By Joe Locker, Local Democracy Reporter
The Nottingham city councillor in charge of finance believes the authority won’t uncover any more “financial scandals” in its accounts.
The Labour-run authority is currently having its finances reviewed by national auditor Grant Thornton to ensure everything is in order.
This is standard practice for all local authorities across the country.
But previous issues have been uncovered in the council’s finances, including misspent Housing Revenue Account (HRA) money dating back to the start of 2014. The total cost to amend the issue is estimated to be in the region of £51m.
This contributed to the council effectively declaring bankruptcy last November.
However, auditor Grant Thornton has said it’s “quite likely” it won’t be able to provide total assurance over some accounts by a new deadline due to a significant national backlog.
The backlog of unfinished accounts is expected to grow to 1,000 by September, and the Government has now proposed “significant measures” to reset the system.
At the end of July, Minister of State Jim McMahon (Lab) said all accounts up to 2022/23 must be signed off by auditors, even if they are not fully completed, by December 13, 2024.
Unfinished accounts will be published with a disclaimer as a result.
Now Cllr Linda Woodings (Lab), executive member for finance, told the Local Democracy Reporting Service she’s confident the council’s accounts will be the best set possible given the constraints.
“I don’t think we will find, I am going to touch wood here, any more financial scandals in Nottingham, because wherever we’ve looked we have found stuff and we’ve fixed it,” she said.
“But people have been through our accounts with a fine tooth comb now.
“The problem is, if you don’t have a backstop, these accounts will keep building up.”
There have been certain Nottingham-specific problems preventing the completion of annual accounts.
One major problem was the wrongful spending of HRA cash, which has caused delays in the publication of the 2019/20 accounts.
Money from the HRA, intended for council housing and tenants, was wrongly transferred to the council’s General Fund over a series of years.
“[Grant Thornton] is being ultra-cautious now because previous external audits completely missed some pretty obvious stuff that we should have known about, and have objected to, there and then,” Cllr Woodings said.
“I don’t blame them for being cautious and double-checking things.”
On top of the Nottingham-specific problems, auditors have been facing a worsening national backlog.
The Audit Commission had conducted the assessments until it was closed in 2015 under the previous Conservative Government, and work is now outsourced to private firms.
Cllr Woodings said the firms have been battling a financial system that is becoming ever-more complicated, and this has gone some way to causing a shortage in audit capacity.
“We use companies like PwC, Grant Thornton, they do the external audits and there is a big shortage in people who are skilled-up to do that,” she added.
“You will keep hearing us talk about this £100m per year less we get in our Revenue Support Grant. Obviously, we have £100m per year less, but we get separate pots of grant-funded money for one-off purposes, and every time you build in a level of complexity like that, that has to be audited as well.
“Local authority accounts have become more complicated because of the way councils have been funded.”
The previous Conservative Government had proposed the end of September as the deadline, however, due to the election a decision was postponed.
Under the new Labour Government, the deadline for all accounts up to 2022/23 has been extended to December 13.
Deadlines have also been set for each year up to 2027/28.
Minister of State Jim McMahon said: “We know how important local services are to our communities and how vital it is councils, and other local bodies, have the financial transparency needed to continue to deliver them.
“We inherited a broken local audit system. These proposals will tackle the immediate challenge of the backlog, but work is also underway to deliver our manifesto commitment to overhaul the system to ensure it is fit, legal and decent and works for everyone.”
