NHS TAYSIDE will require emergency bailouts worth up to £12 million by next week after it emerged that its accounts had been "misrepresented" for six years.
Paul Gray, the chief executive of NHS Scotland, said senior bosses at the health board should think “very hard” before accepting pay rises this year in the wake of the scandal, but insisted that money had been “mis-accounted but not misspent”.
Analysis: NHS bailouts will become the norm unless austerity is reversed
It comes after an internal review found that £5.3m designated for spending on digital healthcare had been used instead to prop up general expenditure at the cash-strapped board, making its financial position look more favourable.
The practice began in 2012 under the health board's previous finance director, Ian McDonald, and continued under his successor Lindsay Bedford, but was also know to both the current and previous directors of finance at NHS National Services Scotland (NSS).
Since 2012, NHS Tayside has received £33.2m from the Scottish Government in brokerage - effectively interest-free loans - as it struggled with its finances. A further £4m in brokerage was already earmarked for 2017/18.
Read more: NHS Tayside 'misrepresented' accounts for six years
However, Mr Gray told Holyrood's Public Audit Committee that this would now have to rise to between £9-12m after the probe into its accounts revealed a wider than expected funding gap as a result of how use of the £5.3m was misrepresented.
“To say this was disappointing would be putting it mildly” @PAG1962 discussing @NHSTayside with @LesleyMcLayNHST Watch live https://t.co/jV4UtOCD3Q #Tayside pic.twitter.com/w02YvpCaXl
— Public Audit & Post-legislative Scrutiny Committee (@SP_PAPLS) March 29, 2018
Mr Gray stressed that the internal review, which was carried out by accountants Grant Thornton, had exposed bad practice but not corruption.
He said: "The £5.3m has been mis-accounted - it hasn't been misspent or used for something that it shouldn't have been.
"It's just a shame that it wasn't asked for as brokerage because it would have been given and then the situation would have been exactly the same as it is, but it would have been properly represented."
Read more: Tayside reveals 60% surge in patients not been seen within waiting time guarantee
Mr Gray added that despite the questions raised over accounting practices within NHS Tayside, he did not regret signing off on the £33m of brokerage to date.
He said: "It's not that NHS Tayside have money and it's disappeared down a hole. It was spent for legitimate purposes on patient care and other things. So there has been benefit from this expenditure."
He said there had been no wider detriment to the NHS as a result of allocating the extra funds to NHS Tayside.
He said: "What could we have spent £33m on that we didn't? Well, the answer is I don't know because we didn't. It's not that we had some plans that we then cancelled."
However, Mr Gray added that he would expect senior executives to reconsider pay uplifts this year.
The Public Audit Committee heard how all senior management executives at NHS Tayside, including Mr Bedford, had been awarded performance-related pay rises for the current year.
The uplifts are approved by health boards if performance is rated at least satisfactory.
Mr Gray said: "I'm happy to place on record that I will expect Tayside to think very hard about this year's round."
The committee heard that Mr Bedford was suspended in February pending the outcome of the internal review of finances.
Chief executive, Lesley McLay, said it had been necessary to suspend Mr Bedford to ensure that "an open and transparent" investigation could take place. However, Mr Bedford subsequently chose to take early retirement.
Ms McLay said he had been paid three months' salary plus outstanding holiday entitlement, and would receive a smaller lump sum and monthly pension allowance as a result of retiring several years early.
His conduct will also be probed by his professional body, the Chartered Institute of Management Accountants (CIMA).
Ms McLay said she was commissioning an external review to find out "who knew what, when, and why the issue was missed for so long".
Defending her scrutiny of the board's finances, Ms McLay said: "There isn't anybody more disappointed to be here in front of the committee on this issue.
"There is a level of accountability, clearly I am the chief accountable officer, but I also delegate and there is a level that you have to trust."
Mr Gray said he was "very unhappy" about the situation.
He said: "These transactions were in my view carried out in a way which was intended to obscure them from the board of NHS Tayside and that is what happened.
"Checks and balances will deal with it up to a point but we're reliant on honesty and integrity."
He added that he is also awaiting the findings of an internal investigation into the role played by National Services Scotland, which he expects to receive in April, before determining what action might be required.
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