The boss of the West of England Combined Authority was warned by her top legal adviser that a £59,000 severance package to a senior officer was “unlawful”, finance watchdogs found.
External auditors Grant Thornton concluded there was also “doubt” that the exit payment to the director of infrastructure achieved best value for taxpayers’ money.
They found that while it was a legal requirement for chief executive Patricia Greer to have been advised over the payoff by director of legal services and monitoring officer Shahzia Daya and chief finance officer Malcolm Coe, both were excluded from the process.
Dr Greer feared they had a conflict of interest in the value of the payment as they were both also on their way out of the combined authority over the next few months.
She did not put in place appropriate alternative arrangements, meaning the statutory responsibilities of the two officers – who both expressed concerns over the exit package – were not carried out, Grant Thornton concluded.
“The failure to manage the potential conflict effectively was a significant weakness that placed the combined authority at the potential risk of committing to an unlawful payment,” the 2020/21 WECA value for money (VfM) annual audit report said.
However, the auditors accepted that the chief exec acted in good faith and that there was conflicting legal opinion over the lawfulness of the severance pay.
The report, presented to WECA audit committee on Thursday 17th November, found five “significant weaknesses” in the organisation’s VfM arrangements relating to last year’s golden handshake to then-director of infrastructure David Carter and to “strained relationships” among the region’s political leaders.
It made three legally-binding “statutory recommendations” which the combined authority must address as an “urgent priority” and are so serious they have been reported to the secretary of state, along with two “key recommendations” and four for improvement.
The report said Dr Greer commissioned external legal advice which considered the payoff appropriate, but Ms Daya disagreed and believed the chief executive did not have the authority to make the decision alone, which she assessed would be “illegal”.
It said: “We are satisfied that it was reasonable for the chief executive to have identified potential conflicts of interest in this matter with regard to both the monitoring officer and the chief finance officer.
“We accept that the chief executive was acting in good faith and had taken significant action to ensure the legality of the process, however… appropriate action was not taken to ensure that the statutory duties of the monitoring officer and the chief finance officer roles were appropriately discharged by the incumbent officers or through alternative arrangements.”
The report said Dr Greer was “not well served” by WECA’s constitution which “provided no guidance on how conflicts of interest between statutory officers should be managed or sufficient clarity on the use of delegated powers”.
It said: “In our view, the chief executive’s decision not to inform the statutory officers of the severance transaction at an earlier stage and the failure to manage the potential conflict effectively was a significant weakness that placed the combined authority at the potential risk of committing to an unlawful payment.
“The specific roles of the three statutory officers [chief executive, monitoring officer and chief finance officer] are key checks and balances that the legislation puts in place to ensure that major financial and operational decisions are lawful and in the best interests of the combined authority. It was not unreasonable for the monitoring officer to resort to intervention in the process.
“By bypassing the monitoring officer in this case, and failing to make alternative provision for the discharging of the monitoring officer’s responsibilities, the statutory protections provided by the monitoring officer’s role were significantly weakened.”
It said Ms Daya felt that the payment could be approved only by the WECA committee – comprising elected politicians metro mayor Dan Norris, who heads the combined authority, and the leaders of Bristol, South Gloucestershire and Bath & North East Somerset councils.
“Without this it would be an illegal payment, in the view of the monitoring officer,” the auditors said.
The report said there was a “breakdown in relationships” between the chief executive and the two other statutory officers and a “confrontational tone in the dialogue”.
It said: “We do consider that the onus was on the chief executive as the principal senior officer to take into account the views of the other statutory officers and reach a unified position.
“Not to do so was a significant weakness in the management of the serious issue that had arisen.”
The report said a third set of independent legal advice commissioned by Grant Thornton “agreed that, on balance, the payment was likely to be unlawful if it was not approved by the combined authority committee”.
It said: “At this point, following further negotiation on the legal position, the chief executive agreed that for the avoidance of any doubt, the severance payment would go to committee for approval but did not accept that there had been a risk of unlawful payment.”
Because of a major public fallout, the three council leaders boycotted the meeting in October 2021 where it should have been decided, and it was eventually approved two months later during an exempt session when Mr Norris voted in favour, with two abstentions and one absence.
The report said: “It was the chief finance officer’s statutory duty to undertake an assessment of value for money to protect the combined authority from the risk of overpayment in regard to the director of infrastructure’s exit package.
“If there was a conflict of interest, this duty should have been passed to a deputy.”
It said the failure of this to happen “reflects a significant weakness in arrangements” but that the rationale for the payment and the steps taken were “comprehensive, professional and reasonable”.
On the issue of whether the best value was achieved, we take the view that there is doubt here, particularly given that there is no documented evidence of performance or capability issues on the part of the director,” the auditors said.
“However, this risk is sufficiently mitigated due to the relatively low value of the settlement in comparison to the cost and operational benefits of the alternative options.”
Grant Thornton recommended: “In future, where there is a potential conflict of interest affecting individual statutory officers, adequate steps must be taken to ensure the statutory duties of these officers are effectively discharged.”
WECA’s management response said: “A protocol has been prepared and shared earlier this year with the auditor and chair of audit, which has been designed to manage the rare cases of conflict of interest by statutory officers.
“This is designed to reflect the unusual circumstances that in a small authority there may not always be another employee able to discharge the role of deputy.”
They added that the new monitoring officer had agreed arrangements to ensure officers sought advice in an “agreed framework” and that external legal advisers would know when to escalate matters to the monitoring officer.
The report can be found here.
Adam Postans, Local Democracy Reporter