'Unlawful expenditure' reported at Northumberland County Council

County Hall in Morpeth.County Hall in Morpeth.
County Hall in Morpeth.
Drastic action has been taken at Northumberland’s county hall after the council’s top finance boss revealed ‘unlawful expenditure’.

The report from the council’s chief finance officer reveals two aspects of ‘unlawful expenditure’ – one relating to the council’s participation in the Northumbria International Alliance, and the other relating to an allowance paid to the chief executive.

The report states that a special ‘international allowance’ of £40,000 a year has been paid to the council’s chief executive, Daljiy Lally, since 2017 on top of her salary, stated to be £190,000 a year as of that year.

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The payments were allegedly made without the ‘proper authorisation’ and contravening the council’s pay policy statements. The funding was related to her responsibilities undertaken with NIA.

Known as a Section 114 notice, the move requires the council to hold a meeting within 21 days to discuss the report and decide what action it will take. The chair of the council has confirmed this will happen during the extraordinary meeting on June 8 where the Max Caller review into the council’s governance is also due to be presented to members.

The Section 114 report does not “seek to attribute any individual blame or responsibility for actions or omissions that have led to the unlawful expenditure identified in this report and should not be read as such.”

Furthermore, it notes in the recommendations that the council “does not have appeared to have suffered any financial loss” and that it “may have been a net beneficiary of international consultancy activities.”

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Northumbria International Allowance (NIA) is a healthcare consultancy business which has been running since 2017 in partnership with Northumbria Healthcare NHS Foundation Trust. However, the report states that NIA was an ‘unincorporated partnership’ established for a commercial purpose, breaching Section 4(2) of the Localism Act 2011.

Any future or on-going expenditure will now be incurred by Northumbria Integrated Consultancy Limited (NICL) a wholly owned subsidiary of the council, according to the report.

Council Leader Coun Glen Sanderson said: “When I took office as leader 12 months ago, I called for a thorough review of our governance arrangements. Whilst the contents of this financial report are very serious and reveal a worrying failure of governance and lack of transparency at county hall, I am reassured that these matters are now being made public.

“When the council meets to consider the contents of this report, together with the corporate governance review we commissioned from Max Caller CBE, I will ensure that the administration takes all appropriate steps to ensure that there is a new culture of openness, trust and accountability, in all that we do.”

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Councils usually issue a report under Section 114 when it has gone bankrupt and cannot meet the financial obligations of the coming year.

However, it is understood Northumberland County Council’s finances are currently in good shape. Under the Local Government Finance Act 1988, the chief finance officer of an authority may make a report under the section “if it appears to them that the authority, a committee of the authority, a person holding any office or employment under the authority, or a joint committee on which the authority is represented:

Has made or is about to make a decision which involves or would involve the authority incurring expenditure which is unlawful, Has taken or is about to take a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency on the part of the authority, or Has or is about to enter an item of account the entry of which is unlawful.”

Cllr Sanderson added: “I want to reassure our residents, partners and staff on two key points: firstly, the Council continues to operate on a very sound financial footing, with a balanced budget and clear financial plan; and secondly, we continue to deliver high-performing services across neighbourhoods, schools, investment & jobs and in our key statutory services, thanks to our excellent staff.

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“I want to thank the chief financial officer and the monitoring officer, who have their statutory reporting functions, for having the courage and determination to discharge their duties, in difficult circumstances. I want to reassure everyone that my administration, that has only been in office for one year, will not rest until this matter is resolved.”

Northumberland County Council CEO Daljit Lally has been contacted for comment.