Nottingham City Council could have wrongly spent another £24m worth of council housing rents, a fresh investigation into accounts and council housing money has revealed.
Following the discovery, the authority will meet later this week to consider bringing Nottingham City Homes in-house.
The Labour-run authority was handed an extremely rare Section 114 legal notice in December for ‘unlawfully’ spending more than £15.8m on the wrong services, now revised down to £14.4m.
It was revealed of £15.86m from the council’s Housing Revenue Account (HRA) – which involves income from council tenants’ rent and should have been spent on housing repairs – were incorrectly credited to the General Fund for all council services.
The HRA is strictly ring-fenced and cannot be used for other purposes. The unlawful spend had taken place since 2014/15.
The council said it intends to replace the lost money from its reserves – but concerns have been raised by opposition leaders there is not enough cash to replace the money lost.
Following further investigation, it was revealed on Tuesday, April 26, up to £24m in extra cash has also been spent on the wrong services.
An independent report says the rent payers’ money could have potentially been incorrectly used since 2014/15 by both Nottingham City Homes and the city council.
It is recommended that this is also repaid – the council says the process has already begun.
Opposition council leaders say the fresh development is worse than the collapse of Robin Hood Energy – a failed council energy company which lost taxpayers an anticipated £38m when it went into administration in 2020.
They are also calling for the company, Nottingham City Homes, which manages the council’s housing, to be brought in-house to prevent any further financial problems.
Cllr Kevin Clarke, opposition leader of Nottingham Independents, said: “It just beggars’ belief. You have got to ask the question – what else is going to come out?
“Nottingham City Homes has got to be brought in-house and the sooner the better. It has got to the point where it is not fit for purpose.
“Housing tenants have missed out. Rents have already gone up, which could have been avoided, and tenants have been waiting for things like replacement boilers.
“If the money was where it should have been, the serious delays (in fixing council tenants’ properties) would not be happening. It is terrible.”
Cllr Andrew Rule, opposition Conservative leader, said that at this point it is unclear where the £24m has gone.
He added: : “Up to this point the Labour Group have tried to deflect criticism of the council saying Robin Hood Energy was a one-off. This shows it is not the case.
“It is worse than Robin Hood Energy because you have got the unlawful spending of the Housing Revenue Account to a value that now eclipses what they lost on Robin Hood Energy.”
The news comes at a time when the council is under the watchful eye of the Government following the failure of Robin Hood Energy.
An improvement board appointed by the Government’s Department for Levelling Up and Communities is monitoring the authority’s progress.
If the council fails to become ‘financially resilient’ and implement a balanced budget over the next four years then the council could be taken over by government commissioners.
Cllr David Mellen (Lab), leader of Nottingham City Council, said: “This is a clearly a setback, particularly as the council has been making significant progress on improving our financial governance over the last year. This issue demonstrates the importance of that work and how thorough it has been.
“Last year we took swift and firm action to issue a Section 114 Notice and commission two independent reports into the circumstances surrounding the HRA funding.
“The findings of these investigations show that the finance and governance arrangements around the ring-fencing of the HRA fell seriously short of acceptable standards, although we are disappointed that this wasn’t flagged up at the time by the council’s external auditors.
“Since these decisions were first taken, new leadership and senior management have shown determination to take the action necessary to address these issues and move forward positively.
“I would like to reassure our council tenants that we are committed to dealing with these past issues, ensuring that lessons are learnt so that these mistakes cannot be repeated in future.
“It’s important to make clear that the funding in question has been used for purposes that benefit local people but that are not an appropriate use of what is effectively tenants’ money.
“It also needs to be recognised that in addition to achieving decent homes standards, Nottingham City Homes has worked to improve core housing services, empower tenants and bring about significant improvements to housing stocks, including the response to fire safety following Grenfell and home insulation works.”
Bringing the management of council housing back under the direct control of Nottingham City Council will be discussed at an Executive Board meeting this week.