Watchdog accuses Welsh council of "serious breakdown of governance", ignoring Head of Legal and disregarding external legal advice

The process that led to a £95,000 departure payment being made to a former chief executive of Pembrokeshire County Council “represented a serious breakdown in governance” including a failure to comply with legal requirements, a failure to address the concerns of the Head of Legal and Democratic Services, and the disregard of external legal advice, a report in the public interest issued by the Auditor General for Wales has found.

On 2 September 2020, Pembrokeshire announced that its chief executive, Ian Westley, would be leaving his employment by mutual consent. Under the terms of a settlement agreement signed by the Leader and the chief executive, he received a termination payment of £95,000 and his employment ended on 30 November 2020.

The Auditor General carried out an audit examining the circumstances that led to the departure and the decision-making process that led to the council making the termination payment.

The report found that Pembrokeshire failed to properly record the reason for the chief executive’s departure and why the chief executive was to receive a termination payment.

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The decision-making process the council followed, as well as failing to comply with legislation or their constitution, “led to a payment likely to be contrary to law”, the Auditor General said.

The watchdog found “significant and numerous governance deficiencies” in the way the council dealt with the termination payment to the former chief executive. These were said to include:

  • A failure to address and resolve relationship difficulties between members and officers
  • Lack of clarity on respective roles and responsibilities
  • Officers failing to properly discharge their professional duties
  • Disregard of external legal advice
  • A failure to follow internal policies and procedures
  • Poor and untransparent decision-making
  • A failure to document and report the reasons for decisions
  • Members of the council not being given the opportunity to review and scrutinise the proposal
  • Failure to comply with legislative requirements

The Auditor General said: “In my view, the council has much work to do to satisfy itself that it has robust governance arrangements in place and that these arrangements are being complied with. My audit also identified cultural and behavioural concerns relating to the way in which the former chief executive’s departure was handled. The council needs to satisfy itself that these concerns are not symptomatic of a wider problem.”

In a section of detailed conclusions the report revealed:

  • The Council’s Leader and its then Chief Executive reached agreement that the Chief Executive would leave his employment with a payment of £95,000, but the basis on which he was departing and the reason he was to receive a termination payment was not properly recorded.
  • The Council’s Head of Human Resources instructed external legal advisors to draft a Settlement Agreement in respect of the Chief Executive’s negotiated departure with a termination payment, but the instructions were not based on established facts.
  • The Council’s external legal advisors advised the Council’s Head of Human Resources to clarify and document the basis on which the then Chief Executive was leaving his employment and the reason why he was to receive a termination payment of £95,000, but the Head of Human Resources did not act on this advice.
  • The Council’s external legal advisors prepared a draft Settlement Agreement based upon the oral instructions of the Head of Human Resources, but the wording was subsequently amended on the Leader’s instructions resulting in the Council being exposed to a potential tax liability.
  • There was a general lack of clarity regarding who was advising who in the legal negotiations around the Settlement Agreement, and this was compounded because the Head of Human Resources shared the Council’s external legal advice relating to the departure of the Council’s then Chief Executive with him.
  • The decision to make a termination payment of £95,000 to the Council’s former Chief Executive was incorrectly taken as an executive decision and, in my view, the payment was contrary to law.
  • The Council’s Head of Legal and Democratic Services raised a concern with the Council’s Monitoring Officer that the proposed payment to the Council’s Chief Executive might not be compliant with the Council’s statutory pay policy statement. But this concern was not addressed and the Council appears to have deviated from its pay policy statement without being able to demonstrate good reason for doing so.
  • The Council’s decision-making process in respect of the departure of its Chief Executive with a termination payment was fundamentally flawed and did not comply with legislative requirements.
  • The former Chief Executive received a termination payment of £95,000 in advance of the agreed date of payment set out in the Settlement Agreement.
  • Non-executive members of the Council were not given the opportunity to review and decide whether the Chief Executive should receive a termination payment.

Audit Wales said: “Whilst the report findings are based solely on matters relating to the chief executive’s departure, action is needed by the council to provide the public with confidence that its governance arrangements are sufficiently robust to prevent similar failings occurring in the future.”

The report makes eight recommendations relating to areas of governance, including recommendations around roles and responsibilities, member/officer relationships, decision-making, termination payments, the council’s pay policy statement, procurement, the use of external advisors, the Council Constitution and the need to ensure adherence to the Nolan Principles of Public Life.

The watchdog did, however, recognise that the senior officers at Pembrokeshire had acknowledged the seriousness of the findings and had put in place an ongoing improvement plan, as well as taking action to improve its governance and decision-making.

Auditor General Adrian Crompton said: “Failure to put in place effective governance arrangements and/or to comply with the arrangements that have been established can have serious consequences and undermine public trust in an organisation.

"Pembrokeshire Council has work to do to ensure that its governance arrangements are sufficiently robust and to regain public trust. However, the steps the council has since taken to improve its governance and decision-making processes, and the leadership already provided by its new chief executive, gives me confidence that the council will act on the recommendations in my report.

“I hope that other public organisations will take note of the report and consider whether it holds lessons from which they can learn.”

In a statement Pembrokeshire County Council said it welcomed the report and that it recognised the seriousness of its findings.

“Significant progress has already been made in many of the areas identified in the Audit Wales review of events which took place over a year ago. The council recognises that there is still more to be done,” it added.

“A comprehensive improvement programme was established last year to address observations originating from external and internal reviews commissioned by the council.”

The Auditor General’s report, other associated reports and an action plan to address recommendations will be considered by a meeting of the council on 1 February 2022.