Annual Report and Financial Statements 2014
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Accord Group Annual Report and Financial Statements 2014 Contents
Year at a glance
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Chair and Chief Executive’s foreword 4 Our mission 6 Connecting our customers 8 Homes which link communities 12 Connecting and linking our customers 16 An employer who connects 20 Making strong connections 24 Facts and figures 28 Financial statements 32 Notes to the financial statements 76
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Accord Group
Year at a glance
We actively engaged with
We built
458
2,460 CUSTOMERS,
A 47% INCREASE on last year
NEW HOMES
We increased turnover to
ÂŁ100.7 million
We delivered over
70,000 hours of care a week
Annual Report and Financial Statements 2014
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£203
We invested
was invested per colleague on
TRAINING AND DEVELOPMENT
£36.1 million
in new and existing HOMES
20% INCREASE in Group surplus to
£3.6 million
SECURED savings of £1.3 million THROUGH STRATEGIC PROCUREMENT
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Accord Group
Annual Report and Financial Statements 2014
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Chair and Chief Executive’s foreword Another year has passed, and what a great year it has been for the Accord Group, with a strong financial performance which underpins the varied and exciting opportunities in which the Accord Group is involved. The work that we do with neighbourhoods and communities - making a real difference for people - takes place because we believe in it and are passionate about it, but also because we have created the financial stability required which allows us to think creatively and look at proposals holistically.
Strong financial connections A surplus of £3.6 million, an increase of 20 per cent from 2013, is a tremendous result for the year. This money will be reinvested into our neighbourhoods and services. Plus, we will continue with our £146 million development programme to build over 1,000 homes in the next three years. This is being funded as part of a wider £21 million grant allocation, awarded to the Matrix Housing Partnership by the Homes and Communities Agency. We will also explore new ways of making a difference and ensuring everything we deliver is value-for-money. Over the course of the last year, the Board have responded to the increased focus on value-for-money with a revised strategy and regular reporting. We know we need to keep our costs under review and have set ourselves a challenge of finding increased efficiencies during the next 12 months.
Strengthening our links During the year, the Accord Group has strengthened partnerships and is delighted to welcome Heantun Housing Association into the Group. This is a long-established and fantastic community organisation with services predominantly across Wolverhampton and Walsall. They are very politically connected with a lot of expertise, which in turn will allow us to offer even greater services to our combined customer-base, particularly around health and social care. We reflected last year that there would be challenges ahead with the changes to Welfare Reform Act having now taken hold, which is why we have also invested significantly in providing customers with employment and job training and will continue to channel our resources into support for jobs, volunteering, apprenticeships, training and enterprise creation to help people get off welfare and into work.
Linking our priorities We have spent a lot of time reflecting on the changes facing our customers and exploring solutions. We have come up with some answers, but we know we need to do more and we will respond as appropriate, as well as plan as best as we can for what is known. The result of some of this thinking was the re-thinking of our mission, values and priorities through the business planning process in the year. We have distilled our mission to Making a Difference which we know sets us some challenges, but which gives us a clear focus on what we do. We have set out three values and three core priorities around meeting need, great housing and services and good to great and will be monitoring all our activities under these headings. Finance is not a strategic priority, but continuing our financial strength and the focus on value-for-money supports the priorities and their delivery. We are therefore looking forward to the year ahead. The Board will continue to work with colleagues to ensure that our strategic targets are successfully delivered. We are grateful for all the hard work and support from everyone within the Accord Group and we would like to take this opportunity to thank the Board, the Executive Board, and colleagues for their efforts, commitment and contribution during the last year. By working together we can look to the future with confidence, enthusiasm and optimism.
Barrie Blower MBE Group Chair
Dr Chris Handy OBE Group Chief Executive
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Accord Group
Making a difference To be a strong diverse Group which makes the most of our individual and combined strengths to deliver positive outcomes, improving life chances for our customers and the wider communities which we serve.
VALUES
COMMUNITIES
COMMITMENT
We work with communities where people want to live
We put our customers and our people at the heart of everything we do
INNOVATIVE We are optimistic, passionate and forward-thinking and we deliver better value every day
CORPORATE OBJECTIVES
1. MEETING NEED
2. GREAT HOUSING/ SERVICES
3. GOOD TO GREAT
DELIVERY AND ACTIONS
CUSTOMER REVOLUTION
PERFORMANCE
VALUEFOR-MONEY
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Connecting with our
CUSTOMERS
Homes which link
COMMUNITIES
Connecting and linking
CUSTOMERS
An employer who
CONNECTS
Making strong
CONNECTIONS
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Accord Group
Connecting with our
CUSTOMERS
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The Accord Group is visible and responsive in each of its neighbourhoods it serves and offers customers a range of ways to access services. We are a Placeshaper organisation and will continue to connect with our customers to improve our links with them to make sure they are satisfied that we are delivering excellent customer service.
DURING THE LAST YEAR, WE HAVE: u Undertaken a review of our Customer Engagement Strategy with a panel of residents, which has now has a number of dedicated forums around specific topics u Actively engaged with 2,460 customers through customer engagement activities – a 47 per cent increase on the previous year u Increased the number of activities we offer to our customers to get more involved, from panels and forums to projects and consultation u Held an interactive customer business planning session using Planning for Real® activities. This was attended by 54 per cent of our most involved customers. u Carried out three scrutiny reviews by the Scrutiny Panel and advisors which gave a snapshot review of how we have communicated Welfare Reform, a full review of our Birmingham locality learning and disabilities service and a health check on our customer call centre, Customer First. Report recommendations of all of these have been successfully fed into business action plans.
CASE STUDY
u Reviewed many of our processes as part of our Customer Service vision, aiming to make things simpler for customers. One example is driving people to interact with us more online through a dedicated Channel Shift Strategy, offering a 24/7 service. u Implemented our Care and Support Strategy which delivers a more personalised service to our customers independent to where they live u Rolled out a comprehensive implementation programme to fit internet access points within our schemes u Become a member of the UK Online Digital Inclusion group, offering internet access and training programmes from a variety of locations to our customers, including many of our own Accord offices u Mobilised the Buzz to take internet access and training out to customers who live in the areas we service where local access for many is not possible.
CASE STUDY
APRIL 2013
MAY 2013
We partnered with Walsall Housing Group and Walsall Council’s Sport and Leisure Services and Public Health Walsall, to run a free health and fitness programme for men in Walsall.
Solve, run by the Accord Group, the Long Run Venture and Hub Westminster, was launched to offer 1,500 promising entrepreneurs expert help in turning their ideas into viable enterprises.
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Accord Group
Going forward we will: Concentrate further on our customer service vision making changes to improve the ways that customers can contact us and access our services. This includes implementing a channel shift strategy to encourage more customers online to become self-serving.
Future
LINKS
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During the last year we have actively engaged with 2,460 customers through customer engagement activities – a 47 per cent increase on the last year Connecting with our customers
CASE STUDY
CASE STUDY
JUNE 2013
JANUARY 2014
The Peer Support Project was launched in Staffordshire to help people with dementia and their carers cope with the condition – which affects 11,000 people in the county.
Job seeking customers in Birmingham and the Black Country were given the chance to get one step ahead by signing-up to a free course to help them become more employable.
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Accord Group
Homes which link
COMMUNITIES
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As one of the largest developing housing associations in the Midlands, we continue to enjoy an excellent relationship with the Homes and Communities Agency and have built 458 new homes over the last 12 months. Going forward, we will be delivering a £146 million development programme to build over 1,000 homes in the next three years. This is being funded as part of a wider £21 million grant allocation, awarded to the Matrix Housing Partnership this year by the Homes and Communities Agency. Half of these homes will be manufactured in the LoCaL Homes factory, with 35 per cent delivered by our own in-house construction team.
DURING THE LAST YEAR, WE HAVE: u Also secured funding to build a further 366 homes within the Matrix Housing Partnership, on which Accord leads, through the Affordable Homes Guarantee Programme. These will be complete by March 2015.
u Introduced a new mobile working application to assist surveyors to efficiently and effectively collect stock condition date and other critical information
u Celebrated our factory LoCaL Homes second anniversary with the 500th low carbon timber frame home being manufactured – a UK housing association first
u Introduced a rolling stock survey of all our homes
u Improved our customer satisfaction rating on repairs to over 90 per cent u Delivered over £1.5 million of energy efficient improvement works to our homes
CASE STUDY
u Carried out stock condition surveys across all care and support schemes u Invested more than £27 million in making our homes more modern, including fitting new kitchens, windows, bathrooms and repainting properties u Secured £1.5 million of retrofit funding through the European Regional Development Fund u Made cost-savings of up to half a million pounds on developments through the introduction of our own construction arm.
CASE STUDY
March 2013
OCTOBER 2013
We launched our own construction arm which now sees the Group design, manufacture and build its own homes whilst making significant savings.
Homes were made available to buy through the Help to Buy scheme, including 13 properties at the award-winning Pattern Gardens’ development in Darlaston.
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Accord Group
Going forward we will: Create our first Mutual Home Ownership Society, a home savings co-operative, which offers customers the opportunity to live in high quality, affordable housing, whilst sharing in the equity of gains from within a property.
Going forward we will: Continue to develop and build new homes which will also be affordable to run and built to the very highest of standards.
Future
LINKS
Going forward we will: Continue to seek out new funding opportunities to maximise the retrofit of our homes.
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CASE STUDY
CASE STUDY
FEBRUARY 2014
MARCH 2014
The Pattern Gardens housing development in Darlaston, which is made up of 106 homes, was shortlisted for the Development of the Year award at the 2014 UK Housing Awards.
Redditch Co-operative Homes’ Marlfield development in Church Hill was named as one of the country’s top 50 affordable housing developments by Inside Housing magazine.
During the last year we have invested more than £27 million in making our homes more modern, including fitting new kitchens, windows, bathrooms and repainting properties. Homes which link communities
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Accord Group
Connecting and linking
CUSTOMERS
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We are committed to improving the levels of service delivery to all of our customers and creating new opportunities for them, as we recognise the need to make commitments to neighbourhoods and support their physical, economic and social transformation. Therefore, we strive to continually work in partnership with the local community and partner agencies, with the aim of delivering safer, secure and sustainable communities.
DURING THE LAST YEAR, WE HAVE: u Recruited 21 apprentices into vacant posts as part of our on-going commitment to creating jobs and enterprise and seven have moved into permanent jobs within the Accord Group u Signed up 22 customers to our Recruitment, Opportunities, Learning and Employment (ROLE) programme, which gives people the skills they need to obtain work in the future. Plus, for those working within the health and social care arena, a guaranteed job will be offered. 18 of the 22 ROLE apprentices are Accord Group residents. u Held our third Great Resident Awards which showcases the excellent work our residents have undertaken u Supported 28 residents as part of RiSE, 13 have gone on to set up their own businesses – gardening and grounds maintenance, gutter cleaning and window cleaning, boat repair and maintenance, monumental maintenance and flower arranging
CASE STUDY
u Recruited eight young people from Birmingham and the Black Country to take part in the new wave of The A Fund: Entrepreneurial Skills for Young Entrepreneurs in Europe. Four young women and young men have travelled to Amsterdam to improve their entrepreneurial skills, and develop their business ideas. The young people supported have businesses in fashion and design, journalism, fast food and event catering, spoken work poetry, mentorship and performing arts, teaching and skills development. u Supported seven young social entrepreneurs to start up their projects and businesses as part of our project with UnLtd*, Building Futures with Matrix Housing Partnership. Businesses supported include a creative industry CIC supporting campaigning and social justice through music and photography, a sport and poetry project supporting young people in Shard End, an emotional resilience training programme developed by a young person and delivered to local organisations, an ethical clothing brand, and social enterprise offering cleaning jobs to NEETs and exoffenders whilst developing their employability skills through real-life work experience.
CASE STUDY
APRIL 2013
FEBRUARY 2014
Moseley and District resident Eisa Habibi was one of just seven young people to receive a Dynamic Youth Award, which celebrate inspirational young people who have beaten the odds to succeed.
Job hunters in Walsall had the chance to get one step ahead in the search for work by signing-up to a free workshop to help them become more employable.
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Accord Group
Going forward we will: Continue working with customers and support community development initiatives addressing antisocial behaviour, financial exclusion and worklessness, particularly in light of changes to benefits.
Future
LINKS
Going forward we will:
Going forward we will:
Actively encourage and support social enterprises offering financial and back office support to get their business off the ground.
Ensure job, training and volunteering opportunities within the Group and our partners, supply chain, are made available to our customers.
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CASE STUDY MARCH 2014 Former Shropshire dinner lady Alice Elliott, who lives at the Cartlidge House scheme, marked her 105th birthday with a celebratory tea party with friends and family.
CASE STUDY MARCH 2014 We officially launched our ROLE (recruitment, opportunities, learning and employment) programme, which will see 150 residents and their family members recruited as apprentices over the next three years.
During the last year we have recruited eight young people to take part in the new wave of The A Fund: Entrepreneurial Skills for Young Entrepreneurs in Europe. They travelled to Amsterdam to improve their entrepreneurial skills and develop their business ideas. Connecting and linking customers
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Accord Group
An employer who
CONNECTS
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We ensure that all employees are valued, recognised and supported in their employment by taking action on the issues our colleagues tell us are important. We are proud to have been awarded Investors in Excellence and Investors in People, and continually help our colleagues develop their skills and realise their potential. Because we expect the very best from our people, we also offer a variety of great benefits in return for the work that they do.
DURING THE LAST YEAR, WE HAVE: u Enrolled our second cohort of nine colleagues into our leadership academy where they will gain a Level 5 ILM certificate in leadership and management, investing over £9,600 per colleague u Implemented a challenging Coaching Strategy and methodology where we now have 45 accredited coaches all qualified at Level Five with Chartered Management Institute via Coventry University u Recruited 46 Staff Voices representatives who have a consultative role and who contribute to the organisation’s decisions u Invested in our people, who attended 12,541 training days last year equating to 6.97 days per employee at an average investment of £203 per person
CASE STUDY
u Celebrated and rewarded colleagues who were nominated by their peers for outstanding work at the annual Great People Awards u Invested significantly in our IT, updating our desktop environment and telephony to deliver a more efficient and sustainable solution u Introduced a staff discount scheme for all employees to use across who spectrum of the retail and leisure sector u Undertaken an employee satisfaction survey to understand our colleagues better which 64 per cent completed u Started a review as part of the employee satisfaction survey looking at the Group’s culture and identity as to what we stand for and refreshed our values.
CASE STUDY
APRIL 2013
JUNE 2013
Refuge Manager Sahdaish Pall was one of just six people from across the country shortlisted for the Inspirational Colleague of the Year award at the Housing Heroes Awards 2013.
Two colleagues from Direct Health raised a toast after both winning national awards for their inspirational work at the Great British Care Awards.
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Accord Group
Going forward we will: Recruit employees and members whose skills and experience match our needs, who demonstrate the potential for future development and who commit and where colleagues contribute to the delivery of our corporate objectives and reach their full potential.
Future
LINKS
Going forward we will: Continue to look at diverse opportunities and new areas of business and product development.
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During the last year our people attended 12,541 training days, equating to 6.97 days per employee at an average investment of £203 per person. An employer who connects
CASE STUDY
CASE STUDY
OCTOBER 2013
FEBRUARY 2014
Our Customer First Contact Centre was named as the ‘Best Contact Centre of the Year – Under 50 Seats’ in the Midland Contact Centre Forum Awards 2013.
Throughout February, ‘It’s not fair?’ sessions were held for colleagues, exploring the definition of Fairness and what could be done to make things fairer in communities .
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Accord Group
Making strong
CONNECTIONS
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We grow our business through merger, new development, stock transfer, and diversification, achieving operational efficiency to help meet housing need. Our work with our stakeholders help to shape housing policy and our proactive campaigns and initiatives give the housing sector a voice on matters of the utmost importance for their future.
DURING THE LAST YEAR, WE HAVE: u Successfully acquired Heantun Housing Association as partner into the Accord Group
u Participated in key think tank around the table discussions
u Achieved more than £300,000 worth of media coverage in key national newspapers and taken part in a number of significant on-line debates
u Organised a national conference on behalf of the Black Country Local Enterprise Partnership around social enterprise.
u Held a national care conference for 200 health and housing professionals on the topic of integrating housing, health and social care
CASE STUDY
CASE STUDY
NOVEMBER 2013
DECEMBER 2013
We launched our Retrofit Project and invited businesses to the Black Country Living Museum to find out how they could benefit from the £3 million scheme which will see 250 homes get ‘green’ make-overs.
We were selected to lead the £2.8 million Housing Jobs and Prosperity pilot as part of the Black County City Deal, on behalf of the Black Country LEP.
CASE STUDY
CASE STUDY
MARCH 2013
MARCH 2014
We brought together leaders from public health, housing and children services to discuss our Holiday Kitchen initiative and how they can work together to help struggling families during school holidays.
We were given the thumbs up by the Care Quality Commission (CQC) for meeting a range of essential quality and safety standards in Nottinghamshire.
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Accord Group
Going forward we will: Continue to grow and ensure that the services and facilities we provide are better targeted, more innovative and cost-effective.
Future
LINKS
Going forward we will: Work with partners such as the LEP’s to maximise regional opportunities via initiatives like City Deal.
Annual Report 2014
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CASE STUDY
CASE STUDY
MARCH 2013
AUGUST 2013
Birmingham’s Cabinet Member for Health and Well-being, Councillor Steve Bedser, visited some of our clients who are previous offenders. Fry Housing Trust has been successfully working with offenders for more than 50 years.
The Group was chosen as one of a handful of organisations to carry out pioneering European-wide research to develop smart technology to help people with dementia around the home.
CASE STUDY
CASE STUDY
MARCH 2014
MARCH 2014
We were shortlisted for the European Commission’s EMAS (Eco Management and Audit Scheme) Awards, representing the UK in the Private – Large Company category.
New businesses and startups were invited to the Bank’s Stadium in Walsall to find out how they could win work from the Group – including fitting UPVC windows and installing kitchens and bathrooms.
