2
Welcome 4
Passions, values and actions 6
Committed to communities 8
Value-for-money 10
Delivering great homes and services 12
Fuel poverty 14
Creating opportunity 16
A great place to work 18
Case studies 22
Facts and figures 26
Financial Statements
Annual Report and Financial Statements 2015
1
WELCOME
from Dr Chris Handy OBE Group Chief Executive
With housing an increasingly important topic on the political agenda, the last year has been a busy and challenging one for the sector. At the Accord Group, we also saw it as a year of opportunity. For the last 50 years we have been delivering the best possible services whilst maintaining our financial strength and focusing on our people and the neighbourhoods in which they live. We recognise that we have an important role in providing help and support to local people and add social and economic value to the local economy. This means maximising delivery against our objectives – delivering value-for-money. This is a commitment we will continue to make, as we enter a new era in Accord’s history.
Value-for-money
The Accord Group is determined to further improve services and the value it offers. We will achieve this through effective engagement with customers and by working more innovatively and creatively both internally and with our partners in everything we do. The focus on people and value-for-money remains at the heart of our business and will be the driver to deliver real and lasting change. With the current financial pressures being placed on our customers, it is more important than ever that we do not lose sight of our founding social purpose. We are well placed to address the future financial challenges of Right to Buy 2 and rent reductions.
Flexible and adaptable
With all the continuing uncertainty regarding welfare reform it is essential for us to be flexible and adaptable. We will have to combine working imaginatively with managing the financial and reputational risks that this will bring. The situation is further complicated by the need to ensure that we do not compromise either our financial stability, or social purpose, whilst also maintaining service and high satisfaction levels with our customers. We know we face even greater challenges than we have in the past, but we are not content to simply maintain standards. We want to continue to improve our services for our customers, how they are delivered and the value they offer. We intend to improve our offer of owner-occupation options over the next five years and beyond.
2
Accord Group
Strength in our offer
The Accord Group is financially strong and we have a myriad of successes to shout about from the joining of Heantun Housing Association into the Group to Domus healthcare joining our domiciliary care provider within the organisation, Direct Health. Our Group is sustainable which means we can harness additional capacity to better serve our customers and communities by enhancing our services and adding value. Our collective purpose is to be a catalyst to raise aspirations and to create opportunity. We now collectively own more than 13,000 homes, provide care across the Midlands and the north of England to more than 80,000 people and are still the only housing association to have opened our own factory, producing low carbon timber framed homes. We are therefore looking forward to the year ahead and are grateful for all the hard work and support from everyone within the Accord Group during the last year. By working together we can look to the future with confidence, enthusiasm and optimism.
Dr Chris Handy OBE Group Chief Executive
Annual Report and Financial Statements 2015
3
PASSIONS, VALUES AND ACTIONS
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
Commitment We put our customers and our people at the heart of everything we do
Communities We help create communities where people want to live
Innovation We are optimistic, passionate and forward-thinking and we deliver better value every day
CORPORATE OBJECTIVES
Meeting need
Great housing and services
Good to great
DELIVERY AND ACTIONS
Customer revolution
4
Accord Group
Performance
Value-for-money
Annual Report and Financial Statements 2015
5
1
COMMITTED Communities
The Accord Group wants to be visible and responsive in each of its neighbourhoods and offer customers a range of ways to access services.
6
Accord Group
3
During the last year we have:
In the future we will:
1
Designed and implemented a pre-tenancy workshop for customers
a
Continue to develop our customer service
2
Increased access to money advisors for customers
b
Deliver two new Dementia Centres of Excellence by December 2018
3
Signed a contract to build two new dementia centres of excellence in Staffordshire
c
Widen our help at home services to 9,000
d
Improve overall customer satisfaction to over 80 per cent
e
Continue to work with scrutiny panels to ensure one service per year is scrutinised
f
Deliver the Health, Social Care and Support Strategy which will provide opportunity for greater customer choice
g
Deliver a more structured investment programme for young people and local schools
h
Invest in specific programmes which enhance job opportunities and life chances of our customers
4
Launched a new customer portal for customers to access their accounts online with the option to also report repairs 24/7
5
Opened a dedicated shop called Already Loved Furniture in Walsall which sells used furniture at a low cost
6
Carried out the second successful Holiday Kitchen programme which is a Summer holiday programme designed to cater activity days with meals to West Midlands families
7
Held 86 engagement activities with customers
i
8
Seen the Scrutiny Panel produce two full service reviews focusing on repairs, satisfaction and engagement with customers with learning disabilities
Deliver jobs and skills services to more than 200 customers, with 20 people into employment, 10 into apprenticeships and 60 into training each year
j
Increase opportunity and encourage the use of our online services
k
Greater investment in assistive technology
l
Roll out our Holiday Kitchen initiative nationally as a franchise programme supporting children during school holidays and beyond.
9
Increased Scrutiny Panel membership by 20 per cent
10
Achieved TPAS accreditation.
5
6
7
Annual Report and Financial Statements 2015
7
2
VALUE
Money
During the last year we have: 1
Spent more time working with customer thanks to mobile working
2
Saved money through using smarter ways of buying products and using contractors
3
Worked with tenants and communities through our Pay Ahead - Stay Ahead project to help reduce their utility costs
4
Obtained Green Deal funding for solid wall insulation for 45 hard-to-treat homes in Walsall
5
Optimise interest charges on our loans.
In the future we will: a
Look for ways to support more customers into work and self-employment
b
Look for more ways to improve the quality of life for customers
c
Continue to look for more efficient ways of working and improving customer satisfaction by challenging how we do things
d
Further bear down on the Group’s running costs.
3
We try to deliver the best possible service at the least possible cost.
8
Accord Group
a
c
Annual Report and Financial Statements 2015
9
3
Delivering
GREAT HOMES SERVICES
1
During the last year we have:
Our homes are regularly maintained to ensure they are safe, secure, warm, weatherproof and have modern facilities.
1
Been awarded £20 million of Homes and Communities Agency (HCA) funding to build 1,000 homes over the next five years as part of our wider £173 million development programme
2
Carried out a stock condition survey and appraisal of our homes
3
Spent over £8 million on day-to-day repairs
4
Fitted 166 properties with new bathrooms
5
Replaced 486 new kitchens in our homes
6
Fitted new windows in 469 homes
7
Continued to make cost-savings on developments through the use of our in-house construction team
8
Built further developments with low carbon timber framed homes manufactured at our factory LoCaL Homes.
In the future we will: a
10
Accord Group
Continue to provide and invest in great homes that are decent, warm, safe and secure.
Annual Report and Financial Statements 2015
11
4
Fuel poverty
During the last year we have: 1
Trialled new retrofit technology on six demonstrator properties including solar thermal, new hybrid heating systems and tripled glazed windows with up to 60 different technologies
2
Fitted 29 homes with smart grid systems aimed at reducing fuel poverty with technologies such as battery storage, PV with energy storage, PV with energy share, appliance controls and an energy service company feasibility model
3
Started an enhanced planned maintenance programme delivering insulation measures to complement kitchen and bathroom replacements. High performance windows have been installed, which has seen a total of 620 homes being fitted with energy efficiency home retrofits.
4
Received external funding to provide additional insulation and other retrofitting to existing stock, i.e. Green Deal cash back funded 45 external wall insulations of hard-to-treat properties in areas of economic and social deprivation in Walsall.
In the future we will:
We know that many
a
Help more customers to limit the impact of rising fuel prices
b
Upgrade less efficient boilers
c
Continue to build low carbon timber framed homes from our own LoCaL Homes factory
d
Plan upgrades of heating systems
e
Seek out funding or grants to make our homes warmer and cheaper to run.
customers find it difficult to afford their heating bills and so we try to support them where we can.
12
Accord Group
d
c
c
Annual Report and Financial Statements 2015
13
5
Creating
opportunity
We invest in our communities by helping customers into work and by helping improve their job prospects
14
Accord Group
During the last year we have:
9
1
Supported over 50 customers to help them set up and grow their own businesses
2
Arranged workshops which focus on helping people into work
3
Have recruited 53 new apprentices
4
Continued investment in the Recruitment, Opportunity, Learning and Employment (ROLE) initiatives, which has created 111 new apprentices and seen 29 people attend the programme
5
Clocked up more than 12,000 hours at our volunteering neighbourhood programme Time for Real
6
Successfully supported eight customers into work, volunteering placements or college through the Walsall Get on Track programme
7
Recruited 53 new volunteers
8
Recruited 29 new apprentices - 12 of them into jobs within the Group
9
Kick-started the Working Together welfare pilot project aimed at moving 900 people into work who are currently classed as long-term unemployed.
8
In the future we will:
a
a
Improve our support for customers into training, employment and self-employment
b
Increase external funding to support work
c
Improve how we seek customer views and consult with customers
d
Ensure job opportunities within the Group are advertised to customers
e
Enhance the Group’s volunteering programme.
Annual Report and Financial Statements 2015
15
6
A GREAT PLACE
During the last year we have: 1
Seen eight new recruits trained through our Leadership Academy, a total investment of ÂŁ9,760 per person
2
Held 13,250 training days equating to 7.36 days per employee at an average investment of ÂŁ200 per person
3
Implemented rigorous action plans following the results from the Colleague Satisfaction Survey
4
Celebrated and rewarded colleagues who were nominated by their peers for outstanding work at our annual Great People Awards
5
Invested significantly in our IT, updating our desktop environment and telephony to deliver a more efficient and sustainable solution
6
Extended the staff discount scheme for all employees to use across the spectrum of the retail and leisure sector.
In the future we will:
We want our colleagues to recommend the Accord Group as a place to work and we will take action on the matters that colleagues tell us are important.
16
Accord Group
a
Expand our leadership programme
b
Recruit employees whose skills and experience match our needs, who demonstrate the potential for future development and who commit, where colleagues contribute to the delivery of our corporate objectives and reach their full potential
c
Continue to look at diverse opportunities and new areas of business and product development
d
Implement a revised management charter.
Annual Report and Financial Statements 2015
17
CASE STUDIES 01 02
Dennis Turner Close, a £1.3m housing development in Bilston, was officially opened.
03 18
Accord Group
LoCaL Homes, our award winning manufacturing hub in Walsall, won an external contract to deliver new homes for Shropshire and Rural Housing Association.
A new weekly dementia café – being run by Pathways 4 Life - opened its doors at Walsall Manor Hospital.
04
The third phase of our multi-million pound Urban 180 development in West Bromwich has been launched.
05 06
Our Laurel Road development of 19 twobedroom bungalows in Tipton has been officially completed.
Our ÂŁ8 million Marlfield Farm development in Redditch won the Outstanding Development of the Year award in the UK Housing Awards.
07
The Already Loved Furniture shop in Walsall was officially opened by the then leader of Walsall Council, Sean Coughlan.
Annual Report and Financial Statements 2015
19
08
Shadow Housing Minister, Emma Reynolds MP, visited Purcell Road in Bushbury to see our eco-home development which was designed, manufactured and built by us.
09 10 20
Accord Group
Pioneering families from Paddock Housing Co-operative in Chuckery, who came together to build their own homes in Walsall as an alternative to living in high-rise flats, celebrated their 25th anniversary in June.
We opened a newly refurbished ÂŁ900,000 facility in the West Midlands designed to help the homeless and vulnerable people with convictions turn their lives around.
11 12 13
Direct Health was chosen as one of four organisations to provide home care services on behalf of Nottinghamshire County Council for the next three years.
Breakfasts, lunches and learning activities were offered to 500 families in Birmingham, Sandwell and Solihull this Summer as part of a series of eight-day programmes aimed at boosting children’s well-being as part of the Holiday Kitchen initiative.
Families moved in to one of the 47 modern homes which have been built on a former lock factory in Wood Street, Willenhall, which has lain derelict for more than a decade.
14
An £8 million timber housing development in Church Hill, Redditch, which features two ‘eco homes’ based on a design by a schoolgirl, was named as one of the top 50 affordable housing developments in the UK by Inside Housing magazine.
Annual Report and Financial Statements 2015
21
FACTS AND FIGURES
GROUP STOCK
TYPES OF NEW LETTINGS
General needs housing: 9,126
Single adults: 562
Supported housing services: 1,864
One adult with at least one child: 218
Residential care and Registered Nursing Services: 342
Older people: 33
Shared ownership activities: 1,225
Two or more adults with at least one child: 83
Development pipeline: 75
Two adults, no children: 9
Domiciliary care services: 0
Other: 7
Other activities: 0
Total: 912
Total: 12,632
GENERAL NEEDS AVERAGE WEEKLY RENT AS AT 31 MARCH 2014
22
£90.67
£93.18
£95.86
£87.80
Midland Heart
Bromford
Black Country
Accord
Accord Group
AVERAGE VOID DAYS IN MAINTENANCE
SOURCE OF NEW LETTINGS
Target
Actual
7
7.6
627 Referrals 403 Direct applications
CP12 S
283 Nominations 51 Transfers 1 Other
Target
Actual
100%
100%
Total: 1,365
COMPLIMENTS and COMPLAINTS
Compliments received: 49
HOW EVERY ÂŁ1 OF RENT IS SPENT
Complaints received: 360
29p Service costs 25p Interest 15p Management costs 15p Routine maintenance
Complaints resolved: 360
14p Planned maintenance 2p Void losses
Annual Report and Financial Statements 2015
23
RESPONSE TO REPAIRS Emergencies 2 hours, 43 minutes Non-emergencies 12 days
EMPTY HOMES
LET
302
5.6%
28.94
Empty homes as at 23 March 2015
Empty homes let in the last year
Average days taken to let
GROUP WORK PROFILE 2015
24
3,798
441
457
486
63
87
45
52
5,429
White
Black
Mixed
Asian British Indian
Asian British other
African
Not known
Other
Total
Accord Group
Annual Report and Financial Statements 2015
25
FINANCIAL STATEMENTS
26
Accord Group
THE BOARD, EXECUTIVE AND ADVISORS Board member
Appointed
Resigned
Mr Akshay Parikh (Chair)
2007
Mr Barrie Blower, MBE (Deputy Chair)
2009
Mr Ghulam Shabar
2007
Dr Christopher R. Handy, OBE*
2006
Mr Bruce Gilbert, OBE
2010
Mrs Shahana Khan
2013
Cllr Bill Hartnett
2014
Mrs Elisabeth Buggins, CBE
2014
Dr Lola Abudu
2014
Mr Simon Eastwood
2014
Mr Henry Foster
2014
Mr Derek Leyland
2005
July 2014
Mr Barry Picken
2005
September 2014 *Executive Director
Secretary Mr Stuart Fisher
Executive Board
Resigned
Dr Christopher Handy OBE
Group Chief Executive
Mr Jas Bains MBE
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
Ms Maxine Espley (in post September 2015)
Executive Director of Health, Social Care and Support
Mr Stuart Fisher
Executive Group Finance Director
Mrs Mandy Holcroft
Executive Director of Operations, Caldmoreaccord
Mr Mike Hew
Chief Executive of Caldmore Area Housing Association
December 2014
Mr David Williams
Executive Director of Health, Social Care and Support
April 2015
Mr Lakhbir Jaspal
Deputy Group Chief Executive
June 2015
Funders
Lloyds Banking Group The Royal Bank of Scotland Plc Crown Mortgage Management Abbey National Treasury Services PLC The Housing Finance Corporation (THFC) Co-operative Bank Dexia Public Finance Bank Barclays Bank
External auditors
Grant Thornton UK LLP, Registered Auditors, Grant Thornton House, 202 Silbury Boulevard, Central Milton Keynes, MK9 1LW
Bankers
Lloyds Banking Group, PO Box 908, 125 Colmore Row, Birmingham B3 2DS Royal Bank of Scotland, 139-144 Lichfield St, Walsall WS1 1SE Santander UK Plc, Cornwall St, Birmingham B3 2DX
Annual Report and Financial Statements 2015
27
REGISTRATION DETAILS
Organisation
Registration
Registered office
Accord Housing Association Limited
Registry of Friendly Societies under the Co-operative and Community Benefit Societies Act 2014 (formerly Industrial and Provident Societies Act 1965) (Registration No. 27052R) Homes and Communities Agency under the Housing Act 1996 (Registration No. LH3902)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Ashram Housing Association Limited
Registry of Friendly Societies under the Co-operative and Community Benefit Societies Act 2014 (formerly Industrial and Provident Societies Act 1965) (Registration No. 27926R) Homes and Communities Agency under the Housing Act 1996 (Registration No. LH4034)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Birmingham Co-operative Housing Services Limited (bchs)
Registry of Friendly Societies under the Co-operative and Community Benefit Societies Act 2014 (formerly Industrial and Provident Societies Act 1965) (Registration No. 22573R) Homes and Communities Agency under the Housing Act 1996 (Registration No. L3030)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Caldmore Area Housing Association Limited
Registry of Friendly Societies under the Co-operative and Community Benefit Societies Act 2014 (formerly Industrial and Provident Societies Act 1965) (Registration No. 20135R) Homes and Communities Agency under the Housing Act 1996 (Registration No. L0883)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Direct Health Group Limited Company Limited by Shares (Company No. 05638085)
28
Accord Group
Parkway House Haddenham Bus. Park Haddenham Buckinghamshire HP17 8LJ
Organisation
Registration
Registered office
Fry Housing Trust
Company Limited by Guarantee (Company No. 06297777) Homes and Communities Agency under the Housing Act 1996 (Registration No. L4496) Charity Commission (Charity No. 1119879)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Heantun Housing Association Registry of Friendly Societies under the Co-operative and Community Benefit Societies Act 2014 (formerly Industrial and Provident Societies Act 1965) (Registration No. 20928R) Homes and Communities Agency under the Housing Act 1996 (Registration No. L1669)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Redditch Co-operative Homes
Company Limited by Guarantee (Company No. 3667984) Homes and Communities Agency under the Housing Act 1996 (Registration No. L4335) Charity Commission (Charity No. 1078304)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Accord Group Treasury Limited
Registry of Friendly Societies under the Co-operative and Community Benefit Societies Act 2014 (formerly 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. 03465015) Charity Commission (Charity No. 1075621)
178 Birmingham Road West Bromwich West Midlands B70 6QG
Company Limited by Shares Domus Healthcare Group Limited (Company No. 06578083)
Parkway House Haddenham Bus. Park Haddenham Buckinghamshire HP17 8LJ
Annual Report and Financial Statements 2015
29
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 (operating as Accord Group) for the year ended 31 March 2015. The principal activity of the Accord Group is the provision and management of housing and appropriate support services for people in need. A number of significant milestones were achieved by the Accord Group during the year as it welcomed Heantun, a Wolverhamptonbased social housing and care providing organisation, to the Group in July 2014. Direct Health Group also completed the acquisition of Domus Group, a domiciliary care company based in the North, in August 2014. In addition, in March 2015 the Group entered into a longterm arrangement with Staffordshire County Council for the development and service provision of Dementia Centres of Excellence.
