Accord Group Financial Statements 2012 by The Accord Group

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Financial Statements 2012

Accord makes a difference. Our customers get value for money, excellent services, quality, innovation and a sense of belonging. We do this by empowering our talented staff and engaging our residents to give an outstanding service, all in all giving a great customer experience.

e look for opportunities where we can offer something better, fresher and more valuable, and we seize them. We also look to deliver ‘old’ products and services in new ways. We’re fast and flexible. We create partnerships and alliances with others to combine competences, skills, knowledge, products, services and much more.

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Accord Group Financial Statements 2012

Big A year of

Contents Group highlights

Page 6

The Board, Executive and Advisors

Page 8

Registration details

Page 11

Report of the Board

Page 12

Operating and financial review

Page 18

Independent auditors report

Page 30

Income and expenditure account

Page 32

Group balance sheet

Page 33

Association balance sheet

Page 34

Consolidated Group cash flow statement

Page 35

Notes to the financial statements

Page 36

thinking

Accord Group Financial Statements 2012

Group highlights: Four year summary

2012 Housing

£130,000

saved by procuring green energy services on a Groupwide basis.

Heroes awards,

500,000

40,000

400,000

30,000

300,000

20,000

200,000

10,000 0

100,000 0

For the year ended 31 March 2012 2011 2010 2009 Total £’000 £’000 £’000 £’000 (Restated) Group Income & Expenditure Account Turnover 63,286 61,797 54,799 45,704 Operating Surplus 12,489 13,180 10,988 8,510 Interest Payable and Similar Charges 11,498 10,756 7,907 7,740 Surplus on Ordinary Activities 1,711 2,456 3,667 1,189 Consolidated Balance Sheet Housing Assets at Cost 627,527 612,514 588,201 444,353 Social Housing and other Capital Grants 247,696 247,210 239,749 186,761 Net Investment in New Housing During Year 16,624 16,646 53,527 74,234 Net Current Assets/(Liabilities) 13,495 9,627 (911) (5,789) Total Assets Less Current Liabilities 376,394 360,692 337,697 246,429 Loans Outstanding 303,244 287,597 265,256 203,757 Reserves 78,046 76,348 23,299 19,645 Statistics (Group data) Surplus before Interest as a Percentage of Turnover 19.7% 21.3% 20.0% 18.6% Surplus before Interest as a Percentage of Gross Rents 25.0% 27.1% 24.9% 25.1% Interest Cover 141.3% 151.4% 169.1% 165.8% Gearing 48.0% 43.5% 43.5% 44.8% EBITDA as a Percentage of Turnover 27.2% 27.1% 30.2% 26.4% The numbers included for 2010 and 2009 in the table above have not been amended to reflect the impact of component accounting on these particular years. These numbers have been added for comparison purposes only.

Accord Group Financial Statements 2012

Development team of the year.

Completion of

2011/12

50,000

2010/11

600,000

2011/12

60,000

2010/11

700,000

2009/10

£000

70,000

2008/09

£000

2009/10

Growth in housing assets

2008/09

Turnover

phase two of the £9 million Walsall Waterfront development.

£30 million Matrix-

273

wide grant funding

secured for the HCA 2011–15

new colleagues joined the Accord Group during the year.

Affordable Housing Programme.

£570,000

saved in the re-procurement of

back office service contracts

Accord Group Financial Statements 2012

The Board, Executive and Advisors

Executive Officers

Akshay Parikh

Barrie Blower MBE

Chair

Deputy Chair

Margaret Cope

Chris Handy OBE

Appointed: 09/09/94

Appointed: 11/10/01

Group Chief Executive

Deputy Group Chief Executive, Chief Executive Accord HA

Derek Leyland

Ghulam Shabar

Cllr Bill Hartnett*

Robert Donath

Mike Hew

Sara Woodall

Appointed: 28/01/97

Appointed: 08/10/02

Appointed: 23/03/05

Chief Executive, Fry Housing Trust

Chief Executive, Caldmoreaccord

Interim Chief Executive, Moseley and District Housing

Chris Handy OBE

Andrew Wall MBE

Bruce Gilbert OBE

Alan Yates

David Williams

Appointed: 20/07/06

Appointed: 27/09/07

Appointed: 21/01/10

Director of Regeneration

Director of Care and Support

*C llr Bill Hartnett is a Councillor for Redditch Borough Council. However, he does not represent Redditch Borough Council whilst serving on the Accord Board.

Barry Picken Appointed: 24/09/10

Accord Group Financial Statements 2012

Secretary: Lakhbir Jaspal

Stephanie Gaunt Appointed: 25/09/08 Resigned: 21/06/11

Helen Harvey Appointed: 25/09/08 Resigned: 16/06/11

Kath Hodson Appointed: 17/07/03 Resigned: 11/09/11

Lakhbir Jaspal

Jas Bains MBE Chief Executive, Ashram HA

Funders:

External auditors:

Bankers:

Lloyds TSB Plc The Royal Bank of Scotland Plc Orchardbrook Limited Abbey National Treasury Services PLC Co-operative Bank Dexia Public Finance Bank

Grant Thornton UK LLP Registered Auditors Grant Thornton House 202 Silbury Boulevard Central Milton Keynes MK9 1LW

Co-operative Bank Plc, 118 – 120 Colmore Row, Birmingham B3 3BA Lloyds TSB Plc, PO Box 908, 125 Colmore Row, Birmingham B3 2DS Royal Bank of Scotland, Walsall Branch, 139 – 144 Lichfield Street, Walsall WS1 1SE

Accord Group Financial Statements 2012

The Accord Group

Registration details Accord Housing Association Limited

Fry Housing Trust

Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27052R)

Registration: Company Limited by Guarantee (Company No. 6297777)

Homes and Communities Agency under the Housing Act 1996 (Registration No. LH3902)

Homes and Communities Agency under the Housing Act 1996 (Registration No. LH2213) Charity Commission (Charity No. 505524)

Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG

Ashram Housing Association Limited

Moseley And District Churches Housing Association

Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27926R) Homes and Communities Agency under the Housing Act 1996 (Registration No. LH4034) Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG

Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 17612R) Homes and Communities Agency under the Housing Act 1996 (Registration No. LH0414) Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG Effective 1 May, 2012 Moseley and District ceased to exist following a transfer of engagements into Accord Housing Association Limited.

Birmingham Co-operative Housing Services Limited Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 22573R) Homes and Communities Agency under the Housing Act 1996 (Registration No. L3030)

Redditch Co-Operative Homes Registration: Company Limited by Guarantee (Company No. 3667984) Homes and Communities Agency under the Housing Act 1996 (Registration No. L4335) Charity Commission (Charity No. 1078304)

Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG

Caldmore Area Housing Association limited

Accord Group Treasury Limited

Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 20135R)

Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27057R)

Homes and Communities Agency under the Housing Act 1996 (Registration No. L0883)

Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG

Accord Care Services Limited Registration: Company Limited by Guarantee (Company No. 3465015) Charity Commission (Charity No. 1075621) Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG

Accord Group Financial Statements 2012

Report of the Board Introduction The Board of Management presents its report and audited consolidated financial statements for Accord Housing Association and its subsidiary undertakings for the year ending 31 March, 2012. The principal activity of the Group is the provision and management of housing and appropriate support services for people in need.

Vision Our vision is one in which people have more choice about their homes, the services they receive and where people can be involved in developing their communities.

Core values Putting people first People matter. We respond to need and promote choice by listening to our residents to deliver the housing and services that they want.

Excellence through Innovation We provide outstanding services by constantly seeking new and better ways to enhance our neighbourhoods and safeguard our environment.

Making a difference Our goal of changing lives for the better underpins everything that we do. We help people to shape their destiny and realise their potential.

Committed to communities Working with partners to build sustainable and cohesive communities is at the core of our work. We celebrate diversity and promote equality of opportunity for all.

Group operating results The Group’s surplus for the year before tax was £1.711 million (2011: £2.456 million). Our financial performance remains strong. Turnover of £63.286 million represented a 2.4 per cent increase on the prior year. The operating surplus was £12.489 million in 2011/12, compared to £13.180 million in 2010/11. This continuing strong performance has enabled Accord to further strengthen its financial position and continue its sustained investment in both properties and services. During the year the Association implemented component accounting in accordance with the requirements of SORP 2010. This has resulted in a restatement of the 2011 comparative financial information, including reported surpluses. Accumulated reserves have also been restated as a result of a prior period adjustment to reflect the historic effects of component accounting. 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.

Accord Group Financial Statements 2012

Statement of responsibilities of the Board The Board is responsible for preparing the Report of the Board and the financial statements in accordance with applicable law and regulations. Industrial and Provident Societies Acts and registered social landlord legislation requires the Board to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under the Industrial and Provident Society legislation the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and surplus or deficit of the Association and Group for that period. In preparing these financial statements, the directors are required to: • Prepare suitable accounting policies and then apply them consistently • Make judgments and accounting estimates that are reasonable and prudent • State whether applicable UK Accounting Standards and the Statement of Recommended Practice (SORP) Accounting by Registered Housing Providers Update 2010), have been followed, subject to any material departures disclosed and explained in the financial statements. The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and Association and enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 2002. 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 each of the directors is aware: • There is no relevant audit information of which the Association’s auditors are unaware; and • The directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Accord Group Financial Statements 2012

Corporate governance

Internal Audit

During the period, the Board complied in all material respects with the National Housing Federation (NHF) ‘Excellence in Governance’ (2010) issued by the NHF. The Board members are drawn from a wide background bringing together commercial, professional and local experience along with representation of customers. The Board meets, formally, four times a year for regular and strategic business. Board members also attend conferences and training courses where applicable. The Board has a number of specialist committees, and subsidiary boards as shown below. Each of the committees/boards is responsible for the implementation, monitoring, and review of the key policies and strategies that affect the Group relevant to the specialist nature of their area of operation. The respective responsibilities of the Board and the other committees are set out in the Standing Orders and Financial Regulations. The Remuneration Committee is responsible for the establishment and review of Executive Directors’ remuneration. Whilst the Board is responsible for the overall strategy and policy of the Group and the Association, the day-to-day running of the Group and the Association is delegated to the Group Chief Executive and other directors who operate as an Executive Team. Effective 1 May, 2012 Moseley and District Housing Association ceased to exist following a transfer of engagements into Accord Housing Association Limited. Accordingly its governance arrangements changed post transfer of engagement. The management board of Moseley and District Housing Association has become a committee of Accord.

