Value For Money Self-Assessment 2016

Value for Money Self-Assessment 2016 1

Contents Regulatory framework for social housing in England ……………………………..

3

The Value for Money Standard ………………………………………………………

3

Swan’s value for money strategy 2016-19 ………………………………………….

4

Swan’s approach to delivering value for money ……………………………………

5

Value for money benefits of Swan’s group structure ………………………………

6

Swan’s value for money ‘story’ ……………………………………………………….

6

Maximising the return on assets ……………………………………………………...

7

Assessing comparative costs and performance …………………………………… 10 Effective procurement ………………………………………………………………… 13 Managing our finances ………………………………………………………………..

15

Planning and funding ………………………………………………………………….

16

Investment in development and new business …………………………………….. 17 Resident and service user involvement …………………………………………….. 19 Improving services …………………………………………………………………….

21

Conclusion and self-assessment …………………………………………………….

23

2

Regulatory framework for social housing in England The social housing sector is regulated by the Homes and Communities Agency (HCA). Its role is to ensure registered providers of social housing in England:      

protect social housing assets ensure financial viability and proper governance maintain confidence of lenders to invest in the sector encourage and support the supply of social housing ensure tenants are protected and have opportunities to be involved in the management of their housing ensure value for money in service delivery.

The HCA’s regulatory framework is made up of regulatory requirements, codes of practice and regulatory guidance. Core to the requirements are seven standards which set out the required outcomes and expectations of registered providers.

Where relevant, they reflect the specific directions of Government.

The three standards classified as ‘economic’ are proactively regulated.

These are; the Governance and Financial Viability Standard, the Value for Money Standard and the Rent Standard.

The remaining four standards are classified as ‘consumer’. The HCA is reactive in response to referrals or other information in regulating these, but its role is limited to intervening where failure to meet the standards has caused or could have caused serious harm to tenants.

The HCA take a co-regulatory approach, meaning boards who govern service delivery are responsible for ensuring the standards are fulfilled and being open and accountable in how the organisation meets its objectives. Co-regulation also requires providers to support tenants in shaping and scrutinising service delivery and in holding boards to account.

The Value for Money Standard The specific expectations of the Value for Money Standard are that registered providers shall: a. have a robust approach to making decisions on the use of resources to deliver the provider’s objectives, including an understanding of the trade-offs and opportunity costs of its decisions b. understand the return on its assets, and have a strategy for optimising the future return on assets – including rigorous appraisal of all potential options for improving value for money including the potential benefits in alternative delivery models – measured against the organisation’s purpose and objectives c. have performance management and scrutiny functions which are effective at driving and delivering improved value for money performance d. understand the costs and outcomes of delivering specific services and which underlying factors influence these costs and how they do so Registered providers’ boards shall demonstrate to stakeholders how they are meeting the standard. As part of the process, on an annual basis, they will publish a robust self-assessment which sets out in a way that is transparent and accessible how they are achieving value for money in delivering their purpose and objectives. The assessment shall: i.

enable stakeholders to understand the return on assets measured against the organisations objectives ii. set out absolute and comparative costs of delivering specific services iii. evidence the value for money gains that have been and will be made and how these will be realised over time.

Compliance to the standard is in now a key part of the HCA’s In-Depth Assessments to review its regulatory judgements of registered providers.

3

Value for Money Strategy 2016-19 Swan’s Value for Money Strategy was refreshed in May 2016 and is central to delivering the organisation’s objectives and ensuring on-going compliance with the Value for Money Standard. It sets out how in delivering services Swan will: 







ensure on-going assessment of investment decisions to ensure they meet the objectives of the corporate strategy. This includes a review of the mix of activities provided e.g. homes for rent, homes for sale, supported housing and care and community services to residents understand the costs of delivering services, the quality this provides, how Swan compares with others and ensuring a robust decision making process is in place to challenge what we do and adapt as appropriate. This includes overheads and back office costs measure value for money gains achieved each year including the financial and social return on our assets and investments and the social and financial consequences of material decisions embed the principles of value for money throughout all of Swan’s diverse business streams

Swan defines value for money as a focus on obtaining the best value from available resources to allow us to deliver better services, more homes and effective communities both in terms of quantity and quality and the social value provided.

The key elements of Swan’s approach to achieving the objectives of the Value for Money Strategy are:  

having a clear corporate strategy investing in the right assets at the right price, including human resources

  

ensuring services are customer driven and that there is efficient and effective delivery achieving the right outcomes for Swan and then evaluating success, including social value reinvesting value for money gains to achieve more.

Value for money is considered throughout Swan’s governance structure. The board has overall responsibility for delivering the Value for Money Strategy and ensuring its principles are applied in the delivery of services, strategic planning and investment decisions.

The Operations Committee of the board agrees and monitors operational service reviews to drive continuous improvement.

New investment appraisals are considered by the Development and New Business Committee to ensure they contribute enhanced value to the delivery of the corporate objectives.

Swan’s customers have a vital role to play in assessing and enhancing value for money. The Residents’ Consultative Committees review performance on a monthly basis, holding managers to account, and are directly involved in the policy setting process. In addition the Residents’ Scrutiny Panel carries out detailed service reviews and provides a sounding board for new value for money initiatives and service improvement programmes.