Corporate Governance
The Group is controlled and governed through the Group Board of Management which comprises the following non-executive members (NED) and one executive member (ED).
Membership details Group Board Group Resources Group Group and Audit Committee Remuneration Governance Committee Akshay Parikh
Chair/NED
Barrie Blower
Vice Chair/NED
Bruce Gilbert
Vice Chair/NED
Derek Leyland
NED (Resigned July 2014)
Barry Picken
NED (Resigned September 2014)
Shahana Khan
NED
Bill Hartnett
NED
Ghulam Shabar
NED
Elisabeth Buggins
NED
Lola Abudu
NED
Simon Eastwood
NED
Henry Foster
NED
Chris Handy
ED
30
Accord Group
Chair
Chair
Chair (To July 2014)
Chair
Chair (From July 2014)
The Group Board of Management meet formally four times a year 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 (2015). This Code sets out a number of principles outlined below, which the Group Board of Management assesses its compliance against: l l l l l l l l
Compliance with the Code Conduct of the Board and Committee business Constitution and composition of the Board Audit and risk Essential functions of the Board and Chair The Chief Executive Board skills, renewal and review Conduct, probity and openness.
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, risk management, 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 and 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. The Group’s review against the NHF Code of Governance demonstrated compliance. A number of new non-executive directors have been welcomed on to the Board and its Committees during the year further enhancing the existing skills and expertise. The Board has the necessary skills and knowledge to effectively manage the business and understand the key risks facing the Group. The Group annually reviews its operations against the Homes and Communities Agency’s Governance and Financial Viability Standard and continues to demonstrate compliance. In February 2015, the Group received the highest possible ratings for Governance and Viability from the Homes and Communities Agency (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.
Annual Report and Financial Statements 2015
31
Our marketplace
The Accord Group recognises that the operating environment continues to change and present challenges and opportunities. The Group’s ability to plan successfully is based on a foundation of understanding of the current and future political, statutory and economic environment and the ability to shape and influence local, regional and national policy. The Group’s understanding is based upon work including: l l l l
l l
Analysis of the housing and care markets in which it operates and regular competitor analysis. Consultation with customers to maintain and develop excellent services Research into the local demographics and how demand for services might change in the future Consultation and dialogue with staff, Board and Committee members and external stakeholders Understanding of the political, economic, social, legislative, environmental and technological drivers for change in the sector Robust risk analysis of the activities in which the Group is engaged.
Analysis of the operating environment suggests that the key factors and drivers are: l l l l l l l
Better VFM for the taxpayer built on a foundation of quality service provision Modern, agile services which respond to the ongoing retraction of the public sector, notably Local Authority commissioning Working with customers to help them understand and manage increasing financial pressures More empowerment of local communities and supporting the sustainability of local economies Greater integration between housing, health and social care Increased transparency and accountability to customers, service users and communities The need for greater joined up working between Registered Providers, Local Authorities, NHS organisations and other key partners continues to be very important.
Whilst the private sector economy is showing signs of continuing recovery, there are ongoing significant funding pressures on public finances and associated public sector services to which the housing association and care sectors are not immune. 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 first stages of Welfare Reform. The Accord Group is committed to identifying solutions to these on-going financial pressures and is equally committed to working alongside customers to ensure they understand how these financial challenges also impact upon them. In the short and medium term the Group has reviewed its financial assumptions and decisions in order to reflect the current economic environment and equip itself 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.
32
Accord Group
Group objectives and strategy
The Group’s objectives and strategy are set out in the strategic five year Business Plan that is reviewed annually and approved by the Board. The Group sees identifying and managing risks and opportunities as integral to the way it does business. The Group’s main objectives and strategies taken from the Business Plan 2015-2020, are summarised below:
STRATEGIC OBJECTIVE ONE
Meeting Need
By 2020, the Accord Group will: l l l l l l l
Across the Group have 13,291 homes in management Have developed 2,000 affordable, high quality homes through the development programme and other partnerships Have seen a 200% increase in the number of homes manufactured at the LoCaL Homes factory Have provided volunteering or apprenticeship opportunities for 2,000 customers, their families and local community members, plus 200 direct employment opportunities across the Group Have developed innovative approaches to reduce the impact of child poverty in neighbourhoods working directly with 2,000 young people under the age of 16 and supporting 20,000 activity sessions Have reduced office/commercial building costs and other associated overheads by 20% in order to invest in new services for customers Continued to implement the strategic stock investment and disposals process achieving 218 units sold.
STRATEGIC OBJECTIVE TWO
Great Housing and Services
By 2020, the Accord Group will: l
Have achieved a 20% increase in customer satisfaction ensuring it continues to deliver services that are relevant and meet needs of customers and stakeholders l Significantly environmentally improve 2,000 existing units ensuring they remain high quality homes and help reduce fuel poverty l Have procured along with other efficiency programmes 20% savings to re-invest into our core purpose, evidencing high quality services and products and standards l Further improve the quality, value and range of care services.
STRATEGIC OBJECTIVE THREE
Good to Great
By 2020, the Accord Group will: l l l l l l l
Have achieved £138 million turnover and approaching £8 million surplus to plough back into our work to support those most in need Have achieved a 20% increase in customer satisfaction ensuring it continues to deliver services that are relevant and meet needs of customers and stakeholders Increase customer engagement by 20% and access to the customer web portal by 20% Further improve existing stakeholder relationships and seek out new links to help develop business opportunities Have further enhanced and developed governance arrangements to attain excellence in governing standards Have ensured on-going compliance with regulatory standards and Group-wide collaborative working To increase employee engagement by 20%.
Annual Report and Financial Statements 2015
33
REPORT OF THE BOARD AND OPERATING FINANCIAL REVIEW
Value-for-money Self-Assessment Statement 2015 Introduction 2014/15 has been an important year for the Accord Group and the Group continues to demonstrate value-for-money (VFM) to its customers and communities. With over 1,500 homes built through the 2011-2015 Affordable Homes Programme for the Group and its partners and successful acquisitions of Heantun Housing Association and Domus, the Group is proud to have underpinned its ambitious growth with consistently top-level regulatory judgements on viability and governance (G1 and V1). The Accord Group now collectively own almost 13,000 homes and provide care across the Midlands and the north of England to more than 100,000 customers. With further financial pressures being placed on customers, it is more important than ever that the Group offers choice and value. There is recognition of the ongoing challenges local authority partners and commissioners face, which is why the Group is working collaboratively to deliver affordable high-quality, value-added services to those in need. The VFM self-assessment statement is produced annually and reports on the performance against VFM strategic objectives and the actions taken to ensure services are not only high-quality, but deliver value for customers, communities and stakeholders. Embedding VFM across the Group enables it to demonstrate that every pound spent is invested efficiently and effectively to maximise the return on investment. The Group continues to ensure that best value is a prerequisite throughout all it does; delivering social housing, building new homes, providing care and supported by efficient corporate services.
A. Parikh C. Handy Chair Group Chief Executive
VFM at the Accord Group VFM in business planning The Accord Group’s vision is to be a strong, diverse group which makes the most of its individual and combined strengths to deliver positive outcomes to improve life chances for its customers and the wider communities which it serves. This vision provides customers, colleagues and stakeholders with a clear understanding of what is important to the Group, and delivering value is a fundamental part of that vision. Accord Group’s Business Plan sets out strategic objectives and the activities and initiatives required to achieve these goals and support the Group’s vision. A VFM strategy supports the delivery of these strategic objectives and ensures that the Group’s resources (e.g. assets, finances and people) are used effectively and that processes are carried out efficiently when work is undertaken. Evidence of how the VFM strategy is aligned to the Group’s strategic objectives is outlined within this document. The Group communicates its commitment to achieving VFM through business planning and annual financial reporting, as well as in this self-assessment statement.
34
Accord Group
Embedded governance and reporting
The Group’s VFM approach is firmly embedded across the organisation. All levels of governance are involved in delivering value across all activities.
Reporting / assurance / performance monitoring
Board VFM strategy sign off and ownership
Executive Board Key strategic deliverables identified Reporting / assurance / performance monitoring
Senior management Implementation and ownership of VFM operational aspects of the strategy
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. Finance, Risk and Audit Committee and local Boards Budgetary control and reporting is scrutinised by the Finance, Risk and Audit Committee and the locality Boards review performance and financial viability and report back to the Group Board. 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. 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 annual self-assessment statement enables the Group to demonstrate how it protects its assets and ensured a return on the investment in them over the last 12 months. The statement has been externally validated by the Group’s Statutory Auditors, Grant Thornton. This review sits alongside the Group’s internal audit reviews of service which include the VFM approach to delivery in scope/terms of reference document. Grant Thornton has reviewed the statement content against its own interpretation of the VFM regulatory standard and highlighted where compliance was considered to be good and suggested where further disclosures could be made to further enhance the quality and transparency of reporting. The suggestions made by Grant Thornton have informed the final version of the 2015 VFM Self-Assessment Statement.
Annual Report and Financial Statements 2015
35
VFM strategy and action planning The Board-approved VFM strategy has been developed to ensure regulatory expectations are embedded in every aspect of the Group’s operations. The 2015-2018 strategy consists of five strategic themes which are each aligned to regulatory requirements and the Group’s strategic objectives. The table below outlines the objectives and the key actions required to deliver the objectives.
Theme
Objective What are we going to do? l
l
Be a better buyer
l
l
l
Increase transparency in reporting
Accord Group
Deliver a strategic procurement approach to buying to drive VFM through the implementation of transactional controls and processes.
Prepare an annual fully compliant VFM selfassessment statement in accordance with regulatory requirements Demonstrate to stakeholders how we are delivering against Business Plan objectives relevant VFM targets in all performance appraisals
l
l
36
Value driven contract management – drive best value from contracts awarded over the entire life of the contract.
l Incorporate
l
Evidence the impact of social value
Strategic decisions on insourcing and outsourcing – ensure that the most value is driven from investment decisions.
l
Implementation How are we going to do it? l
l
l
l
l
l l
l
Each department/ function within the Group to have a local VFM action plan with measurable outcomes. Improved reporting on how procured goods and services improve the economic, social and environmental well-being of our communities (as per Social Value Act). Improved reporting on how the Group’s work improves the life chances/opportunities for customers and service users. Using proven methodologies capture, measure and report social value impact in a meaningful way.
l
l
l
l
Closely monitor purchasing and contracting arrangements to ensure the Group standing orders are followed at all times Take advantage of the Group’s growing scale and reach by collaborative large-scale buying in order to drive out value in procurement. Ensure active contract management is applied at all times ensuring that value is driven out of all outsourced and contracted activities Focus on driving value out of local smaller scale companies to ensure VFM is achieved whilst ensuring the local economy and supply chain is supported.
Continue to deliver internal ‘Make it Count’ campaign to raise awareness of colleagues across the Group Introduce VFM measures to the appraisal process. Capture and monitor VFM targets for each major team/function within the Group Challenge departmental action plans to ensure they are maximising efforts to provide VFM.
Continue to deliver awareness raising campaigns on social value amongst colleagues across the Group Develop a Group-wide Social Value strategy including a set of targets, indicators, measurements and formal reporting frameworks Apply a proven methodology to capture the amount of social value added by the Group’s activities. Prepare an annual social value statement/annual report.
Theme
Objective What are we going to do? l
l
Plan and manage our costs
l
Develop a VFM framework/model to measure VFM achieved on strategic business objectives.
Implementation How are we going to do it? l
l
Review and reorganise overheads to drive efficiency and increase VFM
l
Improved use of performance management and benchmarking data to understand costs and drive business improvement.
l
l
l
l
l
Improve return on investment/ assets
l
Improve operational outlets and assets (disposal/change of use/ continued investment) through active asset management Development, asset management and other major investment decisions are always clearly linked to strategic business outcomes/ objectives Improve return on investment in people – demonstrate increased added value from our investment in staff costs.
l
l
l
l
l
l
Align all major investment decisions with Business Plan objectives Continue to robustly apply zero-based budgeting to ensuring that only wholly necessary costs are budgeted for Undertake benchmarking exercises to understand costs in the context of the marketplace and analyse the reasons why comparative cost under-performance may occur. Put targeted, specific interventions in place to improve performance. Provide timely, high quality financial management information to internal stakeholders Carry out robust cost appraisals, challenge and scrutinise new projects and financial commitments Early intervention and challenge where approved budget performance is not being achieved.
Using existing intelligence and data, identify those assets with major investment requirements to inform disposal strategy, and conversely those which provide the greatest yield/return and require future additional investment to maintain these returns. Through the use of the Group Register of Assets and Liabilities we will understand those assets which have a high market value and therefore generate significant proceeds on disposal. Reduce exposure to overheads associated with commercial property by 25% by 2020 Enhanced Return on Assets measured at a corporate level (income earned as a percentage of assets held) will demonstrate increased VFM Through improved utilisation of existing staff and through improved HR metrics, such as sickness and attrition, increased value will be driven from Accord’s investment in its people. Early intervention and challenge where approved budget performance is not being achieved.
