Three managers named in a report alleging financial mismanagement at a health board have left, while the fourth faces a disciplinary hearing. Matthew Limb reports

In the words of one insider, publication of the report on financial mismanagement at Tayside health board has 'lanced a boil'. But it is clear that the scars sustained by the NHS in Scotland may take some time to heal.

Health board chair Frances Havenga says: 'They have uncovered evidence of a management regime that failed the public in the three crucial public service values which should underpin the work of the NHS - accountability, probity and openness.'

The 56-page report by Borders health board chair David Kilshaw castigates senior board officers for financial irregularities. It says they repeatedly breached NHS pay regulations and sanctioned overpayments of£113,501 to themselves and more than 50 staff between 1995 and 1997.

In addition, they tried to influence the content and production of internal and external audit reports in a manner which 'compromised the principles of financial governance'.

The report reserves its strongest criticism for four senior managers - three have left the board and one faces disciplinary action. But it says the board as a whole must 'share accountability'.

It paints a picture of a 'secretive', 'unprofessional' and overbearing regime, which took its toll on some individuals' health.

Former general manager Lesley Barrie is severely criticised over financial irregularities and a 'bullying' management style that left staff feeling 'intimidated and harassed'.

Ms Barrie joined Tayside in 1993 from Forth Valley health board, and was paid£36,323 relocation expenses for a 30-mile move from Bridge of Allan to Perth.

The inquiry report does not recommend recovering the payment, which was subject to 'considerable discretion' by the board. But the board is reserving judgement pending further inquiries and has set a limit of£8,000 on future relocation costs.

The Kilshaw inquiry reveals how the board was misled or kept in the dark about key remuneration decisions.

In 1995, Ms Barrie authorised that payments should be made to a number of staff to clear a back-log of annual leave. Between 1995 and 1997, 32 payments totalling£42,760 were made to senior managers and administrative staff in lieu of annual leave.

Ms Barrie herself received a payment of£5,085 for 23 days' untaken leave.

Finance director John Hudson received£3,846.

A policy was developed which sought to legitimise arrangements for buying out annual leave, says the report. But it was not presented to the remuneration committee. The Kilshaw inquiry found the payments 'were in breach of regulations' because they should only be made in serious circumstances, such as sickness or death of an employee.

In total, Ms Barrie received overpayments of£16,119. She would be facing disciplinary action had she not opted to take early retirement last December, with a reputed golden handshake of£40,000 and a£15,000 pension.

Ms Barrie's lawyers, Mackay Simon, said in a statement last Friday: 'Our client is aware of the inquiry's findings and the terms of the report. There will be no further statements at this stage.'

Tim Brett, Tayside's acting general manager since January, says he dealt with Ms Barrie frequently in his previous job as chief executive of Dundee Teaching Hospitals trust, but adds: 'I made it my business to get on with her.

She was general manager of our main purchaser, we had a professional working relationship.'

He adds: 'I believed what happened was in part a result of the culture of the internal market.'

More than a quarter of the total overpayments identified by the Kilshaw inquiry -£31,603 - went to former finance director John Hudson. He was granted early retirement because of organisational change, to take effect in July 1996.

But the report says the board's remuneration committee was misled over the terms of his early retirement package. The committee was told in May 1996 it would involve the board paying a one-off lump-sum of£58,000. But 'it transpired that the total cost of the package to Tayside health board was in excess of£83,000'.

Mr Hudson received a responsibility allowance of£11,762 for his involvement in managing the process of letting the national contract for computer services. But this was also 'in breach of regulations'.

And he received a salary range overpayment of£12,834, the largest of 44 such irregular payments to senior managers.

Senior board members also took full part in remuneration committee meetings at which decisions on performance-related pay were taken.

Among irregular payments identified by the report was£2,488 paid to five managers for 'incorrect consolidation of performance awards'.

A third manager named in the report, Terry Clark, who was responsible for human resources, received overpayments of£4,096. A fourth, Nigel Young, commissioning and strategic management director, received£10,450.

Mr Young is the only one of the four still employed by the health board. He has been on extended leave since last October and has been asked to attend a disciplinary hearing.

But in a bullish statement issued last week, Mr Young's solicitors said he was 'considering the terms of the decision'.

It adds: 'It is our client's intention to continue to pursue all matters associated with this inquiry, the conduct of those now acting on behalf of Tayside health board, and those who have sought to destabilise the structure and effective working of Tayside health board.'

The health board says that, with the exception of the four named managers, all staff in receipt of overpayments accepted them 'in ignorance of the facts and consequences'. All staff who received money 'unwittingly' will be given 'considerable leeway' over how to pay it back, it adds.

Ms Havenga, who had only been in office for three months when the inquiry was launched, says: 'Tayside health board can only apologise for these past failures.'

The report criticises Ms Havenga's predecessor, James Macfarlane, who was at the helm during the period investigated and retired in March 1997.

He and senior board officers failed to address 'well-founded and justified' criticisms. He told the Dundee Courier last week he had yet to see the full report and refused to comment.

Four of the board's non-executive directors were sacked in April this year by Scottish health minister Sam Galbraith. They were: Charles Forbes, Malcolm May, Vera Joiner and Harry Nicoll.

Although the board says it is implementing the report's recommendations and has 'rigorous' new systems in place to prevent further lapses, there are other calls this week for further scrutiny of the Scottish management executive.

The procurator fiscal for Dundee, who has investigated the irregularities and studied the Kilshaw report, has told the board there will be no criminal proceedings.

How the overpayments break down The total of£113,051 overpayments identified by the inquiry are broken down as follows:

Employment of head of community care development at too high a grade -£5,109 Consolidating five managers' performance increases with basic salary -£2,488 Applying increase salary ranges to 44 managers from 1 April 1995 to 1 April 1996 -£41,062 Increasing four senior managers' pay by 3 per cent from 1 September 1995 -£7,011 Payments in lieu of consolidated prp to three senior managers -£1,101 Payment in lieu of consolidated prp to former finance director on retirement -£1,848 Responsibility allowance for former finance director -£11,762 Compensation for annual leave not taken -£42,670 (In 1995, 21 staff received overpayments totalling£21,146, in 1997, 11 staff were overpaid£21,524)