The Board has delegated responsibility for overseeing the adequacy and effectiveness of the Group’s internal control system to the Resources and Audit Committee. The Group’s internal audit team reports directly to the Resources and Audit Committee. An annual assurance report is produced by the internal auditor summarising the systems audit programme and confirming that the Group has a satisfactory internal control system in place. Quarterly management accounts are also presented to the Committee. Management assurances are received by the Resources and Audit Committee to confirm that recommendations have been implemented by the agreed target date. Subsequent internal audit reviews are undertaken to check those recommendations have been properly implemented.

Risk Management The Board and Resources and Audit Committee oversee the risk management cycle which governs the ongoing process of establishing and communicating responsibilities, identifying risks and providing a framework to enable the organisation to minimise losses and maximise opportunities. Strategic risks are identified through a rolling risk assessment exercise, whilst operational risks are identified through the internal audit and best value process.

he Resources and Audit Committee meets with the members T 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 The Governance Committee ensures that the Group attains the highest standards of effective governance. On behalf of the Board, the Resources and Audit Committee has reviewed the effectiveness of the system of internal control in existence in the Association for the financial year and the period to the date of approval of the financial statements. The Board has received the Chief Executive’s annual report on internal control assurance and has conducted its review of effectiveness of the risk management and control process. The performance auditor has undertaken a number of internal audit reviews in accordance with the approved Internal Audit Plan approved by the 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.

External Audit The work of the external auditors provides some assurance through the interim and final audit visits and the provision of an audit strategy, audit report and management letter. Regular meetings are held with the external auditors to provide an update on changes in the business and to discuss strategic and technical matters.

Quality management systems The quality of the Group’s management systems is acknowledged in its review by the internal auditor and Investors in People accreditation.

Regulatory reports The Group reports to the Homes and Communities Agency (HCA) through a range of regulatory returns all of which were submitted on time. The Executive Team 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.

Performance indicators

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 mis-statement 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.

Accord Group Financial Statements 2012

The process has been in place throughout the year to 31 March, 2012 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 Resources and Audit Committee which met four times in 2011/12. The main policies which the Board has established and which are designed to provide effective internal control, are summarised on the next page.

Key performance indicator reports are produced regularly for the Group and are reported through the Executive Group to the various Boards/Committees. These reports include performance monitoring on housing management, maintenance, development, customer satisfaction, staff and financial results.

Fraud The Group has a rigorous approach to fraud as set out in the Fraud Strategy and Policy. An annual fraud report is reviewed by the Group Resources and Audit Committee. This includes an analysis of the fraud and losses register for the year and how surrounding controls have been improved. Accord Group Financial Statements 2012

Going concern The Board has reviewed the Association and Group budget, borrowing facilities and funding requirements for the year to July 2013 and forward projections. At 31 March, 2012, the Group has £111.6 million of available funding facilities in place following the Group-wide refinancing exercise securing a £140 million facility in June 2010. This includes a £5m bank overdraft facility. 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.

Risk management The management of risk is acknowledged as being fundamentally important to the Group. Risks are continually assessed to measure their significance and reported to the Board. Policies and procedures are adapted to ensure appropriate action is taken to safeguard the Group’s residents and assets.

Our approach to risk management includes the following: • A formal framework setting out how we identify and manage opportunities and risk, which sets out clear responsibilities of staff, Management team and the Board • Risk maps 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 our 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 Board review of the key risks facing the Association. Our Risk Management Strategy is subject to regular review and update, taking specific accost of ‘recession factors’ in revising our risk profile. The emphasis remains on ensuring risks and opportunities are continuously monitored and evaluated. This supports effective and strategic decision-making and ensures the Association is able to adapt to changing circumstances.

Employees The strength of the Group lies in the quality and commitment of its employees. Our ability to meet our business objectives and commitments to residents in an efficient manner depends on the contribution of employees throughout the Group. We are committed to equal opportunities for all employees and will not discriminate on the grounds of disability or impairment, gender, sexual orientation, race or religious beliefs. The Group demonstrates its commitment to equality in all aspects of employment, including recruitment, career development, training, promotion and welfare. We have achieved ‘Investors in People’ recognition and successfully retained this status, which demonstrates our commitment to training and developing our employees to a high level. The Group has continued its practice of consulting and keeping employees informed on matters affecting them and on the progress of the Group. This is carried out in a number of ways including a formal forum for consultation, departmental meetings and a variety of newsletters.

Fairness

General meeting The Annual General Meeting will be held on 13 September, 2012.

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 Annual General Meeting. On behalf of the Board

Mr A. Parikh (Chairman) Date: 26 July, 2012

The Accord Group treat all people fairly and with respect, recognising and responding to their individuality. We: • Focus on the needs of each individual in providing employment, homes and services • Listen to and understand our customers, asking people what help, support and/or guidance they feel they need to access our services • Ensure our people treat each other and our customers with respect to build the trust, care and commitment necessary to deliver an excellent service to all • Monitor and demonstrate how successful we are 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 our regulators, as well as adopting a person-centred approach • Be an excellent organisation, demonstrating our accountability and promoting fairness for all. The Group’s policies reflect its commitment to fairness and the value it places on diversity in all aspects of its work.

Health and safety The Board acknowledges its duty of care to employees, tenants and residents in respect of all matters relating to health, safety and the environment. A dedicated member of staff, operating under the supervision of the Deputy Chief Executive, regularly reviews and updates relevant policies and procedures, supervises risk assessments and provides staff with training and support on health and safety issues.

Charitable donations The Association made donations to charitable organisations of £4,519 during the year (2011: £6,062).

Accord Group Financial Statements 2012

Operating and financial review Overview of business

Value-for-money The revised Regulatory Standards have an increased focus on housing associations providing value for money services. Accord is an organisation which is committed to providing excellent services in an efficient and cost-effective way. The Group’s commitment to providing a value-for-money service is supported by the Make it Count campaign. The Make it Count working group works alongside all functions in the Group to embed a value-for-money culture in all aspects of our work.

The Group is committed to remaining focused on its core business and services for people in need through the provision of general needs, sheltered and supported housing, and shared ownership. The extent and nature of our activities has widened and these services are provided to over 50,000 people within the West Midlands and beyond.

Effectiveness

The development of new homes to provide affordable social housing remains a fundamental objective for the Group. As a housing provider we recognise the contribution that a wider range of tenures can make to the achievement of balanced, sustainable communities. There were 10,799 units in management at 31 March, 2012 as shown below:

Economy

Group Group 2012 2011 Property Numbers Property Numbers

Business plan priorities

General needs housing Supported housing Residential care homes Shared ownership accommodation Other

7,246 1,333 294 1,159 767

7,095 1,445 274 1,167 843

Total

10,799

10,824

The table shows the Group has a diverse portfolio of properties, which are located across the West Midlands. The Group’s housing stock is a combination of new build and refurbished properties, which have been added since the Group’s inception some 40 years ago. Stock condition reports have confirmed that the housing stock is well maintained and that all Group subsidiaries are fully compliant with the requirements of the Decent Homes Standard. Accord leads the Matrix Housing Partnership which had significant success in the 2011-2015 Homes and Communities Agency (HCA) Affordable Housing Programme. Accord will be delivering 600 new homes as part of this programme.

Accord Group Financial Statements 2012

Accord Group’s mission and the public benefit Our mission and values highlight our commitment to providing public benefit. The Group’s Board and management are satisfied that through the provision of affordable housing and the delivery of community regeneration activities we are creating social and financial opportunities for our tenants, residents, service users and the communities we serve.

The underlying strategic themes of Make it Count are:

How well Accord delivers services to its customers. The effectiveness challenge: “Are we doing the right things?”

Efficiency The relationship between the services Accord offers and the volume of resources used in providing these services. The efficiency challenge: “Are we doing things the right way?”

Getting the appropriate quality and quantity of resource at the best cost. The economic challenge: “Are we doing things at the right price?”

The Group continues to invest in its commitment to service improvement through benchmarking. We continue to subscribe to benchmarking services, including Housemark, and place significant importance in using results to drive through service improvements. The Group procurement function was also implemented in the year to ensure a collaborative and strategic approach to buying is also embedded in the business. We strive to make the best use of our available resources and re-invest savings in core services and new innovations for the benefit of our customers and communities.

The Group’s objectives and strategies are set out in our rolling business plan which is reviewed annually and approved by the Group Board. The 2012-17 business planning process builds on the 2011-16 plan, includes management’s assessment of strengths, weaknesses, opportunities and threats.

Our core business objectives are aligned to our four values and include: • Meeting individual needs. Giving people real choice in assessing the housing and services that they want to help them shape the communities they wish to live in. • Providing outstanding and affordable homes. Delivering excellent services in ways which are appropriate, accessible and accountable to our customers. • Involving residents, tenants and service users in our work. Encouraging people to shape the way their homes and services are managed and to influence the level and quality of services they receive. • Regenerating and building sustainable communities. Working together with partners to help regenerate areas, build and maintain sustainable communities and enhance and protect the environment.

Accord Group Financial Statements 2012

Group objectives and strategy The Group’s objectives and strategy are set out in the strategic five year plan that is reviewed annually and approved by the Board. Accord sees identifying and managing its risks and opportunities as integral to the way we do business. The Group’s main objectives and strategies are taken from the Strategic Plan 2012-17.

Key objective Strategy statement

Key targets

Meeting individual needs

Providing quality homes and services

Involving residents in our work

Meeting individual needs – giving people real choice in accessing the housing and services that they want to help them shape the communities they wish to live in.

Providing outstanding and affordable homes and delivering excellent services in ways which are appropriate, accessible and accountable to our customers.

Involving residents, tenants and service users in our work – encouraging people to shape the way their homes and services are managed and to influence the level and quality of services they receive.

Regenerating and building sustainable communities – working together with partners to help regenerate areas, build and maintain sustainable communities and enhance and protect the environment.

We will achieve this through:

• Investment in learning and development of staff to meet wider, individual community needs • Using customer profiling information to deliver personalised and new services • Working in partnership with local authorities and other social landlords to deliver choice based lettings frameworks • Develop partnerships with other local providers to provide a wider range of services and opportunities for our care and support service users • Improved and refurbished properties • Developing new funding models.