How we deliver In order to implement the strategy, a VFM action plan has been developed. Progress against the action plan is monitored by an internal VFM working group made of colleagues from central services and locality-based teams and is reported to Group Finance, Risk and Audit Committee and Group Board periodically. In addition to the action plan, each major function has their own VFM targets which are captured within departmental action plans. As at 31 March, 2015, there were 233 individual VFM actions from across the Group – with all of actions implemented, highlighting the level of commitment to a fully embedded Group-wide approach to delivering VFM. Annual Report and Financial Statements 2015
37
VFM for stakeholders Customers The Accord Group is committed to achieving VFM on behalf of its customers. This not only requires the Group to manage the financial aspects of VFM but also ensures the social value outputs of its operations meets the needs of its customers and communities. The added social value the Group helps to create for customers and local people includes:
Providing energy efficient homes with affordable fuel bills to reduce fuel poverty
Integrated flexible health and housing offer allows customers to benefit from care and support services in their existing homes
Retrofitting schedule to ensure improvements and enhancements are made to customers’ homes
Opportunities for customers to increase their skill sets and meet new people through volunteering, involvement activities and community days
Creation of jobs for customers including roles at the LoCaL Homes factory and Home and Garden Services team, as well as support to help customers create new enterprise start-ups
A range of ways to get in touch, including an mobileoptimised customer portal, 8am – 8pm customer contact centre and local offices
A variety of tenancy types including tenant management organisations and co-operatives, offering customers increased choice and responsibility over how their rent is spent and local decisions about their schemes
Pre-tenancy courses and support services to help customers to improve their financial and digital confidence.
Customers themselves have a role in helping the Group deliver VFM and one of the ways in which they drive improvements is through the Group-wide Scrutiny Panel. The Scrutiny Panel solely comprises customers and independent members and is part of the Group governance structure reporting into the Chairs Committee. The panel works independently to scrutinise and review services throughout the Group. They compile a report of their findings and make recommendations to improve the efficiencies and effectiveness of the services we provide. The Group also regularly asks for feedback about its services through customer satisfaction surveys. This feedback assists the Group in developing services to achieve even better VFM.
38
Accord Group
Regulators The HCA regulatory standard outlines its expectations for providers to demonstrate that VFM services are being delivered, and moreover that VFM is embedded in the culture of the organisation. The Accord Group understands the importance of being able to confidently demonstrate that it can manage 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 below:
Registered providers shall… “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.”
How Accord Group delivers against these requirements Business planning and objective setting at Board away days. This ensures the commitment of financial resource aligns to the business plan objectives. Annual Board-approved budget assumptions report identifies resources to be committed. Internal senior management Project Approval Panel (PAP) which reviews all major investment decisions, business cases and business development opportunities with recommendations to Board. Opportunity costing is incorporated into the PAP approval process to demonstrate the rationale behind proposed business and investment decisions. Financial planning is integrated into business planning cycle. Annual detailed financial plans are prepared identifying the extent of the financial resources available to deliver the Board’s strategic objectives and ambitions.
Annual Report and Financial Statements 2015
39
Registered providers shall… “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.”
How Accord Group delivers against these requirements The Stock Disposal strategy was further enhanced as part of the delivery of the Affordable Homes Programme and supports the Group’s approach to active asset management. The Group has a detailed active asset management approach which determines, at a unit level, whether to invest in or divest of social housing assets. Considerations include high value, high investment, low yield, high tenancy turnover and location. PAP makes informed decisions on disposals/retentions. This includes a non-financial value element which ensures the Group maintains a strong commitment to existing operational areas and the communities it serves. Scheme enhancement initiatives see the provision of long-term asset management solutions which offer financial and environmental benefits. For example, LED lighting, photovoltaic panels and other retrofit installations. Accord Group continues to receive ongoing accreditation for its long-term work on environmentally sustainable initiatives through the Eco Management and Audit Scheme (EMAS). The Accord Group is one of only a small number of providers to achieve this accreditation. Satisfied customers are considered to be a good measure of resources being invested appropriately. The Group undertakes a STAR survey to understand customer satisfaction levels and develop and enhance products and services. External benchmarking agencies (e.g. HouseMark) and internal bespoke benchmarking exercises are used to assess peer performance. Outputs are used to drive positive performance as a commitment to continuous improvement. The Group invests more than 50 per cent of operating costs in wages and salaries. The return on this investment is measured through a number of performance indicators including attrition and sickness absence. As well as through twice-yearly performance appraisals. A review of commercial property is ongoing to enable a measured and appropriate rationalisation programme which encompasses modern working practices and increased customer contact.
40
Accord Group
Registered providers shall… “Have performance management and scrutiny functions which are effective at driving and delivering improved VFM performance.”
How Accord Group delivers against these requirements Board, Committees and the Executive Board receive regular reports to understand performance against KPIs in the context of agreed targets and the Business Plan. The Performance and Quality team undertake performance interventions where operational performance is less than expected to drive improvement and challenge at operational level. Performance data including trend analysis and cause and effect assessments are presented to the Executive Board and Directors Group regularly. Monthly management accounts are prepared and reviewed at a corporate, management and budget-holder level. The Group has an embedded, mature and agile approach to risk management and risk appetite, owned at a Board level. People management processes include an appraisal framework which measures performance against agreed objectives. Performance scrutiny exists with a wider audience through internal colleague forums and the Customer Scrutiny Panel. A Board approved VFM strategy and implementation plan is in place to ensure delivery of key objectives VFM successes are promoted internally and individual achievements formally recognised Contract management and review processes are in place to assess spend against tendered and quoted work. The Group has mechanisms to challenge suppliers and contractors on areas of unsatisfactory performance where necessary. Regular ‘temperature checks’ from colleagues and customers take place to gather feedback on contractor performance.
Annual Report and Financial Statements 2015
41
Registered providers shall… “Understand the costs and outcomes of delivering specific services and which underlying factors influence these costs and how they do so.”
How Accord Group delivers against these requirements Service level and corporate performance is benchmarked to contextualise current performance and identify future service improvements. This information is reported to the Executive and the Board. Year-on-year trend analysis allows the direction of travel to be understood. Finance colleagues adopt a zero-based budgeting approach each year to ensure that only necessary costs are included in the budget. The budget is informed by the Boardapproved business plan objectives. Monthly budgetary and financial reporting allows budget-holders and senior management to ensure financial performance is in line with agreed expectations. The Group carries out close and continuous monitoring of the impact on housing services in relation to the roll-out of Welfare Reforms and Universal Credit. Accord Group has developed a range of services (including money advice and jobs and skills support) to address the increasing financial difficulty experienced by our customers to ensure rent is paid. Board and senior management have established effective and strong relationships with local authorities, commissioners and regulatory bodies. This helps the Group better understand the requirements of the market and shape services to meet emerging needs. Performance and delivery in the context of the Group’s purpose and objectives is captured through its adherence with the ethos and principles of the Social Value Act.
42
Accord Group
Colleagues The Accord Group continues to be a major employer with c3350 employees across the Midlands and 51 per cent of the Group’s turnover being directly invested in local communities through employment. Commitment to its people and the excellent services they provide makes the Accord Group a proud employer. The graphics below demonstrate some of the ways in which VFM is achieved through investment in people.
% of turnover reinvested in communities via employment
2014-15
51% 2013-14
52% 2012-13
49%
Executive salaries as % of turnover
1.2% 2013-14 1.2% 2012-13 1.2% 2014-15
Emoluments payable to the Group CEO as a % of turnover
0.17% 2013-14 0.18% 2012-13 0.18% 2014-15
Annual Report and Financial Statements 2015
43
To ensure VFM is at the heart of the Group’s activities, an internal campaign, called Make it Count, has been developed to: l
Communicate the importance of providing value-added services in the context of the social housing and care sectors l Educate colleagues in ways in which they can contribute to delivering the strategy l Encourage constructive challenges and suggestions to improve VFM l Share and celebrate VFM successes. The campaign is championed by the VFM working group, which is made up of colleagues from a variety of functions and departments. The internal working group meet regularly to co-ordinate VFM activities, oversee the progress for each departmental action plan and shape the key messages as part of the internal campaign which is promoted in staff newsletters and on the intranet. The Make it Count campaign supports the Group’s strong commitment to recognising the contributions colleagues make to embedded VFM. During 2014/15 over 20 individuals were formally recognised for their personal actions and activities. The Accord Group also includes a Make it Count award at its annual Great People Awards, which celebrate those colleagues who deliver outstanding work. Through the VFM working group, the Accord Group has also introduced an employee discount scheme that offers colleagues access to discounts and savings from many high-street shops and supermarkets. The benefits scheme can help colleagues spend more efficiently and receive over £600 of annual savings for themselves and their families.
Maximising return on assets
The Accord Group prides itself on providing high-quality homes, and in order to do that it is important that the Group understands the return on assets and investment. Understanding the Group’s asset base The Accord Group’s business is built on the homes it owns and manages, which is why it is vital to ensure accurate and useful data about these properties. As a developing organisation, one which consistently out performs targets for delivering new homes, the Group carries out regular valuation exercises as part of the security process when seeking private finance. This information provides the assurance that the Group has ongoing oversight of the value of the stock and is able to use this information to help inform the management of assets. As well as developing new homes to deliver a supply of much-needed housing, the Accord Group maintains and enhances its existing assets to drive value through standing stock. Examples of how this data is used to measure and improve performance and support the development and delivery of the corporate asset management strategy is outlined below:
Responsive repairs cost per property
2014-15
£644.36 44
Accord Group
2013-14
£695.97
2012-13
£674.77
% of homes with gas safety certificate
2014-15
100%
2013-14
100%
2012-13
100%
Spend on building homes
2014-15
£35,004,000
2013-14
2012-13
£27,402,000
£29,223,000
Total asset management spend per property
2014-15
£1,213.61
2013-14
£1,350.83
2012-13
£1,172.02
Total asset management investment
2014-15
£15,158,000
2013-14
£14,951,000
2012-13
£12,782,000
The Group has further developed its data collection and analysis tools and asset registers and now has an even greater insight about its homes, customers and other members of the household. Geo-mapping tools are used to ensure housing and asset management services are arranged and deployed in the most efficient and effective ways possible to ensure these services are designed with the primary purpose of providing excellent service and added value. In addition, geo-mapping data helps to identify appropriate locations for building further new homes, helping the Group deliver an integrated approach to planning new homes and the delivery of wider locality and community services.
Annual Report and Financial Statements 2015
45
CASE STUDY
Understanding our asset base – active asset management
The Corporate Asset Management team has developed a tool which uses existing property and customer data to inform the Group’s strategic and disposal strategy. The tool is populated with a series of data fields which allows management to make an informed decision: l l
Is this a home the Group should retain and continue to invest in as it generates a future return on investment? Is this a home the Group should dispose of and divest from as it does not generate a sufficient future return on investment?
The tool considers the following information: l Market value: is the market value sufficiently high enough to support a decision to sell the home? A property with a high market sales value upon becoming void may generate funds to help the Group to develop several new homes. l Location: does the location of the home support efficient housing and asset management practices? Geographically outlying stock is inherently more costly and therefore less efficient to manage. l Rent levels: does the home generate high rental income streams? Those properties with a higher rental value will generate greater future income streams for the Group. l Stock condition - recent investment: has the Group invested significantly in this home in the last five years? If investment in major planned works and component replacements in the home has taken place in the last five years then it may support the decision to retain the property. l Stock investment - future requirements: by using the long-term asset management investment strategy, the Group can identify whether there is a significant investment in the property required in the next five years. Where a property is in need of major investment in the next five years, a decision may be made to divest in this home upon it becoming void. l Tenancy turnover: A property with a history of high tenancy turnover may support a decision to dispose of the home as there has been increased exposure to historic costs. Trends may suggest this exposure to increased costs could continue in the future. The outcomes of these individual considerations provide management with an overall decision to invest or divest in certain properties. The decision is based on sound reasoning. Each time this tool is used the Group is making an informed and demonstrable contribution towards increasing its return on assets. This decision making tool supports the implementation of the Group’s Stock Disposal Strategy – it also ensures that each decision maximises the benefit to the Group.
Location
Market value
Rent yield/current and future rent levels
Decision making process
Investment/return
46
Accord Group
Recent major works/condition
Future major works required
Tenancy turnover
(Exec. and Board)
Divestment/sale/reclassification
During 2014/15, £2.25 million 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 £25.1 million return on assets from strategic stock disposal over the life of the five year business plan. 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:
2015 2016 2017 2018 2019 2020 Actual Budget Forecast Forecast Forecast Forecast Number of housing units disposed
46
51
40
35
30
30
2,255 338
4,195 108
5,558 183
5,172 603
4,729
5,521
Investment in new homes developed
28,615
32,510
66,589
32,439
Investment in existing housing stock
14,040
13,948
13,263
12,950
12,719
13,007
Total investment in housing
42,655
46,458
79,852
45,389
12,719
13,007
Net loan debt required/(repaid) to finance investment programme
17,682
14,559
44,048
10,860
(12,622)
(14,997)
24,973
31,900
35,805
34,529
25,341
28,004
Return on assets generated through strategic asset management Number of new homes handed over in year
Return on Assets available to reinvest in new and existing homes
£25,174,000
£197,426,000
£155,578,000
Forecast to be generated from sales of assets over life of 2015 – 2020 Business Plan
Forecast total investment in new and existing homes over life of 2015 – 2020 Business Plan
Forecast return on assets generated over life of 2015 – 2020 Business Plan
Annual Report and Financial Statements 2015
47
Performance and cost management
The Accord Group has benchmarked its performance on a number of key areas. A benchmarking cohort of 20 registered providers has been selected to reflect the scope and nature of the Group’s work, particularly the commitment to care services and community-based initiatives. The findings of the benchmarking process are outlined below.
CORPORATE INDICATOR S
O P ER AT IO NA L IN D I CATO RS
Benchmarked indicator
What does this measure?
Ranking*
2015
2014
2013
2012
Social housing lettings operating margin
The percentage of income from lettings converted to operating surpluses
8 (9)
32%
31%
29%
26%
Social housing lettings total operating costs per home
The total cost of managing each social housing home for one year.
13 (14)
£3,228
£3,430
£3,416
£3,408
Void losses per home
The total amount of void income forsaken in the year averaged across all homes in management.
16 (16)
£83
£115
£106
£77
Total asset management spend per home in management
The average investment in each home in management per year.
5 (5)
£1,214
£1,292
£1,172
£1,295
Bad debts per home
The total amount of bad debts written off in the year averaged across all homes in management.
6 (2)
£15
£58
[£1]
£37
Return on assets: Turnover (all activities)
The return on assets expressed as total turnover as a % of total assets less grant
10 (9)
20.3%
22.6%
21.4%
16.1%
Return on assets: Operating Surplus (all activities)
The return on assets expressed as total operating surplus as a % of total assets less grant
17 (14)
3.13%
3.6%
3.6%
3.2%
Income earned per executive officer
The value of income generated averaged across the number of Executive Officers
6 (11)
13.9%
£11.2 m
£10.1 m
£5.8 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 (1)
2.33%
2.4%
2.5%
4.0%
Average interest rate
The average cost of debt being interest paid as a % of total debt held
4 (7)
3.9%
3.8%
4.2%
4.0%
* Ranking out of cohort of 20 comparible organisations. Brackets denote 2014 performance.
48
Accord Group
Direction
Key influencing factors
2015 - future commitments and actions
Impacts of welfare reforms, housing management policies, local authority interactions, budget performance, rent policy, market wage inflation.
The Accord Group continues to improve on its overall financial operating effectiveness of its social housing activities demonstrating the Group’s commitment to driving efficiencies and adding value in front line services. This will continue to be a priority going forward and further efficiencies have been built in to the 2015/16 budget.
Welfare reform, housing management policy, contractor performance, social mobility, customer economic pressures, demand.
Close monitoring of voids and re-let process undertaken in 2014 has seen an improvement in performance in this measure. Again, there will be an ongoing commitment to further improve on performance going forward and the 2015/16 budget includes stretch target re-let times.
Contractor performance, cyclical investment need, customer aspirations, compliance with standards, demand, service reorganisation.
As outlined in the 2013/14 VFM self assessment statement there was a commitment to continue to improve upon the financial efficiency of asset management procurement processes. This has been borne out in 2014/15 with improved performance identified on this measure whilst still delivering against the planned programme of works for improvements to our homes.
Welfare reform, housing management policy, social mobility/abandonment, customer economic pressures, demand.
A commitment was made in 2013/14 VFM self assessment statement to improve performance on this measure. Accord has substantially reduced its financial exposure to bad debts in 2014/15 and will continue to focus on further improvement going forward.
