Nottingham City Council has pleaded with ministers not to send in commissioners to run it after unlawful spending came to light.
Then local government minister Kemi Badenoch said in a statement last month that despite significant support, “Nottingham City Council has struggled to resolve serious governance and financial issues”.
A report by local government troubleshooter Max Caller “highlighted serious governance failings, poor risk management and the pursuit of commercial ventures which had resulted in a significant budget gap and low levels of reserves”, including the failed Robin Hood Energy firm, the minister said.
She noted that in December 2021, the council discovered unlawful accounting practices associated with its ring-fenced Housing Revenue Account (HRA) over six years, totalling £15.86m.
A report by another local government consultant, Richard Penn, found the unlawful accounting was not a deliberate mechanism to divert funds from the HRA to the general fund, but provided “evidence of cultural failings and a reluctance to escalate issues appropriately, which led to the situation remaining unchallenged over several years”, with the amount involved now thought to be up to £40m, Ms Badenoch said.
In a letter to Max Soule, deputy director for local government stewardship at the Department for Levelling Up, Housing and Communities, Nottingham’s leader David Mellen and chief executive Mel Barrett made a case against the imposition of commissioners.
They wrote: “Over the last 18 months the council has been undertaking a comprehensive organisation wide transformation and improvement programme, arising from the need to respond to the failures of governance in relation to Robin Hood Energy.
“We have understood that the seriousness of the issues and the need for improvement was not centred on a narrow technical issue of an individual company, but on the underlying way that we do things and we have sought to do this in an open and transparent way.”
Nottingham had improved strategic financial management and identified a strategy to repay the HRA, they said.
The council is already subject to an improvement board imposed after the Robin Hood Energy collapse, and the letter told Mr Soule: “Whilst acknowledging there is more to do these significant achievements have been acknowledged by the [board].
"We believe that the current support arrangements in place through the [board] are working well and it would be the council’s preference that these arrangements remain in place.”