Official Report: Minutes of Evidence

The Chairperson (Ms Boyle): With us today we have Mr Will Haire, who is the accounting officer for the Department for Social Development; Mr Jim Wilkinson, who is the director of housing for the Department; Mr Mark Graham, who is the assistant director for the social housing development programme; Mr Donald Heaney, who is head of the governance and inspection unit with the Department for Social Development; and Mr Arthur Canning, who is the chief executive of OakleeTrinity Housing Association. Members, you have the bios of the witnesses in your pack today. I also welcome Mr Kieran Donnelly, Comptroller and Auditor General, and his team and Mr Jack Layberry, who is the treasury officer of accounts. Thank you all for joining us here today.

Members, I will put some opening questions to Mr Haire. I will start by asking you about the housing sector at strategic level. I refer you to paragraph 2.2 of your brief. I note that there have been a number of mergers within the housing associations in recent years, including that of the merger between Oaklee and Trinity. Is that to be welcomed? What is your view on the ideal number of housing associations?

Mr Will Haire (Department for Social Development): Thank you very much, Chairman. This is the first time that we have been able to put the issue of the housing associations in front of the Committee. It is a key sector, and I hope that we will be able to give you a sense of what is going on.

At the moment, we have 24 housing associations, and that has come down from 33 in 2010. There is no ideal number of housing associations, and the Department has no position on that. There is quite a variety. In the back of the paper, we gave you a table that sets out the different sizes of housing associations. You will see that there are some quite large ones, including, of course, the development of the new largest one, of which Trinity is part. There are a number of quite big ones in that area, but there are also some very small ones that are very specialist or deal with community groups and that background.

The key element for us is that they provide the service to their tenants. A number of them are developing associations that are building new houses and are key to the delivery of the Executive and Assembly's social housing development programme. Remember that you have the most ambitious social housing development programme in the United Kingdom. You are building, pro rata, 30% more than England and about 60% more than Scotland in social housing, and you want those houses to be built throughout Northern Ireland, targeted at areas of social need. Often, therefore, they are in small brownfield sites with major challenges around them.

The Chairperson (Ms Boyle): What challenges do the mergers represent to the Department?

Mr Haire: The challenge for us is to make sure that we have housing associations that are fit for purpose and that they are the sort that are developing new sets of social housing and what we have put forward as the Housing Plus programme. Housing associations are not only providing housing, they are very important in supporting people in need in a variety of areas back into employment and helping communities to grow and develop. Many of you will know associations like Triangle, which specialise very much in assisting people with learning disability etc. It does a fantastic job in supported housing. Many of you, as constituency MLAs, will realise the importance of that. There are a variety of processes.

To go back to your point at the beginning, Chair, we have seen a valuable maturing of the sector. The sector started 40 years ago from community activism to meet social needs here. It has, over time, grown, developed and matured. In the last seven years, it has added 11,000 new houses. It gets such a good return for you, the public sector, because you can get twice as many houses because it can draw private money into that process. That is key; we have a very dynamic sector. It is one where the governance processes have had to mature. Over the last 10 years, as we have regulated carefully, we have seen issues and problems, and we have had to get housing associations to face up to them. Six associations decided on the merger route as a way of improving their governance and the strength of their organisations. Others have entered into groups with other organisations; that is why you have seen the move from 33 down to 24. There has been a maturing of the process over time. We are very pleased that the Comptroller and Auditor General's (C&AG's) report recognised that we have seen a real progress in governance. It is a journey; there is still more maturing to take place. As we go forward to the next stage of social housing policy reform, we are looking at developing the concept of regulation in different ways as it matures. It is a powerful sector. The point is that we do not have a numbers game. There is not a perfect number; we want a variety of strong, robust and resilient associations. We are on that journey.

The Chairperson (Ms Boyle): Strictly speaking, housing associations are not part of the public sector. However, around half the cost of their housing stock has been provided by the public sector, and a large part of their income comes from housing benefit. Therefore, it is essential that the public sector has significant oversight of the sector. In that context, will you tell me who appoints the boards of housing associations? Who is responsible for doing that, and who are they?

Mr Haire: They are social enterprises; they appoint their own boards. The regulation is a regulation of their governance, but the boards are chosen like charities; they are charities as well. Those boards are chosen by a variety of routes by the organisations themselves.

The Chairperson (Ms Boyle): What levers does the Department have to influence and intervene in the membership of housing associations' boards, given that they are channelling so much public money through them?

Mr Haire: I will ask Donald Heaney to come in, but my understanding is that it is a fairly high level. We have a duty to say that they must have good boards that are competent and skilled in that area and, at a high level, set the standards that are expected. The detail of the appointments is for the organisations themselves.

Mr Donald Heaney (Department for Social Development): The Department has no legislative authority to appoint or replace board members except with the express provision of conducting an inquiry and appointing an independent person to review its findings and the status of the association. If that inquiry comes down in favour of the Department, under the legislation, the Department would have power to change or input a board member. Over the years, in the inspection process, when we have carried out an inspection and taken it to the board and presented the findings and had those discussions, the board has accepted — sometimes after a few very difficult discussions — the findings and the rationale behind them and has accepted the responsibility and determined a course of action to take from there. This is about getting boards to accept the responsibility and take the action that has to be taken. That has led to a number electing to merge with larger associations. Some of them decided to seek group structure and some have replaced their management and their boards. We work fairly closely with the associations through that process.

The Chairperson (Ms Boyle): OK. We might come back to that point later.

Mr Haire, I note from correspondence dated 6 February from you to the Audit Office that you believe that you have taken your investigations as far as you possibly can in relation to Trinity's chief executive and the purchase of the Crossgar site. Are you satisfied with the answers that were provided on the three questions that were put to the chief executive as far back as October 2013?

Mr Haire: I am satisfied that, in response to the Audit Office request, he has given as much as he is going to give in that process and that he has set down his position and his evidence on that point.

The Chairperson (Ms Boyle): Mr Canning's solicitor made a statement in relation to question 2 that Trinity Housing Association has provided a full and frank disclosure of all the matters within its knowledge relating to the site. Are you content with that response?

Mr Haire: That is our understanding.

The Chairperson (Ms Boyle): Finally, Mr Haire, do you think that it is appropriate that an organisation in receipt of substantial public funds should take a legal challenge against the very funder?

Mr Haire: It has a right if it thinks that it has a duty to its tenants and to the values and resource of that. If it feels that there is a legal issue, it has the right to do that. In the past, a number of non-departmental public bodies (NDPBs) and organisations have challenged my Department and me, as accounting officer, on those issues, and they have the perfect legal right to do that.

The Chairperson (Ms Boyle): Members will no doubt have their own views on the letter of 6 February to the Audit Office and whether the three questions have been satisfactorily addressed. I am not sure that I agree that your investigations have gone as far as they possibly could, but I hope that this evidence session will provide the clarity and clarification that the Committee needs to form an opinion on the issues at hand. Thank you, Mr Haire.

Moving on, I will ask each member to ask their questions in the agreed order for the session. Members, if you have a supplementary, keep it precise, short and to the point.

Mr Hussey: Good afternoon, gentlemen. I will deal with the regulation of housing. My first question is to you, Mr Haire, and it relates to inspections. From paragraph 3.5 of your brief, it is clear that, following round one of the inspection process, there were huge problems in the housing association sector, with significant weaknesses resulting in 40% of housing associations failing.

Why was that so bad, and how were associations allowed to get into such a poor state? How did DSD ensure that these failures were appropriately addressed? I noticed that Donald made some reference to some of the inspections. Can you answer that? We will maybe get some more information from Donald on that?

Mr Haire: Thank you, Mr Hussey. I thank that it will be very appropriate to bring in Donald. In the early stages of inspection from 2005-06, the teams were looking separately at different aspects of the system, such as finance. We increased and produced a more coordinated set of processes and increased the skill of our teams to have specialist staff on maintenance and finance. We built up our teams that way and started looking more deeply into the process. It was not suddenly in 2010, but as the second phase got in and with it a more coordinated process, some of the issues came through. Remember also that that was a time of maturing in the process and also the time of the property crash. People had been drawn into, I think, a lot of the land deals around that issue and the issues of funding. I think that the organisation at that time was trying to mature into a developing market and the issues around that. I think that that threw up some of the key issues. I think that, for example, the Helm case, which was obviously a key one, is where some of the key problems were faced.

Our response has been to maintain, develop and put more resources into rigorous governance. Over those years, I am pleased to say that, as the C&AG recognises, that seems to be having a very good effect. May I say that it has been a tough journey for the boards of many of these associations? They have had to dismiss senior staff. Some of them, such as the board of Helm, had to recognise that they had made a major failure. With great dignity and understanding, they basically organised standing down from work that they had committed themselves to very heavily. They accepted their areas of failure and moved on. They have gone through a difficult process, but I think that they have faced up to it well. As I said, we now have the situation where we have four non-developing associations that still have some problems, but, overall, we have a process.

The other element is that it is not just that we do inspections every, say, two to three years. We have material coming to us all the time. We are checking the board minutes all the time, and we look at the accounts all the time. We have a risk-based analysis to make sure that we keep on top of those issues. Donald, do you want to come in on the general issue of regulation and that journey?

Mr Heaney: Yes, I will pick up on a few things that Will mentioned. I think that there was a clear line where associations were moving into territory that they did not have the skills and expertise for, either at management level or board level. That was not the case in all situations, but, from our evidence, that seems to have been very prevalent. Leading up to 2008-09, the property boom created its own problems. Helm is a specific example of some very real difficulties and reactions from management. That is, essentially, where it came from; it was associations moving forward without building up their skills and expertise across the piste. I feel that our process has helped to address that situation. We have moved forward. One of the things that we brought in was that we changed the requirement on board membership. We brought in a maximum tenure of nine years, and that was really to assist and drive through new blood coming in to the associations at board level.

Mr Hussey: Some comments have been made about this being a tough journey. It was a tough journey, but some of those tough journeys were at cost to the public purse. I will not deal with Helm or Trinity, because other members will. I still have concerns in that we have a situation where public money was being allocated to housing associations to do a specific job. My attitude is that, from day one, that public money should be tracked from the day it leaves DSD until the day that it is spent in a delivery process. We are told here that you are bringing in a maximum of nine years' tenure on boards. I do not see that as a great solution. Nine years is still quite a long time. You then say that boards were going into areas that may have been outside their knowledge. Why were they allowed to go into areas outside their knowledge when so much public money was involved? Why were they allowed to extend their remit when they were having difficulty coping with what they already had to deal with?

Mr Heaney: They were not going into areas that were outside their remit so much. They were going in at a level and then stepping up the level of activity. We were moving from what were fairly small, community-based organisations when they were set up through to some of the larger housing associations becoming multi-million-pound organisations.

Mr Hussey: Yes, but that is the question. When it was clear that they were having difficulties dealing with that smaller housing association development, why were they allowed to take that further step forward? If there is an element of control and audit, why were they being allowed to go outside that?

Mr Haire: I think that the key point is that, according to our inspections, they seemed to be going quite well at that stage, in 2005-06. However, as we started raising the intensity of inspections, we realised that they were getting into difficulties. The moment we saw difficulties, we acted and moved. I take your point. It is a very key element that we should follow up issues. There was a significant issue in this area, and, once we started to see it, we started to put the resource in to move things back.

Mr Jim Wilkinson (Department for Social Development): I think, as well, that it is important to draw a distinction between the regulatory framework and the inspection process that looks at the operation of the association in its entirety and the operational process that applies around the allocation of grant. That operational process will follow the grant through to the allocation and delivery of the homes. It is true that, while there were a number of issues with housing associations, and they were identified and followed through on, at the same time, the delivery by those housing associations of social homes was monitored through the operational activity of the programme.

Mr Hussey: I am going to come back on that. I am still not happy with the answer that I am getting in relation to inspections. For example, checking the minutes is not really a big deal; we have had a meeting; we did x, y and z. What else actually happened? What further, detailed inspections took place?

Mr Haire: Donald, could you maybe just run through that?

Mr Heaney: The big change in the inspection process was in the identification of the problems and mapping them out. The inspection process that was introduced in 2006 covered the five key activities of the organisation: finance; property management; property development, if it was a development association; housing management; and governance. In bringing together an inspection process that looked at each of those areas, we were able to cross-fertilise our findings from them. If we had some concerns in finance, we could look at development or property maintenance to see what the impact was and vice versa. So we were able to —

Mr Hussey: For how many years were the housing associations allowed to operate before you brought in these five key inspections? They were introduced in 2006. For how many years were they operating without that?

Mr Heaney: From when the housing associations became responsible for the new-build programme.

Mr Hussey: How many years was that?

Mr Haire: New build began in 2003, did it?

Mr Wilkinson: No, it was in 1996.

Mr Hussey: So, there was a 10-year period before there was a tightening of inspections?

Mr Heaney: There were inspections, but what you had were technical, finance and governance audits. They would have been happening on a rolling basis.

Mr Hussey: I am sorry, Chair, for the length of time I am taking. I want to concentrate on this before I move forward. It seems to me that it took 10 years to identify the five key areas that you were going to check on and try to tighten up. Was there a 10-year free fall? Were there 10 years when, basically, they were allowed to create this monster, and then you started to take control of it?

Mr Heaney: No. There was an inspection process, and, to pick up Jim's point, there was a grant allocation and administration process that approved applications for grants and monitored them. So that whole approval process was sitting alongside the inspection process. We were not relying wholly on the inspection process to get our assurance of delivery.

Mr Haire: I am afraid that we have not been able to give you the history of the last 20 years; we have tried to give the history of the last 10 years, which is our experience of working. Donald has been around for that time. That was the nature; you are looking at the reports for the last three years.

Mr Hussey: I accept that. I —

Mr Haire: We have made that transition and in that process. In many areas of governance — frankly, throughout the system — things that we did 20 years ago are so different from what we do now —

Mr Hussey: I accept that, but, again, we are looking at the background. From 2006, we clearly see significant weaknesses resulting in 40% of housing associations failing, and those failings would have happened from 2006.

Mr Haire: Those were picked up between 2006 and 2010. That was when we started doing that. When those started being picked up, we immediately moved against that process.

Mr Hussey: I will move on. How dependent is DSD on the housing association sector to meet its house-building targets? Is it fair to say that DSD has to balance its regulation role with getting the work done? How does the Department ensure that the housing association sector takes it seriously?

Mr Haire: Using housing associations gives you access to private money. Basically, you get twice as many social houses through the social housing process as you would through direct building by the Housing Executive. Basically, the business case from DFP says that you have to use housing associations as the core means of achieving that issue. Clearly, it a very cost-effective means of achieving the Assembly's very ambitious social housing targets. Therefore, there is a need to use that mechanism. You can always consider whether you want to look at other mechanisms. In GB, where there are private companies or other issues, you might always look otherwise, but, here, the message that we have received from the political process is that the housing association route is the best way of achieving your targets. We need that process, but, as you can see from what we did the last time, that does not mean that we do not regulate very strictly; it is a very tough issue. We have made some very major changes in the organisations over the last year to make sure that you get the best return for your money and you get completion for the public money that you put into that. It is a sector that you depend on to achieve your objectives, but that does not mean that you cannot regulate it correctly.

Mr Hussey: Moving on from that question, for the associations that failed the Department's inspection and were suspended from development, was there any temptation to get them back into the development programme as quickly as possible in order to achieve challenging new-build targets?

Mr Haire: I will ask Donald to come in on that because, obviously, he is the person who gives the agreement to go ahead with that process. It is about balance. Quite clearly, we want to have people who can develop that process going forward, but we do not want second failures. We have to get it right before people can move forward. We have to see significant change in the organisation, and we have to get those things through. We are tough in that way; we are saying, "Unless we are satisfied, and unless it is clear in that process, we're not going to back that horse again until we're very clear that it's got that process.".

Donald, do you want to comment?

Mr Heaney: I reiterate that the measure has to be the assessment of the performance of the association. If that assessment is not there, the recommendation will come forward from the inspection side for a return to the development programme. Even when they get that assessment, the recommendation is for a phased return, so they are allowed back for only a limited period so that they can be monitored very closely.

Mr Hussey: To move on from there, what are the four associations that failed the current round of inspections, and what are the main reasons behind their failure?

Mr Heaney: Appendix 1 of our report gives them. The four associations are Covenanter, Grove, Hearth, and Woodvale and Shankill. It is mostly because of their size. Covenanter is a very small organisation; it has only two schemes.

Mr Haire: And 42 stock.

Mr Heaney: And 42 tenants. Hearth is a very small organisation; it has 90 units.

There is a limitation on what small organisations can do to meet what are fairly hefty regulatory governance and finance requirements.

Grove is a small organisation with, from memory, fewer than 200 units. Woodvale and Shankill is the largest of the three.

Mr Hussey: In paragraph 3.9, you point out that, for some of the failed associations, actions such as restructuring the senior management team and the complete restructuring of board membership have been taken. Will you expand on that?

Mr Heaney: Yes. When we find significant failings in an association, it is down to us to present those findings to the board and then to identify and explain where we think the failings are. Sometimes the failings are at management level, sometimes they are at board level and sometimes they are at both. Our assessment of that will drive the tenor of the discussions. We have had discussions in which we have said, "Management have failed. There are significant failures, and we think you need to look seriously at that. As a board, you have failed in your challenge function and your oversight function, and there is a question mark about your future".

Mr Hussey: If you go down the line of the complete restructuring of a board's membership, including the full replacement of a board, how do you follow that process through?

Mr Heaney: We follow that through by working with the association. The associations are independent organisations. They are constituted independently. They have a responsibility for their boards. So we work very closely with them. What we look for, for example, in the change of a board is a phased approach to change so that, over 12 months, a replacement board is appointed. On the management side, we expect the board to take the lead in finding a replacement management team and releasing the existing management team.

Mr Hussey: How closely do you monitor that process? You mentioned minutes and things, but do you go to board meetings? Are you invited to board meetings?

Mr Heaney: We have been invited to board meetings. In the process, once an association fails an inspection, it immediately plugs into a high-level interaction with us. So we set a follow-up review for six to nine months later and carry out a specific follow-up inspection. Within that time, depending on the nature of the issues, we either have further ongoing meetings with the board or we get formal updates from the board on the progress of its action plan. Once an association fails an inspection, there is a high degree of interaction between it and the inspection side.

Mr Hussey: What oversight do you have of this process, Will? How are you kept informed of what is happening?

Mr Haire: The issue sits within one of my groups. One of my deputy secretaries is over this area, and Jim reports to him. I see the issue on our risk register. For a long time, Helm was a major issue on the risk register. There were issues in the housing association for several years, and we were monitoring that process. I got feedback from the team about where they were in the process. In some cases, intervention is needed. There were quite significant issues with Helm, which meant that we had to intervene with the board and some of its financial backers to assure them that the issues were being sorted. I was involved, and I wanted to ensure that those things were clear and that people realised the seriousness of the issues and understood that changes had to take place.

Mr Hussey: You will be glad to hear that this is my last question: apart from Helm, which was well publicised, did that happen in any other organisation?

Mr Heaney: No. Obviously, there were concerns with Helm, and the extent of that issue raised the very same question for us. Part of our process was to go to the seven other key development associations, which account for more than 80% of the programme, to carry out targeted inspections on the development and structural aspects of each organisation. Apart from one association that had issues, none of the others was experiencing the issues that we had picked up in Helm.

Mr Hussey: You said, "apart from one".

Mr Heaney: One association had some difficulties with a delay in clearing a scheme, which had originated when it was purchased back in 2008. It was not the same degree of difficulty, if you like, as was evidenced in the Helm situation.

Mr Hussey: Chair, in that circumstance, do we want to know what that particular organisation was, or do we want to get something in writing?

The Chairperson (Ms Boyle): Do you have that information, Mr Heaney?

Mr Heaney: I can give you that information. Given that it was in the past, would it be better if I were to drop you a note of the details and background?

The Chairperson (Ms Boyle): That would be helpful in our deliberations.

Mr Heaney: It was the only association that received limited assurance, but it was a different situation from the one in Helm.

Mr Hussey: As it was flagged, we would like to be aware of it.

Mr Heaney: Sorry, incidentally, on that point, that association has since moved forward through "satisfactory" assurance to "substantial" assurance.

Mr Hussey: If it is a positive story, we want to know that, too.

Mr Dallat: Sorry for having been absent from the meeting for a short time. Mr Haire, you told us earlier that the directors of these housing associations were chosen from social enterprises.