Income generation/welfare reform/ public sector spending, economic influences.
The addition of Heantun to the Group part way through the year has impacted negatively on the performance of overall Return on Assets measures. There has been substantial asset growth but only part year effects of increases in turnover leading to an unfavourable impact on 2014/15 performance. Improvements in reported performance for this measure are expected in 2015/16.
Income generation/welfare reform/ public sector spending, management performance/cost control.
The addition of Heantun to the Group has impacted favourably on this measure as top-line growth was achieved without adding to the Executive costs.
Income generation/welfare reform/ public sector spending, management performance/cost control, wage inflation.
The Accord Group again achieves VFM by demonstrating that only a very small percentage of overall staffing costs are committed to the Executive.
Interest rates, economic market performance, Treasury Management Strategy.
The Group continues to demonstrate a competitive and average cost of finance through effective and efficient treasury management practices.
Annual Report and Financial Statements 2015
49
Key VFM achievements from 2014/15
VFM initiative
Financial achievement
Non-financial achievement
In-house Construction Services team made savings across the Bushbury, Greenfields and Beechdale phase one developments and the Holtshill project.
£723,125
64 low carbon homes have been developed, providing affordable housing to over 250 local people.
External Green Deal funding was secured to install solid wall insulation in hard-to-treat homes in Walsall.
£132,000
45 homes were made more thermally-efficient, reducing energy bills for customers.
£46,000
Review and redesign has seen improvements to the IS systems which have led to enhanced working practices and a more effective internal service from the IS team
£50,000
Financial savings are re-invested into research and development in order to promote continuous improvement and innovation into low carbon technologies.
£125,000
Reorganisation of resource to meet the evolving needs of the Group’s customers and communities in Birmingham has led to an enhanced local offer.
£475,213
Detailed understanding of the services received from external suppliers and contractors have led to more effective and accurate KPIs.
£24,000
Colleagues are able to deliver ‘on the spot’ solutions which helps the Group to deliver an improved customer experience.
Redesign of IS infrastructure to significantly reduce hosting costs.
Renegotiated material costs for LoCaL Homes factory
Relocation of teams as part of the creation of the Ashrammoseley partnership
Efficiencies against existing contracts and agreements for a range of goods, works and services
Invested and installed mobile working solutions of locality-based staff
50
Accord Group
VFM initiative
Financial achievement
Non-financial achievement
As part of Heantun joining the Group, an annual corporate service saving of £120,000 was included in the business case (this doesn’t include the supply chain review or new business). This has been exceeded.
£120,000
Savings made have been re-invested into frontline services, including the development of a community hub at Springvale House. This will directly benefit the customer as they will be able to access financial advice, get online and meet with their housing officer in a refurbished, informal environment.
Supply chain review as part of Heantun joining the Group.
£126,000
Increased opportunities for local business to work with the Group.
New business secured for Heantun’s Direct Services team
£160,111
Job creation, skills development and apprentice opportunities for local people.
Former tenant collection in 2014/15 sees the recovery of money from previous customer arrears for the benefit of current customers.
£123,116
Reinvestment into services for existing and new customers.
Care and support services were reorganised, identifying cost efficiencies.
£1.3m
Care and support service redesigned to meet the new and emerging needs of local communities.
Total financial achievement:
£3,404,565
Annual Report and Financial Statements 2015
51
Managing money
The Group recognises that to be an effective organisation which provides a value-added service, it is important that income and expenditure are managed in the most effective manner to provide the greatest return on investment possible. The information below demonstrates how the Accord Group reinvests its incoming resources to deliver the key objectives around meeting need, delivering new homes and providing excellent services. To meet these strategic aims, the Group has major commitments it needs to fund. This includes the resources needed to build new homes, pay people to deliver services and maintain and repair existing assets. During 2014/15 the Group expended £134.1 million of financial resources. A breakdown of this is provided below:
Developing new homes: £35 million
£35.0 million was spent on the development of new homes as part of an ongoing major commitment to deliver new housing supply.
Maintaining existing homes: £15.2 million
In addition to the development of new homes £15.2 million was spend in maintaining our existing homes.
Wages paid to colleagues: £56.4 million
Accord is a significant employer and has supported the local economy by committing over £56.4 million into employing people from our communities.
Direct service costs / overheads: £13.3 million In the provision of housing and care services £13.3 million of direct costs and overheads were incurred.
Loan interest: £14.2 million
Accord paid £14.2 million in loan interest to its funders to service the debt borrowed to build new homes.
52
Accord Group
26% 11%
of total expenditure
of total expenditure
42%
of total expenditure
10%
of total expenditure
11%
of total expenditure
The Accord Group generates income from the sources below to fund the expenditure commitments above, which therefore support the work required to meet the strategic goals.
Turnover: £110.8 million
During the year the Group earned £110.8 million of income from the delivery of social housing and care services.
Net new borrowings: £17.7 million
The Group borrowed a net amount of £17.7 million of loan debt in the financial year.
Social Housing Grant received: £5.6 million £5.6 million of social housing grant was received from the Homes and Communities Agency this year.
83% 13% 4%
Total expenditure:
of incoming resources
of total expenditure
of total expenditure
£134.1 million
Annual Report and Financial Statements 2015
53
Performance against targets Core service Key Performance Indicators 2014/15 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 2014/15 is outlined below: Housing services
Care and Support services
2014-15 2014-15 2013-14 2013-14 2014-15 2014-15 2013-14 2013-14 Actual Target Actual Target Actual Target Actual Target
Current tenant arrears (%)
3.72%
2.9%
3.3%
4.1%
3.08%
3.00%
3.6%
3.3%
Former tenant arrears (%)
1.96%
1.45%
2.1%
2%
4.62%
2.00%
3.5%
2.2%
Re let time (days)
27.26
14
27.4
15
30.5
14
32.6
22.7
Void losses (%)
1.0%
0.80
1.0%
0.60%
6.88%
4.50%
7.3%
3.4%
Repairs satisfaction with service (%)
96%
85%
99%
95%
96%
85%
99%
95%
Repairs first time fix (%)
94%
80%
92.2
86%
94%
80%
92.2%
86%
Gas compliance CP12 (%)
100%
100%
99.9%
100%
100%
100%
99.9%
100%
Social and environmental return on assets
The Accord Group is committed to the communities it serves and recognises the importance of delivering more than just a core social housing service. Social value Social value is achieved by utilising and investing resources carefully in order to maximise opportunities to benefit customers health and well-being and improve their life chances. The Group has been able to deliver social value by ensuring that new and existing initiatives align to its values and continues to champion innovative solutions to meeting need at a local level. The Accord Group delivers social value in many ways due to the diverse nature of the Group’s operations. Many of the activities the Group undertakes generate a significant amount of social value added, for example: l
Housing management services: the provision of housing to those in need meets social outcomes. Accord Group provides around 13,000 homes to those in need of housing and it continues to develop a substantial amount of new homes each year to meet this as a growing demand. l Community-based activities: Community is at the heart of Accord Group. It is deeply committed to improving the communities in which its customers live. This is achieved through community housing officers working collaboratively with customers and other partnering organisations to create and nurture sustainable communities. l Care and support services: Accord Group delivers care services to a significant amount of people. The services are delivered to the highest standards to ensure customers receive excellent care services, delivered with consistency and professionalism. l Youth offender services: Fry Housing Trust and Heantun Housing Association both deliver youth offender services. Both organisations have an excellent track record of working with ex-offenders to re-integrate them into society. Through this work, the Trust and Heantun are able to equip their customers with the skills to improve their life chances and their employability in the future.
54
Accord Group
In addition to the delivery of services where social value added is wholly embedded in the activity, the Group also operates a number of initiatives which have the specific intention of adding significant additional social value, examples of these include: Holiday Kitchen The Group and partner organisations have launched a school holiday programme providing children and families with food and activities in attempt to reduce the impact of child poverty. See case study on page 56. Already Loved Furniture Already Loved Furniture is a second-hand furniture project run by the Accord Group. Based in Walsall town centre, the shop offers good quality furniture and household items at affordable or discounted prices. Much of the stock sold comes from donations of unwanted items from colleagues and community members, which is reconditioned to sell on. The project aims to help people to furnish their homes affordably, reducing the need to borrow money or take out pay day loans to buy items. Time for Real Set up by Caldmoreaccord, the Time for Real time bank allows people to exchange a host of skills free of charge. For every hour that someone spends doing a task, such as gardening or dog walking, they get an hour’s worth of ‘work’ from another member of their community. Time for Real, based in Caldmore Green, has 74 members who in total have exchanged 1,000 hours, which is the equivalent of 142 working days. The time bank brings people from across the community together. It helps tackle social isolation by providing free services to those who may struggle to undertake tasks themselves or are unable to afford them. Moseley garden party Customer and community events provide a great opportunity to bring people together in an informal and fun way to not only celebrate being neighbours but to get advice on a range of subjects. Over the years the garden party in Moseley has seen hundreds of customers come together to play games, enjoy food and refreshments and browse stalls offering information on reducing energy bills, employment support and health and well-being advice. ROLE programme ROLE (which stands for Recruitment, Opportunity, Learning and Employment) is the Accord Group’s exciting recruitment, training and apprenticeship programme. It is open to Accord Group customers and their families and can lead to a real job, caring, supporting and working with people with health and social care needs. ROLE includes: l
Employability skills including literacy and numeracy A six week unpaid work experience placement to gain vital skills and knowledge l Apprenticeships where you can learn on the job and get paid at the national apprentice rate. l Importantly, everyone who completes an apprenticeship will be offered a contract of employment, caring and supporting people including the elderly, young people and those with mental health concerns. l
Residents who successfully complete the six week programme or an apprenticeship can include the Accord Group as a referee on their CV, new skills to add to their CV and training certificates. Old Tree Nursery Heantun Housing Association has acquired a licence to occupy Old Tree Nursery, a horticultural centre in Wolverhampton. The site will provide plants for its various housing schemes around the Black County as well as supplying seasonal fruit and vegetables for kitchens in its residential and sheltered care homes. Additionally, the site will act as a base for Heantun’s successful Skills for Life scheme, a training programme which helps people with learning disabilities or mental health needs to develop the skills and confidence they need to live more independently.
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55
CASE STUDY
Holiday Kitchen
Holiday Kitchen is just one of the initiatives the Accord Group has launched to increase opportunities for customers. Holiday Kitchen offers family learning, food and play opportunities during the school holidays. The aim is to improve children’s well-being, educational outcomes and life-chances through the provision of fun activities and experiences. The Holiday Kitchen concept was created on the back of customer research which suggested that customers required support in holiday periods. To ensure activities and interventions are impactful, a robust and comprehensive evaluation programme was implemented. The evaluation looked at how the initiative achieved the core objectives of: l
Improved social inclusion and aspiration Improved family nutrition and well-being l Reduced financial and emotional strain. l
In 2014, Holiday Kitchen worked with local and national partners to co-deliver 2,300 activity days and meals to almost 300 participants across 11 sites in Birmingham, Sandwell and North Solihull. There was no large grant applied for in 2014 to cover costs so delivery drew upon multiple small investments, including corporate product sponsorship, donations and in-kind contributions which maximised local resources. It is estimated that the 2014 summer project saved families from our communities a total of £30,000. The evaluation programme drew on the principles of the SROI (Social Return on Investment) methodology and data collection techniques included: child-centric visual activities, parent/carer questionnaires and guided 1:1 interviews, interviews with centre managers and a feedback session with commissioners/funders. The evaluation clearly showed that Holiday Kitchen met the short term outcomes for children of ‘reduced opportunity gap’, ‘increased physical activity’, ‘improved opportunities for family bonding and learning outside the home’, ‘improved nutrition’ and there was partial achievement of the ‘increased exposure to reading and language development’ and ‘increased awareness of illegal money lending’ outcomes. For parents/carers there is strong evidence that the ‘improved opportunities for family bonding’ and ‘improved social inclusion’ outcomes were achieved, particularly through the shared meal times. There is also evidence that the ‘reduced financial strain’ and ‘reduced family indebtedness’ were realised through the provision of meals and free activities for the children. The Group continues to work to develop Holiday Kitchen in to a nationally recognised model of holiday learning, food and play.
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Accord Group
Environmental matters
The Accord Group is aware that VFM and environmentally conscious activities go hand-in-hand. The Group has a strong history in ensuring eco-friendly practices are in place across the organisation. Its commitment to the environment is demonstrated through the achievement of ISO 14001 quality management systems accreditation and EMAS (eco management and audit scheme), the launch of the first timber-home manufacturing facility to be opened by a housing association and its commitment to retrofitting properties for the benefit of the Group and the customer. The Group has a detailed environmental policy and each function has a departmental action plan. Each of these actions contributes to the reduction of waste, paper, carbon emissions and water usage. The actions are monitored by an internal Environmental Improvement team. The Environmental Improvement team meet once a quarter to review progress against departmental action plans, share internal best practice and hear from external experts about their approaches to improving environmental performance. One of the main ways the Accord Group has demonstrated its commitment to delivering environmental and social added value is its ongoing investment in its LoCaL Homes factory and the in-house construction services team.
The Environmental Improvement team meet once a quarter to review progress against departmental action plans, share internal best practice and hear from external experts
LoCaL Homes is a timber-frame manufacturer which makes highly insulated properties. By investing in over 300 timber homes over the next four years, around 1,200 people will benefit from significantly reduced fuel bills. In addition, by guaranteeing work to the factory, the Group is supporting sustained employment for over 20 factory-based colleagues and move through the supply chain. The Group recognises that there is also a significant impact from the properties that house customers, not only from their use, but also from their construction. That is why the Accord Group set up the LoCaL Homes factory, enabling the Group to annually produce around 200 offsite manufactured low-carbon homes. The properties produce on average 50 per cent of the carbon emissions of traditional brick built homes and 50 per cent lower fuel bills, reducing costs for both the Group and customers of the new homes. The embodied carbon in the manufacturing process is also a fraction of that in traditional homes, as timber locks in carbon from the atmosphere as it grows. Around 20 local jobs have also been created at the factory, putting further investment into the community and helping to reverse local unemployment levels and manufacturing decline. The factory process also benefits the contractors erecting each property on site, offering both time and waste savings. A site waste management plan is provided for the contractor which considers the project’s design and access statement, to ensure that efforts are maintained in reducing the creation of waste on site from building, in line with the Group’s environmental policy, Environment Management System (EMS) and the legal requirements. However, it is not only new homes that are of environmental concern to the Accord Group. As part of its asset management strategy the Group has sourced external funding to retrofit older properties to increase their environmental performance, offering customers the benefit of reduced heating bills as outlined in the case study overleaf.
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57
CASE STUDY
Environmental Impact of the ERDF Retrofit Project
The Accord Group retrofit project is a £3million initiative which is 50 per cent funded though European Regional Development Fund (ERDF). The funding is split into capital and revenue; the revenue stream of the project has been set up to provide Business Support to SME’s in the region. The capital stream has a number of elements all of which are geared towards making homes more environmentally sustainable. Examples of this include the use of new technologies to harvest and utilise energy from self-generating sources, and retrofitting homes with a number of existing technologies which make homes substantially more thermally efficient. To date the project has spent £1.375 million and achieved a carbon saving of 2,362 tonnes against a target of 3,000 tonnes. The remaining target will be achieved and exceeded before the end of the project in December 2015. These savings have come from various interventions throughout the project: l
45 homes have benefited from external wall insulation which in itself will lead to carbon reduction of 900 tonnes. This part of the project has also been funded by Green Deal, who provided 75 per cent of the funding with the remainder funded through ERDF - demonstrating Accord Group‘s commitment achieving excellent VFM by maximising external funding opportunities. l 1,200 properties have received cavity wall treated which will make an estimated carbon saving of 2,600 tonnes over the life time of the project l The planned works programme has been bolstered by the ERDF funding. Along with replacing bathrooms, kitchens and windows with more modern energy efficient solutions, 15 per cent of the properties will also receive internal wall insulation. In addition, 15 per cent of all the new windows will be replaced with upgraded double glazing which saves additional carbon. By continuing to attract external funding Accord Group is able to make significant environmentally sustainable improvements to its homes at a fraction of the total overall cost. These homes are permanently more efficient to live in therefore also generating VFM for our customers too.
