Independent report

Nottingham City Council: Improvement and Assurance Board third report

Published 13 December 2023

Applies to England

Introduction

The Improvement and Assurance Board (IAB) was appointed in early 2021 to oversee and monitor the council’s response to Max Caller’s report on its performance following the demise of Robin Hood Energy.

Over a period of more than two years the IAB has tracked the council’s progress in addressing a series of failings in governance, finance, service provision and companies’ performance, underpinned by the council’s duty to deliver Best Value. Quarterly reports have been submitted to ministers over this time, highlighting improvements as well as shortcomings in the council’s delivery of required fundamental change.

This report marks a key stage in the council’s Recovery and Improvement Plan. The IAB was given powers of direction in February 2023 after which it issued a series of instructions to the council relating to the identified and unresolved weakness in the authority’s performance, in terms of resourcing, service provision and the delivery of Best Value. It records progress, or otherwise, against the instructions, commenting upon the specific evidence provided by the council which is appended to this report.

Background

The IAB, as in previous reports, provides analysis of the council’s performance against the following areas of concern:

Governance, finance, transformation, strategic and corporate planning, workforce planning and companies.

Each of these is not a discrete entity but the areas covered in each category are those that have caused the IAB greatest concern, particularly in regard to the pace at which these deficiencies have been addressed by the council over the past two years.

Governance

Efficient and effective decision making/officer member protocol:

The council’s new constitution created a sound governance structure which would enable decisions to be made in a clear, consistent and a timely way. The respective roles and responsibilities of members and officers were articulated to facilitate the action to be effected through delegated authority, together with a protocol relating to the member/officer interface on the decision-making process itself.

The protocol is becoming imbedded, with greater emphasis given to how the delegation scheme is delivered. However, the challenge remains in terms of the way some member and officers interact when decisions are made. Timeliness is a key consideration here bearing in mind delay occurs if members resist the officer’s decision-making in the short term. This practice may not be widespread but is sufficient to be material to the efficient operation of the council. Post-election in May, all members have been briefed about the need to respect governance procedures and the scheme of delegation in place. In addition, the professional and technical advice tendered by officers should always be observed, understood and taken into account when members, committees and the executive are making decisions. This, too, has sometimes created tensions which can compromise decision-making.

Good communication with stakeholders/Best practice in partnership working:

Good governance is also key in ensuring effective and healthy relationships with the council’s partners. This has been advanced by the mapping of partnerships together with the drafting of best practice guidance. A new communication and engagement strategy assists in defining the objectives and priorities to enable the council and its partners to work together in the best interest of citizens.

Commissioning and procurement:

Commissioning and Procurement processes have been advanced significantly in terms of structuring the relative roles of commissioning services through a lens of professional and technical knowledge and expertise in determining the nature of the requirement, followed by a rigorous procurement process to ensure Best Value in service delivery. The relative roles and responsibilities must be sustained to recognise the respective roles.

Risk management:

Risk was identified as a key weakness in the city council’s operation following the failure of Robin Hood Energy. There is now in place a new system of risk management which seeks to avert any such problems in the future. The risk register has been updated and a training programme is planned for the current year. In addition, an independent review of the council’s risk profile is underway. The board recognises the importance of these initiatives but looks for evidence that a sound approach to risk is deeply embedded in the day-to-day practices of the workforce.

Finance

Approval of wholly realistic, and balanced, plans and budgets:

A balanced 2023/24 budget and MTFP through to 2026/27 was approved, and subject to some key assumptions, was credible, dependent on the delivery of those assumptions. That was the minimum required by the board in term of production by 31 March 2023. Whether those plans are also ‘balanced’ in practice can only be judged at the end of the plan period, namely 2023/24 in the first instance and over the medium term in the second. Two key assumptions underpin the budget plan credibility for 2023/24.First, that it is no worse than a, circa, £10 million overspend in 2022/23, which could then be accommodated from the new £20 million financial resilience capacity established for 2023/24, afforded by temporary re-purposing of the FFI reserve, leaving £10 million of additional capacity to deal with other ‘shocks’ in 2023/24 and over the medium term. Second, delivery of the planned budget savings for 2023/24 are critical to financial sustainability.

