Auditors are examining a bonus system operating in Bradford Council's crisis-hit housing section.

KPMG confirmed today that they were also in talks with the Council about the quality of work in the Direct Service Organisation, value for money and management processes.

The Telegraph & Argus revealed exclusively yesterday that the DSO - which deals with housing and building and repairs - would have to slash between £1.5 million and £2 million in overheads.

The service is heading for a £600,000 shortfall and also needs to meet a target set by housing chief Patrick Howley to make it competitive and good value for money.

Now Mr Howley, who is working alongside KMPG, is talking to unions about the possibility of up to 50 redundancies to put the books back on course.

He says his department inherited some bad practices when the DSO transferred to his section after the Council's troubled stand-alone contracting arm Bradmet.

Mr Howley, director of Housing and Environmental Services, says abuse of the bonus system by a minority of people has also contributed to the problems.

He says it has also taken two years to unravel the problems resulting from the transfer.

The current crisis follows two disastrous years with housing shortfalls of £1 million and £600,000 in the year ending last March.

The DSO has to go out to tender against private contractors to win work and is currently operating the Council contract.

Chairman of the Council's housing and environment committee, Councillor Steve Thomas, said: "We are in talks with the trade unions and there is a possibility of job losses.

"There is a projected overspend and there will be a need for firm management action to make sure we will come onto line."

But leaders of the Council's Tory and Liberal groups, Councillors Margaret Eaton and Jeanette Sunderland, said the Council had failed to take action soon enough.

They said they had demanded full reports last year and been told there was nothing wrong.

Coun Eaton said: "So much for best value. This is what happens when you take on competition.

"It is totally unacceptable that they failed to deal with it and very unfair to blame Bradmet.

"There have a been a lot of complaints about repairs. We have been told of workers having to go back time and time again to get the work up to scratch."

Coun Sunderland said: "We believe things are spiralling out of control in housing."

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