By Anne Jones*
Ten years ago I used to catch an evening bus to go from the city to my village. I had this new bus driver for the first time. I had asked him for a single to my destination. It was cash and a paper ticket in those days as opposed to the digital money and e-tickets of today.
When I got off the bus I looked at my ticket and it said ‘Pensioner Free Fare’ and ‘£0.00’ paid. I thought to myself it was either a genuine mistake or that the bus driver was pocketing the money I had paid. (I can assure you I am not in my mid 60s even now).
On another evening I had to go from my village to the city with my relative. The same bus driver turned up and I asked for a single as did my relative. My relative paid and got his ticket first and I then got mine, but noticed that the bus driver had done exactly the same thing as before – taking the money but issuing a ‘free’ ticket. I told the driver that he’d given us the wrong tickets. He looked embarrassed and provided us with the correct tickets.
It was clear and obvious that the driver was pocketing the cash. The errors were intentional. No passengers were checking their tickets and each evening he would be taking home some additional earnings. This incident always stuck with me.
Later in life, I began working in the finance department of a housing association and I saw the same method being used, but this time it was deployed on a grand scale to earn the organisation a vast amount of unearned income. It was the same scam, but built into the corporate DNA.
Within finance, there are ledgers that record transactions. Journal entries would be made to record costs. There can be errors, but from what I saw, the errors were intentional. The ledger would show costs incurred which were not genuine. Subsequent internal checks to remedy these were very limited.
This would cause revenue to be gained which was not genuine. The landlord’s corporate mentality was “let’s see if the residents spot the errors, and only then will non-genuine charges be removed.” This would run into 1000s of transactions which would result in £1000s in overcharging every year.
There should have been more reversals to these non-genuine transactions. Some residents raised complaints and highlighted the inaccuracies, but often most residents just accepted what they were charged. At least until recently because the service charges are much higher than normal and there is an increased awareness than before thanks to groups like SHAC.
It was clear cut that if no evidence existed of the costs incurred, then refunds were due. When no invoices supported the ledger entries this meant that the cost was not genuine. Sometimes we knew there was no such service – like communal cleaning – but the residents would still be charged for it, and fobbed off by being told that some form of minimal sweeping and wiping had been carried out.
The message here is simple. Errors with service charges almost always occur because they are done intentionally. The bus driver example above is no different to what some social landlords do. The key difference with the bus driver was that he did not charge more than the actual fare, but landlords regularly charge in excess of the cost of the service allegedly being delivered.
Depending on the type of service charge, this was down to either an arrangement with the contractor to charge more (inflated invoices) or boost the revenue whilst manipulating the costs which would not match. The legislation says the charges just need to be ‘reasonable’, but no-one is checking.
Leaseholders and shared owners in blocks of flats might have a lease that says that service charges would be audited. Usually this would be by an external accountant. There is a second opportunity for audit when it comes to year-end financial reporting. But external auditors do not rigorously review the transactions. They are limited as to what they review and only check a small sample in order to provide a statement of opinion.
Therefore always make sure that any service charge is reviewed and checked. If the landlord fails to remedy the errors then escalate to a complaint. And ask for evidence as to whether the actual service was even delivered, for example asking explicitly whether the cleaner turned up, a description of what cleaning they did, and whether there are photos of the cleaned areas. You can send your own photos if the work has not been done.
Recently The Big Issue (housing and homelessness magazine) asked the question ‘could a cavalier attitude to overcharging until you’re caught be part of the business model?’ I would say that this is now the dominant business model for the big housing associations who are independent of any real scrutiny or regulation as long as they have money in the bank. Creaming off service charges makes sure this is pretty much always the case.
* Not her real name
10 June 2024
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