It has been recommended by investigators Nottingham City Homes should be brought under the full control of the city council to "put right" a series of potentially unlawful payments. Millions intended for the benefit of council tenants had been wrongly transferred over several years to the authority's general fund in a bid to prop up other services suffering from financial constraints.
Towards the end of last year the 'unlawful treatment' by the council of money intended for Nottingham City Homes' tenants and housing stock was uncovered. It totalled almost £15m and two external investigations have just recently uncovered many millions more may have been misspent.
Now up to £40m of ringfenced money, from Nottingham City Homes' Housing Revenue Account (HRA), could have been spent on 'non-HRA activity' and 'without full consideration' of the legally-binding ringfence, according to the reports released on Tuesday (April 26). The reports, conducted by the Chartered Institute of Public Finance and Accountancy (CIPFA) and investigator Richard Penn, state just over £22m had been misspent by the council since 2014/15, while NCH misspent £17.1m.
While NCH denies the allegations made in the reports, the city council has served a 12-month notice to its arms-length housing provider notifying it of the contract being terminated. This comes after the two reports recommended NCH be brought in-house, as has been done with EnviroEnergy recently.
Speaking during a meeting of executive councillors at the Council House on Thursday, April 28, council leader and Dales ward councillor, David Mellen, said the council had "commissioned further work into the misallocation of the money". He added: "This administration is keen and determined to make the changes necessary where they have been mistakes that may have originated quite a few years ago and need to be put right."
The council heard the existing arrangements between NCH and the Labour-run authority do not allow for the money to be "adequately protected" and, therefore, "changes need to be made". The misspent money must be repaid to the Housing Revenue Account, but there are concerns over just how the council plans to do so considering the pressures on its General Fund.
"The other recommendation is that we take Nottingham City Homes back under the control of the council," councillor Mellen added. "That is not an unusual thing to suggest, across the country there were 70 arms-length organisations and now there are only about 20.
"We are proposing we do the same. It is a lift and shift proposal, the staff will be shifted across and the tenants, who are our tenants, will have their housing management done by probably the same people as they move across."
The move will cost around £750,000 in transfer fees. Conservative councillor for Clifton West, Andrew Rule, said: "It is important this is not reflected and nor should it be on the majority of NCH staff who do an excellent job in the city. However bringing NCH in house alone in my view alone is not the soul panacea of this."
He suggested several improvements and explained the role of external auditors, who twice missed the payments, should have their scope of reference expanded. He added: "It is vital the council's political leadership instil a culture whereby any transactions involving the HRA, given the nature of the ringfence that surrounds it, are backed up by thorough documentation that is stored both physically and electronically. This will ensure that if necessary the appropriate paper trail can be retrieved in the future.
"I suggest also the evidence requirements involving the HRA are treated in exactly the same way evidence an external organisation would retain its tax or VAT affairs and retained for six years." He also said all future transactions should be checked and signed-off by the section 151 officer, Clive Heaphy, who originally uncovered the initial £15m of payments in the first place.
Councillors said there was "more work to be done to unravel the finances". And, despite the seriousness of the situation, with the Government still snapping at the authority's heels, one argued there may be a positive to be taken.
Councillor Sam Webster, who represents the Castle ward and is the portfolio holder for finance, argued: "I hope these reviews and this investigation will ultimately lead to a better service in terms of housing and the housing function for our tenants. I am hopeful, in the end, although given the difficult elements of this today, will be a positive end result for the council and for council housing tenants."
