An investigation has been launched after the chief executive of a controversial County Hall partnership received payments totalling £500,000.
Auditors have discovered the money was paid to David McElhinney before he resigned from his position at One Connect Limited - without the knowledge of the County Treasurer or the current Labour administration.
An employee of Liverpool Council and Lancashire County Council, Mr McElhinney was seconded to manage both OCL and BT’s partnership with the Merseyside authority - working two and a half days a week in Preston on a council £40,000 salary.
But a council report says no salary payments were made to him from May 16, 2011 to March 31, 2012, or April 1, 2012 to March 31, 2013, and he instead received payments agreed by OCL of £231,709 in June for the first period, and £275,888 in July for the second period.
Labour’s David Borrow, the council’s deputy leader and portfolio holder for finance, said he didn’t think there was “any way you could justify” the payments.
But today the former leader of the council, Conservative Geoff Driver, said Mr McElhinney’s pay deal had cost the taxpayer nothing as it was underwritten by BT.
The Lancashire County Council report revealed Mr McElhinney received remuneration payments totalling £507,597 in June and July, for the financial years of 2011/12 and 2012/13.
One Connect Limited (OCL) is a partnership between Lancashire County Council and BT, which was set up in May 2011 to save the authority £400m over 10 years.
Mr McElhinney, who was an employee of the county council and still works for Liverpool Council, was seconded to manage BT’s partnerships with the two authorities - OCL and Liverpool Direct Limited.
His job was split 50/50, and saw him receive a £40,000 salary from Lancashire County Council, his existing salary from Liverpool Council, plus bonus payments and remuneration agreed by OCL.
The report said: “Mr McElhinney was entitled to significant bonus arrangements, access to a lease car and access to private medical insurance.”
According to the report, council chiefs only became aware of the overall payments in August, because no salary payments were made to Mr McElhinney for the periods of May 16, 2011 to March 31, 2012, and April 1, 2012 to March 31, 2013.
Accounts showed he instead received an overall remuneration of £324,567, comprising a salary of £135,338, and bonus payments of £189,229, for the first period, in June.
The report said: “The terms of Mr McElhinney’s appointment entitled him to a one off bonus arrangement of £92,858, which is included in the bonus payment of £189,229. The County Treasurer is seeking to establish whether or not this payment has been made to Mr McElhinney.”
For the second period the overall remuneration was £286,531, comprising a £159,675 salary, bonus payments of £116,213 and lease car payments of £10,643.
David Borrow, the council’s deputy leader, said of the two payments: “The two payments relate to the OCL chief executive’s pay and bonuses for two separate years, 2011/12 and 2012/13, even though they were paid in 2013/14.
“They were paid without the knowledge or approval of the current Labour administration at County Hall and without the knowledge of the County Treasurer, so the question is who authorised them, and when they were authorised?
“We don’t think there is any way you could justify a payment of a quarter of a million pounds plus for somebody working two and a half days a week.He was getting paid more for two and a half days a week than the chief executive is paid for a full time job.”
He added: “The leader has directed that arrangements are made for the whole matter to be investigated and reviewed independently, including the scale of the sums involved and the process by which the payments were made.
“This council aims to provide good value for money on behalf of Lancashire people and to be transparent about how it achieves that.
“People have a right to expect that this includes keeping senior officers’ pay at sensible levels and being open about our accounts.”
Liberal Democrat group leader Bill Winlow will sit on the Audit and Governance Committee on Monday, when the payments will be discussed.
He said: “This entails two large payments, very close together, basically a very large sum of money, far more than you would have expected.
“There is an administration issue and an authorisation issue and until we get to the bottom of that, I can’t really say any more.”
Mr McElhinney resigned at the end of August, weeks after the chief executive of the council, Phil Halsall, was suspended over allegations OCL was favoured when bidding for a fleet maintenance services contract.
Geoff Driver, the former Conservative leader of the county council, who along with Mr Halsall is a board member of OCL, questioned the report.
He said: “I am seriously concerned about the content of that part of the audit report and the way that it has been written, such that I would question the motives of the author of the report.
“David McElhinney’s remuneration is agreed by BT and it does not cost the county council or the taxpayers of Lancashire a penny.
“It is totally reimbursed by One Connect and underwritten by BT. As part of the original agreement when we set up One Connect, BT put £3m per annum into the equation to pay for the senior management costs of One Connect. David McElhinney’s remuneration comes out of that £3m.”