Probe criticises 'high risk' Invest NI fund facing £30m loss
The taxpayer is expected to lose almost £30m from "high risk" investment schemes designed to support small business expansion in Northern Ireland, Stormont's spending watchdog has said.
Private investors, however, who signed up for the same venture capital and loan funds could make a £44m return.
The critical Audit Office report states that while there is potential for longer term success, there is insufficient evidence to show it is delivering "value for money".
Access to Finance is a publicly-funded programme and was set up by Invest NI in 2009 in a bid to attract private capital where little had previously existed.
The probe into the funds initiative also criticised the programme's assessment of the funding gap and said more work is needed to produce a "robust and complete" estimate.
The funds, which are managed by independent fund managers, will operate until 2024.
Comptroller and auditor general Kieran Donnelly said: "The Access to Finance strategy is providing an important source of finance to local SMEs (small and medium-sized enterprises).
"A number of key measures will determine the strength of performance achieved, including the financial returns realised by Invest NI, the extent of growth and wider economic benefits achieved by supported businesses, and the strategy's contribution to developing the local risk capital industry.
"Invest NI can take steps to help assist the future performance of funds. It should ensure that fund managers are actively and judiciously managing investments to maximise potential fund returns.
"It should also more clearly define what the overall strategy is expected to deliver, set aggregated targets for key areas, and identify the specific outcomes which would demonstrate that the strategy has helped develop the local venture capital industry."
The watchdog's report, however, stated that the strategy will make some return from investment and loan funds and could create up to 5,000 jobs while boosting the economy by £1bn by 2024.
Invest NI also became embroiled in a legal dispute over performance "concerns" about one fund manager, E-Synergy, in 2014. It was settled this year after Invest NI had paid the company £3.2m in fees and incurred £240,000 costs.
The report said: "The selection of fund managers is critical to the success of funds.
"Invest NI must ensure that all appointment competitions rigorously test the ability of bidders to provide a high quality service.
"Invest NI must also ensure that its oversight of fund managers is capable of promptly identifying issues such as breaches of contract and potential conflicts of interest and of gathering sufficient evidence to take action to tackle poor fund manager performance."
A spokeswoman for Invest NI said: "We welcome the report and the NIAO's recognition that our Access to Finance strategy is providing an important source of finance to SMEs.
"This is a 15-year investment strategy designed to stimulate economic growth and as the report acknowledges, it is too early to estimate value for money.
"However, it is estimated that the funds will create almost 4,500 jobs.
"By next year, SMEs supported through the loan funds are expected to have generated up to £175m of GVA (gross added value) in the economy.
"Our equity funds are also having a positive impact with investments in Path XL and Ingresso realising a financial return of £2.8m against an investment of £1.2m.
"These are strong examples of how the funds will deliver good economic and financial returns for the Northern Ireland economy," the spokeswoman added.