Article by Nottingham Post:

A legal notice has been issued over unlawful £15m Nottingham City Council payments.

The action comes because the council took £15.86 million from its ring-fenced Housing Revenue Account, which is used for council homes and tenants, and used it for its General Fund for all council services.

Funds had been wrongly credited since 2014/15, prompting city council leader Councillor David Mellen to apologise for the blunder.

The council is taking immediate steps to stop this action with effect from April 2020 and to refund to the Housing Revenue Account the full amount from its General Fund reserves.

The use of the cash breached local government financial law.

In line with local government law, the Labour-led council’s section 151 officer and monitoring officer have issued the legal notices which confirm the misspend was unlawful.

The issue was initially identified as part of ongoing work to confirm that its financial governance and practices were fully compliant.

Council Leader, councillor David Mellen, said: “Having reported their recommendations to me last week, I am committed to acting without delay to ensure that the money is accounted for correctly.

"This will not directly affect the Council’s revenue budget for day to day services but will put further pressure on our General Fund reserves and steps are now being taken to immediately refund the Housing Revenue Account from the council’s General Fund by the full amount.

“I am absolutely committed to making sure that the council continues to deliver vital services whilst ensuring that issues such as this are discovered and dealt with immediately. As Leader of the Council, I am determined that an investigation is carried out without delay to understand how this happened and will absolutely ensure that measures are put in place so that something like this cannot happen again.

“The fact that this continued unchecked for a number of years is clearly disappointing and whilst we understand how this could have happened, it is only right that issues such as this are unearthed and dealt with transparently.”

Mel Barrett, the council’s Chief Executive, added:

“This is clearly a setback for the council in the context of the significant improvement journey underway, however it is positive that the matter has been identified and is being addressed quickly under the current arrangements we now have in place.

“Following legal advice that the use of funds was unlawful, the council is required to issue what’s known as a Section 114 Notice under the Local Government Finance Act 1988 in relation to this activity only. The matter will be brought to a special meeting of the Full Council in the New Year.”

It comes amid a Government investigation into the state of the finances at the city council following the demise of Robin Hood Energy, which cost Nottingham taxpayers £38m, and the mounting overall debts at the council - which currently sit at almost £1bn.

Councillor Graham Chapman, who, during the reign of former council leader Jon Collins, controlled the authority's purse strings, said: "I really do not think it is sensible to say anything.

"All I can say is that whatever decision was done was done under legal advice."

Jon Collins, speaking to Nottinghamshire Live as the council announced the £15m blunder was indeed unlawful, added: "Any decision that was taken at the time would have been on the advice of the finance officer and, bearing in mind, we are talking about something that by all accounts was something that went through the budget process from 2014/15 onwards.

"It would have been recommended by the head of finance and approved by head of legal and been through the executive, so all the executive councillors would have supported it, it then went to full council so all the councillors would have voted for it and it then went through the district audit, the internal audit and then the external auditors.

"In terms of process nobody ever questioned whether it was or wasn't an appropriate thing to do. Not that I'm aware of. Obviously if someone had raised a concern that would have been considered at the time."

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