EDITOR'S NOTE: Later in 2016, Ms Lynch and Citizens Advice Scotland (CAS) reached a settlement of their dispute and CAS said it accepted that “there was no improper or dishonest intent in Ms Lynch’s conduct during her time as chief executive and that there was a breakdown in the relationship between Ms Lynch and the board”.


THE chief executive of one of Scotland’s top charities has been sacked after an investigation into her expenses and use of the company credit card.

Citizens Advice Scotland took the action against Margaret Lynch after auditors examined allegations by a whistleblower.

In their probe, the auditors found:

* She made up to £4,890 of cash withdrawals from a CAS credit card

* She used the same method of payment to buy alcohol and £1,762 of store vouchers, while £2,671 worth of spending on the card was classed as “unknown”

* She submitted a receipt for a car repair from a garage the auditors cannot locate

* She authorised a £6,000 payment to a local advice service in Dumfries and Galloway after a CAS committee had turned down the application

Lynch had a disciplinary hearing last week and was fired days later. However, she says she is “innocent” and is appealing her dismissal.

CAS is the umbrella body for the 61 member bureaux that advise over 300,000 people every year on finance, welfare and consumer issues.

The service is a lifeline resource for vulnerable citizens who need support at difficult moments in their lives.

CAS relies on public money to function. The UK Government’s Department for Business, Innovation and Skills provided around £3.4 million last year; and the Scottish Government handed over £2.6m in 2014/15.

However, CAS has been in trouble since August after Lynch – in post since 2012 - was suspended without public explanation.

The Sunday Herald can now reveal the full background to this decision and Lynch's eventual sacking.

In the summer, a long-serving staff member made detailed allegations about Lynch and Head of Finance John Dye.

The CAS board tasked its Officers’ Group to take the lead and Edinburgh-based chartered accountants Chiene and Tait were hired to investigate.

However, the Group believed Lynch tried to control the probe and she was suspended. Dye was not accused of interference and remained in post.

The general allegations Chiene and Tait investigated were: inappropriate use of credit cards and staff expenses claims; using CAS funds for a Christmas party, vouchers for staff and management lunches; inadequate controls over the appointment of consultants; and the £6,000 D&G payment.

Examining the first allegation involved reviewing expenses claims submitted by the CEO, as well as the spending incurred on the credit card.

Auditors noted that this exercise was difficult due to the “poor quality of the records”, claims not submitted in a timely manner, and receipts not always being provided.

A credit card analysis between 2012/13 and 2015/16 showed that £2,671 of spending on Lynch’s card was classed as “unknown/unable to allocate”.

Chiene and Tait explained: “The reason for this is because the majority of this expenditure was not receipted so it was not possible to determine which goods/services had been paid for or whether the expenditure was business related.”

The auditors found that Lynch had withdrawn cash from the credit card and £4,890 had been taken out over three years, which in the “majority” of cases was sums of £200 or £250. Over £100 was also incurred in withdrawal fees.

“The reason why the CEO withdrew these cash amounts is not known,” the report stated.

The report added that £2,065 had been deducted from the CEO’s expenses, but it was not possible to determine whether this amount was a repayment for the credit card withdrawals.

Even if the £2,065 was a repayment, Chiene and Tait concluded that “this would still leave an amount of £2,924.67 to be repaid by the CEO when also taking into account the fees incurred in respect of the withdrawals”.

Lynch’s actual expenses claims came to £7,457, which included £2,321 for taxis, £2,481 in mileage, £145 for fuel, £887 of subsistence, food/drink worth £701 and £103.30 for alcohol.

However, the auditors observed that not all the submitted expenses claim forms had been signed by the CEO and some of the forms had not been authorised for payment.

The firm also found that CAS had made no declaration to HMRC about payments to Lynch for mileage, expenses and other items.

They also revealed that some mileage sums had been paid to her twice in error.

On taxis, auditors quoted the Staff Handbook which explained that employees should “normally” travel by public transport, while taxis would only be approved at the “discretion” of a line manager.

In a three-year period, the report says £444.60 was spent on taxis using the CEO credit card, while over a similar period she claimed £2,321 in expenses for the same mode of transport.

“It is not known why the CEO has used taxis instead of alternative public transport and it is not possible to determine this from examination of her diary.”

