The Board of Management is pleased to present the report and audited financial statements for the year ended 31 March 2001. This report gives a brief business overview of the financial affairs of the Association during the previous 12 months.
The Vale is a major registered social landlord operating in Oxfordshire with a primary objective to provide quality housing at affordable rents.
In trying to achieve this we aim to develop affordable solutions to housing needs; manage effectively with financial responsibility and tenant involvement, the resources of the Association to deliver quality services; to seek and develop opportunities for beneficial partnership in co-operation with other agencies and to perform at the highest levels expected of registered social landlords.
Our principal activities consist of managing our existing stock, developing and acquiring new homes; to carry out property maintenance to the stock and the provision of a 24 hour emergency service to our tenants.
Last year was the first year in which the Association operated outside of the period in which key promises and targets were given to tenants who transferred from the local authority in 1995. If there had been any general perception that things would change after the initial 5 years, with increased rents and reduced services then the Association is pleased to say that it made no conscious policy changes last year designed to reduce service levels.
Statistics produced by the Housing Corporation show that our average rent continues to be one of the lowest in the Southeast region, with new and relet rents in line with other Associations operating in the area.
During the year, 46 properties were acquired or developed and work was in hand to build a further 30 units by the end of the year.
The Association has carried out an extensive review of its repair and maintenance services within the principals of Best Value, involving not only staff but Focus Groups and Tenant Forums. The Association believes that Best Value will bring improvements in service delivery for our tenants but is not convinced that the process will necessarily lead to significant cost savings. Comparison against other RSL’s indicate that the Association already has lower overheads than most and the aim is to achieve a balance between improved service delivery and cost effectiveness.
Finally, our continued emphasis on providing a quality service was rewarded by gaining the Charter Mark an independent assessment of performance.
The accounts show a deficit after transfers of £414,000 compared to an original forecast of a deficit of £295,000. These figures are distorted by a change in accounting conventions in the year which increased the depreciation charge on properties by £500,000.
During the year there was a notable slowdown in the number of house sales (32 compared to 115 for the previous year) with increasing property values in the area and a reduction of discount levels. The reduced number of sales meant additional rent income from retained stock and the change in rent policy introduced in April 2000, whereby tenants who transferred homes were now obliged to pay higher rental values, contributed to an overall increase in rent income.
The largest proportion of spending was on repairs, maintenance and improvement to our stock. £6.1million was spent in the year including £1.6 million on planned renewals. This included over £560,000 spent on new or replacement central heating systems: £195,000 on replacing external doors: £216,000 on replacing kitchens and bathrooms: £155,000 on insulation works.
The Association was involved in letting almost 400 properties during the year. 60% of these went to people on the Vale of White Horse District Council’s waiting list. The average time for re-letting was just under 5 weeks. The Association has a policy of carrying out any necessary repairs during the period in which the property is awaiting to be relet as opposed to re-letting the property immediately and carrying out those repairs whilst the new tenant is in situ. From surveys of new tenants this policy is fully endorsed.
The Association continues to partake in a number of Benchmarking exercises, which are aimed at comparing performance against other Associations. These results, coupled with those produced by the Housing Corporation, confirm that our overall financial performance compares very favourably against any chosen peer group. Overall impressions are that the Association spends less on general overheads and more on repair and maintenance services whilst at the same time delivering a high level of service provision.
a) Financial Framework
Over the past 6 years the Association has continually out performed its original Business Plan and aimed to feedback some of those gains directly to our tenants either through lower rent increases or the provision of some additional service wherever possible.
Starting from a low average rent the Association has always been conscious of the need to be cost effective and to determine priorities carefully. Like others it has benefited from the historically low rates of inflation as well as recent low interest rates. Financial pressures are however increasing with tenant expectation on service delivery issues and the need to maintain the stock at lettable standards.
A new stock condition survey was carried out during the year by outside consultants, identifying significant additional spending on stock in order to satisfy perceived funders expectations.
The impact of this survey on the Business Plan coupled with the governments new proposals for rents from 2002 have led the Association to review its long term financial plan with a view to re-negotiating its existing funding arrangements in order to meet the increased spending requirements whilst over the same period likely to see restrictions in the growth of future rental streams.
The immediate impact of the stock condition survey and future rent proposals is reflected in the latest stock valuation. This has reduced the value of our properties, based on projected rental income and spending proposals, by over £28.5 million with an equivalent reduction in resources.
As the ability of any RSL to borrow in the future depends on the value of its assets this significant reduction may possibly restrict future growth of the business.
This issue is currently being considered by the Board.
b) Treasury Management Policy
The Association has a loan facility of £120million. Current spending plans are likely to use just under £105 million of this.
Last years plan allowed for the additional borrowing of £4.1million. Actual new loans amounted to £3.4million with a total debt outstanding at the year-end of £79.2million. Drawdowns were lower than anticipated due to reduced spending on development projects.
During the year the Association reduced the amount of its debt, subject to fixed rate agreements, anticipating that interest rates will fall over the next 12 months.
c) Rent Policy
From April 2000 the Association was outside the initial 5 year rent guarantee period. Its general rent increase for the year was in accordance with the Housing Corporation guidance allowing increase up to 1% above inflation.
