A financial report has revealed Nottingham Council’s struggle to keep money raised from selective licensing ring-fenced.

The subject is a sensitive one in many landlord circles – councils often insist the huge fees charged for selective and other licencing schemes is ‘not for profit’ but many suspect the money is used elsewhere.

In Nottingham, Ernst & Young recently conducted a review for the authority which commissioned it partly due to questions around the legality of spending on its housing stock.

The accounting firm investigated money generated by its traffic enforcement and property licensing teams and found, “there was a perception that reserves generated from surpluses by [by these activities] are on occasion treated by the corporate centre as a means of meeting organisational budget pressures”.

Although a council spokesman tells LandlordZONE: “Funds raised for selective licensing are ring-fenced and have always been”, Ernst & Young found that there was “no clear audit trail to demonstrate that reserves/surpluses absorbed by the corporate centre are used for purposes that are consistent with the relevant regulations, for example that licensing income is used to support the administration of the licensing regime”.

Nottingham runs mandatory, additional and selective licensing – the latest scheme was launched in December.

It has previously come under fire from landlords including Mick Roberts who accuse the authority of charging high licence fees which forces them to either increase rental prices to avoid being out of pocket, or to sell their properties, leading to fewer rental properties in the city centre.

The financial report goes on to say that although finance had confirmed that licence fees in the last 12 months had been ringfenced, observations made regarding the licensing team’s perceived loss of agency over budget management “might increase the risk of income targets/forecast for licensing being set at a level that is in excess of the cost of administering the regime”.

It adds: “Licence team do not understand the fee structure and make-up of the ‘full cost recovery’ of the licensing service. The budgeting method needs to engage the team to provide confidence how fees have been arrived at.”

Read the EY report in full.