Regenerating and building sustainable communities

• Retrofitting homes •F urther delivering effective • Embedding a ‘customer through the installation first’ approach through relationships with the of solar panels which training, development and Homes and Communities will reduce residents leadership Agency and other partners fuel bills and provide and key stakeholders • Delivery of excellent new employment services which offer •D evelop our approach opportunities choice delighting the to the personalisation • Expand volunteering customer, empowering agenda and develop and apprenticeship people in line with the a range of options to programmes to develop localism agenda meet the needs of the pathways to employment communities in which • Actively involve tenants through social enterprise we operate and local communities •C reate additional opportunities for volunteers in particular within care and support services •D evelop new approaches to service delivery in partnership with Care Commissioners •D eliver excellent services towards the top quartile in all published key performance indicators.

• Actively involve our care and support tenants as auditors of our schemes and services

• Empower and support local leaders to establish a sustainable ‘local exchange of talent’ scheme to help tackle worklessness

• Working with Staff Voices forum to positively engage with our staff to support great service delivery

• Develop relationships with the schools within the communities we serve

• Deliver projects which provide support to both our elderly tenants and owner occupiers, helping them to maintain their homes independently for as long as possible

• Engage with younger residents through the use of the social media portal Socialbreakfast.org to allow them to have a voice in society

through resident scrutiny panels and consultations

• Market the services available to residents • Explore new pathways and the wider to home ownership or community collective ownership to • To assist in the ensure people do not regeneration of local remain as ‘social tenants’ areas and work with any longer than they need communities to develop to. new services.

Accord Group Financial Statements 2012

Our marketplace Accord’s ability to plan successfully requires an understanding of the political, statutory and economic environment now and into the future and the ability to shape and influence local, regional and national policy.

Our understanding is based upon work including: • Analysis of the housing markets in which we operate • Consultation with our tenants and residents through the development of our local offers • Research into the local demographics and how demand for our properties 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 demographic drivers for change in our sector • Regular risk analysis of the activities we are engaged in.

Our analysis of the operating environment suggests that the key factors and drivers are: • An increased focus on local delivery of services • Better value for the taxpayer • More empowerment of local communities • Greater accountability to service users/communities • Increased need for partnership working • The need for greater joined up working between registered providers and local authorities will become even more important • Development of unannounced inspection with tenants playing a greater role.

The UK economy is experiencing significant challenges and housing associations are not immune to the downturn in the housing market and wider economic factors. The Government continues to embark upon a number of measures to strengthen the economy through austerity measures such as ongoing reductions in public spending. An example of this is the reduction in grant funding to support the development of new social housing, accordingly social housing providers are required to find new sources of funding to support their development programmes. In the short and medium-term Accord, in common with other associations, will be reviewing its business plans in order to reflect the current economic environment and equip ourselves appropriately to manage these ongoing pressures. The Accord Group remains confident that growth opportunities will remain for strong organisations like ourselves.

Risks and opportunities As part of our risk management framework, Accord Group operates a comprehensive risk mapping process which incorporates all subsidiaries and major Group functions. Risk mapping informs our business planning cycle and in the current economic climate proactive risk management becomes an increasingly important management tool. Our Risk Management Strategy is regularly reviewed and updated to make sure it remains fit for purpose. Quarterly risk management updates are now subject to review by the Group Resources and Audit Committee. This supports effective and strategic decisionmaking and ensures the Group is able to adapt to changing circumstances. The Group’s emphasis remains on ensuring risks and opportunities are continuously monitored and evaluated. Key risks facing the sector currently include: Care and support income Local authority partners are reducing their financial commitment to Supporting People and other care services as a result of wider central Government public sector funding cuts. Grant funding for development of new homes Providers’ access to the Homes and Communities Agency (HCA) grant funding is at an all time low level and providers are required to find new approaches and methods for funding the development of new homes. Housing benefit and the Welfare Reform Agenda Anticipated reductions in the housing benefit paid to social housing tenants impacts upon the income, cash flow and debt collection approaches across the sector. Welfare Reform and the introduction of direct payments are risks for which the sector will need to prepare. Financial performance: income and costs Owing to pressures on income streams there is a risk that costs of service delivery may increase at a greater rate than income. Through challenging and rigorous budget setting and monitoring, these pressures can be better understood and addressed in a timely manner.

Changes to the regulatory framework The Group continues to monitor, plan for and respond to regulatory changes associated with the impending dissolution of the Tenant Services Authority (TSA), the changing role of the HCA and the increased focussed on providers’ self-regulation. Housing market The poor performance of the housing market continues to impact upon the sector, notably on sales income and surpluses generated from the sale of houses through outright sales or shared ownership. The sector has adapted to these conditions and associated pressures in recent years and allowances continue to be made for very limited sources of income from this activity. Accounting changes The implementation of SORP 2010, notably the introduction of component accounting, has impacted on the reported financial performance of Accord. Looking ahead there are likely to be similar issues arising from the introduction of IFRS accounting in coming years.

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. 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.

Accord Group Financial Statements 2012

Availability and pricing of funding from the banking sector Whilst there are still a number of active and engaging lenders, the current economic climate has impacted on access to and the pricing of private finance to the social housing sector. Accord Group completed a large scale refinancing deal in 2010 which provides the required financial capacity to deliver against key strategic objectives. New funding streams such as bonds and private placements are becoming increasingly popular in the sector.

Accord Group Financial Statements 2012

Performance in the period Our business strategy provides a clear balance between growth and excellent customer services. Our strong track record of prudent financial management will ensure that we continue to meet the needs of existing customers as well as building new homes.

The Group’s surplus for the year before taxation was £1.711 million (2011: £2.456 million) which is above the budgeted surplus of £1.618 million. Group operating surplus was £12.489 million (2011: £13.180 million) which represents 20 per cent of Group turnover. Total revenue expenditure on repairs and maintenance in the year was £13.990 million (2011: £13.140 million) of which £2.452 million of repairs have been capitalised in the year (2011: £3.319 million). This demonstrates the Group’s on-going commitment to investing in its existing stock and the impact of increased capitalisation under component accounting.

70,000

Group turnover and operating surplus/(deficit) by activity are shown below:

60,000 50,000 40,000

2011/12

10,000

2010/11

30,000 20,000

£1.7m

Surplus for the year

decreased by £0.7 million

£000

Total

63,286

61,797

12,489

13,180

Development

3,500 3,000 2,500

Operating Surplus

2011/12

2010/11

500

2009/10

1,000

2008/09

1,500

£12.5m Decreased by £0.69 million

£000 14,000 12,000 10,000 8,000

2011/12

2010/11

2,000

2009/10

4,000

2008/09

6,000

Accord Group Financial Statements 2012

Turnover Operating Surplus/(Deficit) Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) General needs housing 29,841 27,748 11,881 11,521 Supported housing 10,538 10,367 1,057 998 Residential care homes 7,754 8,014 (347) (183) Shared Ownership accommodation 1,805 1,749 535 461 First Tranche Shared Ownership 701 321 118 93 Other 12,647 13,598 (755) 290

4,000

2,000

Group-wide interest payable increased to £11.498 million (2011: £10.756 million) as debt increased from £287.597 million to £303.224 million. Our increased debt position highlights our commitment to the development of new homes and the regeneration of the communities we serve.

increase 2.4%

2009/10

During the year the Group has built on its strengths to maintain its position as a leading, effective and innovative housing group. We have continued to manage our resources efficiently to ensure we meet the demands of today whilst building for the challenges of tomorrow. The year ended 31 March, 2012 has continued to see additional provision of social housing and consolidation of a sound financial position. The results for the year show Group turnover up from £61.797 million in 2010/11 to £63.286 million in 2011/12.

£63.3m

Turnover £000

2008/09

By adopting a rigorous approach to financial planning we are better placed to meet the needs of our business. Our finances are managed through the annual budget process and delivery against key performance targets.

The majority of the Group’s operating surplus continues to be sourced from general needs activity. The growth of our care and supported housing activity has continued to remain strong and accounts for 36.6 per cent of our turnover from social housing lettings (2011: 36.5 per cent). However, the lack of an inflationary increase on Supporting People income in most local authority areas during the year has required continual review in light of the financial pressures being faced. During the year the Group received £5.752 million (2011: £6.391 million) from Supporting People. The Supporting People budget is administered by local authorities. Supporting People budgets have been subject to ongoing significant reductions in funding, a trend which is expected to continue in the short-term. Across the Group we continue to monitor the financial viability of the Supporting People business closely.

The Group continues to build on its strong reputation and proven track record in both general needs and supported housing. The Group’s 2011-2015 Affordable Homes Programme was agreed with the HCA in October 2011 when the Framework Delivery Agreement was signed. The bid outlines Accord Group’s appetite to develop 600 new homes over the next three years. This development programme will be financed by a mixture of social housing grants and our own reserves. A key part of this is the development and maintenance of sound working relationships with our many local authority and other key stakeholders.

In 2011, Accord commenced operations of its LoCaL (Low Carbon Living) Homes factory. The factory produces high quality, energy efficient timber frame homes from sustainable materials. The homes produced will supply Accord’s development programme. The factory is based in Walsall with the significant majority of employees being social housing tenants who have been brought back into employment. Accord Group Financial Statements 2012

Capital structure

Treasury management and control

Total funds including long-term creditors at the end of the period amounted to £376.394 million (2011: £360.692 million), of which £77.979 million (2011: 76.287 million) comprised the income and expenditure account reserve. The increase compared to 2011 is largely due to an increase in tangible fixed assets, Social Housing Grant, increased borrowing and the surplus for the year. Long-term borrowings at the end of the period have increased to £303.244 million from £287.597 million in 2011.

Treasury activities are controlled by the 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.

increased 2%

700,000 600,000 500,000 400,000

200,000 100,000 0

2011/12

300,000 2010/11

The net movement in cash for the year was an inflow of £4.369 million (2011: £10.851 million inflow) reflecting the net impact of our development programme, increased borrowing, higher debt management costs and increased growth linked to new developments and services. The average interest rate for the year stood at 4.15 per cent (2011: 4.27 per cent). Interest cover stands at 137.5 per cent (2011: 151.4 per cent) and remains comfortably within our funding covenants.

£625.1m

£000

2009/10

The Group has access to undrawn borrowing facilities of £111.6 million, and has substantial unutilised security on its balance sheet. These facilities ensure that we remain in a strong position to fund future growth plans and investment opportunities.

Housing Assets at Cost

Growth in Housing Assets

2008/09

Balance sheet gearing of the Association decreased in the year to 51.3 per cent (2011: 54.5 per cent) and remains comfortably within our funding covenants. All other members of the Group comply with their funding covenants, including those covenants introduced in the year under the new Group funding facility.

