Belfast Telegraph

Housing Executive contractors 'overpaid by £500,000'

By Steven McCaffery

Contractors carrying out kitchen replacement schemes for the Housing Executive were overpaid by an estimated £500,000, a report has revealed.

But the Audit Office said the overspend was detected in a review of only five of 112 such projects, suggesting the final figure could be much higher.

The finding is contested by the Housing Executive, but it is only one of a litany of concerns raised over the organisation and its handling of huge sums of public cash.

The Audit Office's report questioned the levels of fraud and error in housing benefit, putting the cost to the taxpayer at £10.2 million over the last year.

Major problems were identified in the handling of multimillion-pound maintenance contracts, with one company given £250,000 for uninspected work at a time when it was already subject to claims it had been wrongly overpaid by £240,000.

Housing associations suspended from developing projects were found to have nevertheless received grants totalling £25.6 million in 2011-12.

The report also questioned lucrative land deals, which in some cases have sparked police investigations.

The audit highlighted how a major kitchen replacement project rolled out across Northern Ireland was queried by the Schemes Inspection Unit (SIU), which operates independently in the Housing Executive.

"In November 2011 the SIU reviewed five kitchen replacement schemes, one from each geographical area. This was out of a total of 112 schemes covering over 8,000 individual dwellings," the report said.

"The SIU identified potential overpayments to contractors in those five schemes of approximately £500,000.

"Issues identified by this inspection included: cupboards being attached to walls before the new plaster was fully dried out; meter boxes not adequately fire lined; and metal trims not properly fitted to worktops with protruding edges. "

It said the extent of overpayments was disputed by the Housing Executive and investigations were continuing at the time of the audit.

But the report added: "No action has yet been taken to recover the potential overpayment nor have other similar schemes been examined to determine if there is further potential for overpayments."

On the issue of over-payments to contractors the report noted:

  • In July 2011 the Housing Executive terminated maintenance contracts with the Red Sky company, with the report adding that by that date "it had withheld a total of £506,000, representing the full estimated overpayment, from payments due to Red Sky". But after the company went into administration, the deductions were queried and the Housing Executive had to seek legal advice.
  • A second company was investigated over potential over-payments of £240,000. The contractor was nevertheless paid a further £250,000 for other work which had yet to be inspected. The Housing Executive said that by June this year £233,157 had been recovered, with arrangements in place to recover a further £16,443.

But Auditor General Kieran Donnelly said: "I am very concerned that the Housing Executive made such a large payment in advance to a contractor that it was investigating in relation to potential overpayments and that it did not seek approval of this unusual transaction from the Department (Department for Social Development) or DFP (Department of Finance and Personnel)."

On land deals the report highlighted how:

  • Investigations are under way into a number of "questionable land deals", and recounts how a Department for Social Development (DSD) review found that not all deals were being presented for board or chief executive approval, while some approvals were sought "without key information or with wrong information".
  • A range of issues highlighted included "favouritism towards buyers", the absence of any "justification for off-market sales", plus sales conducted without proper valuations.

On payments to housing associations, the report found:

  • Housing associations suspended from development projects following inspections nevertheless received grants totalling £25.6 million in 2011-12. The Housing Executive said the payments referred to schemes approved before the associations were suspended.
  • But the report found that £21.5 million of the total went to Helm Housing Association, which came in for heavy criticism for its work in a report published in January. The Housing Executive said the figure referred to work in place before Helm was reprimanded, while remaining funds were dependant on additional assurance checks.

On the handling of benefits the report found:

  • In 2011 £558.5 million was spent on housing benefit, of which £13.8 million was lost to fraud and error.
  • Overpayments totalled £10.2 million, with £2.6 million due to official error, £4.8 million due to customer error, and £2.8 million attributed to customer fraud. The figure for customer fraud was a jump from a figure of £0.9 million the previous year.
  • Housing benefit underpayments due to official error totalled £3.6 million, which was a 50% increase on the previous year's figure of £2.4 million.

The Auditor General Kieran Donnelly said: "I consider the estimated levels of fraud and error in housing benefit expenditure to be material and I have therefore qualified my audit opinion on the regularity of this expenditure."

The report said tenancy fraud, where someone falsely holds social housing tenancy, is a major area of concern.

And though the Housing Executive was said to be examining the issue, the auditor said: "It is estimated that tenancy fraud costs the public purse £1 billion a year in England and Wales. To date NIHE's (Northern Ireland Housing Executive) counter fraud work has not addressed this irregular activity and its implications for those in need."

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