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Accord Group
Facts and figures
SOURCE OF NEW LETTINGS
TYPES OF NEW LETTINGS 910: Single adults
608: Referrals
344: One adult (with at least one child)
534: Direct applications
308: Older people 463: Nominations 213: Transfers
155: Two or more adults (with at least one child)
158: Other
144: Two adults, no children
Total: 1,976
102: Other Total: 1,960
COMPLIMENTS AND COMPLAINTS
HOW TENANTS’ RENT IS SPENT
28p: Service costs 25p: Interest
:) / :(
121: Compliments
£1
580: Complaints
16p: Management costs 15p: Routine maintenance 14p: Planned maintenance 2p: Voids losses
AVERAGE WEEKLY RENTS AT 31 MARCH 2013 Data taken from RSR submissions 2013
£ 100 90 80 70 60 Midland Heart (91.98)
Black Country (88.73)
Accord
Bromford
50
(89.47)
(89.74)
40 30 20 10 0
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3,398: White 541: Black 157: Mixed
Group work profile 2014
276: Asian British Indian 63: Asian British Other 78: African 45: Not Known 52: Other
7,025: General needs 1,324: Supported
Group stock AT 31 MARCH 2014
1,205: Shared ownership 932: Other 427: Affordable rent 347: In development 78: Leasehold Total: 10,991
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Accord Group
REPAIRS
FIRST TIME FIX
CUSTOMER SATISFACTION Actual
Target
Actual
Target
97%
90%
78%
80%
CP12S
AVERAGE VOID DAYS IN MAINTENANCE
Actual
Target
100%
100%
EMPTY HOMES
Actual
Target
RESPONSE TO EMERGENCIES Target
296
18.12%
Empty homes at 31 March, 2014
Homes let in the last year HOURS
30.64
£1,680
Average days taken to let
Average cost of works for re-fitting
MINUTUES
Actual
HOURS
MINUTUES
Annual Report and Financial Statements 2014
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Accord Group
FINANCIAL STATEMENTS
Annual Report and Financial Statements 2014
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The Board, Executive and advisors
Board member Appointed Resignation Mr Barrie Blower, MBE (Chair) Mr Akshay Parikh (Deputy Chair) Mr Ghulam Shabar Dr Christopher R. Handy, OBE* Mr Bruce Gilbert, OBE Mrs Shahana Khan Cllr Bill Hartnett Mrs Elisabeth Buggins, CBE Dr Lola Abudu Mr Simon Eastwood Mrs Margaret Cope Mr Derek Leyland Mr Barry Picken
2009 2007 2007 2006 2010 2013 2014 2014 2014 2014 2005 2005 2005
March 2014 July 2014 September 2014
*Executive Director
Secretary Mr Lakhbir Jaspal CPFA
Executive Board Dr Christopher Handy OBE, Group Chief Executive Mr Lakhbir Jaspal, Deputy Group Chief Executive Mr Jas Bains, Chief Executive of Ashram Housing Association Mr Rob Donath, Chief Executive of Fry Housing Trust Mr Jonathan Vellacott, Chief Executive of Direct Health Group Ms Sara Woodall, Chief Executive of Heantun Housing Association Mr Alan Yates, Executive Director of Regeneration Mr David Williams, Executive Director of Health, Social Care and Support
Funders Abbey National Treasury Services PLC Co-operative Bank Crown Mortgage Management Dexia Public Finance Bank Lloyds Banking Group The Housing Finance Corporation (THFC) The Royal Bank of Scotland Plc
External auditors Grant Thornton UK LLP Registered Auditors Grant Thornton House 202 Silbury Boulevard Central Milton Keynes MK9 1LW
Bankers Co-operative Bank Plc 118 – 120 Colmore Row, Birmingham B3 3BA
Lloyds Banking Group PO Box 908, 125 Colmore Row, Birmingham B3 2DS
Royal Bank of Scotland 139-144 Lichfield Street Walsall WS1 1SE
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Accord Group
Registration details
Organisation
Registration
Registered office
Accord Housing Association Limited
Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27052R)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Homes and Communities Agency under the Housing Act 1996 (Registration No. LH3902) Ashram Housing Association Limited
Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27926R) Homes and Communities Agency under the Housing Act 1996 (Registration No. LH4034)
Birmingham Co-operative Housing Services Limited (bchs)
Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 22573R)
Caldmore Area Housing Association Limited
Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 20135R)
Homes and Communities Agency under the Housing Act 1996 (Registration No. L3030)
Homes and Communities Agency under the Housing Act 1996 (Registration No. L0883) Direct Health Group Limited
Company Limited by Shares (Company No. 5638085)
178 Birmingham Road West Bromwich West Midlands B70 6QG
178 Birmingham Road West Bromwich West Midlands B70 6QG
178 Birmingham Road West Bromwich West Midlands B70 6QG
Parkway House Haddenham Business Park Haddenham Buckinghamshire HP17 8LJ
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Organisation
Registration
Registered office
Fry Housing Trust
Company Limited by Guarantee (Company No. 6297777)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Homes and Communities Agency under the Housing Act 1996 (Registration No. L4496) Charity Commission (Charity No. 1119879) Heantun Housing Association
Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 20928R) Homes and Communities Agency under the Housing Act 1996 (Registration No. L1669)
Redditch Co-operative Homes
Company Limited by Guarantee (Company No. 3667984) Homes and Communities Agency under the Housing Act 1996 (Registration No. L4335)
3 Wellington Road Bilston Wolverhampton WV14 6AA
178 Birmingham Road West Bromwich West Midlands B70 6QG
Charity Commission (Charity No. 1078304) Accord Group Treasury Limited
Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27057R)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Accord Care Services Limited
Company Limited by Guarantee (Company No. 3465015)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Charity Commission (Charity No. 1075621)
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Accord Group
Report of the Board and Operating Financial Review Introduction The Board of Management presents its report and audited consolidated financial statements for Accord Housing Association and its subsidiary undertakings for the year ended 31 March 2014. The principal activity of the Group is the provision and management of housing and appropriate support services for people in need.
Corporate governance The Group is controlled and governed through the Group Board of Management which comprises the following non-executive members and one executive member. Membership details
Group Board
Barrie Blower
Chair / NED
Akshay Parikh
Vice Chair / NED
Derek Layland
NED
Barry Picken
NED
Shahana Khan
NED
Bill Hartnett
NED
Bruce Gilbert
NED
Ghulam Shabar
NED
Elisabeth Buggins
NED
Lola Abudu
NED
Simon Eastwood
NED
Chris Handy
ED
Group Resources and Audit Committee
Group Remuneration Committee
Group Governance Committee
Chair Chair (to July 2014)
Chair Chair
Chair (from August 2014)
NED – Non Executive Director ED – Executive Director
The Group Board of Management meet four times a year formally and also attend conferences and training courses where appropriate. In addition, there are a number of special meetings during the year to review and approve specific proposals which fall outside the scheduled meeting dates. The Accord Group is committed to the principles of good governance and a high standard of business integrity in everything it does. As a result the Group has adopted the NHF Code of Excellence in Governance. This Code sets out a number of principles as outlined below, which the Group Board of Management assesses its compliance against: u Constitution and composition of the board u The Chief Executive u Essential functions of the board u Committees of the board u Board induction and information u Openness transparency and accountability u Board recruitment, renewal and review u Diversity and inclusion u Responsibilities of the Chair u Audit and risk u Conduct of the board’s business u Conduct and probity.
Group Care and Support Committee
Annual Report and Financial Statements 2014
The essential functions of the Board of Management are formally recorded. They include the setting of strategy and monitoring of progress in achieving that strategy, the definition of values and objectives, approving policies plans and budgets and monitoring performance of the business. By doing this the Board seeks to ensure that the Group does not take any undue risks and that affairs are conducted to the highest level of performance and propriety. Every Board/Committee across the Group has responsibility for the implementation, monitoring and review of key policies and strategies that are relevant to the specialist nature of their area of operation. The respective responsibilities of the Boards and committees are set out in the Group’s Standing Orders and Financial Regulations. The Group Board delegates day-to-day management of the activities to the Group Chief Executive and his team, who in turn are responsible for ensuring that the organisations have appropriate executive arrangements in place to meet their objectives and targets. Our review against the NHF Code of Governance demonstrated compliance. There was recognition that there are areas of improvement to be made during 2014/15 focusing on 100% of individual appraisals for non-executive directors and the implementation of a new induction process. A number of non-executive directors reached their maximum term of nine years during 2013/14 and have retired. In addition a number of non-executive directors will also retire in 2014/15 as they too will reach their maximum terms in office. Following the successful recruitment process of new non-executive directors in April/May 2014, we continue to have a Board which has the necessary skills and knowledge to effectively manage the business and a process which ensures continuous renewal. In April 2014, the Group received the highest possible ratings for Governance and Viability from the HCA (G1 and V1). Details of the remuneration drawn by members of the board during the year are set out in Note 6 of the Financial Statements. The total remuneration of non-executive members represents 0.1% of turnover.
Our marketplace Accord recognises that the operating environment continues to change and present challenges. However, the Group’s ability to plan successfully, is based on a foundation of understanding the current and future political, statutory and economic environment and the ability to shape and influence local, regional and national policy. Our understanding is based upon work including: u Analysis of the housing and care markets in which we operate u Consultation with our customers to maintain and develop excellent services u Research into the local demographics and how demand for our service might change in the future u Consultation and dialogue with staff, Board and Committee members and external stakeholders u Understanding of the political, economic, social, legislative, environmental and demographic drivers for change in our sector u Robust risk analysis of the activities we are engaged in. Our analysis of the operating environment suggests that the key factors and drivers are: u Better value for the taxpayer u Quality service provision u Working with customers to help them understand and manage increasing financial pressures u More empowerment of local communities u Supporting the sustainability of local economies u Greater integration between housing health and social care u Greater accountability to service users/communities u The need for greater joined up working between registered providers, local authorities and other key partners continue to be very important. Whilst the wider economy is showing signs of recovery, there are significant funding pressures on public finances and associated public services which the housing association and care sectors are not immune to. The social housing sector has already experienced the financial challenges brought about by reduction in grant funding to support the development of new social housing and the implementation of the early stages of welfare reform. Accord is committed to identifying solutions to these on-going financial pressures and is equally committed to working alongside our customers to ensure they understand how these financial challenges also impact upon them. In the short and medium-term, Accord, in common with other associations, has reviewed its financial assumptions and decisions in order to reflect the current economic environment and equip ourselves appropriately to manage these ongoing pressures. The Group continues to stress test the Business Plan each year with various scenarios to demonstrate the ability to manage these pressures. The Group remains confident that growth opportunities will remain for strong organisations like ourselves.
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Group objectives and strategy The Group’s objectives and strategy are set out in the Strategic Five Year Plan that is reviewed annually and approved by the Board. Accord sees identifying and managing its risks and opportunities as integral to the way we do business. The Group’s main objectives and strategies are taken from the Strategic Plan 2013-18, are summarised here:
Strategic objective: Meeting Need By 2019, we will: u Through Government funding and other funding options, build at least 300 new homes per year u Develop a co-dependency housing model combining general needs and care and support customers and allocate up to 15 per cent of all new build homes to residents with learning disabilities or mental health needs, via agreed scheme-based Local Lettings Plans u Undertake research and feasibility studies to explore the options of ownership or operating responsibility for a community centre, a free school and potentially a business academy u Offer a wider choice in how customers access services and communicate with the Group u Have ensured that 500 residents/customers or members of residents’/customers’ families have gained work experience within the Accord Group either through apprenticeships or through substantive employment u Have ensured the on-going success and evolution of the ROLE programme and by 2015 will have had 200 customer volunteers who will have been engaged on the ROLE programme within health, social care and support services u Worked with the Black Country LEP on the City Deal Welfare pilot to target job opportunities to our tenants and communities u Further developed and enhanced the Group’s volunteering programme to provide opportunities for customers, which will include 180 volunteers over the five years being engaged across the Group, including customers, their families and community volunteers u We will offer a range of innovative pre-tenancy support services to all new general needs customers based on the principles of shared responsibility for sustaining tenancies; together with post tenancy services, we will generate additional household income or savings of £50 per week on average per engaged customer u Have developed innovative approaches to reduce the impact of child poverty in neighbourhoods.
Strategic objective: Great Housing and Services By 2019, we will: u We will have developed our first Mutual Home Ownership scheme u Identified options for acquisition of additional external facilities services u Have achieved 80 per cent customer satisfaction in 2015 and 85 per cent by 2019 for our internal and external services u Have reduced office costs by 25 per cent in order to invest in new services for customers u Have retained and acquired external accreditations to evidence high quality services and products and standards - using the Investors in People framework, we will go beyond the Core Standard retained in 2013 to ensure that by 2019, we have been accredited as Investors in People Gold u Have key performance indicators and benchmarking tools reviewed to ensure effective assessment of performance across all services and incorporating adding value to people’s lives u Have developed and will lead on a benchmarking forum of truly comparable housing groups, measuring the indicators that we consider business critical, and using data to help drive improvement across all services areas u Each quarter hold regular ‘back to the floor’ sessions for senior management and Boards u Have achieved 95 per cent CQC compliance u Hold external accreditation for all corporate service delivery teams in area of specialist service delivery as appropriate.
Accord Group
Annual Report and Financial Statements 2014
Strategic objective: Good to great By 2019, we will: u The Accord Group will have a minimum of 80 per cent of its employees stating they are engaged with the work that they do and satisfied with the Group as an employer u After achieving in 2017, an employee satisfaction rating of 70 per cent, the Accord Group will feature in the list of the 100 Best Not for Profit organisations to work for u Have launched an employee discount scheme and have achieved 50 per cent take up in the first year u Have had 50 colleagues benefit from the Leadership Academy u Ensure every Personal Development Review (PDR) has targets around value-for-money firmly embedded to further the ‘make it count’ culture. u Be recognised for publishing each year a paper on one of the Group’s innovative services or products u Be nationally recognised for holding a service specific national conference each year u Have developed an existing care site as a flagship dementia centre of excellence u Have achieved a turnover of £200 million and 3.5 per cent surplus u Have become a leading player in the national social innovation market, generating new revenue streams to support mission-led social enterprises u Have completed a 0-5 year stock review and Disposal Strategy.
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Accord Group
Value-for-money (VFM) statement Why VFM? This Statement sets out to the Accord Group’s stakeholders and customers how we ensure we deliver services which are high quality and which ensure value-for-money. The Statement combines the many threads of our VFM work which is embedded in the day to day work of our organisation and sets out what our stakeholders, including the regulator, should expect from us.
“Value-for-money is fundamental to our ‘social business’ approach. It ensures we achieve value for our customers.” Barrie Blower MBE, Accord Group Chair
The Accord Group has a diverse heritage, further fostered and built by each of its organisations, all of whom were established as charitable, not for profit associations providing homes and services for those most in need in society. We are proud that we still have that vision and we have seen our services develop over time as needs have varied. We are able to build homes and provide services through a combination of public funding, private finance and have always worked hard to ensure that every pound is spent in an efficient way to maximise the return on that investment. We have therefore always ensured that best value is a prerequisite throughout all that we do; delivering housing management services, building new homes, providing care and supported by efficient back-office services. We have a long-standing and proven commitment to delivering VFM for our customers, stakeholders and the tax-payer and this is fundamental to how we manage our business. We monitor, challenge and review how we achieve value in all that we do and we use a framework of six key principles to enable us to do this: 1. We have a robust approach to strategic decisions and VFM 2. We have embedded governance and reporting 3. We meet the regulator’s requirements 4. We have rigorous performance and cost management 5. We maximise the return on our assets 6. We provide added social and environmental value.
To be a strong diverse Group which makes the most of our individual and combined strengths to deliver positive outcomes, improving life chances for our customers and the wider communities which we serve.
VALUES
1. Strategic decisions and VFM The Group-wide vision provides customers, stakeholders and staff with a clear understanding of what is important to the Accord Group and the approach to delivering value is a fundamental part of that vision. We show how we achieve on our VFM targets in a way that is clear and open. Our Business Plan sets out the strategic objectives and how we will achieve these. They are: 1. Meeting need 2. Great housing and services 3. Good to great. We produce an Annual Report and Financial Statements which shows how we are managing our performance and finances. Our customers produce a report on what we have done throughout the past 12 months and our corporate plans take the strategic objectives to the departmental level so colleagues are clear about what they need to achieve. An electronic copy of Accord’s VFM self-assessment statement can be found on the VFM area of the Group website at accordgroup.org.uk/VFM
COMMUNITIES
COMMITMENT
We work with communities where people want to live
We put our customers and our people at the heart of everything we do
INNOVATIVE We are optimistic, passionate and forward-thinking and we deliver better value every day
CORPORATE OBJECTIVES
1. MEETING NEED
2. GREAT HOUSING/ SERVICES
3. GOOD TO GREAT
DELIVERY AND ACTIONS
CUSTOMER REVOLUTION
PERFORMANCE
VALUEFOR-MONEY
Annual Report and Financial Statements 2014
2. Embedded governance and reporting This VFM approach is firmly embedded across the Group, and visibly so. All levels of governance have a role to play.
Group Board assurance Group Board Strategic decision–making and setting the vision and key objectives is led and directed by the Group Board of Management. VFM is a key strand within this. The Board receive regular reports on VFM achievements, for example recently in using our new in-house construction team to save around 20 per cent on new housing developments.
Resources and Audit Committee and local Boards Budgetary control and reporting is scrutinised by the Resources and Audit Committee and the locality Boards review performance and financial viability.
Executive Board The operational delivery is overseen by the Executive Board which also ensures that all strategies and policy documents clearly demonstrate how they support VFM approaches to the specific service area.
Directors Group and senior managers Senior management are responsible for ensuring that the strategic objectives are cascaded to front-line staff and that the VFM approach is ingrained throughout all we do. Colleagues are empowered to challenge spend at all levels and for many years, the Accord Group has encouraged and enabled staff to make suggestions about improved and more efficient ways of working or procuring. The current internal ‘Make It Count’ campaign has seen a cross-departmental task group support over 200 actions across all parts of the business which reinforces the long-standing approach to securing value. The annual self-assessment and Statement enable the Group to show how we have protected our assets and ensured return on the investment in them over the previous 12 months. This Statement is externally validated by the Group’s auditors, Grant Thornton (GT) and sits alongside the regular internal audit reviews of services which includes the VFM approach to delivery. GT has reviewed the statement content against its own interpretation of the VFM regulatory standard and highlighted where compliance was considered to be good and recommendations highlighting where further disclosure may be required to enhance the quality and transparency of reporting.
Customer and stakeholder involvement We involve customers in all areas of our work and use their feedback to find innovative ways to deliver more for less. Our Customer Scrutiny Panels and ‘armchair auditors’ regularly review our policies and services and test how effectively these work. The Group’s customers produce an annual report which reflects on key areas of service delivery including repairs and maintenance, customer service and VFM. The Accord Group includes co-operative and mutual organisations within its structure. There is much research and evidence to show that housing co-ops deliver real VFM as tenants are in control of how their rent is spent. Redditch Housing Co-operative and the co-ops that bchs supports further prove this.
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Accord Group
Organisational approach To drive further improvements in service delivery, each key service area is challenged on a rolling six-monthly basis by a Performance and Strategy Review Board and actions are monitored. Internal Audit reviews highlight areas of good practice and recommendations are shared. Furthermore, the Accord Group’s internal processes including the Project Approval Panel for large or higher risk projects scrutinise and test whether the initiative or development achieves and demonstrates value. The Asset Management Strategy is being further developed in 2014 and will see further strides being made in improving and enhancing existing assets to protect that investment further. Accord is a member of several benchmarking clubs and uses information to compare and measure performance and value against other organisations. Housemark data is used along with informal networks and data is analysed by Accord’s Performance and Quality team with areas of good practice shared. Accord is a key member of the PlaceShapers group of housing organisations and uses this forum to compare and measure performance in a range of areas.
