Central Bank paid €540,000 in discretionary severance deals

Six discretionary severance payments amounting to over €540,000 were made by the Central Bank between 2011 and 2013, including one to a person who had not yet started work with the bank.

A special report by the Comptroller and Auditor General published on Tuesday on the management of severance payments in public sector bodies identified 14 high-value discretionary severance payments, amounting to nearly €1.5 million, made by public sector bodies.

It said the estimated value of severance awarded between 2011 and 2013 under six separate public sector schemes was €17.9 million. Nearly 62 per cent of that (€11 million) related to non-cash elements in the form of pension enhancements.

The examination found “broad compliance” with severance scheme rules in most cases, with the exception of a scheme for chief executives of State bodies.

It said two State bodies made severance payments, in the form of pension enhancements, between 2011 and 2013 without the required prior approval of the Department of Public Expenditure and Reform.

The estimated total value in those two cases amounted to more than €1 million.

The C&AG said that outside formal schemes, severance payments may arise in a number of situations, including cases where the employee’s capacity to perform the role is or has become limited, or where the employment relationship has broken down irreconcilably.

The C&AG examination did not assess the circumstances giving rise to the individual termination agreements and said it was presenting the results at “a level of detail that does not identify individuals”.

Six of the discretionary severance payments, amounting to over €540,000 (including legal costs), were made by the Central Bank. A €73,000 cost was incurred in a case where the individual involved was recruited but did not actually commence work with the bank.

The bank said that before the person commenced employment, matters arising from the bank’s code of ethics and pre-employment processes arose.

The individual did not take up employment and the case was settled for €32,000 plus €25,000 legal costs.

The bank, which employs 1,541 staff, said the cases arose in a period of “unprecedented renewal and growth...where staff numbers grew by approximately one third between 2009 and 2013”.

The C&AG found the bank “had not adopted a standard approach for assessing and determining those cases, or for approval of the severance awards”.

Central guidance

In eight cases reviewed in other public bodies, it was found that external sanction (from either the parent department or the Department of Public Expenditure and Reform) had not been obtained in advance of the severance award.

“A number of those entities pointed out the absence of central guidance about severance payments.”

The Central Bank said it had put in place formal guidelines approved by the budget and remuneration committee which set out the governance and authorisation procedures that apply where a severance arrangement is considered to be the most appropriate response to a particular situation.

In recognising its responsibility to balance the use of public monies and minimise the risk to its operations, it had made a number of changes to operating procedures and practices, it said.

It had shortened the probationary period from 12 to six months to ensure performance and development issues were dealt with in “a timely and focused” way and to ensure that sufficient time was allowed to address any concerns.

It had also made amendments to its pre-employment processes.

Bank practices had also been amended “to further distinguish between permanent employees and contract workers”.