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 is also sought periodically. Treasury activity is closely monitored on a regular basis and compliance with covenant conditions continues to be met with no breaches in the year. Quarterly monitoring information and management accounts are submitted in accordance with funder requirements. Cash flow requirements are monitored through an ongoing forecasting process. It is our policy to balance the cash held by repaying debt as far as possible, while ensuring sufficient access to funding to cover investment and business development plans. This is achieved by the use of detailed cash flow forecasts covering the short, medium and longterm, together with a substantial programme of short-term investment, and maximum use of revolving facilities. Interest rate exposure is managed via the use of interest rate fixings. Accord’s policy is that a maximum of 80 per cent of its total borrowing should be at fixed rates of interest. At the year end, 72.0 per cent (2011: 69.8 per cent) of the Association’s borrowings were at fixed rates of interest. Accord has not used stand alone derivative financial instruments to manage its interest rate exposure during the year. However, Accord does have the wider rule change and approval from the TSA to use stand alone derivative financial instruments, and has facilities in place with three funding institutions to utilise these instruments.

Interest Rate Management

72%

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. At the year end, the undrawn committed facilities of Accord Group were £115.1 million. Undrawn facillities available to Accord Housing Association amounted to £49 million (2011: £59.5 million). The table below provides an analysis of when the debt falls due for repayment. 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 a registered social landlord.

Group Debt Repayment 2012 2011 £’000 £’000 0 – 1 year 1 – 2 years 2 – 3 years 3 – 5 years 5 – 10 years 10 – 15 years 15 – 20 years 20 – 25 years 25 – 30 years Over 30 years Total

2,712 2,919 4,215 13,415 43,838 84,149 61,238 62,972 27,671 115

759 1,793 3,319 8,653 42,605 72,767 62,377 62,803 29,292 3,229

303,244

287,597

Fixed Debt

28%

Variable Debt

Accord Group Financial Statements 2012

Key operational indicators

Accounting policies

General Needs Year 2007/08 2008/09 2009/10 2010/11 2011/2012 Accord Group % of rent debit in arrears – – – 4.51 2.48 % of rent debit lost due to voids – – – 0.82 0.75 Average re-let time (days) – – – 18 16 % emergency repairs completed within target 98.12 97.46 95.61 99.49 99.64 % urgent repairs completed within target 97.79 96.15 95.39 97.72 98.65 % routine repairs completed within target 97.69 94.99 95.63 96.99 98.92 Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days) % emergency repairs completed within target % urgent repairs completed within target % routine repairs completed within target

The principal accounting policies are set out in note one to the financial statements on pages 36 to 38. The most critical accounting policies in terms of impact on the financial statements are the treatment of capital grants, capitalised interest, the capitalisation of development staff costs within housing properties and the calculation of housing property depreciation. These policies have remained largely unchanged during the year, with the exception of: • A new accounting policy for the treatment of stock and work in progress associated with materials and activity at the LoCaL Homes factory • Changes to the capitalisation of planned works and depreciation rates as a result of the requirements of component accounting under SORP 2010 • Changes to the treatment of negative goodwill under the requirements of component accounting under SORP 2010.

5.07 1.57 48 95.0 95.0 94.0

4.96 1.32 34 95.0 96.0 99.0

2.20 1.35 41 97.0 93.0 98.0

2.71 1.21 27 99.61 98.57 97.55

2.00 0.68 20 99.29 98.57 98.71

Supported Housing Year 2007/08 2008/09 2009/10 2010/11 2011/2012 Accord Group % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)

– – –

4.61 5.10 23

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)

1.84 1.79 –

3.10 3.51 35

3.83 2.90 21

5.91 2.33 27

1.33 3.63 34

Looking to the future We continue to operate in both challenging but exciting times. Public sector funding continues to show signs of further retraction and housing associations continue to be required to find new and innovative operating and funding solutions to bridge the gap between the decreasing public sector and the future expansion of private business. The Accord Group has positioned itself in exactly the right way, not only to manage these changes and to support our customers but to influence and lead the new policy agenda. As a housing and related services provider, we are facing choices about our future. A progressive housing association provides homes but it does more, it can and should be the catalyst for change in people’s lives and the communities in which they live. We are well placed within civil society to have a significant impact upon individuals and neighbourhoods.

Lakhbir Jaspal Deputy Group Chief Executive 26 July, 2012

The Group’s average creditor payment period at 31 March, 2012 was 30 days (2011: 28 days).

Accord Group’s commitment to environmental matters

•A ccord successfully achieved approval to our revised EMAS statement which embraces the latest requirements of the initiative to EMAS III

The Accord Group set itself the goal to become the ‘greenest’ housing association in the country. As part of this journey we have accomplished a number of key achievements:

•W e are already committed to the development of low and zero carbon homes with our partnership with a Norwegian manufacturer of timber framed homes that are generally 50 per cent more efficient when compared to traditionally built homes.

• 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

Accord Group Financial Statements 2012

High quality, highly efficient timber frame homes are now being produced at Accord’s LoCaL Homes factory, based in Walsall and will supply Accord’s 2011-2015 development programme.

Accord Group Financial Statements 2012

Independent auditors’ report Independent auditors’ 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, 2012 which comprise the Group 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 4 of the Friendly and Industrial and Provident Societies Act 1968. Our audit work has been undertaken so that we might state to the housing association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the housing association and the housing association’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Board and the auditor As explained more fully in the Statement of Responsibilities of the Board, set out on pages five and six, the Board is responsible for the preparation of financial statements which 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.

Opinion on financial statements In our opinion the financial statements: • Give a true and fair view of the state of the Group’s and Association’s affairs as at 31 March, 2012 and of the Group’s and Association’s surplus for the year then ended • Have been properly prepared in accordance with the Industrial and Provident Societies Acts, 1965 to 2002, the Housing and Regeneration Act 2008 and The Accounting Requirements for Registered Social Landlords General Determination 2006.

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts, 1965 to 2002 requires us to report to you if, in our opinion: • A satisfactory system of control over transactions has not been maintained; or • The Association has not kept proper accounting records; or • The financial statements are not in agreement with the books of account; or • We have not received all the information and explanations we need for our audit.

Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Milton Keynes, England 20 August, 2012

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.

Accord Group Financial Statements 2012

Income and expenditure account

Group Association Year Notes 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Turnover 63,286 61,797 36,022 33,600 Operating Costs (50,214) (48,389) (26,159) (25,739) Cost of Sales (583) (228) (583) (228) Operating Surplus 2 12,489 13,180 Surplus/(Deficit) on Sale of Fixed Assets 4 134 (26) Interest Received and Similar Income 186 102 Interest Payable and Similar Charges 7 (11,498) (10,756) Other Financing Costs 7 – (404) Surplus on cessation of ordinary activities of Associated Company – – Exceptional Item 8 400 360

9,280 (19) 156 (7,630) –

7,633 (123) 58 (6,689) –

– –

Surplus for the financial year before Taxation 8 1,711 2,456 1,787 Taxation 19 (13) (16) –

879 –

Surplus for the financial year after Taxation 20 1,698 2,440

879

1,787

Statement of Total Recognised Surpluses and Deficits Group Association Year Notes 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Reported Surplus for the financial year after Taxation 1,698 2,440 1,787 879 Prior period adjustment 30 49,803 – (3,079) – Total Recognised Surplus 51,501 2,440 (1,292)

Group balance sheet

Year Notes 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Tangible Fixed Assets Housing Properties Less Depreciated Costs 602,995 590,602 Social Housing and Other Grants (247,696) (247,210)

9 355,299 343,392

Other Fixed Assets 10 7,511 7,584 Investments 11 89 89 Current Assets Properties for Sale 12 292 647 Stock and work in progress 13 136 – Debtors 14 8,793 7,694 Cash at Bank and Short Term Deposits 21,946 17,577 31,167 25,918 Creditors: Amounts Falling Due Within One Year 15 (17,672) (16,291) Net Current Assets

13,495

9,627

Total assets less current liabilities

376,394

360,692

Creditors: Amounts Falling Due After More Than One Year

298,348

284,344

Capital and Reserves Share Capital 18 – Revenue Reserves 20 77,979 Designated Reserves 20 15 Consolidation Reserves 20 43 Minority Interest Reserve 20 9

– 76,287 9 43 9

376,394 360,692

879 The Financial Statements were approved by the Board of Management on 20 August, 2012 and signed on its behalf by:

All amounts relate to continuing activities. The notes on pages 36 to 63 form an integral part of the Financial Statements.

CHAIRMAN

BOARD MEMBER

COMPANY SECRETARY

The notes on pages 36 to 63 form an integral part of the Financial Statements.

Accord Group Financial Statements 2012

Association balance sheet

Consolidated Group cash flow statement

Year Notes 2012 2012 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Tangible Fixed Assets Housing Properties Less Depreciated Costs 363,960 355,197 Social Housing and Other Grants (133,991) (131,743)

9 229,969 223,454

Other Fixed Assets 10 4,749 4,646 Investments 11 89 89 Current Assets Properties for Sale 12 292 647 Stock and work in progress 13 136 – Debtors 14 7,757 5,797 Cash at Bank and in Hand 19,456 13,782 27,641 20,226 Creditors: Amounts Falling Due Within One Year 15 (12,634) (9,427) Net Current Assets 15,007 10,799 Total assets less current liabilities

249,814

238,988

Creditors: Amounts Falling Due After More Than One Year

226,670

217,631

Capital and Reserves Share Capital 18 – Revenue Reserves 20 23,144

– 21,357

249,814 238,988

Year Notes 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Net Cash Inflow from Operating Activities 22a 15,914 19,173 Returns on Investments and Servicing of Finance Interest Received 186 103 Exceptional Item re: Icelandic Bank/Loan Breakage costs 8 200 (43) Interest Paid (13,270) (12,583) Net Cash Outflow from Returns on Investments and Servicing of Finance (12,884) (12,523) Corporation Tax paid (11) (16) Capital Expenditure and Financial Investment Acquisition and Construction of Housing Properties Social Housing Grant Received 22d Purchase of Other Fixed Assets Sales of Housing Properties Investments Capital Grant Repaid

(18,991) 2,367 (1,585) 3,909 – –

(21,797) 5,151 (1,301) 1,011 3 (56)

Net Cash Outflow from Capital Expenditure (14,300) (16,989) Cash Outflow before movement of Liquid Resources and Financing (11,281) (10,355) Management of Liquid Resources Financing Loans Received (including capital costs removed) Loans Repaid Net Cash Inflow from Financing Increase in Cash

29,000 (13,350)

36,000 (14,794)

15,650

22c

21,206

4,369 10,851

The Financial Statements were approved by the Board of Management on 20 August, 2012 and signed on its behalf by:

CHAIRMAN

BOARD MEMBER

COMPANY SECRETARY

The notes on pages 36 to 63 form an integral part of the Financial Statements.