Value for money is a cross cutting theme embedded throughout Swan’s decision making process, strategies and policies. It has particular relevance however to Swan’s procurement, portfolio management, asset management, regeneration and development, people, treasury and social value and engagement strategies.

4

Swan’s approach to delivering value for money To assist in the delivery of the Value for Money Strategy, Swan has developed a value for money framework (right). The framework is split into eight key areas of activity, providing a structure for recording outcomes and testing whether the objectives of the strategy are being met.

This self-assessment sets out Swan’s approach to value for money and illustrates the relevant gains in this format.

Swan understands that value for money should be delivered, assessed and evidenced in the context of meeting the organisation’s objectives. This means that what value looks like for Swan and its customers may be different to that of another provider.

Having a proper understanding of the corporate strategy, purpose and priorities is essential to maintaining a robust assessment of value for money. Swan’s current corporate strategy was launched in 2014 and sets out the group’s overarching mission statement: “to deliver effective services, enterprising solutions and exemplary homes and communities”.

Underpinning the delivery of the mission are four strategic themes that Swan are working towards over the life of the strategy. These are ‘happy customers’, ‘the local partner’, ‘fit for future’ and ‘motivated people’.

Throughout the self-assessment we will use the icons below to illustrate which element(s) of the corporate strategy the value for money outcomes and gains being highlighted benefit.

5

Value for money benefits of Swan’s group structure

Swan’s group structure (right) incorporates a number of different business streams and includes commercial entities. Swan New Homes Ltd (trading as NU Living), Vivo Support Ltd and Hera Management Services Ltd, support Swan Housing Association and the Swan Foundation.

This structure allows Swan to maximise resources by investing profits through gift aid, supporting Swan’s corporate objectives and offer enhanced services that might not otherwise be delivered.

The group structure has generated £22.2m of gift aid from commercial activities over the last three years. This has been invested in regeneration projects, the development of affordable homes and community projects.

Swan’s business plan forecasts that a further £68.9m of gift aid will be delivered over the next five years.

Through effective procurement and contract management, Swan is able to keep costs down and divert expenditure to activities that increase the social value of what the group does.

In addition, the performance management arrangements in place mean that satisfaction levels are high and Swan can quickly respond with service improvements.

The value for money story

Swan’s value for money ‘story’ is a great one. The organisation’s structure maximises resources available for delivering the corporate mission, objectives and customer priorities. As a result, the impact Swan makes on the communities it serves is enhanced.

Swan have reacted positively to changes in the operating environment, striving to work smarter, finding innovative solutions and setting £1 million and £10 million challenges to find savings.

Swan has also delivered on the plans set out last year and a summary of our achievements in 2015/16 is included in each of the following sections.

6

Maximising the return on assets As a social housing provider, Swan understands that the return on housing stock is not only measured in terms of the rental value, but also the wider benefits good quality housing brings to communities. Three strategies; the Asset Management Strategy, the Portfolio Management Strategy and the Group Investment Strategy are key to how Swan approaches managing its stock and maximising the return on the properties it owns.

Asset management

The Asset Management Strategy sets the course for how Swan will maintain and improve its existing housing stock over the next five years. Above ensuring homes are safe and free from hazards, Swan remains committed to maintaining homes to its Decent Homes PLUS standard and achieving an energy efficiency SAP rating of 71.5 for the majority of properties by 2021.

Against the background of a changing and more challenging operating environment, being able to interrogate accurate stock data is essential for delivering an effective improvement programme. Swan’s integrated asset management database, Keystone, uses information collected via stock condition surveys to inform the business plan of component lifecycles (e.g. kitchen, bathroom, heating system etc.) and to record and predict breakdowns. This enables those properties with greatest need or poor energy efficiency performance to be

targeted and ensure maximum value for money is achieved through the programme. The table below sets out the number of improvement works carried out during 2015/16 and those planned for 2016/17: Component External decorations Kitchens Bathrooms Rewire/upgrade Roofing Boiler/heating Windows Gross spend 2015/16

2015/16 2016/17 544 288 184 200 29 18 52 90 12 83 109 229 54 119 £2.2m £2.4m

The success of Swan’s approach is confirmed by customer feedback.

Satisfaction with overall quality of home is currently at 86% and ranks amongst the top 25% of social housing providers in London and the East (median = 80%).

Calculating the return on assets Measuring the ‘return on assets’ is one way of assessing the current financial performance of housing stock. At a headline level it is calculated by dividing annual operating surplus (profit) by the total value of the assets owned.

The table below sets out the return achieved on Swan’s main stock types, all of which are in line with expectation.

Return on general needs units fell slightly between 2014/15 and 2015/16, whilst shared ownership and NHS keyworker both improved marginally.

Return on Assets Operating Surplus General Needs Shared Ownership NHS Keyworker

2014/15 Value of Assets*

£k

£k

24,165 1,148 1,716

513,430 54,131 50,634

2015/16 Value of Assets*

Return on Assets %

Operating Surplus £k

£k

4.7% 2.1% 3.4%

26,658 1,195 1,907

578,878 52,213 48,913

Return on Assets % 4.6% 2.3% 3.9%

* Value of Assets based on UK GAAP including FRS102 net book value which is cost less depreciation and excluding grant received

7

Portfolio management strategy

Affordable social housing is at the core of Swan’s on-going provision and is essential to the delivery of the corporate mission and objectives. The graphic below illustrates the dominance of this tenure type over the others that Swan manage.

