WICS: Scots financial watchdog chief spent £400 on dinner for two

The Herald previously revealed that the Water Industry Commission for Scotland (WICS) sent a senior executive on two £5000 return flights to the US as part of the scandal.

It was confirmed just before Christmas that chief executive Alan Sutherland had left his role with immediate effect after Audit Scotland found "unacceptable use" of public funds by senior officials at the water industry watchdog.

The WICS is coming under scrutiny over its expenditure including spending £77,000 on sending chief operating officer, Michelle Ashford on a training course at the Harvard Business School in the US and a series of perks given to staff including leaving lunches and birthday and Christmas gifts. Some £2,600 was claimed to provide every staff member with a £100 gift card for Christmas.

It has emerged that the latest concerns over the body's spending surrounds Mr Sutherland entertaining a representative of the New Zealand water industry at the award-winning Champany Inn in Linlithgow in October, 2022. Auditors say there was no submitted receipt for the spending so there was no way of knowing what the split was between food and drink.

The fine-dining restaurant, which opened in 1983 was awarded one star in the Michelin Guide in 2008 but lost it in the 2012 guide.

READ MORE: Scots watchdog using public funds to settle 1000s in unpaid staff tax

It has further emerged that the chief executive had 47 expense claims totalling nearly £4,500 from April 2022, to October 2023 that were not supported by itemised receipts.

And according to Audit Scotland one in eight expenses claims submitted by the senior management team did not have itemised receipts - totalling £9,660 - and it largely surrounded the entertaining of foreign visitors.

Audit Scotland has said there was "very significant concern" over the lack of receipts saying that they "do not see this type of activity in our audits".

WICS logo and (inset) former chief executive Alan Sutherland and chief operating officer Michelle Ashford

The majority of the expenditure related to what was termed "business entertaining costs" and was connected to food and drinks with international delegations.

They say that there were multiple foreign trips, particularly to New Zealand as part of the Hydro Nation strategy and the provision of services to the water industry there as it was going through its evolution.

That work started with a project for two of the country’s water and sewerage companies - Wellington Water and Watercare, the largest water and sewerage provider in the country.

Hydro Nation is a Scottish Government initiative aimed at building international partnerships, sharing knowledge and undertaking joint research.

And WICS has previously said that they found that water sectors the world over were facing many of the challenges face in Scotland, such as planning for climate change and ensuring that the industry’s infrastructure will be fit for the future.

It is understood that all members of the senior management team - four directors and the chief executive - had corporate credit cards.

The executive flights bill to the US exceeded the £8,819 run up in unpaid UK tax and national insurance contributions dating back to 2018/19 over perks given to staff including leaving lunches and birthday and Christmas gifts.

They included some £5,500 spent on £100 Christmas gift vouchers for each member of staff over two years - 2021/22 and 2022/23 - without any tax being paid.

Auditors have said this exceeded the regulator's delegated limit of £75 for gifts and should have been approved by the Scottish Government but was not.

The Scots water industry financial watchdog is expected to use public funds to settle the personal tax issues as a result of the spending.

The WICS has already told Audit Scotland there was an "oversight" over spending that needed Scottish Government approval which it said it accepted and regretted.

WICS management advised that it recognised that some of the processes that worked well when they were based in Moray House lapsed when the commission started to work remotely and accepted there was insufficient discussion on expenditure.

WICS has said it was "committed" to address issues raised by the public spending auditors.

Auditor General Stephen Boyle has, meanwhile, told MSPs on the Scottish Parliament's public audit committee that there were "cultural issues" at the WICS that needed addressed.

The chief executive was to oversee changes with a view to implementation next month. At the time of the auditors' investigation, it was still Mr Sutherland who was to take this on.

And Mr Boyle issued a caution that there there is still a gap in the leadership of the commission at present since the resignation of the chief executive.

"There are cultural issues within the commission and there needs to be more rigour as part of their internal control arrangements, that they have appropriate controls, checks and balances," he said.

"These were a range of deficiencies in internal control whereby there wasn't that rigour of culture on expenses, If you're claiming back, you have to have a receipt. So these were being processed without those in place.

"In terms of giving hospitality, the Scottish public finance manual, also covers this in a fair degree of detail. The expectation and assumption is this will be very rare and unusual set of activity for a public body to be offering hospitality.

"There are clear boundaries and concerns also about receiving hospitality as a public official for the concern that that might influence judgement."

The regulator is funded through a levy on Scottish Water and on retailers that participate in the competitive non-household water market. The size of these levies is set by Scottish Ministers.

Scottish Water operates under an annual borrowing limit set by the Scottish Government. The annual borrowing limit controls the amount by which Scottish Water can increase externally sourced finance.

As at March 31, 2023, government loans totalled £4.5 billion.

Net new borrowing by Scottish Water from the Scottish Government was planned to be to the tune of £196m in 2023/24 to carry out its activities.

The commission, which employs 26 staff, received income of £5.288 million during the year, including levy income of £2.279 million from Scottish Water, £1.718 million from licensed providers, and £1.185 million from international work related to the Scottish Government’s Hydro Nation strategy.

The WICS is responsible for determining the level of revenue Scottish Water needs to collect through customer charges in order to deliver the objectives set for it by Scottish Ministers.

It has a duty to determine the ‘lowest reasonable overall cost’ that Scottish Water will have to incur to meet ministers’ environmental, quality and service objectives for the industry.

The post of Water Industry Commissioner for Scotland was created in 1999 and Mr Sutherland was appointed to the role.

His remit was to advise the then Scottish Executive on the charges that the water authorities could and should set for their customers.

After the Water Industry (Scotland) Act (2002) the Commissioner continued in this advisory role, though this time it was the newly formed Scottish Water that he would advise.

A WICS spokesman said that it accepted the findings of the Auditor General's analysis and "recognise there have been significant governance deficiencies in the past".

The spokesman went on: “We are committed to addressing these issues and have begun to implement a 13-point action plan that will bring in greater oversight, tighter financial controls and rigorous staff training.”