58
Accord Group
Performance against VFM targets
In 2013/14 we set ourselves 11 commitments. Below explains the progress we have made to meet these commitments:
Target 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£300,000 savings in 2014/15
Achieved?
What we have done l
l
l
Ashrammoseley partnership saw the reorganisation of resource to meet the evolving needs of the Group’s customers and communities in Birmingham Insourced further work as part of the Home and Garden Services offer Rationalisation of commercial properties as part of the Ashrammoseley partnership
We will undertake future work to 300 units to upgrade the energy efficiency ratings to improve running costs for those customers
To date we have upgraded 245 units with the remaining to be completed over the next year.
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
Review carried out in Walsall and Birmingham and Care and Support housing stock has been identified. Units have either been sold, invested in or converted to general needs tenure ensuring the maximum return on assets
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
Restructure has been implemented and sees a holistic joined-up approach to property management.
We will carry out further procurement activities which will realise a further £400,000 to £500,000 of procurement savings, particularly in the supply of products and services in relation to asset management
Efficiencies against existing contracts / agreements for a range of goods, works and services have seen a saving of £475,213
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59
Target
Achieved?
What we have done
We will review our external contractors and supply chain and further develop in-sourcing and growth of the in-house team, Homes and Gardens
A review has taken place and recommendations have been made to improve internal working practices and increase opportunities for our customers to gain work experience, apprenticeships and employment.
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
LoCaL Homes are accredited and work to the BM TRADA Q-Mark, which is regarded as one of the most rigorous certification processes available for construction products, it is recognised by controlling authorities, home warranty providers such as the NHBC (National House Building Council) and is used by world-class construction companies and manufacturers.
We will realise further synergy savings of £400,000 across our Group wide care and support operations
The locality model has seen rationalisation of operating structures in line with current service delivery requirements. This ensures that value is achieved in the care and support staffing structure, whilst allowing sufficient capacity to achieve growth aspirations. This provided an annual staff cost saving well in excess of £400,000.
We will realise further synergies and savings for Heantun to the value of £120,000 in backoffice services as a result of Heantun joining the Accord Group
Heantun joined the Group in July 2014 and savings in excess of £120,000 were made.
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
The commercial building review has been carried out and a building rationalisation plan is place. Stock investment / divestment decision making process is in place hand-in-hand with a review of locality working. Going forward, the Group will look at how to optimise office space in line with increasingly modern approaches to working practice.
We will increase the income stream through Matrix Housing partnership by the delivery of further development services
Partnership successfully secured the funding to facilitate 551 properties as part of the Affordable Homes Programme 2015-2019.
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Accord Group
Aims for the year ahead
For 50 years the Accord Group has been providing choice, support and opportunity for local people and communities. Going forwards, the Group will continue to adapt to meet the changing needs of its customers and stakeholders demonstrating not only innovation but improved VFM in the services it provides now and develops in the future. To ensure VFM is at the core of strategic decision making for the future, the Group aims to deliver the following targets:
Timeframe
Target VFM targets 2015/16 l
l
l
l
l
l
l
Complete and realise the benefits of the first phase of the Group’s review of its commercial properties, identifying capital receipts on disposal and substantial overhead savings. Complete and realise the benefits the Group’s review of its care and support assets, identifying capital receipts on disposal or re-commissioning assets into alternate usage e.g general needs to ensure an appropriate return on these assets. Identify property disposal proceeds in accordance with the Group Stock Disposal strategy and financial targets included in the Group Business Plan Create a Social Value strategy and framework that consistently measure social value for the Group’s activities. Continue to divert £400,000 of existing budget into the delivering against the Group’s Big Issues objectives without increasing establishment staffing Deliver against the Group’s care and support growth and new business target objectives of £1.5 million Deliver against the Group’s approved 2015/16 budget which includes £3.6 million of built in operational VFM targets.
These targets will be delivered throughout 2015-16 financial year with a target final implementation/delivery date of March 2016
VFM targets included in the 2015 – 2020 Business Plan l
l
l
l
l
l
Have reduced office/ commercial building costs and other associated overheads by 20 per cent in order to invest in new services for customers Continued implementation of the strategic stock investment and disposals process achieving 186 units sold Significantly environmentally improve 2,000 existing units ensuring they remain high quality homes and help reduce fuel poverty Procurement and other efficiency programmes delivering 20% savings to reinvest into core purpose and evidencing high quality services and products and standards Have achieved £150 million turnover and approaching £10m surplus to plough back into supporting those most in need Have achieved a 20% increase in customer satisfaction ensuring delivery of services that are relevant and meet needs of customers and stakeholders
These objectives are embedded within the Group’s key strategic priorities for the forthcoming five years, as outlined in the 2015 - 2020 Business Plan
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61
62
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. The business strategy provides a clear balance between growth, VFM and excellent customer service. The Group’s strong track record of prudent financial management will ensure that it continues to meet the needs of existing customers as well as building new homes. By adopting a rigorous approach to financial planning it is better placed to meet the needs of the business. Finances are managed through the annual budget, the monthly corporate financial reporting process and performance against predetermined key performance targets. During the year the Group has built on its strengths to maintain its position as a leading, effective and innovative housing organisation. The Group has continued to manage its resources efficiently to ensure it meets the demands of today whilst building for the challenges of tomorrow. The year ended 31 March 2015 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 £38.064 million (2014: £3.635 million). Financial performance remains strong. Turnover of £110.8 million represented a 10.0% increase on the prior year. The operating surplus was £17.067 million in 2014/15, compared to £15.871 million in 2013/14. This continuing strong performance has enabled the Accord Group to further strengthen its financial position and continue its sustained investment in both properties and services. Underlying surpluses (excluding gains on business combinations) remain broadly consistent with performance in 2014 and demonstrate the Group’s ability to manage continuing financial and economic pressures in social housing and care sector marketplaces. 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, the Group now also serves customers in the North, North West and North East of England and provides 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 it recognises the contribution that a wider range of tenures can make to the achievement of balanced, sustainable communities. There were 12,557 units in management at 31 March 2015. The substantial increase reflects Heantun joining the Group in July 2014.
Group Group 2015 2014 Property Numbers Property Numbers General needs housing Affordable rents Supported housing Residential care homes Shared ownership accommodation Other
7,705 788 1,864 275 1,225 700
7,101 427 1,324 275 1,207 734
Total
12,557
11,068
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63
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. Stock condition reports confirm that the housing stock continues to be 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 £15.158 million (2014: £14.942 million) of which £4.718 million of repairs have been capitalised in the year (2014: £4.679 million), demonstrating the Group’s on-going commitment to investing in its existing stock on both a responsive and planned/cyclical replacement basis. Group turnover and operating surplus/(deficit) by activity are shown below: Turnover
Operating Surplus/(Deficit)
Year 2015 2014 £m £m Total General needs housing Supported housing Domiciliary care services Residential care homes Shared ownership accommodation First tranche shared ownership Other
38.288 12.462 29.516 6.847 2.060 3.074 18.505
Total
2015 2014 £m £m
34.594 11.031 30.610 7.336 1.959 2.004 13.154
16.747 14.315 2.866 1.843 (0.372) (0.442) (1.008) 0.095 0.730 0.683 0.031 (0.069) (1.927) (0.554)
110.752 100.688
17.067 15.871
In the year, 36.4% of income was derived from general needs and shared ownership lettings (2014: 36.3%), 44.1% from care and care related activities (2014: 48.6%), and 2.8% from first tranches sales of shared properties (2014: 2.0%). In addition, the Group generated 16.7% of its income (2014: 13.1%) from other sources, including the factory, floating support and nurseries. The focus of the Group’s main source of income continues to relate to the provision of care and support and associated services. The Group continues to monitor the financial viability of all care and support services closely at an executive level. Group-wide interest payable increased to £14.212 million (2014: £12.635 million) as debt increased from £326.495 million to £396.172 million. The increased debt position highlights our commitment to the development of new homes and the regeneration of communities. The Accord Group surplus of £38.064 million consists of a net gain of business combinations in the amount of £34.959 million and trading surplus of £3.105 million (2014: £3.635 million).
17.0
100,000
16.0
90,000
15.0
80,000
14.0
70,000 60,000
64
Accord Group
2014/15
110,000
2013/14
18.0
2012/13
120,000
2011/12
2014/15
OPERATING SURPLUS - GROUP
2013/14
2012/13
2011/12
TURNOVER - GROUP
13.0 12.0
GROUP HIGHLIGHTS: FOUR YEAR SUMMARY
2015 2014 2013 2012 £m £m £m £m For the year ended 31 March (restated) Group Income and Expenditure Account Turnover Operating surplus Interest payable and similar charges Surplus for the financial year
110.752 100.688 17.067 15.871 14.212 12.635 38.064* 3.635
91.399 63.286 15.682 12.489 13.242 11.498 3.003 1.711
Consolidated Balance Sheet Housing assets at cost Social housing and other capital grants Net investment in new housing during year Net current (liabilities)/assets Total assets less current liabilities Loans outstanding Reserves
823.871 677.958 649.675 627.527 305.057 257.059 252.459 247.696 63.418 21.134 15.823 16.624 (5.805) (2.199) 0.218 13.495 507.507 418.431 402.694 376.394 396.172 339.808 326.495 303.244 122.720 84.660 81.046 78.046
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
15.6% 30.5% 159.8% 47.7% 26.264 23.7% 4.11% 0.2% £60
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
* 2015 data includes a surplus of £3.105 million plus £34.959 million net gain on business combination identified in the acquisition accounting associated with Heantun Housing Association and its subsidiaries joining the Group in July 2014.
Annual Report and Financial Statements 2015
65
KEY OPERATIONAL INDICATORS General Needs Year
2014/15 2013/14 2012/13 2011/12
Accord Group % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
2.93 1.05 27
2.58 1.10 28
3.35 0.72 31
2.48 0.75 16
Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
2.23 1.22 29
1.95 1.15 29
2.04 0.92 27
2.00 0.68 20
Supported Housing
2014/15
2013/14
2012/13
2011/12
Accord Group % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
0.67 6.88 31
1.61 7.29 33
2.32 5.86 34
2.10 5.75 34
Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
0.45 4.02 46
1.14 4.91 69
0.39 4.13 54
1.33 3.63 34
Year
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
2014/15
2013/14 2012/13
94.0 96.0 96.2
92.2 99.0 97.2
74.2 94.7 96.5
94.0 96.0 96.2
91.5 99.1 97.4
74.9 94.5 96.6
The Group’s Corporate Asset Management team continues to measure its performance using a set of customer centric key performance indicators to ensure that performance is measured in the context of the service provided to customers. The Group’s average creditor payment period at 31 March 2015 was 30 days (2014: 30 days).
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Accord Group
Development
The Accord Group leads the Matrix Housing Partnership which has successfully delivered the 2011-2015 HCA Affordable Housing Programme. As part of this programme the Group delivered 753 new homes, representing a total investment of £96.3 million invested in new housing supply including £14.2 million HCA grant. In 2014/15 alone the Group committed £26.8 million to the development of new homes. The development of new homes continues to be financed by a mixture of HCA grants and the Group’s own reserves. A key success factor on the delivery of new homes is the development and maintenance of sound working relationships with local authority partners and other key stakeholders. In 2015 the Group will commence delivery of 742 additional new homes through both the Affordable Homes Guarantee Programme and the 2015-18 Affordable Homes Programme. Over the 2015-18 period, the Group will invest a total of £104.7 million in bringing new homes to the communities where it works (including £16.4 million HCA grant). The Group continues to build on its strong reputation and proven track record in both the development of general needs and supported housing. The 2015-18 development cycle will also see the commencement of the Dementia Centres of Excellence in Staffordshire. Operations at Accord Group’s LoCaL (Low Carbon Living) Homes factory remain strong. The factory produces high quality, energy efficient timber frame homes from sustainable materials and continue to supply homes for more than half of Accord Group’s development programme. The factory is based in Walsall and provides employment and skills opportunities to a number of local people, many of whom are social housing tenants. 2014/15 production targets delivered new homes for the Beaconview and Beechdale School developments with a forward programme of production undertaken in preparation for the 2015-18 development programmes.
Capital structure
Total funds including long-term creditors at the end of the period amounted to £507.507 million (2014: £418.431 million), of which £122.647 million (2014: £84.583 million) comprised the income and expenditure account reserve. The increase compared to 2014 is due to Heantun joining the Group in July 2014 and 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 £396 million from £334 million in 2014. Balance sheet gearing of the Group at the year-end is 47.7% (2014: 49.6%) and remains comfortably within its 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 £46.7 million, and has substantial unutilised security on its balance sheet. These facilities ensure that the Group remains in a strong position to fund future growth plans and investment opportunities. The net movement in cash for the year was an inflow of £1.341 million (2014: £2.530 million inflow) reflecting the net impact of the 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 4.11% (2014: 4.01%). Interest cover for the Group stands at 159.8% (2014: 166.6%) and remains comfortably within funding covenants.
Treasury management and control
Treasury activities are controlled by the Executive 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.
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67
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 the Group’s 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. 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, 64% (2014: 63%) of the Group’s borrowings were at fixed rates of interest; this rate will increase as additional fixing of debt is planned during 2015/16. The Accord Group has not used stand-alone derivative financial instruments to manage its interest rate exposure during the year. However, the Group 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 £46.7 million (2014: £63.0 million), and with a maximum amount of £45 million for Accord Housing Association (2014: £45 million). Group-wide interest payable increased to £14.212 million (2014: £12.635 million), and debt increased from £339.808 million to £396.172 million. An increased debt position highlights the Group’s commitment to the development of new homes and the regeneration of the communities it serves. 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
Accord Group interest rate management Fixed debt 64% Variable debt 36%
Group
2015 2014 £m £m
0 – 1 year
9.523
4.191
1 – 2 years
10.259
7.190
2 – 3 years
8.476
6.094
3 – 5 years
24.358
13.965
5 – 10 years
85.543
63.436
10 – 15 years
93.352
89.080
15 – 20 years
85.370
77.881
20 – 25 years
68.778
65.017
25 – 30 years
10.429
12.874
Over 30 years
0.084
0.080
396.172
339.808
Total
68
Accord Group
Risk management
The management of risk is acknowledged as being fundamentally important to the Group. Risks are continually assessed to measure their significance. The Board has responsibility for risk management and leads on risk appetite. Policies and procedures are adapted to ensure appropriate action is taken to safeguard the Group’s residents and assets. The Accord Group’s approach to risk management includes the following: l l l l l l l l l l l l l
A formal framework setting out how the Group identifies and manages opportunities and risk, which sets out clear responsibilities of staff, management team and the Board Risk registers which set out the risks of failing to meet business objectives, together with controls and actions needed to manage risks Internal audit using a risk based approach for the audit programme “Project Approval Panel” to assess the business case for major new projects and initiatives Appraisal and regular staff reviews which are aligned to managing risk Sensitivity analysis of the key areas of risk built into financial forecasts Activity limits set where required Formal project management procedures in place in relation to the development of new homes Business continuity plans and disaster recovery plans Regular assessment of the local housing market Regular review of the key risks facing the Group by the Executive and Board Regular review of risk appetite by the Board Risk scenario planning.
The Group-wide Risk Management Strategy is owned by the Board and 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 the Group’s risk management framework, the Group operates a comprehensive risk management process which incorporates all subsidiaries and major group functions. Risk management informs the business planning cycle and in the current economic climate proactive risk management becomes an increasingly important management tool. The Group operates to a Board-approved Risk Management Policy. Quarterly risk management updates are subject to review by the Group Finance, Risk and Audit Committee. The Executive Board formally reviews risk at each meeting. 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.
Annual Report and Financial Statements 2015
69
Key risks facing the Group include:
Risk: Repairs contractor service under performance Key controls and risk reduction include: Contract review meetings. Internal monitoring information, Performance and Strategy Board meeting. MIS Data analysis. KPI data (P&Q). KPI data (contractor), KPI data (Asset Management). Customer satisfaction data. Improvement notice protocol.