Mr Haire: They are board members, who are chosen from a wide range of backgrounds. The boards choose their members from social enterprises and charities.

Mr Dallat: Do you think that any of them have been homeless at some time in their life?

Mr Haire: I do not know is the answer.

Mr Dallat: The answer is no.

Maybe I should switch to Mr Graham. The Housing Executive has a proud history, and you are bound to have inherited some of the attributes of that organisation, which, sadly, had to give way to housing associations 26 years ago. In the last 10 years, 74,000 people have been declared homeless. How would they feel about a housing association spending public money to fight a legal action?

Mr Mark Graham (Northern Ireland Housing Executive): I presume that you refer to Trinity's letter, which indicated that it may go to judicial review because we had indicated that we were going to recover the money for the Crossgar site. As Will said, Trinity is perfectly entitled to do that. We were surprised that it chose to take that route. It is not unusual for us to recover money from housing associations for lots of different reasons. However, faced with that situation, we had simply to follow appropriate and due process. For a long period, we exchanged information through freedom of information requests. During that period, we also tried to make sure that channels were kept open with the association to indicate that we intended to recover the money but were willing to discuss an appropriate way of doing that. The end result was that the association indicated that it wanted to have a discussion about how we would recover the money. I am happy to say that, eventually, we reached a settlement with the association.

Mr Dallat: I do not want to put words in your mouth, Mr Graham, but this was nothing short of a scandal.

Mr Graham: It is not really for me to comment. The association is entitled to do what it did. All I can say is that it was not what we expected to happen, and I think that, in the end, we reached an appropriate settlement with the association.

Mr Dallat: What do you call an appropriate settlement? Remind me of what that settlement was.

Mr Graham: We agreed with the association that the bulk of the money would be recovered from it, and it would develop a scheme that will go on-site in March this year without any grant funding.

Mr Dallat: So, you rolled over.

Mr Graham: No. The association will use its own money to develop that scheme. We have also recognised some of the sunk costs associated with the Trinity scheme. So most of the money that we provided to Trinity will be used to provide social housing. The money that we would have grant funded to that scheme will be used for other social housing schemes. I think that, certainly, we did not roll over; we were very clear throughout the process that we thought that there was a clear basis for us recovering the money.

Mr Dallat: Were you in control at all times? How long do you consider it appropriate to wait before the alarm bells begin to ring, telling you that the association was not going to deliver? At what stage should you have been shouting from the rafters, "We want our money back"?

Mr Graham: We keep very close track of each scheme, so we know. We have a regular bimonthly meeting with all associations, including Trinity in this case, to understand how they are progressing each of their schemes. We were very aware in this case that Trinity had submitted various planning applications and that some were recommended for approval and there was a recommendation that others be denied.

It is not unusual for there to be multiple iterations before a planning application is approved. Yes, the timescale on this scheme was exceptional, and only it and the Helm scheme took that long. No other scheme that I am aware of has taken anywhere near that length of time.

Mr Dallat: Can I substitute "exceptional" with "scandalous"?

Mr Graham: I do not think that that is appropriate word. Generally speaking —

Mr Dallat: I am trying to put myself in the position of the 74,000 people who, in the last 10 years, did not have a roof over their head because you lost control of two housing associations that had such a brass neck that they had their solicitors writing to you.

Mr Graham: I want to make it clear that Helm did not take that approach. When we indicated to Helm that we were going to recover the money, it was very willing to sit down and talk to us about the best way of doing that. I do not recognise that we lost control of the situation. We have had large numbers of advance land purchase (ALP) grants approved and successfully delivered since the Housing Executive was responsible for this — indeed, before the Housing Executive was responsible for this. These two individual schemes were exceptional. Yes, it took a long time, and it is unfortunate that it took that length of time, but that money has now been recycled back into social housing.

Mr Dallat: Mr Graham, how long would you consider an appropriate time before the money should have been repaid?

Mr Graham: One of the significant lessons that we learned from the Helm and the Trinity —

Mr Dallat: So you did learn some lessons.

Mr Graham: Absolutely.

Mr Dallat: I am glad that you said that, because I was getting the impression that you had learned nothing and forgotten everything.

Mr Haire: It is in the paper, Mr Dallat, as indicating —

Mr Dallat: I know, Mr Haire, that you are dying to get in, and you are next on my list.

Mr Haire: Fine.

Mr Graham: Let me explain what the issue was when we approved both those schemes. The 'Housing Association Guide', which is the rule book for housing associations, said that the schemes should go on-site within a reasonable time. The lesson that we have learned from that is that, if associations buy a piece of land, they must get that scheme on-site within two years of us paying them the ALP money or three years with prior approval. That is a reasonable period because, typically, the time from a site being identified to a scheme going on-site is around two years. That was the first, and probably critical, lesson that we learned from that.

The second lesson that we learned is that, at that time, we relied on the opinion of a planning professional that a scheme would be reasonably acceptable to Planning Service. Since then, we have introduced a stronger control, which is that an association is expected to have a pre-application discussion with Planning Service and be able to indicate to us, through minutes, that Planning Service believes that a scheme of that type would be broadly acceptable.

We certainly have learned lessons and introduced stronger controls.

Mr Dallat: Mr Graham, I do not want to prolong this, but I was in local government for 33 years: if somebody expressed an interest in a piece of land for housing, the first people I phoned were those in the planning office, who would indicate whether it was feasible or not. We know from this experience that there was not a pup's chance of a housing development ever happening.

Mr Graham: I would not agree with that. A planning application went to council —

Mr Dallat: For one house.

Mr Graham: A number of planning applications also went to council with a recommendation to approve. Indeed, Minister Poots recommended approval of one of those schemes. In the end, that did not happen, but I do not think it right to say that there was not a pup's chance of planning approval for a scheme of that type.

Mr Dallat: We will move on. Mr Haire, I know that you are very anxious to come in on this. When projects do not proceed as expected, how long would the Department normally allow before requiring the grant to be repaid? At what stage did your auditors realise that this whole thing was out of control and public money had gone AWOL?

Mr Haire: As you say, of the 121 ALPs, we had these problems in two cases. There was the situation in Helm, which had problems. The 131 houses that we wanted for north Belfast would have given us coverage for 10% of the housing stress there. There was the problem of 2007, when the land was purchased, and the scheme had initial planning problems, but it was in 2011, when the Department for Regional Development said that the road was to go through that area, that it came to an end.

Then came the really important phase when Helm was trying to use that land to negotiate with DRD to see whether it could do a land swap, so we could have got some land for north Belfast social housing. You can understand, therefore, why, with regard to those 131 houses, the Department was keen to make sure of two things: first, that the opportunity was not lost; and, secondly, to uphold our duty. We knew that that had to be dealt with, but we also had to make sure that we landed Helm safely and did not lose that organisation, given the sheer cost of losing it. We were monitoring that very carefully, and, as I said to Mr Hussey, it was very much on our risk register from that time. We were working with our colleagues in the Housing Executive, which is the operational end, to make sure that that was done.

At the same time, then, we had the smaller project, 13 houses originally, for Crossgar. We realised that there were planning issues, but the housing association was trying to get a smaller unit. At that time, there was a housing need of 10 in Crossgar, but there is now a housing need of 25. Even if we got a smaller viable project — for example, for three houses — that would start meeting some of the housing need that, undoubtedly, we all want to address in the town. You can understand that, at the time, we wanted to see whether something was viable there.

It was being monitored very carefully. However, by 2012 — you are right — we recognised very clearly the need to tighten the process. In the two cases that failed of the total of 121, we realised that there were things that had to be sorted. That is when, as Mark has indicated, we made stronger use of the pre-application discussion (PAD) system in that process. I will explain this so that people are clear: it is two years plus, with prior agreement from the Housing Executive, one more year. We move from the language of "reasonable period" at that time, and that is, I think, absolutely right.

Mr Dallat: Mr Haire, I am not sure that you answered the question that I asked you, but perhaps you did and I missed it. What was a reasonable time before you got the money back in your bank?

Mr Haire: I think that the reasonable time now is two to three years, but you will have circumstances because of trying —

Mr Dallat: Two or three: which is it?

Mr Haire: A project generally takes three years from getting the land through to completion, if all goes well and you get it through the planning. So, three years is sort of reasonable. However, you know from your experience of planning that other issues come up. There will be circumstances in which another year may be logical because of an issue coming up. It would be foolish to say that three years is the limit and you cannot go to four. The Housing Executive, very sensibly, put in place a mechanism for monitoring that process. We are talking about two of the 121 cases. I was talking to Mark earlier, and I think that, at the moment, all the ALP projects he is working through are on

for three years.

The Chairperson (Ms Boyle): Mr Girvan wants to come in for a supplementary.

Mr Girvan: It is just on the back of what John asked previously. Will, you said that you were potentially trying to do a land swap with the Department for Regional Development.

Mr Haire: Well, the housing association was trying to do that.

Mr Girvan: Why would it want to do a land swap with DRD?

Mr Haire: It had land in the area, the roads there were being aligned and DRD has land in the area. It was an opportunity to get some land —

Mr Girvan: This was land at the bottom of the M2 at Great Georges Street. I can understand a three-year period if you are going to get some housing on the land and are fighting over whether you get 20 units or 28 units. I understand that it might take a bit of time to work that out. However, the fact was that no units could be put on the site. Was that not a key point? Surely the Department should not have allowed public money to be transferred for a site that, to all intents and purposes, was right beside a motorway. It was a key site required by a plan that has been in place with the Department for Regional Development since 1996. Was that not blighted from then?

Mr Haire: It was not affected by the 1996 plan. I know the area and have driven through it, and my understanding is that it was the 2011 decision by DRD that affected that land. It was potentially possible before that time, and the 2011 decision changed the situation.

Mr Wilkinson: That was the case in 2011, and I think that it is also useful to reflect on the advance land purchase process. It is not an entirely speculative process. In the first instance, the Housing Executive has to say that there is social housing need in an area. In the second instance, the housing association has to have a valuation and an opinion that both planning and delivery are possible. In the third instance, it has to go through the system and be approved. The money has to be spent on the purchase of the site. Ultimately, if it fails to be delivered, there is a process by which the housing association will enter an agreement for the return of those resources.

It is not quite as speculative as simply purchasing a site. First, the association must tell the Housing Executive that the area is one in which there is social housing need — that is a key driver because we want to deliver homes only where there is maximum need. A second element is the planning opinion. We have now tightened that so that there is a pre-application discussion. The third element is valuation. All three are required to trigger an advance land payment. Then, ultimately, the site has to be purchased. In both of these instances, the associations used the funds and bought the sites.

Mr Girvan: Housing need can be determined within half a mile of where you were talking about. I appreciate that not everybody says that they want a site on Great Georges Street. The identification is of a general housing need, and, to be honest, that list has little credence. We have found that people do not put their name down for areas that are very popular, simply because they are told that there is no hope of getting a house there. Therefore, there is no hope of ever getting a list in these areas because people go to their housing officer and say that they would like to live in, for example, Ollardale, which is an estate in my area.

When people have no hope of getting a house in a certain area, the consequence is that they never put their name down for it, so you will never, ever generate a list for that area, even though there might be the greatest need and everybody wants to live there. I think that the whole system leaves itself open to all sorts of abuse.

On that point, I would like clarity on the land swap with the Department for Regional Development, which had a key interest in this site, obviously. Did anybody ever check the 1996 development plan that sat up in Hydebank for many years, showing the area where the underpass and so on was included?

The Chairperson (Ms Boyle): We will go back to the Deputy Chairperson. You can briefly answer that, if you wish. Deputy Chairperson, are you happy enough to continue?

Mr Dallat: Yes, I am almost finished. Mr Wilkinson, I was suitably impressed by all of those plans that you were explaining. These housing associations have been knocking about for 26 years. Why is it only now that there is the semblance of a risk assessment or some kind of guidelines emerging that might mean that people in need of social housing get a roof over their head?

Mr Wilkinson: Sorry, I should have clarified. I described the guidance that was in place at the time. The additions to that guidance have been the requirement of a formal pre-application discussion, and the further addition has been the two to three years as a descriptor of reasonableness. Throughout the whole process of the social housing development programme, both when the Department operated it and when the housing association operated it, there is a process of application and a process of business case approval.

Mr Dallat: I do not want to be accused of advertising, but this whole thing was, from beginning to end, a real Horlicks, was it not? Who is taking responsibility for it?

Mr Haire: Are you saying that the use of ALPs is a Horlicks?

Mr Dallat: From the day and hour that the money left you, went to the Housing Executive and then went to the housing association. Even now, we do not have a clue when Trinity might give you the money back, if at all. It probably will not.

Mr Graham: We do, to be clear. We have an agreement with Trinity. That money will be accounted for by the end of this financial year.

Mr Dallat: Explain "accounted for".

Mr Graham: What I mean is that a scheme will go on-site in March this year.

Mr Dallat: So, you are not getting the money back.

Mr Graham: We will not grant fund that scheme.

Mr Dallat: You have worked out a scheme to get them off the hook.

Mr Graham: No. That is absolutely not the case. That scheme is a supported housing scheme. It was a dementia scheme and would have been grant funded. We will recycle the money that we did not spend on that scheme on other schemes, so the money will be safeguarded for social housing.

Mr Dallat: Have any lessons been learned?

Mr Haire: We have very clearly tightened the scheme. In fact, I understand that our scheme is run more tightly than schemes in GB.

As you described, 3,824 houses have been supported by the ALP scheme. It is true that 143 have not been delivered under the scheme, including 113 in the case of Helm and 13 in this area. That will free up resources and we will get that amount of money through the system. The housing associations carry the risk, not the public body, and they will have to make sure that that amount of social housing gets into the system.

At a time when a lot of people have property issues and have lost out on social investments, the ALP scheme has ensured that all the schemes have been delivered. Two had difficulties, and, as a result of that, we tightened the system.

Mr Beggs: I want to quickly focus on the time frames. You said that three years is a reasonable time frame for something to come through and be delivered or to chase up money if it has not delivered its intended purpose. The advance land purchase scheme was established in 2007. It was 2011 — almost four years later — before the first planning applications were made for 10 to 12 units. There was another planning application for seven units in December 2007 and another for three units in April 2012, all of which were unsuccessful. A successful application for one unit that would not meet the criteria was approved in July 2014, and they then made seven applications. I looked at the map of the half-acre site in a residential area. If somebody had come to me and told me that they were thinking of putting seven houses or apartments on that site, I would have told them that it was a no-brainer that they would not get through and that they should forget about it. Does nobody have any common sense?

Surely that was a totally unreasonable amount of time. Have you allowed the problem to be kicked down the road for a long period?

Mr Graham: The first application for 12 units was made in 2008. Revised planning went with a recommendation for approval to the February council in 2010, and a recommendation to refuse that was made in 2011. Minister Poots recommended approval in March 2011, and Minister Attwood overturned that approval in November 2011. A recommendation for refusal was to be made to the November council, but it never reached that point because a meeting was called with Planning Service. It was after that period that the Housing Executive requested the repayment of the grant.

Yes, it was a long time. I think that it is too crude to say that there was no chance of planning permission. As I said already, and as Will also said, we have learned a lesson from that, and we are now very clear with the associations that we expect them to be on-site within two years or, with prior agreement, in three.

Mr Beggs: Can we have a copy of that agreement? What, in particular, are deemed to be valid deductions — nine sets of planning applications? Will you let us know that in writing or now?

Mr Graham: Yes, we will do that.

Mr Clarke: I am trying to stick to my questions, but I am intrigued by what Will said. Will, if you keep telling yourself what you said in response to John Dallat, you might even start to believe that the ALP scheme was good. Let me take you back to the piece of land that we are talking about, which was sold to Helm for £9·75 million. How many houses were to be built there?

Mr Graham: I think that there were to be 160: 130 social houses and 30 affordable houses.

Mr Haire: There were to be 200 altogether.

Mr Clarke: Sorry, maybe I am confusing that with another one. How much was the half-acre site that Roy talked about, which was to have seven units built on it?

Mr Haire: It was £835,000.

Mr Clarke: I am not that good at maths, but that is probably about £120,000 per house.

Mr Girvan: Per site.

Mr Clarke: Per site, sorry.

Mr Haire: There was an independent valuation —

Mr Clarke: And you are sitting here pontificating about how wonderful advance land purchase is.

Mr Haire: That is what it was valued at independently, as was required.

Mr Clarke: Who picked the valuer?

Mr Graham: The housing association picks the valuer.

Mr Clarke: Oh, right.

Mr Graham: However, there is another control in place.

Mr Clarke: Mark, are you going to defend £120,000 per site for social housing?

Mr Graham: This was —

Mr Clarke: A yes or no will do.

Mr Graham: This was in the context —

Mr Clarke: A yes or no.

Mr Graham: Yes, at that time.

Mr Clarke: So, the Northern Ireland Housing Executive is telling us that it cost £120,000 per site before the houses were built and the permanent secretary of the Department is praising the advance land purchase. Is that right, Will? Have I missed something?

Mr Haire: Let us understand the issue —

Mr Clarke: It is not a separate issue. You cannot talk about something being a great system in what it delivers; it can only be good if it is good value. Are going to tell me that £120,000 per site is good value for the public purse?

You are aware that I sat on the Committee for Social Development, and I know that the Housing Executive was looking at purchasing houses. I think that the estimated cost to purchase a social housing house was £60,000. You are telling me that £120,000 per site, before we build, is good value.

Mr Haire: To be clear, I was not talking about those two projects. What I was saying is that the advance land purchase scheme, whereby we can help organisations to purchase land as part of the housing grant that they get, enables them to put those projects forward and means that you have a number of schemes flowing through the system. If that scheme and support for the purchase of land was not in place, we would not achieve our goals for social housing. The scheme —

Mr Clarke: It seems, Mr Haire, that all of us around the table are in the wrong business. We should all set up housing associations and go round the countryside identifying pieces of land for sites at £120,000 a unit.

Mr Haire: I am not defending the price of that land. I make the point that, at that time and at the height of the market —

Mr Clarke: What you are saying is that the system is very good.

Mr Haire: I am talking about a scheme. I am saying that the scheme has worked well to make sure that we had that flow. Ninety-six per cent of the houses that went through the scheme will be delivered successfully. Four per cent of the houses were not delivered successfully and the resources flowed back through the system. I am saying that, overall, that scheme has proved to be a success.

Clearly, there were house prices at the height of the market that, when we look at them now, we could not believe them. They were incredibly high, and I quite accept that. That was what the market was paying at that point, and I think that that was the point that Mark was making.

Mr Graham: There is an additional check apart from the independent valuer. The schemes are based on a tariff.

Mr Clarke: He is not really independent, because he has been appointed by the association that is coming to you to gift it, but go ahead.

Mr Graham: Basically, the Department calculates what a normal scheme of that type in that area would cost in three ways. It calculates the construction or build cost of the scheme from the cost of schemes that have taken place over the last year; it uses the LPS calculation for the value of land at that point; and it includes on-costs for the scheme. That gives a fixed cost for the scheme. We will compare what a normal scheme of that type in that place will cost with the actual scheme that came into us at that point.

In hindsight, I accept that it seems ludicrous that that was the amount that land cost. However, LPS confirmed that, in that area and at that time, land was selling for that price. So, there was an additional check and it was not just the independent valuation. That largely aligned with LPS's view.

Mr Clarke: I suggest that you do your own independent research, go back to the figures at that time and get us the average cost that social houses were being sold for at the time you were paying £120,000 for a site for one unit.

Mr Clarke: Can you write to the Committee to tell us the average price that social houses were making at the height of the market and how much the Housing Executive was selling them at? There are two aspects to that.

Mr Haire: Yes.

Mr Clarke: Maybe you, Will, should read that before it comes here. When you read it, you will find that your ALP has not been as good value as you think.

The Chairperson (Ms Boyle): I have to let Mr Rogers in at this point.

Mr Rogers: On the advance land purchase, following on from

said earlier about all the planning applications for the Crossgar site, are we talking about the same piece of land with the same access right throughout this saga?

Mr Graham: Yes.

Mr Rogers: Your briefing talked about projects that will develop out. My understanding of developing out is that it is making an agreement, whether it is 40 houses or 140 houses. How many of your 74 projects have developed out fully; in how many did you deliver the number of houses in the original agreement?

Mr Graham: I would need to find the information on what "complete" means for developed out. However, we have had no other issues with schemes going on site, getting planning and our approving them within that time.

