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£232,000 charity chief pay-off 'constitutes misconduct', says OSCR3

Governance | Niki May Young | 16 Jan 2013

A discretionary redundancy payment of £232,708 to the chief executive of a charity in the process of winding up should not have been paid, OSCR has ruled.

The Office of the Scottish Charity Regulator says that because the payment has already been made to the former chief executive of the Glasgow East Regeneration Agency (GERA), the regulator has no powers to recoup the funds for use in the charitable sector.

A reported payment of £500,000 was made to Ronnie Saez when GERA was merged with four other charities into the Glasgow Regeneration Agency (GRA) in 2011, and he was made redundant. GERA, which in its 2011 accounts spent £145,491 on governance costs, had applied to OSCR to wind up as a separate entity and this was approved on 1 March 2011 with GERA transferring its assets to the receiving company for the GRA.

But OSCR advises in a report published yesterday that the charity had presented to the regulator only half of this payment in its plans for closure. What was presented, a statutory redundancy payment and a pension element were required by law. However a £232,708 discretionary pension augmentation, that the trustees later advised was in recognition of the CEO's performance in his role, was not included in the application.

The trustees, three of whom are also local councillors, had advised that the payment would put him on a par with Glasgow City Council employees who had recently left employment, although Saez was not an employee of the Council. However in its investigation, opened in response to local press interest, OSCR was made aware that Saez had already been rewarded through remuneration for his achievements during the time he was employed with GERA.

OSCR concludes that: "The charity trustees breached their section 66 duties [to act with care and diligence in the interests of the charity and to ensure that all of a charity's assets are used to further its purposes] when deciding to make a discretionary payment to augment the chief executive's period of membership of the pension scheme. This is considered misconduct in the administration of charity."

The regulator formed its conclusion based on the size of the payment, the lack of advice sought before making the payment, the prior remuneration in recognition of the CEO's achievements and a lack of evidence that the money was spent in the interests of the charity.

Additionally, OSCR advised that: "Terms and conditions of service in a local authority may not be a suitable comparator on which charity trustees base decisions."

OSCR advised that it would not recommend that the former trustees, some of whom are trustees of other charities, be prevented from sitting on other charity boards:

"We concluded, from knowledge of the charities concerned and having made the charity trustees of GERA aware of their misconduct, that the risk of a similar situation arising is minimal. We do not therefore consider it would be proportionate to monitor the other charities with which the charity trustees of GERA are involved," OSCR added.

The regulator said it will review how its consent procedures deal with the possibility of actions such as these, including the information it asks for from charities seeking consent to dissolve and its subsequent checks of charities' actions in this regard.

Directory: Office of the Scottish Charity Regulator (OSCR)