The overspend for 2022/23 is currently of the order of £10 million, which on the surface is consistent with the key plan assumption; however, this belies both significant volatility in how that total forecast varied towards the year end and significant variation  in the elements driving that total overspend. The former points to specific improvement actions in budget monitoring and forecasting that still to need to be articulated and delivered as part of the Financial Improvement Plan (FIP). The latter is perhaps more concerning as circa £2.5 million of this amount relates to the correction in 2022/23 of inappropriate revenue recharges to capital. This correction was triggered by some of the new quality assurance arrangements implemented as part of the FIP development, which is positive, but it also raises the possibility of having also to correct this in previous accounts. Going back to 2019/20 implies a minimum restatement in the open accounts of £7.5 million which would have to be funded from reserves.

 In isolation, this is probably manageable but, again, stretching credible financial resilience. In respect of 2023/24, the latest outturn forecasts, albeit only at period two monitoring, suggest circa £10 million year-end overspend on service activity but with a helpful, significant unplanned offsetting gain from interest on balances of circa £6 million to £7 million held centrally. The former, in part, reflects continuing inflation issues, some increased service demand but also some likely failure to deliver planned savings. For reasons previously discussed, the council has very limited resilience buffers to deal with any overspend in 2023/24 and thus must take all possible action to avoid that possible outcome.

The non-delivery of savings is a concern and challenges the credibility of the MTFP; this rests on the council delivering its £62 million of planned transformation savings over the plan period. The board, at recent meetings with the council leadership, has expressed its growing concern about the likelihood of that target being achieved, especially in children’s and adult social care services. The council has been challenged to provide reassurance on its actual delivery prospects over the plan period as the board is currently envisaging significant a shortfall over the plan period.

A significant reduction in transformation savings creates a financial gap  in the council’s MTFP but other issues suggest that this may increase. The council is not immune from the unbudgeted ‘inflationary’ or other cost pressures facing the whole sector but in Nottingham’s case this looks like being compounded by non-delivery of other planned savings and a lack of proper grip on activity data especially in the social care area. At this stage it is not possible to scale the likely new financial gap from 2024/25 onwards. The council will be setting out its planning parameters in July for the refresh of the MTFP for 2024/25 onwards, hopefully, with some initial assessment of that emerging gap; however, preliminary work by council officers suggests it could be very significant in 2024/25 alone. This paints a concerning picture of the council’s financial prospects and stability over the medium term, and the ability of the council’s current plans and actions to address that.

Establish and maintain a sound and prudent reserves policy and practice

The council’s approved budget for 2023/24 reflected a sound approach to reserves in general, albeit with a tight and minimum level of financial resilience, relying on temporary repurposing of the major PFI reserve to achieve that. The council is undertaking a further critical examination of all its reserves which will inform future budget planning and should bring it completely into line with best practice on the management and reporting of reserves. These process points are to be commended but the reality is that the council’s inherent resilience capacity is very thin and, for reasons previously stated, now under even more pressure, especially from 2024/25 onwards.

Deliver a fully resourced Capital Investment Plan

The council’s approved capital programme over the medium term is soundly based, in terms of policy, and fully funded. It involved some £20 million of temporarily removed schemes to ensure redirection of likely capital receipts to fund transformation over the MTFP period. The risks inherent in the plan are twofold. First, the council remains very reliant on, and thus exposed to, generating capital receipts. At this stage, targets for 2023/24 remain on track but this is clearly a risk area requiring constant focus. Second, and perhaps more concerning, the council’s resolution of its future arrangements for District Heating will inevitably imply very significant capital spend requirements, of the order of £30 million to £40 million, over the medium term. There is no clear current plan for dealing with this scale of liability other than hopes of future grants and/or private sector support.

Early resolution of all outstanding matters relating to 2019/20, 2020/21 and 2021/22 audit of accounts

This needs to be separated into two strands of activity, namely the council producing and approving, with advice from the s151 officer, what it believes are sound, true and fair accounts which can then be passed to its external auditor for audit. In setting this instruction, the board was conscious that both strands being completed by the end of September 2023 was an ambitious target but the lack of substantial progress since the board’s inception demanded a hard and challenging target.

