The council says it will be taking the necessary steps to ensure the funding in question is paid back.
As part of the ongoing work the council is undertaking to review financial governance and practices in line with our Recovery and Improvement Plan, a serious issue has been brought to light involving funds from the council’s Housing Revenue Account being incorrectly credited to the General Fund for all council services.
The Housing Revenue Account is strictly ring-fenced for transactions related to council housing landlord functions and cannot be used for other purposes. The sum involved is circa £15.86m and has accumulated since 2014/15.
A draft report on the issue commissioned by the council from CIPFA (the Chartered Institute of Public Finance and Accountancy) has now been received and makes a number of recommendations. Whilst the council awaits a final version of the report, having regard to the nature of the findings, it is acting without delay.
Steps are being taken immediately to refund the Housing Revenue Account from General Fund reserves by the full amount of £15.86 million (uplifted to current prices). This will not directly affect the council’s revenue budget for day-to-day services.
City Council Leader, Cllr David Mellen, said: “Since I was elected Leader in May 2019, this issue had not been raised directly with me by officers or auditors on whose advice elected councillors rely, until in recent months, when I agreed with the advice of the council’s Corporate Director of Finance and Resources that an external review should be commissioned.
“The initial finding of that review is that the payments concerned are illegitimate. I have therefore asked for an urgent investigation to be carried out to understand how this happened and put measures in place to ensure it cannot happen again.
“This report raises significant questions and as Leader of the Council, I am determined that those questions will be answered.
“We will be taking the necessary steps to ensure the funding in question is paid back into the Housing Revenue Account immediately.”
Mel Barrett, the council’s Chief Executive, said: “This issue is being taken very seriously by the council and needs to be seen in the context of the significant progress being made with the work underway to improve governance, financial management and organisational culture and underlines the importance of that work continuing.
“This event is clearly a setback for the council in the context of the significant improvement journey underway. That this arrangement continued for a number of years is disappointing, however it is positive that things that need discovery and have not been unearthed in the past, are being unearthed now and dealt with.”
Cllr Kevin Clarke, leader of the opposition Independent Group at Nottingham City described the news as “outrageous” and said Nottingham’s council tenants had missed out.
Cllr Mellen said: “That is the purpose of the HRA account to improve tenants properties and repairs and things like that. Clearly putting that money back will enable that to happen.
“We will put that back as soon as we can. There has been significant work done to improve the quality of homes by Nottingham City Homes.”
He added: “My leadership has been about trying to re-establish financial stability for the council and to prove to others we are able to manage our affairs and this is certainly a setback and disappointing.
“It is mystifying I guess how this could have been signed off by so many people before and it is clearly not the right way to spend that money.
“We know about it now we need to do something about it and there are questions and as leader of the council I will make sure we get answers to the questions.”
