Northumberland County Council criticised for 'unlawful' expenditure

Northumberland County Council's finance boss said the council had made unlawful expenditure

A council made "unlawful" £40,000-a-year payments to its chief executive and failed to register a consultancy firm it co-founded, a review has said.

Northumberland County Council agreed deals worth million of pounds but records were not kept, its finance boss Jan Willis said.

Payment of an "international allowance" to its chief executive also amounted to "unlawful expenditure", she added.

Councillors unanimously agreed to a "full independent investigation".

In her report, which was triggered by her concerns over unlawful expenditure and presented to an extraordinary meeting of the full council moments after a review criticised the authority as "dysfunctional", interim executive director of finance Ms Willis highlighted two concerns.

'Accounts not kept'

The first was over the creation of the Northumbria International Alliance (NIA), a joint venture between the council and Northumbria Healthcare NHS Foundation Trust aimed at selling consultancy services abroad.

She said NIA "traded commercially from at least 2018 to 2021" but did not record "all related income and expenditure in the council's accounts" which Ms Willis deemed to be a breach of local authority rules and therefore was "unlawful".

Ms Willis said NIA agreed deals worth £5.8m with clients including the United Arab Emirates (UAE) and China before the company was properly registered in March 2021.

She said: "Although it does not appear that the council has suffered financial loss, and may have made some net gain, this cannot be definitively proven as proper trading accounts and contemporaneous records of all time spent by [council] officers supporting the delivery of these contracts and other business development activities were not kept."

Her second concern was over the payment of a £40,000 annual international allowance to the council's chief executive Daljit Lally since June 2017, which she said was never approved by councillors and did not have "proper authorisation".

'Dismayed and embarrassed'

She said she was "satisfied" the allowance, which came in addition to Mrs Lally's £190,000 salary split between the council and NHS trust, "remains unlawful" and instructed the payment to be suspended.

At an extraordinary meeting of the full council, councillors agreed Ms Willis' numerous recommendations, including a "full independent investigation" into the formation of NIA and stopping the international allowance payments "pending consideration of further legal advice with regard to potential recovery of unlawful payments".

She told councillors it was "rare" for such a report, known as a Section 114, to be made "because in most councils there are processes in place that ensure councils don't make unlawful decisions and in Northumberland these have failed", the Local Democracy Reporting Service said.

Councillors also supported an "internal audit" into a "small number of other potentially unlawful payments to officers" and to "review all exit packages with a value of £100,000 or more over the last two years".

Council leader Glen Sanderson said he was "hugely dismayed and embarrassed" by the report which got "to the bottom" of what councillors had been expressing concerns about "for a very long time".

Deputy leader Richard Wearmouth said he had been accused of "bullying" when trying to find out more details about NIA, adding those asking questions were told to "keep their noses out".