East Kent Housing deal could be axed and overpayment ‘fraud’ case considered against former contractors

Thanet council

The future of East Kent Housing, which manages social housing for Thanet, Canterbury, Folkestone and Hythe, and Dover councils, will be discussed by Thanet councillors this month – including the possibility of a criminal case due to overpayments which could ‘constitute fraud.’

Earlier this month it was revealed that hundreds of council property tenants across east Kent had been awaiting gas safety certificates due to overdue Landlord Gas Safety Register assessments.

It then emerged that there were also grave concerns over potential further issues with electrical certification, lifts, fire safety and legionella testing.

The issue of electrical safety certification was first raised by former Thanet councillor Suzanne Brimm some three years ago.

At a full council meeting on Thursday (July 11) Thanet Labour Party leader Rick Everitt said a list of failings outlined at EKH, included overpayments running to £1million across the four councils to contractors P&R – responsible for area including provision for annual Landlord Gas Safety Record (LGSR) inspections, emergency repairs and boiler replacements and an annual programme of routine boiler upgrades.

EKH told Thanet council that at the end of March 2019 there were 19 isle properties with an overdue LGSR. These were understood to relate to access difficulties and EKH were instructed to resolve the cases as soon as possible.

In May EKH advised verbally that all 19 had been completed, although that turned out to be incorrect. EKH have alleged that P&R provided them with false information about the 19 cases.

By May 20 Thanet had 133 properties without the correct gas safety certification. This was eventually brought down to 10 at the start of this month.

Cllr Everitt said: “The situation with the gas safety certificates is concerning and puts our residents at risk. There are gross failings of governance and management at EKH. This council is responsible in law for EKH failings.

“Our officers were initially misled by EKH about the gas certificates outstanding, P&R overpayments run to £1million across the four councils. What was TDC doing?

“Cabinet will consider (EKH’s) future on July 25. Can the leader (Bob Bayford) confirm as far as Thanet is concerned it does not have one?”

Cllr Bayford confirmed all options will be discussed at the July 25 meeting.

Health and Safety Executive

A report due to go to Cabinet members states that the Health and Safety Executive (HSE) is involved with the case and a letter from the Regulator for Social Housing sent to local authorities in May spells out that it is the responsibility of the Local Authority to ensure that the Health and Safety standards are met even if the service is contracted out to an Arms Length Management Organisation (in this case East Kent Housing).

The report also says Thanet and the other three councils have “sought joint legal advice and could pursue criminal action if it is decided that the overcharging would constitute fraud.”

P&R has terminated its contract with EKH and work is currently being undertaken by Swale Heating.

The report to Cabinet members says: “P&R has claimed there are amounts outstanding and written to all four councils demanding payment for sums that do not appear to have been invoiced and do not correspond to any of the figures provided by EKH. TDC has asked P&R for clarification and relevant invoice numbers which have not been provided. The other three councils have also received letters from P&Rs legal representatives, although TDC has not,  most likely because disputed amounts are smaller.

“These issues have been discussed with the other councils and joint legal advice has been commissioned about the options for the recovery of overpaid amounts, how best to protect the councils’ respective positions and whether the overcharging would constitute fraud. This process may lead to formal legal or criminal action or independent arbitration, depending upon the advice and the strength of the evidence upon detailed examination.”

The overpayments centre on:

  • £530k – This sum has been acknowledged and accepted by P&R and is being set off against contract payments.
  • £353k – EKH have advised that this sum was being treated as a payment on account/payment in advance and that P&R would inspect all properties at the next service visit, evidence work carried out and provide the certification required under the contracts. However the early termination of the contract meant that this was insufficient time to complete this work and this amount is now viewed as an overpayment, although it is disputed by P&R.
  • £596k – EKH advised that this sum related to services, such as co-located administrators and resident liaison officers, where evidence of the service had not been provided. P&R strongly disputes this sum and have argued that these services were provided, from a different location.

East Kent Housing (EKH) was launched on 1 April 2011. There have been concerns about its asset management since it was established and in particular concerns about procurement and contract management.

These problems have mainly been over failures to follow proper procurement processes and include requests for waivers to contract standing orders to allow contract extension, direct awards, and retrospective approvals. Due to the concerns the four councils agreed to an improvement plan for EKH which included extra funding. EKH was given from April 1 this year until September 30, 2020 to improve.

Further concerns

But the gas certification failures have raised questions about the reliability of data and the performance of EKH in other areas such as the electrical certification. These areas are being audited and initial findings reveal more failings.

The report to councillors states: “Continued service failures of this nature are not acceptable which inevitably starts to raise questions about further control and improvement measures that can be applied to the services delivered by EKH.

“The council has undertaken an immediate direct intervention. The intervention involved a TDC officer task force, investigating health and safety management and reporting across the range of services provided by EKH to the council’s tenants, inspecting key buildings and relevant health and safety files. The findings of this intervention will inform the next steps, including the potential to replace the current management of EKH or withdraw responsibility for the delivery of specific areas of the service from EKH.”

Removing management

Immediate measure may involve removing members of EKH management. This would be part of a short-term intervention which the council says is “essential to secure the required improvements.”

The report adds: “In the longer term, the councils also have the authority to remove elements of the service from EKH and deliver it in a different way or terminate the arrangement completely.”

Options being considered include replacing EKH with another provider, returning the service back to the council to manage or retaining EKH but on different terms.

The Thanet Labour Party are backing the option to bring services in-house.

Working hard

East Kent Housing say: “We’ve been working hard to ensure gas certificate are up to date, and the backlog is almost cleared. We are working with our four councils and their contractors to identify any other issues and ensure they are fixed as quickly as possible.”