In terms of the council’s actions, the s151 officer, with one crucial caveat, considers that he will have produced and will be able to advise that the council approves all draft accounts, 2019/20, 2020/21 and 2021/22, by the 30th September 2023. The board is satisfied, based on progress to date, that this should be the case but the caveat is a major one. The council has not received, as yet, a request from the Auditor for further investigatory work and possible restatement of the accounts and balances going back to 2019/20, arising from the Ernst Young (EY) review of over-ride risks and the broader control environment weakness. If such a request were to materialise, the council may not be able to submit draft accounts by the end of September. It is clear none of the open accounts, starting with 2019/20, will have a formal audit opinion by 30 September 2023 so that aspect of the Instruction will not be achieved. Any actual audit work on the historical accounts is unlikely to start in substance before September. Based on current methodologies this suggests that it could take up to 6 months for each year of account to balance, taking final closure of the historical accounts to March 2025.  A pragmatic risk-based solution needs to be found that means the historical accounts can be closed, officially, as soon as possible. A key strand of the FIP has been a focus on ensuring current systems and processes within the council lend themselves to the production of clean accounts. The council has made significant improvements in its standard working papers and general quality assurance arrangements for the closure of the 2022/23 accounts. That is also to be commended.

Complete the financing of the £17 million misappropriation of funds relating to the HRA

This Instruction concerned the misappropriation by Nottingham City Homes (NCH), rather than the City Council, of HRA funds. That distinction is important. Since the Instructions were issued, further due diligence by the s151 officer relating to the company’s affairs revealed that NCH did not have the financial capacity, either in cash or other assets, to make good the debt. Its trading position is now judged difficult to the extent that meeting its own loan obligations of £50 million to the council is now considered a significant ongoing risk. The board accepts this analysis but it is a concerning development. The scale of potential default risk is yet another concern relating to the council’s future financial resilience. It is disappointing given that the council had previously and consistently expressed some confidence that NCH would have that capacity to repay the HRA.

In the circumstances, the board has accepted a plan that the City Council approves and makes a voluntary annual contribution to the HRA from its budget over eight years, adjusting for interest as appropriate, equivalent to that owed by NCH to the HRA. This is well within any Business Plan requirements of the HRA. The only other local alternative would have been for the council to transfer £17 million plus interest now, but, in the absence of any funding source, it would have had to engineer a further ‘temporary re-purposing’ of its PFI reserve on top of the £20 million already applied in that way in the 2023/24 budget. This is not credible given all the risks and issues now emerging in its current MTFP.

Deliver the Finance Improvement Plan (covering the key elements identified by the IAB to provide assurance in respect of finance and accounting)

A refreshed Finance Improvement Plan was presented to the IAB board in January 2023. Over the 6 months to date the FIP has been expanded to cover further areas of concern and has become much more granular in its capture and articulation of issues along with detailed action and resourcing plans to address them. In practical terms the board has seen a step change in actual structured progress since the turn of the year. The need for such a plan, to ensure proper accounting and finance practices across the council, has been a continuing demand by the board almost from its inception along with its assessment that the council starts from a low base.

The progress we can now acknowledge has unfortunately revealed yet more new areas of concern regarding historical and current accounting issues, in respect of poor practices in routinely reconciling payroll with headcount/establishment control, and inappropriate revenue recharges to capital.

In addition, following the significant HRA misappropriation, the board sought specific assurance work from the council on whether there were other areas of possible significant ‘over-rides’. Given the cultural weaknesses exposed and inherent in the HRA, there was understandable concern that such failures would exist elsewhere across the council. This assurance work was also clearly of interest to the Department and the council’s auditors. Due to internal capacity and skill set constraints, the council had to commission that work externally and, disappointingly, needed two procurement cycles to commission EY to undertake the work. EY reported to the council in this latest quarter and their findings are of serious concern. In short, across six key financial over-ride risk areas, they found that the control environment was poor in all cases, has been for a considerable time, with the controls in place not fit for purpose. Overall, the keynote finding was that there was a fundamental cultural malaise concerning compliance with basic system and process requirements.

