Select Committee on Public Accounts Minutes of Evidence


Supplementary memorandum submitted by the Housing Corporation (PAC/1999-2000/296)


NAO access to Focus Housing Association

  1.  Mr Rendell asked for clarification about the time taken to agree access to the records of Focus Housing Association. The sequence of events is set out below.

  2.  The NAO's request for access to the association's papers was received by letter dated 24 September 1997. This was a year after the investigation commenced and dissonant to a letter dated 19 September 1996 which confirmed the terms of reference for the study. In that earlier letter the NAO had stated there were no plans to seek access to the association's records on the basis that all reports and papers stemming from the reviews being carried out by Focus into the reported corruption would be made available to the NAO by the Corporation.

  3.  The NAO's letter of 24 September 1997 referred to the terms of a letter dated 5 December 1994 from the former Department of Environment (DoE). The DoE letter set out the circumstances in which the Department and the Corporation would be expected to assist the NAO in gaining access to the records of associations in relation to value for money studies and had been written in the light of the Treasury Minute response, published 29 June 1994, to the Committee's Twentieth Report, 1993-94 session.

  4.  The Corporation replied by letter dated 17 October 1997 and undertook to secure copies of any papers required by the NAO from Focus. This was offered as a practical way forward given that discussions were continuing between DETR and NAO on the December 1994 letter on access terms.

  5.  The NAO replied by letter dated 5 November 1997 saying while the Corporation's offer was appreciated, the investigation would not be credible without direct access to the papers at Focus Housing Association.

  6.  The Corporation replied by letter dated 24 November 1997, repeating its offer to secure copies of any papers required, and referred to the Permanent Secretary at DETR the question of access to the association direct.

  7.  Following further discussions between DETR, NAO and the Corporation, the Corporation wrote again to the NAO on 23 January 1998. In that letter the Corporation undertook to approach the Chief Executive of Focus to ask for his co-operation in a visit by NAO staff, this offer being without prejudice to the wider access issue. A meeting with Focus was proposed to agree the terms of the visit. Focus confirmed by letter dated 2 February 1998 their willingness to assist and a meeting was held on 17 February 1998 of all parties to agree the details. The visit was then programmed in to the NAO's timetable and took place at the end of March and early April 1998.

  8.  Four months elapsed while the question of access to the records of Focus was discussed between the NAO, the Corporation and DETR. Once agreement had been reached a further two months elapsed before the NAO's visit took place.


Number of frauds

  9.  Following the Committee of Public Accounts Twentieth Report, 1993-94 session the Housing Corporation issued a circular in March 1994 (HC 11/94) updating the requirements for internal controls in RSLs, and requiring them to register all incidents of actual or attempted fraud. Frauds in excess of £1,000 must be reported to the relevant Regional Director, as must any fraud perpetrated by a member of the governing body or senior RSL member.

  10.  In the subsequent five years the number of fraud and theft cases reported to the Corporation was as follows:



Follow up to the Committee of Public Accounts Twentieth Report, 1993-94 session

  11.  Mr Gardiner asked for confirmation of action taken by the Corporation to follow up several of the conclusions and recommendations in the Committee of Public Accounts Twentieth Report, 1993-94 session. The table below summarises the position on the matters enquired about.

Committee's Twentieth Report 1993-94, HC 204 Treasury Minute CM 2602, 1993-94 Further Action by the Housing Corporation
The Corporation should address the frequency of its reviews of RSLs, paying particular regard to the risk of fraud and irregularity and the need to ensure proper conduct of public business. The Corporation would expand its coverage of RSLs in the introduction of a new performance review system, to be phased in over three years. Implementation of the new performance review system was completed in 1997. The Corporation now carried out annual compliance reviews of all RSLs. Additional information, such as quarterly financial returns and annual risk appraisals, is required from larger RSLs or those under supervision. Investigatory visits are made to follow up any matters of concern and validation visits to check on the accuracy of information provided by RSLs in making self-certified annual regulatory returns.
The Corporation should improve its auditing of new development schemes, paying particular attention to the quality and probity of procurement methods. The Corporation would keep its revised scheme audit system under review. Following an Internal Audit report in 1994 the Corporation changed the random basis of selection of schemes for audit to one based on risk and size of schemes.

The new development and maintenance reviews, introduced in 1998, involve joint visits by regulation and technical staff to RSLs and include additional checks to ensure internal controls over development activities are operating as they should.
The Corporation should make faster progress in developing and publishing performance indicators for RSLs. The Corporation would be consulting on proposals for publication of performance indicators, for implementation at the end of 1994. The Corporation has published annually a range of performance indicators for RSLs starting in 1995 (based on 1993-94 data).


Frequency of visits/performance against targets

  12.  Mr Gardiner asked for confirmation of whether the Corporation was up to target with its cycle of visits to RSLs.

  13.  The performance review system requires all RSLs to make an annual regulatory return to the Corporation. This information together with the results of analysis of quarterly financial returns and annual risk appraisals from larger RSLs, is reviewed by the Corporation and an initial assessment made of performance.

  14.  The Corporation carries out a range of investigatory visits to follow up any concerns arising from its desktop review or from other information received which may imply a regulatory failure. These are non cyclical; frequency depends on whether there are regulatory concerns about the performance of RSLs. In addition, the Corporation carries out validation visits to RSLs to check on the accuracy of information returned to the Corporation. For larger and medium sized RSLs the frequency of such visits should be at least every three years.

  15.  Each year a programme of regulatory activities, including visits, is set for each regional office and performance is monitored on a quarterly basis. At the end of the year the overall annual performance is reported to the Corporation's Registration and Supervision Committee and Board of the Corporation, and is also published in an annual regulatory report.

  16.  In the last five years the following completion rates have been achieved in relation to the annual programmes set:



Money withheld on governance grounds

  17.  Since 1994 the number of RSLs that have had their development funding suspended on governance grounds is as follows:


30 November 2000

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