There is now however, far greater emphasis placed on financial viability and ensuring that housing stock meets local need. Alongside the Asset Management Strategy, the Portfolio Management Strategy sets out how Swan will make the best future use and ensure value for money of its assets.

The strategy provides a framework within which decisions can be made on stock rationalisation. In conjunction with the return on assets calculation, Swan use Savills’ Asset Project Evaluation Model (APEM) to appraise housing stock. The

model assesses the net present value (NPV) for each property, together with a suite of sustainability indicators. This allows similarly performing properties to be grouped together. Where asset groups are not found to be cost effective or conducive to delivery of the corporate mission and objectives, the strategy sets out options to:    

revise tenure type and rental stream swap with another landlord, or come to another financially mutual arrangement for transfer dispose on the open market to raise funds for new homes change ownership or management arrangements

During 2015/16 Swan recalculated the APEM to reflect the 1% rent reduction and as a result, average NPV has dropped from £59,958 to £50,040. Savings to mitigate this however, have already been identified in the 2016/17 budget.

8

NPV is based on the expected income and expenditure on each property over the course of the 30 year business plan, in conjunction with some standard financial assumptions e.g. the rates of inflation and VAT. A negative NPV would indicate that it will cost the organisation to retain the property.

sustainability score, none are categorised by the model as ‘poor NPV, poor sustainability’. The model does identify some asset groups with quite low sustainability scores though and Swan is in the process of investigating whether these properties could be rationalised.

During 2015/16 we:

The APEM has so far identified 35 properties that were sold based on their poor NPV. These generated £1.8m for reinvestment in the building of ten affordable new homes.

Swan’s approach to stock rationalisation remains flexible. A further asset group identified as having a low NPV was eventually not disposed as the market conditions were unfavourable and a sale would not have offered value for money.

The APEM uses measures around income, demand and housing management to determine the sustainability of each property and asset group. These include indices of multiple deprivation, tenancy turnover, refusal rates and distance from a management office and other Swan properties.

No asset groups have a negative NPV and so consequently when combined with the

 

Maintained 100% decent homes Recalculated the net present value (NPV) of housing stock

In 2016/17 we plan to:  

  

Refresh the portfolio management strategy for another three years Continue to update and review the APEM and identify asset groups with low sustainability scores and / or NPV and consider rationalisation In particular consider stock swaps in areas / blocks where another landlord has a substantial presence Identify hard to let / hard to manage asset groups and consider rationalisation Continue our programme to maintain 100% decent homes and achieve energy efficiency targets 9

Assessing comparative costs and performance

Comparing Swan’s cost and performance against other social housing providers is essential for setting the context around whether value for money is being delivered or not. To do this, Swan participates in HouseMark’s annual core benchmarking service.

Benchmarking assists Swan in understanding which areas are high or low cost and what good performance looks like. It informs the budget and target setting process and helps to determine what’s achievable.

Rather than reading it as a league table, Swan use benchmarking as a ‘can opener’ for further investigation and to establish whether the position is in line with the group’s priorities and those of its customers. Whilst in the current climate being low cost and high performing is desirable, there could be some functions where greater expenditure is appropriate for the delivery of key objectives. Also certain characteristics such as stock/tenant profile, can limit the level of performance that is achievable.

Selecting an appropriate peer group to benchmark against is important for ensuring the outputs are relevant and as much as is possible, comparisons are made on a like for like basis. Swan’s standard peer group is made up of 26 similar providers in London and the East with a stock size of between 5,000 and15,000 properties*.

The following tables set out Swan’s cost and performance over the last three years compared to this peer group. The results are ranked in quartiles that split the peer group into four bandings. Quartile one refers to the upper 25% (lower cost/better performing). Quartile four refers to the lower 25% (higher cost/poorer performing).

For comparing costs, HouseMark’s model uses a cost per property (CPP) so that landlords of different sizes can be benchmarked alongside each other. Total CPP includes an element of overheads i.e. office premises, IT, finance and central services expenditure.

The area of greatest expenditure for Swan is repairs and maintenance, and both planned and reactive works functions have the lowest CPPs of the peer group. It is likely that investment in major works is lower than others due to the comparative age and condition of Swan’s housing stock. Satisfaction with the overall quality of home is upper quartile and this indicates that despite lower costs, Swan’s investment programmes are being targeted correctly and tenants are happy with their homes.

As well as the age and condition of stock, the low expenditure on responsive repairs and void works is attributable to the partnering arrangement Swan has with its contractor Axis Europe. The service delivers real value for money, with repairs being carried out quickly and right first time. Appointments made and kept have however dropped for the second year running and is now quartile three. As a result, a review of the appointment

10

* Note: Swan’s peer group is detailed on page 23

service and two hour timeslots currently offered, will be carried out later in 2016/17.

Following a repairs service review, the slight increase in CPP of responsive repairs and void works is attributable to expenditure being increased to deliver an enhanced standard. Swan performs consistently well on average re-let time, maintaining an upper quartile position over the last four years. Expenditure on voids is low, and by letting empty properties quickly improves value further by minimising rent loss and maximising the availability of affordable housing.

