The garden suffered from falling visitor numbers

The Welsh assembly audit committee says bodies did not make adequate checks before funding the "risky" project.

After its 2000 opening, the garden in Carmarthenshire had financial problems and narrowly avoided closure in 2004.

Welsh Culture Minister Alun Pugh said the garden had made progress and the assembly government would respond to the recommendations within 30 days.

The garden, at Llanarthne, was set up as a project to mark the new millennium and was opened by Prince Charles in 2000.

There is nothing wrong with the public sector putting money into risky projects, but the risks involved need to be identified and managed Janet Davies Audit committee chair

About half of the initial �43.6m cost was met by National Lottery money provided by the Millennium Commission.

The rest of the capital came from a range of sources, including �6.3m (European regional development fund administered by the Welsh Office), �2.1m (Welsh Development Agency) and �1.2m (Wales Tourist Board).

By 2002, the garden had begun to suffer falling visitor numbers and financial problems and received assistance from the assembly and other sources.

The garden only avoided closure in March 2004 after a rescue package of �300,000 each from Carmarthenshire Council, the Millennium Commission and the assembly government was secured.

The assembly audit committee report, which only considered the role of the Welsh funding bodies, concluded they recognised the garden was a "risky" project but did not adequately probe its business plans.

There is still work to be done but the position is far more positive Culture Minister Alun Pugh

It found they could have collaborated more effectively during the development and early operational phases of the garden project.

Presented with signs the garden might be facing financial difficulties, the funding bodies did not collectively build up a picture of the situation until the garden's finances had reached a crisis point, the report said.

The report has made a number of recommendations for future projects, including better analysis of business plans and more collaboration between funding partners.

Janet Davies, chair of the assembly audit committee, said: "The garden was a high risk project - intended to be self-funding once open to the public.

"There is nothing wrong with the public sector putting money into risky projects, but the risks involved need to be identified and managed."

New projects planned include a glasshouse designed by John Belle

But she said the committee was pleased the project appeared to be meeting most of its key recovery strategy targets, and that its future now looked better.

Mr Pugh said the garden "continues to play a key role" in the local economy and he welcomed the garden 40% more visitors this Easter over last year.

The garden's interim chief executive, Roy J Thomas, said all the issues raised in the report had been addressed, including the appointment by the board of seven new trustees which had "strengthened the overall strategic management".

In addition, he said, a new chief executive's office had been established to strengthen the internal management and a chief executive officer had been appointed to oversee the creation of this new management structure.

A new marketing and communications department was being developed to focus on marketing the garden, he added.