Embedded VFM
Accord Group Board
Resources and Audit Committee and local boards
Executive Board
Customer panels and scrutiny committees
Directors Group
Strategies, policies and procedures
Colleagues
Project Approval Panel, internal audit, Performance and strategy review boards
Annual Report and Financial Statements 2014
43
3. Meeting the regulator’s requirements The current HCA regulatory standard outlines its expectations for providers to demonstrate VFM services are being delivered, and moreover VFM is embedded in the culture of the organisation. Accord continues to be an organisation strongly committed to providing VFM and in light of on-going economic pressures, this commitment becomes increasingly important. Accord is also committed to demonstrate to its stakeholders that it is able to manage its finances and resources diligently, whilst continuing to provide excellent services to its customers. The Group’s achievements have been benchmarked against the requirements of the standard, as demonstrated below:
“Registered providers shall”
How Accord delivers against these requirements
“Have a robust approach to making
u Budget assumptions reports provide the Executive and those charged with governance on the appropriate investment of finite resources. The budget assumptions report also makes reference to the Group’s strategic objectives
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.”
u The Project Approval Panel process is the Group’s internal mechanism for approving major new projects. This documentation which supports this process allows the panel to consider the opportunity cost of these projects u The Caldmoreaccord locality has understood the efficiencies and enhanced service which could be achieved through expanding the scale of the In House Maintenance team. This has already achieved identified efficiencies, particularly VAT savings.
“Understand the return on its assets, and have a strategy for optimising the future returns on assets – including rigorous appraisal of all potential options for improving VFM including the potential benefits in alternative delivery models - measured against the organisation’s purpose and objectives.”
u Social return on investment models have been developed and have reported outputs in both Ashram and Fry. These models have been formally recognised/accredited. u A thorough review of care and support assets has been undertaken. The quality of the buildings has been considered in the context of the financial performance of the services run from the building and the ongoing cost of maintenance. This information has been used to determine those assets which do not provide an appropriate return on investment. u Colleagues in asset management also continue to undertake cyclical stock conditions surveys to understand whether expected returns on investment are being achieved and whether preventative actions need to be taken to address future potential problems. Responsive repairs by property have also been reviewed to ascertain where return on assets could be further improved. u For every new housing development undertaken a detailed financial appraisal is undertaken. The financial appraisal contains the payback period highlighting the return on investment over time. It also informs the Project Approval Panel decision and the Board decision. This process is followed up by a post completion financial review to ensure that projected development costs have been achieved and the original financial viability is still valid. u STAR satisfaction survey carried out October 2013 to gauge satisfaction levels of customers in a number of areas to gain an understanding of the investments made. u Detailed annual benchmarking exercises are undertaken to understand Accord’s performance in the context of its peers. Particular focus is paid to metrics which help us to understand our return on assets relative to those of peer organisations.
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Accord Group
“Registered providers shall”
How Accord delivers against these requirements
“Have performance management and
u KPI data is reported to the Executive, Group Board and local Boards.
scrutiny functions which are effective
u Performance and Strategy scrutiny meetings are held twice annually for each core service within the Group. These forums challenge senior management and the leadership on aspects of their performance.
at driving and delivering improved VFM performance.”
u Performance interventions have been employed to help improve performance within certain parts of the Group. Performance and Quality colleagues embedding themselves in a team or function to work collaboratively with the team to drive performance improvement. u Financial performance management information is presented to each meeting of the Executive and Directors Group, local Board, the Group Board and the Group Resources and Audit Committee. Colleagues are held to account by those charged with governance regarding financial performance. u Discreet financial performance reports are also prepared, for example the care and support financial viability report. These reports are used to manage financial performance to ensure that expectations are being achieved and VFM delivered/demonstrated. u Board reporting and monthly performance summaries show progress on performance from previous year, quarter and month, showing clear directions of travel. u The Performance and Quality team conduct Quarterly audits with teams and where risks are identified P&Q interventions take place, which focus on specific areas to identify where improvements are to be made. Examples include Gas servicing,arrears and void management interventions.
“Understand the costs and outcomes of
u Active benchmarking is undertaken across the Group:
delivering specific services and which
l
underlying factors influence these costs
l
Care and support benchmark care standards against national data to ensure above average compliance is achieved
l
Central services use benchmarking clubs to assess the efficiency of these services and also to measure the comparative corporate performance.
l
Best practice is shared at formal and informal benchmarking clubs (e.g. Placeshapers)
and how they do so.”
Housemark is used to benchmark performance of core housing services
u Lean reviews have been successfully employed by the Group to drive performance improvement on process based areas of core business u Regeneration colleagues have insourced construction services which delivered significant savings of c15 per cent on its first project.
Accord’s Board approved VFM Strategy has been developed around meeting the requirements of the regulatory code and ensuring VFM becomes embedded in every aspect of the Group’s operations. The Strategy consists of four strategic themes which are each aligned to regulatory requirements.
Annual Report and Financial Statements 2014
45
VFM strategic objective
Alignment to regulatory requirements
To understand and manage our costs : In order for us to be an effective organisation which provides a VFM service, it is important that we fully understand our costs. In addition, it is equally important that these costs are managed in a responsible way to ensure that the Group’s resources are used in the most effective manner and therefore provide a return on investment. We will also continue to give consideration to the opportunity cost at a strategic level by considering what we commit financial resources to, and what the available alternatives are.
Through understanding and managing our resources and making decisions on how best to invest these resources we are able to demonstrate to our Board, our stakeholders and the regulator that we “Have a robust approach to making decisions on the use of resources to deliver objectives, including an understanding of the trade-offs and opportunity costs.”
To understand return on assets: Understanding our return on assets is necessary to ensuring that the regulator’s expectations are being met and to ensuring we demonstrate a VFM approach to core business. Measuring, assessing, understanding and improving return on assets demonstrates that we are an effective organisation, moreover an organisation which provides VFM services to our customers, communities and wider stakeholders.
The regulator has defined that providers are required to “Understand the return on its assets, and have a strategy for optimising the future returns on assets.” Through market engagement and assessment, benchmarking and performance management we will understand and report our return on assets. Therefore, by delivering against this strategic objective and reporting our performance, we will satisfy the necessary expectations and further demonstrate our commitment to continuous improvement.
To become a better buyer: The Accord Group generates and commits substantial financial resource in the delivery of its core objectives and core services. Where these resources are committed to external organisations which support us in delivering excellent services we will ensure that our approach to procurement is robust and that maximum value and returns from the investment are achieved.
With a thorough, robust and strategic approach to procurement in place, we are able to demonstrate we “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.” Through strategic procurement we ensure the Group’s resources are utilised in a way which delivers against the strategic objectives, and which also maximises the return on the financial commitment made.
To increase accountability and transparency in reporting VFM: It is important that evidence based VFM performance management information should be presented to the Board on a regular basis. This information will provide the Board with assurance that Accord is an organisation which is committed to delivering VFM services and also that we are able to achieve a series of VFM targets/objectives.
By increasing accountability and transparency in reporting VFM, we are able demonstrate “performance management and scrutiny functions which are effective at driving and delivering improved VFM performance.” By reporting VFM information to the Board, we are also able to demonstrate we are an organisation which is held to account by its board on delivering against our commitment to VFM.
The VFM strategy is supported by an action plan. Progress against the action plan is reported to the Group Resources and Audit Committee and Group Board as part of the VFM annual report. Furthermore, each department/function within the Group has a department action plan - progress against these plans is also provided in the VFM Annual report to the Board. As at 31 March 2014, 233 individual VFM actions were included in the departmental action plans – 223 (96%) of actions were implemented. This highlights the commitment to a fully embedded Group-wide approach to delivering VFM. Looking ahead, the 2014-15 Accord Group budget has built in VFM efficiencies totalling £5.5m. Furthermore, the partnership between Accord and Heantun will generate annual efficiencies of £176,000 per annum from 2014/15. VFM is branded as ‘Make it Count’ within Accord Group. The campaign is supported by a working group which meets monthly to co-ordinate VFM activities in the Group. The intention of the Make it Count campaign is to: u Educate and inform colleagues of the three key principles of VFM (effectiveness, efficiency and economy) u Help colleagues to identify what these really mean u How colleagues can make these principles real and apply them to their everyday jobs/roles u How colleagues can share good ideas and good practices whether they be new or existing.
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Accord Group
4. Performance and cost management Accord has benchmarked its performance on a number of key areas of performance. The benchmarking cohort of 20 registered providers has been selected to reflect the scope and nature of Accord’s work, particularly the commitment to care services and community based initiatives. The findings of the benchmarking process are outlined below.
Operational indicators
Corporate indicators
Performance 2014 2013 against the performance performance cohort of 20
Benchmarked indicator
What does this measure?
Social housing lettings operating margin
The percentage of income from lettings converted to operating surpluses
6
31%
29%
Social housing lettings total operating costs per home
The total cost of managing each social housing home for one year.
14
£3,430
£3,416
Void losses per home
The total amount of void income forsaken in the year averaged across all homes in management.
17
£115
£106
Total Asset management spend per home in management
The average investment in each home in management per year.
5
£1,292
£1,172
Bad debts per home
The total amount of bad debts written off in the year averaged across all homes in management.
2
£58
[£1]
Return on assets: Turnover (all activities)
The return on assets expressed as total turnover as a percentage of total assets less grant
9
22.6%
21.4%
Return on Assets: Operating Surplus (All activities)
The return on assets expressed as total operating surplus as a percentage of total assets less grant
14
3.6%
3.6%
Income earned per Executive Officer
The value of income generated averaged across the number of Executive Officers
11
£11.2 m
£10.1 m
Executive costs as a percentage of total staff costs
The percentage of total costs of the Executive as a percentage of total staff costs.
1
2.4%
2.5%
Average interest rate
The average cost of debt being interest paid as a percentage of total debt held
7
3.8%
4.2%
Annual Report and Financial Statements 2014
2012 Direction performance of travel
47
Key influencing factors
2014 - looking ahead
Housing management policies, budget performance, rent policy, market wage, inflation, service reorganisation.
Improving performance confirms management continues to improve cost-efficiency and maximising income generated. Further efficiencies have been built in the 2014/15 operational housing management budgets.
£77
Welfare reform, housing management policy, contractor performance, social mobility, customer economic pressures, demand.
Management continues to monitor voids closely with improved performance expected in 2015. Processes have been reviewed to support this improvement.
£1,295
Contractor performance, cyclical investment need, customer aspirations, compliance with standards, demand, service reorganisation.
Increased effectiveness in asset management procurement identifies financial efficiency. Again this will continue to be the focus of asset management colleagues in 2014.
Welfare reform, housing management policy, social mobility/abandonment, customer economic pressures, demand.
Arrears and debt recovered identify a positive position for 2013. 2014 saw performance decrease. Management scrutiny over this PI will increase in 2015.
26%
£3,408
*
* £37
16.1% Income generation/welfare reform/public sector spending, economic influences. 3.2%
Additional income and activity from Direct Health joining the Accord Group resulted in favourable trends on these corporate measures. Looking ahead in 2014 and beyond, and in light of the importance of demonstrating VFM, management will continue to focus on further improvements to corporate performance indicators and measures
£5.8 m
Income generation/welfare reform/public sector spending, management performance/cost control.
4.0%
Income generation/welfare reform/public sector spending, management performance/cost control, wage inflation.
By identifying that Executive costs continue to represent a very small percentage of overall staffing costs management continues to demonstrate VFM.
4.0%
Interest rates, economic market performance, Treasury Management Strategy.
New debt drawn attracts a slightly higher overall rate than historic debt which is reflective of the market.
*See overleaf for further information
Source: 2012 and 2013 financial statement data
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Accord Group
Targeted performance improvement Included in the table above are two indicators which show deterioration in performance. Specific actions being taken by management to address this position and drive performance improvement are outlined below: u Void losses per home: An End-to-end systems and lean review of lettings process undertaken. Resource has been redeployed for focussed improvement on lettings. Increase data analysis has been undertaken to better understand termination reasons – this information has been used to inform lettings policy. u Bad debts per home: There has been an increased focus on arrears KPI data to ensure operational teams are aware of management’s expectations. Locality teams have been set targets for former tenant arrears recovery. The performance of this KPI is aligned to voids, particularly where increased abandonment is apparent – intelligence and data is being used to increase intervention with the aim of reducing abandonment rates. Abandonment rates have increased since the implementation of welfare reforms.
Performance against targets Core service Key Performance Indicators 2013/14 The Executive and the Board both receive regular performance management updates with respect to performance against KPI targets for aspects of core services. Core KPI performance for 2013/14 is outlined below:
Housing services
Care and support services
2013/14 Actual
2013/14 Target
2013/14 Actual
2013/14 Target
Current tenant arrears (%)
3.3
4.1
3.6
3.3
Former tenant arrears (%)
2.1
2.0
3.5
2.2
27.4
15.0
32.6
22.7
1.0
0.6
7.3
3.4
Repairs: satisfaction with service (%)
99.0
95.0
99.0
95.0
Repairs: first time fix (%)
92.2
86.0
92.2
86.0
Gas compliance CP12 (%)
99.9
100
99.9
100.0
KPIs
Re-let times (days) Void losses (%)
Financial performance targets 2013/14 saw increasingly strong financial performance with surpluses once again outperforming the previous periods and the agreed budget plan targets as shown in the table below:
Group surpluses
2014 Actual
2014 Budget
2013 Actual
2012 Actual
£3.635m
£3.081m
£3.003m
£1.711m
Annual Report and Financial Statements 2014
49
VFM targets Included in the 2013/14, Board approved budget assumptions were a number of pre-determined VFM focused objectives. These measures continue to be included in the budget setting process and demonstrate the Board’s commitment to ensuring VFM is embedded in all aspects of the Group’s operations. Performance in the year against these measures is outlined below:
Measure
Savings from repairs procurement
Reduction in re-let times
Reduction in former tenant arrears
Reduction in new build cost per unit
Reducing the Housing Benefit bill by helping residents into work
Releasing internal staff capacity to work on Accord’s Big Issues work-streams
Delivered
2013/14 achievements
3
The 10 year responsive repairs partnering contract with Lovell identified saving of £1.4 million over the life of the contract. The contract costs and proposed savings were externally ratified by a cost consultant. Furthermore, additional savings of c£120,000 have been identified through the continued insourcing of other aspects of asset management obligations, such as gas maintenance.
3
During 2013/14 re-let times for general needs have improved by nine per cent (2.7 days). Care and Support re-let times have improved by four per cent (1.35 days) during 2013/14.
7
2013/14 has seen consistent performance on former tenant arrears balances. General Needs FTAs represents c2% of the rent debit, with care and support FTAs at 3%. Whilst a reduction hasn’t been achieved in 2013/14 performance remains consistent and no further deterioration has occurred. 2014/15 will see further increased focus on KPI performance to ensure the required improvements are achieved.
3
The Bushbury development using in house design, manufacture and construction identified reduced new build costs per unit of c20%. The overall final cost per square metre for this development was c£1,025 compared to an industry expectation of around £1,250.
3
Colleagues in the Transformation Team, Jobs and Skills coaches have helped people into work and therefore reduced their dependence on housing benefit. During the year, nine customers have been supported to help them build confidence, become work-ready and secure permanent employment.
3
As outlined in case study two at section nine of this statement, £762,000 of existing group staffing and financial resource has been diverted to the Group’s Big Issues work-streams. This investment has helped to transform people’s lives, help people find training and employment opportunities and to support local social enterprises.
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5. Return on Assets Understanding our asset base Our business is built on the homes we own and manage and it is imperative that we have up to date, accurate and useful data about those homes. As a developing organisation, one which consistently out-performs on delivering new homes, we carry out regular valuation exercises as part of the security process when seeking private finance. This information provides us with assurance that we know the value of our stock and we are able to use this information to help inform the management of our assets. As well as developing new homes to provide much needed housing and choice of housing for local people, we ensure we maintain and enhance our existing assets to drive value through standing stock. We have further developed our management tools and asset registers and have wider insight through data collection about our homes, our customers and their families. We use geo-mapping technology to plot locations and this helps housing and assets colleagues in planning best use of time when visiting customers and properties. It also brings a wealth of other data and allows us to take current stock and areas of operation into consideration when looking to build new homes, helping us deliver an integrated approach to planning new homes and the wider locality and community services those new homes require. We have also revised our process of planned maintenance and this links to externally-funded programmes of retrofit and new eco technologies. Accord has successful track record in securing external funding to help develop enhanced retrofitting schemes bringing added value to the properties. Our robust Disposals Strategy provides us with the analysis and tools required to take strategic decisions on how we manage our stock and the strategy is linked to the Asset Management Strategy to ensure all of our data is used effectively when considering disposals and maintenance programmes. Our day to day repairs contract ensures we receive intelligence from our contractor which is fed into the assets strategy and we also talk to the people that live in our homes on a regular basis so that we can be confident that we have current and valid data about our assets and can protect them and maintain them to a high standard. We also look to win further funding, particular from Europe to deliver solutions which bring added long-term value to our stock.
Moseley & District owned a property in Selly Oak which had provided supported housing for vulnerable people, together with some office space for administration purposes. The funding for providing the support came to an end and the buildings were no longer used for supported housing. Moseley & District carried out a review of the use of the buildings and decided that the asset could not be utilised effectively or efficiently in its current form. As part of the review process, the rest of the Accord Group were made aware of the availability of the buildings and Fry Housing Trust assessed the possibility of taking over the asset for a brand new supported housing service. As a result of this assessment, the Trust took over the buildings and, following refurbishment, is opening the 12 units as a specialist service for ex-military personnel who are struggling to return to civilian life. The office space is being used by the Birmingham Scheme Manager and her team which has resulted in significant savings in rental payments for the previous office base. More efficiencies have been achieved by delivering the new service through siting the support workers in the new office base and utilising existing staff combined with the contribution of volunteers.