Risk: CQC/OFSTED/Regulated Services ratings impact on reputation and ability to win new business Key controls and risk reduction include: Close working relations with Regulatory body. Transparent approach to reporting. Action plans to maintain standards. Quality management systems.
Risk: Housing services - arrears escalate significantly/Welfare Reform Impact Universal Credit Risk Key controls and risk reduction include: Arrears KPI monitoring to Board. New group wide housing management Policies/procedures in place. Authorisation for evictions/write off’s. Resources redirected accordingly. Budgetary controls. Increased management scrutiny. Welfare reform and digital inclusion action groups. Local Authority and DWP engagement.
70
Accord Group
6-10
11-16
Residual risk score 2015
16
Residual risk score 2014
16
1-5
6-10
Residual risk score 2015
11-16
16+
16+
15
Residual risk score 2014
10
1-5
6-10
Residual risk score 2015
11-16
16+
* Not applicable, new in 2015
Risk: Failure of realise the benefits/impact/growth of the Care and Support Strategy Key controls and risk reduction include: Board-approved strategy in place to support implementation. New Business targets/identify new income streams included in approved budget. Project plans in place to support post-implementation. Locality-by-locality approach to reduce risk. Executive Board level accountability.
1-5
16+
* Not applicable, new in 2015
Risk: Loss of income from care contract renewal/ funding plus increased exposure to cost control pressure Key controls and risk reduction include: Care and Support Strategy to protect income streams. Growth plans. Local Authority relationship engagement. Quality management systems for excellent services. Close financial performance monitoring. New Business targets/identify new income streams.
15
Residual risk score 2014*
1-5
6-10
Residual risk score 2015
11-16 12
Residual risk score 2014*
1-5 Residual risk score 2015 Residual risk score 2014
6-10
11-16
8 12
16+
In addition to the Group’s key risks outlined above, wider risks facing the sector include:
Accounting changes The new Statement of Recommended Practice (SORP) has been released and will be applicable for year ended 31 March 2016. The main changes in the SORP relate to the implementation of International Accounting Standards under FRS 102. The Group has undertaken an early impact assessment to understand the effects of the implementation of the new standards. Pension scheme liabilities Under the new SORP it is likely that past service deficit contributions in respect of defined benefit pension funds for multi-employer schemes will be required to be brought ‘on Balance Sheet’. The economic performance of pension assets has deteriorated due to the downturn in economic conditions, resulting in pension scheme liabilities exceeding the value of these assets significantly. VFM There is a clear and ongoing expectation from the HCA that Providers clearly demonstrate VFM 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. New finance has recently been secured by the Group and the long-term funding strategy remains under constant review as both the financial markets sources of funding continue to evolve. 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. Welfare Reforms The ongoing reforms of the benefits and welfare system will continue to be a risk for Providers to manage. The continuing implementation of Universal Credit exposes Providers to income collection pressures which they will need to equip themselves to manage.
Annual Report and Financial Statements 2015
71
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 2015 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 Finance, Risk and Audit Committee which met four times in 2014/15. The main processes/policies which the Board has established, and which are designed to provide effective internal control, are summarised below: l
l
72
Internal audit The Board has delegated responsibility for overseeing the adequacy and effectiveness of the Group’s internal control system to the Group Finance, Risk and Audit Committee. The Group’s Internal Audit team reports directly to the Group Finance, Risk and Audit Committee. An annual assurance report is produced by the internal auditor summarising the risk-based systems audit programme and confirming that the Group has a satisfactory internal control system in place. Management assurances are received by the Group Finance, Risk 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 Finance, Risk 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.
Accord Group
l
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.
l
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 ISO14001 and ISO20001 (related to Environmental and Information Technology quality management systems respectively).
l
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.
l
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.
l
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 Finance, Risk and Audit Committee. This includes an analysis of the fraud and losses register for the year and how surrounding controls have been improved.
l
The Group Finance, Risk and Audit Committee This Committee meets with the members of the Executive team, the internal auditors and external auditors to review specific reporting and internal control matters and to satisfy itself that the systems are operating effectively.
l
The Chairs Committee This Committee is made up of the Group Board Chair and the subsidiary Chairs with the option to have co-opted members if there is a skill gap. The Committee ensures two-way communication between the Group Board and local Boards. They also assist Group Board with strategy development and free up the Group Board to look at the wider issues.
On behalf of the Board, the Group Finance, Risk 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 Finance, Risk 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.
Health and safety
The Board acknowledges its duty of care to employees, customers 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 Executive 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 2014/15 a number of health and safety audits and inspections have been undertaken to ensure compliance with the required standards and legislation is maintained.
Employees
The strength of the Group lies in the quality and commitment of its employees. The ability to meet business objectives and commitments to customers in an efficient manner depends on the contribution of employees throughout the Group. The Accord Group is committed to equal opportunities for all employees and will not discriminate against the nine protected characteristics, which are age, being or becoming a transsexual person, being married or in a civil partnership, being pregnant or having a child, disability, race including colour, nationality, ethnic or national origin, religion, belief or lack of religion/belief, or sex and sexual orientation. The Group demonstrates its commitment to equality in all aspects of employment, including recruitment, career development, training, promotion and welfare. The Group have achieved ‘Investors in People’ recognition and successfully retained this status, which demonstrates its commitment to training and developing its 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.
Fairness
Accord Group treats 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. The Accord Group will: l l
l
l
l l
Focus on the needs of each individual in providing employment, homes and services Listen to and understand customers, asking people what help, support and/or guidance they feel they need to access our services Ensure staff treat each other and customers with respect to build the trust, care and commitment necessary to deliver an excellent service to all Monitor and demonstrate how successful the Group is in acting fairly, making a difference and in meeting the needs of our local communities Always aim to exceed the requirements of the law and regulators, as well as adopting a person centred approach Be an excellent organisation, demonstrating accountability and promoting fairness for all.
Annual Report and Financial Statements 2015
73
Accord Group’s commitment to environmental matters
The Accord Group remains committed to being at the forefront on delivering innovative service delivery solutions which impact favourably on its environment and communities. As part of this commitment the Group has accomplished a number of key achievements: l l l
l l
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 Accord Group is the first housing association to achieve the much more demanding European Eco Management and Audit Scheme (EMAS) standard Environmental factors are considered and all key project investment decisions are considered by the Group’s Project Approval Panel Accord successfully achieved approval for the revised EMAS statement which embraces the latest requirements of the initiative to EMAS III Commitment to the development of high quality, highly efficient timber frame homes at the LoCaL Homes factory. These homes are generally 50% more efficient when compared to traditionally built homes. These homes will continue to supply Accord Group’s 2015-2018 Affordable Homes development programme and beyond.
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 fixed asset component replacements, depreciation, capital grants, and the capitalisation of interest and development staff costs within housing properties. These policies have remained largely unchanged during the year.
Charitable donations
The Group made donations to charitable organisations of £6,003 during the year (2014: £16,501).
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. The Co-operative and Community Benefit Societies Act 2014 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 this 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: l
Select suitable accounting policies and then apply them consistently Make judgements and accounting estimates that are reasonable and prudent l 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. l
74
Accord Group
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 Co-operative and Community Benefit Societies Act 2014, 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.
Disclosure of information to auditors In so far as each of the directors is aware: l l
There is no relevant audit information of which the Association’s auditors are unaware The directors have taken all steps that they ought to have taken as directors, in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
Going concern
The Board has reviewed the 2015/16 budget, five year financial plan, borrowing facilities, funding requirements and forward projections. At 31 March 2015, the Group has £46 million of available funding facilities in place which is more than sufficient to meet the Group’s strategic growth ambitions and development plans. The 2015/16 forecasts Group surpluses of c£6 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.
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 2015 Annual General Meeting. On behalf of the Board
A. Parikh (Chairman) Date: 23 July 2015
S. Fisher (Executive Group Finance Director) Date: 23 July 2015
Annual Report and Financial Statements 2015
75
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 2015 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 87 and 98 (7) of the Co-operative and Community Benefit Societies Act 2014. 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 74), 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/auditscopeukprivate
76
Accord Group
Opinion on financial statements In our opinion the financial statements: l
give a true and fair view of the state of the association’s affairs and group affairs as at 31 March 2015 and of the group’s and parent’s income and expenditure for the year then ended; and l have been properly prepared in accordance with Co-operative and Community Benefit Societies Act 2014, 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 Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion: l
a satisfactory system of control over transactions has not been maintained; or l the parent association has not kept proper accounting records; or l the financial statements are not in agreement with the books of account; or l we have not received all the information and explanations we need for our audit.
Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Bristol, England 10 August, 2015
INCOME AND EXPENDITURE ACCOUNT
Notes Group Group Association Association 2015 2014 2015 2014 £000 £000 £000 £000 Turnover 110,752 100,688 Operating costs (90,642) (82,744) Cost of sales (3,043) (2,073) Operating surplus 2 Net gain on business combinations 30 Surplus on sale of fixed assets 4 Interest receivable and similar income Interest payable and similar charges 5 8 Exceptional Item Gift Aid 8
17,067 34,959 222 28 (14,212) - -
8
38,064
Surplus for the financial year before taxation
50,745 (35,085) (3,043)
48,456 (34,171) (2,073)
15,871 12,617 12,212 - - 316 172 85 11 14 5 (12,635) (9,543) (9,408) 72 (150) - 469 473 3,635
3,579
3,367
19 (4) (21) - Taxation Surplus for the financial year after taxation
20
38,060
3,614
3,579
3,367
All amounts relate to continuing activities. The notes on pages 82 to 111 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 23 July 2015 and signed on its behalf by:
A. Parikh CHAIRMAN
C. Handy BOARD MEMBER
B. Gilbert BOARD MEMBER
Annual Report and Financial Statements 2015
77
GROUP BALANCE SHEET
Notes 2015 2014 £000 £000 £000 £000 Intangible fixed assets Goodwill 29 25,946 23,999 Tangible fixed assets Housing properties less depreciated costs 782,443 645,718 Social housing and other grants (305,057) (257,059) 9 477,386 388,659 Other fixed assets 10 9,904 7,889 Investments 11 76 83 Current assets Properties for sale 12 5,141 2,650 13 1,175 894 Stock and work in progress Debtors 14 17,459 13,865 Cash at bank and in hand 8,503 6,612 32,278 24,021 Creditors: Amounts falling due within one year 15 (38,083) (26,220) Net current liabilities
(5,805)
(2,199)
Total assets less current liabilities
507,507
418,431
Creditors: Amounts falling due after more than one year
384,787
333,771
Capital and reserves Share capital 18 - Revenue reserves 20 122,647 Designated reserves 20 21 Consolidation reserves 20 43 Minority Interest reserve 20 9
84,583 25 43 9
16
507,507 418,431 The Financial Statements were approved by the Board of Management on 23 July 2015 and signed on its behalf by:
A. Parikh CHAIRMAN
C. Handy BOARD MEMBER
B. Gilbert BOARD MEMBER
The notes on pages 82 to 111 form an integral part of the Financial Statements.
78
Accord Group
ASSOCIATION BALANCE SHEET Notes 2015 2014 £000 £000 £000 £000 Tangible fixed assets Housing properties less depreciated costs 477,848 461,305 Social housing and other grants (176,990) (173,783)
9 300,858 287,522
Other fixed assets 10 5,027 5,224 Investments 11 29,113 29,120 Current assets Properties for sale 12 5,066 2,650 Stock and work in progress 13 1,175 894 Debtors 14 9,197 8,188 5,461 2,815 Cash at bank and in hand 20,899 14,547 Creditors: Amounts falling due within one year 15 (27,130) (19,461) Net current liabilities
(6,231)
(4,914)
Total assets less current liabilities
328,767
316,952
Creditors: Amounts falling due after more than one year
273,956
265,720
Capital and reserves Share capital 18 - Revenue reserves 20 54,811
51,232
16
328,767 316,952
The Financial Statements were approved by the Board of Management on 23 July 2015 and signed on its behalf by:
A. Parikh CHAIRMAN
C. Handy BOARD MEMBER
B. Gilbert BOARD MEMBER
The notes on pages 82 to 111 form an integral part of the Financial Statements.
Annual Report and Financial Statements 2015
79
CONSOLIDATED GROUP CASHFLOW STATEMENT
Notes 2015 2014 £000 £000 £000 £000 Net cash inflow from operating activities 21a 28,201 26,937 Returns on investments and servicing of finance Interest received Exceptional item re: Icelandic bank
28
8
-
Interest paid
(15,977)
11 72 (14,380)
Net cash outflow from returns on investments and servicing of finance
(15,949)
(14,297)
Corporation tax (received) / paid
(9)
2
Capital expenditure and financial investment Acquisition and construction of housing properties
(35,004)
(27,402)
21d
5,607
4,253
Purchase of other fixed assets
(1,206)
(2,740)
Sales of housing properties
1,820
2,366
Social housing grant received
Investments 6 3 Acquisition of Domus Healthcare Group Limited, net of cash Net cash acquired with Heantun Housing Association Limited, acquisition
(722)
-
915
-
Net cash outflow from capital expenditure
(28,584)
(23,520)
Cash outflow before movement of liquid resources and financing
(16,341)
(10,878)
Management of liquid resources Financing Loans received Loans repaid
22,750 (5,068)
16,500 (3,092)
Net cash inflow from financing
21b 17,682 13,408
Increase in cash
21c 1,341 2,530
The notes on pages 82 to 111 form an integral part of the Financial Statements.
80
Accord Group
Annual Report and Financial Statements 2015
81
NOTES TO THE FINANCIAL STATEMENTS
1. PRINCIPAL ACCOUNTING POLICIES Legal Status
The Association is registered under the Co-operative and Community Benefit Societies Act 2014 and is a registered housing provider.
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 on the next page.
82
Accord Group
Basis of consolidation
The consolidated accounts incorporate the financial statements of Accord Housing Association Limited and all of its subsidiary undertakings. For acquisitions made in the year, the 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 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.
Supporting People (SP) subsidy income
Supporting People funding was introduced on 1 April 2003 and replaced Supported Housing Management Grant. Supporting People contracts are entered into with local authorities and are of two types: l
Block subsidy is determined for each tenancy based on support needs, or l 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
The Group adopts full component accounting in relation to the capitalisation and depreciation of its completed housing property stock. Previously the Group depreciated housing properties over the estimated useful life of the asset as a whole. All housing properties are 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
Bathroom
30 years
Windows and doors
35 years
Kitchen
20 years
Boiler and central heating
20 years
Lifts (where applicable)
30 years
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.
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83
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 Group 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. 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.
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Accord Group
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
4 - 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 Group’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 2014/15 of 4.11% (2014: 4.01%). 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.
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 Group 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
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.
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.