Expenditure on rent arrears and collection is high compared to peers, being driven largely by the number of employees Swan have working on the activity. In 2013/14, savings elsewhere in the business funded two additional welfare reform posts which pushed up staffing costs. Current tenant arrears are around the median, with FTAs being upper quartile and continuing to reduce.

Expenditure on other housing management functions is about average for the peer group, although following a service review in 2013/14, tenancy management CPP has reduced and is now quartile one. Lettings costs are below the median and are consistent with the levels of tenancy turnover Swan experience. CPP of estate services is low, especially given the type of stock Swan manages. Costs have come down year on year and this provides direct value for money benefits for residents through reducing service charges.

The most significant change between 2014/15 and 2015/16 is the improvement in STAR survey satisfaction, which now compares much better to the peer group.

Overhead costs continue to fall and are now about average. In part the change is due to group adjustments, although there have been some absolute cost savings too e.g. from reviewing office accommodation and expenditure on consultancy fees.

During 2015/16 we have:     

continued work to improve the repairs service increased expenditure on repairs to deliver an enhanced standard significantly improved customer satisfaction, with levels now similar to that of 2013/14 improved or sustained performance against the majority of key indicators continued to find efficiencies in our estate services to help drive down service charges and maintain affordability

Value for money dashboard

When analysed alongside each other, Swan’s cost and performance benchmarking position is strong. The following dashboard, based on the HouseMark data, plots each service area in relation to its ranking within the peer group. All activities fall in and around the good performance/low cost area of the quadrant.

11

ownership and for sale housing. Whilst these activities generate turnover and consume resources, they are not related to the number of units counted in the calculation. Total turnover for 2015/16 was £109.9m, of which just £57.2m was generated by social housing units.

Adjusting the headline social housing costs for supporting people and PFI contract activity only, brings CPU down to £3.67k, slightly above the median for the sector.

1 = Responsive repairs and void works 2 = Rent arrears and collection 3 = Antisocial behaviour 4 = Major works and cyclical maintenance 5 = Lettings 6 = Tenancy management 7 = Resident involvement 8 = Estate services

Swan’s location, operating in both South Essex and East London also has an impact and taking all the above factors into account, Swan would expect its 2015/16 CPU to fall closer to its quartile one / two HouseMark position. The business plan forecasts a reduction in CPU over the next three years.

A service review, triggered by the high cost position of rent arrears and collection is detailed later in the self-assessment.

In 2016/17 we plan to: 

HCA unit cost analysis In addition to HouseMark’s benchmarking service, Swan has used the HCA’s new unit cost analysis to assess costs. The analysis is based on data submitted by housing associations as part of the annual FFR/FVA returns and is set out at the bottom of this page. Swan’s position as a low cost provider across management and maintenance functions is backed up by the data. The higher headline social housing cost per unit (CPU) is driven by ‘other’ costs and is affected by Swan’s structure and diversity.

Within other costs is significant expenditure relating to management of the Forest Gate PFI contract, supporting people activity, property management and the development of affordable, shared

   

 

build on improvements to customer satisfaction, particularly in relation to repairs complete service reviews of the repairs appointment service and legal fees implement the recommendations of income management service review find additional savings to free up cash for front-line services identify further efficiencies in our caretaking schedules to help reduce estate services costs and service charges investigate lower ASB satisfaction results and review our approach to case management utilise the HCA’s new CPU analysis to complement our existing financial benchmarking

** Note: Other costs include expenditure associated with supporting people activities and management of the Forest Gate12 PFI contract. Adjusting for these reduces other social housing cost per unit down to 1.94. The high cost relative to others in this area (and comparatively very low costs in others) reflects how Swan manages and allocates expenditure. The basis of allocation has been changed in 2015/16 statutory accounts as part of the conversion to FRS102.

Effective procurement Swan’s procurement strategy centres on utilising common suppliers and seeks to ensure that the group’s procurement activity delivers value for money, customer focus, rising standards, efficiency, social value and a standard pre-condition of the living wage.

Procurement health check

During 2015/16 we completed our procurement health check action plan. In 2014, Baker Tilley carried out an audit of our procurement activity making recommendations to introduce a procurement manual, tender plan and spend map. It also suggested looking at savings targets, the Axis contract and delivery of procurement training.

This work has helped strengthen Swan’s approach to procurement and complements the procurement strategy.

activity e.g. call centre services, surveying etc. This speeds up processes, avoids duplication and keeps costs down.

In addition to the above, Axis are willing to work with Swan to achieve on-going value for money improvements. Over the last year, both organisations have worked proactively in identifying efficiencies to help mitigate the impact of the 1% rent reduction.

Other benefits include sharing Axis office space and being able to deliver joint training. Swan / Axis have also just rolled out a schedule of rates for subcontractors that will enable greater financial control.

Axis performance compares well to that of others in Swan’s peer group and this combined with the partnering arrangement means that Swan is able to achieve value for money on its largest operational contract.

Repairs and maintenance supply chain

Repairs and maintenance contract

All standard repairs and maintenance to Swan’s housing stock is delivered by Axis.

The partnering contract is in its seventh year of a 14 year term and the length of this arrangement has numerous value for money benefits to Swan and its customers.