Within this overall target the Association introduced a first phase of a rent restructuring process designed to base future rents on property attributes.
Rents for the majority of transferred tenants increased from April 2000 by 2% above inflation. For new tenants there was a maximum increase of 1% above inflation. A change in the rent policy also allowed for most relet property rents from April 2000 to be charged at the higher rent levels. Coupled with a relet turnover of 6%, overall rent income increased by just over 4%.
The government’s rent proposals to be introduced from 2002 are likely to result in the majority of our tenants having to pay the maximum increase allowed under the proposals of inflation plus £2 per week, for a number of years. For new tenants and relet tenancies increases will be in line with the proposals of ½% above inflation.
These increases reflect the fact that current average rents are well below other providers in the area and therefore to achieve a common rent standard by 2011 the rent increases must include a catching up element as well as the real increase allowed for in the proposals.
d) Long Term Stock Maintenance Repair Policy
A Stock Condition Survey was carried out during the year. The survey anticipates increased spending on repair and maintenance to ensure lettable standards are maintained.
e) Statement of Recommended Practice
The accounts have been prepared in accordance with the recommendations contained within the latest SORP and Housing Corporation determinations.
The main impact on the accounts has been for the need to increase the depreciation charge in the income and expenditure account to £914,000 this year. This figure has been arrived at in accordance with a methodology included within the SORP and takes account of the accounting valuation provided by external consultants.
The Association takes the view that the balance sheet valuation of its stock should be at current values and not based upon historic costs.
f) Employment Policies
Similar to any service provider the Association views its staff as its main asset. Over 30% of its operational costs are spent on employment costs.
Employment policies fully comply with current legislation. The Association has a staffing policy covering recruitment: training; industrial relations; conditions of service; disciplinary and grievance procedures; codes of practice and pension entitlement.
The Association believes that these employment policies provide for openness and accountability. Staff are involved in the workings of the organisation at various levels. These include a Health and Safety Group and a Staff Association (including representation of the recognised unions) which meets regularly with the Management Team.
Training is encouraged throughout the organisation both individual and organisational levels.
The Association has a positive attitude towards employment of disabled persons preferring to concentrate on abilities not disabilities. Work in this area means that the Association has the right to use the Positive about Disability symbol.
The Board of Management has adopted the competence and accountability Code of Governance published by the National Housing Federation (revised January 2000) and believes that the Association complies with the principal recommendations of the Governance requirements.
The Board of Management comprises 15 non executive Members and is responsible for the management of the affairs of the Association. The Board Members are drawn from 3 elements of our community; there are five tenant representatives; 3 local authority appointments; and 7 Members drawn from professional and local business sectors. The Board normally meets formally 5 times a year for regular business together with an annual general meeting. It has 3 standing Committees in place to consider the detailed work of the Association. These cover Resources, Housing Management, Development and Property Services. These Committees meet on a regular basis, usually in the weeks prior to the Board meeting itself. Also in place are an Urgency Committee; an Audit Committee; a Remuneration Committee; and Appeals Committee.
The Board is responsible for the Association’s statutory and policy framework. The implementation of that framework is delegated to the Chief Executive and other executive officers. The Management Team comprises of the Chief Executive, the Director of Finance and Administration, the Director of Housing Services and the Director of Property Services. The Management Team meets on a weekly basis to review and discuss internal matters and are present either individually or collectively at all Committee and Board meetings.
Tenant Board Members are elected by the tenant forums and serve for a 3-year term. Local Authority nominees are appointed by the Vale of White Horse District Council annually.
Each Committee comprises 6 Members (Appeals Committee 3) with the allocation to tenant representatives being no more than 1/3 of each Committees membership. The Chair of a Committee cannot be a local authority nominee with the local authority representation being no more than 1/5 of each Committee’s membership.
Each of the Committees consider policy and detailed issues arising within their terms of reference with, recommendations to the Board of Management where appropriate. The broad terms of reference for each Committee are as follows:
To oversee internal and external audit and ensure effective and adequate management controls are in operation.
The Industrial and Provident Societies Acts and the registered social housing legislation require the Board of Management to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Association and of the surplus or deficit of the Association for that period. In preparing these financial statements, the Board of Management has had regard to the following:
The Board of Management believes that the Association has adequate resources to continue in operational existence for the foreseeable future, for this reason it continues to adopt the going concern basis in the financial statements.
The Board of Management is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Association and enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 1978, paragraph 17 of Schedule 1 and the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determinations 2000. It is also the responsibility of the Board of Management to safeguard the assets of the Association and ensure reasonable steps are taken for the prevention and detection of fraud and other irregularities.
The Board is ultimately responsible for the Association’s systems of internal financial controls, which are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information.
The Board has through its Audit Committee reviewed the effectiveness of the Association’s internal financial control system for the period from 1 April 2000 to 17 July 2001, the date of this report.
The Board, through its adoption of policies and procedures is constantly reviewing the Association’s internal financial controls and has introduced the following mechanisms that are designed to provide effective internal control:
The auditors for the year to 31 March 2001 are Mazars Neville Russell. The report of the Board of Management was approved on 17 July and signed on its behalf by:
Hugh Manson Mike Roberts Nicholas Morris
Chair Secretary Chair of Resources