Mr Rogers: Chair, it would be useful if the Committee could get the breakdown of developing out: the agreement for the grant and how many houses were actually delivered.

Mr Graham: To be clear, when we approve a scheme for an association, it is on the basis that it has planning, that it complies with guidance on house type, space standards and all that type of thing, and that an economic appraisal has been approved. If an association is going to develop a scheme of 60 units, that is what it will develop. We can find that information for you.

Mr Rogers: I heard it said that you realise that there were planning issues and that planning has now tightened up with the PADs. Particularly for the two that we are speaking about, was there any discussion with planning at the initial stage?

Mr Graham: I am not sure about the Helm scheme. In the Trinity scheme, the planning consultant indicated that they had looked at that and believed that there was a reasonable chance of getting a planning application for that site.

Mr McQuillan: Whose planning consultant was it?

Mr Graham: It would have been Trinity's.

Mr Rogers: Was a report produced?

Mr Graham: The consultant produced a report.

Mr Rogers: Could we get a copy of it?

Mr Graham: Yes.

Mr Rogers: Following on from Mr Dallat's questions earlier, Mr Haire, I think that my only question is this: do you think that more should be done on due diligence before paying out grants in the first place?

Mr Haire: Due diligence about the sites —

Mr Rogers: About the mess that we have got into with these two.

Mr Haire: The point was made about the PADs and looking at those issues and that process. There has already been a tightening in the system. We have tightened the system, and we have also been clear about organisations' delivery time. The ones that we have at the moment all seem to be delivering out in that process.

Mr Rogers: However, you cannot assure the Committee about due diligence on Trinity.

Mr Haire: As I said, we learnt about the question of the timing in this process. The fact is that you had to be tighter in the timescales of that process. We adjusted the scheme in 2012 because of that issue.

On the question of planning, as, I think, Mark indicated, there were times when, quite clearly, that scheme was being put forward for approval. It is hard to say that something was not going to be given in that area in that process.

Mr Rogers: So, basically, it was its own housing association planning consultant who put the report together. Is that it?

Mr Haire: As Mark indicated, at certain stages, the project did get towards planning; it was put forward for approval.

Mr Graham: The guide at the time indicated that we needed support from an independent planning consultant. That is what we received. The only point that I made earlier was that it seemed to get close at various times to receiving planning approval.

Just to reiterate, we recognise that we need stronger assurance on planning, and that is why we have indicated that associations must have a pre-application discussion with the Planning Service and they must provide us with the minutes of that meeting to indicate that the scheme is broadly acceptable. So I think that we are in a much stronger position on due diligence in planning than we were in 2007.

Mr Rogers: Mr Graham, you said "independent planning consultant", but, basically, it is a planning consultant working for the housing association.

Mr Graham: The consultants are appointed by the housing association, but they are independent professionals.

Mr Rogers: For how many houses did that report —

Mr Graham: That was for the 13 houses, initially.

Mr Rogers: And now there is permission for 25?

A Member: No. For one.

Mr Graham: To be clear, there is planning for one house, but, once we got to that stage, it was clear that this was not a social housing scheme, so that is essentially what initiated our recovery of the money: that this was not going to be a social housing scheme.

Mr Rogers: I go back to Mr Dallat's original point: it really is a strategy to let the housing association off the hook.

Mr Graham: I do not see it that way. It has also has to be appreciated that, taking those two exceptional cases aside, it is not unusual for an association to have to submit more than one planning application and to get it approved for a wide variety of reasons. The number of times that this went in for planning was exceptional, but it is not unusual for it to take more than one planning application. That is why we must allow some leeway, namely two years, for associations to get planning through the system.

Mr Rogers: I have to say that I am not satisfied with the answers at all, but I move onto looking at the charging of interest. The guide allows for the charging of interest when development does not proceed as anticipated, but, in the two cases that we are speaking about, no interest has been charged. Why is that? We are talking about a loss of millions to the public purse.

Mr Wilkinson: When we look at the interest, there are probably three relevant factors. The first is that both associations spent the funds that they received to purchase the land, so they had invested those funds in the land purchase. Secondly, as I have indicated, in any agreement to recover, we are very conscious of the financial implications for the associations on their existing lending, and also the impact that it might have on existing tenants. The third issue relates to the legislative provisions. They indicate that interest should be considered from when a relevant event occurs, and the relevant event is when the decision is triggered to recoup, or seek the recovery of, any funds, because until then the scheme is still viable. In both those instances, the triggers, if you like, to commence discussions, at which time discussions nearly commenced immediately, were in 2013 and 2014.

Mr Rogers: We are talking about almost 10 years in the case of Helm, and no interest was recovered. How can that be justified?

Mr Wilkinson: Just to reiterate, Helm was paid the grant that was deemed to be in order and met the requirements. It used that grant to purchase the site; the site was on its stocks. It was seeking to develop it for social housing. When it became clear that the site was no longer viable and could not to be developed, it entered into an agreement with the Housing Executive to ensure that those funds were utilised for social housing. In those circumstances — taking account of the legislation, the actions of the association and the importance of ensuring the association's financial viability, that there is not undue pressure put on tenants or on the services that they can provide — we have to make a balanced judgement about how we seek to recover the funds.

Mr Rogers: I have no further questions.

Mr Clarke: May I ask a question, Chair?

The Chairperson (Ms Boyle): Adrian, do you still want to ask a question? I will come back to you, Trevor.

Mr McQuillan: We have moved on from what I wanted to ask about earlier. It seems to me, from what Mark has been saying, that this whole scheme was devised on the back of a cigarette packet. There is no rhyme nor reason to it at all. I am still not clear whether this money has been repaid, there has been agreement to repay it or it has just been moved to another property deal.

Mr Graham: The money will be recycled to another housing association.

Mr McQuillan: It is not going to be repaid. Let us get that clear.

Mr Graham: It will be used to develop another scheme without any grant funding associated with it; so it is being recycled. I am not quite sure what —

Mr McQuillan: Where? Where is it being —

Mr Graham: That scheme is due to go on site in March, and, once that happens, we will recognise that in our accounts.

Mr Wilkinson: My understanding is that the method of recovering the grant is that either of these associations could and would be entitled to claim grant. For example, one of the sites that we are talking about is a Helm site. Helm was developing social housing and is entitled to a grant of £1·5 million. That is offset against the £8 million paid, and that is how it is being recovered. It will be an amalgamation. Some will be direct repayments, and some will be offset against grants from other schemes. In that way, you create a package of ensuring that the funds are returned but which does not affect the financial viability of any of the organisations or their ability to deliver tenants' services.

Mr Clarke: Jim, rather than reading this all again, I want to get my head around this. How much was the advance land purchase for the Crossgar site?

Mr Haire: Eight three five.

Mr Clarke: Eight hundred and twenty-five million. Sorry, £835 million. What is £10 million? That is the price of these sites. We have had one site passed on it.

Mr Graham: Thousand.

Mr Clarke: Sorry, £835,000; I would hate to get my decimal point wrong. It is £835,000 for one site. I think that John described it rightly as this laundry scenario that you are working through, Will. How much of the £835,000 will be attributed to the Crossgar site?

Mr Haire: That resource has to come back, except for some excepted costs.

Mr Clarke: How much?

Mr Graham: About £600,000 will be reused.

Mr Clarke: So, that site will have cost £235,000 for one unit. Is that what we are saying?

Mr Graham: No.

Mr Clarke: If I take £835,000 and subtract £600,000, I get £235,000.

Mr Graham: Yes, I see what you mean now.

Mr Clarke: We were talking about £120,000 earlier, and we are now talking about one site in Crossgar costing £200,000 before a brick is laid.

Mr Graham: To be clear, we are still finalising the detail, but, yes, it will be around that amount.

Mr Clarke: You did say to me that you are getting approximately £600,000 back. That is over £200,000 for a site for one social house.

Mr Haire: It will not necessarily be a social house.

Mr Graham: It will not be a social house, but that is recognising the costs that —

Mr Clarke: Sorry, what will it be?

Mr Graham: Once we recover the money, it is for Trinity to decide what it will do with the site. It can either continue to apply for planning for the site, it can sell it, or it can develop it for private purposes.

Mr Clarke: This is the one that it cannot get planning permission for.

Mr Graham: I have no doubt that it would get planning permission of some sort for that site.

Mr Clarke: How have you no doubt? I heard Roy reading out the planning history. I read it earlier. I gather from that that it has tried this on four or five different decisions and has got one site passed. Where are you getting the confidence, Mark, that it will get more in future?

Mr Graham: I mean that it has planning for one house on that site. Therefore, it could develop that site for one house, but it would not be a social housing site. Once we recover the money from this, or recycle the money, it will own the site. What it decides to do with it from that point is up to it.

Mr Clarke: As John identified earlier, hundreds upon hundreds of people are waiting for houses. The whole purpose of the advance land purchase is to help to provide them. This is not even to provide social housing, and you are taking only £600,000 back. You are leaving this housing association with £200,000 in a slush fund.

Mr Graham: The housing association has lost a considerable amount of money on this scheme.

Mr Clarke: I have to say that I would not give it any tea or sympathy because it did not go into it with its eyes closed; it knew that it had the public purse backing it and that somebody else would lift the tab. Mark, if you want me to give it sympathy, you are looking at the wrong person, because I do not do sympathy. We are now selling a site with £200,000 and no value.

Jim, in response to Seán, you gave three areas: land purchase, the financing arrangements, and the legislative process. There is a fourth that you did not consider: public opinion. I think that public opinion, in this case, would have outweighed the other three. People listening to or reading this will find out now, Will, that your Department has sponsored a housing association to the tune of £835,000 and that there will be no social housing on the back of that. People will be appalled, particularly those who come to every one of our offices with their sons, daughters, brothers and sisters because they cannot get houses, yet you sponsor a housing association to the tune of £835,000 with no planning permission. Mark, you are going to try to recover only £600,000-odd of that and allow it to keep the rest.

Mr Haire: I make this point: £126 million has gone into advance land purchase, which has led to 3,800 houses being delivered in the process to meet —

Mr Clarke: Will, let me stop you there. I am not interested in that. I will tell you why: we do not have the facts about what each of those sites cost, but we have the facts on what these sites cost. With the greatest respect, I do not want to hear about all the others. Unless we have the paperwork to find out whether there was true value for the public purse, they are of no interest to me. It should be of interest to you, because you need to learn lessons from what you have been involved in.

Mr Haire: I assure you that we have learnt lessons; that is why we have tightened the system in the process. We readily admit that there were failures in development in these two cases. We recognise the point. I am trying to make the point, Mr Clarke, that we have an advance land purchase system because you, as an Assembly, have the ambition to push forward with social housing at a very high rate. We know that we have to get the housing associations assembling the land. We have DFP experts in PEDU telling us that we had to do that process to get it forward. We have tightened the scheme, and we will continuously get the scheme tight. Overall, the scheme is delivered in that process, but I readily recognise — we have made the point — that there are issues. The on costs of looking after the site for the association was £200,000. That is a loss in the system, but I am just saying that those —

Mr Clarke: Will, you are doing what you do best. If you had taken that £835,000 to some of the developers who were in difficulty with units finished, you would have been buying units for less than £120,000. In this case, you would have been buying a unit for less than £200,000. You would have found that you got much more value. Do you know what the issue would have been? You would have addressed housing need, but, here, you gave a housing association £835,000 to deliver nothing. All of us round the table want to push on and see social housing being delivered. This scheme has delivered nothing, but it has wasted almost £1 million; £835,000, and no interest was charged over the years. If you apply the interest, it will be over £1 million. How many houses did we get? None. I suggest that, rather than propping up housing associations that are squandering money, you start speaking to developers with units built who are facing pressure from the banks. That is all this is: squandering money. You could not defend it.

The Chairperson (Ms Boyle): I am going to bring in Adrian McQuillan.

Mr McQuillan: My question has nearly been clarified, but I am just trying to get it clarified. What you are saying, Will, is that the total of £835,000 that Trinity and Oaklee or whatever—

Mr Haire: It was Trinity at the time.

Mr McQuillan: Right. Mark called it "recycling"; we are recycling £600,000.

Mr Graham: Approximately. It will be in that region.

Mr Haire: We will give you the figures.

Mr Graham: It will probably be slightly more than that.

Mr McQuillan: So, there is £235,000.

Mr Graham: It will be nearer to £200,000. We are still —

Mr McQuillan: Well, it is £200,000 that has gone by the wayside.

Mr Haire: Because of the siting process.

Mr McQuillan: On top of the £200,000, there is interest on the £800,000.

Mr Haire: We just explained that there is not; we cannot charge interest. That is the point that we are making. We do not have the legal powers to do that.

Mr McQuillan: No, but have you worked out how much that interest would be?

Mr Haire: We do not have the powers to get that; that is the point. One of the reasons why we have gone for three years is that we want to get it quickly in the process. If you do not have that money up front from the public sector, you are not going to get the flow. That is the point that I am trying to make again. I recognise Mr Clarke's point: here was a scheme that did not work. It is extremely annoying in the process. As you say, it went to planning, and planning made its decision in that process. That is absolutely right. It is not our job to interfere in the planning process. We have tightened the system with the PAD system to make sure that we get better alignment. Generally, that works. That is the point that I was making, Mr Clarke. Clearly, we want to —

Mr McQuillan: The Department was happy enough to run with £835,000 of public money on the back of a report from a so-called independent planning consultant who was employed by the housing association.

Mr Haire: That was the system at the time —

Mr McQuillan: Wholly wrong and irresponsible.

Mr Haire: — and, generally, a lot of schemes worked very well in that process. This one did not.

Mr McQuillan: It was only a matter of time before you were caught using that process.

Mr Wilkinson: It is worth pointing out that that was an element of the process. The process for working out the costs of a scheme, upon which 50% funding from government goes towards 50% borrowing, is based on a land valuation by an independent land valuer at that time, on a planning consultant's advice on the planning permission, but also on a calculation done by the Department.

Mr McQuillan: Why could one Department not talk to the other? Why could DSD not talk to DOE and the Planning Service and sort it all out? That would be joined-up government; we hear about it every day, but it is not happening.

Mr Wilkinson: You are right, and there is a pre-application discussion that does not actually supersede the planning process.

Mr McQuillan: That would be a good idea. If I was going to spend £800,000, I would want a pre-application discussion. I might want two of them.

Mr Wilkinson: At the time, that was the process for the association. However, it is also important to say that it was all within an envelope —

Mr McQuillan: I thought that you were going to say "It was all on the back of an envelope."

Mr Wilkinson: — of a calculation of what a scheme of that size should cost to a development, and that cost is a calculation in the Department that, as Mark said, looks at construction costs and land value costs from LPS. So there is an internal review of what the total cost should be, and the grant that goes through the whole process is roughly 50%. The land purchase is one element of that 50%, and it is paid at a tranche to allow the land purchase because the grant comes in.

Mr McQuillan: Was there not a time before the grant was paid out when land prices had fallen, yet you still paid out at top dollar? If you had not done that, you could have got another valuation done that would have —

Mr Wilkinson: At the time of the advance, as Mark said, the land valuations are concurrent with the time the application —

Mr Graham: They are. The LPS valuations are used to update every six months, so that valuation should have been largely concurrent with what the independent valuer reported.

Mr Beggs: You talked about the payment method. Is that applicable to the Trinity Housing Crossgar scheme? Linked to a new scheme?

Mr Graham: Yes.

Mr Beggs: If that is the case, I do not understand the logic. Money was lent; why is a straight invoice not sent? The money should be repaid and come back. It should appear in everybody's accounts and everybody would learn a lesson. Is this a way of allowing senior officials — who made highly risky, inappropriate decisions that resulted in losses — to hide those losses in their accounts? Would it not be better to have a straight, up-front transaction "repayment of money lost"? The money was lent with conditions, the association failed to meet the conditions, and the money should be repaid.

Mr Wilkinson: From an accounting perspective, all the figures will be fully disclosed.

Mr Beggs: They will be the same figures, but why come up with some complicated arrangement? It is the same amount of money.

Mr Graham: The Helm scheme in particular —

Mr Beggs: I am sorry, I am talking about the Trinity scheme.

Mr Graham: The same principles apply to both. The 'Housing Association Guide' asks us to take consideration of the financial impact of a recovery of grant. So, in making the decision to recover, we had to consider what we were doing, whether it could impact upon the financial viability of the association.

Mr Beggs: OK. Trinity has a much smaller scheme. Why is it necessary to come up with —

Mr Graham: The same consideration applies because a direct and immediate recovery of grant could allow the lenders to the association to say that it is in breach of its covenants and reprice their loans. In choosing to do it the way we did it, we believe that we got the money back, or recycled into other schemes, in a way that also protected the financial viability of the association. In protecting the financial viability of the association, we are also protecting previously invested public money and, indeed, the tenants in the association. That was the basis on which the Housing Executive board made that decision.

The Chairperson (Ms Boyle): OK, members, at this juncture I would like to suspend the meeting and move into the next session on the Trinity Housing Association ALP grant. I would like to suspend to change the table and the witnesses. I request that people in the Public Gallery leave and come back in again, if that is OK. Suspension is for five minutes and you will be asked to come back in again.

The Chairperson (Ms Boyle): We are staying on Trinity. I welcome Mr Arthur Canning. You are very welcome to our meeting. We move to the Trinity Housing ALP grant.

Mr McQuillan: Paragraph 6.2 of your brief states that the Trinity scheme was submitted in January 2007 as a design-and-build project. However, an email in March 2007 from the Department to Trinity asked the association to submit an application for an ALP grant, with the deadline only a week away. Why did the Department ask Trinity to change from a design-and-build to an ALP?

Mr Haire: I will ask Donald to come in on this question about the design-and-build issue. This was a period of change with the European regulation.

Mr Heaney: No, that came after.

Mr Haire: OK, sorry.

Mr Heaney: Essentially, part of the programme is the new-build programme and the ALP process. The Department is, throughout the year, constantly looking for sites coming on or approving ALPs and getting expenditure covered. That was an instance when this would be part and parcel of the normal procedure with the Department writing out. It was aware that the Crossgar scheme was on the programme and then asked Trinity to consider processing it as an ALP.

Mr McQuillan: And that is the reason behind it. Are you sure it was not that the Department had money to spend before the end of the year and wanted to do this to get rid of the money?

Mr Heaney: It is to do with meeting the target insofar as we were going to meet the target through the provision of new builds and the provision of sites and land for the following and subsequent years.

Mr McQuillan: Surely the Department should not be spending money like that. Surely you should have had other plans in place to spend the money, for example, if there was a housing association coming forward with a scheme and wanted to do the design and build itself. Why did the Department get involved in wanting to change that, other than to get rid of its money?

Mr Haire: There is an issue for us. As you understand, for three-year schemes, we have to do annual budgets. We come under understandable pressure from the Executive and Assembly to make sure we spend all the money in that process. For that reason, at times, there is always this big problem of backloading and getting everything through at the end of the year so that you get that money spent. Sometimes, therefore, ALPs are a key element of getting the land purchased. That, in a sense, is the first tranche of the HAG towards the housing, so there has been that process.

As I mentioned, we had the PEDU experts in from DFP to look at this issue, and they emphasised that we should be trying to enter any year with the land purchased for the next year's housing. That is what you should be doing because it gives you a better flow and gets you into that process.

That is what we are trying to do. We are moving, using ALPs, to build up a better land bank in the process. Obviously, that is carefully balanced with getting your planning in place. There is always a big pressure for us to get this out. It is very difficult getting all the planning through at the last moment.

It is a significant issue of management for the Department. Throughout each of the last three years, I have had a lot of sessions with housing associations to make sure that they are bringing forward the programmes in the right place so that we can go through all the economic appraisals and other issues — the Housing Executive deals with that — to try to make that flow come through.

I expect there is an element of budgetary management is this process. You are absolutely right.

Mr McQuillan: An email from one of your officials, received through a freedom of information request, said that it changed design and build to an ALP to transfer the risk from the developer to the housing association. Why would the Department have wanted to do that?

Mr Heaney: What email was that?

Mr McQuillan: It was in an email from a senior official that was released under freedom of information.

Mr Haire: Do you know which one?

Mr McQuillan: No.

