NIHE Management of Response Maintenance Contracts
Mr Kieran Donnelly, Comptroller and Auditor General, today issued his report to the Assembly on ‘Northern Ireland Housing Executive Management of Response Maintenance Contracts’.
Mr Donnelly said “Over the five years to 2011, the Housing Executive has spent more than £200 million on response maintenance. My review found serious weaknesses in the management of the contracts governing this expenditure. However, I welcome the Housing Executive’s acceptance of the recommendations contained in my report and its introduction of wide ranging changes to deliver improvements. These are essential if tenants are to receive a quality service and taxpayers are to receive value for money.”
Main Findings
The report concludes that, for many years, there has been a very significant risk to value for money in response maintenance expenditure. According to today’s report the problems identified are also indicative of wider governance deficiencies and have implications for other areas of expenditure within the Housing Executive’s housing budget.
Today’s report also concludes that the weaknesses in the Housing Executive’s assessment, reporting and oversight of response maintenance contracts left it exposed to impropriety and fraud. While concerns about response maintenance contracts had been evident within NIHE over a long period, it failed to effectively address these. For example, poor contractor performance was not robustly challenged and as a result has been difficult to pursue against contractors. In addition, overpayments were identified but the action to address these issues was inadequate and the risk to fraud was not adequately assessed. This has resulted in a loss of public funds and poor standard of work carried out for tenants.
This is illustrated by the Red Sky case. In July 2011, NIHE terminated its response maintenance contracts with this company (worth £7 million a year) after a series of investigations into its performance. However, the Audit Office found that there had been a long history of problems with the company stretching back over many years. For example:
- In 2000 and 2005, there were allegations of NIHE maintenance officers accepting excessive hospitality from the company;
- In 2005 NIHE found that £264,000 had been overpaid to Red Sky. However, following investigations, NIHE decided not to penalise the contractor as responsibility for some of the overpayment lay with NIHE staff. Following negotiations, NIHE recovered £20,000 from the company;
- In April 2009, following whistleblower allegations made to the Assembly’s Public Accounts Committee, investigations carried out by NIHE identified significant overpayments to the company. NIHE has since recovered some £650,000. However, in March 2012, additional problems with the quality of electrical work undertaken by the company were found. It anticipated that testing for these defects will cost at least £150,000 with further expenditure required to remedy them.
Following the termination of the Red Sky contracts the Department commissioned a wider investigation into the performance of a number of contractors; the investigation is expected to be finalised by autumn 2012.
On inspection of repairs and maintenance work
While poor contractor performance had been evident to NIHE management for many years the Audit Office found that the actions necessary to strengthen the contract management regime were not taken. For example, NIHE’s Repairs Inspection Unit and its Internal Audit Branch had identified poor quality work but their findings were not properly considered and acted on. In addition, the Audit Office found that information provided by NIHE senior management to NIHE’s Board and Audit Committee glossed over or did not adequately highlight significant issues.
The Audit Office investigation also identified a fundamental weakness in NIHE’s inspection methodology which fails to give sufficient weight to on-site inspections, including standards or quality of work carried out by contractors. As a result Districts with low scores for on-site inspection could, and did, get an overall satisfactory rating. When the Audit Office made adjustments for this it found that 21 out of the 35 Housing Executive District Offices achieved an unacceptable rating.
In 2011, to improve the reporting of performance NIHE set up a new Corporate Assurance Unit to bring together its various inspection units. It has also introduced new arrangements for inspection reports to be brought to its Audit Committee.
On whistleblowing and complaints
The Audit Office found that the reporting of serious concerns within NIHE is poor. In 2010-11, of 22 on-going investigations of suspected fraud in NIHE, only 2 had been formally notified to the Comptroller and Auditor General.
There have been a number of cases where staff have raised concerns in relation to NIHE contract management in the course of their work or in a whistleblower capacity. Based on the information available to it, the Audit Office report concludes that there is a perception that these staff have not always received the protection required. The report makes a number of recommendations to improve NIHE’s handling of such cases.
While the NIHE tenants’ complaints process is well publicised and readily accessible by tenants, the Housing Executive could make better use of information from complaints to improve its management of contracts and services to tenants.
On contract management and governance in NIHE
While the Audit Office found evidence of systematic and documented governance arrangements in place, the nature and scope of the failings in NIHE indicate that, in practice, they did not work. The Audit Office considers that a culture of accountability was absent in NIHE.
Following recent reviews, NIHE and the Department for Social Development are committed to implementing the changes necessary to improve governance and contract management. Action plans have been put in place to take forward the relevant recommendations from the various internal and external reviews.
Notes for Editors
The Northern Ireland Housing Executive (NIHE) is an executive Non-Departmental Public Body of the Department for Social Development (DSD).
NIHE is the largest landlord in Northern Ireland and is responsible for the management and maintenance of some 90,000 homes. It has an annual budget of some £750 million of which around £50 million is spent on response maintenance which covers day-to-day repairs requested by tenants, repairs following storms or civil unrest and minor adaptations.
The Comptroller and Auditor General is Head of the Northern Ireland Audit Office (the Audit Office). He and the NIAO are totally independent of Government. He certifies the accounts of Government Departments and has a range of other public sector bodies. He has statutory authority to report to the Assembly on the economy, efficiency and effectiveness with which departments and public bodies use their resources. His reports are published as Assembly papers.
The Comptroller and Auditor General’s report “NIHE Management of Response Maintenance Contracts” is available from the Stationery Office throughout the United Kingdom.
The Assembly’s Public Accounts Committee will take evidence on the C&AG’s report on Wednesday, 12th September 2012.
Background briefing can be obtained from the Audit Office by contacting Brandon McMaster (028 9025 1077) or David Murdie (028 9025 1135).