Accord Group
Annual Report and Financial Statements 2014
51
Return on our assets Our up to date and comprehensive housing management and stock condition information ensures we have a strategic and informed approach to stock disposal. This approach demonstrates Accord’s approach to understanding its return on assets. The location of stock and required future investment contribute to the decision to dispose – this ensures an efficient approach to managing stock. During 2013/14, £2.2m of income was generated from the disposal of housing stock. These funds have been re-invested in the development of new homes and further improvements. Furthermore, in the next five years, the Group’s approach to strategic asset management sees the disposal of housing stock identify a further £24.2m return on assets from strategic stock disposal over the life of the five year business plan. Accord’s approach to strategic stock disposal will consider: u The location and market value – is this a cash generative asset? u The location in the context of other properties – is the property in an area of strategic importance? u The type, condition and overall viability of the property – is there demand for this property? u Current and future rent levels – will the property generate a sufficient income yield? The Group Business Plan identifies how income from the strategic disposal of property will support the development of new homes over the next five years, as outlined below:
2014 2015 2016 2017 2018 2019 Actual Forecast Forecast Forecast Forecast Forecast Number of housing units disposed
36
34
30
40
35
30
Return on assets generated through strategic asset management
£2.2m
£4.1m
£4.0m
£5.8m
£5.4m
£4.9m
There is significant investment in both the development of new homes and improving the condition of new homes over the life of the five year Business Plan. As outlined below, a significant proportion of investment in new and existing homes is achieved from the resources generated from existing assets. The data below shows a total investment in new and existing homes of £261.4m, £164.3m (63%) is funded by returns generated from existing assets. 2014 2015 2016 2017 2018 2019 Actual Forecast Forecast Forecast Forecast Forecast No. of new homes handed over in year
181
282
31
260
603
-
Investment in new homes developed Investment in existing housing stock
£22.1m £14.0m
£31.5m £12.4m
£22.0m £12.4m
£73.2m £12.6m
£35.2m £12.4m
£1.4m £12.2m
Total investment in housing
£36.1m
£43.9m
£34.4m
£85.8m
£47.6m
£13.6m
Net loan debt required/(repaid) to finance investment programme
£12.4m
£15.1m
£7.4m
£54.2m
£17.6m
(£9.6m)
Return on Assets available to invest in new and existing housing
£23.7m
£28.8m
£27.0m
£31.6m
£30.0m
£23.2m
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6. Social and environmental added value Accord is an organisation with a strong commitment to its communities. So in addition to ensuring our operations are efficient and provide VFM, we recognise the importance of delivering significant social value. Below are three case studies demonstrating examples where Accord has delivered social value added and highlights how the careful investment of our resources has helped to improve our communities, peoples’ life chances and our environment. We have been able to deliver these achievements by remaining committed to our social purposes and continuing to innovate through challenging existing assumptions.
Case study one
LoCaL Homes and in-house construction services Accord’s LoCaL Homes factory, based in Walsall, produces between 150 and 200 new homes each year. The pioneering design and manufacture of these homes, using the closed panel timber frame system, ensures: u Fast and efficient off-site manufacturing u Construction using sustainable resources u Efficient on-site construction as erecting the closed panel timber frame system is substantially faster than traditional build timescales u A high degree of design engineered thermal efficiency. This ensures news homes are highly, which in turn ensures that residents occupying these homes will benefit from reduced heating costs. In addition to in-sourcing the manufacture of timber framed homes, Accord has also commenced in-sourcing construction services. Construction Services has identified significant cost-savings in the development process and has also brought about a greater degree of control to schemes and developments being managed in this way. The first development both manufactured by LoCaL homes using the timber frame system and constructed using inhouse Construction Services, identified savings of around £400,000, representing 20 per cent of approved budget. The overall final cost per square metre for this development was c£1,025, compared to an industry expectation of around £1,250. In addition to the VFM and environmental achievements associated with the manufacture and construction of the timber frame system, there have also been substantial socio-economic benefits. The LoCaL Homes factory has created around 20 jobs for local people from our local communities, many of which are social housing tenants who have been taken from unemployment and trained with a vocational skill in manufacturing. The in-sourcing of construction services has also created a number of permanent jobs, but more importantly it allows the Accord Group to ensure that local businesses are provided with the opportunity to ensure they thrive in times of austerity. The processes adopted by Accord in the design, manufacture and construction of these thermally efficient, environmentally friendly, cost-efficient homes, ensures we continue to demonstrate our commitment to producing VFM housing solutions. It also allows us to demonstrate our commitment to providing VFM in the local economy, our commitment to our communities, and our commitment to job creation.
Case study two
Investment in our communities and transforming people’s lives As part of Accord’s commitment to our customers and our communities, resource has been diverted into a number of initiatives focused on increasing the employability of resources, supporting new social enterprises and delivering a number of initiatives aimed at increasing community cohesion. Accord has diverted £67,000 of existing staffing budget resource into Money Advisor posts. Money Advisors support our customers in managing household finances and help them to understand and meet their financial obligations. In 2013/14, the Money Advisors helped customers secure £142,000 of benefit entitlement to help them meet financial commitments, including rents due to Accord. £230,000 of existing resource has been invested in Accord’s AddVentures. AddVentures helps to support the creation and development of local enterprise. In 2013/14, AddVentures provided support to establish 12 successful social enterprise businesses and also secured funding for a number of local young entrepreneurs to undertake an extended visit to Amsterdam where they would receive coaching and training to enhance their business development and entrepreneurial skills.
Accord Group
Annual Report and Financial Statements 2014
53
£116,000 of existing resource continues to be committed to Customer Engagement services. The Customer Engagement team works closely with our customers and communities to ensure we understand their thoughts, needs and concerns and work alongside customers to enhance our communities. An investment of £349,000 in the creation and development of the Transformation team (including Jobs and Skills Coaches) has been made as Accord identifies the need to work with our customers to increase their work readiness and help them into training or permanent employment. In 2013/14, the advisors helped nine people find permanent employment and many more have received Accord’s ROLE (Recruitment, Opportunity, Learning Employment) programme was launched in 2013/14 which provides Accord customers and their families training and apprenticeship opportunities in the social care sector. In 2013/1,4 Accord worked alongside 50 customers to provide coaching, training and apprenticeship opportunities in the first year of the programme. In total £762,000 of existing resources has been diverted into community enhancements and helping people to improve their life chances.
Investment in communities and transforming people’s lives Community money advisors
£67,000
Accord AddVentures
£230,000
Customer Engagement services
£116,000
Transformation team (including jobs and skills coaches)
£349,000
Total investment in communities and transforming people’s lives
£762,000
This investment in community activities has also afforded the Group the opportunity to lever significant external funding a Provider typically wouldn’t have been able achievement. Recent achievements include:
Funding levered through investment in community activities Cabinet Office funding for a Social Incubator Fund aimed improving the life opportunities of young people in Birmingham and the Black County
£1.0m
ERDF funding aimed at supporting local businesses deliver a large scale retrofit programme to the Group’s housing stock
£1.5m
Accord has been appointed as the lead delivery agent for the City Deal programme for the Black Country. This funding has been secured from DCLG and the Cabinet Office as part of a five year programme to increase employment opportunities for the people of the Black Country.
£2.8m
Funding levered through investment in community activities
£5.3m
Case study three
Accord’s commitment to environmental matters Accord Group is aware that VFM and a commitment to eco-friendly business practices go hand-in-hand. Accord’s commitment to environment and eco matters is demonstrated in the Group achieving the ISO14001 environment quality management systems accreditation and the EMAS European Standard for environmentally friendly practices. By committing to these initiatives Accord has managed to achieve improved performance with respect to environment performance measures and also VFM in the following ways: u Revised waste management practices u Reduced paper usage u Significantly reduction energy consumption (11% over the period 2010 – 2013) u ‘Green’ energy sources procured for all group electricity contracts.
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Our achievements Realising VFM Accord’s commitment to achieving VFM aligns with the delivery of corporate objectives. The Group’s top level objectives are outlined in the Business Plan: 1. Meeting Need 2. Great Housing and Great Services 3. Good to Great
VFM achievements Highlighted below are a number of VFM achievements identified during 2013/14. Each of these achievements have been cross referenced back to the 2013/14 corporate objectives to demonstrate how VFM is embedded and how it contributes to the successful delivery of the Group’s objectives. In 2013/14 the Group realised Returns on Assets of £23.7m, and VFM achievements totalling £4.35m.
Return on assets During 2013/14 Accord Group invested a total of £36.1m in new and existing homes. During the same period, net private finance of £12.4m was drawn to contribute to this investment programme. The remaining balance of the investment programme, £23.7m, was from funds generated as returns on our existing assets and resources. See section 6 for further information. (Meets corporate objectives 1, 2 and 3)
Insourced construction services 2013/14 saw the commencement of the Group’s insourced construction team. The team’s first project achieved cost efficiencies of £400,000, representing around 20 per cent of the approved budget. Through insourcing construction services, the Group is able to directly contribute to job creation in the local building economy and associated trades. These new homes were constructed using the closed panel timber frame system produced at Accord’s LoCaL Homes factory in Walsall. Not only does LoCaL Homes provide a number of employment and training opportunities to local people, it also produces highly thermally efficient homes which much less energy to heat in colder weather. This approach ensures we are able to provide VFM in the construction and delivery of new homes, whilst providing VFM for the customers who will live in these homes. (Meets corporate objectives 1, 2 and 3)
Procurement – goods and services During 2013/14, £1.301m savings were secured through the Group’s strategic approach to procuring contracted goods and services, including a mixture of both cashable savings and cost avoidance. The benefit of these savings will be realised in 2013/14 – 2015/16 period. Specific to 2013/14 £205,000 of procurement savings was secured. (Meets corporate objectives 2 and 3)
Procurement - IS/IT services Procurement of bought in Information Technology services have identified a total of £129,000 in VFM savings and efficiencies in 2013/14. These savings were generated through new approaches in the procurement of IT consumables, data storage and through adopting significantly more power efficient IT infrastructure equipment. (Meets corporate objective 3)
Corporate Asset Management – productivity increases: Through improved use of mobile technology, the productivity of asset management colleagues complete stock condition surveys has increased by 46 per cent. (Meets corporate objective 3)
ERDF grant funding attracted ERDF (European Regional Development Funding) will provide £1.5 Million external funding for a minimum of 250 whole house retrofits, a smart grid to 50 properties and six demonstrator units of near to market technologies. (Meets corporate objectives 2 and 3)
Accord Group
Annual Report and Financial Statements 2014
Caldmoreaccord locality Housing services, money advisors: Two colleagues fulfilling the Money Advisor role have secured a total of £142,000 in cash benefits to our customers and services users in 2013/14. (Meets corporate objectives 1, 2 and 3)
Caldmoreaccord locality – transformation services, jobs and skills In 2013/14, Jobs and Skills coaches were successful in supporting nine people into permanent jobs generating income totalling £90,000 for these individuals. (Meets corporate objectives 1, 2 and 3)
Caldmoreaccord Locality - former tenant arrears collection In 2013/14, a total of £109,000 of former tenant arrears were collected. Since the partnership began in April 2012, around £200,000 of arrears from former tenants has been recovered. (Meets corporate objective 2 and 3)
Caldmoreaccord locality – expansion of the in-house Maintenance team In April 2013, the in-house Maintenance team took over the delivery of previously outsourced work in the Caldmoreaccord locality. Insourcing these services has identified savings of around £120,000 per annum. (Meets corporate objectives 2 and 3)
Finance/Treasury Services – debt management Financial benchmarking undertaken in the year identified that Accord’s managed treasury portfolio of loans attracts competitive rate of average interest costs. The benchmarking highlighted Accord’s average interest rate achieved savings of £2.4m per annum when compared to the average rates in the benchmarking cohort. (Meets corporate objective 3)
Investment in the local community and the local economy – big issues During 2013/14, an additional £440,000 of existing resource was committed to be re-diverted into the Big Issues fund. Big Issues work is focused on social, neighbourhood and community matters. Funds are set aside each year as contributions to the delivery of the Big Issues work-streams. It is important to note that this is not an additional cost to the business, but amounts which have been identified through the effective management of existing resources throughout the Group. To date around £1.5m budget has been allocated to the Big Issues highlighting the ongoing importance of this work to the Group. (Meets corporate objectives 1, 2, and 3)
Redditch Community Homes: Photo Voltaic (‘PV’) energy PV panels have been installed on 59 newly built environmentally friendly homes in Redditch. Under the feedin-tariff, annual income from solar energy fed back into the grid will be generated totalling around £20,000 per annum. (Meets corporate objectives 1 and 3)
Social return on investment Ashram and Fry have both developed externally accredited Social Return on Investment Models. The outcome identified that every £1 invested Ashram’s in core activities generated £5.12 of social value added. Fry Housing Trust conducted the same review on its Employment and Skills Services and found that for every £1 invested, £10.75 of social value was added. (Meets corporate objectives 1, 2 and 3)
Socially responsible energy and utilities procurement During 2013/14, the Group energy supply contract was re-procured. This re-procurement exercise not only saved a predicted £600,000 over the next two years, but also guarantees that energy procured by the Group continues to be Green Energy, generated by environment responsible methods. (Meets corporate objectives 2 and 3)
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Our future VFM plans We remain at heart a social business, one which provides homes and services for those in need. We will continue to do this and also use the return on our assets and investments to develop services, ensure high quality and deliver VFM. We will continue to build more new homes and we will ensure we maintain and enhance existing homes. The key objectives in the business plan have VFM entrenched and we also have the following key areas where we will drive value for our customers and stakeholders: u We will undertake a review of the reorganisation of our operational services to ensure those services are delivering effectively for customers and in a way which clearly demonstrates good VFM aiming for c£300k savings in 2014/15 u We will undertake future work to 300 units to upgrade the energy efficiency ratings to improve running costs for those customers u We will undertake a further review of our care and support dedicated housing stock to identify key actions for the future and determine whether any of the units should be modified, redeveloped or sold, particularly where there is uncertainty around future commissioning of services u We will combine our assets management operation with our building, development and regeneration team to ensure a more integrated approach to asset development and management u We will carry out further procurement activities which will realise a further £400 to £500k of procurement savings, particularly in the supply of products and services in relation to asset management u We will review our external contractors and supply chain and further develop in-sourcing and growth of the in-house team, Homes and Gardens u We will undertake a review of the Local Homes Factory to ensure it has delivered good VFM since it’s commencement of operation in 2012 u We will realise further synergy savings of £400k across our Group wide care and support operations u We will realise further synergies and savings for Heantun to the value of £120k in back-office services as a result of Heantun joining the Accord Group u We will carry out a detailed review of commercial buildings and rationalise office space as well as reduce office costs by 25 per cent in order to invest in new services for customers u We will increase the income stream through Matrix Housing partnership by the delivery of further development services. The Accord Group is proud to deliver consistently good services – we must now deliver great services across all our areas of operation. We know that we can do this and that we must do this efficiently. Moving to mobile working, retraining colleagues, bringing in new services will ensure we take responsibility for our business and our support to customers and local communities. Most importantly, we shall ensure we use our asset base responsibly to enable us to deliver our strategic objectives and carry out our business resourcefully and professionally.
Accord Group
Annual Report and Financial Statements 2014
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Accord Group
Report of the Board and Operating Financial review Overview of business The Group recognises that its primary objective is to provide homes and services to people in need, whilst at the same time ensuring that sufficient income is generated from its activities to meet its operating costs, interest costs and funding covenants. Our Business Strategy provides a clear balance between growth and excellent customer service. Our strong track record of prudent financial management will ensure that we continue to meet the needs of existing customers as well as building new homes. By adopting a rigorous approach to financial planning we are better placed to meet the needs of our business. Our finances are managed through the annual budget process and delivery against key performance targets. During the year, the Group has built on its strengths to maintain its position as a leading, effective and innovative housing group. We have continued to manage our resources efficiently to ensure we meet the demands of today whilst building for the challenges of tomorrow. The year ended 31 March 2014 has continued to see additional provision of social housing and further consolidation of a sound financial position. The Group’s surplus for the year before tax was £3.635 million (2013: £3.003 million). Our financial performance remains strong. Turnover of £100.7 million represented, a 10.1 per cent increase on the prior year. The operating surplus was £15.871 million in 2013/14, compared to £15.682 million in 2012/13. This continuing strong performance has enabled Accord to further strengthen its financial position and continue its sustained investment in both properties and services. Increasing surpluses of £0.632 million (21.0 per cent) from 2013, demonstrates the Group’s ability to translate growth in income into growth in overall bottom line surpluses. In successfully delivering these services, the Group continues to highlight its commitment and focus on its core business for people in need through the provision of general needs, sheltered and supported housing, care and support services and the provision of low cost home ownership solutions. In addition to providing services to over 40,000 people in the Midlands, we now also serve customers in the North, North West and North East of England and provide around 65,000 hours of care services each week. The development of new homes to provide affordable social housing remains a fundamental objective for the Group. As a housing provider we recognise the contribution that a wider range of tenures can make to the achievement of balanced, sustainable communities. There were 11,068 units in management at 31 March 2014:
Group Group 2014 2013 Property Numbers Property Numbers General needs housing Affordable rents Supported housing Residential care homes Shared ownership accommodation Other
7,101 427 1,324 275 1,207 734
7,203 174 1,314 287 1,180 748
Total
11,068
10,906
Annual Report and Financial Statements 2014
59
The table shows the Group has a diverse portfolio of properties, which are located across the West Midlands. The Group’s housing stock is a combination of new build and refurbished properties, which have been added since the Group’s inception some 40 years ago. Stock condition reports have confirmed that the housing stock is well maintained, and that all Group subsidiaries are fully compliant with the requirements of the Decent Homes Standard. Total expenditure on repairs and maintenance in the year was £14.942 million (2013: £12.782 million) of which £4.043 million of repairs have been capitalised in the year (2013: £3.192 million). This demonstrates the Group’s on-going commitment to investing in its existing stock and the impact of increased capitalisation under component accounting. Group turnover and operating surplus/(deficit) by activity are shown below:
Turnover Operating Surplus/(Deficit) Year 2014 2013 2014 2013 £000 £000 £000 £000 Total General needs housing Supported housing Domiciliary care services Residential care homes Shared ownership accommodation First tranche shared ownership Other Total
34.594 31.901 11.031 11.495 30.610 26.136 7.336 7.460 1.959 1.867 2.004 0.565 13.154 11.975 100.688 91.399
14.315 14.144 1.843 2.332 (0.442) 0.275 0.095 (0.028) 0.683 0.618 (0.069) (0.014) (0.554) (1.645) 15.871 15.682
In the year, 34.3 per cent of income was derived from general needs (2013: 34.9 per cent). During the year, the Group received £5.084 million (2013: £5.320 million) from local authority administered Supporting People budgets, which are continuing to diminish; this represents 10.4 per cent of total income from care related services (2013: 11.8 per cent). Since the acquisition of Direct Health Group Limited in 2012 the focus of the Group’s primary source of income continues to be from the provision of care related services. Across the Group we continue to monitor the financial viability of the care and support business closely at an Executive level. Group-wide interest payable increased to £13.242 million (2012: £11.498 million) as debt increased from £303.224 million to £326.495 million. Our increased debt position highlights our commitment to the development of new homes and the regeneration of the communities we serve.
