BBC agreed to fund £687k payoff after executive's move to commercial arm

The BBC agreed to fund a redundancy payoff of nearly £700,000 to a former senior executive using licence fee money, after she moved to BBC Worldwide, the corporation's commercial arm.

BBC Worldwide later repaid the £687,333 redundancy money to the corporation's licence fee-funded public service arm. Jana Bennett, the executive in question, was unaware her redundancy payoff was initially funded by the licence fee.

Details of the payment emerged in a report by the public spending watchdog published on Wednesday, which revealed that senior managers at the BBC were paid nearly £2m more than they were contractually obliged to over a three-year period.

The National Audit Office examined a further 90 severance payments made to corporation executives after its report on an initial study of 60 cases, published earlier this year, showed many staff were paid more than they were entitled to.

On Wednesday BBC management also published a separate report by auditors KPMG examining severance payments from July 2006 to December 2009, which made recommendations for stricter oversight of redundancy payoffs including a "detailed business justification report" to be written in each case prior to authorisation.

Tony Hall, the BBC director general, who has pledged to put a cap on controversial redundancy payoffs, said: "Both these reports underline what we already knew – approvals, record keeping and oversight were poor. Although as a result of these [severance] deals the BBC delivered savings of £37m a year in management costs, it did it in the wrong way."

Extra payments

Wednesday's "supplementary note" on the NAO's initial July report said that across 150 severance payments to senior managers in the three years to the end of 2012, the BBC paid "more salary in lieu of notice than it was contractually obliged to in 22 cases, at a total cost of £1.4m".

It said the BBC made further discretionary severance payments, such as compensation for terminating employees' contracts and car allowances, to 22 senior managers at a total cost of £510,000.

Bennett moved from her job as BBC Vision director, in charge of licence fee-funded public service TV channels including BBC1 and in-house production, to a new role at BBC Worldwide as president, worldwide networks and global iPlayer, in 2011. She was made redundant the following year as part of a major restructure of BBC Worldwide.

BBC management had "verbal discussions" with BBC Worldwide, agreeing to meet the cost of her departure from the licence fee if she left the commercial division within two years.

The NAO said: "This understanding was based on verbal discussions with BBC officials rather than a written agreement. These discussions were conducted without Jana Bennett's knowledge and she was not informed of any such understanding at any point."

Bennett's payment of £687,333 was two months' pay more than she was contractually entitled to, the NAO said. The total BBC payment, after adding employers' national insurance contributions, was £726,433, which it paid in March this year.

It included £404,000 for loss of office and 10 months' pay in lieu of notice of £283,333. She was given four months' notice.

The BBC, which had previously not revealed the payment to the NAO, told the watchdog it "agreed to make the payment [because] it considered it was obliged to meet the cost of the individual had chosen to leave, but now considers that it should not have met the cost because her post was made redundant".

BBC Worldwide, which is responsible for meeting its own redundancy costs, agreed to repay the money to the BBC last month.

Committee hearing

Wednesday's reports come before BBC Trust chairman Lord Patten and trustee Anthony Fry appear again before MPs on the Commons public accounts committee (PAC), along with former director general Mark Thompson, now chief executive of the New York Times Company.

The BBC's outgoing director of human resources Lucy Adams, who announced last week she was leaving the corporation after five years next spring, will also appear before MPs on Monday.

Fry, in a letter to Margaret Hodge MP, chair of the public accounts committee, published along with the new NAO report on Wednesday, said the BBC Trust "shares the dismay which licence fee payers and BBC staff will feel at the NAO's findings".

He also said the trust "regret the oversight which resulted in the BBC's failure to identify the significant payment [to Bennett"] at an earlier stage in the NAO's work".

'Weak governance'

On Wednesday the NAO said its further investigation of BBC payoffs confirmed "the conclusion set out in our earlier report". "Weak governance arrangements led to payments that exceeded contractual entitlements, provided poor value for money and put public trust at risk."

The NAO said in 18 cases the correct internal scrutiny and approval process was not followed, including one in which approval was not provided until after severance of £141,000 had already been paid.

Across the entire three-year period to the end of 2012, the BBC paid out a total of £25m to 150 senior managers.

Of the 65 senior staff who received salary in lieu of notice, 22 received more than they were contractually obliged to at a total cost of £1.4m.

Of 22 cases in which the BBC made extra discretionary payments totalling £510,000 the NAO said 16 were made as part of a "compromise agreement ... to avoid possible disputes and agree mutually acceptable terms".

Another 38 departing staff received additional payments to their pensions – a policy of "pension augmentation" which has since been discontinued – of £3.8m.

Stricter controls

The separate BBC management-commissioned report by KMPG into severance payments proposed a number of new measures to introduce stricter oversight. These include:

a detailed business justification report for each severance deal to be written prior to authorisation of the payoff;

the report to record authorisers for each individual payment;

all reports to be held on file for 10 years with BBC executive board members' records to be held indefinitely;

BBC senior manager remuneration committee to sign off any payments in excess of standard redundancy guidelines; and

BBC executive remuneration committee to have the authority retrospectively to investigate any severance packages brought to its attention by whistleblowers, the director general or other non-executive directors.

These proposals follow earlier reforms announced by Hall including a severance pay cap of £150,000.

"Reforming severance pay arrangements and addressing these problems of the past have been a priority for me from day one as director general," Hall said. "I commissioned today's KPMG report to ensure that we can get everything out in the open and help bring this difficult chapter to a close.

"The measures I am announcing today further strengthen the new controls I have already put in place. I want to make sure that the BBC does everything it can to give the public confidence we are managing their money in the right way."

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