Lack of Government oversight at water body ‘unacceptable’, says committee

The lack of Government oversight at a water body where lavish spending was rife was “simply unacceptable”, MSPs have said.

Audit Scotland released a report in late 2023 detailing £200-a-head meals, gift cards for staff and a £77,000 Harvard business course for a senior manager at the Water Industry Commission for Scotland (Wics).

Within days of the report’s release, the body’s chief executive Alan Sutherland resigned following criticism from Government and parliamentarians.

A new report from Holyrood’s Public Audit Committee has now criticised oversight of the body by the Scottish Government.

Committee convener Richard Leonard said: “The committee is clear that there also appears to have been a serious lack of oversight from the Scottish Government.

“This failure from those who are meant to be safeguarding the public purse is simply unacceptable.”

According to evidence from Audit Scotland in the committee’s inquiry, engagement between the body and the Scottish Government largely revolved around policy, rather than the commission’s internal processes.

“Although the Scottish Government was engaging on policy progress, it was perhaps less concerned about the overall internal arrangements of the organisation,” Auditor General Stephen Boyle said.

“I do not think that it is an unreasonable leap to say that, because the organisation was generating significant revenue from its role as part of the hydro nation strategy, that resulted in less focus from the sponsor team on other parts of its activity.”

Wics was undertaking foreign consultancy work as part of its remit, and according to the report brought in £1.2 million revenue in 2022-23.

The report was also critical of Government giving retrospective approval for the Harvard Business School course and the gift vouchers after Wics had already made the purchases.

Appearing before the committee last year, former deputy director for water policy Jon Rathjen said he had been “assured” by Mr Sutherland that the course “met the needs of the individual”, but admitted it was an “error of judgment” not to have pressed for more information.

The lavish spending on meals is believed to be linked to the consultancy activity, with one meal costing more than £200 per person – well above the £50 limit.

A further nine meals exceeded £50 per person, costing a total of £2,669, including £996 on alcohol.

But it was revealed through evidence that the limit had been removed at a board meeting in January 2023, which the Auditor General said “we have not seen before”.

A letter from former chief executive Mr Sutherland said: “As I recall, the Wics corporate plan in 2021 explicitly allowed for expenditure to develop the office’s international footprint and increase its international revenue.

“To my mind, this specific line item agreed in the corporate plan formalised an understanding that had been in place for several years, dating back to the EU funded assistance to the Romanian regulator of public services.

“Hospitality is an element of consultancy life.

“At the time, I considered that this event was covered by the agreed allowance for the development of Wics’s international activity. No-one at the time, or afterwards during my tenure, suggested otherwise.”

Mr Leonard added: “Some of the evidence we have heard about the arrangements in place at Wics was simply extraordinary.

“That the body, charged with promoting long-term value from Scottish Water to its customers, itself failed to live up to the standards required of a public body left the committee with deep concerns.”

The regulator has made significant changes to its leadership team and policies, according to the report, but the committee has pushed for “concrete evidence” of change.

Wics interim chair Ronnie Hinds said: “We accept the Public Audit Committee’s report in full. It reflects issues that we have acknowledged and have been actively addressing since December 2023.

“With direction from our board and through the commitment of our leadership team and staff, we have taken decisive action to strengthen governance, improve financial controls and embed a culture that is firmly focused on best value.

“We welcome the committee’s recognition of the steps Wics has already taken, and we are committed to continuing this momentum.

“Everyone at Wics continues to be fully focused on regaining trust and reaffirming our role as an economic regulator that upholds the highest standards, both in our regulatory approach and in our stewardship of public resources.”

A Scottish Government spokeswoman said: “Ministers have been clear that the approach to expenditure at the Water Industry Commission for Scotland (WICS) up until December 2023 was completely and utterly unacceptable.

“We have taken steps to improve our sponsorship function, completing all the management actions set out in the internal review of WICS sponsorship published last November.

“We want to thank the Public Audit Committee’s for their report and will provide a full Government response in due course.”