By Brian Meechan BBC Wales political reporter

Elwa was seen as the flagship for post-16 education and training

Liberal Democrat Peter Black said the findings by the National Audit Office highlighting shortcomings at Elwa, the organisation responsible for post-16 education in Wales, were some of the most "appalling" he had seen.

The government watchdog said Elwa failed to protect the interests of taxpayers and that there was a serious and fundamental breakdown in the controls that should have been operated by the quango.

The report says that almost every aspect of the quango's handling of the Pop Centre Caf� project in the Rhondda, south Wales, was flawed.

I haven't seen such an appalling report on a government quango for a very long time Peter Black AM

Many of these "major failings" were repeated in other projects.

Mr Black, who is chair of the education and lifelong learning committee at the assembly, said: "When I read the report, I was shocked.

"I haven't seen such an appalling report on a government quango for a very long time.

"A lot of work is still to be put into place before we can be certain these concerns will not be repeated."

'Series of weaknesses'

Mike Usher, from the Audit Office in Wales, said there were serious concerns about the way public money was being managed and spent across a range of projects.

He added: "The auditor general's report reveals a series of weaknesses in the National Council's handling of the Pop Centre project and we are concerned that those weaknesses have been found across a range of other National Council projects.

"It is unacceptable for public business to be conducted in this way."

The National Audit Office, also found that Elwa failed to get approval from the Welsh Assembly Government for their payments to training providers.

Elwa says it is taking action to correct the problems

The public body has appointed an independent investigator to look into disciplinary proceedings against individual employees.

The chair of the organisation, Enid Rowlands, announced in June that she was standing down.

Elwa had been reorganised a few months before - effectively being split in two.

The Auditor General for Wales, Sir John Bourn, says the contract between the quango and Learn to Live Ltd, who run the Pop Centre Caf�, failed to "provide an adequate safeguard for public funds or a sound basis for the management of the project".

There were no clear measures for judging the Pop Centre Cafe's performance, it's financial viability or the risks attached to it, the report said.

EU rules

Almost �2m was given to the company running the project without any business case being made for the advance, which breaches the rules for public bodies.

The deal may also have broken European Union laws, because the equipment bought with the money from Elwa was used for commercial profit.

This was allowed under the contract agreed by the quango, but could fall foul of EU rules on state aid being given to companies.

This catalogue of errors was repeated in 17 other Elwa-funded projects in 2001 and 2002, with some contracts being based on the one drawn up with the Pop Centre Caf�.

The assembly's audit committee will begin hearing evidence from some of those involved in Elwa's decisions on Thursday.

'Serious deficiencies'

In a statement, Elwa said it acknowledged that the errors made were "not acceptable".

It added: "The National Council-Elwa accepts that there have been serious deficiencies in the operation of the organisation's financial and management control systems.

"The report identifies major failings in the management of a number of projects, most notably the Pop Centre MP3 Caf� initiative which was intended to bring accessible learning opportunities to one of Wales' most deprived areas.

"These errors, and those which occurred in 17 other projects in 2001-02, are not acceptable and the organisation has been working to ensure that these mistakes are never repeated.