A team of auditors is to be sent in to investigate the financial operations of the north-east’s main conference venue amid fresh concerns about the way it is run.
The review, expected to be rubber-stamped later today, comes after it emerged the troubled Aberdeen Exhibition and Conference Centre (AECC) spent a significant sum on a luxury hotel project before the local authority agreed the scheme.
Aberdeen City Council is now expected to pull out of the four-star hotel development, because of “unacceptably high risks” detailed in a confidential report.
Bosses at the AECC will be asked to write off £2.3million they had already spent on the project, with a large amount of the money believed to have been spent before councillors backed the development.
The council – which owns the centre and the land earmarked for the hotel – faces having to provide a £568,000 grant to help cover the cost.
Councillors will be asked to approve the grant at today’s full council meeting, and to order its auditors to carry out a wide review of the AECC’s finances and management.
Councillor Alan Donnelly, leader of the opposition Aberdeen Conservatives group, said he supported the venue, but described the audit as an “unusual” move.
He said: “They obviously believe there is something not right financially. You don’t send auditors in with no reason.”
Accountancy firm PricewaterhouseCoopers will carry out the audit. Similar reviews are periodically carried out at bodies which the council is involved in running, but they are rarely instructed by the authority.
Councillor Neil Fletcher, chairman of AECC’s board, would not comment on the confidential report.
But he did say: “As a director of the organisation, I have no concerns about its finances at all. In fact, I am very pleased because for the first time the AECC has lived within its means and not run up an operational debt.”
Council officials previously described the hotel development at the Bridge of Don site as “fundamental” to securing the future of the AECC, which was estimated to inject £77.3million into the local economy last year.
Councillors agreed to guarantee the scheme in February, as well as push back loan repayment deadlines as part of a package of measures to save it from receivership.
Last month The Press and Journal revealed that negotiations over the hotel project were close to collapse. The proposed deal would have seen the centre achieve an estimated return of between £14million and £20million within five years, but the council could have been left to foot the entire £24million cost of building the hotel if the AECC ran into further financial difficulties.
Aberdeen City Council is unlikely to abandon the hotel project because it has little choice but to continue supporting the venue. Its collapse would leave the authority in a perilous financial position, due to £28million owed by the AECC in loans.
The council is expected to look to change the terms of the deal in order to limit its financial risks – a move that would also generate less profit for the venue.
An AECC spokeswoman said: “For several years now, the board of Aberdeen Exhibition and Conference Centre has been working, on behalf of Aberdeen City Council, to develop its land to provide a four-star hotel, and also to generate a significant cash profit in order to repay its historic debt to the council.
“Market conditions mean that the council feels that although the profit expected is considerable, the related risk may be too high, and it may therefore wish to develop the hotel in a different way.
“Although this means that the eventual profit for the land will be lower, a hotel will still be built.
“Until this profit is realised, Aberdeen City Council will not be in a position to pay for the investment already made by AECC.
“The AECC is having a positive trading year and has been living within its budgets. The centre is not currently increasing its debt and continues to contribute positively to the local economy.”