Back in March 2017, the then Auditor General for Wales laid before the Assembly a report on the accounts of NRW, setting out his reasons for qualifying the 2015-16 regulatory opinion on NRW’s financial statements. The report referred to NRW’s decision to award eight high-value timber sales contracts to a sawmill operator in May 2014. As a committee, we conducted an inquiry into these matters and published a report in June 2017, concluding that:

'We believe that NRW could and should have ensured that there were good governance arrangements in place in the contracting process, and in failing to establish effective governance arrangements, it is unable to demonstrate how it acted lawfully. We do not believe there is any evidence to demonstrate whether the contracts represent value for money.'

We also recommended at that time that NRW

‘undertake a full evaluation of its governance arrangements relating to contracting processes, clearly setting out lessons learned'.

Now, fast forward to 2018, and the committee found itself back in the same position, when the then Auditor General for Wales qualified NRW’s 2017-18 financial statements for a third year in a row, and for exactly the same reasons. We were extremely disappointed that, despite the findings of previous reports by the Auditor General for Wales and the Public Accounts Committee regarding NRW’s approach to timber transactions, NRW’s accounts were qualified for a third consecutive year. This led to us publishing a further report in November last year, in which we raised again a number of concerning issues around the awarding of these timber contracts, a number of which remain unexplained. 

Not least, we were left bewildered that the decision—when awarding these contracts—to follow a process outside of the procurement rules was taken against the backdrop of a scathing auditor general’s report that raised concerns about that specific type of process. Indeed, I recall Members of the committee, and one Member specifically, citing this as the crime that was committed twice, such was the concern on the committee at that time. This suggested to the committee that there has been a cultural failure within NRW in relation to governance procedures, and that a serious overhaul was needed.

We could only conclude that previous concerns had been disregarded, and the decisions that followed at NRW appeared to defy logic. These were decisions made by experienced staff, and it is difficult to view these actions as a result of incompetence. We could only conclude that we will never fully understand, or have an explanation for, what happened at NRW. I should add at this point that Natural Resources Wales had a new chief executive from February 2018, and that an interim chair took up post on 1 November 2018 for a period of 12 months. Together, they've stated their commitment to turning NRW into the organisation it aspires to be. The 2018-19 annual report and accounts will be the first complete accounts fully under their watch, so previous qualifications were prior to their appointments. I think it's important to make that point.

Moving forward, we fully welcomed and respected the decision of the new chief executive to commission a full independent review of the issues raised in the auditor general’s report on NRW’s 2017-18 financial statements. The review was undertaken by independent auditors Grant Thornton and, at the request of NRW’s chief executive, was to be a no-stone-unturned investigation to fully flush out the failings within the organisation and bring about wholesale reform.

The findings of the review were published on 4 February this year and considered by us on 11 February. The Grant Thornton review makes further uncomfortable reading as it explores in some greater depth the issues raised in previous reports on NRW’s timber transactions. However, the report did not reveal any surprises or, indeed, anything new, but it did raise further questions about when we will see change at NRW and, more importantly: are the issues relating to timber sales restricted to the forestry division at NRW, or do these issues reflect a fundamental flaw in the organisational culture? The Grant Thornton report highlights a lack of single organisational culture at Natural Resources Wales, and there are many lessons for the whole of the organisation to learn from this.

It seems unfortunate that the merging of three organisations into one has left a lasting legacy of deep-rooted cultural differences that have never been resolved. However, we welcome the commitment given to us by the new chief executive and chair of the board that work is under way to completely restructure the organisation, with a move towards a more place-based organisation that, it is hoped, will unite it more fully.