Damning report exposes council’s mishandling of selective licensing fees

A controversial council has found itself in hot water following a damning report that exposes its failure to ringfence its selective licensing fees.

Nottingham City Council finally published a report this week by accounting firm Ernst and Young (EY) who accused the council of “inappropriate financial activity”.

The review which was commissioned by the council has been kept under wraps for six months.

Despite calls for transparency, the council withheld the report saying it would have a “significant disruptive effect” and divert limited resources from its finance and legal teams.

Selective licensing fees have only just been ringfenced

The damning report reveals that selective licensing fees have only just been ringfenced in the last year.

The report said: “Whilst revised practices protect against the use of ringfenced accounts, the licensing team did share a view pressure has been placed on generating more licence fees with an eye to easing wider budgetary pressures. This would be contrary to the relevant legislation, and not the position of the Section 151.

“In responding, finance noted that the prior Resident Services Corporate Director had been highly commercial and did not promote effective ringfencing.

“However, finance confirmed licence fees in the last 12 months have been ringfenced, noted new leadership, and stated all trading account budgets have not contributed toward [budget] planning.”

One of the main sources of licensing income

The report reveals one of the main sources of licensing income for the council is selective licensing.

According to its annual expenditure report, the council spent a whopping £4.2 million on selective licensing between 2020/1 and another £2.8 million in 2021/22.

Previously Nottingham City Council told Property118 that the selective licensing scheme is not designed to make a profit and the fees solely cover the costs of setting up, operating, and delivering the scheme in the city.

Mick Roberts, one of Nottingham’s largest landlords to house benefit tenants, told Property118 that selective licensing fees have caused misery.

He said: “It appears selective licensing fees which have been paid for by vulnerable tenants through rent increases have only been ringfenced in the last year.

“This means that tenants’ money has been spent elsewhere by the council.”

The report warns that “reserves used for purposes other than those defined in the relevant legislation are illegal.”

‘Significant weaknesses that needed to be addressed’

In a statement, Nottingham City Council said: “The assessment identified significant weaknesses that needed to be addressed to provide the necessary level of assurance, including a weak control environment, ineffective systems and a culture which was not focused upon compliance.

“A report taken to the council’s Audit Committee provided a comprehensive summary of the issues raised by the assessment and the urgent action needed to make the necessary improvements.

“It is important to be clear there is nothing specifically identified within the samples tested in the assessment that suggests any allocated funds have been misspent or funding has not been used for its overall intended purpose.

“The council has been open about the nature and seriousness of the assessment’s findings. Good progress has been made to address the issues raised and through the council’s Finance Improvement Plan, reported at every Audit Committee, to ensure the necessary controls are in place.”

In response to the council’s statement, Mr Roberts told Property118: “Absolute codswallop by the council – they are in total denial again.

“Meanwhile, the council’s homeless bill exceeds £8 million a year and is increasing.”

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