Mr Wilkinson: I think that I have a vague recollection. I may have it here. I think that was the official saying this is what has been suggested. The advance land purchase scheme operated at that time, as did the design-and-build scheme. The design-and-build scheme changed in, I think, April 2009, with a change to EU procurement. As we mentioned in the earlier session, it is about understanding the whole grant system that operates for new housing. It is made up of three components: one for land; one for on-site costs; and one for completion. The amount of grant goes down each time because the fourth element of funding any social housing is the loan taken out by the housing association. That loan is serviced through rents, and obviously rents are the last part of the jigsaw that comes into any development scheme. That is why the grant is higher for the land purchase and it comes down, but, in total, it represents around 50%. In this case, the suggestion was that, by seeking an ALP, there was a potential shift of risk, if you like, but, at that time, both advance land purchases and design-and-build schemes were going ahead and either option was available to a housing association. The Department, in this case, in March, probably driven in part by some budgetary considerations, suggested an ALP. Actually, it did not happen in March but much later on; I think it was January 2008.

Mr McQuillan: February 2008.

Mr Wilkinson: It was a proposal.

Mr McQuillan: Can we go back to the planning situation? An independent planning consultant was at the centre of all this, and that is where the whole mess started. Neither the Department, the Housing Executive nor even Trinity got proper advice at that time. What did you tell us earlier is in place now to counteract that?

Mr Wilkinson: A pre-application discussion with the Planning Service.

Mr McQuillan: So, that takes place with every ALP.

Mr Wilkinson: Yes.

Mr McQuillan: If Planning Service said at the very start, "This is a dodgy site and you might not get the number of units that you are saying", what would happen?

Mr Wilkinson: It would not go through as an ALP or it would not be assessed at the same level as was originally requested. The Housing Executive is the operational end, but my understanding at the moment is that the same thing happens: an association identifies a site; it seeks confirmation from the Housing Executive that that site is in an area of housing need; it gets an independent valuation of the site and independent planning advice; and it supplements that independent —

Mr McQuillan: Where does the independent evaluation come from? Is it Land and Property Services?

Mr Wilkinson: No, it comes from a registered professional valuer.

Mr McQuillan: Is it paid for by the association?

Mr Wilkinson: Yes.

Mr McQuillan: It is hardly independent then.

Mr Wilkinson: There are professional standards. Again, as I mentioned, there is the independence that comes in, beyond that, from the Department's calculation. It also has its planning consultant advice, and it supplements that with a formal minute of a letter of the discussion with the Planning Service that indicates that this is a viable proposal. It comes into the Housing Executive, which assesses the overall scheme costs using our total cost indicator, which includes the six-monthly update from the LPS site evaluations. So, all these converge to give a view that this is an acceptable site, it meets housing need and it is broadly within the parameters of what we expect to pay. The grant that we will pay will still be 50% of the total cost, and that triggers the ALP payment. More detail can obviously be provided by the Housing Executive on the various steps in the exercise.

Mr McQuillan: It would be handy for us to see the steps that you go through.

Mr Wilkinson: We can certainly provide that.

Mr McQuillan: I have a couple of questions, which you probably touched on, about the repayment of the grant. We have heard now that it is not going to be repaid but recycled, so there is no point in asking you those. Do you think it was appropriate for a body which you were funding to take a legal challenge against the Department? You touched on that earlier but, I did not really hear what you said about it.

Mr Haire: As I said, a number of bodies have threatened the Department with legal challenge and started it. I would prefer it if people did not use legal challenge. The point is that they have the right to do so, if they think that there is a point of law in which I am operating incorrectly. I would always encourage people not to do that. I would always try to discuss that issue, but the point is that people have a right to go into that process. That is all I can say.

Mr McQuillan: Following the legal challenge from Trinity to recover the grant, why did the Housing Executive say that it would await the planning decision relating to three units before reviewing its decision to recover the grant? Surely, even if they had got three units, it still would not have covered the value of the grant.

Mr Haire: The point is that the Housing Executive has the ability, at any time, to pull back on its grants and process. Mark, unfortunately, is not with us. He is readjusting all the time. If people are delivering less, we make sure that they only get paid for what they deliver.

Mr Wilkinson: We can certainly write with the detail.

Mr McQuillan: The payment was made here.

Mr Wilkinson: Sorry, you are quite right. It would have been clawed back. We will get the Housing Executive to write to you in detail. The total cost indicator that we mentioned was the total cost of a scheme of a certain size. The Housing Executive was waiting to see what the ultimate scheme was that might go ahead. If it still merited consideration as social housing, it is of the view that the three still would have gone some way to meeting need. It would have immediately recalculated that total cost indicator on the basis of three homes, not 12. If that calculation was less, as it would have been, than the original funds paid for the advance land purchase, it would have clawed back the balance. There would have been a process in place.

Mr Haire: We will send you a note on the TCI and the wider scheme. It is quite a sophisticated scheme that gives you many options to pull back the money and protect public money in the process. We will give you a full description of the scheme because, obviously, you are concerned. As I said, it is one that we look at. It also fits in with the housing guidance system. It is quite sophisticated. It is about trying to make sure that we follow that money as tightly as possible, which is difficult in this moving market.

Mr McQuillan: It sure is.

The DSD told the Audit Office in the report on its accounts in 2013-14 that the planning permission that was in place for one house had only minimal restrictions that could lead to the permission being expanded to several units. In fact, the restrictions led to planning permission for further units being rejected just a few months later. What basis did the Department have for saying that the planning permission restrictions were minimal, and what did the term "minimal restrictions" mean?

Mr Haire: We took advice from Mark Graham, who was our adviser on this issue. That would have been the advice that we got from him. I am afraid that Mark is the person who would be able to give you the detailed answer. I will have to write to you on that issue.

Mr Wilkinson: It would have been in relation to the nature of the planning permission. From my understanding of the planning system, planning permission might have been a footprint without specifying the details of the site. Presumably, there are options to amend what could be achieved within that footprint, but, obviously, we will write to you with the details.

Mr McQuillan: It is back to the planning consultant again.

Mr Wilkinson: It is the planning process.

Mr McQuillan: The association has now indicated that it will seek an acceptable compromise. What does that mean?

Mr Wilkinson: Again, Mark referred to this in his earlier evidence. That agreement has now been reached, and the final details are being put into it. He mentioned the figure of £600,000, I think, with some additional costs that were claimed. We will be providing the Committee with the detail of that agreement.

Mr McQuillan: Maybe Mr Canning could enlighten us a wee bit on that.

Mr Arthur Canning (OakleeTrinity Housing Association): My development colleagues were involved in the discussions and negotiations with the Housing Executive. I do not have the detail of the breakdown.

Mr McQuillan: We will get a written response on that as well.

Mr Haire: Yes.

Mr McQuillan: I think that I asked earlier about the valuation of the site at different times. Will you answer that again? It was regarding the valuation of site that was carried out by Trinity in 2007. The grant was not paid fully until February 2008, by which time land prices had been falling. Why was another valuation not carried out before the grant was paid out? The land could have been a hell of a lot cheaper.

Mr Wilkinson: Again, unfortunately, Mark, who was processing the application, will have the detail of that. As we explained, valuations are concurrent, in that another valuation would have been asked for or the total cost indicator, which includes the latest LPS data —

Mr McQuillan: But when prices were falling so quickly, how could it have been concurrent?

Mr Wilkinson: The process will have a timescale within which a valuation is deemed to be acceptable. Again, unfortunately, the operational end of the programme is with the Housing Executive, which will have the detail of that. We will provide the Committee with the full detail of the process. There will be a specific timescale within which a valuation is deemed to be current. At the same time, the total cost indicator is updated every six months.

Mr McQuillan: The valuation today and that back in 2008 are two totally different things.

Mr Wilkinson: Absolutely. Yes, they will be.

Mr McQuillan: When land was falling at that high a speed, surely somebody in the Department thought, "Well, there's a chance here to get this land cheaper".

Mr Wilkinson: That would have been looked at in the application, no doubt. The Housing Executive will be able to indicate what action it took on that.

Mr McQuillan: I am nearly finished. Mark should have been at the table for a lot of my questions.

Will, you said that, in hindsight, lessons have been learnt and that maybe you could have handled the whole thing better.

Mr Haire: Clearly, there was an issue with the system. The scheme at the time talked about reasonable time, which was broad. We have tightened it to two years plus one. It is much more managed by the Housing Executive than it was before. It was rather broad in that sense. As I said, even then, the planning upfront element and the PAD issue —

Mr McQuillan: The way it was before. The Housing Executive had no control over it at all.

Mr Haire: It obviously had a control, but the point is that these two problematic cases demonstrated the weakness of the scheme. In many other cases, the scheme delivered very well. These two did throw up particular problems coming through that really bumpy, difficult time in our land and property markets, so we recognise the issue.

I keep asking whether there other ways we can carry out this process. Are there other checks and balances? It is a careful balance so that you do not make it such a bureaucratic system that people cannot go through it and we do not deliver you the social housing that you are looking for in different areas. It is about trying to get that balance right.

Mr McQuillan: At the same time, we need to have value for money.

Mr Haire: That is absolutely crucial.

Mr McQuillan: It is public money we are talking about, and £200,000-plus is a lot of money in anybody's terms.

Mr Haire: That was the cost of looking after the site and all the other issues. Clearly, those are the sorts of issues you want to avoid again. We take seriously any loss in that process. That is why you have to refine the scheme. On the other hand, if you do not have advance land purchase, at times, it has been difficult to assemble land. Sometimes, land values have then gone up and, by being slow in the process, you have lost out or have to bid up later. You have to look at it in its broad sense.

Mr McQuillan: You have to get the balance.

Mr Haire: Exactly.

Mr Hussey: I want to come back to a question that Adrian asked in relation to the planning permission. We have stated in the documentation that the planning permission that was in place for one house only had only minimal restrictions. Yet, it states clearly, when planning permission was refused, the proposed development was contrary to policy QD1 of PPS 7, it was contrary to policy QD1 (a) and policy LC1 etc. Those are planning policies that any planning individual worth their salt would know. I simply do not understand how someone could give advice when planners were making it clear that they were not going to do it. It states:

I do not know much about planning, but I know that, in certain areas, you know you have not got a cat in hell's chance of getting planning permission. This refusal is clear. PPS 7 is something that some of these so-called experts should know. Why were you not aware of this? We asked earlier why there was no relationship with the DOE. This is so black and white. I cannot understand how we can get an answer along the lines of, "Well, there was a possibility that this might be changed". Was PPS 7 going to be changed? Did the Minister of the Environment tell you that he was going to change PPS 7?

Mr Haire: Unfortunately, Mr Hussey, Mark, who was the person handling this issue, is not at the table —

Mr Hussey: Regardless, DSD should have somebody somewhere who is aware of planning regulations. We can blame Mark when he is sitting over yonder. I want someone to come back and tell us why DSD was not aware of PPS 7. That is a question I am going to ask of DOE. People were dealing with public money and public housing, and in a situation where hundreds of thousands of pounds seem to be handed out like Monopoly money, I am not satisfied with the answers. I accept that the expert you are looking for is hiding over there — well, not hiding over there; he has moved over there. However, I cannot accept that DSD did not speak to DOE. Let us find out what DSD knows about PPS 7.

The Chairperson (Ms Boyle): Mark, are you OK to come back in again? We will put a chair beside Mr Heaney. Everybody can move up; is that OK?

Mr Haire: Yes, that is fine; that is good.

Mr Wilkinson: I think it is worth mentioning, as Mark said, this was a long planning process. The Planning Service's proposals and recommendations to council changed on a number of occasions, and the PPS system was in place.

Mr Hussey: You are saying that DOE changed its opinions. Can we have the relevant paperwork to show us that? There is a PPS, and a PPS 7 specifically, and, throughout this whole process, it does not appear that planning permission was ever going to be granted on that site. You are not going to convince me otherwise. For someone to say that restrictions could lead to permission being expanded seems unlikely. I doubt it very much. I want someone to give this Committee a paper trail that proves to me, and others, that such an expansion was possible.

Mr Graham: I think that the simplest thing to do is to provide you with that history of the planning process from the beginning to the point where planning permission was made for one dwelling. It was at that point, when the planning permission was granted for one dwelling, that we came to the conclusion that this was no longer a social housing scheme, that a relevant event had occurred and that anything resembling a reasonable period had expired. It was at that point that we made the decision to recover.

Mr Hussey: Just for clarity: the site was what? A quarter of an acre?

Mr Graham: Something like that.

Mr Beggs: It was 0·54 acres.

Mr Hussey: I live in Tyrone. There is quite a bit of land in Tyrone.

A Member: It is very cheap.

Mr Hussey: It is cheaper, yes. Come and build houses in Tyrone. For £800,000, you could build a hell of a lot of housing. Regardless of that, this situation does not make sense to me. Looking at it from the outside, seven dwellings in a half-acre site would be worth seeing. I do not think that it ever had a cat in hell's chance, as I said earlier, and I want to see the paper trail. I do not believe that you are going to get planning permission or the planning regulations changed about to suit. This seems to suggest that DSD was convinced that Planning Service was going to wave its magic wand. It does not make sense to me, so I want to see the paper trail.

The Chairperson (Ms Boyle): I want to bring Mr Clarke in at this point.

Mr Clarke: Ross referenced PPS 7. Mark, what exactly do you do for the Housing Executive?

Mr Graham: My responsibility is to manage the social housing development programme.

Mr Clarke: Are you familiar with PPS 7?

Mr Graham: No, but I have a qualified planner working with me who is.

Mr Clarke: So, you have never heard of creating places or amenity space.

Mr Graham: Yes.

Mr Clarke: You have. So, you are sort of familiar with PPS 7, then.

Mr Graham: I understand what it is, yes.

Mr Clarke: This is the bit where I struggle; I have struggled all day with this one. On your own admission, you have an understanding of PPS 7, creating places, sustainable development and open space. By gifting a housing association with £835,000, how did you see that it was going to build houses on a very restricted site? I have never visited the Beverley area, but I have looked at it on the map. To me, it resembles single, detached dwellings with very large gardens. How did you think by giving — Actually, I will refer that one to Mr Canning. I will ask you first about Crossgar. We will come to Mr Canning on that one.

Mr Graham: To rerun the history of this slightly —

Mr Clarke: No. We do not want a history lesson. We just want to know what you understand about PPS 7, creating places and a good environment.

Mr Graham: Let me be clear about my role. It is to approve the scheme, if the scheme receives planning permission. The planning issues are matters for the Planning Service. We will not approve the scheme to go ahead on-site unless it receives planning permission. So —

Mr Clarke: Let me stop you there. That is how you have described it. Did the Crossgar scheme get planning permission before you gave the association £835,000?

Mr Graham: No, but they —

Mr Clarke: No. So, why did that break away from your normal pattern?

Mr Graham: It did not break away from the normal pattern.

Mr Clarke: It did, because you are just after saying that you do not normally enter these schemes until you have planning permission. Crossgar clearly has not got planning permission. So, why has Trinity or Helm, whoever it is, got £835,000 of public money with not a pup's chance of building the houses that they told you they were going to build?

Mr Graham: There are two steps to this process. At the time, in 2007, you could apply for an ALP, which allowed you to acquire the land. For planning, the information required at that time was the view of a professional planning consultant appointed by the housing association.

Mr Clarke: Who was that planning consultant?

Mr Graham: I do not know.

Mr Clarke: Can you let us know?

Mr McQuillan: On that point, when you are sending through the report and the follow-up on all the planning, can we have the report of the planning consultant as well?

Mr Graham: Yes.

Mr Dallat: And perhaps how much he charged.

Mr McQuillan: Well, that would be good too.

Mr Clarke: Go ahead, Mark.

Mr Graham: I will explain it. At that point, what we would do is fund the purchase of the site. There is a separate and different approval process for the whole scheme, and that would have —

Mr Clarke: So, do you mean to say that the £835,000 was not the end of it and that they were going to get more money?

Mr Graham: Yes.

Mr Clarke: In this case, it was £200,000 a unit. Are you telling me that you will give them more money?

Mr Graham: Had the scheme received planning permission and gone ahead, we would have gone through a separate approval process to determine a number of additional factors, such as the design of the scheme and whether it met guidelines on lifetime homes and other space standards. We would not have approved the next tranche of payment unless that scheme received planning approval. That was the process at the time, and it is the process that remains, except for the additional checks that we put in for the application —

Mr Clarke: I will maybe come to Will then. That was the process at the time, and that process remains. We could be looking at another situation in which you have bought another half-acre site at £800,000 with no units on it. Is that what we are hearing, Will?

Mr Haire: Are you asking whether no units would appear?

Mr Clarke: If we get another very adventurous housing association — we will come to Mr Canning, but another organisation like Mr Canning's organisation or another housing association could come to you with a proposal for another half-acre site at another £800,000-odd. You have not learned anything at all.

Mr Haire: Sorry, that is why we have the PAD system in place and a process to make sure that there is a great deal of discussion on planning before —

Mr Clarke: You did not put the PAD system in place. That has been in place for a number of years.

Mr Haire: Yes, and when it was put in place, we said that we would have to use that scheme. That is absolutely right and the right way to make sure that you have that clarity in the process. I made it quite clear that we have learned from those two difficult cases that threw up real issues. When we got a handle on those issues in 2011-12, we amended it and put that in to make sure that we would not get to this.

There is a risk. There is always a risk in development. The key point for us is to transfer the maximum risk to the housing associations. That is the key aim. If you always waited for land that had planning permission, you would pay a lot more for it. That would slow down the process and you would not achieve the targets that you wish to achieve. Generally, the scheme has been able to process that and get the planning as desired.

Mr Clarke: You have just said that, if you waited for planning permission, you would pay more than £120,000 a unit.

Mr Haire: No, I did not say that.

Mr Clarke: That is what you said. The scheme was an at-risk application, and that is how you conducted business in the past. On the basis of that being an at-risk application, the units cost you £120,000 each. The way that you have summarised that can only suggest that you see that as value as opposed to waiting to get planning permission first.

Mr Haire: That is not what I am saying.

Mr Clarke: That is how it came across.

Mr Haire: That is not what I am saying.

The Chairperson (Ms Boyle): Mr McQuillan, are you finished your questions?

Mr McQuillan: Yes.

Mr Beggs: My first question is to Donald Heaney. The Northern Ireland Audit Office raised the issues that were initially raised by the whistle-blower relating to conflicts of interest and looked at the work that was done by your inspection unit. The Audit Office still had some questions that it sought answers to. Why is it only now, more than a year later, that those questions have been answered?

Mr Heaney: We —

Mr Beggs: Is it because you are in front of the Public Accounts Committee?

Mr Heaney: No. We spoke to Mr Canning in November 2013.

Mr Haire: It was 2011.

Mr Heaney: That was the original time. You are talking about the letter from the Audit Office in July 2013, which it followed up in October 2013.

Mr Beggs: Yes.

Mr Heaney: We spoke to Mr Canning and his legal representatives in November 2013. His position was that he felt very uncomfortable about allegations that had been made about him and did not want to answer any questions until he had seen the full raft of correspondence.

Mr Beggs: Do you consider that to be a reasonable approach from people you are working with in partnership?

Mr Heaney: I am not there to judge whether someone feels that they are being victimised or that allegations or insinuations are being made against them. That was simply what he said. He said that he did not want to go into anything further until he had seen all the correspondence that related to him. That instigated an FOI request.

The fallout from that generated a series of freedom of information requests, and there were legal questions that we had to raise because of subsequent actions that came out of that, and other people were then asking for freedom of information requests. We had a chain reaction, if you like. Those requests were finally cleared round about August 2014 or so.

Mr Beggs: Do you think it reasonable that, if you ask reasonable questions — they were perfectly reasonable questions to ask — it should take more than a year for people who are funded by public money to give you an answer?

Mr Heaney: It is not for me to judge the reasonableness of other people's reactions. On one level, my answer is yes, but put yourself in the other person's position.

Mr Beggs: If I had concerns about actions that had been taken, I might have taken the approach that he has taken. What sanctions did you have to ensure that you had an earlier response?

Mr Heaney: This is where, if you do not mind, I might talk about when we spoke to Mr Canning in November 2011, when the issue was first brought to our attention. We had spoken to him about the issue relating to the Beverley Heights situation. He had given us information then. He had explained that he had not known anything about the situation until he got correspondence in April 2009 and he had dealt with it at that stage. He did not think that there was any conflict of interest but he mentioned it to his chair. We had confirmed that with his chair in 2011, and we got that from him in writing. So the further pieces of information that came through from the Audit Office were expansions on that. I think that I would have been in a similar position to you, if this had been our first sight of it and we did not have any previous information on the matter. We had information; this was looking for clarification. So I took the view that that was in a somewhat different vein from dealing with the issues in the first instance.

