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James Robinson

Investigation into alleged rule-breaking at Northumberland County Council moves closer

An independent investigation into alleged rule-breaking at Northumberland County Council has moved a step closer after the draft terms of the review were published.

It comes after a section 114 notice was published in May identifying alleged "unlawful expenditure" at the authority relating to the international health consultancy business, as well as a £40,000 annual payment made to chief executive Daljit Lally as an "international allowance" in connection with the business.

At Wednesday's meeting of the council's audit committee, members were presented with the draft terms that will see an independent investigator look into the circumstances that allowed work to continue in the allegedly unlawful manner between 2017 and 2021.

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The draft terms of reference were as follows:

1. What was the original basis of the agreement to participate with Northumbria Healthcare Foundation Trust in the Northumbria International Alliance? Who authorised this?
2. How, when, and why did the arrangement change and who authorised this?
3. How was advice regarding the legal basis for these commercial trading activities commissioned and what involvement did the NCC legal team have in this?
4. What advice was given, or concerns raised by the statutory officers, NCC legal team and others regarding the lawfulness of the activity and what evidence is there that these were acted upon?
5. What management controls over commercial trading activities were in place over this period and how were they overridden, and the 3 lines of defence circumvented? What steps need to be taken to ensure that this cannot happen again?
6. Did the international business make a profit and if so, how was this shared between NCC and NHCFT?
7. Was the financial position accurately reported to members?
8. On what basis was the Chief Executive paid an international allowance from 2017? Did the NHCFT or the CCG pay a similar allowance at any point prior to December 2017?
9. Who approved travel expenses incurred in relation to the international business by the Chief Executive and other officers and members? Were these reasonable and proportionate and did they comply with the NCC business travel policy in force at the time?

A Freedom of Information request by the Local Democracy Reporting Service found that Mrs Lally had flown to Dubai seven times between January 2018 and December 2019. The total cost of the flights - excluding VAT - came to £18,825.87, with the most expensive flight in March 2018 costing £3,792.22.

However, at a meeting later that same day , councillors agreed a six-figure settlement with Mrs Lally to end her employment with the council. Part of the agreement included the former CEO keeping £100,000 of the international allowance, with just over £79,000 to be recovered by the council.

Councillors have repeatedly been told that while it does not appear that the business lost the council money, the amount of profit it made is virtually impossible to ascertain due to poor record keeping. Speaking at Wednesday's meeting of the audit committee, councillors and independent members raised further issues they believed should be included in the investigation.

Chairman Stephen Watson said: "I think we're quite keen to see this review taker place. I think there is a consensus that there is a part missing.

"I think there needs to be a point about risk management and due diligence."

Coun Peter Jackson added that he felt the investigation needed to look back to 2016 when the business was originally proposed to see whether there was "proper governance around the whole process from the start".

He continued: "If you miss that start, you're playing catch-up."

Coun Nick Oliver said: "I'm concerned about processes being overridden. This report will identify what went wrong and how we can stop this happening in the future.

"Can we include something that stops process being overridden?"

The committee agreed to "tentatively endorse" the terms of reference with the amendments they had asked for.

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