The Illawarra's largest public housing provider is being investigated by the NSW government after an alleged large-scale fraud carried out over six years by one of its employees.
The Illawarra Housing Trust (IHT) has been notified that its registration with Housing NSW will be cancelled unless it takes urgent action to fix a number of serious breaches in its internal communications and work practices.
The non-government organisation manages more than 1000 properties in Wollongong, Shellharbour and Kiama, 974 of which are linked in some way to Housing NSW.
A government investigation began in April, when NSW Community Housing Registrar Roxane Shaw was notified of a potential long-term systemic fraudulent activity by a staff member.
A letter sent from the registrar's office to IHT chair Sandra Depers this month details how the alleged fraud was discovered when the IHT chief financial officer identified "significant discrepancies" between the organisation's budgeted and actual income.
The amount of money allegedly embezzled has been blacked out on the version of the letter published on the registrar's website.
The incident was reported to the IHT board, which appointed forensic accountants to conduct an investigation and notified the police.
The employee who allegedly embezzled the money was stood down and had access to all IHT systems removed and their assets frozen.
The registrar's office praised the IHT management for taking fast action, saying their response "provided evidence they recognised the potential threat to the reputation of the community housing sector".
"The registrar acknowledges the responsive and timely response made by the Illawarra Housing Trust Ltd to this fraud," the letter said.
"Nevertheless the scale of the fraud [information blacked out] and the length of time over which it has been occurring, estimated from 2006, clearly demonstrate that IHT is not currently compliant with performance areas 4, 5 and 6 of the Regulatory Code."
These areas relate to the trust's controls to ensure its compliance with legal requirements, systems designed to prevent or monitor fraud and controls to address financial risk.
The company was given 28 days from August 6 to respond to the letter by appointing a "special advisor" and submitting a formal plan of action outlining how it would comply with Housing NSW regulations.
IHT board deputy chair June Williams yesterday told the Mercury the organisation was on track to meet these requirements by Tuesday's deadline.
"We acted swiftly as soon as the allegations came to light, alerting police and calling in forensic accountants and financial experts.
"We are confident that - while serious - this matter relates to one individual and is not an indication of systemic issues," she said.
"We have put a number of measures in place to ensure such a situation cannot occur again."
Ms Williams said the investigation would not affect the trust's tenants.
"Our priority is to continue to respond to issues of homelessness and affordable housing in the Illawarra and beyond, and that is our ongoing focus," she said.
"We are, as we speak, in the process of writing to all tenants to assure them they will not be affected, and letters have also gone out to members of our organisation and other key stakeholders."
A Housing NSW spokesperson confirmed the registrar was working with the Illawarra Housing Trust to bring the organisation back into compliance with the regulatory code.
"There is no impact on service delivery," the Housing NSW spokesperson said.