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Local Authority Housing Loans

CHAPTER 3 THE INVESTIGATION

Investigation

Having regard to the outcome of the complaint against Meath County Council, I decided to use my power under Section 4 (3)(b) of the Ombudsman Act, 1980 to investigate whether there were similar incidents of overpayments in other local authorities. I am enabled to carry out such an investigation without the need for a specific complaint in respect of each local authority.

Accordingly, on 19 January 1999, I commenced my investigation of the complaint and asked each local authority with housing loan responsibilities to provide me with the following:

(a) the number of identified cases, if any, in their functional area where overpayment was made on mature housing loans and, in relation to each case identified,

1. the number of overpayments made by the borrower,
2. the amount (in �s) involved,
3. the action taken by the authority to rectify the matter,
4. the action taken by the authority to make good any loss, if appropriate, and

(b) the measures taken to ensure that, generally, overpayments would/could not arise in the future.

In addition, I asked Meath County Council to re-check the position to ensure that it had identified all borrowers who were due a refund. The Council then notified me that it had since discovered a total of 217 cases,

• involving total refunds of �27,289,
• ranging from �20 to �872.20,
• with one loan having been fully redeemed in 1982,
• during which time a credit balance remained on the account for a period of 16 years.

Acknowledgement

Many local authorities found it necessary to deploy staff on overtime because of the substantial effort involved in checking the accounts, making the refunds and preparing a response to my Office. It took some local authorities a year to compile their reports. I would like to acknowledge this effort and assure the bodies concerned that I do not underestimate the difficulties this investigation presented for many of them. I would like to thank them for this co-operation and, in particular Kildare, Kerry, Sligo and Dunlaoghaire Rathdown County Councils which provided me with very good quality reports that did not necessitate further enquiries from my Office. I would also like to acknowledge the effort of Donegal County Council which provided my Office with the information required on a phased but regular basis. While acknowledging the difficulties involved it was, nevertheless, necessary for my Office to issue a Section 7 Notice to South Dublin and Fingal County Councils. The purpose of these notices was to get the local authorities concerned to provide a response or relevant information in relation to the investigation.

A Section 7 notice requires the provision of a response or information by a specified date. Such notices are issued only as a last resort after both verbal and written reminders have failed to elicit a response.

One local authority, Dundalk Urban District Council, has provided me with estimated returns. While this is helpful it falls far short compared to the effort made by every other local authority in the country. I asked the UDC to explain the delay. In reply, it stated that it had identified approximately 500 loan accounts to be investigated but, due to pressure of work and staff shortages the exercise was taking longer than originally anticipated.

My Own Audit

One of my staff visited Sligo, Galway, Mayo County Councils and Dublin Corporation to examine a sample number of cases which were included in their completed returns in the context of:

• the techniques in place for monitoring and reviewing accounts,
• the custody of accounts and record keeping and
• the procedures followed for the processing of transactions.

My investigator also examined the procedures, both present and past, in the above housing authorities.

Summary of Returns

During the course of my investigation I received returns from the 42 local authorities which issue housing loans. I have summarised their responses by way of Summary Tables :

In summary, my examination has identified:

• 6,411 accounts,
• involving refunds of �546,597,
• ranging from �1 to �3,456 and
• seven local authorities which reported no overpayments.

Tables 1 to 6 summarise the results in league-table format by identifying those local authorities with:

• the largest total value of overpayments reported,
• the largest number of accounts on which overpayments were discovered,
• the longest time period a credit balance remained on an account,
• the largest number of consecutive payments accepted by a housing authority after a loan, had been redeemed or had matured,
• the largest amount refunded to an individual borrower and
• the number of cases where refunds exceeded �100.

Table 1: The Largest Total Value of Overpayments Reported

Local Authority	Total Value	Number of Accounts
Donegal County Council	�122,823	1,002
Kildare County Council	�67,408	379
Limerick County Council	�33,166	234
Westmeath County Council	�32,045	392
Tipperary (South Riding) County Council	�28,769	245
Meath County Council	�27,289	217
South Dublin County Council	�25,353	1,134
Cork Corporation	�21,859	453
Dundalk Urban District Council	�20,000 (est.)	500 (est.)
Waterford Corporation	�17,163	144
Longford County Council	�16,113	139

Cavan County Council, Laois County Council, Monaghan County Council, Offaly County Council, Drogheda Corporation, Kilkenny Corporation and Galway Corporation were all found to have workable procedures in place which ensured that there were no overpayments which had not been refunded and therefore they had no cases of undiscovered overpayments to report to this investigation.

