The SIC is reviewing its standard practice regarding security on capital grants, following an extensive review of “lessons learned” from the controversial Mareel arts centre which finished 18 months late, over-budget and had to be bailed out by the SIC last year.
Speaking this afternoon council leader Gary Robinson said that the £6 million granted to build Mareel by the last council had limited conditions, was unsecured and the council had no “residual interests” in the building, which was to have cost a total of £12.137 million. This meant that the SIC had to effectively continue supporting the project, which eventually cost around £14 million, or face losing its investment entirely.
The council made a further £600,000 available in bridging finance to developers and managers Shetland Arts Development Agency (SADA), before last February providing £1.2 million to further support the project, in return for which the council has obtained “heritable rights” to the property, which can be bought for £1 in just over 20 years, when a Creative Scotland security runs out. Salary arrears and bridging finance were also repaid to the Council from that sum.
The council was one of several funders of Shetland Arts’ flagship project with Creative Scotland, Highlands and Islands Enterprise and the European Regional Development Fund all chipping in. Mareel opened in August 2012, eighteen months late, and an acrimonious dispute between Shetland Arts and builders DITT was settled in November with neither party prepared to comment on the deal.
Mr Robinson said that the council would not make the same mistakes again and added: “The key thing we did take out of it is that where other funders, namely Creative Scotland, had taken a security and they were quite clever to do so.”
SIC director of corporate services Christine Ferguson said it was important to recognize that Shetland now had an arts centre and the council did have a cultural strategy and there was “no walking away from that function.”
If the council had negotiated a security in Mareel, it would have given it an ongoing presence in the development rather than just as a provider of funds and a hand in developing a strategy for the arts centre.
Other major shortcomings were a failure of council staff involved with the project to exercise authority and responsibility and a failure to report back to the development committee when things started to go wrong.
According to the council’s report on Mareel, which was considered by the audit and standards and executive committee today, the key issues included:
● Councilors on the Project Sounding Board stopped updating the development committee in the summer of 2012, failing to give members the chance to debate “outstanding issues” [when problems associated with Mareel’s construction were emerging].
● Senior managers and staff from the SIC were directly involved which “gave an impression of a level of authority and responsibility for the project on behalf of the Council which was not accurate.”
● Very little dialogue between funding partners and a disjointed approach particularly in monitoring progress and a failure to address issues in a timely manner.
● SADA salaries were administered by the council until July 2013 owing to a considerable sum owed to the council and the possibility of liabilities if SADA employees were not paid.
Since then, SIC staff had undergone project management training and the council had “fully adopted the Prince 2 system methodology to provide greater clarity and a more effective way of following the public pound.” The council will also make sure there is no risk to it if undertaking payrolls for other organizations.
Mr Robinson said that no particular individuals could be blamed for the shortcomings of the project and that investigations by the council had gone as far as they could. The council’s auditors had also examined this in “every conceivable way and none of it points to the culpability of any individual.”
But the SIC had very much taken on board the auditors’ well documented findings of failings in council governance and the need to examine the reason for these failings.
He added that “times had changed” since the original decision to back the project was taken 10 years ago. Cracks in SIC finances had begun to appear under the last council and opposition to the Mareel project had begun to stiffen. He doubted that the project could happen in today’s financial climate and certainly the failings in its development “could not happen again.”
Meanwhile the process of tightening up on council spending and applying governance lessons had begun under temporary chief executive Alistair Buchan and was being continued by Mark Boden.
Asked if the SIC had been prudent to invest in a construction job that was being managed by an arts agency, Mr Robinson said that “no one expected Shetland Arts would do it themselves”, and that there had been “sufficient in the budget to ensure that adequate project management was hired in.”
According to a statement from the council, the funding partners, SCT, Creative Scotland, HIE and the Council continue to work together and in partnership with SADA to ensure the long term sustainability of Mareel and the provision of arts and cultural activities in Shetland.