The Board of Management is pleased to present the report and audited financial statements for the year ended 31 March 2003. 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 as part of the Corporate Plan, which describes how the organisation is trying to achieve these aims.
Our principal activities consist of managing our existing stock, developing and acquiring new homes, carrying out property maintenance to the stock and providing a 24 hour emergency service for our tenants.
The composition of the Board has not significantly changed during the last twelve months. James Barker replaced Hugh Manson in September, 2002, Hugh standing down from the Board after eight years, four of which were as Chair. Following the retirement of Olive Black during the year, the Board has recently decided to co-opt Frank Isahak to the Board as a tenant representative.
A review was started to look at the effectiveness of the Board and in particular to ensure that all members are being fully kept informed of what was going on in the organisation and to improve members awareness of the strategic issues affecting the future of the organisation. From this review, Board meetings are now held more frequently and the number of Committees dealing with specific service areas has been significantly reduced.
The Association’s business plan has always been based on the premise that during the first few years of it’s existence, financial losses could be expected as spending plans and borrowing costs exceed income. Eventually, this position would begin to reverse, and future surpluses would be used to reduce the overall level of borrowings incurred.
In hindsight that turning point was probably achieved in 1999/2000, and for three out of the last four years the Association has generated a financial surplus on its activities, and the trend is for these surpluses to be ongoing.
These will be used in the short term to finance new developments, thus reducing the need to increase existing borrowing levels.
Last years financial performance (see below) far outstripped expectations and the Association is actively considering options aimed to mitigate future tax liabilities, and thereby retain as much money as possible within the business.
The accounts show a surplus after transfers of £2.7 million. This compared to an original forecast of a surplus of £597,000. The improved financial position was highlighted throughout the year and arose because of two main factors; savings from reduced interest charges and increased income from additional property sales during the year.
The number of property sales has fallen over the last few years with the increase in prices and limits on the amount of discounts available. 21 sales were completed last year. This was only 9 higher than allowed for but the increase in prices in the area over the last twelve months meant that sales income increased by almost £900,000 for the year.
Interest rates during the last twelve moths have remained almost static. The Association has benefited from this and coupled with a lower level of borrowing during the year, saved over ½ million in interest charges.
Our largest spending programme remains the repair and maintenance of our housing stock. Almost £7.0 million was spent in the year including over £2.5million on renewing and replacing items that were worn out or needed updating. This programme included £1.2 million on renewing kitchens and bathrooms; £275,000 on renewing central heating systems; £387,000 on renewing roofs and £225,000 on new doors. The greater emphasis over the last two years on pre-planning repairs has reduced the spending on responsive repairs, and overall savings of over £200,000 were made on this budget last year.
The original investment programme allowed for £5.8 million to be spent, largely on development, with an anticipated 102 new homes being acquired or developed during the year. In the event 92 new homes were provided including 14 dwellings acquired from another housing association operating in the area; 33 properties were developed in South Oxfordshire (including 2 shared ownership units); 9 bed spaces were acquired following the purchase of properties owned and leased by Social Services. The Association also started a programme of acquiring properties with the view to letting these at below market rents. At the year end work was in progress on building a further 26 units. Overall spending on development in the year amounted to just over £3 million.
The Association monitors not only its own financial performance throughout the year but also compares itself against other similar social landlords, working in the area. In addition the Housing Corporation collect a host of information from all registered associations and compare across different peer groups. From this comparative data we know that the Vale’s results have been consistently amongst the best throughout the country and this gives a lot of reassurance about performance standards.
This years end of year figures covering rents, management and repair costs, rent collection, arrears, vacancies, lettings, repairs and tenant satisfaction are all broadly in line with our own internal targets and should once again be comparable to the highest level of performance amongst all social landlords.
a) Financial Framework
The financial framework within which any social landlords operates, is constantly changing. The frustrating aspect about many of these changes are that they are not driven by business requirements but by external factors, which the Association has little control over and very often these changes have tended not to add substantially to the value of the business or services provided.
In April 2002 the new rent regime was introduced by the government, taking away much the discretion of landlords to set rents according to local factors or influences.
To prepare for the current financial year starting April 2003, it has taken the best part of the last twelve months to introduce the new Supporting People regime. This introduces another agency into the equation of providing services that are already being provided to tenants, but under the threat that these may in future have to provided by other suppliers if the service does not meet, cost or service standards.
At the end of the year the Government announced the termination of Local Authority Funding to assist in providing social housing at affordable rents. Whilst the potential loss of grant funding is bad enough the time delays involved in moving from one funding system to another will inevitably lead to delays in bringing new schemes to fruition
All these changes have a real impact on the business and particularly the disruption such changes can make to long term plans or aspirations.
b) Treasury Management Policy
The Association has a loan facility of £120million. Current projections indicate that the Association is likely to use £114 million of this. Last years’ business plan allowed for additional borrowing of £3.9million. The improved financial performance meant that no borrowing took place, and at the end of the year the amount of debt outstanding was £82million.
