Agenda item

International Lessons Learned Review

 

To report to the Committee the outcome of the international lessons learned review commissioned following the issue of the S151 Officer’s S114 report in May 2022.

International Lessons Learned Review

 

Members welcomed J. Gilbert, External Advisor to the meeting to report to the Audit Committee the outcome on the International lessons learned review commissioned following the issue of the S151 Officer’s S114 report in May 2022.  (A copy of the report and powerpoint slides has been filed with the signed minutes).

 

Members were reminded that the purpose of the investigation was to draw out key lessons to be learned.  Identify where the council’s processes for ensuing commercial trading activities were undertaken on a lawful basis and subject to appropriate oversight and reporting were fit for purpose fell short of both standard and best practice.  The investigation also made recommendations for addressing any weaknesses identified.

 

J. Gilbert presented a powerpoint presentation which covered the following:

 

A recognition that the investigation followed on from the ‘Caller report’.

 

The background, review methodology and report structure.

 

The process was voluntary with a focus on lessons learnt, not individual blame.

 

A number of individuals were still quite affected by the experience, but there was also evidence of a number of individuals trying to do their best at times in testing circumstances.

 

Following the ‘Caller report’, a number of recommendations in this report were already in place.

 

An explanation on the process of legal maxwellisation, the right to reply to drafts on the investigation report and associated timeline.  

 

It was stressed that the was no hearsay within the report prepared.  It was an evidence-based report.  Although due to the poor governance that was taking place at the time, some conclusions that had to be finally drawn were as much through a lack of evidence, rather than evidence supporting it.

 

The investigation focused on the time span from 2017-2021.  

 

International started as a Trust initiative with Northumberland County Council seeing it as an opportunity to generate income.  

 

There were no solid foundations when International was set up or processes of ‘vetting’.  There was also an absence of any formal management accounts being established.

 

In the beginning there was an assumption that proper governance was in place.  

 

In the first two years the only good formal governance taking place was by the Trust.

 

Members were not inquisitive enough in their questioning of this initiative at the beginning and were evidently very supportive of the work in the first couple of years.

 

In the first two to three years, any meetings held were informal and away from formal scrutiny and audit.  This resulted in inadequate formal governance arrangements which were not formally recognised within the internal control environment of the Council.  

 

In most of the discussions that took place as part of the investigation, both officers and members talked about the increasingly toxic environment it felt like to be working in.  

 

Poor behaviors across the whole Council during periods of International work contributed to a high turnover of statutory officers in particular.  

 

There were eight different S151 Officers in place since 2007 and the sharing of the Monitoring Officer role resulted in gaps of handover and corporate memory.

 

Many interviewees felt that they were operating in an environment where constructive challenge was discouraged, thereby eroding internal checks and balances.  

 

Members did not appear to have been aware of increasing concerns of the Trust Board which culminated in their decision in September 2018 to withdraw from the commercial arrangement and replace it with an overarching co-operation agreement.

 

Formal internal checks and balances that would normally be expected were either weak or absent.

 

Poor internal governance across the Council resulted in the work of International not being picked up as a potential risk area at a level that audit should have overseen, until much later in the journey.

 

The continued turnover of the ‘golden triangle’ of statutory officers did not help.

 

There was an uncertainty around expenditure and key decision criteria linked to the position of the Council’s Constitution at that time.

 

There were several joint posts where senior officers had roles in both the Council and the Trust which blurred accountability.

 

There was a lack of training, development and support for senior officers and members.

 

The S151 and Monitoring Officers were not as close to the work of International as they should have been.  The Monitoring Officer operated at a third-tier level which diminished the level of understanding of this position.

 

There was a complete breakdown in relationships and erosion of trust and confidence between some senior officers and executive members across the Council.  This resulted in questions being asked by Cabinet members not being responded to or responses given not a level which satisfied them.

 

From late 2018 onwards, discussions were taking place about the need to establish a company structure, but various things delayed this including the COVID pandemic.

 

A reminder that the purpose of the investigation was not to look at unlawfulness or to attribute individual blame.

 

The report detailed the key lessons learnt and recommendations going forward.

 

To note that during the course of completing the investigation, the Council had started to formulate a formal governance process that picked up a number of the recommendations or lessons learnt.

 

The Audit Committee would need to monitor the delivery of the recommendations and associated action plan.

 

The importance of the Council moving on from this situation. 

 

The Chair thanked J. Gilbert on the independent investigation report and his presentation today.  He then opened the meeting up for questions.  It was noted M. Greenburgh, External Advisor was also in attendance for any legal input needed.

 

Councillor Grimshaw thanked J. Gilbert for his detailed report.  She commented that she hoped that lessons had been learnt and the informal culture identified was in the past.  She stated that informal Cabinet was still taking place but expected that no formal decisions were being made at these meetings.  The Council needed to now move forward.

 

Councillor Jackson commented on the limited scope of the report commissioned.  He commented that he had asked for Cabinet Members to be interviewed as part of the investigation.  He said that no formal decisions could be made during the time specified as to do that members would need information on what they were being asked to approve, which was not forthcoming.  He stated that questions were being asked but members were not receiving satisfactory replies.  He questioned why the three lines of defence were not followed, why the role of audit was not properly applied and how members of the management team could say they were not aware of what was happening.  J. Gilbert responded by confirming that the investigation was not to point fingers at any individuals.  However, the review had made recommendations which would help address the weakness identified within the management and connectivity of the Council.

