Media playback is unsupported on your device Media caption AM Lee Waters says there is something not right in the culture of Natural Resources Wales

Wales' biggest quango has admitted a deal to sell wood to a sawmill without going to the open market lost taxpayers £1m, a report said.

New details have been revealed on repeated failures by Natural Resources Wales to properly tender timber grown on publicly-owned woodland.

Labour AM Lee Waters said taxpayers had been "ripped-off" by the debacle.

NRW, which is holding an independent review into what happened, has said sorry for the sales.

The Wales Audit Office report discloses some of what took place behind the scenes when a 10-year agreement with BSW Timber ended.

The firm had failed to deliver part of the deal that was worth £39m to NRW, leading to its collapse in March 2017.

The deal, which was not tendered, was criticised by the former auditor general Huw Vaughan Thomas.

Nevertheless, NRW awarded the company and subsidiary Tillhill further contracts without going to the open market.

In both cases the auditor was unable to satisfy himself that the deals were lawful.

The report, by Mr Vaughan Thomas, shows that NRW believed it earned £1m less from the original 2014 deal than it would have received if it had tendered it.

The deal was terminated after BSW Timber, which has a sawmill at Newbridge-on-Wye, Powys, failed to build a new saw line that was promised in the agreement.

NRW then established 59 "transitional contracts" with three firms - BSW Timber, Tillhill and a separate timber harvesting company called Euroforest - worth £2.76m.

Image caption Natural Resources Wales manages Wales' public woodlands

An internal email showed the quango knew the prices on the earlier deals were poor value for money.

But 17 of the newer agreements to the timber harvesting firm sold wood at the same rate.

NRW also ignored its own legal advice which warned the new contracts posed risks under EU state aid rules, the report said.

Mr Vaughan Thomas's assessment of the timber contracts led him to raise concerns over NRW's yearly accounts - the third time he has done so.

It also led to the resignation of NRW chairwoman Diane McCrea in July.

Llanelli AM Lee Waters said NRW was "clearly an organisation operating outside of any control".

"Clearly the taxpayer has been ripped-off," the member of the Public Accounts Committee said.

He questioned the nature of NRW and BSW's "cosy" relationship.

"It does beg the question, the nature of the relationship between a close supplier and a public body like this, that they can behave like this without consequence," Mr Waters said.

NRW earned £11m on the 10-year deals before they were terminated.

The chairman of the Public Accounts Committee, Tory AM Nick Ramsay, has written to NRW asking for officials to come before the committee in September.

Andrew RT Davies, Welsh Conservative rural affairs spokesman, said: "Welsh Labour must also recognise their own role in creating this quango which seems to be mired in scandal."

Clare Pillman, chief executive of NRW, was not in post when the scandal began.

But she said the organisation was "sorry" for not realising "the best value we possibly could for the timber sales that we made".

"We must learn lessons and I'm committed to ensuring this never happens again, which is why I will commission independent experts to get under the skin of these findings and to make recommendations on the steps we need to take," she said.

BSW Timber has not responded to requests to comment.