Auditor issues ‘bankrupt’ Nottingham City Council with legal notice over its accounts

Loxley House HQ in Nottingham
Loxley House HQ in Nottingham
By Joe Locker, Local Democracy Reporter

An auditor reviewing Nottingham City Council’s accounts has issued the authority a legal notice requiring it to consider a number of recommendations.

Grant Thornton has been reviewing the council’s yearly accounts from 2019 through to 2023, and is now in the process of looking at the authority’s in-year accounts for 2023 to 2024.

It is typical for an auditor examine the books of a local authority to ensure finances are in order and being managed in the correct way.

In October last year Andrew Smith, key audit partner for Grant Thornton, said during a council meeting he was “very concerned” over the council’s financial position.

A month later in November the council issued a Section 114 notice, effectively declaring itself bankrupt, over a £23m in-year budget gap.

A separate £53m hole in the 2024/25 budget has also resulted in a proposals for a series of sweeping cuts and a request for emergency financial support.

Consequently the Department for Levelling Up, Housing and Communities decided to appoint commissioners to help run the council on February 22.

During an Audit Committee meeting on Friday, February 23, it was revealed Grant Thornton has issued what is known as a Section 24 statutory notice following its concerns.

Under the Local Audit and Accountability Act 2014, auditors have powers to issue a public interest report or make written statutory recommendations.

The recommendations must be sent to the Secretary of State, and the statutory powers require councils to take action on a number of areas.

Helen Lillington, who was representing Grant Thornton in the absence of Andrew Smith, said: “As auditors it is part of the regulations, it is part of our wider powers.

“You can imagine that we don’t take those lightly. That is supported by a panel and a risk management process by our firm as well to make sure those judgements are consistent and appropriate in light of the circumstances.”

Chairman of the committee, Cllr Sam Gardiner (Lab), said he had been taken by surprise by Grant Thornton’s decision to issue the notice.

“[Andrew Smith] has come to the committee before and has expressed concerns, and has talked about writing a letter to the chief executive about the concerns, but not once has he explained to this committee he was concerned enough to be issuing a Section 24 statutory notice,” he said.

A formal letter was first sent to the council on February 9, however it was only communicated on February 21 to members, Cllr Gardiner added.

The notice requires the council to meet to discuss the statutory recommendations and this is expected to take place on March 4.

Councillors questioned whether the issuing of Section 24 notices had become more commonplace due to soaring costs in social care and demand for homelessness support, which the council says resulted in 80 per cent of its recent budget overspends.

Other councils, including Slough and Birmingham, have before been issued with the notices.

Ms Lillington said they are perhaps a reflection of the financial challenges facing councils today.

“The environment is changing significantly,” she said.

“I probably would have sat here five, six years ago, and the incidents of auditors actually using any of their wider powers to issue any report was very, very rare and largely unheard of.

“That landscape has changed significantly with the introduction of more public interest reports and certainly more statutory recommendations being made.”

The council is also facing delays in the auditing process, as are many local authorities across the country, prompting a Government review and a consultation to determine how to improve the situation.

Private auditing firms are now commissioned to review council books, after the Audit Commission closed under the Conservative Government in 2015.

Nottingham City Council currently has four sets of accounts that should have already been published with audit opinions, including the accounts from 2019/21 through to 2022/23.

Additional staff have been employed to help clear the backlog and an extra £92,000 spend has been agreed to reflect issues encountered through the auditing process.

In total around £640,000 has been spent so far.

The exact details of the recommendations as part of the Section 24 notice are not yet publicly available and will be published ahead of Full Council in March, the City Council says.

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