Panning for NRA over financial mismanagement

Charges of gross incompetence were levelled at the top management of the National Rivers Authority (NRA) during an inquiry by the House of Commons Public Accounts Committee into the massive overrun of expenditure on its new headquarters. The inquiry has also shed new light on the resignation last year of the NRA's Chief Executive, Dr John Bowman, and helps to explain why the Government cut the NRA's grant-in-aid last autumn.

The Committee's inquiry was held in January, but it was only with the publication of the minutes of the hearing at the end of March that the story behind the NRA's headquarters emerged into the open. This is told in an attached report on the affair by the National Audit Office (NAO).

The scandal centres on how the NRA handled the contract for fitting out its new headquarters building in Bristol. The original budget estimate for this was £1 million. The main management contract was let by negotiation rather than competitive tender to CDC Ltd, apparently for the sole reason that a sister company had been one of the two lowest bidders for a £12,000 design contract. Most of the work carried out was to design specifications subsequently drawn up by CDC rather than the NRA. The total contract was for £2.65 million, a cost escalation of 165%.

In spring 1991, following allegations that CDC was obtaining secret commissions from sub-contractors, the police were called in, but insufficient evidence was found to substantiate fraud. An internal inquiry into the handling of the contract was also launched within the NRA.

What transpired, according to the NAO's report, revealed "serious weaknesses in financial management and control, and repeated failures to observe the high standards of propriety and regularity necessary in the expenditure of public funds."

The report of the NRA's internal inquiry has not been made public, but evidence given in January to the Public Accounts Committee by John Wheatley, then the NRA's Chief Executive, told a sorry story.

The three senior personnel most closely involved - Dr Bowman, the Director of Finance, and the Director of Corporate Affairs, who signed the contract even though she was not empowered to do so - all gave different answers when asked by the NRA's inquiry who was responsible for controlling the contract. Dr Bowman did not know about the cost escalation although he should have done so, and neither he nor the other two Directors - all of whom attended Board meetings - informed the Board about it. Indeed, the Board was told that "everything was progressing satisfactorily," according to Mr Wheatley.

A financial memorandum issued by the Department of the Environment was breached on numerous occasions. This requires contracts to be let competitively, prior approval to be sought from the Department for large expenditures, submission of a cost-benefit appraisal of such projects to the Board, and generally that the NRA's spending should be in accordance with accepted standards of propriety, control and accountability. None of these provisions was observed. As one MP commented, "there is hardly a rule in anyone's book that has not been broken."

The Committee was also highly critical of the consequences of the affair for the three senior personnel concerned. The two Directors were given only a written warning.

Dr Bowman, meanwhile, left the NRA last spring because of other "structural problems of a non-financial character", and did so just before he would have been required to appear before a disciplinary hearing. He asked for severance terms of £180,000, and received £120,000 plus expenses of £3,400.

Such generous terms were a matter of "great concern", according to the Committee's Chairman, Robert Sheldon. Another MP, Alan Williams (Lab, Carmarthen), put the issue more harshly. Speculating on the reasons why Dr Bowman had escaped "so lightly," he suggested that there was "a certain suspicion that it may well be that the Board realised that to dismiss him would draw attention to their own inadequacy, shortcomings and failures in this whole sordid affair."

The inquiry closed with assurances from the NRA and the DoE that improved financial controls are now in place. But the affair has undoubtedly soured their relationship, and appears to have been at least partly responsible for two successive cuts in the DoE's grant-in-aid to the NRA last year (ENDS Reports 201, p 4, and 202, pp 4-5). For obvious reasons the NRA took the blows quietly, but they left its regional staff deeply unhappy that failings at its headquarters were responsible for reductions in their budgets for pollution control and other activities.

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