THERE was "real confusion" around the decision to double the severance entitlement paid to NHS Tayside's axed chief executive, MSPs have said.

In a wide-ranging report into the troubled health board's finances, Holyrood's Public Audit committee said there remained "a lack of clarity about why mistakes were made" that led to Lesley McLay departing with £32,000 more than she was contractually owed.

The error occurred after her notice period was upped from the three months stated in her contract to six months following an intervention by her solicitors, and on the mistaken belief that this was the standard notice period for NHS chief executives.

Ms McLay was forced to stand down as NHS Tayside's chief executive in April 2018 following revelations in the Herald that more than £2.7 million had been taken from its charity fund in 2014 to cover NHS IT projects. Ms McLay had just taken over as chief executive at the time the charity cash was used. It later transpired that a total of £3.6m was taken out.

The Public Audit report stresses that the overpayment - which saw Ms McLay depart with a total package worth £91,000 - were based on a genuine misunderstanding, but questioned why the Scottish Government did not step in earlier to correct it.

The report states: "The Scottish Government knew that any payments made to the former chief executive would be subject to a high level of public and parliamentary scrutiny.

"It is therefore perplexing to the Committee as to why it did not take more direct control over the settlement arrangement, which might have enabled it to detect and correct the misunderstandings by NHS Tayside which led to errors and, ultimately, overpayments, being made."

The report added that MSPs want to know what steps have been put in place to learn from the episode, which also saw Ms McLay mistakenly paid £19,135 in employer pension contributions.

It comes at a time when NHS Tayside has been battling severe financial pressures which saw it borrow £50.2m in brokerage from the Scottish Government over six years to balance the books.

The Public Audit committee heard evidence from a number of witnesses from NHS Tayside, Scottish Government and NHS legal professionals in relation to Ms McLay's case.

It found that there was "real confusion around the events that resulted in the settlement that was negotiated with the former chief executive".

It added: "In particular, it became apparent that the decision to increase the notice period to six months was a deliberate decision as part of the negotiation process, albeit based on a misunderstanding."

It emerged that the basis for believing that six months' notice was the norm for NHS chief executives was based on a circular written in 2006 - but never actually issued.

Official guidelines in fact stipulated that notice should be three to six months, and that anything over six months should be specifically approved by the health board's remuneration committee - something NHS Tayside only did retrospectively, after Ms McLay had already been paid her £91,000 settlement.

The Public Audit report also noted that the decision to increase her notice from the three months in her contract to six months followed an intervention by her solicitors who indicated that Ms McLay believed she had grounds for unfair dismissal and discrimination on the basis of her age and sex.

Ms McLay's solicitors made a request to NHS Tayside that she "would resign if the board would agree to payment in lieu of six months’ notice".

A report by the charity regulator OSCR later concluded that the use of money from NHS Tayside's charity fund had benefitted patients, but criticised mismanagement of the fund.

The Public Audit committee said there was a clear conflict of interest in allowing the same people controlling NHS budgets on the health board to also act as trustees for its endowment fund, made up from public donations and bequests.

The Scottish Government has now set up a project group to review how to ensure endowment funds are not compromised in future.

Jenny Marra MSP, Convener of the Public Audit and Post-Legislative Scrutiny Committee said: “Whilst the past can’t be changed, the Scottish Government must learn lessons to ensure that these kinds of issues don’t emerge again.

“Challenges at NHS Tayside remain and NHS leaders should work to meet all of the 20 national targets. If local leaders work to improve services and get their finances under control, the public’s confidence will increase.”

A Scottish Government spokeswoman said: “Over the last two years the Scottish Government and NHS Tayside have responded to the issues summarised in this report, and the Board continues to make good progress in moving back towards financial sustainability.

“This year the Scottish Government is investing over £14 billion in health and care services, with NHS Tayside’s overall funding now in excess of £760 million – an increase of £21 million since last year.

"Our recently published Health and Social Care Medium Term Financial Framework sets out the approach that we are taking to deliver balanced and sustainable services across Scotland.”