By Matt Jarram, Local Democracy Reporter
Nottingham City Council is to terminate its contract with Nottingham City Homes after 17 years and will bring its council housing back in-house.
It comes after an independent investigation said up to £40m of ringfenced cash from the Housing Revenue Account (HRA) was spent on the wrong services.
Council housing tenants’ rent which should have been pumped into council housing and repairs was put into general council services instead.
The Penn Report, published on Tuesday, says the money was misspent, including in some cases to prop up council services and to avoid job losses.
It found that the local authority has misspent up to around £22.8m since 2014/15 while Nottingham City Homes, which manages the council housing stock, misspent £17.1m.
The money must now be paid back into the HRA but opposition council leaders are concerned there is not enough money in the bank to ensure that can happen.
Following the report, councillors met on Thursday, April 28, at Nottingham’s Council House to discuss a series of proposals, including terminating the contract with Nottingham City Homes.
Papers prepared for the meeting said the investigations, which the council commissioned, identified issues with “historical financial mismanagement, a lack of adequate record keeping and governance failures”.
Nottingham City Homes says it has not misspent the money adding, the £17.1m is available for council housing.
But councillors at the Executive Board decided to serve 12 months’ notice to terminate the Nottingham City Homes contract and to take over the management of its council housing.
It will cost around £750,000 to bring the service in-house.
Cllr David Mellen (Lab), leader of the city council, said: “We are in a situation where we are on a journey of improvement – and this administration is keen and determined to make the changes necessary.
“Where there have been mistakes, originated some years ago, they need to be put right.
“It is a lift and shift proposal – so the staff will be brought across and the tenants will have their housing management done by the same people.
“We will maintain the service and within consultation with them, improve it. We are determined to put right what has been wrong.”
Cllr Sally Longford (Lab), deputy leader of the council, added: “Obviously this is extremely disappointing.
“It is a misallocation of funding which you expected to be identified by different people along the way including our external auditors.
“Tenants will be aware there is going to be change, but the change is hopefully seamless and there are a lot of projects underway to improve the energy efficiency of council housing.”
Cllr Andrew Rule, leader of the opposition Conservative Group, put forward some recommendations and called it “a damaging series of events.”
He believes external auditors should expand their work by taking “additional tests and sampling of such transactions so irregularities are highlighted at an earlier stage”.
He said any transactions around the Housing Revenue Account should be backed up with thorough documentation, physically and electronically, so that “paper trails can be retrieved in the future if any further transactions are called into question”.
Cllr Sam Webster (Lab), portfolio holder for finance, said in the end this will be “positive” news for the council and housing tenants.
He said: “What I wouldn’t want is these difficult circumstances to overshadow all the good work that happens in housing.
“We are a very proud housing authority – we have a lot of council housing stock across the city and very good quality, well-maintained and good quality homes.
“There is a huge amount of investment that goes on and will continue to go on.
“The ambition we continue to have to build more good quality council houses for Nottingham people.
“Actually, I hope the review and investigation will ultimately lead to a better service for housing for our tenants – and will be a positive end result for the council and for council housing tenants.”