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Accord Group
2013/14
2012/13
2011/12
2010/11 (restated)
TURNOVER - GROUP 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
£100.7m increase 10%
OPERATING SURPLUS - GROUP 16.0 15.0
13.0 2013/14
2012/13
12.0 2011/12
2010/11 (restated)
14.0
£15.9m
increase 0.2 million
11.0 10.0
SURPLUS - GROUP 4.0 3.5 3.0
2011/12
2013/14
2012/13
2010/11 (restated)
2.5 2.0 1.5
£3.6m
increase 20%
Annual Report and Financial Statements 2014
61
GROUP HIGHLIGHTS: FOUR YEAR SUMMARY
2014 2013 2012 2011 £m £m £m £m For the year ended 31 March (restated) Group Income and Expenditure Account Turnover 100.688 Operating surplus 15.871 Interest payable and similar charges 12.635 Surplus for the financial year 3.635
91.399 63.286 61.797 15.682 12.489 13.180 13.242 11.498 10.756 3.003 1.711 2.456
Consolidated Balance Sheet Housing assets at cost 677.958 649.675 627.527 612.514 Social housing and other capital grants 257.059 252.459 247.696 247.210 Net investment in new housing during year 21.134 15.823 16.624 16.646 Net current (liabilities)/assets (0.979) 0.218 13.495 9.627 Total assets less current liabilities 419.651 402.694 376.394 360.692 Loans outstanding 339.808 326.495 303.244 287.597 Reserves 84.660 81.046 78.046 76.348 Corporate Performance Surplus before interest as a percentage of turnover Surplus before interest as a percentage of gross rents Interest Cover Gearing EBITDA (£m) EBITDA as a percentage of turnover Average cost of finance Group CEO pay as a percentage of turnover Group CEO pay per employee
16.1% 29.5% 166.6% 49.6% 23.544 23.4% 4.01% 0.2% £54
17.4% 30.1% 158.4% 49.7% 23.267 25.5% 4.48% 0.2% £43
19.7% 25.0% 141.3% 48.0% 17.209 27.2% 4.15% 0.2% £111
21.3% 27.1% 151.4% 43.5% 16.998 27.5% 4.27% 0.2% £103
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Accord Group
KEY OPERATIONAL INDICATORS
General Needs Year 2013/14 2012/13 2011/12 2010/11
Accord Group % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
2.58 1.10 28
3.35 0.72 31
2.48 0.75 16
4.51 0.82 18
Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
1.95 1.15 29
2.04 0.92 27
2.00 0.68 20
2.71 1.21 27
Supported Housing Year 2013/14 2012/13 2011/12 2010/11 Accord Group % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
1.61 7.29 33
2.32 5.86 34
2.10 5.75 34
4.61 5.10 23
Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
1.14 4.91 69
0.39 4.13 54
1.33 3.63 34
5.91 2.33 27
Year Accord Group % first time fix repairs completed % customer satisfaction in respect of repairs % repairs appointments kept Accord Housing Association % first time fix repairs completed % customer satisfaction in respect of repairs % repairs appointments kept
2013/14 2012/13
92.2 99.0 97.2
74.2 94.7 96.5
91.5 99.1 97.4
74.9 94.5 96.6
During the year the Group-wide Corporate Asset Management team was formed. As part of the commencement of this team, a new set of centric key performance indicators have been introduced. These indicators represent a departure from the traditional KPIs for a repairs service. The indicators were developed in conjunction with our customers and measure aspects of the service which they consider to be most important to them. The Group’s average creditor payment period at 31 March 2014 was 30 days (2013: 31 days).
Annual Report and Financial Statements 2014
Development Accord leads the Matrix housing partnership which continues to deliver successfully its significant 2011-2015 HCA Affordable Housing Programme. Accord is delivering over 600 new homes as part of this programme. As at 31 March 2014, Accord and the Matrix partners were ahead of development commitments agreed with the HCA. The Group continues to build on its strong reputation and proven track record in both the development of general needs and supported housing. This development programme will be financed by a mixture of Social Housing Grants and our own reserves. A key part of this is the development and maintenance of sound working relationships with our many local authority and other key stakeholders. Throughout 2015-18, Accord Group will also deliver a confirmed substantial number of new homes through the HCA’s Affordable Homes Guarantee Programme. Operations at Accord’s LoCaL (Low Carbon Living) Homes factory remain strong. The factory produces high quality, energy efficient wood frame homes from sustainable materials which continue to supply Accord’s development programme. The factory is based in Walsall, with the significant majority of employees being social housing tenants who all receive thorough training in a new vocation. 2013/14 production targets delivered new homes for the Beaconview, Bushbury, Greenfields and Whitworth Close developments with further programmed production for 2014/15 to support the completion of the current programme.
Capital structure Total funds including long-term creditors at the end of the period amounted to £418.431 million (2013: £402.694 million), of which £84.583 million (2013: £80.983 million) comprised the income and expenditure account reserve. The increase compared to 2013 is largely due to an increase in tangible fixed assets, social housing grant, investments increased borrowing and the surplus for the year. Long-term borrowings at the end of the period have increased to £334 million from £322 million in 2013. Balance sheet gearing of the Group at the year-end is 49.6% (2013: 49.7%) and remains comfortably within our funding covenants. All other members of the Group comply with their funding covenants, including those covenants introduced under the Group funding facility. The Group has access to undrawn borrowing facilities of £63.0 million, and has substantial unutilised security on its balance sheet. These facilities ensure that we remain in a strong position to fund future growth plans and investment opportunities. The net movement in cash for the year was an inflow of £2.530 million (2013: £18.314 million outflow) reflecting the net impact of our development programme, increased borrowing, higher debt management costs and increased growth linked to new developments and services. The average interest rate for the year stood at 4.01% (2013: 4.48%). Interest cover for the Group stands at 166.6% (2013: 158.4%) and remains comfortably within our funding covenants.
Treasury management and control Treasury activities are controlled by the Group Finance Director with the assistance of external consultants as required, and are carried out in accordance with policies approved by the Board. The purpose of the treasury management function within the Group is to ensure that adequate cost-effective funding is available at all times and that exposure to financial risk is minimised. The key risks managed by the treasury function are interest rate risk and liquidity risk. Treasury management activity is subject to review by internal auditors on a regular basis. External review from Treasury specialists was also sought in the year. Treasury activity is closely monitored on a regular basis and compliance with covenant conditions continues to be met with no breaches in the year. Quarterly monitoring information and management accounts are submitted in accordance with funder and regulatory requirements. Cash flow requirements are monitored through ongoing cash flow forecasting. It is our policy to balance the cash held by repaying debt as far as possible, while ensuring sufficient access to funding to cover investment and business development plans. This is achieved by the use of detailed cash flow forecasts covering the short, medium and long-term, together with a substantial programme of short-term investment, and use of revolving facilities.
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Accord Group
Interest rate exposure is managed via the use of interest rate fixings. The Group’s policy is that between 60% - 80% of its total borrowing should be at fixed rates of interest. At the year-end, 63% (2013: 66%) of the Group’s borrowings were at fixed rates of interest; this rate will increase as additional fixing of debt is planned during 2014/15. Accord has not used stand-alone derivative financial instruments to manage its interest rate exposure during the year. However, Accord does have the Wider Rule Change and approval from the Homes and Communities Agency to use stand-alone derivative financial instruments, and has facilities in place with three funding institutions to utilise these instruments. Continuity of funding is ensured by arranging for short-term borrowings and committed facilities and by limiting the amount of debt repayable in any one year. Year-end undrawn committed Group facilities were £63.0m (2013: £79.5 million), and with a maximum amount of £45 million for Accord Housing Association (2013: £52.5 million). Group wide interest payable decreased to £12.635 million (2013: £13,242 million), and debt increased from £326.495 million to £339.808 million. Our increased debt position highlights our commitment to the development of new homes and the regeneration of the communities we serve. The Group’s main financial covenants are in respect of loan gearing and interest cover. The Board believes that the financial covenants entered into are appropriate for the Group’s operations. The table below provides an analysis of when the debt falls due for repayment.
Debt Repayment Group
2014 2013 £m £m
0 – 1 year
4.191
2.958
1 – 2 years
7.190
4.91
2 – 3 years
6.094
7.040
3 – 5 years
13.965
12.568
5 – 10 years
63.436
53.490
10 – 15 years
89.080
85.738
15 – 20 years
77.881
71.361
20 – 25 years
65.017
68.977
25 – 30 years
12.874
20.067
Fixed debt 63%
Over 30 years
0.080
0.105
Variable debt 37%
Total
339.808
326.495
Accord Group interest rate management
Risk management The management of risk is acknowledged as being fundamentally important to the Group. Risks are continually assessed to measure their significance and reported to the Board. Policies and procedures are adapted to ensure appropriate action is taken to safeguard the Group’s residents and assets. Our approach to risk management includes the following: u A formal framework setting out how we identify and manage opportunities and risk, which sets out clear responsibilities of staff, Management Team and the Board u Risk maps which set out the risks of failing to meet business objectives, together with controls and actions needed to manage risks u Internal audit using a risk based approach for the audit programme u “Project Approval Panel” to assess the business case for major new projects and initiatives u Appraisal and regular staff reviews which are aligned to managing risk u Sensitivity analysis of the key areas of risk built into our financial forecasts u Activity limits set where required.
Annual Report and Financial Statements 2014
65
u Formal project management procedures in place in relation to the development of new homes u Business continuity plans and disaster recovery plans u Regular assessment of the local housing market u Regular review of the key risks facing the Group by the Executive and Board u Regular review of risk appetite by the Board. u Risk scenario planning. The Group-wide Risk Management Strategy is subject to regular review and update. The emphasis remains on ensuring risks and opportunities are continuously monitored, understood and evaluated. This supports effective and strategic decision-making and ensures the Group is able to adapt to changing circumstances. As part of our risk management framework, the Group operates a comprehensive risk management process which incorporates all subsidiaries and major group functions. Risk management informs our business planning cycle and in the current economic climate proactive risk management becomes an increasingly important management tool. The Group Risk Management Strategy was approved by the Group Board in 2013. Quarterly risk management updates are subject to review by the Group Resources and Audit Committee. The Executive Board formally reviews risk on a monthly basis. This supports effective and strategic decision-making and ensures the Group is able to adapt to changing circumstances. The Group’s emphasis remains on ensuring risks and opportunities are continuously monitored and evaluated. Key risks facing the Group as outlined in the Business Plan include:
Risk: Loss of care funding/or care contract renewal Key controls and risk reduction include: New Care and Support Strategy implemented with new model for delivery of care going forward. Financial performance monitored monthly. Close monitoring of new delivery model by Quality team. Care and Support New Business team.
1-5
16
Residual risk score 2013
15
1-5
6-10
11-16
Residual risk score 2014
12
Residual risk score 2013
12
Risk: Housing Services - void properties Key controls and risk reduction include: Difficult to Let Strategy in operation. Void policies and procedures in place. Liaison with local authorities and demographic research undertaken. Incentives for clean properties at termination introduced.
11-16
Residual risk score 2014
Risk: Housing services - arrears escalate significantly Key controls and risk reduction include: Arrears action group to monitor and update policies and procedures. Authorisation for evictions and write-offs set up. Income management policy review undertaken by the welfare reform action group.
6-10
1-5
6-10
Residual risk score 2014
11-16
16+
16+
16+
12
Residual risk score 2013
9
Risk: Welfare reform changes/end of direct payments/ erosion of income streams Key controls and risk reduction include: Welfare reform action group set up with robust action plan to manage the changes. Comprehensive intelligence gathering of customer. Financial inclusion group set up to monitor risks. Effective robust management policy and practices. Jobs and skill coaches in place.
1-5 Residual risk score 2014
16+
15
1-5
6-10
Residual risk score 2014 Residual risk score 2013
11-16
8
Residual risk score 2013
Risk: Poor performing KPI’s e.g. voids and lettings Key controls and risk reduction include: Performance improvement review undertaken. Monitoring and reporting to Exec and Boards on regular basis with performance collation and dashboard with set targets.
6-10
11-16 12
9
16+
66
In addition to Accord’s key risks outlined above, wider risks facing the sector include:
Accounting changes The sector is preparing itself for the implementation of new accounting standards as part of the next SORP release. Final consultation was undertaken in May 2014 with the new SORP expected to be released late in 2014. The new SORP is still expected to be applicable for the 2016 year end.
Pension scheme liabilities Under the new SORP, it is likely that past service deficit contributions in respect of defined benefit pension fund for multiemployer schemes will be required to be brought ‘on Balance Sheet’. The economic performance of pension assets has deteriorated significantly due to the downturn in economic conditions, resulting in pension scheme liabilities exceeding the value of these assets significantly.
Value-for-money There is a clear expectation from the HCA, that Providers clearly demonstrate value-for-money which is clearly linked to corporate objectives and return on assets. The effective and transparent application of finite resources is increasingly important under the current regulatory focus.
Financial markets: interest rates, inflation and deflation Performance of the financial markets can impact on business performance – both rent increases and debt management costs can be directly influenced by economic market movements.
Contraction of the public sector Public spending and associated public services continue to face funding pressure. In light of this it is increasingly important that the social housing and care sectors position themselves appropriately in context of these pressures.
Availability and pricing of funding from the banking sector The type and nature of new funding for the social housing sector continues to change. Bank finance continues to be a source of short to medium-term funding with ‘private placement’ finance becoming increasingly available to the sector. Accord has sufficient finance and funding in place to fulfil our current development commitments as part of the 2011-2015 HCA affordable homes programme. Additional funding will be secured in early 2015 to fulfil future strategic development aspirations.
Human Resources: staff recruitment and retention The ability to recruit and retain skilled carers is an ongoing pressure for all providers in the care and support business. This can impact on both the cost and consistency of service delivery and is therefore a risk which is closely monitored on an ongoing basis.
Health and safety The Board acknowledges its duty of care to employees, tenants and residents in respect of all matters relating to health, safety and the environment. A dedicated member of staff, operating under the supervision of the Group Finance Director, regularly reviews and updates relevant policies and procedures, supervises risk assessments and provides staff with training and support on health and safety issues. During 2013/14, a number of health and safety audits have been undertaken to ensure compliance with the required standards and legislation is maintained.
Accord Group
Annual Report and Financial Statements 2014
Internal control The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. Such a system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide the Governing Board with reasonable and not absolute assurance against material misstatement or loss. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks to the achievement of the Group’s strategic objectives. The process has been in place throughout the year to 31 March 2014 and up to the date of approval of the Financial Statements and Annual Report. The effectiveness of this process has been reviewed regularly by the Group Resources and Audit Committee which met four times in 2013/14. The main policies which the Board has established, and which are designed to provide effective internal control, are summarised below. On behalf of the Board, the Group Resources and Audit Committee has reviewed the effectiveness of the system of internal control in existence in the Association for the financial year and the period to the date of approval of the financial statements. The Group Resources and Audit Committee received the annual report on internal control assurance and have conducted its review of effectiveness of the risk management and control process. A number of internal audit reviews have been undertaken in accordance with the approved Internal Audit Plan approved by the Group Resources and Audit Committee on behalf of the Board. No weaknesses were found in internal controls, which resulted in material losses, contingencies, or uncertainties, which require disclosure in the financial statements or in the external auditors’ report on the financial statements.
Internal audit The Board has delegated responsibility for overseeing the adequacy and effectiveness of the Group’s internal control system to the Group Resources and Audit Committee. The Group’s internal audit team reports directly to the Group Resources and Audit Committee. An annual assurance report is produced by the internal auditor summarising the systems audit programme and confirming that the Group has a satisfactory internal control system in place. Management assurances are received by the Group Resources and Audit Committee to confirm that recommendations have been implemented as agreed. Subsequent internal audit reviews are undertaken to check recommendations have been properly implemented. Quarterly Management Accounts are presented to the Committee for review and scrutiny.
Risk management The Board and Group Resources and Audit Committee oversee the risk management cycle which governs the ongoing process of establishing and communicating responsibilities, identifying risks and providing a framework to enable the organisation to minimise losses and maximise opportunities. Strategic risks are identified through a continuous risk assessment exercise, whilst operational risks are identified through the internal audit and best value process.
External audit The work of the external auditors provides assurance through the interim and final audit visits and the provision of an audit strategy, audit report and management letter. Regular meetings are held with the external auditors to provide an update on changes in the business and to discuss strategic and technical matters.
Quality management systems The quality of the Group’s management systems is acknowledged in its review by the Internal Auditor and Investors in People accreditation. The Group also complies with a number of other recognised quality management systems including Investors in Excellence, ISO14001 and ISO20001 (related to Environmental and Information Technology quality management systems respectively).
Regulatory reports The Group reports to the Homes and Communities Agency through a range of regulatory returns all of which were submitted on time. The Executive Board ensures that regulatory matters are dealt with promptly and efficiently, co-ordinates the self-monitoring system operated by the Board, and monitors compliance with performance standards.
67
68
Performance indicators Key performance indicator reports are produced regularly for the Group and are reported through the Executive Board to the various Boards/Committees. These reports include performance monitoring on housing management, care quality compliance, maintenance, development, customer satisfaction, staff and financial results.
Fraud The Group has a rigorous approach to fraud as set out in the Fraud Strategy and Policy. An annual fraud report is reviewed by the Group Resources and Audit Committee. This includes an analysis of the fraud and losses register for the year and how surrounding controls have been improved. The Group Resources and Audit Committee meets with the members of the Executive Board, the internal auditors and external auditors to review specific reporting and internal control matters and to satisfy itself that the systems are operating effectively. The Governance Committee ensures that the Group attains the highest standards of effective governance.
Employees The strength of the Group lies in the quality and commitment of its employees. Our ability to meet our business objectives and commitments to tenants in an efficient manner depends on the contribution of employees throughout the Group. We are committed to equal opportunities for all employees and will not discriminate on the grounds of disability or impairment, gender, sexual orientation, race or religious beliefs. The Group demonstrates its commitment to equality in all aspects of employment, including recruitment, career development, training, promotion and welfare. We have achieved ‘Investors in People’ recognition and successfully retained this status, which demonstrates our commitment to training and developing our employees to a high level. The Group continues to be committed to consulting with employees and keeping them informed on matters affecting them and on the progress of the Group. This is carried out in a number of ways including a formal forum for consultation, departmental meetings and a variety of newsletters.
Fairness The Accord Group will treat all people fairly and with respect, recognising and responding to their individuality. The Group’s policies reflect its commitment to fairness and the value it places on diversity in all aspects of its work. We will: u Focus on the needs of each individual in providing employment, homes and services u Listen to and understand our customers, asking people what help, support and/or guidance they feel they need to access our services u Ensure our people treat each other and our customers with respect to build the trust, care and commitment necessary to deliver an excellent service to all u Monitor and demonstrate how successful we are in acting fairly, making a difference and in meeting the needs of our local communities u Always aim to exceed the requirements of the law and our regulators, as well as adopting a person centred approach u Be an excellent organisation, demonstrating our accountability and promoting fairness for all.
Accord Group
Annual Report and Financial Statements 2014
Accord Group’s commitment to environmental matters Accord remains committed to being at the forefront on delivering innovative service delivery solutions which impact favourably on our environment and communities. As part of this commitment we have accomplished a number of key achievements: u The Accord Group became one of the first housing associations in the country to obtain the ISO14001 Environmental Management Standard. This accreditation was recertified following a successful stringent audit process. u The Accord Group is the first housing association to achieve the much more demanding European Eco Management and Audit Scheme (EMAS) standard u Environmental factors are considered are all key project investment decisions considered by the Group’s Project Approval Panel u Accord successfully achieved approval to our revised EMAS statement which embraces the latest requirements of the initiative to EMAS III u We are already committed to the development of low and zero carbon homes with our partnership with a Norwegian manufacturer of timber framed homes that are generally 50 per cent more efficient when compared to traditionally built homes. High quality, highly efficient timber frame homes are also being produced at Accord’s LoCaL Homes factory. LoCaL homes have been produced, built and lived in by our customers. These homes will continue to supply Accord’s 2011-2015 Affordable Homes development programme and beyond.