Mr Beggs: I certainly got the impression that it was a very defensive approach that was being taken. Would that be a reasonable —

Mr Heaney: No, I do not believe so. I think that in our dealings —

Mr Beggs: OK. I move on to a very interesting email, of 24 October 2011, from one of your inspection team members to yourself, around the issue of handling potential conflicts of interest. I think it is important that I put on record what the guidance is regarding conflicts of interest:

That is the guidance. I noticed that, at the bottom of the email, it mentions that issues arose from an inspection of perceived conflict of interest involving Trinity during the previous inspection carried out on them in December 2007. So it had been identified that there was an issue in 2007 about misunderstanding, or not fully understanding, the issue of perceived conflicts of interest. That is the background to all this. Here you are, and one of your inspection team members, four years later, highlights a concern about how the issue has been handled. Why was it not until almost two years later, when the Audit Office raised them again, that follow-up occurred?

Mr Heaney: We looked at that matter in November 2011 —

Mr Haire: It was a month after that.

Mr Heaney: Yes; a month after that. Our conclusion was that it was difficult to see where the conflict of interest was. The confirmation received from the chair was that the conflict of interest had been dealt with because it had been brought to the attention of the board.

Mr Beggs: The chair, in his response, talked about your "inference" that a potential conflict of interest had arisen. Clearly, he was questioning whether there was any conflict of interest or potential conflict of interest. He states:

When you read that, it is clear that he thinks that there is no potential conflict of interest. Do you think that there is a potential conflict of interest?

Mr Heaney: There is always a potential conflict of interest. My difficulty is —

Mr Beggs: The guidance is on potential conflicts of interest. Is that correct?

Mr Heaney: Yes, but if you —

Mr Beggs: Sorry, will you answer that? Is the guidance about potential —

Mr Heaney: The guidance is about potential —

Mr Beggs: Thank you.

Mr Heaney: — conflicts of interest, because it is the potential that you have to deal with. I argue that that conflict of interest arises in an area that Trinity does not have any decision-making process on.

Mr Beggs: Sorry, had Trinity not registered the Beverley site as a potential development site?

Mr Heaney: It had registered an interest in the site.

Mr Beggs: Yes, so it had registered an interest in the site. It registered an interest in the site, and the chief executive's brother lives adjacent to the site. Is there a potential conflict of interest? He could be an objector. He could potentially benefit from sale. He could potentially alter the design so that it affects other people's property rather than his. Do you recognise that there was a potential conflict of interest once Trinity registered an interest in the site?

Mr Heaney: The difficulty is that Trinity does not have a decision-making role in what happened in that. There is a potential conflict of interest —

Mr Beggs: Are you saying that Trinity would not talk to the developer about how the site would be developed?

Mr Heaney: Yes, it would.

Mr Beggs: So, you are recognising that it has an influence on the site.

Mr Heaney: Yes.

Mr Beggs: Who is the most important person in Trinity?

Mr Heaney: The chief executive.

Mr Beggs: So, does the chief executive have a potential conflict of interest?

Mr Heaney: He would have a potential conflict of interest.

Mr Beggs: OK. Has the chairman failed to recognise that the chief executive of Trinity has a potential conflict of interest?

Mr Heaney: No, I do not think so. What the chair —

Mr Beggs: Have you failed to recognise, until now, that —

Mr Heaney: No —

Mr Beggs: — the chief executive has a potential conflict of interest?

Mr Heaney: No, I do not believe so. On the chair —

Mr Beggs: Sorry, have you not just acknowledged that the chief executive has a potential conflict of interest? This is being recorded in Hansard.

Mr Heaney: Yes. Sorry.

Mr Beggs: OK. So, you have acknowledged that he has a potential conflict of interest. If that exists, surely it has to be managed. The chairman has a responsibility to manage it.

Mr Heaney: The difference in what the chairman is conveying in the letter is that the board discussed it, and it did not think that it was a conflict of interest.

Mr Beggs: So, it got it wrong as well.

Mr Heaney: It determined that there was not a conflict of interest. If it has assessed the evidence and feels that it was not a conflict of interest, that is it dealt with.

Mr Beggs: Even if it makes a mistake?

Mr Wilkinson: It is a confusing one. We were asked —

Mr Clarke: It is not really. Donald was answering. You would be better letting Donald finish.

Mr Heaney: I do not think that he has made a mistake. I think —

Mr Beggs: You have acknowledged — it is in Hansard — that there is a potential conflict of interest.

Mr Heaney: Yes. I said that I believed that there is a potential conflict of interest. In the context of the letter from the chair, I am saying that the chair and the board have considered that, and they do not consider that there is a conflict of interest.

Mr Clarke: Would that concern you?

Mr Beggs: He considers it to be hypothetical, but a potential conflict of interest is hypothetical. Unless you deal with the hypothetical situation, the perception can arise that conflicts have occurred and have not been managed.

Mr Heaney: I was taking the chair's letter, and I would still take the chair's letter, as communicating to me, when I raised the issue with them, that they had looked at this, and they had considered it and did not consider that there was a conflict of interest here.

Mr Beggs: But you have acknowledged today that there was.

Mr Heaney: No, I said there was a potential conflict of interest.

Mr Beggs: Yes, and that is what we are all talking about. The regulations and guidance are about potential conflicts of interest.

Mr Heaney: And you deal with a potential conflict of interest. If you look at a potential conflict, and I go back to my interpretation of the chair's letter, I believe that the chairman was communicating to me that they looked at the potential conflict of interest and did not consider that there was a conflict of interest.

Mr Beggs: Would you agree that the safer method of dealing with potential conflicts of interest is to exclude all possibility of conflicts of interest by individuals withdrawing themselves from that situation?

Mr Heaney: Absolutely.

Mr Beggs: The failure of the board to manage that resulted in perceptions in the local community that untoward things were happening.

Mr Heaney: Obviously, things could well have been handled better but, by the same token, when we spoke to Mr Canning in November 2011, his assertion to us was that he was not aware until he received the correspondence from the Beverley Residents Action Group (BRAG) in 2009. He has maintained that, because he was not aware of the sale of his brother's house, there could not have been a conflict of interest.

Mr Beggs: Surely the house does not have to be sold for there to be a potential conflict of interest. If the house exists and his brother lives there, there is a potential conflict of interest. You were making the wrong judgement, surely. If the brother simply lived there, there was a potential conflict of interest. Forget about the sale issue and whether it went through or not. Is there not a potential conflict of interest?

Mr Heaney: There is a potential conflict of interest.

Mr Beggs: That is the issue, and that was not seen at the time because that is not part of the difficulty.

Mr Heaney: I am not sure I would fully agree with that because —

Mr Beggs: OK, moving on. I will ask this of Will Haire, the permanent secretary. What do you insist upon from the bodies that you work with so that they are aware of, trained and understand how to deal with these things? I see from the correspondence that the inspection unit identified issues with Trinity in 2007. A number of years later on through this process, that has still not been recognised. What standards do you require of the public bodies that you work with and that public funding is handed out through?

Mr Haire: The key point for me is that when people become aware of issues, they should try to have a regular declaration of all conflicts of interest, as we did at the start of this meeting. As regularly as possible, you try to get those issues out. Obviously, it depends on the information that people have and their knowledge of the issues. People should declare all conflicts of interest as regularly as possible and have mechanisms in place for that.

Mr Beggs: And potential conflicts of interest.

Mr Haire: Potential is interesting, because where does that conflict stop? What if a close friend lives in the area? Where does it stop? The point is there are issues —

Mr Beggs: To declare close family members is normal practice, is that not correct?

Mr Haire: That would be an issue in the process, but the question you obviously have to ask Mr Canning is how the process worked in that organisation and how they deal with processes of that sort.

Mr Beggs: In the meetings between the Department's governance and inspection unit and Trinity's chief executive in 2011 and again in November 2013, how would you describe Mr Canning's attitude?

Mr Haire: I read the documentation, like you. I understand that there were a lot of issues around Beverley Heights, and there were other issues. There is a lot of correspondence, and the documents disclose quite a lot going to the board around the issue. Clearly, for several years it had been a matter of local issue, so when 2011 came, clearly he was concerned whenever Donald and his team went in for their first meeting. The record of the meeting is quite clear and shows that there was quite a forthright discussion between the two, with both sides putting their case. As time has gone on, obviously he has been concerned about the reputational issues for himself.

Mr Beggs: I was talking about the chair of the board's response to Donald Heaney. In that response, which was about Mr Canning's potential conflict of interest, the chair seemed to say that there is no foundation and that, if a potential conflict of interest had arisen, it was a slip. He then went on to use the word "hypothetical". Do you have concerns that senior people in Trinity did not appear to know how to handle potential or perceived conflicts of interest?

Mr Haire: I think that this issue had been brought up, and the board was clear about the sensitivities of the issue. It was discussing the issue, and it took a line. The letter contains very strong personal views on the issues. I think that it was certainly aware of the issue. I think that it was well lodged in the board, and the fact that the Department was taking an interest in emphasising the point reinforced the importance it placed on the issue.

Mr Beggs: My question has not been answered. I will ask it again. Do you have concerns that senior members of the board and senior officials do not fully understand potential and perceived conflicts of interest?

Mr Haire: I think that they fully understood it after the exchange with Donald. I think that the point was made clearly.

Mr Beggs: Are you satisfied that other such boards also fully understand the difference and that there is appropriate governance training to ensure that all new members are fully aware?

Mr Haire: There are strong governance processes in place across the system, and these sorts of things are inspected. One key element of the inspection process is that it is very much focused on the role of the board and in trying to make sure that boards really understand that the buck stops with them.

Mr Beggs: Can I just go back to the interesting email from Mr Heaney's colleague in the inspection unit? The issue was highlighted in 2007 during a previous inspection, yet, four years later, it was still not understood. It is not enough just to carry out an inspection; there has to be a follow-up.

Mr Haire: That is interesting. It was picked up by inspectors. Donald saw them within a month. In his meeting, he was talking to them.

Mr Beggs: Sorry. The issue was highlighted in December 2007. Four years later, there was still not an understanding.

Mr Haire: When we picked it up, there was a meeting within a month of 24 October. Donald brought up the importance of dealing with those issues.

Mr Beggs: In your correspondence to the Audit Office dated 6 February, you indicated that you thought that the investigation had gone as far as it could go. Are you satisfied with the solicitor's response? You did not get a nice friendly response from the officials whom you were working with. You got a solicitor's response that Trinity had provided:

Mr Haire: Donald had had two meetings about that and had made the point. I have said that I would have liked people to come out quickly in these processes, but I understand, as Mr Canning explained to me, the pressure he had been under and how he felt in this process. What I said to the Audit Office was this: "I have sent teams in twice to deal with the issue. Here are the responses I got". I went back to the Audit Office and said to Tomas, "This is what I have. You gave me specific questions. Here are the answers. This is as far as I think I can go. I have not been able to get any evidence to refute the process". That is what my letter states, and I waited for the Audit Office to give advice. It is my duty to report back to the Comptroller and Auditor General where I am in the process.

Mr Beggs: According to your briefing, you said that the email provided by Trinity's solicitors addressed many concerns raised by the Audit Office and showed that the Department was encouraging Trinity to purchase the land at the time. That was some of the reasoning. Why is that encouragement to purchase the land through the advanced land purchase scheme so important?

Mr Haire: Where is the suggestion in the process to say that, somehow or other, inherent in this argument is the issue of the developer wanting the purchase of the land by Trinity to relate to some of the Beverley Heights issues? We are saying, look at the timeline and who made the decision about the money; it does not stack up. The flow of the money does not come in that way. That is the point I am making?

Mr Beggs: My point is that the conflict of interest arises, irrespective of any transaction.

Mr Haire: Absolutely; I totally agree. A number of suggested arguments came from Tomas's letter. In that argument, I wanted to say, "Here are the facts". In the timings and the nature of the decisions, there is not a logic in that area.

Mr Beggs: There was a failure to recognise the other potential conflict of interest, which was —

Mr Haire: You will have to ask Mr Canning that question.

Mr Beggs: What about your inspection team? You seem to be putting such weight on this document.

Mr Haire: I will ask Donald to come in on that. A flow of money was coming in that might have got to the Beverley site, but the housing association has never developed that site or taken an ALP in the process. There is no public money related to it in that sense. There was a suggestion that the Crossgar money had somehow paid for Beverley Heights. However, the timelines and the evidence that I was getting for the Audit Office suggest that, with that figure, that is the logic, here are the decision-makers and that is how that money got there. I was trying to make it clear on that angle. However, that is very different from your point, which is that, if a family member lives in an area where there is a site, it should be immediately declared.

Mr Beggs: I want to go back to the slow response. It was almost a fifth amendment response: no comment. There were no answers to some of the specific questions that were asked. What powers do the Department and the Housing Executive have to follow up these questions in cases in which public money has been advanced and individuals refuse to answer questions that would allow an investigation to reach a conclusion with all the evidence?

Mr Haire: I will ask Donald to come in, because he has more expertise on this issue.

Mr Beggs: No, I am asking you.

Mr Haire: Donald may be able to give you more detail. The key thing is that you have a perfect right to ask the individual involved. On two occasions, the regulators asked the individual directly about the issue. There is a perfect right to ask those questions if there are issues, which is what we did. We went directly to the individual. How far you go to investigate that process further and other queries —

Mr Beggs: Originally, no answers came back to some of the questions.

Mr Haire: There were two meetings, as you know, at which answers were given. That was the point that the solicitor was making. The Audit Office is aware of those meetings.

Mr Beggs: You have not answered me. What powers or sanctions do you have to insist that you get answers to reasonable questions that you pose?

Mr Heaney: There is a legislative requirement for registered housing associations to provide any and all information that the Department so seeks. Therefore, we would have —

Mr Beggs: Why did it take a full year for you to follow up, using that power? You did not even use that power; you got the answer without it. Why did you wait a full year before going back in again?

Mr Haire: It was because all the legal queries from the organisation were coming back to us, and the FOI queries, and we had to —

Mr Heaney: It set off a chain of FOI requests from other organisations and bodies.

Mr Beggs: That can go on in the background. That does not stop you using your authority and powers to gather the information that you need. Why did it stop?

Mr Haire: The judgement was that it did cause problems for us.

Mr Heaney: Yes —

Mr Beggs: Can you explain why?

Mr Heaney: Given the nature of the questions that were going to be asked, there was a question of potential litigation. We wanted to make sure what ground we were on, and then this —

Mr Beggs: Litigation? Surely you would be suing them. They threatened to sue you, but I do not see on what grounds they would be suing anybody. Someone could just say, "I will get my solicitor on to you". Essentially, I think that that is what happened. What grounds would anybody have to take litigation measures against the Department if you carry out your job reasonably? You could use your powers and ask for those questions to be answered. Whether or not that litigation was going on in the background is a separate issue. You could use those powers to gather information. Why did you not use them?

Mr Heaney: We took a decision that we needed to pursue the FOI request, respond to it and seek advice and guidance on how the process —

Mr Beggs: You have not explained why you took that decision other than using the word "litigation". I do not understand why you did not use your powers to gather the reasonable information that you are entitled to.

Mr Haire: As I said, we had asked for that information in 2011 and got it. It went back again, and it was the judgement of the team that it needed that backing. Is that OK?

Mr Beggs: OK.

Mr Clarke: Mr Canning, you have had a long wait to get to your part of the inquiry. We have talked a lot about Crossgar, but I want to concentrate more on Beverley. Most of us were shocked about Crossgar, but thankfully public money did not reach your organisation for Beverley. Who identified the Beverley site?

Mr Canning: Who identified the Beverley site? Between 2004 and 2007-08, housing associations, of which we were one, were inundated with offers from developers because design and build was an approved procurement method.

Mr Clarke: When was the Beverley site first shown to you?

Mr Canning: To me?

Mr Clarke: You are the chief executive of the organisation.

Mr Canning: I will deal with an issue that has been raised. We were receiving, as were many of our colleagues, many sites on offer. The first —

Mr Clarke: I want the specifics about Beverley. We will stick with it.

Mr Canning: I am trying to answer that question. The honest answer is that lots of offers come in and are dealt with by my development colleagues. I am not notified of those offers. Many of them fall by the wayside, and many simply do not stack up and are never brought for consideration or on to an approval process.

Mr Clarke: Are you saying that you are very hands-off?

Mr Canning: I am hands-off on preliminary enquiries, because I employ staff to undertake that work. When a development is worked up to the point at which it becomes a proposal that may go to my board for consideration, I would look at it then.

Mr Clarke: Did that one come to your board?

Mr Canning: No, it never came to the board.

Mr Clarke: Did you not register an expression of your organisation's interest for that site to the Housing Executive?

Mr Canning: That is one of the first things that staff in the development department do. The reason why they do that is because there is competition for sites and competition to meet need. So, for example —

Mr Clarke: I get all that. We will skip that. I think that that makes sense, given the economic climate at the time and the value of sites.

Mr Canning: The answer to your question is that my development department would have registered an interest in the site as soon as it became available.

Mr Clarke: When was that?

Mr Canning: I do not have that information to hand. There is very little on our file regarding the Newtownards development.

Mr Clarke: Why is that?

Mr Canning: It did not progress.

Mr Clarke: It did not progress, but your organisation registered an interest with the Housing Executive in it as a potential site.

Mr Canning: They confirmed that there was housing need. All that was being led by the developer, who was proposing to purchase the site from Ards Borough Council. That has never happened —

Mr Clarke: Sorry, what was that?

Mr Canning: It was being led by the developer who was making the proposal. That developer was contracted to purchase the site from Ards Borough Council. That contract fell by the wayside and never happened. My development colleagues —

Mr Clarke: We appreciate that. Given the development, it would probably never have passed anyway.

Mr Canning: My development colleagues would have been in early communication. The first question that a developer would ask would be this: "I have a site in Newtownards; are you interested in it?". My colleagues would then have to assess whether there was housing need. We would be advised by the corporate section in the Housing Executive if there was housing need and what that need was. That would be communicated by my development colleagues to the developer. Under a design-and-build scheme, they would determine whether they could obtain planning permission for the specification that the Housing Executive would be prepared to approve. When they had worked that up, they would bring a proposal back. That never happened.

Mr Clarke: It may never have happened to the degree that you are describing; however, your organisation registered an interest with the Housing Executive and stated that it was looking at that piece of land. Yes or no?

Mr Canning: Yes.

Mr Clarke: When did you first know that your organisation was looking at that piece of land?

Mr Canning: 2009.

Mr Clarke: When did your organisation let the Housing Executive know that it was interested in that piece of land.

Mr Canning: I cannot answer that; I do not have access to the file. I assume that it would have been at the point of contact by the developer, which would have been 2007.

Mr Clarke: How long have you been chief executive of Trinity or, as it now is, OakleeTrinity?

Mr Canning: Quite a long time.

Mr Clarke: How long is quite a long time?

Mr Canning: 30 years. Over 30 years.

Mr Clarke: Will, are you not alarmed that the chief executive of an organisation for almost 30 years, or over 30 years, whichever it may be, is not aware that his organisation is working up schemes and passing them to the Housing Executive to look at before he is aware that they have been drawn up?

Mr Haire: I do not know his business. I work in DSD and many scheme are pushed forward to DFP which I do not —

Mr Clarke: I will explain your business to you. You are the paymaster. You write cheques for £835,000 for sites that are going nowhere.

I will ask you the same question again. Are you content listening to the chief executive of an organisation today saying that his officials are working up programmes that he knows nothing about? Those are then passed to your Department, where you are the paymaster. Are you content with that level of governance?

Mr Haire: I can understand why he would not know about every scheme. He has to make sure that he has processes in place to ensure that issues are thrown up to him. I can quite understand, in a big organisation, that sometimes you will not follow every scheme. The point is that money is transferred to the Housing Executive. I do not sign the cheques.

Mr Clarke: You are also the permanent secretary —

Mr Haire: My job is to make sure that the systems are in place and that the Housing Executive processes —

Mr Clarke: Do you think that the systems were robust?

Mr Haire: I think that you always have to keep on developing —

Mr Clarke: No. Do you think that the systems were robust?

Mr Haire: I have made the point that the ALP system needed to be tightened, and we tightened it. As to whether if something is happening in an organisation, people need to know every issue, they clearly need to improve that, but I see many organisations in which the flow of information comes through and senior people would not necessarily know.

