By Joe Locker, Local Democracy Reporter
Staff shortages have delayed the fixing of some problems found during a review of Nottingham City Council’s financial management.
Accounting firm Ernst and Young (EY) was asked to review the authority’s books after unlawful spending from the council’s Housing Revenue Account was uncovered in 2021.
During an Audit Committee meeting on Friday, February 23, councillors were told progress to fix the problems EY found was being made, but delays had been encountered.
EY was commissioned to check if any more ring-fenced money had been incorrectly used after millions of pounds intended for council housing and tenants was wrongly and unlawfully transferred to the authority’s general fund.
Members of the public, press and councillors had initially been refused access to the full report.
It was only made public at the start of February, following a number of Freedom of Information request attempts and a successful appeal to the Information Commissioner’s Office (ICO).
The report revealed four of six areas had a medium risk of management overriding financial controls, while the parking department had a high risk.
There was a perception money from parking enforcement and licensing was used as a means to meet budget pressures, while fines were treated as a “cash cow” with income targets set contra to regulations.
During Friday’s meeting Shabana Kausar, the director of finance, said: “There was a high risk of controls circumventing through management override.
“As a result we commissioned EY to do the remediation work that we have been reporting back on.
“We are looking at 71 per cent, but there is still about 29 per cent, about eleven things, that we need to do.”
Work being done includes regulating access to financial and control systems, filing and looking at compliance.
This work is expected to commence in April.
Some delays have been encountered, largely due to staffing shortages in the finance department.
Some of the work will form part of a wider Finance Improvement Plan, while additional work is also ongoing to meet a series of instructions from the Improvement and Assurance Board (IAB), which is now being replaced by Government commissioners as of February 22.
The work the IAB has been doing will be transferred over to the three commissioners to allow for a smooth transition.
Some of the instructions include setting a balanced budget, maintaining reserves, and paying back Housing Revenue Account funding that was misspent.
The authority is still facing a £23m in-year budget gap, which led to it declaring effective bankruptcy in November, and a £53m gap in 2024/25, which has resulted in planned cuts to services.
Setting a balanced budget is subject to the Government approving £65m in emergency financial support.
Meanwhile, the misspent millions from the Housing Revenue Account is expected to be paid back over a period of eight years.
With interest and inflation, this is expected to cost up to £51m to make right.
“What I am trying to give you assurance on is there is very little that we are not working on,” Ms Kausar added.
“From a proportionality perspective it is very good progress we are making and we will continue to make.”