 

Councillor Oliver said that he understood the lack of hard evidence that would have been around due to the informality in 2019.  However, he stated that formally he had asked questions.  He commented that although the investigation was not about blame, the question of why still needed answered.  He asked for the opinion of the External Auditor on the matter.  He also asked whether the environment identified where constructive challenge about the work of International was discouraged included not just members but also challenges from the S151 and Monitoring Officers at that time.  In response J. Gilbert stated that the report did summarise why but did not assign individual blame.  From the evidence and strength and weight of those opinions established through interviews, the toxic environmental was a major contributing factor to a breakdown in member/officer relationships.  The environment could not have encouraged a two-way dialogue between both.  He stated that the report was evidence based with no hearsay or guesswork included.  The External Auditor said that he had nothing to add as the S114 notice had stated it all from their perspective.

 

Councillor Dale commented on the key lessons learnt within the report.  She stated that although she was not aware of International at first, she did write to the External Auditor in 2019 about her concerns.  It was worrying that there were no paper trails of decisions made or of questions being raised during this time.  She stated that it was clear that during this time there had been a breakdown of controls, there were no adequate lines of defence and there was a very high turnover of staff.  She asked if councillors and officers needed additional training, and whether the external advisor was satisfied that the investigation was evidence based.  In response it was confirmed that the investigation was based on evidence gathered but as previously reported some conclusions that had to be finally drawn were as much through a lack of evidence, rather than evidence supporting it.  The recommendations detailed in the report included training and support for members and officers.

 

Councillor Oliver commented on a past investigation that had taken place to examine International.  On that occasion a barrister was appointed to investigate.  He queried whether a report had been prepared from the barrister’s investigation as he was aware that interviews had taken place.  He also asked if the barrister of the previous investigation had been approached as part of this work.  J. Gilbert confirmed that he had not contacted the barrister, as the scope of his investigation had been different.

 

Councillor Oliver stated that the lessons learnt investigation had made it clear that systems/processes that were in place had been overridden.  He asked what had changed to ensure the same problems did not happen in the future.  In response, it was confirmed that if the recommendations and lessons learnt were taken onboard and implemented, they would help mitigate risks.  

 

Councillor Wallace asked if this report would be reported to full County Council and whether members of the public and opposition councillors would have the opportunity to ask questions there.  J. Willis confirmed that governance matters were for Audit Committee not full County Council.  It was not intended to bring the report to a meeting of County Council and questioned what additional purpose would be served.  Meetings of Audit Committee were open to the public and reports available on the Council’s website for all to access.  

 

Councillor Wallace replied that he felt for accountability and transparency reasons the report should be reported to a meeting of County Council.  He commented on an email received before the meeting which he felt was informing members what they could or could not say on this matter.  The Chair stated that the only purpose of the email was to advise councillors on legal matters associated with the report.

 

Councillor Wallace asked the Head of Internal Audit and Risk Management if he was satisfied that lessons had been learnt and recommendations were being implemented.  K. McDonald reported that some of the details covered a period when he was not in position.  However, Internal Audit annually prepared an audit plan on risks. This ensured that an effective internal audit to evaluate the effectiveness of the Council’s risk management, control and governance processes took place.  He was comfortable and confident that proportional and measured risks were now being taken.  Internal Audit continued to review, but at the minute there was nothing to flag.

 

Councillor Grimshaw asked a question on behalf of members of the public as to how much the investigation had cost.  J. Willis said it would be difficult to quantify officer time, but she could provide information to Councillor Grimshaw outside the meeting. 

 

Councillor Wallace left the meeting at this point.

 

Councillor Reid commented on the business dealings of International and stated that the Council should have always seen it as a bad idea.  Delivering services in local areas should have been the top priority for the Council not conducting training in overseas countries.  He pointed out that within the report there were some inaccuracies in the timeline.  One example of this was that the Leader had not stood down in September 2020; he lost a vote of no confidence.  He stated that it seemed that the Leader at the time was the only person who had paid any political price for the failings associated with International.

 

Councillor Dale commented on the Risk Appraisal Panel, the value of the panel and the need to utilise it formally and effectively.  It was confirmed that this would be the case and was covered in the recommendations within the report.  

 

Councillor Jackson discussed the attempts he made to raise concerns including his whistleblowing report.  He commented that his concerns were passed to Northumbria Police who suggested the Council conduct its own investigation.  He queried where the responsibility lay and if following this investigation, the Council should take any further actions or referrals.

 

In response the Monitoring Officer stated that the mater of prosecution was for the police to decide upon.  There had been an internal review which had now been concluded.  There was no reason to reopen the matter although if anything was to change, he would advise.

 

Councillor Grimshaw thanked those officers who had continued to work hard during this time often under difficult circumstances.

 

RESOLVED that Audit Committee note the recommendations set out in the report and action plan and agree to receive a progress update in 6 months’ time.