The nature of the contract means that both parties are invested in the partnership, and allows for longer term service planning and a commitment to continuous improvement. It also ensures that if problems are encountered or performance drops, it is in the interests of both Swan and Axis to quickly put things right.

The partnering arrangement in place is different in comparison to many others in the sector. Swan has retained very little in terms of the ‘client side’ function i.e. staff to manage the day to day running of the contract, with Axis taking on much of this

In addition to the main contract, Swan has achieved a number of value for money gains on repairs and maintenance procurement during 2015/16. Costs have either reduced, or an enhanced service is now provided: 







Lift maintenance awarded to Schindler, amalgamating several earlier arrangements, and delivering around £115k of savings over the term of the contract due to major works being included External gas consultant contract awarded to Leander Services, with additional requirements added at no cost Procurement of new emergency lighting testing (Hetlan) and fire risk assessment / health and safety (CSUK) also delivered gains Extended the grounds maintenance contract for two years, with additional work valued at £20k per year added at no cost

13

Other procurement activity Office accommodation  Other procurement activity during 2015/16 included: New MFD agreement   

Multi-functional devices (MFDs) are used for printing, photocopying and scanning the new agreement with Konica offers a £45k saving to Swan over the next three years the new machines are faster and include a secure printing option that improves security and should also produce some savings in print.

 

Consolidated our office space to deliver greater value through our office accommodation strategy refurbished Pilgrim House head office ended the lease and moved out of Zurich House in Billericay.

The table above sets out Swan’s procurement savings over the last three years and anticipated savings going forward. During 2015/16 savings of £560k were achieved. The graphic at the bottom of this page sets out how this was reinvested in added value projects and service improvements.

In 2016/17 we plan to:

Mobile telephony     

New deal includes a £46k saving over the term of the contract plus, hardware budget increased from £42k to £65k at no extra cost to Swan tariff improved, with data, calls and text allowances now shared between users stops overspend as data consumption will rise, so provisioning for the future all devices moved to 4G.

  

Review our personal protective equipment (PPE) and merchandising costs Consolidate our energy costs to achieve savings that can be passed on to residents Utilise Laser buying group who are negotiating with water companies to enable consolidation of accounts. If successful this will save time processing individual invoices and realise costs savings too.

14

Managing our finances

To ensure value for money in delivering services, Swan prioritises expenditure against the corporate mission and objectives.

Across the group, Swan has a zero-based approach to budget setting and this helps to avoid unnecessary expenditure. As part of the process, budget holders are required to present requests, setting out how expenditure will help deliver the group’s priorities and sustain or improve performance. Finance managers meet monthly with budget holders to support robust financial control and keep track of planned value for money efficiencies.

Each of Swan’s performance management reports include financial data. Also balanced scorecards, including performance indicators under the headings of strategic, risk, financial, customer internal process and learning and growth, are produced for operational and strategic review meetings.

In continuing to find savings, Swan has responded positively to the increasingly challenging operating environment for housing associations. Mitigating the impact of the 1% rent reduction, on-going roll out of universal credit and protecting front-line services, the group launched its £1 million and £10 million challenges to staff during 2015/16.

The £1 million challenge has been set to find £1m of savings in Swan’s day to day operations in each of the next four years.

Over the same period, Swan has also set a target to achieve £10m of efficiencies through reduced costs and increased profitability on its development and regeneration activities. Employees at all levels of the organisation have been asked to contribute ideas to find the necessary savings. In addition, teams are encouraged to discuss value for money at their team meetings, and specific value for money objectives are set for individuals as part of the appraisal process.

During 2015/16 we:    

worked to a zero based budget and challenged budget holders on their requests for 2016/17 launched our £1m and £10m challenges engaged all staff in finding value for money savings completed our transition to the new FRS102 financial reporting model

In respect of financial performance, Swan compares favourably to other housing associations within their peer group.

Swan’s operating margin in 2014/15 was 35% compared to the median of 30%, and average cost of borrowing at 3.9% was below the median of 4.0%.

In 2016/17 we plan to:   

deliver year one savings in respect of the £1m and £10m challenges undertake a reforecast after six months to ensure our financial plans are on track continue our zero-based approach to budget setting and engage budget holders in the process

15

Planning and funding

Swan’s approach to planning and funding is to ensure the on-going financial viability of the business plan, allocating resources to deliver the mission and objectives of the group’s corporate strategy as effectively as possible.

Decisions on funding are made through the Group Investment Framework. This standardises assumptions used for interest rates, payback periods, discount rates etc. so that different projects can be appraised and trade-offs considered on a consistent basis.

Additional funds are generated from Swan’s commercial business streams to reinvest in new social housing and support communities.

In 2014/15 Swan restructured its debt in order to reduce on-going costs and maximise the value of the group’s assets.

This created greater headroom to fund additional development and removed some of the more onerous provisions of previous arrangements.

As part of the restructure, Swan issued a £250m bond and broke up a syndicated

loan agreement. Both strengthened the group’s long term financial plans and were shortlisted in the corporate finance deal of the year category at The Association of Corporate Treasurers (ACT) Awards 2016.

The bond was issued with a coupon of 3.625% and term of 33 years. The rate is significantly lower than the original business plan assumption of 4.5% and equates to a saving of £1.3m per year, or £43m over the life of the bond.

