Department for Social Developement: Social Security Agency - Third Party Deductions from Benefit and The Funding of Fernhill House Museum

Today, John Dowdall CB, Comptroller and Auditor General for Northern Ireland, published two reports into (1) the Department for Social Development’s (DSD) funding of Fernhill House Museum and (2) the Social Security Agency’s administration of the third party deductions from benefit schemes.

1. Funding of Fernhill House Museum

Fernhill House Museum is a community museum in the Glencairn area of West Belfast. It houses a number of significant exhibits relating to the history and culture of the Greater Shankill area. Fernhill House was purchased in 1993 with funding of £726,048 provided under the Belfast Action Teams (BATs) initiative of the then Department of the Environment.

In 2004, the Museum was experiencing financial difficulties because of the cessation of funding from other charitable sources and continuing low visitor numbers. In October, the Museum Manager wrote to Belfast Regeneration Office (BRO) requesting funding. The case for a one year ‘rescue package’ was accepted and the Museum was notified three days after the receipt by DSD of the request for funding. The offer did not take effect until the contract for funding was issued on 5 November 2004. Glencairn Peoples Project, which owns the Museum, was awarded a “rescue package” grant of £98,175 by BRO of DSD under the Making Belfast Work (MBW) initiative. The grant was provided to fund the salaries of the Museum’s manager and his staff and other running costs for one year. This was to provide breathing space to allow DSD to work with other departments to find a long-term financial solution. DSD has advised us that the museum has decided to close. The funding for one year offered to the Museum in October 2004 of £98,175 was paid out, in full, prior to this decision.

The Audit Office concluded that:

• Fernhill might well be perceived to have had more favourable treatment than other applicants for funding as its application for funding did not follow standard internal procedures- no application form was received or pro forma economic appraisal conducted.
• There were no established rules for fast-tracking assistance of this type. The funding, itself, did not fit readily within the criteria for funding MBW projects and there was no prospect of viability or sufficient evidence of sustainability. Consequently the ‘rescue package’ was what would be described under Government rules as “novel and contentious” expenditure which required the prior approval of the Department of Finance and Personnel (DFP). Having failed to obtain DFP approval, payments to the Museum were, in our opinion, irregular.
• The value for money of the funding decision has not been demonstrated. DSD’s assessment of the application did not conform to the minimum requirements for an economic appraisal required by DFP nor did it satisfy DSD’s own requirements. We are particularly concerned that, in failing to appraise the project in line with DFP guidelines, DSD has acted contrary to an undertaking on assessment and appraisal of funding given to the Public Accounts Committee in 1998 following its Report on the “Control of Belfast Action Team’s Expenditure”

DSD told us that while they acknowledge that their standard internal procedures were not followed, they are satisfied that the request for financial assistance was subjected to appropriate assessment and appraisal. They said that there was no question of favouritism in the handling of the case and that the only benefit that may have accrued to the applicant was the speed of the decision-making process, which they regarded as entirely justified by the circumstances of the case. DSD said that in their view the decision to support Fernhill was in line with the criteria for Making Belfast Work and that, at the time of the assessment, they did not consider the funding to be novel and contentious. They said that they do not accept that there was no prospect of sustainability and that the purpose of the time-bounded funding package was to explore the prospects for sustainability. DSD said that the process they used to reach a decision was reasonable and proportionate and that their assessment had all the elements of an economic appraisal. They are satisfied that sufficient information about the project was gathered to form an adequate basis to support the decision to provide funding, which was taken in light of all the risks involved.

2. Third Party Deductions from Benefit

The Social Security Agency is responsible for managing the third party deductions schemes making deductions from social security benefits towards debt recovery for mortgage and accommodation costs, fuel costs and rates. The aim of the schemes is to provide a last-resort welfare service to a vulnerable minority on income-related benefit. Around 26,000 benefit customers are involved in the schemes, with £18.4 million paid to third parties such as mortgage lenders and Northern Ireland Electricity.

The Audit Office found that;

• the Agency did not have in place the necessary management information systems to enable it to make an accurate calculation of the staff costs involved in administering the Mortgage Interest Direct scheme. These form part of the costs. which it recovers from those lenders using the service;
• although the Fuel Direct scheme aims to safeguard vulnerable customers on income related benefits, through its operation the public sector is effectively providing a free debt collection and budgeting service to private companies.
• a key feature of the Government’s Spending Review 2004, was a focus on delivering improved public services through maximising efficiency. The Audit Office considers that establishing the full cost of administering the third party deductions schemes and reviewing the present administrative arrangements, may also offer scope for potential savings and/or improved efficiency through, for example, centralised administration or recovery of costs.

Notes for editors

1. The Mortgage Interest Direct scheme was introduced in 1992 as part of a package of measures, agreed with lenders, to avoid mortgage repossessions and consequent homelessness. The Fuel Direct scheme was introduced in 1976, against a background of increasing fuel prices and a rising number of disconnections. The schemes broadly mirror those in operation in other UK regions. However, in practice, the Fuel Direct scheme in Northern Ireland has only been utilised for electricity fuel costs, although the current legislation does provide for deductions in respect of mains gas. The Social Security Agency is an Executive Agency of the Department for Social Development.