Accord Group Financial Statements 2012

The notes on pages 36 to 63 form an integral part of the Financial Statements.

Accord Group Financial Statements 2012

Notes to the financial statements 1. Principal accounting policies Basis of accounting The financial statements have been prepared in accordance with applicable Accounting Standards, the Statement of Recommended Practice ‘Accounting by Registered Social Landlords’ 2010 and on the historical cost basis. Accounting policies are consistently applied. SORP 2010 was adopted by the Group during the year ended 31 March, 2012. Changes in accounting policies and prior period adjustments to the accounts have occurred as a result of adopting SORP 2010. Prior period adjustments are disclosed in note 30. A summary of accounting policies is set out below.

Basis of consolidation The consolidated accounts incorporate the financial statements of Accord Housing Association Limited and all its subsidiary undertakings.

Turnover Turnover represents rental and service charge income receivable, fees receivable, revenue grants from the Tenant Services Authority and other public authorities and sale proceeds from first tranche shared ownership sales.

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) is 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.

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.

Supporting people (SP) subsidy income Supporting People funding was introduced on 1 April, 2003 and replaces Supported Housing Management Grant. Supporting People contracts are entered into with local authorities and are of two types: • Block subsidy is determined for each tenancy based on support needs, or • Block gross is a fixed sum payable, determined by the number of qualifying bed spaces and subject to minimum occupancy levels as agreed with local authorities.

Housing properties, impairment and property improvements During the year ended 31 March, 2012 the Association adopted full component accounting in relation to the capitalisation and depreciation of its completed housing property stock. Previously the Association depreciated housing properties over the estimated useful life of the asset as a whole. From 1 April, 2011, all housing properties have been split between their land, structure costs and their major components which require periodic replacement. Refurbishment or replacement of such major components is capitalised and depreciated over the estimated useful life of the component. The estimated useful economic life for each component has been arrived at based on the Association’s experience of component replacement. The Association will continue to monitor and review the useful economic lives of all components and make revisions where sustained material changes arise. 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.

Accord Group Financial Statements 2012

Housing properties are transferred to completed properties when they are ready for letting and are stated at cost less depreciation. Shared ownership properties are split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover, and the remaining element is classed as fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment. The Association reviews its properties for impairment on an annual basis. Any permanent diminution in the carrying value of these properties is charged to the Income and Expenditure Account.

Donated land Land donated by local authorities and others is added to cost at the market value of the land at the time of the donation. Where the land is not related to specific development and is donated by a public body an amount equivalent to the increase in value between market value and cost is added to other grants. Where the donation is from a non-public source, the value of the donation is included as income.

Social housing and similar grants Where developments have been financed wholly or partly by social housing grant, the cost of those developments has been reduced by the amount of grant receivable. Social housing grant is credited to the income and expenditure account to the extent that it is claimed in respect of development administration costs which are not capitalised. When a social housing grant funded property is sold, the grant becomes ‘recyclable’ and is transferred to a recycled capital grant fund until it is reinvested into a replacement property. Social housing grant may be repayable in certain circumstances, such as when a property is no longer used for social housing. When social housing grant becomes repayable, it is included as a current liability until it is repaid. The repayment of social housing grant is generally subordinated to the repayment of housing loans as agreed with the Homes and Communities Agency.

Fixed assets and depreciation 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 six years Computer equipment

Four - six years

Leasehold improvements Six years Where there is evidence of impairment, fixed assets are written down to recoverable amount, with the impairment being charged to the operating surplus.

Accord Group Financial Statements 2012

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 2011/12 of 4.15 per cent (2011: 4.27 per cent). 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 longterm 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.

Negative goodwill Negative 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

Accord Group Financial Statements 2012

Recycled capital grant fund Grants repayable on property disposals are calculated in accordance with relevant TSA 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 TSA concludes that the Group is unlikely to use the fund for a permitted purpose within three years. The fund is included within long-term creditors.

Disposal process 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 TSA, in certain specific circumstances. The fund is included in long-term creditors.

Operating Surplus/ (Deficit) £’000 (Restated)

Cost of Sale £’000 (Restated)

Operating Costs £’000 (Restated)

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 at a constant annual rate. Loan termination costs are charged to the income and expenditure account in the year that they are incurred.

Turnover £’000 (Restated)

Loan expenses

Operating Surplus/ (Deficit) £’000

Capitalisation of interest and development administration costs

Year 2012 2011

Cost of Sale £’000

Stock, work in progress and finished goods relate to activities at Accord’s LoCaL Homes factory. Raw materials used in the construction of timber frame homes/panels are valued at the lower of cost and net realisable value. Work in progress is valued on the basis of direct costs, including raw materials and labour, incurred in bringing part complete timber frame panels to their present location and condition. Finished goods comprise completed timber frame panels ready for despatch and construction which are valued at the contracted transfer value.

acquired subsidiary or business. Previously on acquisition, a negative goodwill reserve was created, and released to the income and expenditure account over the periods in which the fair values of the non-monetary assets purchased on the same acquisition are recovered. Under SORP 2010, the fair value of the recognised assets and liabilities should be recognised as a gain or loss in the income and expenditure account in the year of the transaction. The adoption of SORP 2010 results in a change in accounting policy in respect of negative goodwill, and as such a prior year adjustment is reflected in the 2012 accounts.

Operating Costs £’000

Stock, work in progress and finished goods

2. Turnover, operating costs, cost of sales and operating surplus - Group

Turnover £’000

Notes to the financial statements

Social Housing Lettings General Needs Housing 29,841 (17,960) – 11,881 27,748 (16,227) – 11,521 Supported Housing 10,538 (9,481) – 1,057 10,367 (9,369) – 998 Residential Care Home 7,754 (8,101) – (347) 8,014 (8,197) – (183) Shared Ownership 1,805 (1,270) – 535 1,749 (1,288) – 461 Total Social Housing

49,938 (36,812)

– 13,126 47,878 (35,081)

– 12,797

Other Social Activities Supporting People Contract Income 2,469 (2,342) – 127 2,820 (2,684) – 136 Development Administration – (56) – (56) – (82) – (82) Management Administration 739 (1,266) – (527) 717 (1,313) – (596) First Tranche Shared Ownership Sales 701 – (583) 118 321 – (228) 93 Other 233 (311) – (78) 498 – – 498 Total Social Housing Activity 4,142 (3,975) (583) (416) 4,356 (4,079) (228) 49 Non Social Housing Activity Registered Nursing Homes 569 (943) – (374) 881 (1,065) – (184) Market rents 680 (787) – (107) 665 (795) – (130) Other 7,957 (7,697) – 260 8,017 (7,369) – 648 Total Non Social Housing Activity 9,206 (9,427) – (221) 9,563 (9,229) – 334 Total 63,286 (50,214) (583) 12,489 61,797 (48,389) (228) 13,180 Surplus on Sale of housing units 134 (26) Interest Receivable and Similar Income 186 103 Interest Payable and Similar Charges (11,498) (10,757) Other financing costs – (404) Exceptional Item 400 360 Surplus for the financial year before Taxation

1,711

2,456

Accord Group Financial Statements 2012

2. Turnover, operating costs, cost of sales and operating surplus continued - Association

3. Income and expenditure from social housing lettings - Group

6,740

24,462 (18,821)

–

5,641

Other Social Activities Supporting People Contract Income 86 (103) – (17) 84 (117) – (33) Development Administration – (56) – (56) – (82) – (82) Management Administration 2,861 (1,191) – 1,670 2,453 (1,779) – 674 First Tranche Shared Ownership Sales 701 – (583) 118 321 – (228) 93 Other 534 (26) – 508 623 – – 623 Total Social Housing Activity 4,182 (1,376) (583) 2,223 3,481 (1,978) (228) 1,275 Non Social Housing Activity Registered Nursing Homes 569 (943) – (374) 881 (1,065) – (184) Other 5,334 (4,643) – 691 4,776 (3,875) – 901 Total Non Social Housing Activity 5,903 (5,586) – 317 5,657 (4,940) – 717 Total 36,022 (26,159) (583) 9,280 33,600 (25,739) (228) 7,633 Surplus on Sale of housing units (19) (123) Interest Receivable and Similar Income 156 58 Interest Payable and Similar Charges (7,630) (6,689) Surplus for the financial year

Accord Group Financial Statements 2012

1,787

5,153 4,149 1,764

1,507 2,958 3,350

1,167 637 1

Gross Rental Income Less: Rent Losses from Voids

30,088 11,066 7,815 1,805 50,774 48,638 (247) (528) (61) – (836) (800)

Net Rental Income Other revenue grants

29,841 –

10,538 –

7,754 –

1,805 –

35,881 9,736 5,157

49,938 –

2011 Group Total £’000 (Restated)

28,054 1,992 42

2012 Group Total £’000

Low Cost Home Ownership £’000

–

Residential Care Homes £’000

(19,197)

Supported Housing and Housing for Older People £’000

25,937

General Needs Housing £’000

Social Housing Lettings General Needs Housing 12,240 (7,589) – 4,651 11,041 (7,347) – 3,694 Supported Housing 5,736 (4,221) – 1,515 5,427 (3,837) – 1,590 Residential Care Home 6,495 (6,299) – 196 6,581 (6,546) – 35 Shared Ownership 1,466 (1,088) – 378 1,413 (1,091) – 322 Total Social Housing

Rent Receivable net of Identifiable service charges Service Income Charges for Support Services

Operating Surplus/ (Deficit) £’000 (Restated)

Cost of Sale £’000 (Restated)

Operating Costs £’000 (Restated)

Turnover £’000 (Restated)

Operating Surplus/ (Deficit) £’000

Cost of Sale £’000

Operating Costs £’000

Turnover £’000

Year 2012 2011

33,745 10,016 4,877

47,838 40

Turnover from Social Housing Lettings 29,841 10,538 7,754 1,805 49,938 47,878 Management (3,650) (1,607) (892) (329) (6,478) (6,537) Services (2,129) (3,782) (2,671) (632) (9,214) (8,830) Care & Support – (1,665) (4,097) – (5,762) (5,881) Routine maintenance (6,709) (1,275) (290) (71) (8,345) (7,853) Planned maintenance (2,746) (317) (33) (97) (3,193) (1,968) Rent Losses from Bad Debts (258) (118) (34) 6 (404) (565) Depreciation on housing units (2,468) (717) (84) (147) (3,416) (3,447) Operating Costs on Social Housing Lettings Operating Surplus on Social Housing Lettings

