It was an account entry for £601,000 which set alarm bells ringing.
The money, which was being handed to outgoing Aberdeen University principal Sir Ian Diamond, was detailed in its financial statements for 2017/18.
The publication of the accounts in 2018 eventually led to an inquiry, and now a “damning” 20-page report which finally confirmed on Tuesday that the ancient institution had, among other issues, been unnecessarily paying to have two principals for a year.
We have seen no evidence that the value for money consequences of that arrangement were assessed.”
The cash paid to Sir Ian, according to the accounts, comprised £282,000 in salary payments, a further £282,000 for working his notice, another £7,000 in expenses, and £30,000 in pension contributions.
The financial statement also noted that while Sir Ian had announced his intention to retire in August 2017, he only formally gave his notice in July 2018, just as his successor George Boyne was taking up the post in August.
It meant Sir Ian officially began working his year-long notice at the time he retired.
After reviewing the accounts, the Scottish Funding Council (SFC) wrote to the university on January 18 last year seeking clarification of issues surrounding the payment, and then decided a “formal review should be undertaken” after being left dissatisfied with its response.
A total of 40 Aberdeen University court members from the years 2016/17, 2017/18 and 2018/19 were contacted as part of the inquiries and 35 responses were received, while members of the senior management team in the period were also contacted.
Evidence with an index consisting of 19 pages and 503 numbered entries was gathered, dating back to December 2016.
The university incurred the cost of two principals over the 2018/19 financial year.”
The Scottish Government body’s investigation found evidence that Sir Ian proposed initial terms in relation to his retirement and then there was a period of negotiation with the university’s remuneration committee, during which Sir Ian’s “right to a 12-month contractual payment arose”, and an agreement that defined his last working day as “the date the successor ….takes up post”.
However, it found “no evidence that a formal documented business case, including an
appraisal of different options, was made in relation to the financial arrangements.”
While the settlement agreement was said to be aimed at securing “continuity” until a successor principal was appointed, the SFC concluded that “the same objectives could have been achieved at a considerably reduced cost to the university”.
The review also revealed that arrangements had been put in place for Sir Ian to step away from his principal duties in September 2017, despite being almost a year away from formally stepping down, and triggering his year-long notice period.
“It appears that internal senior management matters were no longer within Professor Diamond’s full responsibilities once the settlement agreement was signed, though he kept the title of ‘principal’ and the role of titular head of the institution, along with his full salary until his ‘formal’ notice was given,” the SFC found.
Although the university said Sir Ian was available “to provide support” during his gardening leave, the SFC found no evidence of his advice being sought in the period.
“By defining the former principal’s ‘formal’ notice date as the date immediately
preceding both the successor principal taking up his post and the former principal
moving to a 12 month period of ‘gardening leave’, the university incurred the cost
of two principals over the 2018/19 financial year,” the report said.
“In addition, over the 2017/18 financial year, the principal received his full salary while having significantly fewer duties and responsibilities than those constituting the full role of principal, and we have seen no evidence that the value for money consequences of that arrangement were assessed.”
When the agreement with Sir Ian was reached in July 2017, there was no proof that any consultations were undertaken with student or staff representatives, and there was no record to show that the details of what was agreed by the remuneration committee concerning the settlement was formally communicated to the university court.
The principal received his full salary while having significantly fewer duties and responsibilities.”
And while the contractual 12 month notice period was not described in the accounts or in the settlement agreement as a “severance payment”, the SFC found evidence that it was referred to in such a way in other communications,
Meanwhile, as well as the £601,000 of payments detailed in the financial statements, an additional £60,000 was also handed to Sir Ian for “outplacement support”, with the SFC finding that it should have been disclosed in the accounts, and that it may have represented a “benefit in kind”.
“We conclude that the remuneration committee agreed to consider providing
outplacement support to the former principal following consultation with the
university lawyer,” the report said.
“However, after its decision we saw no evidence that any such
consultation with the university lawyer occurred or that authorisation to proceed
with obtaining such support was properly concluded.”
The SFC concluded that the university had breached the requirements of its grant funding, that it should repay £119,000 and that an external review of its governance arrangements should be carried out.