Annual Report and Financial Statements 2015
85
2. TURNOVER, OPERATING COSTS, COST OF SALES AND OPERATING SURPLUS: GROUP
Cost of sale £000
Operating surplus/ (deficit) £000
Turnover £000
Operating costs £000 (restated)
32,288 12,462 6,847 2,060
(21,541) (9,596) (7,855) (1,330)
- - - -
16,747 2,866 (1,008) 730
34,594 11,031 7,336 1,959
(20,279) (9,188) (7,241) (1,276)
- - - -
14,315 1,843 95 683
Total social housing
59,657
(40,322)
-
19,335
54,920
(37,984)
-
16,936
Operating surplus/ (deficit) £000
Operating costs £000
Social housing lettings General needs housing Supported housing Residential care home Shared ownership
Cost of sale £000
Turnover £000
Year 2015 2014
Other social activities Supporting people contract income Development administration Management administration First tranche shared ownership sales Other
1,926 (2,134) - (208) - (50) - (50) 876 (495) - 381 3,074 - (3,043) 31 215 (415) - (200)
2,296 (2,250) - 46 - (50) - (50) 957 (705) - 252 2,004 - (2,073) (69) 180 (539) - (359)
Total social housing activity
6,091
(3,094)
(3,043)
(46)
5,437
45,004
(47,226)
-
(2,222)
40,331
(3,544) (2,073)
(180)
Non-social housing activity Registered nursing homes 2,450 (2,640) - (190) 477 (639) - (162) Market rents 315 (353) - (38) 458 (416) - 42 Domiciliary care services 29,516 (29,888) - (372) 30,610 (31,052) - (442) Other 12,723 (12,679) - 44 8,786 (8,277) - 509 Amortisation of goodwill - (1,666) - (1,666) - (832) - (832) Total non social housing activity
(41,216)
-
(885)
Total 110,752 (90,642) (3,043) 17,067 100,688 (82,744) (2,073) 15,871 Net gain on business combinations 34,959 Surplus on sale of housing properties 222 316 Interest receivable and similar income 28 11 Interest payable and similar charges (14,212) (12,635) - 72 Exceptional item Surplus for the financial year before taxation 38,064
86
Accord Group
3,635
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 2015 2014
Social housing lettings General needs housing 21,264 (11,674) - 9,590 20,462 (12,296) - 8,166 Supported housing 5,650 (4,583) - 1,067 6,694 (5,269) - 1,425 Residential care home 6,479 (7,307) - (828) 6,979 (6,794) - 185 Shared ownership 1,652 (1,074) - 578 1,607 (1,068) - 539 Total social housing
35,045
(24,638)
-
10,407
35,742 (25,427)
- 10,315
Other social activities Supporting people contract income - - - - 66 (66) - Development administration - (50) - (50) - (50) - (50) Management administration 2,837 (1,129) - 1,708 2,318 (1,204) - 1,114 First tranche shared ownership sales 3,073 - (3,043) 30 2,004 - (2,073) (69) Other 487 (164) - 323 446 (275) - 171 Total social housing activity 6,397 (1,343) (3,043) 2,011 4,834 (1,595) (2,073) 1,166 Non-social housing activity Registered nursing homes 488 (680) - (192) 476 (639) - (163) 8,815 (8,424) - 391 7,404 (6,510) - 894 Other Total non social housing activity
9,303
(9,104)
-
199
7,880 (7,149) - 731
Total 50,745 (35,085) (3,043) 12,617 48,456 (34,171) (2,073) 12,212 Surplus on the sale of housing properties 172 85 Interest receivable and similar income 14 5 Interest payable and similar charges (9,543) (9,408) Exceptional item 319 473 Surplus for the financial year
3,579
3,367
Annual Report and Financial Statements 2015
87
2015 Group total £000
2014 Group total £000
Low cost home ownership £000
Rent receivable net of identifiable service charges Service income Charges for support services
35,782 2,495 11
7,012 4,933 517
1,161 2,169 3,517
1, 311 749 -
45,266 10,346 4,045
39,775 9,831 5,314
Net rental income
38,288
12,462
6,847
2,060
59,657
54,920
Turnover from social housing lettings
38,288
12,462
6,847
2,060
59,657
54,920
Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation on housing properties
(6,246) (1,543) (513) (355) (8,657) (7,680) (2,448) (4,404) (2,633) (715) (10,200) (8,983) - (1,330) (4,245) - (5,575) (5,898) (6,405) (1,302) (250) (91) (8,048) (7,703) (1,867) (318) (131) (76) (2,392) (2,569) (324) 113 14 - (197) (424) (4,251) (812) (97) (93) (5,253) (4,727)
General needs housing £000
Residential care homes £000
Supported housing and housing for older people £000
3. INCOME AND EXPENDITURE FROM SOCIAL HOUSING LETTINGS: GROUP
Operating costs on social housing lettings Operating surplus on social housing lettings Void losses
88
Accord Group
(21,541)
(9,596)
(7,855)
(1,330)
(40,322)
(37,984)
16,747
2,866
(1,008)
730
19,335
16,936
405
587
56
-
1,048
1,282
2015 Association total £000
2014 Association total £000
Low cost home ownership £000
Rent receivable net of identifiable service charges Service income Charges for support services
19,783 1,471 10
3,205 1,944 501
1,088 2,058 3,333
954 698 -
25,030 6,171 3,844
24,124 6,483 5,135
Net rental income
21,264
5,650
6,479
1,652
35,045
35,742
Turnover from social housing lettings
21,264
5,650
6,479
1,652
35,045
35,742
Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation on housing properties
(3,805) (373) (460) (1,428) (1,992) (2,448) - (870) (3,963) (2,993) (649) (234) (1,310) (181) (122) (201) 101 13 (1,937) (619) (93)
General needs housing £000
Residential care homes £000
Supported housing and housing for older people £000
3. INCOME AND EXPENDITURE FROM SOCIAL HOUSING LETTINGS: ASSOCIATION
Operating costs on social housing lettings Operating surplus on social housing lettings Void losses
(167) (4,805) (4,614) (667) (6,535) (6,296) - (4,833) (5,074) (86) (3,962) (4,428) (76) (1,689) (1,865) - (87) (243) (78) (2,727) (2,907)
(11,674)
(4,583)
(7,307)
(1,074)
(24,638)
(25,427)
9,590
1,067
(828)
578
10,407
10,315
254
181
56
-
491
740
Annual Report and Financial Statements 2015
89
4. SURPLUS ON SALE OF HOUSING PROPERTIES
Sale proceeds Grant abated Cost of sale Incidental sale expenses Surplus on sale
Group
Group Association Association
2015 2014 2015 2014 £000 £000 £000 £000 2,313 150 (1,995) (246)
2,252 286 (1,931) (291)
1,337 88 (1,139) (114)
838 139 (743) (149)
222
316
172
85
5. INTEREST PAYABLE AND SIMILAR CHARGES
On loans repayable within five years On loans repayable in more than five years
Group Group Association Association 2015 2014 2015 2014 £000 £000 £000 £000 - 15,431
- 13,485
10,345
10,707
10,345
Add: Other interest payable and similar charges Less: Capitalised in respect of housing properties
856
493
481
276
(2,076)
(1,343)
(1,645)
(1,213)
14,211 12,635
90
Accord Group
15,431 13,485
- 10,707
9,543
9,408
6. DIRECTORS’ EMOLUMENTS
Remuneration totalling £60,000 was paid to Non-Executive Members of the Group Board in the year, as outlined in table below: Remuneration Expenses £000 £000 Akshay Parikh 8 Barrie Blower, MBE
15
-
Ghulam Shabar 6 Bruce Gilbert, OBE
7
7
Shahana Khan 6 Bill Hartnett - Elisabeth Buggins 4 Titilola Abuda 4 Henry Foster 3 1 Simon Eastwood 3 Derek Leyland Resigned July 2014
2
-
Barry Picken Resigned September 2014
2
-
Total 60 8 Group-wide non-executive members received remuneration totalling £120,591 (2014: £118,716) 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 Group’s pension scheme. No enhanced or special terms apply to his membership and he has no other pension arrangements to which the Association contributes.
2015 2014 £000 £000 (restated) Aggregate emoluments payable to directors (including pension contribution and benefits in kind) Emoluments payable to the highest paid director, the Group Chief Executive Officer, (excluding pension contributions but including benefits in kind)
Group Chief Executive Officer total emoluments as a percentage of turnover Group Chief Executive Officer total emoluments per employee
1,315
1,288
188
182
0.2%
0.2%
£60
£54
Annual Report and Financial Statements 2015
91
The full time equivalent number of executive staff who received emoluments: 2015 (No.) £70,001 to £80,000
1
£80,001 to £90,000
1
£90,001 to £100,000
1
£110,001 to £120,000
1
£120,001 to £130,000
1
£130,001 to £140,000
1
£160,001 to £170,000
1
£180,001 to £190,000
1
£200,001 to £210,000
1
In addition, 17 members of senior management received emoluments in excess of £60,000 (including pension contribution and benefits in kind). 3 of these senior managers received emoluments of between £60,001 - £70,000, 5 between £70,001 - £80,000, 3 between £80,001 - £90,000, 2 between £90,001 - £100,000, 1 between £100,001 - £110,000 and 3 between £110,001 and £120,000. 2015 2014 £000 £000 Total expenses reimbursed to the directors excluding board members expenses above not chargeable to United Kingdom income tax
20
12
7. EMPLOYEE INFORMATION The average number of persons employed during the year was:
Group Group Association Association 2015 2014 2015 2014 Persons FTE Persons FTE Persons FTE Persons FTE Office staff, care support workers, wardens, caretakers and cleaners
3,349
Staff costs (for the above persons) Wages and salaries Social security costs Other costs (incl. pension)
£000 51,129 3,476 1,835
Total
92
Accord Group
2,411
3,378
2,371
£000 47,287 3,379 1,463
912
750
975
£000 18,036 1,191 840
£000 18,132 1,200 816
56,440 52,129 20,067 20,148
797
8. OPERATING SURPLUS FOR THE FINANCIAL YEAR
Group Group Association Association 2015 2014 2015 2014 £000 £000 £000 £000
Operating surplus for the financial year is stated after charging: Depreciation on housing properties: Depreciation charge – social housing (Note 3) 5,253 4,727 2,727 Depreciation charge – other social housing (Note 2) 87 89 738 Depreciation charge – non-social housing (Note 2) 24 21 15 Total depreciation charge Less: write off component disposals
5,364 (234)
4,837 (451)
3,480 (68)
2,907 705 12 3,624 (366)
Depreciation Charge (Note 9) 5,130 4,386 3,412 3,258 Depreciation on other tangible fixed assets 1,945 1,688 1,067 1,092 Auditors’ remuneration (excluding VAT) - in their capacity as auditors 161 85 54 - in respect of other services 44 95 5 Surplus on disposal of tangible fixed assets other than development for outright sales Operating lease payments Repairs and maintenance expenditure
23 91
222
316
172
85
1,015 10,440
881 10,263
227 5,651
270 6,293
£4.718 million of repairs expenditure has been capitalised in the year (2014: £4.679 million). Exceptional items in Accord Housing Association Limited relates to a donation payable to Heantun Housing Association Limited. Comparitive exceptional items in 2014 relates to ongoing amounts recovered from the Icelandic banks.
Annual Report and Financial Statements 2015
93
2015 total £000
Non-social housing properties held for letting £000
Long leasehold social housing properties £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 2014 601,009 44,394 29,171 2,067 1,317 677,958 3,590 - - 10 - 3,600 Additions - works to existing properties Additions - new properties 30,709 39,577 50 - 77 70,413 Transfer to stock/cost of sales - (8,552) - - - (8,552) Acquisition of Heantun 77,001 4,536 1,444 - - 82,981 Flexible tenure - buybacks 106 - (106) - - Schemes completed in the year 68,091 (72,346) 4,255 - - Disposals (1,865) - (663) (1) - (2,529) 778,641 7,609 34,151 2,076 1,394 823,871 At 31 March 2015 Social housing grant and other grants At 1 April 2014 237,671 8,970 8,827 1,426 165 257,059 Received and receivable during year 497 6,498 - - - 6,995 Acquisition of Heantun 39,500 1,775 563 - - 41,838 Flexible tenure - buybacks 30 - (30) - - 14,047 (15,291) 1,244 - - Schemes completed in year (Repaid)/abated on disposals (643) - (192) - - (835) 291,102 1,952 10,412 1,426 165 305,057 At 31 March 2015 Depreciation At 1 April 2014 30,517 - 1,207 384 132 32,240 Charge for year 4,978 - 113 27 12 5,130 Acquisition of Heantun 4,552 - 51 - - 4,603 Eliminated in respect of disposals (506) - (39) - - (545) At 31 March 2015 39,541 - 1,332 411 144 Net book value at 31 March 2015 447,998 5,657 22,407 239 1,085
477,386
Net book value at 31 March 2014
388,659
94
Accord Group
332,821
35,424
19,137
257
1,020
41,428
2015 total £000
Non-social housing properties held for letting £000
Long leasehold social housing properties £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 2014 416,665 35,945 25,597 1,319 1,317 480,843 1,797 - - 11 - 1,808 Additions - works to existing properties Additions - new properties 80 31,596 50 - 76 31,802 Transfer to stock/cost of sales - (8,552) - - - (8,552) Transfer of subsidiaries - (3,895) - - - (3,895) Flexible tenure - buybacks 49 - (49) - - Schemes completed in the year 45,636 (49,896) 4,260 - - Disposals (969) - (481) (1) (1,451) 463,258 5,198 29,377 1,329 1,393 500,555 At 31 March 2015 Social housing grant and other grants At 1 April 2014 158,584 6,613 7,322 1,099 165 173,783 Received and receivable during year 86 3,674 - - - 3,760 Flexible tenure - buybacks 30 - (30) - - Schemes completed in year 8,197 (9,441) 1,244 - - (419) - (134) - - (553) (Repaid)/abated on disposals At 31 March 2015 166,478 846 8,402 1,099 165 Depreciation At 1 April 2014 18,285 - 1,094 27 132 Charge for year 3,283 - 101 16 12 Eliminated in respect of disposals (215) - (28) - -
176,990
At 31 March 2015 21,353 - 1,167 43 144 Net book value at 31 March 2015 275,427 4,352 19,808 187 1,084
22,707
Net book value at 31 March 2014
239,796
29,332
17,181
193
1,020
19,538 3,412 (243)
300,858 287,522
Work to existing properties
Group Group Association Association 2015 2014 2015 2014 £000 £000 £000 £000
Revenue
10,440 10,263 5,651 6,293
Amounts capitalised: – Improvements – Replaced components
1,118 3,600
636 4,043
206 1,808
280 3,236
15,158 14,942 7,665 9,809
Annual Report and Financial Statements 2015
95
10. TANGIBLE FIXED ASSETS: OTHER
2015 Total £000
Office furniture and equipment £000
Plant and machinery £000
Freehold offices £000
2015 Total £000
Office furniture and equipment £000
Plant and machinery £000
Freehold offices £000
Association Group
Cost At 1 April 2014 6,078 413 11,998 18,489 4,342 413 7,272 12,027 Additions 4,792 959 3,043 8,794 29 7 834 870 Acquisition of Heantun 70 7 1,129 1,206 Disposals (349) - (5) (354) - - - 4,371
420
8,106
12,897
Other Grants At 1 April 2014 1,015 306 - 1,321 1,015 Acquisition of Heantun 1,192 940 32 2,164 -
306 -
- -
1,321 -
At 31 March 2015
1,015
306
-
1,321
Depreciation At 1 April 2014 1,323 38 7,918 9,279 686 Charge for year 170 16 1,759 1,945 70 Acquisition of Heantun 913 - 2,720 3,633 - Eliminated in respect of disposals (106) - (5) (111) -
38 16 - -
4,758 981 - -
5,482 1,067 -
At 31 March 2015
2,300
54
12,392
14,746
756
54
5,739
6,549
Net book value at 31 March 2015
6,084
79
3,741
9,904
2,600
60
2,367
5,027
Net book value at 31 March 2014
3,740
69
4,080
7,889
2,641
69
2,514
5,224
At 31 March 2015
10,591
2,207
1,379
1,246
16,165
28,135
32
3,485
11. INVESTMENTS
Group
At beginning of year Addition in the year (see note 30) Repaid during year At end of year
Group
Accord Group
Association
2015 2014 2015 2014 £000 £000 £000 £000 83 - (7)
86 - (3)
29,120 - (7)
29,123 (3)
76
83
29,113
29,120
See Note 26 for a list of subsidiary undertakings and joint ventures.
