Nottingham City Council faces bankruptcy

Nottingham City Council could declare itself bankrupt in the next few days, it has emerged.

The stricken council, which is struggling with a £26m gap in its finances for its financial year to April 2024, is on the verge of issuing a bankruptcy notice, according to reports from Nottinghamshire Live.

If the Labour-led council is unable to find the cash it needs to meet the finance gap, its finance boss could issue a Section 114 notice, effectively saying it can’t meet its spending forecast for the year, such as Birmingham City Council did recently. The move would mean that any further spending by the council is banned – unless the chief financial officer gives permission.

The move would cap another tumultuous year for the council.

In June, report commissioned by Nottingham City Council 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 added.

“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.”

In a separate move yesterday (November 9), the Government official in charge of keeping track of any improvements at Nottingham City Council, Sir Tony Redmond, the chair of the IAB, was told he is to get a pay rise – backdated and funded by the council.

A letter to Redmond from Max Soule of the Department for Levelling Up, Housing and Communities, said: ”

I am writing to let you know that the Secretary of State has decided to increase your daily fee from £900 to £1,000, and to increase the daily fees for the other independent members of the Nottingham City Council Improvement and Assurance Board from £800 to £900.

“This reflects the changed status of the board, which was moved to a statutory footing as per the Directions
issued on 2 September 2022. As per those Directions, the Council are directed to meet these fees, and the Secretary of State expects Nottingham City Council to backdate this uplift to the start of the statutory intervention on 2 September 2022.

“I would like to take this opportunity to thank you and the Board for your continued hard work to support this intervention, and for your commitment to improving the performance of Nottingham City Council.”

Last month, the authority cancelled its fireworks display for the second year in succession, saying it simply couldn’t afford it.

Nottingham City Council declined to comment when approached.