Welsh Assembly’s public accounts committee that three times running he has had to qualify the environmental regulator’s accounts because of issues around timber sales from woodland owned by NRW.

Investigations led him to “significant uncertainty as to whether NRW acted in accordance with its statutory duties, public law principles and state aid rules”.

NRW had eight long-term contracts with a sawmill, which required the latter to open a new saw line by March 2017.

This line was not opened and NRW negotiated 59 transitional contracts from March 2017, of which 21 went to the sawmill and 38 to another timber firm.

Crompton said it should have been evident that “the income from the sawmill operator’s long-term contracts was at that point £1m lower than could have been achieved on the open market”.

He added: “I was unable to satisfy myself of the regularity of these transactions and I have therefore qualified my regularity opinion accordingly.”

NRW failed to authorise 13 of the transitional contracts in accordance with its scheme of delegation, “and I therefore consider that they were not entered into lawfully”, he said.

There was also no evidence that NRW took account of the market price of timber when determining the contract prices, and so it in effect gave improper state aid support.

Crompton said it was “disappointing that the urgency of the [March 2017] situation arose because NRW failed to properly monitor the long-term contracts and plan for the eventuality that the contracts would terminate”, given it should have been aware for the preceding 18 months that the new saw line was unlikely to be constructed in time.

“The termination of the contracts was eminently foreseeable,” he concluded.

NRW’s chair Diane McCrea resigned in July after earlier criticism by Crompton.

Its chief executive Clare Pillman, who took the post only in February, 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, often in very difficult circumstances, 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.”

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