96
Association
12. PROPERTIES FOR SALE
Group
Group
Association
Completed properties
2015 2014 £000 £000
5,141 2,650
5,141
Association
2015 2014 £000 £000
2,650
5,066
2,650
5,066 2,650
13. STOCK AND FINISHED GOODS
Group
Group
Association
Raw materials Finished goods
2015 2014 £000 £000
1,175 894
14. DEBTORS
29 1,146
Group
2015 2014 £000 £000
29 865
Group
Association
29 1,146
29 865
1,175 894
Association
2015 2014 £000 £000
Association
2015 2014 £000 £000
Arrears of rent and service charge Provision for bad and doubtful debts
3,164 (1,431)
2,348 (1,177)
1,475 (738)
1,309 (670)
Social Housing Grant receivable Amounts owing by subsidiary undertakings Other debtors and prepayments
1,733 1,171 2,956 1,788 - - 12,770 10,906
737 639 2,759 1,788 609 530 5,092 5,231
17,459 13,865
9,197
8,188
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group
Group
Association
Association
2015 2014 £000 £000
2015 2014 £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 (Note 17)
9,523 1,000 11,393 - 12 526 11,380 3,641 608
6,628 - 8,615 1,075 - 333 7,553 2,353 573
4,191 450 8,170 - 17 463 10,243 2,671 15
38,083 26,220
3,328 123 5,847 850 340 7,077 1,881 15
27,130 19,461
Annual Report and Financial Statements 2015
97
16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Group
Group
Association
2015 2014 £000 £000
Association
2015 2014 £000 £000
Housing loans Repayable by annual instalment
386,649
335,617
276,293
267,479
Total housing loans Financing costs capitalised Premium on THFC loans
386,649 (4,151) 824
335,617 (3,334) -
276,293 (3,092) -
267,479 (2,688) -
Net housing loans Recycled capital grant fund (note 17)
383,322 1,465
332,283 1,488
273,201 755
264,791 929
384,787 333,771
Group
Loans repayable by instalments fall due as follows: Between one and two years Between two and five years In five or more years
Group
Association
2015 2014 £000 £000
10,259 32,834 343,556
273,956 265,720
7,190 20,059 308,368
Association
2015 2014 £000 £000
5,437 23,342 247,514
6,139 15,605 245,735
386,649 335,617
276,293 267,479
Floating borrowings Fixed borrowings
144,098 252,074
108,329 174,592
396,172 339,808
Weighted average interest rate Weighted average time for which rate is fixed
124,150 215,658
99,573 171,234
282,921 270,807
% 4.11
% 4.01
% 3.84
% 3.83
Years 9.5
Years 9.3
Years 7.44
Years 5.9
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 a Co-operative and Community Benefit 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. During the year the Association reviewed its hedging portfolio and removed any options that could be exercised at the bank’s discretion therefore the Association no longer has any cancellable swap transactions.
98
Accord Group
17. RECYCLED CAPITAL GRANT FUND AND DISPOSAL PROCEEDS FUND
Group
Group
Association
Association
2015 2014 2015 2014 £000 £000 £000 £000
Fund at beginning of year Transferred to fund during year Acquisition of Heantun Interest credited to fund Utilised during the year Repaid during year
1,503 686 21 9 (146) -
1,540 1,295 - 9 (1,341) -
944 465 - 5 (86) -
1,053 287 6 (402) -
Fund at end of year
2,073
1,503
1,328
944
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 2015 2014 2015 2014 Number Number Number Number 30 4 -
30 - -
30 4 -
30 -
34
30
34
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
Group Group Association Association 2015 2014 2015 2014 £000 £000 £000 £000 4
21
-
-
The taxation liability arises solely from bchs.
Annual Report and Financial Statements 2015
99
25 - (4)
43 - -
9 - -
84,660 38,060 -
122,647
21
43
9
122,720
Association At 1 April 2014 Surplus for the year
51,232 3,579
- -
- -
- -
51,232 3,579
At 31 March 2015
54,811
-
-
-
54,811
At 31 March 2015
Total £000
Designated reserve £000
84,583 38,060 4
Group At 1 April 2014 Surplus for the year Transfer to income and expenditure account
Minority interest £000
Revenue reserves £000
Other reserves consolidation reserve £000
20. RESERVES
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, to 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
2015 £000
2014 £000
Operating surplus Depreciation charges and amortisation of finance costs Decrease/(increase) in debtors Increase in creditors Sale of other fixed assets Disposal of fixed assets
17,067 8,742 156 1,756 243 237
15,871 7,644 (129) 3,098 453
Net cash flow from operating activities
28,201
26,937
100
Accord Group
b) Reconciliation of net cash flow to movement in net debt Increase in cash in the year Cash inflow from debt increase
2015 £000
2014 £000
1,341 (17,682)
2,530 (13,408)
Cash inflow from management of liquid resources Non-cash movement Net debt at 1 April 2014
(16,341) (38,689) (330,312)
(10,878) (319,434)
Net debt at 31 March 2015
(385,342)
(330,312)
c) Analysis of changes in net debt Cash at bank and in hand Bank overdraft
At 31 March Cash Flow Non-cash At 1 April 2015 movement 2014 £000 £000 £000 £000 8,503 (1,000)
1,891 (550)
- -
6,612 (450)
7,503
1,341
-
6,162
Debt due within one year Debt due after one year
(9,523) (383,322)
(3,566) (14,116)
(1,766) (36,923)
(4,191) (332,283)
Changes in debt
(383,322)
(17,682)
(38,689)
(336,474)
Changes in net debt
(385,342)
(16,341)
(38,689)
(330,312)
Changes in cash
d) Analysis of changes in capital grant funding 2015 £000 Balance at beginning of year 258,380 Cash inflow from capital grant funding 5,607 Movement in debtors/creditors (net) 1,242 Acquisition of Heantun 44,001 Repaid/(abated) on disposals (148) Transfer to/(from) grant funding (540) Balance at end of year
308,542
2014 £000 252,872 4,253 1,087 123 45 258,380
Annual Report and Financial Statements 2015
101
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 £95,405 (2014: £43,402). The number of employees in the pension scheme at the year-end was 623 (2014: 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 £503,271 (2014: £529,268). Contributions payable are charged to management expenses as they fall due. The number of employees in the pension scheme at the year-end was 133 (2014: 150). 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 2015 were £174,324 and an amount of £52,318 was owing to the schemes at the year end. Ashram Housing Association, Caldmore Area Housing Association, Accord Housing Association and Heantun Housing Association and its subsidiaries, participate in the Social Housing Pension Scheme (the Scheme). The Scheme is funded and is contractedout of the State Pension scheme. The Scheme 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: l
Final salary with a 1/60th accrual rate Final salary with a 1/70th accrual rate. l Career average revalued earnings (CARE) with a 1/60th accrual rate. l
From April 2010 a further two defined benefit structures have been available, namely: l l
Final salary with a 1/80th accrual rate. 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 plus CARE 1/20th, plus the defined contribution 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. *A Career Average Revalued Earnings (CARE) structure with a 1/20th accrural rate was made available from 1 April 2013. This structure is contracted-in to the State Pension scheme.
102
Accord Group
During the accounting period the following contributions were paid: l
Ashram Housing Association paid contributions at the rate of 9.25% and made past service deficit contributions of £54,234 (2014:£52,140). Member contributions varied between 11.05% and 13.05%. As at the balance sheet date there were 2 active members of the Scheme (2014: 3). The annual pensionable payroll in respect of these members was £152,819 (2014: £149,159). l Caldmore Area Housing Association paid contributions of 6.95% (CARE scheme) and 9.25% (Final salary scheme) and made past service deficit contributions of £264,511 (2014: £250,836). Member contributions varied between 11.05 % and 13.05% CARE scheme and Final salary scheme. As at the balance sheet date there were 18 active members of the Scheme (2014: 22). The annual pensionable payroll in respect of these members was £487,275 (2014: £560,118). l Accord Housing Association paid contributions of 6.95% (CARE scheme) and 9.25% (Final salary scheme) and made past service deficit contributions of £91,550 (2014:£88,200). Member contributions varied between 11.05 % and 13.05% CARE scheme and Final salary scheme. As at the balance sheet date there were 14 active members of the Scheme (2014:13). The annual pensionable payroll in respect of these members was £667,315 (2014: £665,663). l Heantun Housing Association and its subsidiaries paid contributions of 8.35% (CARE scheme) and 9.05% (Final salary scheme) and made past service deficit contributions of £193,493. Member contributions varied between 8.15% and 10.15% CARE scheme and 9.75% and 10.75% Final salary scheme. As at the balance sheet date there were 47 active members of the Scheme. The annual pensionable payroll in respect of these members was £939,929. 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 multi-employer scheme, where the assets are comingled 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 is currently finalising the 2014 valuation but key provisional results have been confirmed. As at 30 September 2014, the market value of the Scheme’s assets was £3,123 million. There was a shortfall of assets compared with the value of liabilities of £1,323 million, equivalent to a past service funding level of 70%.
Valuation Discount Rates
% p.a.
Pre-Retirement
7.0
Non Pensioner Post Retirement
4.2
Pensioner Post Retirement
4.2
Pensionable Earnings Growth
2.5 per annum for 3 years, then 4.4
Price Inflation
2.9
Pension Increases Pre 88 GMP
0.0
Post 88 GMP
2.0
Excess Over GMP
2.4
Annual Report and Financial Statements 2015
103
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: l
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 l 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.
Benefit Structure
Long-term Joint Contribution Rate (% of pensionable salaries)
Final salary with a 1/60th accrual rate
19.4
Final salary with a 1/70th accrual rate
16.9
Career average revalued earnings (CARE) with a 1/60th accrual rate
18.1
Final salary with a 1/80th accrual rate
14.8
Career average revalued earnings (CARE) with a 1/80th accrual rate
14.0
Career average revalued earnings (CARE) with a 1/120th accrual rate
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.
These deficit contributions are in addition to the long-term joint contribution rates as set out in the table above. 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 the Scheme. 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
104
Accord Group
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.
Annual Report and Financial Statements 2015
105
23. CAPITAL COMMITMENTS
Group
Capital expenditure that has been contracted for but has not been provided for in these financial statements
Group
Association
2015 2014 £000 £000
Association
2015 2014 £000 £000
-
24,712
-
18,817
Capital expenditure that has been authorised 18,808 by the Board of Management but has not yet been contracted for
12,479
18,808
12,479
24. COMMITMENTS UNDER OPERATING LEASES As at 31 March 2015, the Group and Association had annual commitments under operating leases as set out below.
Group
Operating leases which expire: Less than one year Between one and five years Over five years Total
Group
Association
2015 2014 £000 £000
Association
2015 2014 £000 £000
103 275 431
213 204 34
59 173 40
86 150 34
809
451
272
270
25. CONTINGENT LIABILITIES The Group has contingent liabilities in respect of six 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.
106
Accord Group
26. GROUP STRUCTURE Accord Housing Association Limited’s Group structure comprises: Subsidiary
% Share Capital Owned
Nature of Business
Accord Care Services Limited
N/A
Dormant company
Accord Group Treasury Limited
100%
Group Treasury Vehicle
Ashram Housing Association Limited
100%
Charitable Housing Association
Birmingham Co-operative Housing Services Limited
83%
Non-Charitable Housing Association
Caldmore Area Housing Association Limited
100%
Charitable Housing Association
Redditch Co-operative Homes Limited
N/A
Registered Charity and Housing
Fry Housing Trust Limited
N/A
Charitable 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
Domus Healthcare Group Limited*
100%
Dormant company
Domus Healthcare (East Riding) Limited*
100%
Dormant company
Domus Healthcare (Oldham) Limited*
100%
Dormant company
Domus Healthcare (Kirklees and Calderdale) Limited*
100%
Dormant company
Domus Healthcare (Rotherham) Limited*
100%
Dormant company
Heantun Housing Association Limited
100%
Charitable housing association
Heantun Care Housing Association Limited**
100%
Provision of care services
New Bilston Limited**
100%
Social economic regeneration
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. All subsidiaries have been included in the consolidation. *Direct Health Group Limited is the immediate parent entity of these subsidiaries. ** Heantun Housing Association Limited is the immediate parent entity of these subsidiaries.
27. RELATED PARTY TRANSACTIONS All inter Association charges relate to the recovery of common costs in the usual course of business. Exemptions under FRS8 (Related Party Disclosures) regarding the disclosure of intercompany and related party transactions have been applied. There are two resident members of the Board of Ashram Housing Association, Fozia Ayun and Ali Ali and one resident Board member of the Board of Caldmore Housing Association, Adam Jenkins. Their tenancies are on normal commercial terms and they are not able to use their position to their advantage.
Annual Report and Financial Statements 2015
107
28. HOUSING STOCK The number of units at the year end was:
Group
Social housing General needs housing: social rent Affordable rents Long leasehold Supported housing and housing for older people Residential care homes Shared ownership accommodation Other Total social housing
Group
Association
Association
2015 2014 2015 2014 Number Number Number Number
7,611 7,025 788 427 96 78 1,864 1,324 275 275 1,223 1,205 567 657
4,676 544 64 982 260 1,075 174
4,719 266 64 981 260 1,076 174
12,424
10,991
7,775
7,540
Non-social housing Registered nursing homes Market rent
78 55
11 66
11 -
11 -
Total non-social housing
133
77
11
11
Grand total
12,557
11,068
7,786
7,551
Being: Owned and managed Managed only Owned but managed by others
11,295 848 414
9,975 835 258
5,652 418 1,716
6,187 418 946
12,557 11,068
7,786
7,551
Housing under development
108
Accord Group
75
347
75
240
29. GOODWILL
Group 2015 £000
Cost At 1 April 2014 Goodwill arising on acquisition Acquired goodwill
26,754 1,775 1,838
At 31 March 2015
30,367
Amortisation At 1 April 2014 Charge for the year At 31 March 2015
(4,421)
Total as at 31 March 2015
25,946
Total as at 31 March 2014
23,999
(2,755) (1,666)
In August 2014 the Group acquired 100% of the share capital of Domus Healthcare Group Limited for a total consideration of £1.3 million 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 Domus Healthcare Group Limited 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. ACQUISITIONS Group 2015 £000
Net gain on business combinations Acquisition of Heantun Housing associations and its subsidiaries (Note 31a)
34,959
Total amount credited to Income and Expenditure
34,959
Positive goodwill Acquisition of Domus Healthcare Group UK Limited (Note 31 b) – acquired goodwill Acquisition of Domus Healthcare Group UK Limited (Note 31 b) – goodwill arising on acquisition Total recognised in Intangible Fixed Assets (Goodwill) (Note 29)
1,838 1,775 3,613
Annual Report and Financial Statements 2015
109
31a. BUSINESS COMBINATIONS: HEANTUN HOUSING ASSOCIATION LIMITED AND ITS SUBSIDIARIES On 30 June 2014 Heantun Housing Association Limited became a subsidiary of Accord Housing Association Limited. The acquisition has been incorporated into these financial statements using the acquisition method of accounting. The amount of assets and liabilities of Heantun Association Limited are set out below.
Book Fair value value adjustments
Fair value
Heantun Housing Association and its subsidiaries £000 £000 £000 Net Assets Acquired Fixed Assets – housing properties: - Property 78,378 29,890 108,268 - Property grant (41,838) - (41,838) Fixed Assets – other 2,982 - 2,982 Stock 75 - 75 Debtors 1,973 - 1,973 - 915 Cash 915 Creditors (3,405) - (3,405) Loans (34,011) - (34,011) 5,069 29,890 34,959 Net Assets acquired Consideration Net gain on business combination
34,959
The Fair Value Adjustments represent the difference between the value of assets acquired and their historic book value. The financial results of Heantun Housing Association Limited and its subsidiaries prior to its acquisition were as follows:
Income and expenditure account
1 April 30 June 2014 £000
Turnover 3,338 Operating costs (2,838) Operating Surplus Net interest Surplus
110
Accord Group
500 (425) 75
31b. BUSINESS COMBINATIONS: DOMUS HEALTHCARE GROUP AND ITS SUBSIDIARIES On 24 August 2014 Direct Health Group Limited acquired 100% of the share capital of Domus Healthcare Group Limited for a total consideration of £1.3 million. The details of the transactions are shown in the table below:
Book Fair value value adjustments
Fair value
Domus Healthcare Group Limited £000 £000 Assets Intangible Fixed Assets - Goodwill 1,838 - Tangible Fixed Assets 15 - Debtors 610 - Cash at bank and in hand 534 -
£000
2,997
-
2,997
Liabilities - Creditors due within one year (584) - Creditors due in more than one year (2,932)
- -
(584) (2,932)
(3,516)
-
(3,516)
Net Assets acquired
-
(519)
Goodwill arising on acquisition (see note 30)
1,775
(519)
1,838 15 610 534
Consideration 1,256 The financial results of Domus Healthcare Group Limited prior to its acquisition were as follows:
Profit and loss account
1 April 24 August 2014 £000
Turnover 2,125 Operating costs (2,041) Earnings before interest, taxation, depreciation and amortisation (EBITDA) Depreciation and amortisation Net interest Loss for the financial year
84 (44) (99) (60)
Annual Report and Financial Statements 2015
111