Millions of Selective Licensing fees not ring-fenced by Nottingham City Council

Nottingham City Council (NCC) has been embroiled in a controversy surrounding the publication of an audit on their financial controls completed in April 2023. NCC resisted publishing the report until instructed to do so by a decision notice from the Information Comissioner’s Office in January of 2024.

The council commissioned Ernst and Young (EY) to conduct a review of the “control environments” at Nottingham City Council after “it was reported in 2021 what NCC wrongfully used £15.86m from the Housing Revenue Account – intended for such things as repairs – for general council services”. The report specifically focused on areas of licensing and other funds and revealed instances of “inappropriate financial activity” by NCC, particularly highlighting the delayed ring-fencing of selective licensing fees.

Nottingham City Council’s Financial Controls Audit Findings

The audit report conducted by Ernst and Young (EY) on Nottingham City Council’s financial controls revealed several concerning issues. The report highlighted instances of inappropriate financial activity and raised serious ethical concerns regarding the diversion of selective licensing fees to unrelated council projects. Selective licensing schemes are implemented by local councils to regulate and improve the standards of privately rented properties in specific areas. In 2018, Nottingham City Council introduced one of the largest selective licensing schemes in the country, covering approximately 26,000 homes.

Landlords are required to obtain licenses for their properties to ensure compliance with specific criteria. However, the report found that a significant portion of the funds collected through selective licensing fees in Nottingham had been diverted to unrelated council projects, which is contrary to the relevant legislation. This diversion of funds raised serious ethical concerns.

The report also highlighted that the licensing team at Nottingham City Council felt pressure to generate more license fees to ease wider budgetary pressures, which is contrary to the relevant legislation and the position of the Section 151 officer 1. The report emphasized the importance of revised practices to protect against the use of ring-fenced accounts and ensure compliance with the law.

Nottingham City Council’s Response and Controversy

Nottingham City Council has faced criticism for its handling of the audit report and its reluctance to publish the full findings. The council has only released its own summary of the feedback, named the Financial Controls Assessment, and had originally not made the original Ernst and Young report public.

The council’s decision not to publish the full report has been met with public outcry and calls for transparency. The Information Commissioner’s Office (ICO) even ordered the council to publish the full version of the report, which was eventually released weeks later. The delayed release of the report has raised concerns about the council’s transparency and accountability.

Sources: 

https://www.property118.com/damning-report-exposes-councils-mishandling-of-selective-licensing-fees/ 

http://open.nottinghamcity.gov.uk/InformationGovernance/RequestDetail.aspx?RequestId=17940 

https://www.bbc.co.uk/news/uk-england-nottinghamshire-66058807