FORMER NHS Tayside chief executive Lesley McLay was paid an extra £32,000 in her settlement after bosses doubled her notice period to six months - even though she was only contractually entitled to three months' notice.
Audit Scotland criticised "several errors in the process and a lack of good governance" surrounding Ms McLay's £90,000 settlement deal, which was agreed in July 2018.
Read more: NHS Tayside axed own rules to use charity cash to pay for IT equipment
In a report today, the public spending watchdog noted that her contract stated that her notice period was three months.
However, the breakdown of costs now reveals that the settlement included a payment of £64,211.52, equivalent to six months' notice.
Audit Scotland states: "The Assistant Chief Executive/ Strategic Director of Workforce and current Chief Executive believed this was required to bring parity with other chief executives across the NHS, but the board cannot
provide evidence to substantiate this.
"This increased the payments made to the former Chief Executive by £32,105.
"Since these discussions with the board, auditors have confirmed that the current chief executives of three territorial and four special boards have contractual notice periods of three months, with the others having contractual notice periods of six months.
"The board’s assumption that the former Chief Executive’s notice period needed to be changed to bring parity with all other boards was, therefore, not correct."
Ms McLay was removed as chief executive following an outcry after the Herald revealed that NHS Tayside had breach its own rules in order to use charity money from its endowment fund to cover general NHS spending - mostly on IT equipment - in 2014.
Ms McLay had recently taken over as chief executive at the time of the transaction, which was worth £3.6 million.
There was anger earlier this year when NHS Tayside agreed to pay Ms McLay £90,000 on her departure, but the health board insisted that the payments were "legal and contractual entitlements and no additional payments have or will be made".
Audit Scotland said the health board resolved to pursue a negotiated settlement with McMcLay because the potential legal costs if she was sacked and retaliated by suing NHS Tayside would likely be higher.
Audit Scotland stated that the health board "determined that any possible legal action which could have arisen from a proposed contract termination would have been expensive, time consuming and entail a reputational risk" and that "the total of the negotiated settlement to the board were less than the Central Legal Office's estimated cost of defending an unsuccessful legal case".
Audit Scotland said the decision to proceed with a negotiated settlement "was reasonable".
However, Audit Scotland also found that Ms McLay's termination payment included a mistaken contribution of £19,135.08 to the NHS Scotland pension fund, intended to cover Ms McLay's notice period.
Read more: NHS Tayside insists payments to former boss 'legal and contractual'
Audit Scotland states that the health board realised at a late stage of the negotiations that "payment in lieu of notice does not represent pensionable service and, therefore, pension contributions should not be made".
It adds: "At this late stage, the former Chief Executive [Ms McLay] was not prepared to consider an updated settlement.
"The agreement was not changed, and the payments were made to the Scottish Public Pensions Agency (SPPA)."
Audit Scotland said there was now a plan is place to recover the funds before the end of the current financial year.
It said: "[NHS Tayside's] Assistant Chief Executive/ Strategic Director of Workforce's view is that these contributions do not provide any benefit to the former Chief Executive and that as result they will go ahead and seek repayment of £19,135.08 later in the year.
"The auditor will follow this up as part of the audit of the 2018/19 accounts."
A spokesman for the Scottish Government said: “We note that Audit Scotland reported that the approach taken by the board to negotiate the settlement was reasonable, however they did identify a number of errors in assumption and in governance in the process.
“Health Secretary Jeane Freeman has raised these issues with both the Permanent Secretary and the Director General of the Health Department to ensure that clear guidance goes to boards on applying notice periods.”
In a statement, NHS Tayside said: "Audit Scotland has stated clearly that the decision taken by the Board to negotiate the settlement payment to the former Chief Executive was reasonable, but there was an error in the process.
"Audit Scotland highlighted to the Board that the extension of the former Chief Executive's notice period to six months should have been explicitly approved by the Board's Remuneration Committee.
"The Board accepts that there was an error in not seeking approval from the Remuneration Committee at the time, and this was rectified when the committee considered the matter in November and approved the change from three months to six months."
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