Mr Clarke: Are you content with that?

Mr Haire: Those things happen and —

Mr Clarke: No, that is not the question I asked. I asked you whether you are content that that is the process.

Mr Haire: Ideally, you should have systems that would point those things out. I can understand that, if there was a potential issue — . Let me put it this way, I do not know the full schemes —

Mr Clarke: I will make it easier for you; I will ask you again. Are you content?

Mr Haire: I would want my governance people to look into that.

Mr Clarke: I would suggest that you should. Mr Canning has over 30 years' experience in an organisation that is looking to pick sites around the country and work up proposals with DSD. I remind you again that you are the paymaster. We have heard of single sites going for £200,000, but a more common feature seems to be £120,000 a unit, just for the site. That is the reality, Will, whether you like it or not. You can shake your head, but that is the reality.

Mr Haire: I am not shaking my head; I am just making the point that we discussed the valuation of that site at the time and have gone through that process.

Mr Clarke: Those are the figures.

Mr Haire: Absolutely. The key point I was making was that, at the time, those were the prices that LPS and others were accepting. I am just saying that those are the sorts of issues — the governance processes — that Donald, in his review of the process, makes sure that the flow of systems works, and it goes back to your point of trying to make sure that conflict of interest issues and the culture are embedded in the system.

Mr Clarke: I was just looking at Donald's pen profile, and it includes the responsibility for overseeing governance and accountability of registered housing associations. Donald, given the level of your job and given your answers previously where you could not agree about a potential conflict, that worries me. One of the things I have learnt since I came to this establishment and the public sector is conflicts. If you were to head up an organisation, the only way to describe it is to "dance round the houses" in trying to evade the answer. To any right-thinking person, Mr Canning has a conflict: he did not declare his conflict. However, we will go back to Mr Canning again.

The Chairperson (Ms Boyle): Two members have indicated that they want to ask supplementaries on that point.

Mr Beggs: Mr Canning said that he was not aware of the Beverley site. Can you advise us of the number of registered potential schemes that Trinity Housing has? How many do you currently have, or how many would you have had then?

Mr Canning: How many do I currently have? It could run to 50 or 60.

Mr Beggs: Would the board be aware of those schemes?

Mr Canning: At such an early stage?

Mr Beggs: Sorry; once it is registered or if it is going to be registered, would the board be made aware?

Mr Canning: Numerically, they are now, yes.

Mr Beggs: So, they do not know where these are or anything about them, and whether or not they are landlocked. They do not know anything about them.

Mr Canning: They are not identified at an early stage.

Mr Beggs: I find it strange that the chief executive does not know of the schemes that are registered. If I were chief executive, I would want to know the schemes that my organisation was backing.

Mr Clarke: Thank you, Roy. You were coming into an area that I would like to get into now.

Mr Canning, you and Mr Kirkpatrick, the chairman of your board, must have a very good relationship if he can write a letter to exonerate you in such a way as to suggest that there is no conflict. When did you first become aware of the site?

Mr Canning: 2009.

Mr Clarke: Who brought it to your attention?

Mr Canning: Colleagues were bringing cuttings from 'The Newtownards Chronicle' into the office.

Mr Clarke: This gets better. So, the chief executive of Trinity, who is acquiring sites to deliver the housing need in Northern Ireland, learns about land that they are looking at through cuttings from a newspaper. Will, what do you think of that?

Mr Canning: This proposal —

Mr Clarke: No, we will let Will answer that.

Mr Haire: The information system they have, it may sound strange —

Mr Clarke: I asked you what you thought of that, Will.

Mr Haire: The fact that the information comes —

Mr Clarke: The chief executive of an organisation who is working up applications, where you as the paymaster are paying out hundreds of thousands of pounds, learns about what his organisation is doing through clippings from a newspaper.

Mr Haire: He has not —

Mr Clarke: That is what he said.

Mr Haire: The answer, I presume, is that you would have a management information system that would give you that information.

Mr Clarke: Are you hearing that today?

Mr Haire: Clearly, that was not the way that they ran —

Mr Clarke: That is right. Thank you.

Mr Canning, you got that clipping from the newspaper. What did you do with the clipping once you read it?

Mr Canning: I discussed it with my development colleagues. At that stage, Trinity's interest in the development had not progressed beyond the initiative stage of 2007. The site would have been sought to be purchased by the developer, who would have been seeking planning permission at a future point in time to make a proposal for the procurement and delivery of social housing to meet the housing need. That stage was never achieved.

Mr Clarke: I know that this is a very personal question, and I will let you choose to answer it or otherwise. Do you have a good relationship with your brother?

Mr Canning: I am not prepared to discuss that.

Mr Clarke: That is fair enough.

Mr Canning: It is a family matter. It is my family member's business what he did.

Mr Clarke: It is. It is a very lucrative business, but it is his business, yes.

Mr Canning: It is his business; it is not mine. His business was with a developer with whom I have nothing other than a business relationship. We have undertaken design-and-build schemes successfully with that developer before —

Mr Clarke: That is OK.

Mr Canning: — using ALPs, which the permanent secretary referred to.

Mr Clarke: We will move on. Donald had a difficulty with this, but I think that all of us round the table can perceive that there is a conflict where your brother's house had to be acquired to make access to a site.

Mr Canning: If it had come to the point where my board was having to consider that, I accept that. I do not accept that there was a conflict of interest.

Mr Clarke: Do you know what number your brother lived at in Beverley?

Mr Canning: I could have driven you to it, but no.

Mr Clarke: If I suggested to you that it was number 16, does that sound familiar?

Mr Canning: If I said that I did not know then I do not know, but I could drive you to it, as —

Mr Clarke: Does he still live there?

Mr Canning: — it was then. Pardon?

Mr Clarke: Does he still live there?

Mr Canning: No.

Mr Clarke: Number 16 Beverley Avenue was sold on 31 August 2007 for £700,000. Number 18 was sold on 1 December 2008 for £380,000. I have never met your brother, nor have I ever been around Beverley, but I am reliably informed that your brother lived in the very profitable number 16, which made £700,000.

Twelve months later, the neighbouring house, which was described as being similar, was sold for £380,000. The Ulster University quarterly house price index said that, in June 2007 to August 2007, the houses in that area were worth £367,000, and that, in October 2008 to December 2008, they were worth £340,000.

Mr Canning, I know that you do not really want to talk about this, but can you understand the perception of conflict where your brother gets almost twice the market value for his property when you are the head of the organisation that has an interest in developing that piece of land?

Mr Canning: In the absence of the details —

Mr Clarke: Do you want me to read you the details again?

Mr Canning: No, you have read me the details, but there is such a thing as key land. I do not know the actual planning details about what was needed for access and why the developer wanted to buy the second house. I am not privy to that information.

Mr Clarke: If I had been in your position, I would have informed myself of that today before I came. When I look at the map, number 16 and number 18 are next door to each other. Maybe you should inform yourself of the map, because, in my estimation, a few yards at the bottom of a garden would not equate to another £300,000.

Mr Canning: Trinity has no interest in the site —

Mr Clarke: Trinity had an interest in the site, Mr Canning, and you are the chief executive of the organisation —

Mr Canning: It has no further interest in the site.

Mr Clarke: Mr Canning, your organisation had an interest. Your brother received twice the market value for the property. You did not register an interest. In hindsight, do you think that you were right or wrong?

Mr Canning: With the benefit of hindsight, you have that information. I was not aware of it at the time. When it was an issue, I do not accept that there was a conflict of interest.

Mr Clarke: So, you still think that there was no conflict, given that your brother got twice the market value compared to the neighbouring property to make access to a site? I have not been about for as long as you — I have been in public office only since 2005 — but, in my career in planning, I would have thought that it was very highly unlikely that that site was ever going to be a runner.

Mr Canning: You have advised me today of the premium paid for the second house. That is news to me. I have no interest in it, and I had no reason to search for it. Should I have had reason to search for a conflict of interest?

Mr Clarke: I believe that you should have. You knew that your brother's site was adjacent to the site that your company was going into a partnership to develop. Any right-thinking person can see that your brother's house made twice what his neighbour's did and twice what the market value was, and any right-thinking person would assume that someone in your standing would have declared an interest. If you had done so, it may have looked slightly different from how it is looking for you today. We will move on; we will not talk about the values any more. What else do we have?

The Chairperson (Ms Boyle): Deputy Chairperson, do you have a supplementary question?

Mr Dallat: Mr Canning, you have been in position as chief executive for over 30 years. I have to say that if I had to lead my life over again, that is a job that I would have loved, and I would have done it to the best of my ability, as, I am sure, you will claim that you have done. When this piece of land came up, did you rush out to Beverley, get out of your car, walk it, view it and size it up as something that you would like your association to buy?

Mr Canning: Twenty years ago, when that was more my responsibility, I would have done that. At the time of this development, I had paid professional development staff who undertook that work, so the answer is, no, I did not, nor would I have seen the need to do so at such an early stage because I could not have afforded the time to be running out to every proposal that was being brought into the office for me to walk the site and form a judgement on before my colleagues had given me any information.

Mr Dallat: I find that hard to accept. Are you telling me that you are so important in your post as chief executive that you did not feel the need to go and look at something as important as this site, which cost so much money?

Mr Canning: I would not have felt the need to do so at that time.

Mr Dallat: I think we are beginning to understand how this came about. Mr Haire, to be absolutely fair, I have been here probably 15 or 16 years, and I do not mind putting on the record that I have always found you to be an absolutely decent, totally genuine person. Is it not highly embarrassing today to hear this sort of thing from a chief executive, who was so important that he could not go out and look at the site?

He has already told us that he did not know the number of his brother's house but knew where it was. If he had gone out, he would have got the conflict of interest straight away. Did you look at the maps, Mr Canning? Did you look at the plans? Did it trigger anything in your mind that that was where your brother lived?

Mr Canning: As I have already said, the development did not develop to the point at which it would have been crossing my desk.

Mr Dallat: Chairperson, are we now hearing that we have a chief executive of a housing association who did not go out and look at the site because he was too important, and he did not even look at the maps or the plans? Sorry, Mr Canning, but that is some contrast. I know the person who has to defend you now for over three hours, and it must be very difficult, Mr Haire, because I know that this is not your form.

Is that it, Mr Canning? You did not look at the maps, you did not look at the plans, you looked at nothing. You left it to some underling, and you find yourself sitting here defending the indefensible.

Mr Canning: We employ professional staff to undertake that work at the preliminary stage.

Mr Dallat: Can you define your management role? Where does it begin and end?

Mr Canning: I am the accounting officer to the board for the work that gets done. At the end of the day, we did not pursue the Newtownards site, so I cannot see that there was a need for me to view it at that early stage. I have said that, at that stage, we had many offers for design-and-build schemes. Those would have been processed initially by colleagues. I accepted that. I had no reason to believe that they did not have the capability to undertake the work. My director of development has over 30 years' experience in the field of development. I had no reason to believe that the initial assessment was not work that he could carry out properly.

Mr Dallat: Finally, now that you know all that, how much money did you pay the professional planner for the information that has got you into this mess?

Mr Canning: I do not have the information to hand.

Mr Dallat: But you just said that you are the accounting officer.

Mr Canning: It is not financial accounting; it is accounting in terms of what work is done by the organisation. It would have been an agreed fee under a procurement process. They were assisting colleagues in many initial assessments of sites.

Mr Dallat: Do you feel the need to go back home this evening and write him a letter and ask him for the money back?

Mr Canning: The position, Chair, is that the planning consultant continues to stand over the advice that he gave.

Mr Dallat: Is he still doing work for you?

Mr Canning: I believe the framework under which they were working has just come to an end.

Mr Dallat: Isn't that brilliant.

Mr Clarke: Mr Canning, let us get back to this perception or perceived interest — or, in your case, not perceived. Did I read somewhere that eventually you did declare your brother's house?

Mr Canning: Yes. During 2009, I discussed —

Mr Clarke: What sparked you to do that?

Mr Canning: I discussed the matter with the chairman. I had a member of my board living in Newtownards and reading all the controversy around it. Given that controversy, and the inappropriate suggestions that were being made with regard to a family member, I felt it was appropriate to advise my chairman.

Mr Clarke: From the evidence we have, you first became aware in letters that were raised by the Beverley Residents Action Group. Was it that or your latter suggestion now?

Mr Canning: Those would probably have been happening at the same time. I do not have those cuttings and the letters. They would have been happening at the same time during 2009.

Mr Clarke: OK.

Mr Canning: Those would have been dealt with by my development colleagues.

Mr Clarke: In relation to the dealings from this piece of land, or potential scheme, I suppose you were very hands-off anyway but did you remove yourself any further given, as many of us believe, you had a conflict of interest?

Mr Canning: As I have said, I do not believe there was a conflict of interest.

Mr Clarke: You do not believe there was a conflict of interest yet and all you registered one.

Mr Canning: A member of the board —

Mr Clarke: Sorry, you said you did not have a conflict of interest yet you registered it. Once you registered it, did you remove yourself from any more of the dealings around that piece of land?

Mr Canning: I did not register the matter as a conflict of interest.

Mr Clarke: What did you do?

Mr Canning: I registered the matter with the chairman because suggestions were being made with regard to my brother's involvement with a potential development in Newtownards.

Mr Clarke: This letter should be read into the record. I am sure that the other members have this but I think this is bizarre. Will, you should read this as well.

Do you believe they are fit for purpose, Will?

Mr Haire: The answer is, my inspector tells me that they are satisfied but I do think the point is about —

Mr Clarke: No, sorry. Do you believe that their governance issues are fit for purpose?

Mr Haire: The issue here is that wherever there is a perception issue of a conflict of interest, it is important that it is registered. Right?

Mr Clarke: Right, and in this case we are hearing that it was not registered.

Mr Haire: I must admit, I thought it had been registered.

Mr Clarke: Well, Mr Canning seems confused.

Mr Haire: I must admit, I thought he had registered it with his chair at that point. I have to take the point he has made that he did not know until 2009. We said three times to him. He has made that point. It is the perception issue of conflict of interest, is it not? It is not whether you have to immediately register —

Mr Clarke: Of course, a perception of your own policy applies.

Mr Haire: It is important always to register.

Mr Clarke: Yes.

Mr Haire: We often register things, but I totally agree with that point. My key point is my understanding was he had told his chair and the board knew it, therefore it was in effect registered.

Mr Clarke: The chair of his board is on record, dated 19 October 2011, writing:

Do you agree with that?

Mr Haire: I am sure that they are. Sorry, the answer is, if they were not —

Mr Clarke: Sorry. The really easy way to do this, Will, is if we went on a yes or a no, because it is really a yes or no answer we are looking for. They are fit for purpose or they are not.

Mr Haire: Clearly, they need to have tight systems on that conflict of interest issue.

Mr Clarke: Do you believe that they had a tight system at that time?

Mr Haire: I think that they should have made it absolutely clear —

Mr Clarke: Do you believe that they had a tight system at the time?

Mr Haire: All the evidence here was that they should have had that registered. If it was not registered, it was something they should have made sure was absolutely clear on the record.

Mr Clarke: So, can I take it —

Mr Haire: There was a weakness in that system if was not at that time recognised.

Mr Clarke: Mr Canning does not seem to think he registered it. So, we are assuming now that it is not registered. So, do you believe that their governance issues were fit for purpose?

Mr Haire: The governance systems, overall —

Mr Clarke: Do not put Donald in this, because he is a wee bit confused about a conflict here.

Mr Haire: He is the guy who does the processes.

Mr Clarke: He may be, but he is a bit confused about a conflict. So, I will ask you, Will, because you are the permanent secretary of the organisation.

Mr Haire: On the overall governance systems, the evidence, I think, is that they have satisfactory approvals, but, clearly, if there was a perceived register

, it should be registered on the system. From my reading, I thought it had been registered on that system. If that was not registered, that was as a result of a process.

Mr Clarke: Sorry; we are hearing clearly from Mr Canning that he did not register it, because he did not deem that he had to register it because he had no conflict. So —

Mr Haire: But he —

Mr Clarke: Sorry, Will. Let us get back to what the chairman is saying in defence of the indefensible. We have heard from Mr Canning that it was not registered. We are hearing today that his brother's house made £700,000 and, dear help us, his neighbour got only £340,000. Do you agree that we should dismiss Mr Kirkpatrick, the chairman of the board, and his comments, and suggest to him that the governance systems in his organisation are not fit for purpose? Yes or no will do.

Mr Haire: The answer is they have to have a clear system of registering that process. The board has now moved on another process, another way, and they have got —

Mr Clarke: So, you are not going to offend anyone. Do you believe that it was fit for purpose in 2011, when that letter was written? I can stay here until I get the answer I need.

Mr Haire: It should have been registered as a potential conflict of interest, if the site had gone ahead.

Mr Clarke: And we have learned that it was not. So, can we get from you —

Mr Haire: That was a weakness; that was wrong.

Mr Clarke: So, we are nearly getting there. Was it fit for purpose?

Mr Haire: That part of the system, clearly, does not appear right.

Mr Clarke: Thank you.

Mr Haire: You asked me about the global issue — the entire governance system. I have to say that that was a slightly different question. You can play with words here, but I am trying to make the point that I was trying to be clear on that process. I think we have come to a good conclusion.

Mr Clarke: It is a governance issue. A conflict is a governance issue.

Mr Haire: It is not the entire governance issue.

Mr Clarke: No, it is not, but it is a governance issue.

Mr Haire: I think we agree.

Mr Clarke: Yes, eventually; we got there.

Mr Haire: We both agree on the middle ground.

Mr Clarke: Thank you.

The Chairperson (Ms Boyle): Have you finished your questions, Mr Clarke?

Mr Clarke: Let somebody else in, and I will come back.

The Chairperson (Ms Boyle): I do not think anyone else wants in. Paul, do you want to go ahead with your questions on Helm?

Mr Girvan: I will, if that is OK. I want to go back to another point. It is not necessarily to do with the last site. I want to focus on one organisation, Helm. My understanding is that the report by the inspection unit, in 2006, gave Helm a glowing report, but when we go forward five years we see that it has blotted its copybook to a very large degree. I would like some indication of how that was allowed to happen. Did they take their eye off the ball to let such a large change happen in Helm's governance issues over that five-year period. What caused that?

Mr Haire: I will ask Donald to come in, because he was the person who did the work. The Minister made a statement in January 2012. The report gives you a good sense of the range of issues there. My impression, from discussing with the team, is that people had taken their eye off the ball, especially as they had moved on to some of the new developments. Frankly, they missed key parts of the process and very significant issues. We were very shocked by what we discovered. I immediately put a system round all the other development associations. We were glad to see that six of them were fine. There was a weakness in one scheme, which we talked to Mr Hussey about, and we sorted that one out.

Mr Heaney: It was something that raised our interest as well. The impression that we got, and we made some reference to this in the Helm inspection report, was that it seemed to come about through a combination of overconfidence on the part of the management team — there was a clear sense that it felt that it knew better than everyone else — and a drive to be the best association, which meant that it seemed to be prepared to cut corners and did not appreciate the risk that was being run. It seemed to be a combination of those types of factors, and as this was in the middle of a property boom, that seemed to feed into it as well. There was a sense that there was a lot of activity, charging on and doing things, but when we started looking through the documentation, it was worrying, the level of —

Mr Girvan: In earlier parts of this evidence session we have alluded to the use of middlemen. I will use that term "middlemen", but I am not so sure that they were just middlemen. Some of them were so-called professional advisers. They were either planning consultants or they had other roles to play in the organisation. Helm got involved in the purchase of a piece of land, which it declared an interest in, seemingly; the Great George's Street site. When it went up for sale, my understanding is that the Department's grant funding towards that was £8·1 million. The purchase price that they paid was £9·75 million, meaning that the contribution by Helm was £1·65 million, but that was really only a bit of pump-priming, because the same sale of the same piece of land had been made within a very small window. In fact, it is probably inevitable that no money had passed hands from the original purchaser of £6·5 million, so they made a profit of £3·25 million within two days. It may not have even been two days; it may have been hours. I see that as something that would be classed as insider dealing, but it might even be seen as more. It might be seen as a deliberate fraud of the public purse. Have you involved the police in the matter? If not, why did they not investigate it? We are chasing hundreds of thousands of pounds in some areas, but we are chasing millions on this one.

Mr Haire: It is a very important point. Donald will come in. There is litigation in this area, so there are limits to what we can —

Mr Girvan: I am aware of where the litigation is going, but it is not on this issue.

