The former management of scandal-hit Bermuda Housing Corporation (BHC) "manipulated and out-manoeuvred" a board that failed to perform its duty, Auditor General Larry Dennis (pictured) found in his annual report.

Police are still carrying-out a year-and-a-half long fraud investigation at the Corporation and Mr. Dennis' report on the BHC has still not been made public officially in case it prejudices any criminal cases.

But Mr. Dennis said in his Auditor's report: "I have assigned one of my senior managers to assist almost full-time in this regard. I cannot comment on the Police investigation but I am satisfied with its direction."

Although the report has been kept under wraps, published highlights from it in July.

In his Auditor General report, Mr. Dennis highlights the failure of boards of publicly-funded bodies such as BHC to hold management to accountability. He recommends boards require more accountability of management of quangos; tendering rules similar to those issued by the Accountant-General's department for government ministries; and establishing a register of companies which do business in Bermuda.

"An extreme example of an ineffective board was the board of Bermuda Housing Corporation," writes Mr. Dennis.

"Although I am unable to present the report, the findings of my investigation (lest I prejudice possible court action), suffice to say the problems I found were serious.

"If prior to the investigation, the board of directors of BHC had been discharging its responsibilities effectively, it would surely have become aware of at least some of the problems.

"Yet even when rumours and allegations of wrong doings surfaced, the board did not require management to explain or dispel the allegations.

"In effect, the board abrogated its responsibilities and the accountability inherent in the usual board/management relationship was virtually non-existent.

"Instead of the board overseeing and controlling management, management in effect manipulated and out-manoeuvred the board."

Former BHC general manager Raymonde Dill and property officer Terrance Smith were sacked and have been arrested by detectives investigating the scandal, but have not been charged with any offence.

Mr. Dennis said the BHC investigation took up 2,000 hours of audit time ? 20 percent of the work he carried out last year ? and led to him making 13 recommendations in his final report to former Premier Jennifer Smith, who ordered the investigation.

But Ms Smith, former Housing Minister Nelson Bascome, and a former BHC chairman returned copies of the report unopened in May last year. Mr. Dennis said that because the Premier was not directly responsible for BHC, he sent a second letter in June, 2002 to the chair of the corporation with the 13 recommendations.

He said he was "very concerned" that in April last year, acting BHC general manager Richard James ordered that he had to personally authorise any documents released to the Auditor General.

While Mr. James' concerns were legitimate, "to require his personal authorisation for my staff to see the files or documentation they needed would have unreasonably slowed, impeded, or even obstructed my investigation".

"Fortunately, most detailed audit work was complete by that time and access to documents did not become an issue.

"However, this situation demonstrates a worrying lack of understanding by a chief executive officer of the access to information rights of the Auditor General provided in both the Constitution and by statute."