NATIONALISED shipyard firm Ferguson Marine has come under fire after admitting they cannot trace where £128.25m in public money meant to be used to build two lifeline ferries went.

It has emerged that inquiries with the company into the ferry building scandal by Scotland's Auditor General Stephen Boyle failed to uncover what happened to the money. He has said existing records relating to transactions were "not organised or categorised".

Public spending watchdogs Audit Scotland have also admitted that it was unable to trace how a Scottish Government £30m loan to shipbuilding firm Ferguson Marine Engineering Limited (FMEL) was spent.

At the centre of the continuing row is the awarding of the contract to tycoon Jim McColl's FMEL and the soaring £340m costs and delays of over five years over the completion of the ferries which remain at the Inverclyde shipyard.

David Tydeman, chief executive of the now nationalised Ferguson Marine (Port Glasgow) told the Herald they have not sought to evaulate old files because they "do not add value to the planning or budgeting work still needed to complete the vessels".

Mr McColl, one of Scotland’s richest men, who had acquired Ferguson Marine assets out of insolvency in 2014, saw the shipyard firm fall into administration in August 2019 and nationalised by the Scottish Government.

It followed a dispute with Caledonian Maritime Assets Ltd (CMAL) - the taxpayer-funded company which buys and leases publicly owned CalMac's ships on behalf of the Scottish government - over the construction of the much-delayed ferries under a £97m contract. The bill for the ferries has now reached around £340m.

When Mr McColl's FMEL entered administration in August 2019, it had received £83.25m in milestone payments from CMAL and £45 million in loan payments from the Scottish Government - yet the vessels were largely incomplete.

The Herald: Stephen Boyle, auditor general for Scotland, said the Government needs to clearly outline its plans for future investment

Stephen Boyle.

MSPs on the Public Audit Committee launched an inquiry after a damning report from Audit Scotland about the process of awarding of the ferries contract and the subsequent arrangements for delivery.

Its probe found that ministers went ahead with the contract despite the concerns raised by CMAL over the lack of financial guarantees that placed them at risk.

The auditors' examination of the issues said there was no documented evidence to confirm why Scottish ministers were willing to accept the risks of awarding the contract despite the concerns.

The Auditor General made inquiries as MSPs sought to establish where FMEL spent the £128.25 million of public money but got no joy from the state-controlled shipyard company.

Mr Boyle said FMEL spending had been outwith the scope of his previous examination as it did not include private sector organisations.

He then explored his "rights of access" to the records now the shipyard firm was nationalised at the end of 2019 to become Ferguson Marine Port Glasgow (FMPG).

He said: "Ferguson Marine Port Glasgow (FMPG) has advised us that it holds FMEL’s records, as required by the Sale and Purchase Agreement between the two bodies.

"FMPG advise that these records exist in both digital and hard copy forms, but they are not organised or categorised. The Sale and Purchase Agreement does not require FMPG to review these records and FMPG has informed us that it has no plans to do so."

It has emerged he has told MSPs: "FMPG is therefore not aware of what information exists and indeed whether this information will explain how FMEL spent the £128.25 million."

The Herald:

Audit Scotland in its inquiries had looked into what happened to a £30m loan provided by the Scottish Government to FMEL.

But the watchdog said that while consultants PricewaterhouseCoopers was providing the Scottish Government with reports on FMEL spending, they did not go into detail on where the money went, so were "unable" to trace exactly how that money was spent and what progress was made on the vessels as a result.

Watchdog officials say that without a builder's refund guarantee in place there was no link between the payments that CMAL was making and the quality of the build.

Mr Boyle has previously said that the lack of a link between milestone payments and quality or progress was the industry norm for shipbuilding contracts but was said to be at odds with other large public sector infrastructure contracts.

In response, Mr Tydeman said he understood that the files and other information that related to the stage payments paid to FMEL for the construction of the two vessels rested with CMAL.

"We have not sought to evaluate the old FMEL files, because they do not add value to the planning or budgeting work still needed to complete the vessels, which is where we are directing our efforts for earliest completion," he said.

One ferry user group official said that the FMPG response was "baffling".

He said: "Surely there is a public duty to get to the bottom of precisely how this money was spent, considering that we are still waiting for these ferries to be delivered."

The details emerged as Mr McColl accused ministers of squandering taxpayers' money on a "reckless and foolish scale" by pursuing the nationalisation of the shipyard company at the centre of Scotland's ferry building fiasco.

The Scottish Government rejected a 'solvent solution' being prepared by Ferguson Marine after it fell into financial trouble, and Mr McColl says the plan would have saved the taxpayer £200m.

The proposal was resisted because ministers felt it was unlawful state aid but Mr McColl said he has senior counsel's opinion that said the proposal that avoided nationalisation was perfectly legal.

He said that the plan which would have capped the Government's costs at £50m.

And he said that the failure to act, which included not sanctioning an independent resolution of the issues, "resulted in public money being squandered on a reckless and foolish scale".

Read more by Martin Williams

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