‘Significant weaknesses’ have been identified in Nottingham City Council’s accounts by an external auditor.
Grant Thornton, which were appointed as the council’s auditors in 2018/19, have struggled to begin work checking accounts from recent years.
The demise of Robin Hood Energy – a council company which went bust costing taxpayers an anticipated £38m – has been cited as one of the reasons behind the delays.
Grant Thornton have now compiled a report for the council’s audit committee to discuss on Friday, 25 February.
It wants to “place on record the areas that are the most concern” because delays on the audits of the council’s accounts mean it has been some time since the company has made its views known.
The external auditors have not been able to complete the audit for the council’s accounts in 2019/20 due to missing information.
And the council has also not been able to produce and formally publish its Statement of Accounts for 2020/21, meaning Grant Thornton can not progress work on these either.
It has also had to revisit a risk assessment and carry out further work following the council’s unlawful use of more than £15m in ringfenced funds from the income which comes from council house rents.
Following this, the council was handed an extremely rare Section 114 order, which described the activity as ‘unlawful.’ The money must now be paid back.
Grant Thornton said: “We are aware the council is taking the matter seriously and taking actions to identify what happened, to identify whether there are any other similar circumstances and to prevent re-occurrence.”
They added they were not seeking to comment on all the financial issues the council faces and that “significant improvements” had been made.
But they had identified ‘significant weaknesses’ in three areas in 2020/21 – financial sustainability, company governance and delays in finalising accounts.
Previously, the council said it was unable to finalise the statements of accounts for 2019/20 due to two outstanding issues, which were also impacting the 2020/21 statement.
It said Robin Hood Energy auditors had completed the majority of audit work for the company in 2019/20 but the company went into administration before the audit was finalised.
Once in administration, there was no requirement for them to do so or for a set of accounts to be filed, the council said.
However, Grant Thornton said in its report the council appears to hold ‘no reliable information’ on the company’s performance in 2020/21 and it is “very concerned” about this omission.
It does say “more positively” the council now has more information about the accounts from the administrators and officers are analysing the data.
There have also been problems with the valuation of the council’s 75 specialist assets, which include Wollaton Hall, Nottingham Tennis Centre and Nottingham Theatre Royal and Concert Hall.
This is partly due to the internal team which carried out the previous valuations being disbanded and the council not being able to locate the records. It has employed an external provider to now carry out this work.
Grant Thornton said it is required to report any significant weaknesses promptly rather than waiting for all audit work to be completed.
It has identified three areas of significant weakness but understands the council is currently going through ‘a significant change programme’ which impacts on these areas.
This includes making huge savings of £38m over the next four years, creating a culture change across the organisation and putting in place a stable senior management team.
Grant Thornton added: “While the council has taken significant steps towards securing a sustainable financial position this is still work in progress and the extent of uncertainty and risk means we consider this to remain a significant weakness for the 2020/21 audit.
“While the council has taken some important steps to improve its company governance arrangements, there remain much to do and the extent of all of this work reinforces the deep-seated issues which previously existed in this area.
“The delays to the finalisation of the 2019/20 accounts and production of a full set of 2020/21 accounts represent a significant weakness in the council’s arrangements.”
