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,
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