THE Blobbygate and Salt Ayre blunders are major reasons for the city council's current financial crisis, a new report has revealed.

The report by district auditor Tim Watkinson highlights the poor management of major schemes in the mid to late 1990s as an area where "weaknesses in the council's arrangements" have damaged the council financially.

He is particularly damning about overspending on coastal defence work in 1998/99, which the council is still paying for now.

A grant from the Ministry of Agriculture, Fisheries and Food (MAFF) showed a £500,000 shortfall, according to Mr Watkinson's estimate.

He added: "Proper accounting practice would therefore, in my opinion, have required a charge of £500,000 to the Revenue Account in 1998/99."

Mr Watkinson also warns that the "It is not permissible in law for the council to have capital expenditure which is not financed.

"Yet this is the position as recorded in the council's accounts in both 1998/1999 and 1999/2000, continuing the practice adopted in earlier financial years."

On the Crinkley Bottom affair Mr Watkinson said he could not go into detail because of the ongoing inquiry by his predecessor, but added: "It is a matter of fact that the council has incurred significant expenditure arising out of this failed scheme, notably costs of approaching £2.5 million, inclusive of an out of court settlement with Unique Group Ltd and the external audit costs (currently £370,000) to consider objections received. Clearly these costs have impacted significantly and adversely on the council's financial position."

On Salt Ayre, Mr Watkinson noted the £1.3 million overspend, exclusively revealed by The Citizen, and pointed to a report from former acting chief executive, David Corker, which identified 'significant shortcomings' in the council's arrangements.

He added that the effects of the Blobby and Salt Ayre overspending would not have been as serious if the council's 'management and financial planning' had been better.

In conclusion, Mr Watkinson said the council had 'gone some way' to identifying and acting on some of the issues in the report, in particular building up its reserves and increase provision for bad debt. However, the council has not yet implemented all of the recommendations into the report on Salt Ayre.

He adds: "Overall, I am not satisfied that the council has acted with sufficient prudence, with sufficient regard to legal requirements or with sufficient regard to proper accounting practice."

Responding to the report, council chief executive Mark Cullinan, who took over the top job last year, said: "The report recognises that the council has identified and already acted/or is acting on the issues it raises.

"The financial position of the council's reserve budget has been significantly improved following the decisions made at the recent budget council.

"This has seen significant savings to the on-going budget and a strengthening of the council's bad debt provision. Furthermore the council's revenue reserves have been re-established at a prudent level.

"In addition a comprehensive action plan to address the issues relating to the council's management of capital projects has been prepared and will be considered at the next Finance and Corporate Policy Committee in April.

"Whilst acknowledging that the council has been under pressure financially I am confident that the measures taken by the council have considerably improved its financial standing."