The Serious Fraud Office has been rebuked by the Whitehall spending watchdog for making unauthorised pension and severance payments totalling more than £400,000 to its former chief executive.
The National Audit Office ruled that the payoff package given to Phillippa Williamson was "irregular" and said it was qualifying the SFO's annual accounts.
Ms Williamson unexpectedly took voluntary redundancy last April, just days before the new SFO director, David Green, took up his post. The NAO disclosed that on her departure she received what was described as a "special severance payment" of £15,000. On top of that, her severance agreement provided for £407,000 to be paid into her pension pot to cover the additional costs of her early departure.
Under Whitehall rules the severance payment required advance approval by the Treasury as it was "in excess of contractual amounts", while the pension payment should have been approved by the Cabinet Office.
However the NAO said it could find no evidence of such approvals being sought. It also said there was no evidence that the SFO followed due process in instigating voluntary redundancy - such as determining whether alternative positions within the Civil Service were sought. The SFO stressed that the payments were made under Mr Green's predecessor as director, Richard Alderman.
When Mr Green took up his post he sought legal advice but was told that the agreement with Ms Williamson was legally binding and that the SFO was required in law to honour its terms.
"Upon learning of the exit terms he asked Treasury Solicitors Office to conduct a full independent inquiry," the SFO said in a statement. "He took legal advice as to the enforceability of the agreement and notified the National Audit Office of his decision not to seek retrospective approval from HM Treasury of what he considered unjustified expenditure."
The chairman of the Commons Public Accounts Committee, Margaret Hodge, said she was "astonished" that the SFO had agreed to the severance payment to Ms Williamson.
"The CEO (chief executive officer) and SFO sealed the terms of this sweetheart deal outside of official Treasury procedures. Despite now believing this payment to be irregular, the SFO is unable to cancel it or claw back the cash," she said.
"The SFO showed a total disregard for taxpayers' money when they wrote out a five-figure cheque to the CEO and failed to provide valid justification for the payment. The SFO also ignored Cabinet Office rules when signing off £407,000 worth of pension entitlements."