SIF audit case study: £2.25m rental costs of surgery 'not good value'
According to the Northern Ireland Audit Office report, the Social Investment Fund helped pay for the redevelopment of a derelict site on Bryson Street in east Belfast into a purpose-built community health centre.
SIF provided funding of £1 million, with the site's owners, charity Landmark East, contributing around £200,000. The GPs who operate from the site entered into a 25-year lease with Landmark East, at an annual rent of £90,000.
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The Health and Social Care Board (HSCB) has agreed to fund the annual lease costs of £90,000. The NIAO report said that the "public purse paid to construct an asset for which it is now paying rent".
Over the life of the lease, this will equate to £2.25m, which the NIAO report says "does not represent value for money". The payback period for the site owner's contribution will be just over two years.
The NIAO said it believed the short payback period would "make it inevitable that a commercial loan would have been available to fund this project", therefore it appeared SIF funding was "unnecessary".
The organisation says it was told by the department that a bank loan was considered in the original business case. However, by the time the department considered the business case, a bank loan was "discounted" due to "existing loan commitments and the potential impact on the sustainability of the organisation".
The department told the NIAO that Landmark East were "no longer in a position to secure such a large loan as they had committed to purchasing additional sites with bank borrowing". But the NIAO said Landmark East's accounts for the year ending March 2013 showed a decrease in bank borrowing of £53,000 and a number of these sites had already been purchased previously.
The report said the department considered that the appetite for private funding had decreased.
Landmark East told the NIAO its bank "had little appetite for loans for development at that time" and its ability to borrow was "restricted" as "most of their property was subject to charges taken out by statutory funders".
The department told the NIAO that the new surgery, in an interface location, had "ensured all sections of the community can appropriately access health services" and that "SIF funding ensured the surgery would be located at this site". No response had been received from the HSCB at the time of going to press.