Table 2: The Largest Number of Accounts with Overpayments

Local Authority	Number of Accounts	Total Value
South Dublin County Council	1,134	�25,353
Donegal County Council	1,002	�122,823
Dundalk Urban District Council	500 (est.)	�20,000 (est.)
Cork Corporation	453	�21,859
Westmeath County Council	392	�32,045
Kildare County Council	379	�67,408
Waterford County Council	252	�5,940
Tipperary (South Riding) County Council	245	�28,769
Limerick County Council	234	�33,166
Meath County Council	217	�27,289
Waterford Corporation	144	�17,162

Table 3: Longest Time Period

Local Authority	Length of Time Credit Balance Remained on Account (years)	Amount
Donegal County Council	18	�43.67
Cork Corporation	17	�429.69
Louth County Council	16	�251.42
Roscommon County Council	16	�162.72
Meath County Council	16	�78.78
Waterford Corporation	15	�34.22
Dundalk Urban District Council	14	N/A*
Westmeath County Council	11	�280.00
Kildare County Council	11	�214.00
Clare County Council	11	�128.90

* The return from Dundalk was not finalised by the Council when this report was prepared.

Table 4: Largest Number of Consecutive Payments accepted after Loan Redemption or Maturity

Local Authority	Number of Consecutive Payments accepted after Loan Expiry / Maturity	Cumulative Amount
Athlone Urban District Council	46	�1,432.78
Limerick County Council	22	�3,456.77
Donegal County Council	19	�1,144.44
Longford County Council	18	�914.38
Wicklow County Council	16	�2,396.48
Waterford Corporation	16	�700.05
South Dublin County Council	16	�147.25
Kildare County Council	14	�622.72
Meath County Council	14	�872.20
Westmeath County Council	12	�1,505.04
Kerry County Council	12	�623.70
Cork County Council	11	�1,975.40

Table 5: Largest Amount Refunded to an Individual Borrower

Local Authority	Amount	Amount of Monthly Instalment on Loan
Limerick County Council	�3,456.77	�151.03
Wicklow County Council	�2,396.48	�149.78
Cork County Council	�1,975.40	�197.54
Kildare County Council	�1,926.92	�194.42
Westmeath County Council	�1,505.04	�125.42
Athlone Urban District Council	�1,432.78	�31.09
Donegal County Council	�1,144.44	�99.47
Louth County Council	�1,045.84	�141.74
Kilkenny County Council	�993.10	N/A
Tipperary (South Riding) County Council	�962.80	�96.28
Longford County Council	�914.38	�49.00

Table 6: Number of Cases where Refund was in excess of �100.

Local Authority	Number of cases where refund was in excess of �100.	Number of such refunds as a percentage of total number of refunds.	Highest Refund
Donegal County Council	437	43%	�1,144.44
Kildare County Council	258	68%	�1,926.92
Westmeath County Council	139	35%	�1,505.04
Tipperary (SR) County Council	114	46%	�962.80
Meath County Council	111	51%	�872.00
Limerick County Council	107	45%	�3,456.77
Longford County Council	69	50%	�914.38
South Dublin County Council	69	6%	�536.18
Cork Corporation	61	13%	�429.69
Waterford Corporation	56	39%	�700.05

Explanations offered by Local Authorities

Local Authorities gave various explanations for the matters discovered in the course of the investigation. I should explain that in any individual case the overpayments arose in one of the following situations :-

(a) the loans had run out or matured having reached the expiry date of the loan or (b) the loan was redeemed early by the borrower.

Among the explanations offered for the overpayments were the following : -

• overpayments resulted from borrowers failing to instruct their bank to cancel their standing order. They are requested to do so when redeeming the loan but often fail to act accordingly,
• there are circumstances over which the local authority has no control such as a borrower's bank failing to comply with instructions to cancel the standing order or a borrower forgetting to issue an appropriate instruction to his / her bank,
• banks will not take instructions from local authorities to cancel standing orders and therefore, local authorities are dependant on the borrowers,
• there is no facility for direct debit but it is envisaged that this will become available in the future,
• refunds are made only after receipt of a written application from the borrowers for any credit due because it is an "audit" requirement,
• one local authority maintained that the total number of overpayments represented less than 15% of all accounts and the accounts where refunds were due involved payments by standing order which were not cancelled in time,
• one local authority reported that it did not have a proper tracking procedure in place to highlight matured loans,
• a particular local authority had a system in place for refunding overpayments on redeemed loans but not on matured loans,
• in the past, particularly in the 1980's, some local authorities had a number of refunds due to people but they were not in a position to make the refunds to these people as, in some instances, the families had emigrated and left no forwarding address.
• some local authorities had problems with their computer systems :

• - an authority claimed that information is lost from its Housing Loan Computer System once a loan is redeemed; therefore, in order to assess certain relevant information once a loan has been redeemed, the loan has to be checked manually using paper files and records.
• - one local authority claimed that its computer tapes are not compatible with current software and therefore it is not possible to say whether some of the credit balances showing had been refunded in the past.
• - another claimed that it was unable to be certain whether accounts showing credit balances had not already been refunded as the account in the Housing Loan System might not have been adjusted or the amount refunded might not have been coded to the correct code in the Expenditure System.

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