For the board, the EY findings, coming after the previous HRA issue, raise profound questions relating to board confidence in the quality and effectiveness of the council’s internal audit arrangements and indeed the effectiveness of the Audit Committee’s scrutiny work as part of its role to provide assurance relating to the council’s financial control environment.

The board is encouraged by the fact that the council will be expanding its FIP programme in two key areas. First, it is using EY further to advise on the necessary short to longer term solutions to eliminate the current major over-ride weaknesses on a sustainable basis. Second, it will devote an urgent strand of an expanded FIP to a specific improvement plan in respect of both its internal audit arrangements and Audit Committee effectiveness. The deep-seated cultural malaise concerning compliance with basic system and process requirements has to be eliminated.  Compliance has to become the norm. The council’s leadership, political and managerial, has a vital role to play in the council succeeding in that cultural challenge.

Notwithstanding the marked improvement in pace and focus in FIP work since the turn of the year, this should have happened sooner. There remains a number of areas where the FIP is not yet sufficiently developed, (e.g. quality of budget monitoring and forecasting, especially in the social care area), but it is highly likely that a full FIP will be properly articulated by March 2024. The board, however, is more confident now that the council is committed to the change agenda, that the key elements of the plan are coming together and that a number of key improvement actions are beginning to bear fruit. The board will now challenge the council to specify and be ambitious about the additional improvements that can be expected by the end of December 2023, March 2024 and June 2024. In terms of resourcing, the board is pleased with the leadership being shown by the s151 Officer but is conscious that capacity is still heavily reliant on ‘interims’. We look for the council to reduce such reliance, but in the meantime, it is vital that the council approves continuation funding after September 2023 to allow the FIP pace and focus to continue.

Reinforce financial stewardship in providing resilience and sustainability through 2023 to 2027

Financial resilience and sustainability is a by-product of the extent of success in actually delivering to the MTFP and the more granular implementation of good financial practice across the council as part of the FIP. Earlier comments on both these aspects indicate some progress but, with definite concerns remaining, and much still needing to be done by the council on a sustainable basis. This instruction is also concerned with the reality of visible and true ownership by the council of a sound financial stewardship and resilience agenda. Members have to be commended for authorising the release of significant funds to support key capacity, albeit interims in the main, and other significant investments in support of the financial improvement agenda. Equally, it is clear that the council’s corporate management team is developing and improving its approach to budget and financial management.  However, the board remains concerned about pace, generally, and a true alignment between members and officers about the scale of change needed to ensure sound financial stewardship and sustainable finances.

Bring forward a credible and risk assessed plan for an additional pipeline of capital receipts linked to the implementation of the corporate landlord model

It is worth recapping on the context of this instruction. The current receipts pipeline on a realistic basis (i.e., risk adjusted) implies new capital receipts reducing significantly in 2024/25 and to a relative trickle in 2025/26. So, while the current capital programme is set on that basis, for the council to afford significant new investment ambition and to avoid taking on new debt, a new pipeline of capital receipts is required. In a sense this is the minimum consideration. There is a broader strategic dimension behind this Instruction. Nottingham still retains a relatively high level of debt, compared to its peers, with some 21%, or £55 million, of its annual net budget relating to debt charges. This is a significant drag on being able to fund current revenue service pressures. A significant new pipeline of capital receipts also gives the opportunity to reduce that debt burden, and thus debt charges, as well as the opportunity to bolster financial capacity and resilience generally.

The council’s progress in delivering this instruction is mixed. There are undoubtedly some significant positives in train. By mid-July the council should receive the results of a commissioned review of all its ‘commercial’ holdings with advice on ‘sell or hold’, scale of receipt possible and the revenue and/or any other implications of ‘sell or hold’. In theory this covers some £200 million of the council’s assets. It may well take some time for the council to process its view on that report when it arrives; so at this stage, the council’s measured view on the scale of that opportunity is awaited. However, the process is a positive one, to be commended and in line with the instruction date of the 30 September. It is also a positive that the council is reviewing all of the investment properties it bought in 2018, with external advice, with a view to sale where the rental and/or prospects are not meeting sound investment criteria. Receipts from this exercise are being held to offset the debt burden. This is to also be commended and, in fairness, the council started this exercise some time ago.

