A new report highlighting a series of risks and concerns over Nottingham’s finances “may as well have been written on the back of a fag packet”, a councillor says.
The financial accounts of public organisations, such as councils, are reviewed by audit firms to make sure public money is being managed correctly. Not only that, they can also act as an early-warning indicator for financial distress.
Grant Thornton, the firm that has been reviewing Nottingham City Council’s accounts dating back to 2019, has published its latest report for the year ending March 2025.
It says it has “no assurance” over the council’s cash balances at the start of the year and, as a result, cannot be sure of its closing balances.
A series of risks relating to financial management have also been highlighted, including the potential for managers to ignore controls and for revenue or expenditure to run the risk of including fraudulent transactions.
However, the council’s leadership and a senior officer have disputed the report, arguing it is now out of date and that the auditing of local government is in a “mess” after it was effectively privatised.
Cllr Ethan Radford (Lab), deputy leader of the council, claimed the auditor was “covering its backside” after unlawful spending from the Labour-led authority’s housing account – over a period of seven years – was missed and only later uncovered in 2021.
He said the report may as well have been written “on the back of a fag packet” and said: “The whole national state of audit is a mess. For context, this is a case of an external auditor covering their backside.
“It is a snapshot in time; it is not reflective of much of the improvement that has been made within the authority, and you have the perverse situation of an external auditor saying they can’t give an opinion, but then giving an opinion.
“The fact the Nottingham taxpayer has paid nearly half a million pounds, which we don’t have a choice but to pay because we are in a contract with them, is something that is just not worth leaning against.”
Grant Thornton’s report says a number of historical problems have impacted its work, both on its own side and on the part of the council, leading to it being unable to give a final opinion on the accounts.
The council’s failings, including the collapse of Robin Hood Energy and the unlawful transfer of housing money to its account for day-to-day services, have contributed to a large number of errors in its accounts and more work for the auditor.
Grant Thornton’s report also says: “There are several areas of our work where significant queries have not been responded to, key information remains outstanding to allow us to select samples, or information remains outstanding to support the sample items selected.”
Conversely, a significant backlog in public sector audits has built up ever since the Audit Commission was abolished under a previous Conservative government, with work now outsourced to private firms.
The issue became so severe between 2022 and 2023 that just one per cent of local public bodies published audited accounts on time.
In response, the Government has set a series of new deadlines to clear the backlog and allow the system to recover, meaning a significant number of councils will have their accounts signed off despite not being fully reviewed.
Eric Pickles, the Conservative Secretary of State for Local Government in the Conservative–Liberal Democrat coalition government in 2010, abolished the Audit Commission in a bid to save £1 billion and “reduce bureaucratic public bodies”.
The independent public corporation’s closure came despite it being considered one of the most successful regulators in the recent history of British government, according to a report from the Institute for Government.
Public audit has been outsourced to the few private firms that believed they had the resources to conduct such a significant task; however, the scale of the task has proven almost insurmountable.
“It is widely accepted that the outsourcing of local public audit has been an unmitigated disaster,” Peter Murphy, a professor in public policy and management at NTU, told the LDRS in 2025.
That same year, academics from the Audit Lab in Sheffield said the abolition had actually led to soaring costs and “chaos”.
Fees charged by Grant Thornton for the audit this year have cost the taxpayer £645,000, and value for money has previously been raised as a concern among councillors in the city.
Stuart Fair, the council’s corporate director of finance and Section 151 officer, said: “The fact auditors have not been able to – and it is a sector-wide issue – properly audit local authority accounts has meant you really can’t rely upon what they say about them because they give no opinion. It is a disclaimed opinion.
“It’s going to take some time, and the Government has tried to create a pathway to what they have called restoring assurance. It is going to take years.
“The root cause of this is the abolition of the Audit Commission by the coalition government in 2010/11, which has sown the seeds of this. At least we had government oversight of audit, and they had their own auditors supplemented by commercial firms. It worked really well.
“The abolition of the Audit Commission, I think, is the harbinger of this. It doesn’t happen elsewhere, including in Scotland.”
Asked where city taxpayers should therefore seek assurance from, he added: “We’ve had two years of commissioners here; one of them was an expert finance commissioner, ex-151 officer at Essex County Council, well experienced, Margaret Lee.
“We’ve had CIPFA in, and they’ve looked at financial management. Most commissioner interventions have exceeded their period of commission; ours didn’t. If there had been any doubt about financial sustainability, they would have stuck around.”
Grant Thornton has been approached for comment.