Statement of responsibilities of the board The Board is responsible for preparing the Report of the Board and the financial statements in accordance with applicable law and regulations. Industrial and Provident Societies Acts and registered social landlord legislation requires the Board to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under the Industrial and Provident Society legislation the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and surplus or deficit of the association and group for that period. In preparing these financial statements, the directors are required to: u Suitable accounting policies and then apply them consistently u Make judgments and accounting estimates that are reasonable and prudent u State whether applicable UK Accounting Standards and the Statement of Recommended Practice (SORP) Accounting by Registered Housing Providers Update 2010), have been followed, subject to any material departures disclosed and explained in the financial statements. The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the group and association and enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 2002, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2012. It is also responsible for safeguarding the assets of the association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board is responsible for the maintenance and integrity of the corporate and financial information on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
69
70
Accord Group
Disclosure of information to auditors In so far as each of the directors is aware: u There is no relevant audit information of which the association’s auditors are unaware; and u The directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
Accounting policies The principal accounting policies are set out in note 1 to the financial statements. The most critical accounting policies in terms of impact on the financial statements are the treatment of capital grants, capitalised interest, the capitalisation of development staff costs within housing properties and the calculation of housing property depreciation. These policies have remained largely unchanged during the year.
Going concern The Board has reviewed the 2014/15 Association and Group budget, five year financial plan, borrowing facilities, funding requirements and forward projections. At 31 March 2014, the Group has £63m of available funding facilities in place which is more than sufficient to meet the Group’s strategic growth ambitions and development plans. The 2014/15 forecasts Group surpluses of £3.8 million, with further growth projected over the life of the business plan. On the basis of this review, the Board is satisfied that the Association and Group is a going concern and has continued to adopt the going concern basis in preparing the financial statements.
Charitable donations The Association made donations to charitable organisations of £16,501 during the year (2013: £17,385).
Auditors A resolution for the re-appointment of Grant Thornton UK LLP as auditors of Accord Housing Association and its Subsidiaries will be proposed at the 2014 Annual General Meeting. On behalf of the Board
Mr B. Blower, MBE (Chairman) Date: 24 July 2014
Lakhbir Jaspal (Deputy Group Chief Executive) Date: 24 July 2014
Annual Report and Financial Statements 2014
Independent auditor’s report to the members of Accord Housing Association Limited We have audited the financial statements of Accord Housing Association Limited for the year ended 31 March 2014 which comprise the consolidated and association income and expenditure accounts, the consolidated and association balance sheets, the consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the housing association’s members, as a body, in accordance with regulations made under Section 9 and 13 of the Friendly and Industrial and Provident Societies Act 1968. Our audit work has been undertaken so that we might state to the housing association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the housing association and the housing association’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the board and auditors As explained more fully in the Statement of Responsibilities of the Board (set out on page 67), the board is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/apb/scope/private.cfm
Opinion on financial statements In our opinion the financial statements: u give a true and fair view of the state of the association’s affairs and group affairs as at 31 March 2014 and of the group’s and parent’s income and expenditure for the year then ended; and u have been properly prepared in accordance with Industrial and Provident Societies Acts 1965 to 2002, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2012.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts 1965 to 2002 requires us to report to you if, in our opinion: u a satisfactory system of control over transactions has not been maintained; or u the parent association has not kept proper accounting records; or u the financial statements are not in agreement with the books of account; or u we have not received all the information and explanations we need for our audit.
Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Milton Keynes, England 4 August, 2014
71
72
Accord Group
INCOME AND EXPENDITURE ACCOUNT
Notes Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000 Turnover 100,688 91,399 Operating costs (82,744) (75,138) Cost of sales (2,073) (579)
48,456 44,439 (34,171) (31,939) (2,073) (579)
Operating surplus 2 Surplus on sale of fixed assets 4 Interest receivable and similar income Interest payable and similar charges 5 Exceptional Item 8 Surplus for the financial year before taxation
8
15,871 316 11 (12,635) 72
15,682 405 55 (13,242) 103
12,212 85 5 (9,408) 473
11,921 347 48 (9,906) -
3,635
3,003
3,367
2,410
Taxation 19 (21) (3) - Surplus for the financial year after taxation
20
3,614
3,000
3,367
All amounts relate to continuing activities. The notes on pages 76 to 104 form an integral part of the Financial Statements. All recognised surpluses and deficits have been included in the income and expenditure account.
The Financial Statements were approved by the Board of Management on 24 July, 2014 and signed on its behalf by:
CHAIRMAN
BOARD MEMBER
BOARD MEMBER
2,410
Annual Report and Financial Statements 2014
73
GROUP BALANCE SHEET
Notes 2014 2013 £000 £000 £000 £000 Intangible fixed assets Goodwill 29 23,999 25,555 Tangible fixed assets Housing properties less depreciated costs 645,718 621,535 Social housing and other grants (257,059) (252,459) 9 388,659 369,076 Other fixed assets 10 7,889 7,759 Investments 11 83 86 Current assets Properties for sale 12 2,650 5,633 Stock and work in progress 13 894 1,068 Debtors 14 13,865 13,805 Cash at bank and in hand 6,612 3,741 24,021 24,247 Creditors: Amounts falling due within one year 15 (26,220) (24,029) Net current (liabilities)/assets
(2,199)
218
Total assets less current liabilities
418,431 402,694
Creditors: Amounts falling due after more than one year
333,771
321,648
Capital and reserves Share capital 18 - Revenue reserves 20 84,583 Designated reserves 20 25 Consolidation reserves 20 43 Minority Interest reserve 20 9
80,983 11 43 9
16
418,431 402,694
The Financial Statements were approved by the Board of Management on 24 July, 2014 and signed on its behalf by:
CHAIRMAN
BOARD MEMBER
BOARD MEMBER
The notes on pages 76 to 104 form an integral part of the Financial Statements.
74
Accord Group
ASSOCIATION BALANCE SHEET
Notes 2014 2013 £000 £000 £000 £000 Tangible fixed assets Housing properties less depreciated costs 461,305 444,240 Social housing and other grants (173,783) (170,267)
9 287,522 273,973
Other fixed assets 10 5,224 5,536 Investments 11 29,120 29,123 Current assets Properties for sale 12 2,650 5,633 Stock and work in progress 13 894 1,068 Debtors 14 8,188 7,651 Cash at bank and in hand 2,815 965 14,547 15,317 Creditors: Amounts falling due within one year 15 (19,461) (17,618) Net current (liabilities)/assets (4,914) (2,301) Total assets less current liabilities
316,952
306,331
Creditors: Amounts falling due after more than one year
265,720
258,466
Capital and reserves Share capital 18 - Revenue reserves 20 51,232
47,865
16
316,952 306,331
The Financial Statements were approved by the Board of Management on 24 July, 2014 and signed on its behalf by:
CHAIRMAN
BOARD MEMBER
BOARD MEMBER
The notes on pages 76 to 104 form an integral part of the Financial Statements.
Annual Report and Financial Statements 2014
75
CONSOLIDATED GROUP CASHFLOW STATEMENT
Notes 2014 2013 £000 £000 £000 £000 Net cash inflow from operating activities 21a 26,937 22,748 Returns on investments and servicing of finance Interest received
11
55
8
72
103
Interest paid
(14,380)
(14,114)
Exceptional item re: Icelandic bank/loan breakage costs
Net cash outflow from returns on investments and servicing of finance
(14,297) (13,956)
Corporation tax paid
2 (21)
Capital expenditure and financial investment Acquisition and construction of housing properties (27,402) (29,223) Social housing grant received 21d 4,253 7,430 Purchase of other fixed assets (2,740) (1,852) Sales of housing properties 2,366 2,231 Investments 3 3 Acquisition of Direct Health Group Limited, net of cash
-
(29,037)
Net cash acquired with Direct Health Group Limited, acquisition
-
237
Net cash outflow from capital expenditure
(23,520)
Cash outflow before movement of liquid resources and financing Management of liquid resources Financing Loans received Loans repaid
(50,211)
(10,878) (41,440)
16,500 (3,092)
28,818 (5,692)
Net cash inflow from financing
21b 13,408 23,126
Increase/(decrease) in cash
21c
The notes on pages 76 to 104 form an integral part of the Financial Statements.
2,530 (18,314)
76
Accord Group
Notes to the
FINANCIAL STATEMENTS
Annual Report and Financial Statements 2014
1. Principal Accounting Policies Basis of Accounting The financial statements have been prepared in accordance with applicable Accounting Standards, the Statement of Recommended Practice ‘Accounting by Registered Social Landlords’ 2010 and on the historical cost basis. Accounting policies are consistently applied and have remained unchanged from the prior year. A summary of accounting policies is set out below.
Basis of consolidation The consolidated accounts incorporate the financial statements of Accord Housing Association Limited and all of its subsidiary undertakings. Accord Group acquired Direct Health Group Limited on 18 June 2012. Direct Health Group Limited’s financial performance information is included in the consolidated financial statements from the date of acquisition.
Turnover and revenue recognition Turnover represents rental and service charge income receivable, fees receivable, revenue grants from the Homes and Communities Agency and other public authorities and sale proceeds from first tranche shared ownership sales. Income is recognised from the point when properties are first let. Income from first and subsequent tranches sales, and properties built for sale is recognised at the point of legal completion of the sale. Revenue grants are receivable when the conditions for receipt when the conditions for receipt of agreed grant funding have been met. Charges for care and support services funded are recognised as they fall due under contractual arrangements.
Sale of housing properties Where properties built for sale are disposed of during the year, the disposal proceeds are included in turnover, and the attributable costs included in cost of sales. The surplus or deficit on disposal of housing properties held as fixed assets, including second or subsequent tranches of shared ownership properties, is accounted for on the face of the income and expenditure account. Where any Social Housing Grant (SHG) to be recycled or repaid is less than the SHG relating to the disposal, the difference is treated as abated SHG and included as a component of the surplus or deficit on disposal.
Supported housing managed by agencies Social Housing Grant claimed and capital expenditure incurred on hostels owned by the Association are included in the balance sheet of the Association. The treatment of other income and expenditure is determined by whether day to day financial risk has been substantially transferred or retained by the Association. Where risk has been retained by the Association all the hostel’s income, expenditure, assets and liabilities are included in the Association’s financial statements. Where risk has been substantially transferred to the agency, the Association’s financial statements include only the income, expenditure, assets and liabilities arising directly from Association’s operations.
Value added tax The Association and the subsidiaries are Value Added Tax (VAT) registered but a large proportion of their income (rents and service charges) is exempt from VAT, giving rise to a partial exemption calculation. This significantly restricts recovery of VAT incurred. Expenditure is therefore shown VAT inclusive.
Derivatives The Group uses interest rates swaps to reduce its exposure to future increases in the interest rate on floating rate loans. The notional principal is not reflected in the group’s balance sheet. Payments made under swaps are accrued over the payment period on a straight-line basis and adjusted against interest payable on the loans.
Loan expenses Expenses incurred in raising loan finance are recorded as a deduction from gross proceeds of the loan and charged to the income and expenditure account over the loan term. Loan termination costs are charged to the income and expenditure account in the year that they are incurred.
77
78
Accord Group
Supporting People (SP) subsidy income Supporting People funding was introduced on 1 April 2003 and replaces Supported Housing Management Grant. Supporting People contracts are entered into with local authorities and are of two types: u Block subsidy is determined for each tenancy based on support needs, or u Block gross is a fixed sum payable, determined by the number of qualifying bed spaces and subject to minimum occupancy levels as agreed with local authorities.
Housing properties, impairment and property improvements During the year ended 31 March 2012, the Group adopted full component accounting in relation to the capitalisation and depreciation of its completed housing property stock. Previously the Association depreciated housing properties over the estimated useful life of the asset as a whole. From 1 April 2011, all housing properties have been split between their land, structure costs and their major components which require periodic replacement. Refurbishment or replacement of such major components is capitalised and depreciated over the estimated useful life of the component. The estimated useful economic life for each component has been arrived at based on the Association’s experience of component replacement. The Association will continue to monitor and review the useful economic lives of all components and make revisions where sustained material changes arise.
Estimated useful economic life for each component: Building
125 years
Kitchen
20 years
Bathroom
30 years
Boiler and central heating
20 years
Windows and doors
35 years
Lifts (where applicable)
20 years
Improvements to properties are works, which result in an increase in the net rental income, such as a reduction in future maintenance costs, or result in a significant extension of the useful economic life of the property in the business. All other major repairs expenditure is charged to the income and expenditure account for the year. Housing properties in the course of construction are stated at cost and are not depreciated. Housing properties are transferred to completed properties when they are ready for letting and are stated at cost less depreciation. Shared ownership properties are split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover and the remaining element is classed as fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment. The Association reviews its properties for impairment on an annual basis. Any permanent diminution in the carrying value of these properties is charged to the Income and Expenditure Account.
Donated land Land donated by local authorities and others is added to cost at the market value of the land at the time of the donation. Where the land is not related to specific development and is donated by a public body an amount equivalent to the increase in value between market value and cost is added to other grants. Where the donation is from a non-public source, the value of the donation is included as income.
Social housing and similar grants Where developments have been financed wholly or partly by Social Housing Grant, the cost of those developments has been reduced by the amount of grant receivable. Social Housing Grant is credited to the income and expenditure account to the extent that it is claimed in respect of development administration costs which are not capitalised. When a Social Housing Grant funded property is sold, the grant becomes ‘recyclable’ and is transferred to a recycled capital grant fund until it is reinvested into a replacement property.
Annual Report and Financial Statements 2014
Social Housing Grant may be repayable in certain circumstances, such as when a property is no longer used for social housing. When Social Housing Grant becomes repayable, it is included as a current liability until it is repaid. The repayment of Social Housing Grant is generally subordinated to the repayment of housing loans as agreed with the Homes and Communities Agency.
Fixed assets and depreciation: non-housing properties Depreciation is charged on a straight-line basis over the expected useful economic lives of fixed assets to write off the cost less estimated residual value at the following annual rates:
Freehold offices
50 years
Furniture and equipment
6 years
Computer equipment
6 years
Leasehold improvements
6 years
Where there is evidence of impairment, fixed assets are written down to recoverable amount, with the impairment being charged to the Income and Expenditure Account.
Stock, work in progress and finished goods Stock, work in progress and finished goods relates to activities at Accord’s LoCaL Homes factory. Raw materials used in the construction of timber frame homes/panels are valued at the lower of cost and net realisable value. Work in progress is valued on the basis of direct costs, including raw materials and labour, incurred in bringing part complete timber frame panels to their present location and condition. Finished goods comprise completed timber frame panels ready for despatch and construction which are valued at the contracted transfer value.
Capitalisation of interest and development administration costs Interest on borrowings is charged to housing properties under construction up to the date of completion of each scheme. The interest charged is either on borrowing specifically for a scheme or on net borrowings, to the extent that they are deemed to be financing a scheme based on the Group’s weighted average cost of capital in 2013/14 of 4.01% (2013: 4.48%). This treatment applies irrespective of the original purpose for which the loan was raised. Staff costs, which are directly attributable to bringing housing properties into working conditions for their intended use, are capitalised.
Other long-term creditors Other long-term creditors include the costs of arranging long term funding. These amounts are amortised over the period of the underlying financial instrument.
Leases Rentals paid under operating leases are charged to the Income and Expenditure Account on a straight line basis over the lease term.
Properties for sale Shared ownership first tranche sales, completed properties for outright sale and property under construction are valued at the lower of cost and net realisable value. Cost comprises materials direct labour and direct development overheads. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal.
79
80
Goodwill Goodwill arises on business combinations in respect of acquisitions and represents the difference between the consideration given and the fair value of the net assets of the acquired subsidiary or business. Goodwill is amortised over the deemed useful life (20 years) of the value of the net assets of the subsidiary or business acquired. The Association reviews goodwill for impairment on an annual basis. Any permanent diminution in the carrying value is charged to the Income and Expenditure Account.
Recycled capital grant fund Grants repayable on property disposals are calculated in accordance with relevant Homes and Communities Agency procedures and included within a recycled capital grant fund. Interest is credited to the fund and calculated on a daily basis with the interest rate being determined by the level of total deposits. The fund can be used in the same manner as a new project funded with social housing grant with certain permitted uses. It is intended to use the fund in the provision of either new social housing for rent and/or housing for sale on shared ownership terms or to supplement the major repair programme. Grants are repayable in certain specific circumstances including where the Homes and Communities Agency concludes that the Group is unlikely to use the fund for a permitted purpose within three years. The fund is included within long-term creditors.
Disposal proceeds fund Net proceeds from the disposal of property under voluntary purchase grant and statutory right to acquire legislation and regulations are included within a disposal proceeds fund. Interest is credited to the fund and calculated on a daily basis with the interest rate being determined by the level of total deposits. The fund can be applied for specific purposes ranging from acquisition of dwellings for letting, to repairs or improvement of vacant dwellings or buildings otherwise subject to demolition. The fund may be repayable at the discretion of the Homes and Communities Agency, in certain specific circumstances. The fund is included in long-term creditors.
Pension costs The Group primarily operates a money purchase pension scheme, the costs of which are written off to the Income and Expenditure account in the period to which they relate. There are a very limited number of employees who participate in a multi employer defined benefit scheme to which the Association contributes, the cost of which is written off to the Income and Expenditure Account on an accruals basis. Contributions to the defined benefit pension scheme are calculated as a percentage of pensionable salaries of the employees, determined in accordance with actuarial advice. It is not possible to identify the share of underlying assets and liabilities belonging to individual participating employers.
