Auditors 'horrified' by LDA funding practices

The head of an audit panel investigating financial management at the LDA for Boris Johnson is understood to be considering where the axe should fall. Former financial journalist Patience Wheatcroft admitted she was "somewhat horrified" by the mismanagement she has found so far.

Ahead of publishing the panel's interim findings today, she said: "We may well recommend that the LDA should concentrate on backing fewer but potentially bigger projects and certainly that there is more emphasis on value for money."

She singled out what she described as "soft" policy areas - job creation, the environment and diversity - which are likely to lose out on funds.

The panel claimed there had not been "due diligence" before groups were given public funds and that the agency, which spends £700 million a year, failed to monitor adequately how money was being spent.

Mr Johnson set up the audit panel within days of being elected, after the Evening Standard brought to light projects which had received hundreds of thousands of pounds and appeared to do little or nothing in return.

He said: "Some of the things that the London Development Agency funded were fantastic. But some of them were completely bonkers."

Ms Wheatcroft said: "We feel that there was not enough stress on delivering value for money, there was a lot of trial and error." Grassroots community projects which were supported by Ken Livingstone are expected to be the big losers in the shake-up.

A source in the Mayor's office said: "If the LDA had a more tightly defined role, which suggests making it smaller, it could be a more effective organisation." Ms Wheatcroft is thought to be considering job cuts at the agency, which employs 520 people.

The panel's report said: "It does appear that the LDA has been historically an organisation where success was measured by money out rather than objectively observed results."

There were also questions over the effectiveness of the agency's board - which only approved projects with a budget of more than £6million - and the lack of clarity over the relationship with mayoral advisers.

Mr Livingstone said: "The fact that even a Tory-dominated panel keeps coming back to such a small number of projects which allegedly failed and which represents such a tiny fraction of the LDA's budget actually shows the organisation's overall success."

Five projects funded by the LDA are being investigated by police.

All of them - the Caribbean Showcase, Diversity International, Brixton Base, Green badge taxi school and Ethnic Mutual - have links with Lee Jasper, the former race and policy adviser to Mr Livingstone.

Mr Jasper, who resigned in March, has denied any impropriety.