The Board of Management is pleased to present the report and audited financial statements for the year ended 31 March 2002. 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. These aims are reviewed every year.
Our principal activities consist of managing our existing stock and providing a 24 hour emergency service for our tenants.
It is important that the Board is renewed and reviewed regularly and during each of our seven years in existence there have been some changes in the Board composition. Four members of the existing Board were members at the time of transfer from the local authority, ensuring a degree of continuity. Last year 5 Board members retired but the new members who replaced them have provided a fresh outlook and opportunity to review the Association's objectives and strengthen the mix of skills of the Board.
The Association has adopted a time limit on how long any member can be Chair of the organisation. Accordingly Hugh Manson retired as Chair in October 2001 and Nicholas Morris was elected to replace him.
The Association faced two main financial challenges last year. The first of these was to prepare for the introduction of the new rent regime from April 2002. The second was to respond positively to unforeseen development opportunities with the prospect of diversifying into new areas of activity.
Alongside this the Best Value programme progressed with the concentration in the second year on Housing Management Services and central services. Risk management continued to evolve and play a central role in the strategic thinking of the organisation.
The accounts show a surplus after transfers of £1.3 million. This compared to an original forecast of a deficit of £494,000.
The improved financial position was highlighted throughout the year and arose because of a number of factors including savings from reduced interest rates, reduced spending on responsive repairs, increased income from property sales and additional rent from the number of relets, savings in management costs and revaluation gains on office accommodation.
By far the largest savings came from the spending on repairs and maintenance of our stock. £5.8 million was spent in the year including almost £2 million on planned renewals. This programme included almost £1/2 million spent on new or replacement central heating systems, £1/2 million on new fitted kitchens and bathrooms, £71,000 on replacing external doors, £65,000 on roof and wall insulation and almost £200,000 on replacing worn out roofs. A greater emphasis is now placed on pre-planning repairs and replacing components rather than simply responding to requests. This change in emphasis, together with an improved void management policy meant that savings of over £600,000 were made in the year compared to that originally planned for.
The reduction in interest rates in the economy saved £390,000 in financing costs. The Treasury Management policy of reducing the overall amount of the debt subject to fixed rate arrangements meant that the Association was able to take advantage of the reduced rates.
The original investment programme allowed for almost £3 million to be spent, mainly on development, with the anticipation of 68 new homes being acquired or developed during the year. Additional development opportunities that arose during the year increased this spending level to £5.4 million and the addition of 88 new homes by the year-end with a further 40 in hand. Last year was notable for the development of properties in the South Oxfordshire Local Authority area and included 11 shared ownership units. This was our first venture away from the provision of rented general needs accommodation.
The Association monitors not only its financial performance throughout the year but also measures other key Housing Corporation indicators as a guide to its likely end of year position. The year end figures covering rents, management and repair costs, rent collection, arrears, vacancies, lettings, repairs and tenant satisfaction are all broadly in line with original targets and comparable to the highest level of performance amongst all social landlords.
a) Financial Framework
The impact of the last stock condition survey carried out in 2000 together with the introduction of the new rent regime from April 2002 meant that at the beginning of last year the Board was reviewing its medium term funding requirements. That and the increased level of development activity led the Association to renegotiate the funding arrangements with the existing syndicate on favourable terms. The renegotiation was completed in November 2001. It provides for an extension of the existing repayment period of loans from 25 to 30 years and allows for an increase in development funding over the next 7 years.
b) Treasury Management Policy
The Association has retained its loan facility of £120 million. Current projections indicate that the Association is likely to use £114 million of this. Last year's business plan allowed for additional borrowing of £4 million. The improved financial performance meant that new loans of £3 million were drawn and at the end of the year the amount of debt outstanding was £82 million.
The Treasury policy over the last two years of reducing the level of fixed rate debt enabled the Association to benefit from the general reduction in interest rates. Towards the end of the year, and in the expectation of an increase in rates during 2002, a more balance portfolio has been re-established, to reduce the risk of increased interest rates in the medium term.
c) Rent Policy
From April 2001 rents were increased in accordance with the Housing Corporation guidance resulting in an average increase of 4.3%.