Accord Group
Annual Report and Financial Statements 2014
81
2. TURNOVER, OPERATING COSTS, COST OF SALES AND OPERATING SURPLUS: GROUP
Cost of sale £000
- - - -
14,315 1,843 95 683
31,901 11,495 7,460 1,867
(19,357) (9,163) (7,488) (1,249)
- - - -
Total social housing
54,920
(37,984)
- 16,936
52,723
(37,257)
Other social activities Supporting people contract income Development administration Management administration First tranche shared ownership sales Other
2,296 - 957 2,004 180
Cost of sale £000
(2,250) - (50) - (705) - - (2,073) (539) -
46 (50) 252 (69) (359)
2,396 - 806 565 191
Operating surplus/ (deficit) £000
Operating costs £000 (restated)
(20,279) (9,188) (7,241) (1,276)
Operating surplus/ (deficit) £000
34,594 11,031 7,336 1,959
Operating costs £000
Social housing lettings General needs housing Supported housing Residential care home Shared ownership
Turnover £000
Turnover £000
Year 2014 2013
12,544 2,332 (28) 618
- 15,466
(2,286) - (11) - (691) - - (579) (237) -
110 (11) 115 (14) (46)
Total social housing activity 5,437 (3,544) (2,073) (180) 3,958 (3,225) (579) 154 Non-social housing activity Registered nursing homes 477 (639) - (162) 531 (649) - (118) Market rents 458 (416) - 42 576 (549) - 27 Domiciliary care services 30,610 (31,052) - (442) 26,136 (25,861) - 275 Other 8,786 (8,277) - 509 7,475 (6,941) - 534 Amortisation of goodwill - (832) - (832) - (656) - (656) Total non social housing activity 40,331 (41,216) - (885) 34,718 (34,656) - 62 Total 100,688 (82,744) (2,073) 15,871 91,399 (75,138) (579) 15,682 Surplus on the sale of housing properties 316 405 Interest receivable and similar income 11 55 Interest payable and similar charges (12,635) (13,242) Exceptional item 72 103 Surplus for the financial year before taxation
3,635
2013 data has been restated to reflect a reallocation of certain costs to ensure consistency in values reported.
3,003
82
Accord Group
2. TURNOVER, OPERATING COSTS, COST OF SALES AND OPERATING SURPLUS: ASSOCIATION
Operating surplus/ (deficit) £000
Cost of sale £000
Operating costs £000
Turnover £000
Operating surplus/ (deficit) £000
Cost of sale £000
Operating costs £000
Turnover £000
Year 2014 2013
Social housing lettings General needs housing 20,462 (12,296) - 8,166 18,754 (11,831) - 6,923 Supported housing 6,694 (5,269) - 1,425 6,686 (4,878) - 1,808 Residential care home 6,979 (6,794) - 185 6,958 (6,901) - 57 Shared ownership 1,607 (1,068) - 539 1,546 (1,050) - 496 Total social housing
35,742
(25,427)
- 10,315
33,944
(24,660)
-
9,284
Other social activities Supporting people contract income 66 (66) - - 82 (83) - (1) Development administration - (50) - (50) - (10) - (10) Management administration 2,318 (1,204) - 1,114 2,162 (894) - 1,268 First tranche shared ownership sales 2,004 - (2,073) (69) 565 - (579) (14) Other 446 (275) - 171 440 (35) - 405 Total social housing activity 4,834 (1,595) (2,073) 1,166 3,249 (1,022) (579) 1,648 Non-social housing activity Registered nursing homes 476 (639) - (163) 531 (649) - (118) Other 7,404 (6,510) - 894 6,715 (5,608) - 1,107 Total non social housing activity 7,880 (7,149) - 731 7,246 (6,257) - 989 Total 48,456 (34,171) (2,073) 12,212 44,439 (31,939) (579) 11,921 Surplus on the sale of housing properties 85 347 Interest receivable and similar income 5 48 Interest payable and similar charges (9,408) (9,906) Exceptional item 473 Surplus for the financial year
3,367
2,410
Annual Report and Financial Statements 2014
83
Residential care homes £000
Low cost home ownership £000
5,011 4,485 1,535
1,236 2,335 3,765
1,259 699 1
39,775 9,831 5,314
37,413 9,696 5,614
Net rental income
34,594
11,031
7,336
1,959
54,920
52,723
Turnover from social housing lettings
34,594
11,031
7,336
1,959
54,920
52,723
Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation on housing properties
(5,417) (2,245) - (6,385) (2,160) (340) (3,732)
Operating costs on social housing lettings Operating surplus on social housing lettings Void losses
2013 Group total £000 (restated)
Supported housing and housing for older people £000
Rent receivable net of identifiable service charges 32,269 Service income 2,312 Charges for support services 13
2014 Group total £000
General needs housing £000
3. INCOME AND EXPENDITURE FROM SOCIAL HOUSING LETTINGS: GROUP
(1,315) (619) (329) (7,680) (8,293) (3,729) (2,342) (667) (8,983) (9,051) (2,010) (3,888) - (5,898) (5,863) (1,018) (204) (96) (7,703) (7,359) (235) (96) (78) (2,569) (2,231) (79) (4) (1) (424) 14 (802) (88) (105) (4,727) (4,474)
(20,279)
(9,188)
(7,241)
14,315
1,843
95
683
16,936
15,466
491
717
74
-
1,282
1,157
2013 data has been restated to reflect a reallocation of certain costs to ensure consistency in values reported.
(1,276) (37,984) (37,257)
84
Accord Group
Supported housing and housing for older people £000
Residential care homes £000
Low cost home ownership £000
2014 Association total £000
18,953 1,497 12
3,066 2,093 1,535
1,165 2,227 3,587
940 666 1
24,124 6,483 5,135
22,330 6,227 5,387
Net rental income
20,462
6,694
6,979
1,607
35,742
33,944
Turnover from social housing lettings
20,462
6,694
6,979
1,607
35,742
33,944
Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation on housing properties
(3,530) (353) (557) (174) (4,614) (5,307) (1,411) (2,031) (2,224) (630) (6,296) (6,178) - (1,427) (3,647) - (5,074) (4,765) (3,500) (642) (194) (92) (4,428) (3,952) (1,546) (158) (84) (77) (1,865) (1,541) (203) (35) (4) (1) (243) (201) (2,106) (623) (84) (94) (2,907) (2,716)
Rent receivable net of identifiable service charges Service income Charges for support services
Operating costs on social housing lettings Operating surplus on social housing lettings Void losses
2013 Association total £000
General needs housing £000
3. INCOME AND EXPENDITURE FROM SOCIAL HOUSING LETTINGS: ASSOCIATION
(12,296)
(5,269)
(6,794)
(1,068) (25,427) (24,660)
8,166
1,425
185
539
10,315
9,284
307
359
74
-
740
649
Annual Report and Financial Statements 2014
85
4. SURPLUS ON SALE OF HOUSING PROPERTIES
Sale proceeds Grant abated Cost of sale Incidental sale expenses Surplus on sale
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000 2,252 286 (1,931) (291)
1,947 233 (1,653) (122)
838 139 (743) (149)
1,219 189 (895) (166)
316
405
85
347
5. INTEREST PAYABLE AND SIMILAR CHARGES
On loans repayable within five years On loans repayable in more than five years
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000 - 13,485
- 13,036
- 10,345
9,894
Add: Other interest payable and similar charges Less: Capitalised in respect of housing properties
13,485 13,036 10,345 9,894 493
1,073
276
841
(1,343)
(867)
(1,213)
(829)
12,635 13,242 9,408 9,906
86
Accord Group
6. DIRECTORS’ EMOLUMENTS
Remuneration totalling £59,000 was paid to Non-Executive Members of the Group Board in the year, as outlined in table below:
Remuneration Expenses £000 £000
Barrie Blower, MBE 14 Akshay Parikh 8 Ghulam Shabar 6 Bruce Gilbert, OBE 7 Shahana Khan 6 Bill Hartnett - Margaret Cope Resigned March 2014 6 Derek Leyland Resigns July 2014 6 Barry Picken Resigns September 2014 6
6 -
Total
6
59
Group-wide non-Executive Members received remuneration totalling £118,716 (2013: £100,663) during the period which includes the amounts disclosed in the table above. The Directors are defined as the members of the Group Board, the Group Chief Executive and any member of the executive management team. The Group Chief Executive is an ordinary member of the Association’s pension scheme. No enhanced or special terms apply to his membership and he has no other pension arrangements to which the Association contributes.
2014 2013 £000 £000 (restated) Aggregate emoluments payable to directors (including pension contribution and benefits in kind)
1,288
1,165
Emoluments payable to the highest paid director, the Group Chief Executive Officer, (excluding pension contributions but including benefits in kind) Amounts restated in 2013 include an element of backdated pay. Salary Other benefits Group Chief Executive Officer total emoluments as a percentage of turnover Group Chief Executive Officer total emoluments per employee
165 150 17 14 0.2%
0.2%
£54
£43
Annual Report and Financial Statements 2014
87
6. DIRECTORS’ EMOLUMENTS CONTINUED
The full time equivalent number of executive staff who received emoluments:
2014 (No.) £70,001 to £80,000 £90,001 to £100,000 £100,001 to £110,000 £110,001 to £120,000 £120,001 to £130,000 £150,001 to £160,000 £160,001 to £170,000 £170,001 to £180,000 £190,001 to £200,000
1 1 1 2 1 1 1 1
In addition, 15 members of senior management received emoluments in excess of £60,000 (including pension contribution and benefits in kind).Four of these senior managers received emoluments of between £60,001 - £70,000, eight between £70,001 - £80,000, two between £100,001 - £110,000 and one between £140,001 - £150,000.
2014 2013 £000 £000
Total expenses reimbursed to the directors excluding board members expenses above not chargeable to United Kingdom income tax
12
11
7. EMPLOYEE INFORMATION The average number of persons employed during the year was:
Group Group Association Association 2014 2013 2014 2013 Persons FTE Persons FTE Persons FTE Persons FTE Office staff, care support workers, wardens, caretakers and cleaners
3,378
2,371
3,824 2,900
975
797
1,031
£000 18,132 1,200 816
£000 17,592 1,110 681
843
Staff costs (for the above persons) Wages and salaries Social security costs Other costs (incl. Pension)
£000 47,287 3,379 1,463
£000 41,183 2,731 1,117
Total
52,129 45,031 20,148 19,383
88
Accord Group
8. OPERATING SURPLUS FOR THE FINANCIAL YEAR
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Operating surplus for the financial year is stated after charging: Depreciation on housing properties: Depreciation charge – social housing (Note 3) 4,727 4,474 Depreciation charge – other social housing (Note 2) 89 89 Depreciation charge – non-social housing (Note 2) 21 21 Total depreciation charge Less: write off component disposals
4,837 (451)
4,584 (438)
2,907
2,716
705
644
12
12
3,624 (366)
3,372 (292)
Depreciation Charge (Note 9) 4,386 4,146 3,258 3,080 Depreciation on other tangible fixed assets 1,688 1,940 1,092 1,074 Auditors’ remuneration (excluding VAT) - in their capacity as auditors 85 82 23 25 - in respect of other services 95 1 91 Surplus on disposal of tangible fixed assets 316 405 85 347 other than development for outright sales Operating lease payments 881 452 270 267 Repairs and maintenance expenditure 10,263 9,590 6,293 5,493
In addition £4.679 million of repairs expenditure has been capitalised in the year (2013: £3.192 million). An exceptional item has been reported in the Group Income and Expenditure account totalling £72k. This balance relates to ongoing dividend income in Caldmore as funds lost in the Icelandic banking failure continue to be recovered. In 2013 £103k was recovered and reported as an exceptional item.
Annual Report and Financial Statements 2014
89
2014 total £000
Non-social housing properties held for letting £000
Long leasehold social housing properties £000
Shared ownership properties under construction £000
Completed shared ownership housing properties £000
Housing properties under construction £000
Housing properties held for letting £000
9. TANGIBLE FIXED ASSETS: HOUSING PROPERTIES - GROUP
Cost At 1 April, 2013 589,064 26,413 30,855 - 2,026 1,317 649,675 Additions - works to existing properties 3,996 - - - 47 - 4,043 Additions - new properties 668 26,253 (14) - - - 26,907 Tenure reclassification (2,876) 5,339 (2,463) - - - Flexible tenure - buybacks 169 - (169) - - - Schemes completed in the year 12,295 (13,611) 1,316 - - Disposals (2,307) - (354) - (6) - (2,667) At 31 March, 2014 601,009 44,394 29,171 - 2,067 Social housing grant and other grants At 1 April, 2013 236,442 5,851 8,575 - 1,426 Received and receivable during year 107 5,666 - - - Flexible tenure - buybacks 18 - (18) - - Schemes completed in year 2,187 (2,547) 360 - - (Repaid)/abated on disposals (1,083) - (90) - -
1,317
677,958
165 - - - -
252,459 5,773 (1,173)
At 31 March, 2014 237,671 8,970 8,827 - 1,426 Depreciation At 1 April, 2013 26,544 - 1,117 - 359 Charge for year 4,231 - 117 - 26 Eliminated in respect of disposals (258) - (27) - (1)
165
257,059
120 12 -
28,140 4,386 (286)
At 31 March, 2013 30,517 - 1,207 - 384 Net book value at 31 March, 2014 332,821 35,424 19,137 - 257
132
32,240
1,020
388,659
Net book value at 31 March, 2013
1,032
369,076
326,078
20,562
21,163
-
241
90
Accord Group
2014 total £000
Non-social housing properties held for letting £000
Long leasehold social housing properties £000
Shared ownership properties under construction £000
Completed shared ownership housing properties £000
Housing properties under construction £000
Housing properties held for letting £000
9. TANGIBLE FIXED ASSETS: HOUSING PROPERTIES - ASSOCIATION
Cost At 1 April, 2013 404,430 26,389 27,262 - 1,278 1,317 460,676 Additions - works to existing properties 3,189 - - - 47 - 3,236 Additions - new properties 309 17,899 (11) - - - 18,197 Tenure reclassification (2,876) 5,339 (2,463) - - - Flexible tenure - buybacks 169 - (169) - - - Schemes completed in year 12,366 (13,682) 1,316 - - - Disposals (922) - (338) - (6) - (1,266) At 31 March, 2014 416,665 35,945 25,597 - 1,319 Social housing grant and other grants At 1 April, 2013 156,618 5,325 7,060 - 1,099 Received and receivable during year 107 3,835 - - - Flexible tenure - buybacks 18 - (18) - - Schemes completed in year 2,187 (2,547) 360 - - (Repaid)/abated on disposals (346) - (80) - -
1,317
480,843
165 - - - -
170,267 3,942 (426)
At 31 March, 2014 158,584 6,613 7,322 - 1,099 Depreciation At 1 April, 2013 15,287 - 1,016 - 13 Charge for year 3,126 - 105 - 15 Eliminated in respect of disposals (128) - (27) - (1)
165
173,783
120 12 -
16,436 3,258 (156)
At 31 March, 2014 18,285 - 1,094 - 27 Net book value at 31 March, 2014 239,796 29,332 17,181 - 193
132
19,538
1,020
287,522
Net book value at 31 March, 2013
1,032
273,973
232,525
21,064
19,186
-
166
Annual Report and Financial Statements 2014
91
9. TANGIBLE FIXED ASSETS: HOUSING PROPERTIES CONTINUED
Work to existing properties
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Revenue
10,263 9,590 6,293 5,493
Amounts capitalised: – Improvements – Replaced components
636 4,043
- 3,192
280 3,236
2,141
14,942 12,782 9,809 7,634
10. TANGIBLE FIXED ASSETS: OTHER
2014 total £000
Office furniture and equipment £000
Plant and machinery £000
Freehold offices £000
2014 Total £000
Office furniture and equipment £000
Plant and machinery £000
Freehold offices £000
Association Group
Cost At 1 April, 2013 4,968 413 10,373 15,754 3,231 413 6,686 10,330 Additions 104 - 1,630 1,734 105 - 591 696 Transfer of engagements 1,006 - - 1,006 1,006 - - 1,006 Disposals - - (5) (5) - - (5) (5) At 31 March, 2014
6,078
413
11,998
18,489
4,342
413
7,272 12,027
Other Grants At 1 April, 2013 107 306 - 413 107 306 Transfer of engagements 908 - - 908 908 -
- -
413 908
At 31 March, 2014
-
1,321
1,015
306
-
1,321
1,015 306
Depreciation At 1 April, 2013 1,212 22 6,348 7,582 607 Charge for year 97 16 1,575 1,688 65 Transfer of engagements 14 - - 14 14 Eliminated in respect of disposals - - (5) (5) - At 31 March, 2014 1,323 38 7,918 9,279 686
22 16 - - 38
3,752 1,011 - (5) 4,758
4,381 1,092 14 (5) 5,482
Net book value at 31 March, 2014
3,740
69
4,080
7,889
2,641
69
2,514
5,224
Net book value at 31 March, 2013
3,649
85
4,025
7,759
2,517
85
2,934
5,536
On 17 March 2014 the assets and liabilities of Walsall Housing Regeneration Community Housing Association were transferred into Accord Housing Association through a Deed of Undertaking.
92
Accord Group
11. INVESTMENTS
At beginning of year Addition in the year (see note 30) Repaid during year At end of year
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000 86 - (3)
89 - (3)
29,123 - (3)
89 29,037 (3)
83
86
29,120
29,123
See Note 26 for a list of subsidiary undertakings and joint ventures.
12. PROPERTIES FOR SALE
Properties under construction Completed properties
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
2,650 5,633
2,650 -
5,633 -
2,650 -
5,633 -
2,650
5,633
13. STOCK AND FINISHED GOODS
Raw materials Finished goods
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000 29 865
95 973
894 1,068
29 865 894
95 973 1,068
Annual Report and Financial Statements 2014
93
14. DEBTORS
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Arrears of rent and service charge Provision for bad and doubtful debts
2,348 (1,177)
2,207 (1,075)
1,309 (670)
1,202 (609)
Social Housing Grant receivable Corporation tax debtor Amounts owing by subsidiary undertakings Other debtors and prepayments
1,171 1,132 1,788 1,839 - 19 - - 10,906 10,815
639 593 1,788 1,839 - 530 518 5,231 4,701
13,865 13,805
8,188
7,651
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Housing and other loans Bank overdraft Trade creditors Amounts owing to subsidiary undertakings Corporation tax Social Security and other taxes Other creditors Accruals and deferred income Recycled capital grant fund
4,191 450 8,170 - 17 463 10,243 2,671 15
2,958 109 9,337 - 13 522 8,429 2,661 -
26,220 24,029
3,328 123 5,847 850 - 340 7,077 1,881 15
2,108 6,868 1,013 388 5,569 1,672 -
19,461 17,618
94
Accord Group
16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Housing loans Repayable by annual instalment
335,617
323,537
267,479
260,191
Total housing loans Financing costs capitalised
335,617 (3,334)
323,537 (3,429)
267,479 (2,688)
260,191 (2,778)
Net housing loans Recycled capital grant fund (note 17)
332,283 1,488
320,108 1,540
264,791 929
257,413 1,053
333,771 321,648
Loans repayable by instalments fall due as follows: Between one and two years Between two and five years In five or more years
7,190 20,059 308,368
335,617 323,537
Floating borrowings Fixed borrowings
124,150 215,658
Weighted average interest rate Weighted average time for which rate is fixed
265,720 258,466
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
4,191 19,608 299,738
110,563 215,932
339,808 326,495
6,139 15,605 245,735
3,328 16,247 240,616
267,479
260,191
99,573 171,234
89,385 172,915
270,807 262,300
% 4.01
% 4.484
% 3.83
% 4.07
Years 9.3
Years 10.4
Years 5.9
Years 9.1
The loans are secured by specific charges on the Association’s and Group’s housing properties.
