Highland chiefs under fire over Caithness heat project
Highland Council's director of finance and its former chief executive have been criticised for their handling of an "innovative" energy project.
The Accounts Commission said they should have done more to "ensure effective governance" of the Caithness Heat and Power (Chap) project.
The council set up the not-for-profit company in 2004 to provide a heating system to 500 houses in Wick.
But the £13.8m project experienced technological and financial problems.
The district heating scheme delivered heat and electricity via a biomass boiler and a gasification plant. The boiler was designed to generate heat by burning waste wood.
It was run by an arms-length organisation but Highland Council took over full control of the running of the company in 2008 to "improve governance and financial stewardship".
The 247 houses connected to the system were moved to a temporary oil-fired boiler and the project was mothballed.
In its newly-published report, the Accounts Commission said the project was innovative and had strong local support.
But it added that the local authority made failings in its handling of the scheme.
The report said: "The council failed to establish effective governance arrangements and clear lines of accountability for those officers involved in the project.
"The elected member on the board of the project company was not sufficiently supported in his role - a role which required him to be clear about how to balance his responsibilities as a director of the arms-length company with the need to ensure that the council had an accurate and comprehensive picture of the situation."
Arthur McCourt was the council's chief executive when the scheme was launched in 2004. Alan Geddes was its finance director.
Mr McCourt and Mr Geddes, who are not identified by name in the report but have been confirmed by the council as those involved, come in for some of the strongest criticism.
The report said: "The former chief executive was made aware of concerns but did not take sufficient action to ensure that these were effectively addressed.
"The director of finance should have pursued more vigorously the concerns that he had raised with the former chief executive.
"In these particular respects, the commission finds that the performances of the former chief executive and the director of finance did not fulfil the responsibilities placed on them."
Last year, Highland Council named Ignis Energy Ltd as preferred bidder to take over Chap with the hope of a contract being agreed by 31 March 2011.
A council spokeswoman said: "As the result of a detailed internal audit review, a number of improvement actions have been taken to ensure that these failings are not repeated in any future venture of this nature.
"A huge amount of effort has gone into finding a way forward for the district heating scheme in Wick."
She added: "We have selected a preferred bidder, whom we hope will deliver a district heating scheme using renewable energy and at an affordable price for local residents."