The area where progress is mixed is in respect of the operational estate, namely properties currently used to deliver services. In principle, this is the largest part of the council’s property balance sheet and thus potentially the greatest potential source of new receipts. However, this is where the links and balance between the need for new receipts, rolling out a new corporate landlord model and most crucially enhanced service planning, need to come together. The essential challenge for the council, implicit in this Instruction, is’ pace’ and for all major services to articulate their future service operating model and thus property divestment opportunities (and potentially property investment requirements). Overlaying this would be a corporate landlord perspective in terms of efficiency, including shared use of space.

The council has commissioned a complete review of their operational estate including condition, maintenance requirements and broad disposal values. This is needed and overdue for effective property management but will not report until September and will take some time to process thereafter.  The council must build a coherent Asset Management Plan, something currently missing. The council has identified a number of service best value reviews and the property aspects will form part of that challenge. However, it will take some considerable time to work through all services.

In conclusion, there are a number of positive actions being taken to roll out the corporate landlord model across the council and identify disposal opportunities in the investment and commercial properties portfolios. There is also a number of positive actions in train to enable the council to build a proper Asset Management Plan for the operational estate (and by definition a disposal plan). However, it is difficult at this current juncture to anticipate solid disposal targets being generated from this work in respect of the operational estate by 30 September 2023.

Transformation

Deliver a fully funded Transformation Programme

The Transformation plan was introduced in 2021. The IAB has sought fundamental change in the way in which the council organises, resources and delivers its services. The focus, initially, on identifying the required net expenditure reductions to match the requirements of the medium term financial plan has yielded significant savings. As mentioned previously, however, the board has raised its growing concern about delivery of the planned savings in practice, especially in the children’s and adult social care areas.

Best Value in delivering fundamental change/Dismantling historic practices/Commitment of senior management to cultural change:

This must be consistent with the achievement of Best Value across all services and progress has been made here but much still needs to be done to demonstrate efficiency and cost effectiveness in service delivery. Ultimately, outcomes for citizens are a principal measure of Best Value and this work is in progress. There is an underlying challenge for the council in seeking to achieve a significant cultural change in the way members of staff fulfil their responsibilities; training is in progress here but the pace of change must increase. This must also include dismantling historic practices to enable transformation to succeed and there is evidence that senior management is now motivated to eradicate these practices.

Right balance between in-house/outsourced services:

The council has also been charged with the responsibility for examining and testing the concept of the mixed economy in a delivery of local authority services. As stated earlier, Nottingham’s Improvement Plan also contains a commitment to overhaul the commissioning and procurement procedures of the council so the appropriate professional and technical expertise can be deployed in determining optimum contracts for service provision. The overall approach to these challenges has been encouraging but this must be accompanied by evidence that such outcomes represent true value for money.

Plan for stimulating the local economy

Stimulating the local economy is critical to the success of Nottingham City Council and the plans in place seek to address this. A shared economic action plan is being developed which is coherent and comprehensive and the framework for this should be in place by the end of June 2023. This must be accompanied by effective communication and engagement with all parts of the public, private and third sectors who play a role in enhancing the economic health and wellbeing of the city.

Corporate planning

Fully Integrated Plans: 

The board has, from its inception sought a fully integrated planning process to underpin the delivery of the Improvement and Recovery Plan. The council has made good progress in reconciling the strategic corporate, transformation and the medium term financial plans for the next four years. The vehicle being used to implement these plans is the divisional plans which link the council’s organisation and its workforce to the services provided to Nottingham’s citizens.

Direct Link between Plans and Corporate management regime:

This work has proceeded well but a particular test of its effectiveness will be revealed through performance against plans and management oversight, and control of outcomes. The council is aware of this challenge and all deliverables are performance managed and service plans provide the link to individual officer’s objectives.

