Birmingham CFO rules out issuing section 114 notice over accounts error
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Birmingham City Council’s section 151 officer has decided against issuing a section 114 notice after an investigation discovered waste collection spending was illegally charged to the council’s housing revenue account.
Clive Heaphy, chief finance officer ordered the probe after a whistleblower at the council raised the issue, which related to the collection of rubbish from outside council blocks in the wake of the Grenfell Tower fire.
The investigation found that while the use of a housing repairs contract to carry out the work was legitimate, some of the £818,000 costs were not, as they should have been moved to the general fund account.
A report by Heaphy to the councils’ audit committee said: “Having found that elements of the charges are potentially unlawful, I have to consider the implications under S114.
“The sums involved are not likely to be material and the accounting entries are capable of being corrected so at this stage I am not inclined to issue a report.”
The work was carried out by the housing repairs contractors due to a strike by the council’s waste staff during the period.
Heaphy said that there was a degree of discretion as to which of the costs are allowable within the HRA, if costs can be demonstrated as representing an additional service to the benefit of tenants.
His report said: “The overriding principle is that council taxpayers do not subsidise services specifically for the benefit of tenants and that rent is not used to subsidise functions which are for the benefit of the wider local community.
“Ultimately it will not be straightforward to determine what proportion of the total costs should be reimbursed to the HRA.
“This will be subject to discussion with Grant Thornton during the 2018/19 audit.”
Heaphy’s report said that the payment mechanism for housing repairs is via a cost collection workbook which creates a feeder file and charges the relevant cost centres.
He said: “An express decision would have had to have been made to move the costs to a general fund code.
“This was not done before the closure of the accounts.”
Heaphy recommended that the council’s finance team “need to be robust in challenging compliance with the statutory ringfence”.
He advised the council to commission a review of all HRA recharges from the general fund “to gain a definitive view on current practice”.
Section 114 of the Local Government Finance Act 1988 requires a council’s section 151 officer to produce a section 114 notice if the authority has made or is about to make a decision incurring unlawful expenditure, or if it enters an item into accounts that is unlawful.
In July last year, Norhthamptonshire County Council issued its second section 114 notice in the space of 12 months after financial problems.
Last week, Room151 reported that auditors had issued Birmingham with a notice under section 24 under of the Local Audit and Accountability Act 2014, concluding the authority faces a “unique level of one-off risks”.
Heaphy has been cataloguing his work trying to turn round the finances at Birmingham in a series of articles for Room151.
