Report highlights risk of ‘inappropriate financial activity’ at Nottingham City Council

A new report commissioned by Nottingham City Council has highlighted “very serious” concerns about the way the authority handles its finances.

Ernst & Young (EY) was asked to produce the report following a turbulent period which saw the Government come close to appointing commissioners at Loxley House after over £40m was misspent by the council.

Ministers backtracked on the plan in September 2022, instead choosing to strengthen the powers of the independent Improvement and Assurance Board (IAB) overseeing progress on improvements in Nottingham.

However, EY’s report, which pertains to the period between 2019 to 2022, has identified “fundamental weakness[es] in the control environment” at the authority.

Documents seen by TheBusinessDesk.com state that while no further funds have been misspent, “urgent intervention” is required to avoid the risk of “inappropriate financial activity” at the authority.

The council is yet to publish the report in full.

Responding in a statement, Nottingham City Council said it was important to be “clear” that “there is nothing specifically identified within the samples tested in the assessment that suggests any allocated funds have been misspent or funding has not been used for its overall intended purpose.

“The assessment identified a number of serious concerns including a weak control environment, ineffective systems, associated management information and a culture which is not focused upon compliance. Specific issues include the inability to find documents, no purchase order or goods received note prior to invoice, document retention; eligibility for charging employees to ring fenced accounts and no evidence of approvals and approvers able to authorise above their set limits.”

“Wider improvements to the council’s financial governance are ongoing as part of the Financial Improvement Plan”, the statement adds.

“The findings and recommendations of the assessment will now form a key part of the existing plan with work being carried out to ensure changes are made as quickly as possible.”

The council says it has responded quickly by commissioning an initial three-month remediation plan which is expected to be discussed on 30 June.

The assessment has also been discussed with the Improvement and Assurance Board.

Ross Brown, corporate director of finance & resources at Nottingham City Council, said: “We’ve been undertaking detailed work since significant issues were found with our Housing Revenue Account, including how we receive and process ring-fenced grants which are allocated to the council for a certain projects or areas of our work.

“Whilst this assessment hasn’t specifically identified that allocated funds have been misspent in the samples tested, it has revealed serious weaknesses in this area, and it’s clear that urgent action needs to be taken to improve procedures and practices from the point of acceptance through to delivery of services.

“We’re committed to reviewing all our financial processes as part of our wider improvement journey.

“We have already taken action to address the findings of the assessment but further work is needed. An initial three-month strategy is already in place which will work alongside our wider Financial Improvement Plan.”

Cllr Audra Wynter, the Council’s deputy leader and portfolio holder for finance & HR, added: “It’s right that as part of our improvement journey we are unflinching in our efforts to identify any issues in our finance and governance arrangements. We can reassure residents and partner organisations that we are working to address the underlying issues as a top priority.”