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Council’s unlawful use of Housing Revenue Account ‘still of great concern’, says minister

Past illegal use of funding from a council’s Housing Revenue Account (HRA) is “still of great concern”, a minister has said.

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Nottingham City Council offices (picture: Getty)
Nottingham City Council offices (picture: Getty)
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Council’s unlawful use of HRA funds “still of great concern”, says minister #UKhousing

Kemi Badenoch, minister for equalities and levelling up communities, made the comments in a letter responding to a government assessment of Nottingham City Council’s unlawful transfer of millions of pounds from its HRA to its general fund over a six-year period.

In December, it emerged that between 2014 and 2021 Nottingham City Homes, the council’s ALMO, transferred £15.8m to the council, of which £14.3m went into the general fund for day-to-day services. 

HRA funding is strictly ringfenced for transactions related to council housing landlord functions.

The activity was discovered more than a year after the government launched a non-statutory review into the council’s financial affairs after it was found to be £1bn in debt. 

The government concluded that the council started to lose control of its budget four years previously, and that “both managerial and political leadership failed to heed warnings and take the necessary action”. 


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The Nottingham City Improvement and Assurance Board, charged with monitoring the local authority, published two reports on Monday, its fourth progress report, alongside an assessment into the illegal transactions. 

The latter outlined a series of measures the council must abide by following the discovery of the transfer. 

They include blocking any funds from Nottingham City Homes to the council’s general fund, improved staff training on statutory requirements relating to the HRA and the protection of tenants’ interests and a review of governance arrangements. It also called for a “forensic analysis” of all historic financial transactions between the ALMO and council. 

A full review of systems and processes is also under way to “ensure that rigorous control and scrutiny is in place to achieve full compliance with the ringfenced requirements of the HRA”. 

Sir Tony Redmond, chair of the board, said in the assessment report that he and his colleagues “cannot say with any certainty that other such HRA malpractices have not occurred historically, but have yet to be identified”. 

“The thorough examination of past practices should provide these necessary assurances, or otherwise, in the near future,” he said. 

In her letter commenting on both the progress report and the assessment of the unlawful use of HRA funding, Ms Badenoch said it is “clear the council continues to face many challenges as it seeks to address past failings”.

“The historic unlawful HRA expenditure that came to light last December which resulted in the council issuing statutory notices highlights these difficulties.

“While I note your assessment that the council is taking the necessary steps to rectify the situation, and that this issue relates to historic accounting practices, it is still of great concern,” she wrote.

The minister added that she expects the review of governance arrangements and historic financial transactions between the council and Nottingham City Homes to be completed “expediently” and that the board “continues to monitor this issue closely”. 

The Labour-run authority has been given three years to get its financial problems in order, while an Improvement and Assurance Board (IAB) has been set up to monitor the council’s ongoing progress. 

If Nottingham Council cannot get control of its finances, the government could step in and take control. 

The council approved a balanced budget for 2022-23 on Monday and has finalised a medium-term financial plan for the next four years.   

Council leader David Mellen said: “As the government has welcomed in its response to the report, the council will set a balanced budget for the coming year without the need for any further support or intervention and has now finalised a medium-term financial plan covering the next four years, a key requirement which had previously been highlighted by the Improvement and Assurance Board. 

“The minister’s response to the IAB report highlights that we are taking the steps needed to put right the unlawful use of funds in the HRA for general fund purposes, to ensure that it can’t happen again and to ensure that lessons are learned through an independent investigation which is under way.” 

The issue was also raised by the chair of the Department for Levelling Up, Housing and Communities (DLUHC) committee on Monday, during a session with the department’s permanent secretary Jeremy Pocklington. 

Alex Skinner, director for local government finance at the DLUHC, said the guidance for councils is “crystal clear and that is “recognised by Nottingham”, which has “returned the funding”. 

But he added: “It’s something we should be looking at and learning lessons from.”

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