Amyas Morse, the comptroller and auditor general, has qualified his audit opinion on the 2011-12 financial statements of the East of England Development Agency (EEDA) because of irregular ex-gratia payments.
The National Audit Office found that payments totalling £51,000 made to agency staff members were out of policy.
He said: “I recognise that, in total, the sum involved is not substantial, but the payments exceeded a clearly understood pay remit and did not take into account the wider considerations of public sector pay restraint and the specific initiative already in place to reward those individuals considered key to delivering closure of the agency.”
The Regional Development Agencies (RDAs) are expected to be abolished shortly and as such Morse has not made any recommendations.
The EEDA was required to agree an annual pay remit with the Department for Business, Innovation and Skills and HM Treasury that set out the maximum level of pay increases for permanent employees.
For the most recent accounting period, this also had to comply with the government’s two-year pay freeze instruction for public sector workforces.
The department wished to achieve a smooth and efficient closure of the RDA network and following consultation with the Treasury, in February 2011 the department approved retention payments of up to 12 months’ salary for nominated key staff in each RDA considered essential to the delivery of this objective.
The pay remit was agreed on 24 May 2011, but this included a clause that the EEDA would not pay any other pay increases or non-consolidated bonuses to any staff.
However in July 2011, despite the pay freeze and the agreed parameters of the pay remit, the board of the agency decided that it would like to make ex-gratia payments to staff in recognition of the additional responsibilities they had taken on and their continued hard work as the organisation closed down.
The Remuneration and Selection Committee agreed to make two separate ex-gratia payments of £500 each to almost all members of staff barring the executive directors totalling £51,000.
The individual payments were made on 31 August and 30 December 2011 and were paid to a total of 66 staff, although not all staff received both payments.
The auditors identified these payments as having breached the agency’s pay remit and consequently the agency sought retrospective approval from the department for the payments, which the department declined to give.