(17,960)

(9,481)

(8,101)

(1,270)

11,881

1,057

(347)

535

(36,812) (35,081) 13,126

12,797

879

Accord Group Financial Statements 2012

4. Surplus on sale of housing properties

2011 Association Total £’000 (Restated)

2012 Association Total £’000

Low Cost Home Ownership £’000

Residential Care Homes £’000

Supported Housing and Housing for Older People £’000

General Needs Housing £’000

3. Income and expenditure from social housing lettings continued - Association

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Sale proceeds 3,994 1,542 2,623 7,266 Grant abated 2,455 13 941 2,119 Cost of sale (5,951) (1,297) (3,394) (9,333) Incidental sale expenses (364) (284) (189) (175) Surplus on sale

Rent Receivable net of identifiable service charges Service Income Charges for Support Services

11,355 2,524 734 855 15,468 14,048 1,006 1,605 2,413 610 5,634 6,321 40 1,768 3,350 1 5,159 4,391

Gross Rental Income Less: Rent Losses from Voids

12,401 5,897 6,497 1,466 26,261 24,760 (161) (161) (2) – (324) (298)

Net Rental Income

12,240

5,736

6,495

1,466

25,937

24,462

Turnover from Social Housing Lettings

12,240

5,736

6,495

1,466

25,937

24,462

Management Services Care & Support Routine maintenance Planned maintenance Rent Losses from Bad Debts Depreciation on housing units

(2,202) (272) (608) (983) (1,776) (2,085) – (1,049) (3,242) (2,223) (463) (242) (979) (78) (26) (114) (71) (21) (1,088) (512) (75)

Operating Costs on Social Housing Lettings

(7,589)

(4,221)

(6,299)

Operating Surplus on Social Housing Lettings

4,651

1,515

196

(196) (3,278) (3,164) (601) (5,445) (5,339) – (4,291) (4,485) (65) (2,993) (2,929) (97) (1,180) (859) 5 (201) (148) (134) (1,809) (1,897)

(1,088) (19,197) (18,821) 378

6,740

134

(26)

(19)

(123)

5. Directors’ emoluments The Directors are defined as the members of the Group Board, the Group Chief Executive and any member of the Executive Management team. Board/Committee Members received remuneration totalling £88,458 (2011: £78,002) during the period.

Year 2012 2011 Total £’000 £’000 Aggregate emoluments payable to directors (including pension contribution and benefits in kind) 1,213 1,138 Emoluments payable to the highest paid director (excluding pension contributions but including benefits in kind)

145

135

5,641 The Group Chief Executive is an ordinary member of the Association’s pension scheme. No enhanced or special terms apply to his membership and he has no other pension arrangements to which the Association contributes.

Year 2012 2011 Total £’000 £’000 Total expenses reimbursed to the directors not chargeable to United Kingdom income tax 15 16

Accord Group Financial Statements 2012

6. Employee information

8. Surplus for the financial year

The average number of persons employed during the year was:

Group Association Year 2012 2011 2012 2011 Persons FTE Persons FTE Persons FTE Persons FTE Office staff, care support workers, wardens, caretakers and cleaners

1,303

1,113

1,310

1,131

934

773

926

Staff costs (for the above persons) Wages and salaries Social security costs Other costs (incl. Pension)

£’000 24,055 1,728 1,175

£’000 23,043 1,777 845

£’000 15,984 1,093 631

£’000 15,105 1,123 581

Total

26,958

25,665

17,708

16,809

7. Interest payable and similar charges

777

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Surplus for the financial year is stated after charging: Depreciation Auditors’ remuneration - in their capacity as auditors - in respect of other services Surplus on disposal of tangible fixed assets other than development for outright sales Operating lease payments Repairs and maintenance expenditure

4,586

4,248

3,075

2,976

67 26

67 2

26 26

26 2

134 531 11,538

(26) 430 9,821

(19) 296 4,173

(123) 202 3,788

In addition £2.452 million of repairs expenditure has been capitalised in the year (2011: £3.319 million).

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 On loans repayable within five years – – – – On loans repayable in more than five years 12,376 11,784 8,980 8,219 Add: Other interest payable and similar charges Less: Capitalised in respect of housing units

1,374

1,130

700

623

(2,252)

(2,158)

(2,050)

(2,153)

11,498

10,756

7,630

6,689

An exceptional item has been reported in the Group Income and Expenditure account totalling £400k. This balance relates to ongoing dividend income in Caldmore as funds lost in the Icelandic banking failure continue to be recovered. £200k was received during the year, a further £200k was confirmed as payable as at the year end and was provided for accordingly. In 2011 £360k was recovered and reported as an exceptional item, this was offset by £404k of one-off refinancing costs, leaving a net reported exceptional item of (£44k).

12,376 11,784 8,980 8,219

Other financing costs in 2011 includes one-off breakage costs associated with a refinancing exercise in Moseley and District Housing Association. No such costs were incurred in the current financial year.

Accord Group Financial Statements 2012

2012 Total £’000

At 31 March 2012 124,490 2,840 6,496 – – Depreciation At 1 April, 2011 as previously reported 7,677 – 1,007 – – Prior period adjustment 3,010 – (249) – – At 1 April, 2011 as restated 10,687 – 758 – – Charge for Year 2,103 – 133 – – Eliminated in respect of Disposals (99) – (6) – –

165

133,991

81 4 85 – –

8,765 2,765 11,530 2,236 (105)

13,661

355,299

At 31 March 2012 12,691 – 885 – – Net Book Value At 31 March 2012 200,058 12,972 15,871 – 1

1,067

229,969

343,392

Net Book Value At 31 March 2011

1,067

223,454

2012 Total £’000

1,317

627,527

165 – 165 – – –

250,014 (2,804) 247,210 3,385 – (2,899)

At 31 March 2012 235,067 2,840 8,120 – 1,504 Depreciation At 1 April, 2011 as previously reported 18,346 – 1,168 – – Prior period adjustment 2,330 (331) 310 At 1 April, 2011 as restated 20,676 – 837 – 310 Charge for Year 3,108 – 146 – 26 Eliminated in respect of Disposals (646) – (9) – (1)

165

247,696

81 8 89 – (4)

19,595 2,317 21,912 3,280 (660)

At 31 March 2012 23,138 – 974 – 335 Net Book Value At 31 March 2012 323,076 12,909 17,979 – 268

24,532

1,067

Net Book Value At 31 March 2011

1,067

Accord Group Financial Statements 2012

317,189

6,521

18,325

–

294

Long Leasehold Social Housing Properties £’000

132,154 (411) 131,743 3,391 – (1,143)

At 31 March 2012 581,281 15,749 27,073 – 2,107 Social Housing Grant and other Grants At 1 April, 2011 as previously reported 238,474 2,936 8,439 – – Prior period adjustment (3,849) (226) (233) – 1,504 At 1 April, 2011 as restated 234,625 2,710 8,206 – 1,504 Received and Receivable during year 237 3,148 – – – Schemes completed in year 3,018 (3,018) – – – Repaid/Abated on disposals (2,813) – (86) – –

Shared Ownership Properties Under Construction £’000

165 – 165 – – –

614,490 (1,976) 612,514 2,443 19,235 – (6,665)

Completed Shared Ownership Housing Properties £’000

367,273 (546) 366,727 950 13,460 – (3,516) 377,621

1,321 (4) 1,317 – – – –

Housing Properties under Construction £’000

1,321 (4) 1,317 – – – – 1,317

Housing Properties held for Letting £’000

Non-Social Housing Properties held for Letting £’000

Cost At 1 April 2011 as previously reported 578,482 8,504 26,182 – 1 Prior period adjustment (5,992) 727 1,186 – 2,107 At 1 April, 2011 as restated 572,490 9,231 27,368 – 2,108 Additions - works to existing properties 2,437 – 6 – – Additions - new properties 2,370 16,858 7 – – Schemes completed in the year 10,340 (10,340) – – – Disposals (6,356) – (308) – (1)

Non-Social Housing Properties held for Letting £’000

Long Leasehold Social Housing Properties £’000

9. T angible fixed assets housing properties - Association

Shared Ownership Properties Under Construction £’000

Completed Shared Ownership Housing Properties £’000

Housing Properties under Construction £’000

Housing Properties held for Letting £’000

9. Tangible fixed assets housing properties - Group

Cost At 1 April, 2011 as previously reported 340,001 3,719 22,231 – 1 Prior period adjustment (4,247) 2,413 1,292 – – At 1 April, 2011 as restated 335,754 6,132 23,523 – 1 Additions - works to existing properties 950 – – – – Additions - new properties 2,699 10,754 7 – – Schemes completed in the year 1,074 (1,074) – – – Disposals (3,238) – (278) – – At 31 March 2012 337,239 15,812 23,252 – 1 Social Housing Grant and other Grants At 1 April, 2011 as previously reported 124,684 506 6,799 – – Prior period adjustment 48 (226) (233) – – At 1 April, 2011 as restated 124,732 280 6,566 – – Received and Receivable during year 243 3,148 – – – Schemes completed in year 588 (588) – – – Repaid/Abated on disposals (1,073) – (70) – –

200,335

5,852

16,199

–

Accord Group Financial Statements 2012

9. Association tangible fixed assets housing properties (continued)

11. Investments

Work to existing properties Group Association 2012 2011 2012 2011 £’000 £’000 £’000 £’000 (Restated) (Restated) Revenue 11,538 9,821 4,173 3,788 Amounts capitalised: – Improvements – Replaced components

Group

Loan to Loan to Subsidiary Subsidiary Undertaking Undertaking Year 2012 2011 2012 2012 Total £’000 £’000 £’000 £’000 Fixed assets At beginning of year 89 91 89 6,129 Repaid during year – (2) – (6,040)

9 90 – – 2,443 3,229 950 681

13,990

13,140

5,123

4,469

Prior to the adoption of component accounting in 2012 65 per cent of the value of replacement components were capitalised, 35 per cent being charged to the income and expenditure account. Under component accounting replacement components are capitalised in full.