Chiene and Tait also examined a £148 claim submitted by Lynch for work carried out on a company Skoda she used.

The receipt from “Autofusion” in Airdrie was for replacing the car’s rear brake pads and discs.

According to Chiene and Tait, the same car had previously been inspected by a dealership, which concluded that the front brakes were corroded.

The auditors were “unable to find any trace” of a garage in Airdrie called Autofusion, and the receipt did not include an address, phone number or VAT registration.

It was also not dated and came from a pre-numbered receipt book.

Chiene and Tait asked a number of questions: “Why would the CEO ask for the rear brakes to be fixed, if, as per the Skoda inspection report, the front brakes were the priority?”

“Why would the CEO trust the repairs on a company car to a ‘back street’ garage when the work could have been undertaken by the Skoda dealership?"

“Why did the CEO pay cash for the repairs?”

The car was later re-inspected and the auditors contacted the Skoda dealership that carried out the work.

According to the report, the dealership “confirmed that the rear brake discs and pads were in a terrible condition which would call into question the work supposedly carried out by Autofusion on the car”.

In the “conclusions” section, the auditors noted there had been a “lack of oversight” of Lynch’s expenses and credit card use, no checks for reasonableness and appropriateness, and a “failure to challenge” her on claims which “clearly” contravene CAS policy.

Another part of the investigation focused on the use of CAS funds for a Christmas party, lunches and gifts.

Auditors found that the CEO purchased £1,762 of John Lewis, Marks & Spencer and Asda store vouchers for staff using the credit card.

Over £1,000 was also incurred on the card between 2013 and 2015 on alcohol, including £445 at Majestic Wine on Edinburgh’s Leith Walk.

The report stated: “When interviewed regarding the allegations, the CEO said that she admitted to buying vouchers for staff and to purchasing alcohol. With regard to alcohol, the CEO stated that she felt that the amount she had spent in three years was not huge.

“For example, she stated that she had purchased three bottles of wine at a dinner with the Board and a round of drinks at a function which the Chair of the Board had ‘forgotten to pay for’.”

The report also stated that Lynch confirmed taking the Senior Management Team out for lunch “two to three times” and ordering alcohol for a staff at a Christmas party.

Chiene and Tait noted that gifts to employees are taxable and, according to CAS rules, had to be approved in advance.

The third general allegation was the appointment of consultants and contractors.

According to the auditors, a CAS “procedure note” stated that all purchases of services over £5,000 had to be tendered.

However, the investigators uncovered several examples where consultants had apparently been hired without such a process.

WDF Solutions Ltd, co-owned by former police officer Bill Fitzpatrick, received £106,330 between 2013 and 2015 for work on the Consumer Change project, as well as for training and work on shared services.

Chiene and Tait stated that there did “not appear” to have been any competitive tendering exercise.

They added that the WDF Solutions website made clear the company’s main areas of business were CCTV and security.

The same conclusion about non-tendering applied to 3Rs Strategic Management Ltd, which received £59,500, and payments to Andy Thomson, who was given £30,400 for services.

The final allegation concerned the £6,000 to Dumfries and Galloway Citizens Advice Service (DAGCAS).

According to the auditors, DAGCAS and a local group in Fife requested the sum in 2013 for a human resources project.

However, the CAS Development Committee turned down the request, but Chiene and Tait found that Lynch subsequently authorised the payment:

“It would...appear that in authorising this payment to DAGCAS, the CEO has had a disregard for CAS’s governance arrangements by, in effect, overruling the decision of the Development Committee.”

The Chiene and Tait report formed the basis of Lynch’s disciplinary hearing last week, after which she was sacked.

Lynch told this newspaper: "I am innocent of all the charges against me. I will not rest until these charges are either disproven or withdrawn. These were not the whistleblower’s allegations against me. I am in the process of preparing for my appeal hearing, and then if needs be will pursue this to a tribunal. Then, eventually truth will out."

Dye quit as finance head earlier this month. He could not be contacted.

A CAS spokesperson said: "CAS takes great care to ensure that public funds are spent appropriately. We can confirm that the Chief Executive has been the subject of an investigation, and has now been dismissed. There remains a right of appeal and therefore CAS will not provide further comment at this time."