Corporate commitment to deliver all plans: 

Given the way the council has integrated its planning processes there should be no scope for the strategic and service plans to contain growth proposals which remain unfunded. The IAB has been insistent that the strategic council plan currently in place should not be varied to increase or alter service provision unless it is accompanied by clear exposition of the required resources.

Companies

The future of Nottingham Castle in line with the commercial strategy and without exposing the council to inappropriate risk.

Following a fit-for-purpose analysis of the alternatives, the castle re-opened in June. It is being operated as part of the councils Museum’s and Gallery Service on a temporary basis. Additional governance and financial controls have been put in place, which should avoid inappropriate risk. The other investors in the Castle have continued to be engaged. This temporary operation is due to run for up to two years. During this time, the long-term solution to the castle will be determined and implemented in line with the new Commercial Strategy. The council has responded well to Nottingham Castle Trust going into liquidation and the castle closure in November 2022.

Assist in the process of providing a solution for Tram Link within the confines of NCC role and responsibility.

The council continues to be fully engaged with Tram Link stakeholders and supporting them in reaching a solution. It is accessing appropriate external expert advice to understand and mitigate risks to the council. Additional governance with an SRO is in place.

Ensure major project teams are in place (with SROs) where required to manage or mitigate risk effectively, including the decision on the revised structure of NCH and subsidiaries

A project plan is in place to progress the review of the options that will lead to changes in the NCH Group company structure and assets. This is a complex task and will required continued careful scrutiny. Financial objectives have been agreed and the business case is being prepared for the transfer, movement or disposal assets. Approval of the preferred option is expected in the coming months. The implementation is expected to take at least 12 months. The Greater Broadmarsh redevelopment is also being managed through a major projects’ governance process.

Align conflicts of interest requirements, as they apply to council owned entity boards, with the Lawyers in Local Government Code of Practice.

Whilst the deadline of 31 May was missed, the policy and process for board appointments have been agreed by the Executive and are being implemented. The new approach balances commitment to the City of Nottingham, the IoD’s Competency Framework and the requirements of the specific company board. Councillor, board members and the Chairs of each board have been informed of the new arrangements. A recruitment process is underway, with new appointment to the boards expected in September. This change satisfies the Lawyers in Local Government Code of Practice and has been built on to reflect the needs of all stakeholders. It represents a significant improvement in companies’ governance.

Integrate Shareholder Unit good practice in all company activity.

The Shareholder Unit is now fully resourced. This, along with the appointment of a Commercial Director, has enabled good progress to be made in the improvement of the companies’ Governance over the last year. However, many of the appointments are on an interim basis and maintaining the commercially skilled resourcing will be essential to continued progress. The Companies Governance Handbook, agreed in November 2022, set out a programme of improvements including companies’ business planning, reporting and risk management. Almost all of the improvements had been implemented by the end of the June deadline, with the remainder expected shortly.

Finalise the review of local authority companies expeditiously.

A Head of Companies and Commercial Oversight has been appointed and the remaining strategic reviews are being planned. The resources necessary to deliver the reviews need to be identified (including external resource if necessary) to meet the March 2024 deadline.

Take decisions on the council’s future interests in all subsidiaries / non-subsidiary companies and other commercial ventures.

Forty organisations have been evaluated, including those where the council has representation at board level, as a trustee or where grant funding is provided. Recommendations will be made in July for the level of governance on the retained entities, the planned closure of dormant entities and the monitoring of those going through liquidation. The delivery of this instruction represents a step change improvement in the visibility and governance of these entities.

Carry out an internal evaluation of the shareholder unit effectiveness.

The internal evaluation of the shareholder unit effectiveness remains scheduled for September 2023.

Workforce culture and performance outcomes

Trained, skilled, competent workforce; Best Value in officer performance

The IAB has maintained throughout its time at Nottingham that there must be fundamental change in the culture of the organisation. The instructions requiring improvement in this area of focus, in particular, are the development of new skills and awareness through a comprehensive training programme for all employees. Whilst the board has acknowledged that the workforce is committed to delivering performance showing a caring nature and good commitment, ways of working and practices have not yet delivered  more efficient and effective ways of achieving the right outcomes in a timely fashion.

