An auditor has identified significant risks as it investigates the possible manipulation of accounts across Nottingham’s council-owned bus firm and a council-run charity that maintains Trent Bridge.
Auditor Grant Thornton has been reviewing the council’s accounts over a number of years, alongside the accounts of any companies and charities it runs as part of a wider group audit.
The financial accounts of councils are reviewed by private audit firms to ensure everything is in check, and is a legal requirement.
According to an initial report, Grant Thornton says it has identified a number of “significant risks” that will require further investigation.
These include “management override of controls” at the Bridge Estate charity – for which the council is the sole trustee – as well as Nottingham City Transport (NCT).
The term relates to when management and those in charge of governance manipulate accounting records or prepare fraudulent financial statements by overriding controls put in place by an organisation.
A further significant risk was found in the “valuation of net pension fund liability” in NCT’s accounts.
The report also notes the council has “a significant number of bank accounts, many more than we would normally see, which require consideration as part of our work”.
A council spokesperson said: “The external auditors have not found or are not reporting on any problems emerging, only flagging up some potential risks at an early stage in the process as part of a progress update.
“The issues raised are a matter for the boards of the organisations concerned. The council’s external auditors will await individual audits to be completed by these organisations’ own auditors before finalising the council’s external audit report.”
The risks were noted at an audit committee meeting on Friday (September 26).
Laurelin Griffiths, key audit partner at Grant Thornton, said: “In terms of significant risks, the presumed significant risk of management override of controls is present across all the entities.
“There is one specific risk in relation to the valuation of Nottingham City Transport’s pension liability, because of the size of the numbers involved.
“The key piece of work we are doing in this area is around council journals, and at this point in time we can’t progress that work because we are waiting on a response from management about what actions they have taken to address the previous issues identified within the control environment, both before the 2024/25 year and any changes that happened during the 2024/25 year.”
It is not the first time management override of controls has been investigated.
An independent assessment of how the Labour-run authority managed some of its money was made public in February last year, after the Information Commissioner’s Office ordered the council to release it, following a campaign by the Local Democracy Reporting Service and Nottinghamshire Live.
Accounting firm Ernst and Young (EY) was first asked to review the council’s books after unlawful spending from the council’s Housing Revenue Account was uncovered in 2021.
The review checked for any “management override of controls” concerning council finances at the time.
It revealed there was a “high risk of controls being circumnavigated through management override”.
“EY observed a weak control environment, ineffective systems, associated management information and a culture which is not focused upon compliance,” the report said.
The Labour-run council is the sole trustee of the Bridge Estate charity, which was set up to maintain Trent Bridge and raised income through the letting of around 100 properties across Nottingham, particularly those in Lister Gate.
The council is also a majority shareholder in NCT. Transdev, the UK arm of the French multinational transport operator, acquired an effective 18 per cent stake in the company in 2000.
NCT has been contacted for comment.
