Major changes promised to homeless services funding model

Senior civil servants have promised to transform the way they fund homeless services, following the near-collapse in 2023 of the homeless charity Peter McVerry Trust. 

One reason behind the trust’s collapse was that the system rewarded underbidding for contracts – including to run the flagship Housing First programme in Dublin – building up a deeper and deeper financial hole over time.

In 2023, the Department of Housing bailed out the charity with a €15 million loan, to help it to avoid bankruptcy. 

The Trust underbid for contracts and it hoped to plug the gap with fundraising – but when it couldn’t, it moved money around internally, and dipped into pots of money that were supposed to be for other purposes. 

There was a cashflow problem, said Tony O’Brien, the current chairperson of the Peter McVerry Trust, who was not involved in the charity at the time of its near collapse, told a meeting of TDs and senators on the Oireachtas Joint Committee for Housing on Tuesday.

“There was a borrowing from Peter to pay Paul, type of effort,” says O’Brien. “Of course, that all came to a halt when the music stopped, and therefore it wasn’t possible to replenish the funds.”

The precarity of the state’s funding model had been pointed out years earlier, said Sinn Féin TD and housing spokesperson Eoin Ó Broin, at the meeting. 

He sought assurances from Department of Housing officials that the system for funding homeless services had been reformed so that this couldn’t happen again. 

Rosemarie Tobin, a principal officer in the Department of Housing, said that going forward all homelessness services contracts will be funded at 100 percent of the cost of providing the service. 

“Local authorities should not be allowing tenderers to say fundraising is going to subsidise the service,” she said. 

Indeed, the Dublin Region Homeless Executive (DRHE) focused too much on getting the lowest cost when it tendered for an organisation to operate its Housing First programme 2019, said its director Mary Hayes.

“There has been learning from that,” said Hayes, who was not the director at the time.  

Social services are not supposed to be procured on the basis of cost only. Quality should also be taken into consideration, according to a 2014 Department of Finance circular. 

Public bodies “should prioritise the award of grants to those applicants that can provide evidence of the best outcomes for the end-user”, it says. 

The Department of Housing wrote to the DRHE to remind it of this in 2021. That same year, the Public Accounts Committee agreed that the procurement of homeless services needed to be reviewed. 

At Tuesday’s meeting, both Hayes and Tobin also said that they want to reduce the state’s reliance on private providers of services to homeless people and shift back to relying more on homeless charities for these. 

Hayes said that private hostels, with no support, cost around the same as charity-run hostels, which employ qualified staff and support people to find homes. 

Hayes said that 75 percent of homeless accommodation is run by private companies. “Its not where we want to be,” she said.

Underbidding at the Peter McVerry Trust

O’Brien, the current chairperson of the Peter McVerry Trust, was not involved in the charity when it ran into difficulty. 

But in his opinion, he said at the Oireachtas committee meeting on Tuesday, “there was a degree of non-strategic recklessness ... about the rapid expansion of the organisation in terms of new projects and geographical reach.”

The previous board had insufficient internal controls in place, he said. He agreed with the term “underbidding” to describe what happened.

That underbidding certainly wasn’t the only problem, he said. Issues were concealed from the board, he said. 

O’Brien said that new governance standards are in place, with new external auditors and ongoing engagement with regulators. The new board has broader experience and expertise, he said. 

Lessons learned

At the meeting, Ó Broin, the Sinn Féin TD, said that in 2019 the Peter McVerry Trust bid €6.4 million for a Housing First contract but the full economic cost of doing the work was €16 million. 

“They were awarded a contract where they were underbidding to the tune of €10 million,” he said and he queried how anyone thought that was sustainable. 

Housing First is a government programme, which aims to house long-term homeless people, including those with addictions and serious mental health conditions. 

Mary Hayes, the current director of the DRHE, who was not in charge in 2019, said she thinks that tender was problematic. 

“I think in the tender there was probably too high a focus on ultimate costs,” she said. “It kind of outweighed every other criteria in that Housing First tender.”

Peter McVerry Trust wasn’t the only organisation under-bidding for contracts, said Hayes. 

Others were too, she said. “There is no doubt there was an over-reliance on fundraising.”

Ó Broin said that other charities also underbid by more than 50 percent for that Housing First contract in 2019. Hayes agreed.

In 2020, four homeless charities wrote to the Minister to flag concerns that the funding model for homelessness services was not sustainable and they requested a review. 

Those was discussed in meetings, said Ó Broin. “Why did all of that not raise red flags about what was going on in the McVerry Trust well before that organisation nearly went bankrupt?”

Tobin said that the terms of reference for the review had been agreed prior to revelations about the major problems at the Peter McVerry Trust. 

The County and City Management Association (CCMA) carried out and has now completed that review examining the funding system for homeless services she said. 

And, as a result, the department is working on an implementation plan so that going forward all homeless services contracts are funded at 100 percent of cost, said Tobin. 

That includes the new Housing First contracts, she said.

Meanwhile, DRHE is looking at how it procures social services, said Hayes, including at the overall costs to the NGO of running services.

There should be an acknowledgement that non-profit homeless services are not businesses, said Hayes. 

Workers in the sector should have pensions and increments, she said. “Obviously they have to be paid like everyone else.” 

Both Hayes and Tobin said they want to reduce reliance on private companies for homeless services. 

Hayes said that the costs for private operators, who do not provide supports, are approximately the same as the cost for NGO providers that do.

“We would be lucky to get it for €20,000 per annum,” she says. “That is the cost of an emergency accommodation bed.”