News

PAC reports on States Annual Accounts 2020

​The Public Accounts Committee (PAC) scrutinised the former Chief Executive Officer's termination contract and the decision to settle on £500,000 severance pay, as part of its review into the States Annual Report and Accounts 2020.

The PAC found that the complexities in accounting for and disclosing any payment regarding the former Chief Executive's termination agreement, by the Government, led to the Independent Auditor's Qualified Opinion on the regularity of that payment.

The Annual Report produced by the States of Jersey provides information on how the States of Jersey has performed over the course of the year in the context of its objectives ('the Performance Report') and on how the States are governed ('the Accountability Report'). The Annual Accounts provide information on the financial performance of the States of Jersey covering both assets and liabilities and income and expenditure.

The Public Accounts Committee determines whether public funds have been used efficiently, effectively, and economically to deliver value for money for Islanders.  One of its key tasks is to assess whether the funds have been applied for the purpose intended by the States and whether sound financial practices have been maintained.

Chair of the PAC, Deputy Inna Gardiner, commented:

"I would like to take this opportunity to thank the Treasurer of the States and his team in the Treasury and Exchequer (T&E) for implementing the recommendations made by the Public Accounts Committee last year and improving the preparation of the States Annual Report and Accounts, despite the challenging conditions of the pandemic. The 2020 States Annual Report and Accounts includes additional information on departmental performance and objectives and are further supported by Departmental Annual Reports, and the Treasury is continuing to identify and embed improvements within standard practice.

Our assessment of the States Annual Report and Accounts for the year 2020 has been particularly challenging because the report and accounts reflect unique circumstances, Covid, and also the exit payment of the former Chief Executive and the Qualified Regulatory Opinion issued by the External Auditors as a direct consequence of the handling of the payment.

Unlike other jurisdictions, the pandemic did not delay the preparation and publication of the 2020 States Annual Report and Accounts. Its publication would have been on target but for consideration by officers and the External Auditors of the exit payment of the Chief Executive.

Several of the findings in our report relate to the exit payment of the former Chief Executive but it is my fervent wish that the hard work of the Treasury and Exchequer (and indeed, all Government officers) is not overshadowed by this one event.

However, the PAC does not share the view of the Chief Minister in his role as Chair of the States Employment Board that the lack of consultation with any member of the Treasury and Exchequer before or during the time the exit payment was negotiated with the former Chief Executive was a mere 'technical breach' of the Public Finances Manual. The PAC is of the view that it was a grave oversight which may have caused, contributed to, or given the impression of, an absence of proper financial oversight and/or expertise in respect of the final negotiated settlement.

The PAC accepts that in view of the extraordinary circumstances which led to the potential for the former Chief Executive to lodge a claim against the States, his 'exit' payment of £500,000 was 'reasonable'. However, we hope that this unique set of circumstances remain exactly that – unique. To that end, we have recommended that all due processes should be stringently followed and documented, in respect of every Special Payment, including consultation with Treasury and Exchequer, regardless of time pressures.

Furthermore, to ensure that the pay-out of large sums in Severance Payments does not become the norm, we strongly recommend that all contractual obligations such as alternative dispute resolutions should be exhausted before negotiating special payments.  We sincerely hope that the States Employment Board improves the process for recruiting and appointing the next Chief Executive Officer, especially that:

• a disciplinary procedure specific to the post of Chief Executive is implemented prior to the appointment.

• Negotiated terms and conditions with the preferred candidate are verified as legally 'robust' by an independent HR specialist and employment lawyer.
• A stringent, consistent, clear and robust understanding is agreed, that undertaking any other role would be incompatible with his/her other responsibilities.

Other findings we have made support our recommendations that future Annual Report and Accounts should separate spending made in response to COVID-19 or other non-recurrent expenditure from actual annual spend and greater clarity should be provided to distinguish 'efficiency savings' from the deferral of growth and other rebalancing and savings measures.  We consider that these measures would improve the monitoring of public spending."