The Association has arrangements in order to hedge against the long-term risk of an increase in variable interest rates under its principal loan facility. As an Industrial and Provident Society with charitable objectives and a registered provider of social housing with the Homes and Communities Agency, the Association does not trade for profit and is regulated by the HCA which has issued extensive guidelines on the use of derivative instruments by providers of social housing. The Association has applied this guidance in entering into 14 cancellable swap transactions totalling £89.5 million with the Royal Bank of Scotland Plc. The rates of interest range from 2.63% to 5.39% and maturity dates range from December 2014 to March 2029.
Annual Report and Financial Statements 2014
95
17. RECYCLED CAPITAL GRANT FUND AND DISPOSAL PROCEEDS FUND
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Fund at beginning of year Transferred to fund during year Interest credited to fund Utilised during the year Repaid during year
1,540 1,295 9 (1,341) -
1,185 592 7 (244) -
1,053 287 6 (402) -
569 696 4 (216) -
Fund at end of year
1,503
1,540
944
1,053
Withdrawals from the recycled capital grant fund were used for the purchase of properties under the flexible tenure scheme. Withdrawals from the disposal proceeds fund were used for the development of new housing scheme for letting.
18. SHARE CAPITAL
Shares of £1 each issued and fully paid At beginning of year Issued during year Surrendered during year At end of year
Group Group Association Association 2014 2013 2014 2013 Number Number Number Number 30 - -
22 9 (1)
30 - -
22 9 (1)
30
30
30
30
The share capital of the Association consists of shares with a nominal value of £1 each which carry no rights to dividends or other income. Shares in issue are not capable of being repaid or transferred. When a shareholder ceases to be a member, this person’s share is cancelled and the amount paid up thereon becomes the property of the Association. Therefore all shareholdings relate to non-equity interests.
19. TAXATION
Corporation tax
The taxation liability arises solely from bchs.
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000 21
3
-
-
96
Accord Group
Total £000
Minority interest £000
Other reserves consolidation reserve £000
Designated reserve £000
Revenue reserves £000
20. RESERVES
Group At 1 April, 2013 Surplus for the year Transfer to income and expenditure account
80,983 3,614 (14)
11 - 14
43 - -
9 81,046 - 3,614 - -
At 31 March, 2014
84,583
25
43
9 84,660
Association At 1 April, 2013 Surplus for the year
47,865 3,367
- -
- -
- 47,865 - 3,367
At 31 March, 2014
51,232
-
-
-
51,232
Although under its rules the Group does not trade for profit, its financial affairs are planned so that each year income exceeds expenditure. The annual surplus is vital to enable the Group to meet its commitments to providers of private finance, continue to raise further private finance and have reserves to provide for unexpected situations. The Board or the Committees of each Group member regularly review the Group’s finances to determine the minimum amount of reserves required for day to day management and to provide for the future. Any amounts over and above this minimum are invested in the provision of social housing. The Group’s reserve is not cash backed. Designated reserves relate to Fry Housing Trust’s Benevolent fund only, there are no other designated reserves in the Group.
21. CASH FLOW STATEMENT a) Reconciliation of operating surplus to net cash inflow from operating activities
2014 £000
2013 £000
Operating surplus 15,871 Depreciation charges and amortisation of finance costs 7,644 (Increase)/decrease in debtors (129) Increase/(decrease) in creditors 3,098 Disposals 453
15,682 7,143 522 (599) -
Net cash flow from operating activities 26,937
22,748
Annual Report and Financial Statements 2014
97
b) Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the year Cash inflow from debt increase
2014 £000
2013 £000
2,530 (13,408)
(18,314) (23,126)
Cash inflow from management of liquid resources (10,878) (41,440) Net debt at 1 April, 2013 (319,434) (277,994) Net debt at 31 March, 2014 (330,312) (319,434)
c) Analysis of changes in net debt
At 31 March, Cash Flow At 1 April, 2014 2013 £000 £000 £000
Cash at bank and in hand
6,612
6,612 2,871 3,741
Bank overdraft Debt due within one year Debt due after one year
(450) (4,191) (332,283)
(330,312)
2,871
3,741
(341) (1,233) (12,175)
(109) (2,958) (320,108)
(10,878) (319,434)
d) Analysis of changes in capital grant funding 2014 £000 Balance at beginning of year 252,872 Cash inflow from capital grant funding 4,253 Movement in debtors/creditors (net) 1,087 Abated/(repaid) on disposals 123 Transfer from/(to) grant funding 45 Balance at end of year
2013 £000 248,109 7,430 (2,083) (236) (348)
258,380 252,872
98
22. PENSION COSTS The Association operates a SHPS defined contribution pension scheme in respect of auto-enrolment which commenced 1 October 2013. The assets of the scheme are held separately from those of the Association. The contributions of the Association varied between 1% and 7% and employees varied between 1% and 4% of pensionable earnings. The total employer cost of pension contributions for the year was £43,402. The number of employees in the pension scheme at the year-end was 609. The defined contribution pension scheme with AEGON was closed to new entrants during the financial year. The contributions of the Association varied between 1% and 12% and employee contributions varied between 1% and 7% of pensionable earnings. The total employer cost of pension contributions for the year was £529,268 (2013: £616,967). Contributions payable are charged to management expenses as they fall due. The number of employees in the pension scheme at the year-end was 150 (2013: 166). The Direct Health Group contributes to money purchase pension schemes for the benefit of certain directors and employees. The assets of the schemes are held separately from those of the group in independently administered funds. The pension contributions payable for the financial year ended 31 March 2014 were £120,912 and an amount of £76,269 was owing to the schemes at the year end. Ashram Housing Association, Caldmore Area Housing Association and Accord Housing Association, following the transfer of engagement, participate in the Social Housing Pension Scheme (the Scheme). The Scheme is funded and is contracted-out of the State Pension scheme. SHPS is a multi-employer defined benefit scheme. Employer participation in the Scheme is subject to adherence with the employer responsibilities and obligations as set out in the ‘SHPS House Policies and Rules Employer Guide’. The Scheme operated a single benefit structure, final salary with a 1/60th accrual rate until 31 March 2007. From April 2007 three defined benefit structures have been available, namely: u Final salary with a 1/60th accrual rate u Final salary with a 1/70th accrual rate u Career average revalued earnings (CARE) with a 1/60th accrual rate. From April 2010 a further two defined benefit structures have been available, namely: u Final salary with a 1/80th accrual rate u Career average revalued earnings (CARE) with a 1/80th accrual rate. A defined contribution benefit structure was made available from 1 October 2010. An employer can elect to operate different benefit structures for their active members and their new entrants. An employer can only operate one open defined benefit structure at any one time. An open benefit structure is one which new entrants are able to join. Ashram Housing Association currently operates final salary with a 1/60th accrual rate, Caldmore Area Housing Association and Accord Housing Association operate final salary with a 1/60th accrual rate and Career average revalued earnings (CARE) with a 1/60th accrual rate. Ashram Housing Association and Caldmore Area Housing Association closed their final salary with 1/60th accrual rate to new contracts in previous accounting periods. Accord Housing Association also closed its final salary and career average related earning schemes with 1/60th accrual rate to new entrants in previous accounting periods. The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to determine the level of future contributions required, in respect of each benefit structure, so that the Scheme can meet its pension obligations as they fall due. From April 2007 the split of the total contribution rate between member and employer is set at individual employer level, subject to the employer paying no less than 50% of the total contribution rate. From 1 April 2010 the requirement for employers to pay at least 50% of the total contribution rate no longer applies. The actuarial valuation assesses whether the Scheme’s assets at the valuation date are likely to be sufficient to pay the pension benefits accrued by members as at the valuation date. Asset values are calculated by reference to market levels. Accrued pension benefits are valued by discounting expected future benefit payments using a discount rate calculated by reference to the expected future investment returns.
Accord Group
Annual Report and Financial Statements 2014
99
During the accounting period the following contributions were paid: u Ashram Housing Association paid contributions at the rate of 9.25% and made past service deficit contributions of £52,140 (2013: £29,784). Member contributions varied between 11.05% and 13.05%. As at the balance sheet date there were 3 active members of the Scheme (2013: 3). The annual pensionable payroll in respect of these members was £149,159 (2013: £146,810). u Caldmore Area Housing Association paid contributions of 6.95% (CARE scheme) and 9.25% (Final salary scheme) and made past service deficit contributions of £250,836 (2013: £138,972). Member contributions varied between 11.05% and 13.05% CARE scheme and Final salary scheme. As at the balance sheet date there were 22 active members of the Scheme (2013: 32). The annual pensionable payroll in respect of these members was £560,118 (2013: £773,793). u Accord Housing Association paid contributions of 6.95% (CARE scheme) and 9.25% (Final salary scheme) and made past service deficit contributions of £88,200 (2013:£39,540). Member contributions varied between 11.05 % and 13.05% CARE scheme and Final salary scheme. As at the balance sheet date there were 13 active members of the Scheme (2013:17). The annual pensionable payroll in respect of these members was £665,663 (2013: £571,995). It is not possible in the normal course of events to identify on a reasonable and consistent basis the share of underlying assets and liabilities belonging to individual participating employers. The Scheme is a multiemployer scheme, where the assets are co-mingled for investment purposes, and benefits are paid out of total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. The last formal valuation of the Scheme was performed as at 30 September 2011 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme’s assets at the valuation date was £2,062 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £1,035 million, equivalent to a past service funding level of 67.0%. The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the Scheme as at 30 September 2013. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The market value of the Scheme’s assets at the date of the Actuarial Report was £2,718 million. The Actuarial Report revealed a shortfall of assets compared with the value of liabilities of £1,151 million, equivalent to a past service funding level of 70%. The financial assumptions underlying the valuation as at 30 September 2011 were as follows:
Valuation discount rates
% p.a.
Pre-retirement
7.0
Non pensioner post-retirement
4.2
Pensioner post-retirement
4.2
Pensionable earnings-growth Price inflation
Pension increases
2.5 for 3 years, then 4.4 2.9
% p.a.
Pre 88 GMP
0.0
Post 88 GMP
2.0
Excess over GMP
2.4
100
Accord Group
Expenses for death-in-service insurance, administration and Pension Protection Fund (PPF) levy are included in the contribution rate. The valuation was carried out using the following demographic assumptions: u Mortality pre-retirement – 41% SAPS S1 Male/Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for Males and 1.25% p.a. for Females. u Mortality post retirement – 97% SAPS S1 Male/Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for Males and 1.25% p.a. for Females. The long-term joint contribution rates required from April 2013 from employers and members to meet the cost of future benefit accrual were assessed at:
Long-term joint contribution rate
Benefit structure
(% of pensionable salaries) Final salary with a 1/60th accrual rate Pre-retirement
19.4
Final salary with a 1/70th accrual rate Pre-retirement
16.9
Career average revalued earnings (CARE) with a 1/60th accrual rate Pre-retirement
18.1
Final salary with a 1/80th accrual rate Pre-retirement
14.8
Career average revalued earnings (CARE) with a 1/80th accrual rate Pre-retirement
14.0
Career average revalued earnings (CARE) with a 1/120th accrual rate Pre-retirement
9.7
If an actuarial valuation reveals a shortfall of assets compared to liabilities the Trustee must prepare a Recovery Plan setting out the steps to be taken to make up the shortfall. Following consideration of the results of the actuarial valuation, it was agreed that the shortfall of £1,035 million would be dealt with by the payment of deficit contributions as shown in the table below:
From 1 April 2013 to 30 September 2020
A cash amount(*) equivalent to 7.5% of Members’ Earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April)
From 1 October 2020 to 30 September 2023
A cash amount(*) equivalent to 3.1% of Members’ Earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April)
From 1 April 2013 to 30 September 2026
£30,640,000 per annum (payable monthly and increasing by 3% per annum each 1 April; first increase on 1 April 2014)
(*) The contributions of 7.5% will be expressed in nominal pound terms (for each Employer), increasing each year in line with the Earnings growth assumption used in the 30 September 2008 valuation (i.e. 4.7% per annum). The contributions of 3.1% will be calculated by proportioning the nominal pound payment at the time of the change. Earnings at 30 September 2008 (for each Employer) will be used as the reference point for calculating these contributions.
Annual Report and Financial Statements 2014
101
The deficit contributions are in addition to the long-term joint contribution rates as set out in the table above. The next formal valuation of the Scheme will begin later this year and will give an update on the financial position as at 30 September, 2014. The results of this valuation will be available in Spring 2016. Employers that participate in the Scheme on a non-contributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). Employers that have closed the defined benefit section of the Scheme to new entrants are required to pay an additional employer contribution loading of 2.5% to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into SHPS. New employers that do not transfer any past service liabilities to the Scheme pay contributions at the ongoing future service contribution rate. This rate is reviewed at each valuation and new employers joining the Scheme between valuations up until 1 April 2010 do not contribute towards the deficit until two valuations have been completed after their date of joining. New employers joining the Scheme after 1 April 2010 will be liable for past service deficit contributions from the valuation following joining. Contribution rates are changed on the 1 April that falls 18 months after the valuation date. A copy of the Recovery Plan, setting out the level of deficit contributions payable and the period for which they will be payable, must be sent to The Pensions Regulator. The Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or Recovery Plan are inappropriate. For example the Regulator could require that the Trustee strengthens the actuarial assumptions (which would increase the Scheme liabilities and hence impact on the Recovery Plan) or impose a schedule of contributions on the Scheme (which would effectively amend the terms of the Recovery Plan). As a result of pension scheme legislation there is a potential debt on the employer that could be levied by the Trustee of the Scheme. The debt is due in the event of the employer ceasing to participate in the Scheme or the Scheme winding up. The debt for the Scheme as a whole is calculated by comparing the liabilities for the Scheme (calculated on a buy-out basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the Scheme. If the liabilities exceed assets there is a buy-out debt. The leaving employer’s share of the buy-out debt is the proportion of the Scheme’s liability attributable to employment with the leaving employer compared to the total amount of the Scheme’s liabilities (relating to employment with all the currently participating employers). The leaving employer’s debt therefore includes a share of any ‘orphan’ liabilities in respect of previously participating employers. The amount of the debt therefore depends on many factors including total Scheme liabilities, Scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time. The assets and liabilities of the Moseley and District Churches Housing Association Plan were novated into Accord Housing Association on 1 May 2012 following its transfer of engagements.
23. CAPITAL COMMITMENTS
Capital expenditure that has been contracted for but has not been provided for in these financial statements
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
24,712 19,338
18,817 15,306
Capital expenditure that has been authorised by the Board of Management but has not yet been contracted for
12,479 24,062
12,479 16,380
102
Accord Group
24. COMMITMENTS UNDER OPERATING LEASES As at 31 March, 2014 the Group and Association had annual commitments under operating leases as set out below.
Operating leases which expire: Less than one year Between one and five years Over five years
Group Group Association Association 2014 2013 2014 2013 £000 £000 £000 £000
Total
213 204 34
97 355 -
86 150 34
80 187 -
451
452
270
267
25. CONTINGENT LIABILITIES The Group has contingent liabilities in respect of 7 flats disposed of under the “Right to Buy” provisions of the Housing Acts. Liability could arise for any defects discovered within 10 years, which had not been notified to the tenant before the lease was granted. The Association is not aware of any material defects.
26. GROUP STRUCTURE Accord Housing Association Limited’s Group structure comprises:
Subsidiary
% Share Capital Owned
Nature of Business
Accord Care Services Limited
N/A
Not yet trading
Accord Group Treasury Limited
100%
Group Treasury Vehicle
Ashram Housing Association Limited
76%
Charitable Housing Association
Birmingham Co-operative Housing Services Limited
N/A
Non-Charitable Housing Association
Caldmore Area Housing Association Limited
100%
Charitable Housing Association
Fry Housing Trust Limited
N/A
Charitable Housing Association
Redditch Co-operative Homes Limited
N/A
Registered Charity and Housing Association
Catherine Walker Almshouse
N/A
Almshouse Charity
Direct Health Group Limited
100%
Provision of care services
Direct Health (UK) Limited
100%
Provision of care services
At Your Service (Care) Limited
100%
Provision of care services
Parkmore Services Limited
N/A
Dormant company
New Homes Plus
N/A
Not yet trading
Walsall Housing Regeneration Community Association
N/A
Social Economic Regeneration
Joint Venture
All the above companies are registered in England and Wales. Where appropriate shareholdings are reflective of any permitted voting rights.
Annual Report and Financial Statements 2014
103
27. RELATED PARTY TRANSACTIONS All inter Association charges relate to the recovery of common costs in the usual course of business. Exemptions under FRS8 regarding the disclosure of intercompany and related party transactions have been applied.
28. HOUSING STOCK The number of units at the year end was:
Group Group Association Association 2014 2013 2014 2013 Number Number Number Number Social housing General needs housing: social rent 7,025 7,127 4,719 4,780 Affordable rents 427 174 266 85 Long leasehold 78 78 64 64 Supported housing and housing for older people 1,324 1,314 981 970 Residential care homes 275 287 260 260 Shared ownership accommodation 1,205 1,178 1,076 1,046 Other 657 654 174 174 Total social housing
10,991
10,812
7,540
7,379
Non-social housing Registered nursing homes Market rent
11 66
11 83
11 -
11 -
Total non-social housing
77
94
11
11
11,068
10,906
7,551
7,390
9,975 835 258
9,667 826 413
6,187 418 946
5,959 394 1,037
7,551
7,390
Grand total Being: Owned and managed Managed only Owned but managed by others Housing under development
11,068 10,906 347
331
240
284
104
Accord Group
29. GOODWILL
Group ÂŁ000 Cost At 1 April, 2013 and 31 March, 2014
26,754
Amortisation At 1 April, 2013 (1,199) Charge for the year (1,556) At 31 March, 2014 (2,755) Total as at 31 March, 2014
23,999
Total as at 31 March, 2013
25,555
In June 2012, the Group acquired 100% of the share capital of Direct Health Group Limited and its subsidiary undertakings for a total consideration of ÂŁ27.9m plus costs directly associated with the acquisition. An intangible asset, goodwill, has arisen on the difference between the price paid for the business and the fair value of the net assets and is being amortised over 20 years. Goodwill acquired and amortised in the current year includes goodwill which existed previously in Direct Health and related to previous acquisitions. Goodwill amortisation charged in the current year has also been pro-rated to reflect the post-acquisition period only.
30. POST BALANCE SHEET EVENT Heantun Housing Association Limited and its subsidiaries have agreed to join the Accord Group following approval from the Homes and Communities Agency. Accord Housing Association will adopt acquisition accounting from 30 June, 2014 which was the date of transfer. The financial impact will be incorporated into the 2014/15 Group Financial Statements.
178 Birmingham Road, West Bromwich, West Midlands, B70 6QG Telephone: 0300 111 7000 Email: customerfirst@accordgroup.org.uk Visit: accordgroup.org.uk Tweet: @theaccordgroup Like: facebook.com/accordgroup Watch: youtube.com/theaccordgroup