Measurable progress has been made in addressing this challenge through tracking service plan implementation to an individual level, and end of year reviews assessed against objectives set. Human Resources data are being increasingly deployed to tackle specific performance issues. This is supplemented by an agreed plan and procedure setting out the integrated business and performance management process. Best Value learning completion data are also now in place and sample testing is underway.

Ensure compliance with Ofsted recommendations

The IAB has also sought assurances that NCC is fulfilling the requirements of the OFSTED report which highlights weaknesses and failings in the provision of children’s services. The council has responded to these findings and arrangements are in place to strengthen the approach to child protection and safeguarding procedures. This will be monitored and the Children’s Improvement Board will also oversee progress.

Recovery and Improvement Plan delivered within set timescales

The timescale for the delivery of the Recovery and Improvement Plan remains an issue. The key elements of the plans are in progress and workforce planning acknowledges the need for fundamental change.

Efficiencies are being adopted in working methods and the improvement plan contains substantial measures to deliver change. The challenge now is to integrate new working practices in the transformation of services.

Ensure pay policy assists recruitment and retention

The council‘s pay policy seeks to recognise both the need to determine reasonable pay levels for its workforce at the same time accommodating ability to pay. National negotiations are a factor here but, ultimately, a key test for the authority is to maintain and recruit a qualified and competent workforce, in a difficult labour market, to deliver the required services at the appropriate level.

Corporate Leadership, monitoring performance, acting on under-performance;

The IAB is conscious that many of these initiatives are work in progress and the fruits of this work are yet to be realised. A fully trained and skilled workforce in more efficient and effective ways of working has yet to be achieved. The process must be accelerated and, in particular, action taken to address underperformance must be expedited. The size of the workforce has to be reduced significantly. Current estimates suggest that the reduction of at least 500 employees in Nottingham City Council would match that of the local authorities of similar size and responsibilities. This represents a key part of the Transformation Plan together with the spending levels for future year’s budgets. The measures introduced to change the culture of the organisation are a step forward but the pace of change must now be accelerated if the underlying objectives of the Recovery and Improvement Plan are to be achieved.

Conclusion

The IAB sees this report as a particularly important stage in the council progressing its Recovery and Improvement Plan. After more than two years overseeing the council’s progress the board is not yet in a position to provide a very positive assessment of performance. There is evidence of progress in a number of areas of activity but shortcomings in certain parts of the council’s operation remain. Governance at one level is positive in terms of an improved scheme of delegation but the board is not convinced that the application of the officer/member protocol is yet producing timely and efficient decision-making across the board.

Financial resilience and sustainability remains a challenge, given significant overspending in 2022/23, major reliance on reserves and technical adjustments to balance recent budgets, new forecast pressures going forward and relatively thin reserve cover. Furthermore, the recent EY report highlights serious weaknesses in financial controls which must be corrected as a matter of urgency. These issues are fully understood by the Chief Financial Officer and corrective action is underway.

Transformation, is, generally, proceeding well but is dependent on rigorous planning, full integration, sound finance and a fundamental cultural change in the workforce in delivery of services. Much is still to be done to achieve this. The board has concerns that transformation savings and slippage, especially in the social care area, may occur.

The review of companies presents a mixed picture. Better governance is in place and the work relating to NCH and revenues and benefits has generally proceeded well. Recent issues around Nottingham Castle, Tramlink, district heating and Victoria Market are in large part showing positive signs but some issues remain to be resolved.

In summary, the board concluded that the progress achieved since the last quarterly report presents a mixed picture. Outstanding problems are significant. There is a strong desire amongst members and officers to put this right as quickly as possible and evidence clearly suggests that since the 39 instructions were put in place the council has increased its attention to the outstanding areas of concern. The test must now be to take this to an altogether different pace of change and improvement if the deadlines set out in the instructions are to be met.