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3 July 2012
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, totalling £51,000, made by the Agency to its staff.
The Regional Development Agencies are expected to be abolished shortly. Nevertheless, as in previous years, EEDA was required to agree an annual pay remit with the Department for Business, Innovation and Skills (the Department) and HM Treasury that set out the maximum level of pay increases for permanent employees. For 2011-12, this also had to comply with the Government's two-year pay freeze instruction for public sector workforces.
Notwithstanding the environment of pay restraint, the Department wished to achieve a smooth and efficient closure of the Regional Development Agency network. 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 Agency agreed its pay remit with the Department on 24 May 2011. This included a clause that the EEDA would not pay any other pay increases or non-consolidated bonuses to any staff.
In July 2011, despite the pay freeze, the agreed parameters of the pay remit and the agreement with the Department for additional retention payments, 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.
Following discussion, 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. These payments totalled £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.
Auditors identified these payments as having breached the Agency's pay remit. Consequently, the Agency sought retrospective approval from the Department for the payments. The Department declined to give that approval.
Amyas Morse, head of the National Audit Office, said today:
“I have concluded that these ex-gratia payments are irregular. 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.”