The organisation faced heavy criticism

Robert Black also made recommendations on Euro funding and noted problems and delays in major projects.

The quango spent more than �108m on consultants and contractors last year, which represented a fifth of its budget.

There was success in applying for �25m of Euro cash but Mr Black said the business development agency should tighten up procedures in recording cases where it does not apply for funding.

They have not said there was inappropriate use of consulting, they have simply said there are processes, make sure they are implemented Robert Crawford Scottish Enterprise chief executive

He said the Science Centre at Pacific Quay in Glasgow was not performing to expectations and the number of jobs in the business area on the banks of the River Clyde had been scaled back from 3,500 to just 2,000.

He also warned that planned Intermediary Technology Institutes would cost �450m over the next 12 years and must be carefully planned.

However, progress was made in other areas in relation to major projects.

On the issue of employing outside assistance, Mr Black said: "The auditors concluded from looking at this sample of contracts that SEN should improve its procedures for appointing consultants and monitoring contracts.

"In particular they expressed concerns about the absence of contract documents for a number of contracts.

"They found that the requirement to expose work to competition was not always met and there were some failures to comply fully with EC procurement rules.

Jim Wallace: Studying report

"The auditors also suggested that the procedures for undertaking financial assessments of proposed contractors and for evaluating tenders could be tightened up."

Scottish Enterprise had been accused of failing to apply for funding in some cases but Mr Black noted that often the business case for applying was not there, although the body should tighten up on procedures for recording these decisions.

He said: "EU money can be an important funding source and public bodies should ensure that the potential availability of EU funding is considered at all stages of the development of new projects.

"Sometimes the amounts involved may not justify the efforts involved in applying but there should be procedures for recording any decisions not to apply in cases where EU funding may be available."

Former Enterprise Minister Iain Gray had asked the auditor general to investigate Scottish Enterprise's use of consultancies.

There was concern that Scottish Enterprise was paying for work that its own staff could have carried out.

The organisation also faced media claims of mismanagement and poor performance.

Action plan

However, Scottish Enterprise said it had been "vindicated" by the auditor general's report.

It said the organisation had met 21 of its 22 targets, media allegations that projects were close to collapse or mismanaged were untrue and a claim that the quango had failed to apply for �32m of Euro funding was similarly false.

The board of Scottish Enterprise said it welcomed the auditor general's comments on consultancies and an action plan has been put in place to deal with recommendations for further action in some areas.

Chief Executive Robert Crawford said: "Audit Scotland have not said there was any misuse of funds.

"They have not said there was inappropriate use of consulting, they have simply said there are processes, make sure they are implemented.

"There were other allegations and they have been roundly dealt with as being largely or wholly unfounded."

Enterprise Minister Jim Wallace said he would examine the report but that many claims made about Scottish Enterprise were found to be inaccurate.

Robert Black: "Improve procedures"

He said: "The Scottish Executive wanted the criticisms of Scottish Enterprise to be rigorously examined.

"That is why we specifically asked the auditor general to look into the allegations made earlier this year.

"We will study the report carefully and ensure that the issues for further attention are dealt with."

Mr Black presented his report to the Scottish Parliament's Audit Committee and the Scottish Tories said they were pleased to hear that outgoing Chief Executive Robert Crawford will now be called to give evidence.

Deputy leader Annabel Goldie said: "This report discloses serious administrative and governance failures within Scottish Enterprise, a fact ignored by Jim Wallace who says that many of the claims made against the organisation have proved to be 'well wide of the mark'.

"Sadly, such complacency is completely unfounded."

Ms Goldie said she noted the consultancy criticisms with particular concern.

Scottish National Party enterprise spokesman Jim Mather said: "It is very worrying that formal administration of contracts within Scottish Enterprise seems to have been so irresponsible, and I am concerned that the contracts included in the report are just the tip of the iceberg.