AN "out of control" senior management; Government MPs involved in transactions not declared to Parliament for properties whose values were not independently appraised; cost overruns of up to 100 per cent; five-figure bills paid twice over to contractors; 25 per cent of payments made in cash or by personal cheque; unsecured loans unrelated to property made to five of its own officials; an "ineffectual" board ? those were just some of the problems Auditor General Larry Dennis found during his investigation into the Bermuda Housing Corporation.

The report, completed in May 2002, was finally released by the Government late yesterday afternoon and revealed a catalogue of incompetence and mismanagement, or as the Auditor suspected, "something worse than mismanagement".

In the summary of his findings, Mr. Dennis wrote: "Control deficiencies increasingly cultivated an environment conducive to financial inefficiency and mismanagement, and in which kickbacks and other fraudulent activities could occur and remain largely undetected."

Mr. Dennis said he found evidence that contractors had frequently been over-paid.

"Tendering and quotation processes were rarely used and and when they were, the fairness of the process was sometimes questionable. In most cases, project work was performed based on broadly-worded purchase orders with estimates of the value of the work to be performed.

"There is little or no evidence that most of these estimates represented competitive prices and some were wildly in excess of the value of the work performed."

In some instances, cost overruns were exacerbated: "In six instances, cost overruns were increased by contractors' invoices being paid twice, and the errors remaining undetected or being detected much later. One such duplicate payment was for $32,000, and two others were each for $10,000."

Mr. Dennis said there had been a serious failure to comply with control procedures.

"Available documentation to support project payments was often lacking or incomplete, or insufficiently checked and approved. For many projects, functions such as selecting the contractor, signing the purchase order, approving the work done, and authorising and signing the cheque were concentrated in one person? usually the general manager (Raymonde Dill)."

Property transactions involving Deputy Premier Dr. Ewart Brown and former Environment Minister Arthur Hodgson (as published in this newspaper last week), said the Auditor, did not comply with the Government's Code of Conduct.

And the report highlighted another case in which a senior Government employee had sold two apartments to the Corporation for $285,000 after which the BHC spent a further $200,000 renovating them.

As with the cases involving Dr. Brown and Mr. Hodgson, there was no evidence to show that an independent appraisal of the property value had taken place.

As for the cost to the taxpayer of the debacle, Mr. Dennis said it was "impossible to quantify. The size and circumstances of some of the excessive costs raise suspicions that something worse than mismanagement could be involved."

He claimed that if the board of directors had been discharging its responsibilities properly, it would surely have become aware of at least some of the "management problems" and control deficiencies.

And he said, similarly, when rumours and allegations of wrongdoing surfaced, the board should have demanded that management explain or resolve the underlying issues to its satisfaction.

"In my view, instead of the board directing and supervising the performance of the general manager, the general manager directed, dominated and circumvented the authority of the board, and the board acquiesced to this arrangement," said Mr. Dennis.

"Ultimately, senior management and the corporation were out of control."

Mr. Dennis said another major concern related to loans made by the Housing Corporation ? and one such loan was to a Government MP.

He said: "Loans totalling $770,000 are outstanding that are ultra vires in the requirements of the Bermuda Housing Act in that none of them are for the purposes allowed, none are secured and none were approved by the Minister (Nelson Bascome)."

Also a cause for concern was the abnormally large number of payments that were made by manually-produced cheques or cash. Many large cash expenditures were made from revenue receipts ? a practice considered inconsistent with accepted administration and management control practices.

The Auditor said except for small, out of pocket expenses, only emergency payments should be made by manually produced cheques or cash. However, 25 per cent of the Corporation's payments were made in this way and for the majority of the payments reviewed during the investigation, there was no apparent justification for it.

Another concern was the lack of documentation to support charges incurred on a senior official's credit card.

Mr. Dennis said the only documentation available were the statements from the credit card company. "There were no invoices or receipts or other documentation to verify that the charges were for legitimate Corporation business," said the Auditor General.

"There was also no indication that a second party had checked the charges for validity. This situation contrasts with the controls exercised over the use of credit cards by senior officials in Government departments where strictly enforced usage and documentation requirements apply."

Mr. Dennis reported that his investigation had "produced no indisputable corroboration that kickbacks of other fraudulent activities have occurred." But he added: "My investigation, however, has not dispelled these allegations."

He added: "It should be readily apparent from this that if kickbacks were happening, no record of them would appear in the Housing Corporation's records. They would be transactions between the Corporation official and the contractor.

"They might not even appear in the personal records of the official or the contractor, unless the kickback was in the form of a cheque. Even inflated work estimates or fictitious cost overruns could be made inconspicuous in the contractor's records without too much difficulty."

He went on to point out that he had no access to records of contractors, nor the personal records of officials.

The Auditor said indicators for the possibility of kickbacks could be things such as contracts being awarded without obtaining a selection of competitive bids or quotations; purchase orders being issued for apparently excessive prices; and payment for overruns without evidence to justify and support them. However, he said the fact that all of these things did happen frequently within BHC did not prove that kickbacks existed.

They could, equally, be the result of gross mismanagement, he said.

Other possible symptoms or enablers of wrongdoing by officials could include lax control over expenditures, duplicate payments, concentration of duties in one person, and a climate within an organisation that seemed to tolerate inappropriate behaviour, said Mr. Dennis.

He added: "Many of these apply to the Housing Corporation. Furthermore, with regard to tolerating inappropriate behaviour, the Corporation has in recent years dismissed two staff members respectively suspected of stealing corporation property and receiving kickbacks.

"Yet, in neither case has the Corporation demonstrated its intolerance for such activities by prosecuting the (alleged) offenders."