During 2015/16, Standard and Poor’s annual report affirmed the group’s credit rating. In its report, the agency commented “Swan has a very strong enterprise profile and a strong financial profile … We believe the group has proactively taken measures to mitigate the impact from welfare reforms”.

This helps to confirm that the group has prudent financial plans in place and provides bond holders with an external assessment and reassurance of Swan’s ability to service its debt.

The graphic below sets out where Swan’s funding came from in 2015/16 and how it was spent in absolute cost terms. Total income over the year was £109.9m with expenditure of £98.7m, generating a surplus of £11.2m.

16

Investment in development and new business

 

Swan’s commercial entities; NU Living, Vivo Support and Hera Management offer the key benefit of being able to gift aid profits to reinvest in affordable housing and the associated functions of the group.

Vivo offer value for money domiciliary care across Essex. Working in partnership with Swan’s Care and Repair service, Vivo has been recognised by the NHS Alliance for their innovative approach to care solutions and six day care package for patients leaving hospital. They have featured in an ITN film and been highlighted as best practice by LocalGovernment.co.uk. The company continues to grow, having made strategic acquisitions during 2015/16.

Hera, Swan’s property management company, grew its business by 16% in 2015/16. Contributing to this growth was securing a new strategic contract to act as managing agent for LB of Newham’s residential development arm, Red Door Ventures.

The development programme, specifically private sales of new build homes, generates the vast majority of profits to gift aid. At the centre of Swan’s mission are its growth plans for increasing the supply of high quality affordable and private homes. This activity significantly enhances the group’s ability to deliver against its objectives and generate value for the communities it serves.

The group structure and in-house contractor, mean Swan can maintain a position as the market leader and preferred partner for development and regeneration schemes across South Essex and East London.

During 2015/16 we:  

Increased the number of schemes / properties managed by Hera Achieved a rating of ‘Good’ from the Care Quality Commission for services provided by Vivo

 

Secured a further £3.7m of grants to develop affordable housing Generated £10.5m of gift aid from our commercial activities Invested £35.2m in development and regeneration activities Built 266 new social and affordable homes and 144 for private sale

Development has an important role to play in ensuring the group is fit for the future.

As part of this focus, Swan has set a target to achieve £10m of efficiencies over the next four years through reduced costs and increased profitability on its development and regeneration activities.

Already over £4 million of potential savings has been identified, relating largely to future procurement, predevelopment/design and overheads.

These opportunities will materialise as schemes are delivered.

Six London boroughs, together with six local authority districts in South Essex form Swan’s core operating areas for development activity. Delivery of affordable homes is at present confined to these areas in order to capitalise on the existing local presence, relationships and expert knowledge. A further three London borough’s and one Essex local authority are considered opportunity areas for private only schemes. As with any such project, the appetite for this would be assessed against the Group Investment Framework.

The Group Investment Framework provides a common process for appraising investment projects. It scrutinises the costs and benefits of each project to ensure they fit with Swan’s mission and objectives. The framework links closely with the wider business plan so that any investment has sound financial grounding and complies with the covenants of relevant funding agreements.

Key to deciding where to invest is establishing where Swan can make the greatest difference and add most value to the local community.

17

Swan continues to focus on brownfield regeneration, with the aim of delivering around 70% of all new homes through such schemes. Working closely with partner local authorities, the GLA (Greater London Authority), HCA and private developers to bring forward these opportunities, ensures a holistic approach to the transformation of places and neighbourhoods.

The group has responded positively to changes in the operating environment, including cuts to local authority funding, reduced availability of grants, the 1% social housing rent reduction and other government initiatives such as the voluntary right to buy.

In the five years to 2014/15 around 1/3 of new homes built by Swan were for private sale or shared ownership. In order to sustain a new affordable housing provision going forward, this is expected to increase to around 75% for the five years from 2015/16. Crucially Swan intends to provide a range of tenure types to best meet future housing demands, making efficient use of the profits obtained from sales to maximise new affordable units.

Going forward, smaller properties and studio flats potentially present a practical and viable offering when appropriately designed, particularly in London.

Swan takes an innovative approach to the challenges ahead. Acting as Swan’s inhouse construction contractor, NU Living provide the group with technical expertise in design development, procurement efficiencies, greater certainty over product quality and ultimately, highly competitive pricing. In addition Swan is exploring offsite manufacture and this emerging approach presents vast potential benefits including:

   

improved quality control, speed of construction and productivity reduced health and safety risk on-site reduced waste and improved environmental impact greater control over programme and contract administration

Swan possess a pipeline of thousands of new homes to be delivered and this forward thinking initiative, where viable, will have considerable benefits for Swan’s development and regeneration programmes and deliver significantly increased value for money on the group’s investments.

The regeneration of Bow Cross won ‘the London Mayor’s award for planning excellence’ and ‘best project five years on’ at the 2015 London Planning Awards.

This together with the on-going transformation at Blackwall Reach confirms that Swan’s approach is sustainable, making a difference and delivering value for money.

