Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
"When the Equality and Human Rights Commission came into being, at the beginning of October 2007, taking over the powers of three former commissions, just 10 Directors out of the planned complement of 25 had been appointed, the management team lacked the right balance of skills, and its business plan had not been finalised. It was, to say the least, not ready for business.
"The process by which this new body had been established, at a total cost to the taxpayer of nearly £39 million, was patently flawed. Symptomatic of this was that, before its launch, the Commission had no control over which staff left the former commissions through an early exit scheme, costing some £11 million, leading to a large loss of staff with valuable skills. The re-engagement as consultants by the Commission of seven senior staff who had taken early severance was carried out without competition or formal approval. The taxpayer was hit twice: some £630,000 for their severance packages and nearly £340,000 to rehire them.
"The Chairman of the Commission was in part responsible for the ineffectiveness with which the Board scrutinised the set-up process and challenged management’s proposals.
"There are still weaknesses in the Commission’s controls over staff costs, shown by the unexplained payment of £15,000 to one of the re-engaged consultants. This is not the way this Committee expects public bodies to be run and reinforces the need in future for stronger controls and proper procedures for managing and using public money."
Mr Leigh was speaking as the Committee published its 15th Report of this Session which, on the basis of evidence from the Commission and the Government Equalities Office (the Department), examined the events leading to the qualified audit opinion on the Commission’s 2006–08 accounts and on the continuing weaknesses in the Commission’s controls.
The Equality and Human Rights Commission (the Commission) was established by the Equality Act 2006 and came into existence on 18 April 2006. It took up its new powers, and those of the former Commission for Racial Equality, the Disability Rights Commission and the Equal Opportunities Commission (the Legacy Commissions), on 1 October 2007. The Commission is a Non-Departmental Public Body reporting to the Government Equalities Office, a government department set up in October 2007 with responsibility for equality strategy and legislation.
Serious errors were made in setting up the Commission, not helped by three changes of sponsor department in the months immediately before its launch. The Commission now accepts that it was not ready for business when the doors opened on 1 October 2007 and that its set-up process, which cost £39 million, was flawed and inefficient.
The Commission’s Chairman recognised his personal share of responsibility and told us that the Board did not exercise the level of scrutiny it might have done, despite early warning signs being clearly visible. For example, a report from the Office of Government Commerce in May 2007 expressed serious concern about the Commission’s readiness to open for business later that year as it did not have in place sufficient senior staff, a transition strategy, business strategy, organisation design or job descriptions.
Mistakes were made by the then sponsor department (the Department for Communities and Local Government), the Legacy Commissions and the Commission’s transition team in the handling of an early exit scheme which was offered to employees of the Legacy Commissions.
The Commission had no control over which staff transferred to it or who left under the scheme, leaving it 140 people short and with skills gaps in key areas. Some of these gaps were filled by bringing back former employees of the Commission for Racial Equality as consultants, even though they had all received severance payments through the early exit scheme. The Commission failed to follow the correct process and did not obtain approval from the Treasury before entering into these arrangements.
The Treasury did not grant approval retrospectively on the grounds that the Commission could not prove that these re-engagements gave good value for money. This expenditure was therefore deemed irregular and the Comptroller and Auditor General issued a qualified opinion on the Commission’s 2006–08 accounts.
Weaknesses in the Commission’s controls have continued beyond the period covered by the Comptroller and Auditor General’s report. The Commission has made an additional payment of £15,000, which it cannot adequately explain, to one of the re-engaged consultants, and it has also breached its pay remit and staff complement levels.
This is not the way that this Committee expects public bodies to be run. The Commission has been without a permanent Chief Executive since May 2009. When the new Chief Executive has been appointed, he or she will need to ensure that strong controls are in place to ensure that such errors do not recur.