The Treasury policy over the last few years of reducing the level of fixed rate debt has enabled the Association to benefit from the general reduction in interest rates. At the year £50 million of the debt portfolio was subject to fixed arrangements.
c) Rent Policy
From April 2002 rents were increased in accordance with the adopted Rent Plan, resulting in average rent increases of 4.3%. This was the equivalent of £2.58 per week, based on a 48 week year.
Rent increases for tenants who transferred from the local authority and were generally paying well below the target rent, faced rent increases equivalent to inflation plus ½% plus £2 per week. For this group the average rent increase was between 5% to 6%.
For all other tenants, generally paying near the target rent, increases averaged below 3%. About 800 tenants saw no increase at all, either because there rents were already greater than the target rent or they had become tenants since April the previous year and therefore could not have an increase in rents before a twelve month period had elapsed.
Properties that are let during a year are relet at the target rent. This has the affect of increasing income to the Association from the time of the relet and will ensure a convergence of different rent streams by 2012. At the end of the year 41% of tenants were paying rent levels, not dissimilar from the target rent.
Overall rent income last year grew by £1.35 million compared to the previous year, although this did include an additional rent collection week. The average rent, at the year end (including service charges) was £60.62 for a 52-week year.
This compares with the average rent in the South of England, albeit a year earlier (March 2002) of £61.85p per week.
The new rent regime will continue to mean that a great number of our tenants will face future rent increases up to the maximum allowed, of inflation plus ½% plus £2 per week. For new tenants and relet tenancies, increases are more likely to be in line with a proposed ½% above inflation.
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 have focused on internal replacements including a large programme for replacing kitchens and bathrooms. Preparatory work has begun on preparing 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 2002.
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. Approximately 25% of current 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; whistle blowing; 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 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.
Measured against other social landlords the number of staff employed is lower and our ability to retain staff appears to be successful with turnover rates falling once again last year.
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 5 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. 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 Committee framework was reviewed in February 2003 and from July 2003, Board meetings will be held monthly and the three standing Committees have been disbanded. 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 127 shareholding Members and an open membership policy.
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:
• selecting suitable policies and apply them consistently,
• making judgements and estimates that are reasonable and prudent and,
• following applicable accounting standards and the Statement of Recommended Practice; “Accounting by Registered Housing Associations”.
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, part III of Schedule 1 of the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determinations 2002.
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 has overall responsibility for establishing and maintaining the whole system of internal control and for reviewing its effectiveness.
The Board recognises that no system of internal control can provide absolute assurance or eliminate all risk. The system of internal control is designed to manage risk and to provide reasonable assurance that key business objectives and expected outcomes will be achieved. It also exists to give reasonable assurance about the preparation and reliability of financial and operational information and the safeguarding of the Association’s assets and interests.
In meeting its responsibilities, the Board has adopted a risk-based approach to internal controls which are embedded within the normal management and governance process. This approach includes the regular evaluation of the nature and extent of risks to which the Association is exposed and is consistent with Turnbull principles as incorporated in the Housing Corporation’s circular R2-25/01: Internal controls assurance.
This process adopted by the Board in reviewing the effectiveness of the system of internal control, together with some of the key elements of the control framework includes:
• Identification and evaluation of key risks
Management responsibility has been clearly defined for the identification, evaluation and control of significant risks. There is a formal and ongoing process of management review in each area of the significant risks. This process is co-ordinated through regular reporting framework by the Board. The executive team regularly consider reports on significant risks facing the association and the Chief Executive is responsible for reporting to the Board any significant changes affecting key risks.
• Monitoring and corrective action
A process of control self-assessment and regular management reporting on control issues provides hierarchical assurance to successive levels of management and to the Board.
This includes a rigorous procedure for ensuring that corrective action is taken in relation to any significant control issues, particularly those with a material impact on the financial statements.
• Control environment and control procedures
The Board retains responsibility for a defined range of issues covering strategic, operational, financial and compliance issues including treasury strategy and new investment projects. The Board has adopted, and disseminated to all senior employees, the code of governance Competence and Accountability 2000. This sets out the Association’s policies with regard to the quality, integrity and ethics of its employees. It is supported by a framework of policies and procedures with which employees must comply. These cover issues such as delegated authority, segregation of duties, accounting, treasury management, health and safety, data and asset protection and fraud prevention and detection.
• Information and financial reporting systems
Financial reporting procedures include detailed budgets for the year ahead and forecasts for subsequent years. These are reviewed and approved by the Board. The Board also regularly reviews key performance indicators to assess progress towards the achievement of key business objectives, targets and outcomes.
The internal control framework and the risk management process are subject to regular review by Internal Audit who are responsible for providing independent assurance to the Board via its Audit Committee. The Audit Committee considers internal audit reports at each of its meetings during the year.
Board
May 2003
The Auditors for the year to 31 March 2003 are Mazars Neville Russell. The report of the Board of Management was approved on 15 July 2003 and signed on its behalf by:
Nicholas Morris Mike Roberts Barbara Russell
Chair Secretary Chair of Resources