In 2016/17 we plan to:  

   

Secure a further £1.4m of grant funding and generate £4.7m of gift aid from our commercial activities Invest £84.9m in development and regeneration activities, building 6 new social and affordable homes and 119 for private sale Develop our off-site manufacturing facility Mobilise construction at Cambridge Road, Repton Court P2, Blackwall Reach 1B and Peachy House sites Submit planning applications and gain approval for Laindon Shopping Centre, Craylands and Blackwall Reach P2 Handover Oldchurch P4 and Craylands 1CF 18

Resident and service user involvement

Swan recognises that in achieving its corporate mission and objectives, the group has a wider role than to simply provide affordable housing. Increasingly, Swan is looking to enhance the broader social value it provides to communities.

Swan has recently launched the group’s Social Value and Engagement Strategy. It draws together a number of previous strategies and sets out a more cohesive approach to the social value and engagement activities the group deliver.

This consolidation has enabled Swan to focus attention on the projects / activities that have greatest impact.

The London and Essex Resident Consultative Committees (RCCs) are Swan’s main resident groups. The RCCs hold Swan to account in analysing and challenging performance and overseeing the strategy and policy review process. In addition, four residents sit on Swan’s Operation’s Committee and therefore have direct input in the service delivery decision making process. Residents are also represented at key partnership meetings between Swan and Axis.

Customer satisfaction and complaints

Key to delivering the best service is understanding customer priorities and involving them in the decision making process. Swan offers multiple opportunities for residents to engage, aimed at maximising the diversity of those who do.

For monitoring general satisfaction levels, Swan uses an independent market research company to carry out an annual survey. Swan uses this data to help identify problem areas, inform service improvements and set priorities. The results have a direct influence on the direction of the group and maximise value for money by ensuring resources are directed to where customers say they are most needed.

Swan provides a range of community development activities to help break down barriers to effective engagement. This includes providing English as a second language (ESOL) classes, as well projects such as providing free health checks to residents.

Swan actively encourages complaints and understands the value this feedback offers in terms of a learning opportunity. Trend analysis reports are reviewed at a variety of levels across the group to help identify areas for improvement and inform action plans.

Scrutiny panel and other formal involvement

Financial inclusion, digital inclusion and worklessness

The residents’ scrutiny panel undertakes detailed reviews of services and has a key role to play within the delivery of Swan’s Value for Money Strategy; as a residents’ sounding board for service reviews, providing input and scrutiny of the value for money action plan and selfassessment and setting residents’ value for money priorities.

Through partnership arrangements with organisations such as the Citizens Advice Bureau and Financially Inclusive Tower Hamlets Project, Swan is able to offer training and support for residents around accessing bank accounts and other financial products and services.

The panel’s work in 2015/16 included a review of removal of graffiti and dumped rubbish, recommendations from which will be implemented during 2016/17.

Swan’s work on digital inclusion includes providing ‘how to get online’ and ‘applying for jobs and benefits’ classes.

19

CSR and Swan Foundation

Swan is committed to its corporate social responsibility (CSR) and is able to demonstrate this through its priorities and very nature of work. Also, staff engage in the group’s ‘get involved’ scheme, which over the last year has included providing mock interviews as practice for residents looking for work, and the estate services team holding an ‘action day’ at Laindon Shopping Centre.

Swan Foundation is a charitable organisation set up to help communities achieve more for themselves. The Foundation works with local business to remove obstacles and secure funding for projects which benefit communities. The work helps to drive Swan’s CSR objectives and sustainability commitments.

Social return on investment (SROI)

One way of appraising Swan’s added value activities, is to test SROI. This attributes a cash value to the benefits realised, and compares it to the cost of the project. Whilst this approach applies a definite cash value to gains that often vary, it provides a consistent methodology for comparing projects.

Swan’s calculations are based on the HACT methodology, widely accepted by the sector. During 2015/16 Swan assessed the SROI of the scrutiny panel and health checks.

volunteering and gaining confidence through the mentoring scheme. It also assumes improvements around graffiti and litter on estates and information provided for residents following reviews of complaints and graffiti and rubbish removal services.

Health checks Working in partnership with the NHS, other housing associations and local authorities, Swan delivered free health checks to residents in Essex.

71 Swan residents benefited from the project which was targeted at those aged 40-74, not seeing their GP for regular treatment. 55% of participants were referred to a GP with issues including high blood pressure, high cholesterol, excess weight and smoking.

The calculated social impact of £158k was significant compared to Swan’s investment of under £1.5k. In part, this was due to partners providing much of the resource and the calculation assuming an on-going improvement in health. The project however, still represented a significant social value return.

During 2015/16 we:   

developed our new Social Value and Engagement Strategy implemented TP Tracker to help monitor resident engagement supported the scrutiny panel’s review of graffiti and rubbish removal and implemented recommendations of the scrutiny review of complaints

Scrutiny panel

In 2016/17 we plan to:

A core group of six residents were involved with the scrutiny panel during 2015/16. A mentoring scheme was implemented alongside training as part of building the panel’s capacity to carry out reviews.



The overall social impact of the panel’s activity during the year was £78k, and equates to £10 for every £1 invested. This return was calculated on the basis of panel members engaging in regular



 

implement the recommendations of the scrutiny panel review and support the panel to carry out further reviews deliver SwanFest, a refreshed format for the residents’ away day support the new Beechwood Village Community Trust assess the feasibility of calculating SROI for larger projects e.g. regeneration.

