A councillor claims he has finally unearthed the real reasons why Bristol City Council needlessly made a £98,000 payoff to its former chief executive.

Clive Stevens has spent two months investigating the Anna Klonowksi saga, which he says led to a “cover-up” when high-ranking City Hall officials realised too late that there had been a huge blunder.

The Green councillor for Clifton Down, who is vice-chairman of audit committee, has concluded two major errors led to the severance payment when Klonowski left her role by mutual consent in autumn 2017 to look after her ailing parents.

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A wrong version of her contract was sent to the council’s external lawyers, who then mistakenly advised the authority that she was contractually obliged to the money, a decision auditors BDO later ruled was wrong and should have been classed as discretionary, Stevens says.

The second reason was that the human resources committee’s policies were not updated to ensure it had the final say on the payoff, despite a change in the law in 2011 giving it that power.

Stevens’ findings, which he presented to a recent audit committee meeting and were based on exhaustive research of confidential documents, debunk long-running conspiracy theories that the payoff was “hush money”.

Mayor Marvin Rees has repeatedly said that at the time the council had no procedures in place for the departure of top-level staff and that it was simply following legal advice.

As a result, full council approved statutory recommendations to change the authority’s pay policy in May to give its HR committee oversight of senior officers’ contracts and remuneration when they leave.

The decision came two months after the council’s former auditors BDO raised concerns about a lack of transparency and concluded that the £98,000 payment was discretionary for loss of office, so it was therefore “inappropriate” to call it contractual.

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Read more: Council to make changes following ‘damning’ report into chief executive payout

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Stevens’ 17-page report backs up Rees’s assertions but is also damning about unnamed officers or members who tried to cover the authority’s tracks over the embarrassing episode, saying they should be “ashamed”.

Presenting his findings to audit committee, he said the purpose of carrying out his lengthy inquiry was to improve the checks and balances on the mayoral system by introducing a “value for money” test over decision-making.

He said: “I have looked into this for eight weeks. My conclusions were on the balance of probabilities.

“There were two causes — there was a mistake in the version of the contract that was sent to the external advisers, and we did not update the HR policy in 2011 when we should have done.

“I also found evidence of a gross obfuscation, I would call it a cover-up. I did not investigate that because my report was about value for money.”

In his report, Stevens said the two errors “created an environment for other mistakes which I can’t divulge because the information is subject to legal professional privilege”.

It said: “It is less likely to be a deliberate goodwill payment, more likely to be an accidental one.

“This whole episode is an example of uninformed decision-making of the highest order.

“Therefore it is my conclusion, having been able to study the exempt information but not reveal any of it, that this was not informed decision-making and therefore not ‘value for money’ in the narrow local authority meaning of the term.

“There are still rumours that the mayor had decided during the summer of 2017 that this employee needed to leave.

“It is suggested that top-level leadership was becoming dysfunctional.

“If this scenario were true then the council could have sacked her or maybe agreed a resignation with payoff in lieu of notice.

“In either case BDO would have said the payment was in lieu of notice.

“But they didn’t. The payment wasn’t contractual.

“So even if the top management was dysfunctional back then, the payment wasn’t by this mechanism.

“The external auditors’ report to full council in March 2019 said ‘there was confusion about what information was provided to the external legal advisers’.

“Yes there was. They also said there was a version control problem with the contracts.

“That means there was at least one version of the contract.”

His report said the most likely scenario was that the council’s lawyers were sent the wrong version and inadvertently used it as the basis for their advice about the payoff.

It said: “The simplest explanation is that the interim service director (HR), who was tasked with making this departure happen, used the older version, the one that HR committee approved in November 2016.

“She presumably sent that to the external legal adviser and asked them to draw up a document.

“If they had used an earlier contract version, it would explain why the first legal advisers said that the £98,000 payoff was contractual as they thought it was six months’ pay in lieu of notice.

“The evidence supports a mistake about contract versions.

“BDO stressed this — a simple mistake for an interim working in a department with poor document control.

“It is my opinion that somebody internal to the council spotted the proper version and started questioning the payoff decision, but by then it was too late to change it.

“All credit to that somebody. They are definitely my top hero in this story and they are still employed at the council.

“Congratulations for speaking up. From what I hear, you were quite persistent and eventually listened to.

“And the fact you are still employed at the council is a positive sign regarding the treatment of whistleblowers.

“At the beginning of September 2017, it seems the payoff was genuinely thought by everyone involved to be contractual, the legal advice said it was and at that time nobody involved knew it was the wrong version.

“So it wasn’t brought to HR committee meeting for approval.

“I saw no evidence that the interim director received instructions to ignore HR committee.

“By October 2017, once some legal and HR officers had realised the payment was not contractual, it triggered the start of a cover-up.

“I can’t say the mayor approved the payment or even initiated the cover up.

“It seems unlikely that he approved the payoff if he knew it was ex-gratia.

“It was a goodwill payment. I am fairly certain it was accidental.

“The ex-chief executive received £98,000 because of a series of errors.”

Adam Postans is a local democracy reporter for Bristol

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