2012 Total £’000

Office Furniture and Equipment £’000

Plant and machinery £’000

Freehold Offices £’000

2012 Total £’000

Office Furniture and Equipment £’000

Plant and machinery £’000

Freehold Offices £’000

Association Group 10. O ther tangible fixed assets

Cost At 1 April 2011 4,965 – 11,636 16,601 2,634 – 7,863 10,497 Additions 154 399 1,033 1,586 58 399 797 1,254 Disposals – – (4,048) (4,048) – – (3,282) (3,282) At 31 March 2012

5,119

399

8,621

14,139

2,692

Social Housing Grant and other Grants At 1 April 2011 107 – – 107 107

5,378

–

107

–

306

–

306

At 31 March 2012 107 306 – 413 107 Depreciation At 1 April 2011 1,177 – 7,733 8,910 491 Charge for Year 87 8 1,211 1,306 51 Eliminated in respect of Disposals – – (4,005) (4,005) – At 31 March 2012 1,264 8 4,939 6,211 542

306

–

413

–

306

–

306

– 5,253 5,744 8 780 839 – (3,276) (3,276) 8 2,757 3,307

Net Book Value At 31 March 2012

3,478

3,682

7,515

2,043

2,621

4,749

Net Book Value At 31 March 2011

3,681

–

3,903

7,584

2,036

–

2,610

4,646

Accord Group Financial Statements 2012

At end of year

See Note 27 for a list of subsidiary undertakings and joint ventures.

12. P roperties for sale Group Year 2012 2011 Total £’000 £’000 Properties under construction – – Completed properties 292 647

292 647

Association 2011 2010 £’000 £’000 – 292

– 647

292

647

13. Stock, work in progress and finished goods

8,469

–

Received and receivable during year

399

Association

Group Year 2012 2011 Total £’000 £’000 Raw materials 62 – Work in progress – – Finished goods 74 –

136

–

Association 2011 2010 £’000 £’000 62 – 74

– – –

136

–

Accord Group Financial Statements 2012

14. Debtors

16. C reditors: Amounts falling due after more than one year

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) Arrears of rent and service charge 2,614 3,019 949 978 Provision for bad and doubtful debts (1,325) (1,405) (406) (198)

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Housing loans Repayable by annual installment 300,532 286,838 228,529 219,648

Social Housing Grant receivable Amounts owing by subsidiary undertakings Other debtors and prepayments

1,289 1,614 543 780 1,684 637 1,684 637 – – 1,531 698 5,820 5,443 3,999 3,682

Total housing loans Financing costs capitalised

300,532 (3,304)

286,838 (3,306)

228,529 (2,391)

219,648 (2,438)

Net housing loans Recycled capital grant fund (note 17)

297,228 1,120

283,532 813

226,138 532

217,210 421

8,793

298,348

284,344

226,670

217,631

7,694

7,757

5,797

15. Creditors: Amounts falling due within one year Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) Housing and other loans 2,712 759 1,777 22 Trade creditors 7,008 9,454 4,398 4,773 Amounts owing to subsidiary undertakings – – 877 837 Corporation Tax 12 10 – – Social Security and other taxes 504 527 335 344 Other creditors 4,428 2,926 3,766 2,488 Accruals and deferred income 2,943 2,475 1,444 963 Recycled Capital grant fund (note 17) 65 140 37 –

Accord Group Financial Statements 2012

17,672

16,291

12,634

9,427

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 Loans repayable by installments fall due as follows: Between one and two years 2,919 1,793 1,943 48 Between two and five years 17,630 11,852 12,191 8,266 In five or more years 279,983 273,193 214,395 211,334

300,532

286,838

228,529

219,648

Floating borrowings Fixed borrowings

85,355 217,889

95,167 192,430

63,497 167,609

68,720 151,750

303,244

287,597

231,106

220,470

Weighted average interest rate 4.20

% 4.27 4.01

% 3.91

Weighted average time for which rate is fixed 12.5

Years

12.8

9.2

8.8

The Loans are secured by specific charges on the Association’s and Group’s housing properties.

Accord Group Financial Statements 2012

953

569

421

Group At 1 April 2011 as previously stated 26,487 6 43 9 26,545 Prior period adjustment 49,800 3 – – 49,803

18. Share capital Group Association Year 2012 2011 2012 2011 Shares of £1 each issued and fully paid Number Number Number Number At the beginning of the year 25 29 25 29 Issued during the year – – – – Surrendered during the year (3) (4) (3) (4) At end of year

Total £’000

1,185

Minority Interest £’000

Fund at end of year

Revenue Reserves £’000

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 (Restated) (Restated) Fund at beginning of year 953 555 421 229 Transferred to fund during year 527 731 221 471 Interest credited to fund 4 3 1 1 Utilised during the year (299) (280) (74) (280) Repaid during year – (56) – –

Other Reserves Consolidation Reserve £’000

20. Reserves

Designated Reserve £’000

17. Recycled capital grant fund and disposal process fund

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 Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 Corporation Tax (13) (16) – –

At April 1 2011 as restated Surplus for the year Transfer from Income and Expenditure Account Transfer to Income and Expenditure Account

76,287 1,698 (6) –

9 – 6 –

43 – – –

9 – – –

76,348 1,698 – –

At 31 March 2012 77,979 15 43 9 78,046 Association At 1 April 2011 as previously stated 24,436 – – – 24,436 Prior period adjustment (3,079) – – – (3,079) At 1 April 2011 as restated Surplus for the year

21,357 1,787

– –

21,357 1,787

At 31 March 2012

23,144

–

23,144

Although under its rules the Group does not trade for profit, its financial affairs are planned so that each year income exceeds expenditure. The annual surplus is vital to enable the Group to meet its commitments to providers of private finance, continue to raise further private finance and have reserves to provide for unexpected situations. The Board or the Committees of each Group member regularly review the Group’s finances to determine the minimum amount of reserves required for day-to-day management and to provide for the future. Any amounts over and above this minimum are invested in the provision of social housing. The Group’s reserve is not cash backed. Designated reserves relate to Fry Housing Trust’s Benevolent fund only, there are no other designated reserves in the Group. On 1 April, 2011, the Association adopted the SORP 2010, which requires goodwill to be included in the Income and Expenditure reserve. The effect of the change in accounting policy is to reclassify negative goodwill from the Negative Goodwill Reserve to the Income and Expenditure Reserve (see note 21). Furthermore, the effects of the implementation of component accounting under SORP 2010 have resulted in a prior period adjustment (see note 30) and a restatement to opening revenue reserves balances.

The taxation liability arises solely from bchs.

Accord Group Financial Statements 2012

21. Negative goodwill

22. Cash flow statement

The negative goodwill arising on historic business combinations has been amortised over the remaining useful lives of the underlying housing properties. In accordance with the accounting requirements of SORP 2010, the fair value of the recognised assets and liabilities should be recognised as a gain or loss in the income and expenditure account in the year of the transaction. The adoption of SORP 2010 results in a change in accounting policy in respect of negative goodwill, and as such a prior year adjustment is necessary.

Negative Goodwill on Acquisition £’000

Accumulated amounts amortised to 31 March 2011 £’000

Negative Goodwill at 31 March 2011 £’000

Prior period adjustment £’000

Transferred to income and expenditure reserves £’000

Group Negative goodwill at 31 March 2011 and 31 March 2012 £’000

A) Reconciliation of operating surplus to net cash inflow from operating activities

Fry Housing Trust Moseley & District Churches Housing Association Caldmore Area Housing Association

4,627

(187)

4,400

(4,494)

–

21,195 26,961

(658) (499)

20,537 26,462

240 299

(20,777) (26,761)

– –

52,783

(1,344)

51,439

593

(52,032)

–

Year 2012 2011 £’000 £’000 (Restated) Operating surplus 12,489 13,180 Depreciation charges and amortisation of finance costs 4,586 4,248 Decrease in debtors 148 383 Increase in creditors (1,351) 1,362 Sale of fixed asset 42 – Net cash flow from operating activities 15,914

19,173

B) Reconciliation of net cash flow to movement in net debt Year Increase in cash in the year Cash inflow from debt increase

2012 £’000

2011 £’000

4,369 (15,650)

10,851 (21,206)

Cash inflow from management of liquid resources (11,281) (10,355) Net debt at 1 April 2011 (266,713) (256,359) Net debt at 31 March 2012 (277,994) (266,714)

C) Analysis of changes in net debt Cash at bank and in hand Debt due within one year Debt due after one year

Accord Group Financial Statements 2012

At 31 March Cash Flow At 1 April 2012 2011 £’000 £’000 £’000 21,946

4,369

17,577

21,946 4,369 17,577 (2,712) (1,953) (759) (297,228) (13,696) (283,532) (277,994)

(11,280) (266,714)

Accord Group Financial Statements 2012

23. Pension costs continued

22. Cash flow statement continued

D) Analysis of changes in capital grant funding Year 2012 2011 £’000 £’000 (Restated) Balance at beginning of year 244,887 239,574 Cash inflow from capital grant funding 2,367 5,151 Movement in debtors/creditors (net) 887 694 Repaid/abated on disposals (2,234) (81) Transfer to grant funding (228) (451) Balance at end of year

245,679 244,887

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 per cent of the total contribution rate. From 1 April, 2010 the requirement for employers to pay at least 50 per cent 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. During the accounting period the following contributions were paid:

23. Pension costs The Association operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Association being invested on an individual employee basis with Scottish Equitable. The contributions of the Association and minimum contributions of employees are seven per cent and four per cent respectively of pensionable earnings. The total employer cost of pension contributions for the year was £557,895 (2011: £503,855). Contributions payable are charged to management expenses as they fall due. The number of employees of the Group in the pension scheme at the year end was 142 (2011: 138). Ashram Housing Association, Caldmore Area Housing Association and Moseley and District Housing Association participate in the Social Housing Pension Scheme (the Scheme). The Scheme is funded and is contracted-out of the State Pension scheme. SHPS is a multi-employer defined benefit scheme. Employer participation in the Scheme is subject to adherence with the employer responsibilities and obligations as set out in the ‘SHPS House Policies and Rules Employer Guide’. The Scheme operated a single benefit structure, final salary with a 1/60th accrual rate until 31 March, 2007. From April 2007 three defined benefit structures have been available, namely: • Final salary with a 1/60th accrual rate • Final salary with a 1/70th accrual rate • Career average revalued earnings (CARE) with a 1/60th accrual rate.

