Nottingham City Council: Questions raised over payments dating back to 1990s

Questions have been raised over charges dating back to the 1990s as Nottingham City Council faces inquiries into a series of wasteful spending which could total around £40million. In late 2021, the council’s ‘unlawful handling’ of money intended for Nottingham City Homes (NCH) tenants and housing stock was uncovered.

The illegal use of money initially amounted to almost £15million, but two inquiries recently revealed that several million more could have been misspent to the ‘disadvantage’ of council tenants. According to reports on Tuesday April 26, the earmarked money, from the council’s Housing Revenue Account (HRA), could have been spent on ‘non-HRA activities’.

The reports, led by the Chartered Institute of Public Finance and Accountancy (CIPFA) and investigator Richard Penn, say just over £22million has been misspent by the council since 2014/15, while NCH reportedly spent £17.1million from 2014/15. NCH ​​denies this.

Read more: ‘Don’t rock the boat,’ council workers say amid revelations of illegal payments

It was therefore recommended by investigators that Nottingham City Homes be placed under the full control of the City Council to ‘repair’ a series of potentially illegal payments and 12 months’ notice to terminate the contract was served.

A reshuffle has also taken place, the board revealed at an audit committee meeting at Loxley House on Friday May 6. A new director of housing has been appointed while NCH’s chief financial officer has made a departure and “has been replaced”.

Advisors have expressed concern about the pace at which they are being asked to improve the authority’s operations, with many problematic actions being historical, complex and done with little or no paperwork or online documentation for them. Further inquiries will now have to be carried out after a councilor questioned the accusations relating to the public lighting.

Councilor Graham Chapman, who represents Aspley, raised concerns about the two review reports and the final total to be repaid, which currently stands at £40m. Some areas, he suggested, were perhaps not as costly as there was reason to be, but he questioned the street lighting charges mentioned in one of the two reviews.

Public lighting is now paid for and maintained with money from the general fund. However, the CIPFA review found ‘a number of decisions have been made which do not appear justifiable and appear to undermine the HRA fence’ and this included £2,272,420 of charges relating to street lighting.

Councilor Chapman said: “Why I’m concerned about the rush is that maybe people haven’t had enough discussions with NCH to sort out these issues. The street lighting hasn’t been justified and so the money needs to be recovered, rather than we need to find a justification for it, and that seems a bit premature.

He said the start date of 2014/15 seems a “very arbitrary” date and added: “We have been recharging street lighting since the 90s”.

Councilor Chapman said the damage caused by the news to the council’s reputation was “enormous” and suggested the final total should not have been released to the public until investigations were completed. “I can look at a few areas where I think we could knock this bill down,” he said.

The council’s corporate finance director and Section 151 officer, who uncovered the first batch of illegal payments, answered her questions. Mr Heaphy explained that there had been several weeks of ‘forensic accounting’ and that 2014/15 was a logical start date as that is when the paper trail of evidence began in the form of ‘rebate’ payments on the management fees” indicated on the documents. He also suggested that the final total could potentially be higher.

Legislation may be different in relation to the above charges prior to 2014/15, but they will now be investigated. Mr Heaphy told advisers: “On the verge of 14/15 as the starting year, they clearly chose this year because it was the year in terms of management fee rebate. Now I know that public lighting dates back to the 1990s, I will look further back.

“It’s important that we do things right and have the right accounts, so that was the starting point based on when the management fee rebates start. It was a logical starting point for the Phase 1 of the investigation In general terms, CIPFA’s approach is unless they can prove it, they will report it.

“That doesn’t mean we can keep looking for evidence and backing it up, what I mean is we shouldn’t have to look for that evidence. It should be there in black and white.”

Grievance redress work is also expected to require even more external resources. This has already cost the council significant sums, with some external consultants charging fees of over £1,000 a day.

Mr Heaphy added that “significant external resources will be required” in the future. He says the board will need ‘additional resources way above my team because we are going back several years to help us do this’.

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