West Midlands Regional Health Authority was criticised for mismanagement and the official in charge accused of 'cavalier disregard' in an Audit Commission report, made public yesterday.
Virginia Bottomley, the Secretary of State for Health, has ordered Sir Roy Griffiths, the health service's policymaker, to scrutinise the authority.
West Midlands is the largest regional health authority serving about 5.3 million people. It has an annual budget of pounds 1,766m and last year recorded a deficit of pounds 12m.
The report said the contract between the authority and consultants from the US-based United Research Group was 'improperly entered into and badly managed'.
The contract was so vague that the numbers of staff working on it and how the authority would benefit were never properly specified.
The auditor discovered the consultants spent at least pounds 350,000 on 'expenses', including stays at luxury hotels, private aircraft to fly to work and 'lavish entertaining'. They also leased houses in London for US executives and their wives.
It says the official responsible for awarding the contract ignored a special panel set up to monitor his work and failed to report to the authority's board, which said it did not know what was going on. Chris Watney, the official, took early retirement. Sir James Ackers, the authority chairman, said Mr Watney was believed to be on a cruise in the south Pacific.
The report says Sir James attended a presentation by the US consultants, called to finalise the deal, but said he was never informed they had been taken on.
He said yesterday he did not intend to resign and that Mrs Bottomley had backed him. 'Mr Watney was responsible for awarding the contract.' Standing orders were disobeyed, he added.
He said the authority was discussing with the auditor whether there should be a police investigation. The auditor told the authority to see if payments made to the consultants could be recovered.
When the contract ended there was a row over a final bill for pounds 182,000. Martin Davies, the authority's director of finance, negotiated a cut of 10 per cent, the report says, but did not seek legal advice. Mr Davies later told the auditor that 'given the looseness of the terms' legal advice would be 'fruitless'. Mr Davies resigned last week, the authority said.
Stuart Fletcher, the authority's managing director, admitted mistakes were made. He said although the audit showed 'serious shortcomings in budgetary, financial and managerial control', the authority had since 'tightened lines of accountability and operational procedures'.Reuse content