A renewable energy scheme run by Stormont is set to hit the Northern Ireland budget by "hundreds of millions" of pounds, according to the NI Audit Office (NIAO).

The Renewable Heat Incentive (RHI) scheme could take £140 million for a block grant, the NIAO said.

The scheme was established to encourage businesses and domestic users to switch to biomass heating systems.

Economy Minister Simon Hamilton said the findings were "deeply shocking and catalogue multiple failings".

Minister Hamilton said: "The potential ongoing costs of this scheme to Northern Ireland taxpayers are incredible and the accusations of fraud will be rigorously investigated.  

"Whether it is the absence of tiered tariffs or controls on costs, at various stages of the scheme there were serious systemic failings and opportunities were missed to remediate the situation by those directly responsible for administering the scheme.

"Since becoming Economy Minister in late May, I have held meetings with senior officials about the RHI scheme and how things reached the point of it being over-budget. On foot of these discussions, external consultants are already being appointed to conduct on-the-spot and thorough inspections of installations to ensure they meet the spirit and letter of the scheme. While the policy purpose of the scheme was well founded, aimed at increasing our use of renewable technology, there will be no toleration of fraud and where it is identified it will be firmly dealt with. In addition, we are already actively considering options as to how the costs of the scheme could be controlled in the future. All options will be considered to determine whether future liabilities to the public purse can be minimised."

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Ulster Unionist economy spokesperson, Steve Aiken MLA, said: "It is hard to exaggerate just how damning the report of the Comptroller and Auditor General is of the Department of Enterprise, Trade and Investment and its mismanagement of the Renewable Heat Incentive scheme.

"When the scheme was brought to a sudden end by the former Minister Mr Bell in February, he blamed the 2015 Autumn budget statement at Westminster and an 'unexpected rise in applications'. This report, in paragraph after paragraph blows his excuses out of the water. In reality HM Treasury made it clear to DETI that the scheme would not be funded on an unlimited basis as far back as April 2011. Minister Bell's Department knew there were major monetary difficulties with the scheme but decisions were taken too late to prevent the financial mess which we have all been left with.

"The report makes clear that if the Northern Ireland department had followed the way the scheme was implemented in the rest of the UK - with sensible safeguards to control costs and protect the public purse - then this situation could have been avoided."

(CD/LM)