20

Improving services



Swan has a strong ethos of continuous improvement and this is embedded throughout the performance management framework. The corporate mission and objectives cascade each of the operational strategies and form the basis for team plans and service improvement action plans. This ensures a focused approach to decision making and helps to drive value for money.



Performance information is reviewed at all levels of the organisation. Management reports ensure the triangulation of cost, performance and satisfaction data to enable value for money judgements to be drawn.

   

Repairs service review

A repairs service review was triggered in 2014 following a drop in performance after Axis relocated their call centre. The review originally sought to improve satisfaction by increasing repairs completed right first time, reduce the time taken to resolve complex repairs and minimise missed appointments. Together with Axis and building on the work of the previous year, in 2015/16 we have: 

In addition, the corporate plan outlines specific measures that Swan use to determine whether or not group and customer priorities are being delivered.

These then form the structure for a variety of performance scorecards and dashboards.

Striving for excellence

   

Striving for excellence is Swan’s service improvement programme. Last year’s programme consisted of 54 actions that arose as a result of service review, benchmarking, analysis of customer satisfaction results or other forms of customer feedback/involvement.

Amongst other actions, during 2015/16 we have:   

introduced call monitoring delivered phase two of our hearts and minds training programme for staff reviewed and published a new tenant handbook and service standards

reduced the target for responding to complaints from 10 days to six introduced rent payment prediction software developed an involved resident training programme reviewed our services to older people updated our allocations policy and implemented monthly tenancies challenged managing agent costs to help drive down service charges.

hosted a partnership ‘away day’ for staff to gather ideas, share success and build relationships implemented over 70 improvements identified by staff as part of our learning from complaints carried out a ‘deep dive’ and made improvements to repairs call centre performance invested in improved IT and rolled out a programme of training for staff revised the protocol for dealing with lift breakdowns

Customer satisfaction

As a direct result of the repairs service review customer satisfaction increased during 2015/16, recovering to a similar level to that prior to Axis’ relocation. The following chart shows improvements against all of the core STAR survey questions. Of particular note is satisfaction with value for money for rent and service charges. This reflects the significant improvements made with little additional cost to Swan or residents.

21

Reducing complaints Customer service excellence (CSE)

Swan recognises complaints as being gold-dust for learning from mistakes and improving services. The recording of dissatisfaction has been actively encouraged over the last year, the effect of which has been an increase in informal complaints.

Improvements to customer satisfaction however have been mirrored by a significant reduction in stage one complaints. Initial complaints (informal and stage one) have fallen by almost 30% from 847 in 2014/15 to 615 in 2015/16.

Swan’s latest CSE standard accreditation report (March 2016) highlighted the group’s strong partnerships, particularly with Axis, and the commitment to deliver high quality services to residents. Three additional elements of the standard were awarded a ‘compliance plus’ rating, demonstrating good practice, taking the total to 14. Compliance to the standard is an important independent test of services and the value they deliver to customers. It also helps Swan’s profile as a potential partner.

Income management service review

In 2016/17 we plan to: 

In 2015/16 a review of the income management service was triggered as a result of expenditure on the function being high compared to peers. Due to the known challenges ahead, the review did not recommend any reduction in staffing, but looked to ensure resources were deployed as effectively as possible. The scope of the review also included objectives to; analyse key cost drivers, assess different service delivery models, review performance management arrangements and ensure welfare reform changes can be resourced.

 

  

implement the 2016/17 striving for excellence programme extend call monitoring to a wider range of teams and other types of customer interaction further improve the repairs service, introducing ‘live chat’ and promoting our portal and text service for reporting repairs carry out two service reviews on the repair appointment service and legal fees implement the recommendations of the income service review realign our performance framework to the new corporate strategy 22

Conclusion and self-assessment Value for money is embedded in Swan’s operational activity and decision making process, and is a cross-cutting theme throughout the group’s strategy and policy framework. Our strategy is clear on how we define value and sets out how it will be achieved, monitored and measured.

Customers have a key role to play in this process. The feedback they provide, and formal engagement at board level and through the scrutiny panel and resident consultative committees, helps to set Swan’s priorities.

We appreciate that value for money should be considered in the context of meeting an organisation’s objectives. As such the group is purposely structured to best deliver our mission “to deliver effective services, enterprising solutions and exemplary homes and communities”.

Swan’s commercial subsidiaries gift aid profits to the housing association. In doing so they help to support value added services that might not otherwise be delivered, at the same time as increasing affordable housing and regenerating communities.

We have a detailed understanding of the financial and social returns on the group’s

assets, and assess the financial performance and sustainability of housing stock so that alternative delivery options that potentially offer better value can be considered.

The performance management systems Swan has in place help to drive value for money and foster a culture of continuous improvement. We regularly compare our costs and performance against others to identify where efficiencies could be found, or services improved.

Swan’s financial performance is sound and the group take a prudent approach to managing finances and planning funding.

We recently issued a bond and restructured our debt to reduce the cost of servicing it by £1.3m per year.

The group has responded positively to changes in the operating environment, setting £1 million and £10 million challenges to achieve savings. Through our procurement activity we strive to achieve value for money. £1.2m of savings are forecast over the next three years, which will be reinvested in front line services.

As a consequence of the evidence set out in this self-assessment Swan’s board believes it fulfils the requirements of the value for money standard.

23

24