Mr Haire: OK, but, I think there is some litigation on some aspects. I just want to put that as context for the Committee.

Mr Girvan: There should be criminal litigation, never mind anything else.

Mr Heaney: The PSNI was involved. The association brought them in on Great George's Street and a number of other transactions, including some of the ones we referred to in the report. The conclusion of that was that the police could not turn up any evidence to pursue it, but they were called in because of the concerns raised by us and the association.

Mr Hussey: Was HMRC called in?

Mr Heaney: I am not sure.

Mr Hussey: Surely, when somebody makes a massive capital gain of £3·25 million, HMRC should be involved. This is one of several times when we have heard of this type of thing. HMRC would chase an ordinary individual for £1,000. With £3 million-plus, if HMRC is not involved, it should be.

Mr Haire: I will check that out for you.

Mr Dallat: I am conscious that we have been at this for three and a half hours.

Really, at this stage, I am looking for an assurance that we have not wasted our time. I have just learned that, in the last year alone, the Simon Community helped 3,600 families. Some 13,400 people phoned the homeless helpline, and 19,737 people presented themselves as homeless. So it is against that background that we are having this session. You have heard everything that has been said. We have a chief executive who is not hands-on; he does not even bother to go and see his site. I do not mind repeating what I said earlier, and I do not want to flatter you, Mr Haire. You are a good permanent secretary. Out of this, today, are you going to go back and ensure that a wind of change sweeps not just through these two housing associations but all of them? What we have heard today is absolutely appalling.

Mr Haire: The social housing issue is massive. It is a very key issue. You are very committed, as an Assembly, to get your 2,000 houses a year built. It is a big pressure for us to try to push that issue. The importance of really good governance in this process cannot be overstressed. We are looking at the regulation as we go forward, the nature and strengthening of the powers. You have given us a very blunt power at the moment. Frankly, we are just allowed to do inquiries, which is fairly restrictive. We are drawing up proposals. We need much tighter powers for this issue.

At the same time, we have good examples. I make the point that, at Helm, for example, a board has come in, people have faced up to the issues and moved on. We are still inspecting Helm and working on those issues, but it is work in progress. We have emphasised to the Federation of Housing Associations that the key point is governance at all levels. That is a joint venture. I would argue that the movement has gone through tough times and you are looking at some difficult cases. I readily admit that, but I also say that I go round the houses, I do my visits. I visit many sites, as you will have done in your constituency —

Mr Dallat: I am really pleased to hear that. You are better than the chief executive.

Mr Haire: I was out in Coleraine seeing some of the Triangle Housing Association's work there.

Mr Dallat: It is brilliant, good work.

Mr Haire: You see the staff and, you know, people like that. I go to many housing associations and you see those people and realise their commitment. People are giving work free, gratis, on these boards; they are not being paid. They are doing all those things. I emphasise to the Committee that we always have to be improving the system. We learn from issues like this. The Committee, I am sure, recognises that there is strength in the housing association movement and the good work that many people are doing in this process. It is of course absolutely right that it is as open and clear as possible. I think we are totally committed to that process, and it will be absolutely key to this. As I say, I go round, and I see people working very hard, and there are very committed. However, of course, we always have to learn in this process. The ALP scheme is a mechanism in that process, and of course there are ways that you can tighten up the system without producing such a system that nothing can come out of. That is the balance that we have to achieve. We are certainly very clear on this point.

The Chairperson (Ms Boyle): Mr Girvan have you finished your questions?

Mr Girvan: This is a good opportunity to say that, if you want to be in a line of business in this country, housing associations look quite good. It is also a good idea to own a few pieces of land that have probably no potential whatsoever, if you have some well-meaning person who has access to a planning consultant who can tell them exactly what they want to hear.

Mr McQuillan: Public money.

Mr Girvan: And they have public money to buy it off you. You might even be willing to share some of that money with them. That might be pushing it too far. I am not so sure that what we have heard today gives me any confidence. I do not necessarily hold to the adage that housing associations are delivering everything that they are supposed to be delivering. It is a very interesting opportunity to be unaccountable to a large degree. It is an arm's-length body, not totally answerable to the Assembly.

The Department feels that it is quite adequate if it hands over a large percentage of its budget to an arm's-length body to deliver a function without necessarily being totally accountable in that process. It has been abused, and I am saying "abused", because it is quite evident from this report that there has been major abuse of the whole process. Somebody can let someone else know that they are interested in a piece of land, and within a matter of hours of purchasing it, they can sell it to an association, knowing that it was already doing the work to buy that piece of land, which it may not be possible to develop anyway. They can then get £3·25 million more than they paid for it four or five hours previously at an auction. That does not make any sense whatsoever to me. It smells bad, it looks bad, and it definitely is bad. The Department needs to learn that that is public money and that we will be following that money. Unfortunately, we are following it a number of years later. The public need to be aware and to be confident that we are not just letting millions of pounds fritter away through our fingers. That is what appears to be happening here.

Mr Clarke: Mr Canning, were you listening to that?

Mr Canning: Yes.

Mr Clarke: Can you tell us why your organisation has persistently challenged the recovery of the money?

Mr Canning: What we challenged was the timescale.

Mr Clarke: You got £835,000 for a site that you are never going to develop, Mr Haire is chasing you with a big stick years later, and you think that that is unreasonable?

Mr Canning: No, the letter came from the Housing Executive demanding the money in 30 days.

Mr Clarke: What did you do with all the money?

Mr Canning: I think that has been answered.

Mr Clarke: I am asking you again.

Mr Canning: The money was used for the purchase of the site.

Mr Clarke: What have you done with the site now?

Mr Canning: It is still there.

Mr Clarke: Do you not hold any reserves yourselves?

Mr Canning: I do not understand —

Mr Clarke: Cash reserves?

Mr Canning: The organisation has reserves.

Mr Clarke: You are the chief executive of the organisation. Did you not think of dipping in to those reserves to give it back to the public purse?

Mr Canning: We were asking for time, which has been given, to negotiate the resolution of the issue that was presented by the fact that the project had not progressed within what the Housing Executive deemed to be an acceptable timescale.

Mr Clarke: Can you tell us what the timescale is today?

Mr Canning: As was pointed out, the rules have been tightened, and we have two years today. After two years, we have the opportunity to discuss the matter to have a potential further one-year extension.

Mr Clarke: Do you think that is reasonable?

Mr Canning: I accept that that is the system. If you are asking me whether it is reasonable in the context of our planning experience in recent years, I can say that, in some instances, I am not too sure.

Mr Clarke: We are not talking about planning here; we are talking about you receiving £835,000 of public money on the advice of some expert who you probably paid tens of thousands of pounds to work up the application. Quite some time has passed in the context of the £835,000. You are looking at the possibility of another three years. Do you think that that is reasonable?

Mr Canning: Sorry, no —

Mr Haire: I think that there is a misunderstanding.

Mr Clarke: I am happy for Mr Canning to clarify.

Mr Canning: The repayment of the grant will be resolved by 31 March this year.

Mr Clarke: Thank you. That was easy.

Sorry Paul, can I continue, if you do not mind?

Mr Girvan: Yes, fire away.

Mr Clarke: I want to go back to this conflict, because I knew that there was something else that I wanted to raise with you. The Department's inspection team indicated that perceived conflicts of interest had been raised with your housing association in December 2007. Are you familiar with that?

Mr Canning: No.

Mr Clarke: You are not. The chief executive of the organisation was not aware that the inspection team highlighted those in December 2007.

Mr Canning: You are asking me now. They may have been brought to my attention, and I addressed them at that time. I am not familiar today in 2015 with the issues in 2007.

Mr Clarke: I will ask you in a different way. Does it come very often to tell you of perceived conflicts that you have not addressed?

Mr Canning: No.

Mr Clarke: But you cannot recall this one occasion when it did.

Mr Canning: It discusses many things with us.

Mr Clarke: I am talking about conflicts and perceived conflict.

Mr Canning: We have not had any conflicts of interest.

Mr Clarke: According to the inspection team in 2007, an issue on perceived conflicts was raised with you.

Mr Canning: I cannot recall that.

Mr Clarke: You cannot recall that.

Mr Clarke: The Audit Office sent you three questions on potential conflicts. Why have you not responded, given that this has been going on since November 2013?

Mr Canning: I am not aware that I have not responded to any questions.

Mr Clarke: Will you give us an assurance today that, if the Committee forwards them to you again, we will get a response by return?

Mr Canning: I will consider the questions, but, as I said previously, one of them pertained to a transaction that my brother carried out.

Mr Clarke: Are these the questions that you did not know about?

Mr Canning: I cannot answer those.

Mr Clarke: A few minutes ago you told me that you did not know about the questions from the Audit Office, and now you are telling me one of them relates to your brother. So, you do know the questions.

Mr Canning: If they are the same questions that were asked in 2007.

Mr Clarke: How many questions from the Audit Office have you not answered?

Mr Canning: If I had sight of the 2007 questions, and they are the same, yes, I would be aware of them. I cannot answer at this moment in time —

Mr Clarke: I suggest to you that the three that I put to you, and which you had forgotten about, are actually outstanding. It is those three that you are aware of. Will you be in a position to answer those and, if so, when?

Mr Canning: I have answered them.

Mr Clarke: You have answered them? Even in relation to your brother?

Mr Canning: In relation to my brother, I intimated that it is his business and that the developers are the best people to answer that. I cannot answer.

Mr Easton: I will go back to Great Georges Street, if that is OK. Donald, you are the lucky person. How did the Department investigate the flip sale?

Mr Heaney: One of our big difficulties was trying to find out exactly what happened. We ended up seeking the conveyancing contract, and we checked LPS and the Land Registry to try to track down the previous owners. The copy of the contract then first raised the issue of the separation of the payment. That raised concerns with us, because it indicated that this may not have been so much of a flip sale as just splitting money.

Mr Easton: Had Helm already got the £8·1 million in its bank account?

Mr Heaney: It had.

Mr Easton: I do not know the practice, but if somebody is going to buy such a large piece of land with money, and you, or somebody from your Department, has given it to Helm, would it be practice for somebody from the Department or whoever to be there to ensure that everything is above board and going smoothly at the time?

Mr Heaney: No. Do you mean at the time of the signing of the contract? No.

Mr Easton: I mean the day that it was bought and then all swapped round.

Mr Heaney: No. The Department would not be party to any of those transactions.

Mr Easton: So, on the day that this all happened, the Department knew absolutely nothing about it.

Mr Heaney: That is right.

Mr Hussey: Can I come in there for two seconds just to clarify something?

Mr Easton: Literally two seconds.

Mr Hussey: It says in our notes that there was an agreement to purchase this. What was the original agreement price before they moved on?

Mr Easton: It was £6·5 million, was it not?

Mr Hussey: What was the agreement for Helm to buy it? Our papers refer to:

So, Helm knew what it was going to pay for it. Did it go in with a cheque in its pocket for £6·5 million for it, or was it going to pay £9·75 million?

Mr Heaney: It was going to pay £9·75 million for it.

Mr Hussey: On the same day that it was just bought.

Mr Heaney: It was going in to pay £9·75 million for it, and, if my memory serves me right — I need to check this for you — there was a handwritten amendment to the contract showing the split of the payment.

Mr Girvan: Yes, £6·5 million.

Mr Heaney: Yes, it was £6·5 million to the owners, and £3·25 million to

Mr Wilkinson: Just to —

Mr Hussey: Money laundering seems to appear here somewhere in my head.

Mr Wilkinson: To offer the clarification again, there was a process of inspection that looked at the issues after the fact. Those issues were raised and are being pursued.

The advance land purchase went through the process that was in place at the time. That included the independent valuation, the planning advice, the DFP approval in this instance and the departmental approval. The advance land purchase was then paid, which formed part of the purchase. At the same time and following that, the inspection process raised serious concerns about the transaction. Those are being pursued by Helm and were pursued by the Department.

Mr Girvan: Are all land purchase transactions investigated with the same vigour from a departmental point of view?

Mr Wilkinson: Mark may come in again on this point, but all applications for advance land purchase go through the same process. As part of that process, depending on the value, either departmental or DFP approval will be sought. Following that, as part of our normal inspection regime — Donald can give you the figures — we will go into an association and examine all aspects of property development, look at a sample of transactions and identify issues. Those are two separate processes.

Mr Girvan: There seems to be a very slick process in operation between those parties that want to flip and deal with it. Have you identified other situations in which the same process could be used? Solicitors could be involved or engaged in that process or could facilitate it.

Mr Wilkinson: I will bring Donald in, but those were some of the issues that we specifically identified in the follow-up inspections of the major developing associations.

Mr Heaney: We sought the conveyancing contract for Helm's purchase acquisitions to check what the process was and who the moneys were transferred through. We did the same thing when we carried out the targeted inspection of the other seven leading developing associations later that year. That was done to check whether the same situation was in place. There was no evidence of that in the other associations that we looked at.

Mr Hussey: I think you have to stop the cheque once you have seen that.

Mr Girvan: Was there no evidence of that in the others?

Mr Heaney: No. We covered that in the broad expanse of the work that we did on Helm and in the targeted inspections of the developing associations.

Mr Girvan: I appreciate what you are saying, but I sometimes have a lack of confidence in the process. I am aware of other areas, and I will give an example. The University of Ulster needed to relocate to north Belfast, and as a consequence, it will need to purchase property for one reason or another. That is an opportunity for those who want to abuse the system to get involved. They know that the university will be over a barrel to buy that property. Speculators could engage in a very similar process.

Mr Heaney: That is exactly why we carried out the targeted inspections on the other developing associations. There were concerns about whether that was more widespread than just Helm.

Mr Hussey: Why did Helm still write the cheque when its legal expert saw that somebody, on the back of a fag packet, had changed it? You said that it was handwritten. I do not understand why that cheque went through. I would have stopped it immediately.

Mr Heaney: Absolutely. We were mildly concerned when we saw it as well. There were issues across the whole Helm thing that were of serious concern.

Mr Easton: Chair, we will really have to get on top of who is asking questions in their sections, because —

Mr Hussey: We are going nowhere.

Mr Easton: Yes; we are going nowhere.

Are you able to give me an explanation of why Helm was negotiating paying some millions with whomever owned the land, yet, all of a sudden, that changed and somebody bought it for £6·5 million? Did you get an explanation of that?

Mr Heaney: The only thing that we were told was that, when those people walked into the room, it was the first time that they were aware of the other party to the sale. They went on ahead and signed the contract and amended the contracts on that basis.

Mr Easton: Afterwards, did you attempt to speak to the landowner who was selling to ask why that happened?

Mr Heaney: We did not; we tried to contact some of the other partners, and we could not track them. All that information was passed to the PSNI to follow up on that.

Mr Easton: The police did not see fit to question anybody.

Mr Heaney: They came back and said that there was not enough evidence to pursue the case.

Mr Easton: When dealing with Helm afterwards, were they not asked whether they thought it was a bit suspicious that, on the day they had been turned over, they went and bought it?

Mr Heaney: When we explained it to the board, the members were horrified at the whole thing.

Mr Easton: What about the person who actually did it?

Mr Heaney: One of the main people was not in the association at the time; they were off ill. There was almost — not a shrug of the shoulders — but no comprehension, if you can understand that.

Mr Easton: They did not seem to think there was an issue. Is that what you are saying?

Mr Heaney: It was that type of reaction; there was no real explanation.

Mr Easton: Is that acceptable?

Mr Haire: No. That is why we have had to make all the changes in the process.

Mr Easton: I believe that we need get Helm in to explain its actions on this.

Mr Haire: To be fair, the team at Helm now is entirely new. The others have cleared out and new management has come in, but it will be happy to provide evidence.

Mr Easton: I have not finished. Obviously, there is a case going on, and we cannot stray into that, but do we know who did the valuation?

Mr Heaney: We do.

Mr Easton: We are not going into it, but are we allowed to name them?

Mr Heaney: We could write to you.

Mr Easton: Yes, with the name of the person who did the valuation.

Mr Heaney: The firm.

Mr Easton: Yes. The valuation was about £10 million, I think. Without going into the specifics, do you not view it as a bit bizarre that it was bought for £6·5 million?

Mr Heaney: It was more than a bit bizarre.

Mr Easton: You have accepted that it was a bit bizarre; that is good. The company that bought it for £6·5 million is an Isle of Man company.

Mr Heaney: It is registered in the Isle of Man. It is a partnership that is made up of three trustees.

Mr Easton: Do we know who they are?

Mr Heaney: We have their names. We passed all that information to the PSNI to check that out for us.

Mr Easton: Were you able to contact them?

Mr Heaney: No.

Mr Easton: Did you try to contact them?

Mr Heaney: We passed all the information to the PSNI.

Mr Easton: But you did not attempt to contact them.

Mr Heaney: We did not, no.

Mr Easton: Did you try to talk to the original owner of the site to ascertain why it was sold for £6·5 million?

Mr Heaney: No. Our approach was that we felt that there was something significantly wrong and that the best route would be for the PSNI to pursue it without us going in and talking to people.

Mr Easton: I find it astonishing that the PSNI decided not even to go and talk to anybody.

Mr Heaney: I am not sure what they did, but they came back and said that they did not have any evidence to pursue —

Mr Easton: Yes, but did the PSNI tell you that they had been talking to people? Did they explain anything at all about their investigation to the Department?

Mr Heaney: No.

Mr Easton: Was it just, "We've looked at it, and it's going nowhere"? Is that how it came across?

Mr Heaney: No, we passed that over to Helm to take forward with the PSNI.

Mr Easton: So, you asked the police — well, I do not know whether it was you or the Department who asked the police to investigate —

Mr Heaney: The Helm board asked the police to investigate it.

Mr Easton: Not the Department?

Mr Heaney: No. We passed over all the information that we had on the cases that we had looked at.

Mr Easton: Do you think the PSNI investigation was satisfactory?

Mr Heaney: I am not able to comment on the PSNI investigation. Sorry.

Mr Easton: Well, you did not get any answers, so was it satisfactory?

Mr Heaney: Satisfactory in terms of the outcome? No. Sorry.

Mr Easton: That is OK; I will not hold it against you. What was Helm's response to the PSNI investigation? Dismissal? Did they shrug their shoulders?

Mr Heaney: No. To be honest, I think that the board was outraged. A fair reflection of the board at that stage was that it wanted to get right to the very bottom of everything.

Mr Easton: So the board was horrified but the person from Helm who bought it was not horrified by the whole process. Is that fair? They were the ones who were shrugging their shoulders and going —

Mr Heaney: Yes. It is difficult. At that stage, the management was somewhat shell-shocked by the issues. I think that the board was horrified because it felt let down, betrayed, and various things, by the management team.

Mr Easton: Of Helm?

Mr Heaney: Yes.

Mr Easton: OK. Do we know who was the individual in Helm who signed the agreement to buy it?

Mr Heaney: Perhaps we could write to you about that.

Mr Easton: You can get me that information. Do they still work for Helm?

Mr Heaney: No. None of the senior management team stayed with the Helm.

Mr Easton: They disappeared just after this, did they? Was the Isle of Man their destination?

Mr Girvan: The Caribbean.

Mr Heaney: No. The management team was changed in full because of it.

Mr Easton: Because of this incident.

Mr Heaney: Yes.

Mr Easton: Right. How many staff were involved in that change? Do we know?

Mr Heaney: It was the chief executive and the four directors. Five of the senior management team.

Mr Haire: To be fair, when the old board realised the issues, it started to change the process. As we recognise in the report, when they realised the failure of governance that had taken place under their supervision, they took decisive action and they moved that process. They phased themselves out very quickly over that time. We recognise the fact that the board immediately owned up to the issue and dealt with it. That was actually very helpful to everybody — the tenants and everyone else. It gave us the opportunity to get new management in, so it was a tough decision but they handled it well.

Mr Girvan: I appreciate that the top and senior management fell on their sword over this matter but it does not take away from the fact that maybe there was somebody below that tier who could still be in the organisation and who had some input into ensuring that a piece of land that cannot be developed was valued at such an exorbitant amount of money, then purchased and flipped all in one go. I have a question in my mind about whether that person is still in the organisation or could be involved in it. They are probably well enough off not to be in the organisation. They could be in the Caribbean or somewhere for all I know.

Mr Haire: All that I can say is that the new interim chief executive came in and thoroughly looked at the situation. I remember talking to him to find out what were the management issues. He was very clear and confident that effective changes had been made and the issues were dealt with by the removals. He went in as a no-nonsense individual.