Accord Group Financial Statements 2012

From April 2010, a further two defined benefit structures have been available, namely: • 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 at any one time. An open benefit structure is one which new entrants are able to join. Ashram Housing Association and Caldmore Area Housing Association closed their final salary with 1/60th accrual rate to new contracts in previous accounting periods. Moseley and District Churches 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. This does not reflect any benefit changes made from April 2010.

• Ashram Housing Association paid contributions at the rate of 10.1 per cent and made past service deficit contributions of £28,452 (2011:£27,168). Member contributions varied between 9.1 per cent and 11.1 per cent. As at the balance sheet date there were four active members of the scheme (2011: four). • Caldmore Area Housing Association paid contributions of 8.8 per cent (CARE scheme) and 10.1 per cent (Final salary scheme) and made past service deficit contributions of £132,732 (2011: £126,780). Member contributions varied between 7.5 per cent and 9.5 per cent (CARE scheme) and between 9.1 per cent and 11.1 per cent (Final salary scheme). As at the balance sheet date there were 43 active members of the scheme (2011: 44). • Moseley and District Churches Housing Association paid contributions of 8.8 per cent (CARE scheme) and 10.1 per cent (Final salary scheme) and made past service deficit contributions of £37,764 (2011: £36,072). Member contributions varied between 7.5 per cent and 9.5 per cent (CARE scheme) and between 9.1 per cent and 11.1 per cent (Final salary scheme). As at the balance sheet date there were seven active members of the Scheme (2011: 12). 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 co-mingled for investment purposes, and benefits are paid out of total Scheme assets. Accordingly, due to the nature of the scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. The last formal valuation of the scheme was performed as at 30 September 2008 by a professionally qualified Actuary using the Projected Unit Method. The market value of the scheme’s assets at the valuation date was £1,527 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £663 million, equivalent to a past service funding level of 69.7 per cent.

The financial assumptions underlying the valuation as at 30 September, 2008 were as follows:

Valuation Discount Rates

% pa

Pre retirement

7.8

Non Pensioner Post retirement

6.2

Pensioner Post retirement

5.6

Pensionable earnings growth

4.7

Price inflation

3.2

Pension Increases

% pa

Pre 88 GMP

0.0

Post 88 GMP

2.8

Excess over GMP

3.0

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: • Mortality pre-retirement – PA92 Year of Birth, long cohort projection, minimum improvement 1 per cent p.a. • Mortality post retirement – 90 per cent S1PA Year of Birth, long cohort projection, minimum improvement 1 per cent p.a. The long-term joint contribution rates required from April 2010 from employers and members to meet the cost of future benefit accrual were assessed at: Long-term joint contribution rate (% of pensionable salaries) Benefit structure Final salary with a 1/60th accrual rate

17.8

Final salary with a 1/70th accrual rate

15.4

Career average revalued earnings (CARE) with 1/60th accrual rate

14.9

Final salary with a 1/80th accrual rate

13.5

Career average revalued earnings (CARE) with 1/80th accrual rate

11.9

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 £663 million would be dealt with by the payment of deficit contributions of 7.5 per cent of pensionable salaries, increasing each year in-line with salary growth assumptions, from 1 April, 2010 to 30 September, 2020, dropping to 3.1 per cent from 1 October, 2020 to 30 September, 2023.

Accord Group Financial Statements 2012

23. Pension costs continued

Pensionable earnings at 30 September, 2008 are used as the reference point for calculating these deficit contributions. These deficit contributions are in addition to the long-term joint contribution rates set out in the table above. The Scheme’s 30 September, 2011 valuation is currently in progress and will be finalised by 31 December, 2012. The results of the 2011 valuation will be included in next year’s Disclosure Note. Employers that participate in the Scheme on a noncontributory basis pay a joint contribution rate (i.e. a combined employer and employee rate).

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.

Employers that have closed the defined benefit section of the scheme to new entrants are required to pay an additional employer contribution loading of 3.0 per cent to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into SHPS. New employers that do not transfer any past service liabilities to the scheme pay contributions at the ongoing future service contribution rate. This rate is reviewed at each valuation and new employers joining the scheme between valuations up until 1 April, 2010 do not contribute towards the deficit until two valuations have been completed after their date of joining. New employers joining the scheme after 1 April, 2010 will be liable for past service deficit contributions from the valuation following joining. Contribution rates are changed on the 1 April that falls 18 months after the valuation date. A copy of the Recovery Plan, setting out the level of deficit contributions payable and the period for which they will be payable, must be sent to The Pensions Regulator.

The leaving employer’s share of the buy-out debt is the proportion of the scheme’s liability attributable to employment with the leaving employer compared to the total amount of the scheme’s liabilities (relating to employment with all the currently participating employers). The leaving employer’s debt therefore includes a share of any ‘orphan’ liabilities in respect of previously participating employers. The amount of the debt therefore depends on many factors including total scheme liabilities, scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time.

The Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or Recovery Plan are inappropriate. For example the Regulator could require that the Trustee strengthens the actuarial assumptions (which would increase the scheme liabilities and hence impact on the Recovery Plan) or impose a schedule of contributions on the scheme (which would effectively amend the terms of the Recovery Plan). The Regulator provided a response in respect of the September 2008 actuarial valuation in August 2011, stating that it does not propose to take any scheme funding action under Part 3 of the Pensions Act 2004. The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the scheme as at 30 September, 2010. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The funding update revealed an increase in the assets of the scheme to £1,985 million and indicated a reduction in the shortfall of assets compared to liabilities to approximately £497 million, equivalent to a past service funding level of 80.0 per cent.

Accord Group Financial Statements 2012

The assets and liabilities of the of Moseley and District Churches Housing Association Plan were novated into Accord Housing Association on 1 May, 2012 following its transfer of engagements.

24. Capital commitments

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 Capital expenditure that has been contracted for but has not been provided for in these financial statements 23,491 8,152 17,513 1,310 Capital expenditure that has been authorised by the Board of Management but has not yet been contracted for

43,947

–

43,947

–

25. Commitments under operating leases As at 31 March, 2012 the Group and Association had annual commitments under operating leases as set out below.

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 Operating leases which expire: Less than one year 113 113 75 81 Between one and five years 418 317 221 121 Over five years – – – – Total

531

430

296

202

26. Contingent liabilities The Group has contingent liabilities in respect of 13 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.

Accord Group Financial Statements 2012

27. Group structure

29. Housing stock

Accord Housing Association Limited’s group structure comprises:

Subsidiary

% Share Capital Owned

The number of units at the year end was:

Nature of Business

Accord Care Services Limited

N/A

Not yet trading

Accord Group Treasury Limited

100%

Group Treasury Vehicle

Ashram Housing Association Limited

76%

Charitable Housing Association

Services Limited

N/A

Non-Charitable Housing Association

Caldmore Area Housing Association Limited

100%

Charitable Housing Association

Fry Housing Trust Limited

N/A

Charitable Housing Association

Moseley & District Churches Housing Association Limited

100%

Charitable Housing Association

Redditch Co-operative Homes Limited

N/A

Registered Charity and Housing Association

Catherine Walker Almshouse

N/A

Almshouse Charity

Parkmore Services Limited

N/A

Dormant Charity

New Homes Plus

N/A

Not yet trading

Walsall Housing Regeneration Community Association

N/A

Social Economic Regeneration

Birmingham Co-operative Housing

Joint Venture

All the above Companies are registered in England and Wales. Where appropriate shareholdings are reflective of any permitted voting rights.

Group Association Year 2012 2011 2012 2011 Total £’000 £’000 £’000 £’000 Social Housing General needs housing 7,170 7,095 3,839 3,749 Long Leasehold 78 2 2 2 Supported housing 1,333 1,445 756 756 Residential care homes 294 274 208 208 Shared Ownership accommodation 1,157 1,165 1,015 1,023 Other 654 702 174 221 Total Social Housing

10,686

10,683

5,994

5,959

Non-Social Housing Registered nursing homes Market rent

11 102

11 130

11 –

Total Non-Social Housing

113

141

10,799

10,824

6,005

5,970

9,526 846 427

9,510 822 492

4,527 220 1,258

4,530 156 1,284

10,799

10,824

6,005

5,970

205

184

176

Grand Total Being: Owned and managed Managed only Owned but managed by others

28. Related party transactions

Housing under development

All inter Association charges relate to the recovery of common costs in the usual course of business. Exemptions under FRS8 regarding the disclosure of intercompany and related party transactions have been applied.

Accord Group Financial Statements 2012

30. Prior period adjustment

31. Post balance sheet events

These changes are deemed to be a material change in accounting policy and therefore have resulted in a prior period adjustment. The effect of the changes in accounting policy is a decrease in the Group’s and association’s accumulated income and expenditure reserves of £3.079m. Accounting policies have been updated to reflect these changes in accounting treatment.

The prior period adjustment reflects the changes in accounting treatment for housing property fixed assets, specifically the introduction of component accounting, and also the changes in treatment of negative goodwill in accordance with the requirements of SORP 2010.

Revenue reserves £’000

Designated reserve £’000

Other reserves consolidation reserve £’000

Minority interest £’000

Negative goodwill £’000

Total £’000

Previously housing properties and all component parts were depreciated over the useful economic life of the whole asset and negative goodwill recognised on business combination events was recognised as a separate reserve. SORP 2010 requires individual components of housing properties to be depreciated over their respective useful lives. SORP 2010 also requires that any negative goodwill generated from a business combination be recognised in the income and expenditure account in the year business combination event occurs. Any historic negative goodwill reserves in the balance sheet arising from non-commercial business combinations is required to be cancelled by transfer of the balances to accumulated income and expenditure reserves.

At 1 April 2011 as previously stated Prior period adjustments: - Component accounting - Negative goodwill

26,487

51,439

77,984

(1,636) 51,436

– 3

– –

– (51,439)

(1,636) –

At 1 April 2011 restated

76,287

–

76,348

Group

On 1 May, 2012 Moseley and District Churches Housing Association transferred its engagements into Accord Housing Association. Furthermore on 18 June, 2012 Accord Housing Association acquired the outright ownership and control of Direct Health Group Limited. Direct Health Group Limited is a subsidiary of Accord Housing Association from the date of acquisition. There were no other significant post balance sheet events requiring adjustment to, or disclosure in, the financial statements.

Association

At 1 April 2011 as previously stated Prior period adjustment: - Component accounting

24,436

–

24,436

(3,079)

–

(3,079)

At 1 April 2011 restated

21,357

–

21,357

Accord Group Financial Statements 2012

Big The

and small

Financial Statements 2012