Scandal-hit Scots finance regulator spent £500k on unapproved training

There was an £84,620 spend for a head of retail on an executive Master of Business Administration [MBA] course over two years from September, 2018 which included time in London and a five-day assignment in Argentina with travel and accommodation costing £10,856.

A similar two year course for another senior manager from January, 2017, involving an assignment in Argentina cost £72,795 including £11,713 travel and accommodation expenses.

And some £87,769 was spent on 40 days of executive coaching for the senior management and executive team over five years at the Stirling office.

It comes as ministers have been coming increasing scrutiny after admitting that they gave retrospective approval over a controversial move by Water Industry Commission for Scotland (WICS) that ignored Scotland when sending chief operating officer Michelle Ashford off on an £80,000 training trip to the US whicn included two £5000 Transatlantic flights.

READ MORE: WICS: Scots financial watchdog paid £10k on two US flights for exec

Ms Ashford's trip to Harvard Business School as part of a run of spending described as "unacceptable" by public spending watchdogs Audit Scotland.

WICS logo with (inset) former chief executive Alan Sutherland and chief operating officer Michelle Ashford  (Image: NQ) 

The Scottish Government also gave retrospective approval over other costs which also included a £2,600 spend on £100 Christmas gift vouchers for each member of staff.

It has now emerged that ministers have received details of what is described as "significant training costs" from earlier years and say that no approval was sought for them, although officials were aware that some were attending MBA courses.

But details seen by the Herald show that the training costs have amounted to £474,079 since 2016 with £150,318 spent in 2019/20 alone.

The spend dropped to £10,519 in 2023/24 the year after the spend on Ms Ashford's course the year before.

It has further emerged that the Scottish Government was aware from 2006, when it approved a restructuring and pay agreement, that WICS had a policy of funding MBA courses for senior staff.

Inquiries made internally at the Scottish Government after the further training costs emerged confirmed that in 2014 the Scottish Government approved a WICS pay and grading restructure through its remuneration committee which included reference to a fully funded MBA, available after four years’ service and was a "significant element" of a strategy to retain staff.

Scottish Government officials were also aware through their general day to day interactions with senior WICS staff that they were attending MBA courses.

But ministers insist that the historic training costs were not known about until more recently.

According to WICS, staff were "actively encouraged" to undertake the development opportunities and that it had successfully appointed staff into senior roles as a direct result of such training.

But it admitted that it needed to demonstrate value for money in each case "and accepts that this was not demonstrated sufficiently in the past".

Former chief executive Alan Sutherland and chief operating officer Michelle Ashford  (Image: NQ)

WICS chief executive Alan Sutherland, one of the highest paid public sector workers, was forced from his role with immediate effect in December after Audit Scotland pinpointed an "unacceptable use" of public funds by senior officials at the water industry watchdog.

The disgraced £182,500-a-year executive was given six months salary in lieu of notice which the watchdog says "he was legally due".

WICS say that its board agreed to pay the money as long as Mr Sutherland left at the end of December and say they took "extensive legal advice and gained approval from the [Scottish Government] sponsor team for that approach".

Roy Brannen, director-general of Net Zero and accountable officer for 26 public bodies has accepted it was wrong to have given retrospective approval for the spending.

One WICS whistleblower said that he could not believe the "colossal" costs had been kept quiet for so long and that the public spending auditors should be intervening.

"The way to have handled this is to get it all out there in one go, not to have revelation after revelation coming out over the way they have been spending," he said.

"There is no doubt that the board believe there was a right to go ahead with these courses as an incentive to retain staff and to a degree that is important. But the kind of sums being spent are quite frankly astronomical and as they are answerable to the public, these should be further scrutinised."

Mr Brannen has told MSPs that the Scottish Government was working closely with the WICS leadership team to "ensure that it fulfils its statutory role of regulating Scottish Water" and that ministers were "committed to ensuring that we learn lessons from this matter".

Mr Boyle had previously raised concerns that it was felt that the costs of the Harvard course were not worth challenging as the money had already been spent.

He said it "risks indicating that approval will always be granted when the expenditure has already been incurred".

Ms Ashford has said that Jon Rathjen, the Scottish Government's deputy director of water policy, among others contributed to a 360-degree assessment in relation to the Harvard course.

Ms Ashford, a chartered civil engineer who joined WICS in 2017, said in an email sent to the regulator's executives that the sponsor team at the Scottish Government were aware that she was participating in the Harvard program.

Audit Scotland has said that the the financial management and governance issues found at the commission, which is the economic regulator of Scottish Water, fell "far short of what is expected of a public body".

In approving the expense, a Scottish Government official said approval was "essentially based on the fact that the money had been spent, so there was no material benefit, at that point in challenging it".

One of the other concerns surrounded 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 £400 meal-for-two spending so there was no way of knowing what the split was between food and drink.

The Champany Inn and (inset) former WICS chief executive Alan Sutherland (Image: NQ)

The commission, which employs 26 staff, received income of £5.288 million during 2022/23  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.

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 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.

Audit Scotland said that the Auditor General Stephen Boyle would not be looking into the historical costs of courses that have emerged.

A spokesman said he "has made it clear that the use of public funds at WICS was unacceptable and the auditor made recommendations for improvement".

The spokesman added: "Our focus in on monitoring whether those improvements get made as part of the annual audit process."

A WICS spokesman said: “The most important asset of WICS is its people. In recognition of this, WICS has invested on average 1.5% of revenue per year over the eight years on all types of training from cyber resilience to management development since 2016.

"We also recognise the importance of demonstrating value for money when using public funds and ensuring that the appropriate approvals have been achieved.

“Anyone completing an MBA is subject to a two-year lock in and is required to pay 2/3 of the cost to exit this contract.

“Considerable progress has been made in changing the governance and controls within WICS in light of the issues identified.”

Cabinet secretary for net zero and energy Mairi McAllan said: “This information has come to my attention for the first time despite considerable work put in train to restore propriety and trust in WICS following the Auditor General’s report in December last year. I have made abundantly clear to WICS my profound displeasure and frustration regarding the unacceptable costs involved,  the lack of timely disclosure and failure to comply with due process.

“Ministers place the utmost importance on the proper spending of public money and I strenuously reiterate this.

“These costs incurred by WICS further demonstrate the issues highlighted in the Auditor General’s report issued in December last year.

“The Auditor General was clear in his concern that a significant amount of public money was spent without due process being followed or a clear assessment being undertaken to demonstrate value for money. The Scottish Government shares this concern and we insist on marked improvement.

“We had already been progressing a review of WICS governance in response to the Auditor General’s Report. I am clear that matters must now be escalated. In light of this further information, the scope of the review will be enhanced to include the culture and ethos at WICS, the responsibility of WICS to proactively communicate with the Scottish Government and a specific review of the WICS training policy among other things.

“Ministers are determined to ensure that all the Auditor General’s recommendations are implemented.  The Scottish Government will continue to closely monitor WICS progress, including on their action plan in response to the report’s findings.”