The findings of a delayed review which has been checking for any potential manipulation of Nottingham City Council’s accounts are now expected in around a fortnight. Ernst and Young Global Limited (EY) is currently conducting a review into the council’s historical accounting practices.
It follows the uncovering of millions of pounds in wrongful spending from the Labour-run authority’s Housing Revenue Account in 2021. Alongside Deloitte, KPMG and PricewaterhouseCoopers, EY is considered one of the ‘Big Four’ accounting firms.
The council has employed the help of EY to conduct what it says is a good-practice exercise of going though the authority’s accounts to obtain further assurances that everything is in order. In an update on Friday (March 31) council officers said following a delay the findings are now expected “in a couple of weeks”.
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The review includes checking for if any “management override of controls” has taken place. The term relates to when management, and those in charge of governance, manipulate accounting records and prepare fraudulent financial statements by overriding controls put in place by an organisation.
The review will focus on new areas that haven’t been looked at yet, such as ring-fenced grants, which must only be used for certain purposes. It comes after serious accounting issues were uncovered in the council’s ring-fenced Housing Revenue Account – the fund created by housing tenants’ rent money.
The cost of the wrongful spending of this fund now totals up to £51m, after money was improperly transferred to the council’s general fund, which finances other services, over a series of years beginning 2014.
EY was appointed to carry out the review towards the end of last year. It was anticipated the review would take approximately ten weeks and conclude mid-February 2023, however during an Audit Committee meeting on Friday, March 31, councillors were informed it is taking longer to complete.
Helen Lillington, Grant Thornton audit manager, which is auditing the council’s accounts, said: “As you are probably all familiar with, one of the key pieces of work we have been talking about is the EY report in terms of the management override of controls.
“We are waiting to see that draft report. Once we have seen that report that will then enable us to determine what further work we might need to do.”
The Government-appointed improvement board, which is overseeing the council’s work to become financially stable following the collapse of Robin Hood Energy, has an expectation the review and any remedial work should be done by September.
It is one of 39 instructions the council must meet by certain dates, otherwise the Government may send in commissioners to take over. It is taking a little longer than was originally scheduled, due to a variety of reasons in terms of availability for people to obtain information and the depth of the information,” said Jean Stevenson, the council’s interim finance team leader.
“But we are now very, very close to being able to report our position in a couple of weeks.”
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