2 Improving financial controls
7. The Department's funding to the social housing
sector for the Programme has taken two forms:
- Gap-funding provided specifically
for Decent Homes. Local authorities were only able to access this
funding if they chose one of three options for delivering the
Programme: the establishment of an ALMO; the use of the Private
Finance Initiative; or the transfer of their housing stock to
a Registered Social Landlord. This funding was not available to
local authorities which chose to retain their stock, and
- Funding to local authorities for major housing
repair work, via the Major Repairs Allowance in the Housing Revenue
Account subsidy system and supported capital borrowing from the
Regional Housing Pot. Authorities could use this funding not only
on Decent Homes but also for other repair work.
8. The funding has been directed mainly at local
authorities as Registered Social Landlords were expected to fund
the Programme from their own resources and new borrowing if required.
Registered Social Landlords only received gap-funding from the
Department when taking on local authority housing stock in such
poor condition that it had a large negative value.[11]
9. The sums involved have been significant, with
the Department providing £22 billion in total for Decent
Homes and other repair work by the end of 2008-09, using the funding
routes above. However, the Department does not know exactly how
much it has given towards the costs of Decent Homes as it only
has an estimate of how much of the Major Repairs Allowance and
Regional Housing Pot was used by local authorities for this purpose.[12]
10. The Department exercised effective control when
releasing gap-funding for ALMOs, both when assessing local authority
bids for funding and when releasing this funding in tranches every
two years.[13] Despite
these controls, ALMOs have spent roughly £10,000 per property
on improvements, while local authorities which retained their
stock spent roughly £6,000 per property.[14]
According to the Department, there are a number of reasons why
ALMO spending is likely to have been higher. The condition of
ALMOs' housing stock has tended to be worse than that of retaining
authorities and ALMOs have also refurbished to higher standards
in response to their tenants' wishes.[15]
All social landlords had the freedom to do this, if their tenants
agreed and the landlord could afford it, as the Decent Homes Standard
served as a minimum threshold designed to trigger action by landlords,
and was not a 'one-size-fits-all' specification of the work to
be done.[16] According
to the Department, it was likely that Registered Social Landlords
were spending more per property than retaining local authorities
for the same reasons.[17]
11. We asked the Department and the Homes and Communities
Agency (the Agency) what evidence they had that such higher spending
was not, in fact, the result of ALMOs receiving too much gap-funding.
In the current year, the Agency had worked with 15 selected ALMOs
to examine their business plans in more depth to get a better
understanding of their costs and funding requirements. It had
found that the ALMOs had not been over-funded by the Department.
The gap-funding given to these had been tightly drawn and they
had had to use resources from their local authorities to refurbish
their properties to a higher standard.[18]
However, the Department agreed that there was scope for it to
do more in this area. For example, it had not gone back, once
an ALMO had actually completed its Decent Homes work, to examine
the actual unit costs incurred to see how these differed between
landlords, or had changed over time, and to see whether the amount
of gap-funding it had given had been reasonable.[19]
12. The Department has made some efforts to promote
efficiencies in the use of the funding it provided. For example,
it funded the National Change Agent for Housing which has established
14 procurement consortia covering 122 landlords responsible for
33% of Decent Homes work in the social housing sector. These consortia
have identified potential efficiency savings of £590 million.[20]
Social landlords have also had to demonstrate their value for
money to the Audit Commission.[21]
According to the Agency, local authorities became more efficient
as the Programme developed and they got a better understanding
of their costs and how to improve their procurement.[22]
However, the Department acknowledges that it could have done more
to share good practice with landlords. For example, it did not
make use of the information it had to identify and compare the
unit costs of different approaches to undertaking the work. It
expects that the evaluation that it commissioned in December 2009
will provide such an analysis.[23]
11 Qq 2, 24 and 49; C&AG's Report, Figure 9 Back
12
Q 31; C&AG's Report, para 3.10, Figure 10 Back
13
Qq 6, 64 and 65 Back
14
Qq 22 and 35-36; C&AG's Report, Figure 13 Back
15
Qq 35, 36 and 49 Back
16
Q 5 Back
17
Qq 40 and 49 Back
18
Qq 7 and 11 Back
19
Qq 6 and 74 Back
20
Qq 38 and 64 Back
21
Q 36 Back
22
Q 12 Back
23
Qq 38 and 74 Back
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