Rent increases for tenants who transferred from the local authority and were generally paying less than the assessed local standard rent, were based on a formula of inflation plus £2 per week. For this group the average rent increase was just over 7%.
For all other tenants the maximum rent increase was held at inflation only ie 3,3%, where the rent was below the locally assessed standard rent. Some rents which were above the local standard rent were reduced. This meant that almost 1000 properties (20% of our tenants) benefited from wither actual rent reductions in the year, had no increase at all, or incurred rent increases less than inflation.
The rent increases in April coupled with increased income from new and relet properties resulted in the total income from rents and service charges increasing by 5.9% over the year. The average rent at the year end (including service charges) was £56.18p per week, for a 52-week year.
This compares with the average rent in the South East, albeit a year earlier (March 2001), of £63.58p per week.
The new rent regime from April 2002 saw similar rent increase to those in April 2001. The majority of our tenants will face the maximum increase allowed, of inflation plus 1/2 % plus £2 per week. This will set the pattern for most of the next decade until the target rent is reached. For new tenants and relet tenancies, increases are more likely to be line with a proposed 1/2% above inflation. Current average rents are approximately £13 a week below the target rent for this area.
d) Long Term Stock Maintenance Repair Policy
The last Stock Condition Survey was carried out in 2000 and work is progressing on its findings and recommendations to ensure the housing stock is maintained at a good lettable standard. The early years of this programme are focused on internal replacements including a large programme for replacing kitchens and bathrooms.
Work will begin in 2002 to prepare for the next stock condition survey which will be carried out in 2004.
e) Statement of Recommended Practice
The accounts have been prepared in accordance with the recommendations contained within the latest SORP and Housing Corporation Determinations 2000.
The main impact on the accoutns this year has been the issue of FRS17 on pension disclosures. Additional notes are contained within the report to reflect this standard.
The Association has always taken the view that the balance sheet valuation of its stock should be at current value and not based upon historic costs. An annual revaluation is carried out by external consultants to this end.
f) Employment Policies
As a service provider the Association views its staff as a valuable asset. Over 20% 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; whistleblowing; codes of practice and pension entitlement.
The Association believes that these employment policies provide for openess 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 at both individual and organisational levels.
The Association is an equal opportunity employer, treating all existing and new prospective staff in a fair and equal manner.
The Association has a positive attitude towards employment of disabled persons preferring to concentrate on their skills and competencies rather than their disabilities. Work in this area means that the Association has the right to use the Positive about Disability symbol.
The Board of Management had 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 5 tenant representatives, 3 local authority appointments, and 7 Members drawn from professional and local business sectors. The Board normally meets formally to 5 times a year for regular business together with and annual general meeting.
There are 3 standing Committees in place to consider the detailed work of the Association. These meet on a regular basis, usually in the weeks prior to the Board meeting itself. These are:
Also in place, meeting less regularly, are the following:
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 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.
Professional Members of the Board are recruited following public advertisement.
It is the intention that no Board Member should serve more than 12 consecutive years on the Board.
The Association has 132 shareholding Members and an open membership policy.
Statement of Responsibilities of the Board of Management for the Financial Statements
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 forseeable 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 position of the Association and enable it to ensure that the financial statements comply with the Industrial and Provident Societies ACt 1965 to 1978, part III of the Schedule 1 of 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 system of internal controls. Its financial controls 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. Alongside these are other internal procedures covering the non financial aspects of the organisation's work, which are also designed to give reassurance.
The Board has through its Audit Committee reviewed the effectiveness of the Association's internal financial control system for the period from 1 April 2001 to 16 July 2002, the date of this report. The Board is also conscious of the requirements of Housing Corporation circular R2 - 25/01 and has received initial reports from the Chief Executive about the means by which the Board will be seeking to adopt the full requirements of the circular by the end of this calendar year.
As a matter of fact the Board, through its adoption of policies and procedures, is constantly reviewing the Association's internal controls and already has in place the following mechanisms that are designed to provide effective internal control:
The auditors for the year to 31 March 2002 are Mazars Neville Russell. The report of the Board of Management was approved on 16 July 2002 and signed on its behalf by:
Nicholas Morris Mike Roberts Barbara Russell
Chair Secretary Chair of Resources