A building contractor has been sacked for swindling council housing bosses out of £300,000 in an overcharging scam.
The overbilling took place over 17 months and is the subject of an official report to members of Brighton and Hove City Council.
The report – to the council’s Audit and Standards Committee – said: “The council expects to recover the overpayments from the main contractor Mears.”
It added: “The council is working positively with Mears Ltd to identify any other overpayments that may have been made and to prevent any overpayments in the future.”
The report said that the 10-year Mears contract – for responsive repairs, planned maintenance and major works for council homes – “is expected to cost £27 million in 2015-16”.
It said: “Mears Ltd has contractual responsibility for undertaking post inspections of 10 per cent of all completed works and the council’s housing contract compliance team also carry out checks.
“Following an audit of housing repairs in 2013-14 the Housing Contract Compliance Team enhanced its assurance processes by increasing the number of physical post-inspections with effect from February 2015.
“In May 2015 these inspections identified a potential overcharging issue by a subcontractor.
“After initial investigation, the Housing Contract Compliance Team contacted Internal Audit with their concerns.
“Internal audit, working jointly with quantity surveyors from the council’s Housing Team, inspected 46 repairs completed by a single sub-contractor to identify the extent of any potential overcharging and to identify shortfalls in internal controls.
“Further inspections were then carried out by Mears Ltd and council surveyors.
“The audit concluded that mechanisms put in place by Mears Ltd to identify overcharging were not operating as intended.
“There was significant evidence that a particular subcontractor had routinely overcharged Mears Ltd and that these costs had been passed on to the council.
“The audit concluded that the Housing Revenue Account had been overcharged and estimated that the overcharge was in excess of £300,000 for the 17-month period examined.
“The contractual mechanism allows for review of valuations after submission. This takes place on a monthly basis as a matter of course.
“In this case, however, the overcharging was not identified at the time and so would need to be addressed by correcting historical valuations.
“The audit made a series of high priority recommendations to
- stop the sub-contractor from working on council contracts
- identify and recover all overpayments made by the council to Mears Ltd
- improve controls by Mears Ltd over the work carried out by sub-contractors
- strengthen the scrutiny of the work carried out under the contract by the council
“Officers have agreed to implement all audit recommendations by the end of December 2015. They have also met with senior managers at Mears Ltd who have responded positively.
“The sub-contractor has been dismissed from the contract
“The council and Mears are working together to
- estimate and refund to the council the amounts overcharged for work carried out by the sub-contractor for the 17-month period examined and since the subcontractor was first engaged in 2011-12
- review amounts charged by other sub-contractors to assess whether there are any other potential instances of overcharging
- improve the arrangements put in place by Mears to prevent further instances of overcharging
- reducing the amount of sub-contracted work with more direct delivery through a Minor Works Team
- implementing cultural change, ensuring the lessons learnt from this case are disseminated into practice
- a new management and staffing structure, including the appointment of a new quality assurance manager
- redesigning post-inspection processes
- introducing a new protocol for the information, records and photographs to be made available for the council to inspect
- revisiting the contract to consider providing funds to enable the council to increase the extent of its quality assurance processes
“Mears Ltd has provided regular updates on the progress it has made to gain assurance that these issues are isolated to a single contractor and that processes and procedures have been strengthened to prevent any reoccurrence.
“We will carry out a follow up audit in 2016-17.”
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