Mr Girvan: I have concerns once you start to involve middlemen in the process. They are being paid from the public purse as well, sometimes to give what might be good advice only for themselves and not necessarily for the public purse. You are paying them from the public purse initially to do a service. I am thinking of some housing associations that probably could use that money in better ways, maybe in maintenance.

Have the tenants suffered as a consequence of this action? Rent in housing associations tends to be slightly higher than what would be paid directly to the Housing Executive. Are tenants suffering as a consequence of mismanagement by housing associations?

Mr Haire: I will let Donald come in on that. Undoubtedly, the organisation has to face up to those changes and the losses that they make in that process. Undoubtedly, there are financial impacts, which, ultimately, must have some impact on the process.

That is the point that I want to make about how we withdraw the money and how we get the resource back to you. I understand the frustration that Committee members are indicating, which is, "Can we not get the cheque straight away?". If you do that and break or damage the covenants, everybody's costs will go up because of the banking system etc. As accounting officer, I had to get the resource back for you, but I have to take the point of how I do it and the timescale. I have to do it in a way so that I do not disadvantage the tenant, and that was the judgement that I had to make when I faced the issue of Helm. In a certain sense, I have to do likewise with Trinity. It is about getting that balance right so that the tenant is not the person who suffers. I think that is a fair balance of judgement on value for money that I have to make.

Mr Girvan: What other mechanism have they to get that money back, other than from the rent that they get from their tenants? Ultimately, the tenants are paying for their mismanagement.

Mr Heaney: There is no question that the main source of revenue for any housing association or any social landlord is rental income. One of the things that happened is that, apart from those schemes that they were contracted to, they were excluded from the development programme. I think that they were out of the development programme for around 18 months or two years; I can check that for you. In a way, that means that they were not looking for the same level of loans and finance to generate and support development activity, so that was an easement of pressure. We got our finance people to look at that, and —

Mr Girvan: I am looking at it with a totally business frame of mind. Would that not normally be funded over the lifetime of the property? Therefore, you take a calculation of rent, and it is a business decision. Effectively, we have paid out money and we have no capital resource and no payment stream whatsoever coming in from that development to offset that money. As a consequence, there is no revenue-generating vehicle associated with that debt. The only revenue-generating vehicle for that debt is the wider tenant scheme that is associated with that association. I am correct about that, am I not?

Mr Heaney: Yes.

Mr Girvan: So, ultimately, they will all suffer and are suffering as a consequence of this bad deal.

Mr Wilkinson: I suppose that the key is how you manage that impact and over what timescale. I think that, first, housing associations deal with it through their accounts. It may impact on their reserves and on their future investment. Obviously, all housing associations set rents at an affordable level; that is their objective as a housing association. We have a very strong focus on new build, linked closely to local housing allowance. There is a whole aspect of social housing rent that underpins that.

Mr Girvan: Chair, in light of what we have heard this afternoon, I think that there is a necessity for us to get an urgent report from the PSNI on the investigation into what I deem to be a fraud, if not a criminal case to answer on this issue. We need that as a matter of urgency. I am wondering whether we as a Committee can request that, or does it have to come through the Northern Ireland Housing Executive and the Department? I ask for some clarification.

The Chairperson (Ms Boyle): We will get clarity on that.

Mr Girvan: It is something I need, and I would dearly love to find out because I do not think that asking Helm to pursue this matter with the PSNI has necessarily brought the same vigour in ensuring that they got justice. I can tell you that, if it had been me, I would have been kicking doors for the next six years to get to the bottom of it. I would be ensuring that I found out who had ripped me off and they would be made to pay.

The Chairperson (Ms Boyle): We can get clarity on that. Ross wanted in, and then I will let Trevor in. We will then let Alex finish.

Mr Hussey: I am going to follow Paul's point. We have asked before about the police, and it seems to have been forgotten about. This was an Isle of Man company, so it might not even be within the scope of the PSNI to deal with this. At the time, it could have been the Serious Organised Crime Agency that looked at it. This is, clearly, a serious crime. To me, it was organised and, because this company is registered in the Isle of Man, outside this jurisdiction, this would have to come from outside of Northern Ireland. We must demand some form of a report from the Police Service of Northern Ireland, even in private session.

It has to go a lot further. I am more than surprised that DSD is not standing on the neck of Helm and saying, "If you are responsible for this, you should bring in the police." If the police have said that there is no evidence, that is nonsense. There is a paper trail somewhere, as I said earlier, with HMRC. There is a paper trail somewhere that somebody should be able to follow. I am not content, and I believe that we must follow the money. Whether it is HMRC or what was the Serious Organised Crime Agency, it is outwith the PSNI. It is beyond that.

Yes, the money will be brought back at some stage, but the problem is that, in building terms, £10 million would probably have got you a lot more in 2010 than it would now. As I said, in Tyrone, £10 million would buy you a hell of a lot of housing stock. I am very concerned about that and the loss of money to this part of the world.

We must come back to the issues of the police and of serious and organised crime, and we must require the police to follow the trail. There clearly is a trail. Solicitors are involved in it.

Going back to the other point, somebody signed a cheque for nine-point-something million pounds. I would find it difficult to sign a cheque for a hundred pounds without starting to worry about it. For somebody to sign a cheque for £9·75 million and to seem unconcerned causes me concern. If I had been sitting on the board of Helm, I think I would have wanted to know where every penny was going.

On the point about the scribbling on the contract, where were Helm's solicitors in all of that? Why did they not say, "Hold on. This does not look right"? This is a can of worms and it needs to be investigated. The legal advice that Helm received from its solicitors also needs to be made available to us.

The Chairperson (Ms Boyle): We will get clarity on whether we can get a report from the PSNI on that. Trevor, I am conscious of the time; Alex has to finish his questions.

Mr Clarke: He is OK. Do not worry about it.

The Chairperson (Ms Boyle): Alex, do you want to continue and finish your questions, or do you want to let Trevor in?

Mr Easton: Trevor has a party piece.

Mr Clarke: About 10 or 15 minutes ago, we heard about Mr Canning's reluctance to pay money back. I have an email that was sent to Mr Cochrane. It is about Crossgar. It is in appendix C, page 148. Do the witnesses have the same stuff as us?

Mr Hussey: No, there are different numbers.

Mr Clarke: I will read the email to you because I think that it is very interesting. It is dated 18 March —

Mr Haire: Who is Mr Cochrane? Sorry, can you tell me who is who?

Mr Clarke: He is — sorry — it was from John Cochrane to Tina Diamond from DSD.

Mr Haire: OK. Fine.

Mr Clarke: The email states:

That is Crossgar.

It goes on:

Wait until you hear this bit, Mr Canning. The email continues:

They definitely work quickly. It continues:

That was in March 2007. The emails are all time-stamped. I have the valuation of the land at Crossgar from Ian McCullagh. There was only one site in Crossgar, which was 19 Downpatrick Road.

Mr Haire: Yes.

Mr Clarke: I want to make sure that I am reading it right. The email states that the valuation done in March was £900,000. The organisation was looking for you to pull out all the stops to get it that money because it was in a hurry to spend it before the end of the year.

Mr Haire: It was the other way around. The Department wanted the money. It went back —

Mr Clarke: That is OK. We will not worry about that part.

Mr Haire: The Department wanted that to happen because of a budgetary and management issue that we talked about earlier.

Mr Clarke: We will not lose the detail, Mr Haire. In March 2007, an email was sent requesting £900,000. That figure was based on a valuation that was done, although your Department obviously did not want to have sight of the valuation. However, the valuation was done in May 2007, two months after the email was sent that asked for £900,000 in order to include the land in the scheme in 10 days' time. That email alleged that the valuation had been done, but the valuation was done two months later.

Mr Haire: I will ask the guys to answer that. They did the processing, and that would have been done in the normal processing of the documentation.

Mr Graham: I do not have my file with me, but the ALP was not approved in March; rather it was approved —

Mr Clarke: Sorry, I will read it to you again, Mark.

Mr Haire: The approval —

Mr Clarke: I will read it, Will. Let us not lose this.

The email states:

That means that the housing associations branch had got the report, and the email is dated March 2007. How come the valuer's report is dated 28 May 2007? How can a valuation report be done two months before it was actually carried out?

Mr Wilkinson: I think that there were two. I am looking at the figure work that we have, and there appears to have been a valuation report, dated 26 February 2007, as well. I think that the Department wrote to Trinity in March to suggest that it might be pursued as an ALP. It was not pursued until later in the year, by which time there had been a different valuation done. I am looking at our figures, and I am sure that we can get the paperwork to you.

Mr Clarke: Jim, are you telling us that, as well as £120,000 a site, you had two valuations done within three months of each other? I am sure that those were not free. This is the cash cow. This is government, and we will just milk the cow.

Mr Haire: We will get you the basis of how that was worked out, what the costs were and why a second valuation was done. We will come back to you on that. It is very good point.

Mr Clarke: The general public, of which I am a member, have a perception that, if you do stuff for government agencies, there is a blank cheque. You can understand that perception.

Mr Haire: That issue was put out there. A lot of people also say that there is a lot of paperwork and issues involved, that we check things to the nth degree and that we ask for lots of forms.

Mr Clarke: I would say that you did not check very much in this case, given that you went out and purchased sites for £900,000 to get one house passed. Perhaps that is the one that failed.

Mr Haire: You know the history of the case. You know the

. We have gone through that issue already, Mr Clarke.

Mr Clarke: I look forward to seeing that.

Mr Easton: OK, back to George.

Mr Clarke: Who is George?

Mr Easton: The Great Georges Street site.

Do we know from Helm at what stage it was approached when the site was bought by the new guys from the Isle of Man? Do we know at what stage of the day that took place? Do we have times?

Mr Heaney: Not specifically. My recollection is that it took place in the morning.

Mr Easton: It was done within that one day.

Mr Heaney: It was certainly the one day. I think that it was in the one morning, but I cannot be sure.

Mr Easton: It would be a fair assumption therefore to make that the new owner of the site would have known that Helm would have bought it regardless.

Mr Heaney: I think that that would be a fair assumption.

Mr Easton: To go back to Helm and its staff, we know that four directors and at least one senior manager went as a result of this process. Were there any discussions with higher-level staff in Helm that suggested that those five individuals had some sort of connection to the site owner or the Isle of Man group?

Mr Heaney: There was nothing that would indicate a connection.

Mr Easton: On the valuation of the land, I obviously do not want to talk about the individual. Was that valuation done in-house with Helm?

Mr Heaney: No.

Mr Easton: Was it someone that Helm asked to do it?

Mr Heaney: It was a recognised firm.

Mr Easton: OK, and Helm had only the one valuation.

Mr Heaney: Yes.

Mr Easton: Is it not strange that the valuation of £10 million came back when there was no planning permission attached to it?

Mr Heaney: Without saying too much, yes.

Mr Easton: OK. You are getting the money back, which is good.

The Chairperson (Ms Boyle): Are you getting the money back?

Mr Easton: I am coming to that. You are getting it back by various means. First, there is the possibility of a court case. We do not know what the outcome will be, so there is no guarantee that any money will be coming back. Is there a contingency plan if that falls flat on its face? If there is, can you tell us what it is? Secondly, you are getting money back from Helm through Helm not being allowed to get certain grants that it otherwise would have had. Is any money coming directly to you from Helm's reserves? As I said, Helm will not receive certain grants. In my simple mind, if people are applying for a grant, they cannot always guarantee that they are going to get it. Therefore, it is not the case that it is giving money back.

Mr Haire: We are hypothecating against it.

Mr Easton: Yes. To me, if money is being paid back, it is coming from your own money, but that is not really the case here. I find that hard to understand.

Mr Graham: The broad agreement is that Helm has identified a number of sites that it already owns. In fact, it has a number of those schemes on-site already. Those amount to about £1·44 million. Those schemes will therefore receive no grant. To be clear, those schemes are approved in exactly the same way as for any other scheme or association that we approve.

Mr Easton: It would have got money for that.

Mr Graham: It would have got money for that, but it is not getting money for those.

Mr Easton: How much would that have been?

Mr Graham: It was £1·44 million.

Mr Easton: That makes up for part of it.

Mr Graham: Yes. It has identified that the result of the litigation will be used.

Mr Easton: Hopefully.

Mr Graham: Hopefully, it will be paid. As part of the agreement, we have recognised that, but it depends on a successful litigation. Clearly, at this stage, the money involved in the result of that litigation is uncertain. Therefore, we have agreed with Helm that it will, between now and the end of the 2017 financial year, identify a number of other schemes that it will do for reduced grant level. It will take between now and the end of 2017 to develop those schemes. Obviously, that is dependent on Helm being able to find sites and to develop those schemes, but that is the broad agreement. We have recognised with Helm that it is an outline agreement and that, if the litigation is unsuccessful or if it produces a lesser amount, it will have to find other schemes to do with a reduced grant level.

Mr Easton: Therefore, Helm is hoping that it is going to get £6 million of grants out of you to pay the money if the court case goes belly up.

Mr Graham: To be fair, the schemes will be treated in exactly the same way as any other scheme, so it has to be a scheme in an area where there is housing need; it will have to be a scheme that has planning permission; and it will have to be a scheme that we would approve in exactly the same way.

Mr Easton: Helm has to go through the process, and then you do not give it money.

Mr Graham: Yes. That is essentially how it works. We have regular meetings with Helm to assess its progress on that. We are aware of the risk involved, because it still has to identify sufficient schemes to deliver that, but it is something that we are keeping a very close eye on.

Mr Easton: It is really an interest-free loan in a way, which is not really good.

Mr Graham: In making the decision in the way that we made it, we were conscious not to impact on the financial viability of the association. As Paul Girvan mentioned earlier, the issue for us is trying, in as far as we can, to do it in a way that does not adversely impact on the tenants within Helm Housing or put it in breach of its covenants. That in itself would potentially put at risk the public money that was previously invested and potentially adversely impact on tenants. In coming to that agreement, we were aware of the risks and the issues involved, but we felt, given the large sum of money involved and the need to recover and recycle the money and also to protect the association and, more to the point, its tenants, that it was a reasonable approach to the recovery process.

Mr Easton: Does it still own the Great Georges Street site?

Mr Graham: It does still own the site. I gather that the vesting process for Roads Service has commenced, so it will probably vest it in due course.

Mr Girvan: It will not get back £10 million.

Mr Graham: It will be a much smaller amount, yes.

Mr Easton: Do you know how much it might get back for it?

Mr Girvan: It is £200,000.

Mr Graham: It is valued at £500,000.

Mr Easton: You might get £500,000 back from that source. Do you know whether Helm had reserves? Did it have money stashed away somewhere?

Mr Heaney: I am not sure. I know that it had to recognise the reduction in the asset value on Great Georges Street and a number of other schemes. That is recognised

accounts.

Mr Easton: Did Helm make the argument to you that, if it had had to pay it all back in one go, it would have gone belly up?

Mr Heaney: It felt that, given the impairments that it had to do on the accounts, plus the £8·1 million, unless those were progressed over a period, that would culminate in significant difficulties for it.

Mr Easton: I am finishing, Chair, but, like Paul, I would like to know about the PSNI investigation. I want to have Helm in front of the Committee, and we could even get the firm from the Isle of Man here. I really want to get to the bottom of this, because I believe that some sort of fraud has gone on, and I am really not happy with how the PSNI has investigated this. That is where we are at the moment.

The Chairperson (Ms Boyle): We will seek clarity on those issues.

Mr Clarke: I do not know whether Jim is the right person to answer this, but who does Geraldine work for?

Mr Wilkinson: At the moment, she is part of the inspection team.

Mr Clarke: She is part of your team, Donald.

Mr Wilkinson: At that point, she was probably part of the development team, depending on the date.

Mr Clarke: There is no date on this. I will save you some back-breaking work looking up the other valuation. A timeline was kindly supplied by Geraldine. At the bottom, it states:

For me, the interesting part of the communication is point 4, which states:

That is probably where you got February from, Jim.

Mr Wilkinson: It is probably the instruction rather than the valuation.

Mr Clarke: The instruction was carried out in February. I will now go back to the point that I had tried to make. Point 5 states:

That is on the basis of the valuation that came two months after that, because that was 15 March, according to the chronology supplied by the Department. After that, it suggests the number of houses and units.

Point 9 then states:

A couple of things in there are strange to me. I made the point earlier that we had a valuation two months before we got it. The other strange thing is the valuation, given what the Department wanted. The summary of the valuation states:

When I read that, his remit is a mixture. Perhaps we can go back and see what his instructions were. Perhaps Mr Canning can answer this question. Do you still engage the same chartered surveyor?

Mr Canning: I am not sure whether he has carried out any recent valuations for us. The reason for that is that we are required under European procurement law to go to the market periodically. I know that a lot of those exercises have taken place recently, so I do not know who is on the panel at the moment.

Mr Clarke: That is fine.

Mr Haire: We will come back with the details that you have requested about the timescale.

Mr Clarke: If there are gaps, Will, it says an awful lot about DSD as well. A lot of the focus today is on the housing associations, and I do not think that Mr Canning should leave here proud of how he has conducted himself. Equally, to go back to the public money, it looks as if there is something wrong in the Housing Executive itself.

Mr Girvan: Spending money before —

Mr Clarke: Interestingly, the valuation indicates:

Therefore, it was hardly a very detailed inspection. I do not see why it would necessitate a second one, and, certainly, from the chronology in your own submission, there were no other valuations received.

Mr Haire: Let us get you all the detail, because you have made very good points. We will check the process, and, obviously, that is a key element in the process. I agree.

Mr Clarke: I look forward to it.

The Chairperson (Ms Boyle): Thank you. John, you have nothing to add to that.

No one else has indicated to ask questions. Thank you, members, and thank you for your indulgence today, witnesses.

Mr Haire, at the beginning of the evidence session, I asked you whether you were satisfied with the response that you had received from the chief executive of OakleeTrinity. In the light of what we have heard from you today, are you still of that view?

Mr Haire: My main point is about the declaration of interests. One of the issues was his knowledge at the time, and he has repeated here when he knew of the scheme. That was a core issue in the process. I suppose that the question is that he has repeated the point very clearly. That is his clear recollection. He is explaining the system here, and that has not changed. There is a consistency to what he has presented here, and the Committee has heard his evidence.

The Chairperson (Ms Boyle): Thank you. I am sure that members will agree with me that serious lessons need to be learned from what has gone on and that decisions taken do have serious consequences. I suppose that people find themselves in front of PAC because of decisions that they may or may not have taken. In my opinion — I am sure that I speak on behalf of the Committee — many of the issues that we have discussed here today seem to indicate a breach of governance issues.

Nevertheless, on behalf of the Committee today, I wish you, Mr Haire, the very best in your retirement. I believe that you are retiring very soon. You have come before the Committee on many, many occasions, and as the Deputy Chairperson said earlier, you have shown it the respect that it deserves. On behalf of the Committee, I convey my goodwill and my best wishes for your retirement.

Mr Dallat: At the risk of doing it for the third time, I endorse that sincerely. Will will be sadly missed, and I say that having known him for 16 years. I wish him a long and happy retirement, and I hope that he is not too depressed by this hearing, which has gone on for five hours. Without wishing to open up the discussion again, I hope that today was a good day for those who depend on social housing. I have no doubt that, before you pick up the golf clubs or whatever, you will send out a strong message on the basis of what you heard here today that housing associations are not independent little clubs that can do whatever they like. The money is public money, spent on people who very often cannot help themselves.

Mr Haire: I would just like to say thank you very much for your comments. I emphasise to the Committee that we take this very seriously. It has been an important issue, and there has been a lot of work on this. It is a really important issue. Julie reminded me a short while ago that at four hours I had only the second-longest meeting of the PAC, but I think you may now have put me at the top.

Mr Clarke: You are still the second longest.

Mr Haire: Well, there we are. More seriously, I wish the Committee well for its very important work in the future, and I wish you all very well.

The Chairperson (Ms Boyle): Thank you. A number of action points came out of this meeting, and we will write to you and the external bodies, including the PSNI.

Kieran, do you want to make any comments?

Mr Kieran Donnelly (Northern Ireland Audit Office): No, I have nothing to add.

The Chairperson (Ms Boyle): Mr Layberry?

Mr Jack Layberry (Department of Finance and Personnel): No, thank you, Chair. It was very comprehensive.

The Chairperson (Ms Boyle): Thank you. Members, thank you very much.