Highlands and Islands Enterprise (HIE) has said it is “back on track” after having to delay paying its bills during a two month spell because of “exceptional pressure” on its cash flow.
The economic development agency ditched its usual adherence to the Scottish Government’s “10-day prompt payment policy” in February and March this year and resorted to “standard 30-day trade credit terms”.
The amount HIE owed to trade creditors at the end of the 2018-19 financial year leapt by £5.4 million, compared to the previous 12 months, as a result.
According to a recently-published report by public spending watchdog Audit Scotland, the “significant pressure” on HIE’s cash flow was mainly caused by delays in the agency being reimbursed for money it spent on the new £6.65m Orkney Research and Innovation Campus (ORIC) and projects part-funded by the EU.
HIE, which is funded by the Scottish Government and had a £64m resource budget for the last financial year to the end of March, has said it aims to deliver an improved performance in the current 12 months.
In its report on HIE’s financial statements for 2018-19, Audit Scotland said: “HIE experienced significant pressure on its cash flow during February and March 2019.
“This was mainly due to delays between incurring expenditure (on the Orkney Research and Innovation Campus development and projects part-funded by European funding) and the reclaim and reimbursement of these costs.
“HIE managed its cash flow during this period by working to standard 30-day trade credit terms, rather than its 10-day prompt payment policy.
“As a result, HIE’s trade creditors were £5.4m higher, as at March 31, than the previous year.”
The agency’s performance against the government’s prompt payment policy dropped from 86% of invoices being paid withing 10 days in 2017-18 to 77% in the most recent financial year, the report added.
An HIE spokesman said: “We regret that exceptional pressure on HIE’s cash flow in the early part of 2019 had an impact on ability to pay creditors within 10 days, in line with government policy.
“Working to standard 30-day terms was introduced as a temporary solution.
“We are now back on track and aim to deliver an improved performance in the current financial year.”
ORIC, in Stromness, is a joint-venture between HIE and Orkney Islands Council, with HIE providing £4.65m, including £1.48m of European Regional Development Fund money.
HIE’s annual accounts – laid before the Scottish Parliament at the end of last week – showed that with a total spend of £65.9m, the agency exceeded its original resource budget by £1.8m.
But the figure was within a £2.3m overspend allowed by the government to cover the agency’s response to the crisis at Cairngorm ski centre, following the closure of its funicular railway and the collapse of the company that operated the resort.