Innovative RIFW investment concept let down by flawed sale transaction, weak governance and ineffective oversight.
The Auditor General for Wales has completed a detailed value for money (VfM) study into the sale of publicly-owned land and property assets by the Regeneration Investment Fund for Wales [Opens in new window] (RIFW) and also the governance, operation and oversight of the Fund.
The Auditor General has concluded that the Welsh Government [Opens in new window] and RIFW cannot demonstrate VfM from the asset sale, which had been a distraction for RIFW from its core investment purpose.
The sale process was flawed because it was not supported by an independent valuation or open marketing; there were gaps in information and weaknesses in professional advice; and the land portfolio may well have been sold at below its market value.
Auditor General for Wales, Huw Vaughan Thomas explained:
“At the outset, the concept of RIFW was both innovative and exciting; it promised much needed regeneration for the benefit of everyone living in Wales. Sadly, the reality is that much of this potential investment has so far failed to materialise, largely because the need to sell property assets proved to be a significant distraction from RIFW’s core investment purpose.
“I am deeply concerned that the Welsh Government cannot provide public assurance that RIFW achieved value for money from the sale of its land and property portfolio. If some of the sites had gone to market at a later date, they could have achieved significantly higher prices and thereby generated greater funds for regeneration investment across Wales.
“In establishing RIFW’s governance, Welsh Government officials failed to make adequate arrangements for accountability and oversight, particularly in relation to reporting RIFW’s activities to Ministers.
“However, I am satisfied that the actions that the Welsh Government and the Welsh European Funding Office (WEFO) have taken since October 2012, in response to the developing concerns about RIFW, have been appropriate.”
Our detailed report sets out a highly complex sequence of interrelated events since the inception of RIFW in December 2009, and examines the involvement of a significant number of organisations as well as individuals.
Turning land and buildings into cash for investment was crucial to the success of the Fund as a regeneration vehicle, but it was important to follow an appropriate process so that the maximum sale proceeds could be realised.
Because the portfolio had not been actively marketed and the sale for £21.7 million was not supported by independent valuation, the Auditor General commissioned independent professional valuation advice. This indicated that the portfolio of property sold to SWLD could have realised over £30 million if the Welsh Government and RIFW had handled the disposal differently. However, RIFW’s structure and remit were not designed to facilitate the maximisation of potential sale proceeds.
The Auditor General continued:
“Overall, we found that the sale agreement did not sufficiently protect the public interest in securing a share of future increases in the value of the assets sold.
“Having considered these issues carefully, I have concluded that, due to flaws in the handling of the sale transaction, neither RIFW nor the Welsh Government are able to demonstrate that value for money was achieved from the portfolio sale.”
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