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Nottingham Post
Nottingham Post
Joseph Locker

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

Questions have been raised over charges dating back as far as the 1990s as Nottingham City Council faces investigations over a series of misspends which could total an estimated £40m. At the end of 2021 the 'unlawful treatment' by the council of money intended for Nottingham City Homes' (NCH) tenants and housing stock was uncovered.

The unlawful use of money initially totalled almost £15m, but two investigations have more recently uncovered many millions more may have been misspent at the "disadvantage" of council tenants. The ringfenced money, from the council's Housing Revenue Account (HRA), could have been spent on 'non-HRA activity' according to the reports released on Tuesday, April 26.

The reports, conducted by the Chartered Institute of Public Finance and Accountancy (CIPFA) and investigator Richard Penn, state just over £22m had been misspent by the council since 2014/15, while NCH allegedly misspent £17.1m from 2014/15. NCH denies this.

Read more: 'Don't rock the boat', council employees told amid unlawful payment revelations

It was therefore recommended by investigators that Nottingham City Homes should be brought under the full control of the city council to "put right" a series of potentially unlawful payments and a 12-month contract termination notice has been served.

A shake-up has also taken place, the council revealed during an audit committee meeting at Loxley House on Friday, May 6. A new housing director has been appointed while NCH's finance director has made an exit and "has been replaced".

Councillors raised concerns over the pace they are being asked to improve the authority's operations, with many problematic actions being historic, complex and done with little to no paperwork or online documentation for them. Further investigations will now have to be conducted after one councillor questioned charges relating to street lighting.

Councillor Graham Chapman, who represents Aspley, raised concerns over the two review reports and the final total which needs to be repaid, which currently stands at up to £40m. Some areas, he suggested, may not have been as costly as there may be justification, but he questioned street light charges brought up in one of the two reviews.

Street lighting is today paid for and maintained using money from the general fund. However the CIPFA review discovered "a number of decisions have been taken that do not appear to be justifiable and appear to undermine the HRA ring-fence" and this included £2,272,420 in charges relating to street lighting.

Councillor Chapman said: "Why I am concerned about the rush is perhaps people haven't had sufficient discussions with NCH to sort these issues out. Street lighting hasn't been justified and so therefore the money needs to be recouped, rather than we need to find a justification for it, and that seems to be a bit premature.

He said the start date of 2014/15 seems a "very arbitrary" date and added: "We've been re-charging the street lighting since the '90s."

Councillor Chapman says the damage the news has done to the council's reputation is "enormous" and suggested the final total should not have been revealed to the public until investigations had concluded. "I can look at a few areas where I think we could knock that bill down," he said.

The council's corporate finance director and section 151 officer, who discovered the first batch of unlawful payments, responded to his questions. Mr Heaphy explained there had been several weeks of "forensic accounting" and that 2014/15 was a logical start date because this is where the paper trail of evidence began in the form of 'management fee rebate' payments listed on documents. He also suggested the final total could potentially end up being higher.

It may well be that legislation was different in relation to the aforementioned charges before 2014/15 but they will now be investigated. Mr Heaphy told councillors: "On the point of 14/15 as a start year clearly they have picked that because that was the year in terms of the management fee rebate. Now I know street lighting goes back to the 1990s I will look further back.

"It is important we get it right and get the accounts right, so that was the start point based on when the management fee rebates start. It was a logical start-point for the first phase of the investigation. In general terms the approach from CIPFA is unless they can evidence it they will report against it.

"That does not mean we can continue to look for evidence and support it, the point I make is we should not have to look for this evidence. It should be there in black and white."

The work to right the wrongs is also set to require even more external resources. This has already cost the city council significant sums, with some external consultants charging fees of over £1,000 per day.

Mr Heaphy added "significant external resource will be required" going forward. He says the council will require "additional resource well above my team because we are going back a number of years to help us do this".

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