IMPACT
making an
Financial Statements 20131
Accord Group / Financial Statements / 2013
Lloyds Bank Commercial Banking has supported the Accord Group
for almost a decade, providing term lending, deposits and transaction
banking. Most recently, we supplied long-term funding of £75 million to finance the Group’s on-going
development programme in 2010,
evidencing our continued commitment to its vision.
Jo-Ann Pepperall,
IMPACT
Relationship Director, Lloyds Bank
The Accord Group
makes an
2
Accord Group / Financial Statements / 2013
The Accord Group make 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. We 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. The organisations which make up the Accord Group are part of a family rather than any hierarchy. They are empowered to run their own affairs, independently, yet help each other out, providing multiple solutions to problems and pursuing opportunities collectively and individually. In a word we are a community, with shared ideas, values, interests and goals. The proof of our success is real and tangible.
Accord Group / Financial Statements / 2013
3
4
Accord Group / Financial Statements / 2013
CONTENTS 1
Group Highlights: Four Year Summary
Page 6
2
The Accord Group Board, Executives and Advisors
Page 8
3
Registration Details
Page 10
4
Report of the Board
Page 12
5
Operating and Financial Review
Page 18
6
Independent Auditors’ Report
Page 30
7
Income and Expenditure Account
Page 32
8
Group Balance Sheet
Page 33
9
Association Balance Sheet
Page 34
10 Consolidated Group Cashflow Statement
Page 35
11 Notes to the Financial Statements
Page 36
Accord Group / Financial Statements / 2013
5
GROUP HIGHLIGHTS 6
Four Year Summary
Accord Group / Financial Statements / 2013
As Chair of the Group’s Resources and Audit Committee it is important to me that the Accord Group demonstrates strong financial performance which
underpins its ambitious objectives to
provide high-quality and value-for-money services to its customers. Derek Leyland Group Board Member and Chair of
Group Resources and Audit Committee
ACCORD GROUP
ACCORD GROUP
100,000
650,000
90,000
640,000
80,000
630,000
70,000
620,000
60,000
610,000
50,000
600,000
0
580,000 570,000 560,000 550,000
2009/10
10,000
590,000
2012/13
20,000
2009/10
30,000
2011/12
40,000
2011/12
£000
2010/11 (restated)
£000
2012/13
growth in housing assets
2010/11 (restated)
turnover
2013 2012 2011 2010 £’000 £’000 £’000 £’000 For the year ended 31 March (restated) Group Income and Expenditure Account Turnover - 63,286 61,797 54,799 Continuing activities 66,373 - - Acquisitions in year 25,026 - - 91,399 Operating Surplus Continuing activities Acquisitions in year
- 12,489 13,180 10,988 15,356 - - 326 - - -
15,682 Interest payable and similar charges Surplus for the financial year
13,242 3,003
11,498 1,711
10,756 2,456
7,907 3,667
Consolidated Balance Sheet Housing assets at cost 649,675 627,527 612,514 588,201 Social housing and other capital grants 252,459 247,696 247,210 239,749 Net investment in new housing during year 15,823 16,624 16,646 53,527 Net current assets/(liabilities) 218 13,495 9,627 (911) Total assets less current liabilities 402,694 376,394 360,692 337,697 Loans outstanding 326,495 303,244 287,597 265,256 Reserves 81,046 78,046 76,348 23,299 Statistics (Group data) Surplus before interest as a percentage of turnover 17.4% 19.7% 21.3% 20.0% Surplus before interest as a percentage of gross rents 30.1% 25.0% 27.1% 24.9% Interest cover 158.4% 141.3% 151.4% 169.1% Gearing 49.7% 48.0% 43.5% 43.5% EBITDA as a percentage of turnover 23.4% 27.2% 27.1% 30.2% Accord Group / Financial Statements / 2013
7
The Accord Group Board, Executive and Advisors Board Members
Barrie Blower, MBE
Akshay Parikh
Margaret Cope
Derek Leyland
Appointed 09/09/94
Appointed 09/09/94
Appointed 11/10/01
Appointed 28/01/97
Ghulam Shabar
Cllr Bill Hartnett*
Dr Chris Handy, OBE
Andrew Wall, MBE
Appointed 08/10/02
Appointed 23/03/05 Resigned 28/03/13
Appointed 20/07/06
Appointed 27/09/07 Resigned 28/03/13
Group Chair
Deputy Group Chair
Secretary Lakhbir Jaspal
Bruce Gilbert, OBE
Barry Picken
Shahana Khan
Appointed 21/01/10
Appointed 24/09/10
Appointed 11/10/12
8
Accord Group / Financial Statements / 2013
* Cllr Bill Hartnett is a Councillor for Redditch Borough Council. However, he does not represent Redditch Borough Council whilst serving on the Accord Board.
Funders
Executive Officers
Lloyds Bank Plc The Royal Bank of Scotland Plc Orchardbrook Limited Abbey National Treasury Services Plc Co-operative Bank Dexia Public Finance Bank The Housing Finance Corporation
Dr Chris Handy, OBE Group Chief Executive
Jas Bains, MBE
Lakhbir Jaspal Deputy Group Chief Executive
Chief Executive, Ashram Housing Association
Rob Donath
Mike Hew
Jonathan Vellacott
Chief Executive of Fry Housing Trust
Chief Executive of Caldmoreaccord
Chief Executive of Direct Health Group
Sara Woodall
Alan Yates
David Williams
Executive Director of Corporate Housing Services
Executive Director of Regeneration
Executive Director of Health, Social Care and Support
Bankers Co-operative Bank Plc 118 – 120 Colmore Row Birmingham B3 3BA
Lloyds Bank Plc PO Box 908 125 Colmore Row Birmingham B3 2DS
Royal Bank of Scotland Walsall Branch 139-144 Lichfield Street Walsall WS1 1SE
External auditors Grant Thornton UK LLP Registered Auditors Grant Thornton House 202 Silbury Boulevard Central Milton Keynes MK9 1LW
Accord Group / Financial Statements / 2013
9
ACCORD GROUP 10
Accord Group / Financial Statements / 2013
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
Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG
Ashram Housing Association Limited
Redditch Co-Operative Homes
Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27926R)
Registration: Company Limited by Guarantee (Company No. 3667984)
Homes and Communities Agency under the Housing Act 1996 (Registration No. LH4034)
Homes and Communities Agency under the Housing Act 1996 (Registration No. L4335)
Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG
Charity Commission (Charity No. 1078304)
Birmingham Co-operative Housing Services Limited (bchs) 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) Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG
Caldmore Area Housing Association Limited Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 20135R) Homes and Communities Agency under the Housing Act 1996 (Registration No. L0883) Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG
Direct Health Group Limited Registration: Company Limited by Shares (Company No. 5638085) Registered Office: Parkway House, Haddenham Business Park, Haddenham, Buckinghamshire, HP17 8LJ
Registered Office: 178 Birmingham Road, West Bromwich, West Midlands B70 6QG
Accord Group Treasury Limited Registration: Registry of Friendly Societies under the Industrial and Provident Societies Act 1965 (Registration No. 27057R) 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
Direct Health (UK) Limited Registration: Company Limited by Shares (Company No. 04634266) Registered Office: Parkway House, Haddenham Business Park, Haddenham, Buckinghamshire, HP17 8LJ
At Your Care (Service) Limited Registration: Company Limited by Shares (Company No. 03741346) Registered Office: Parkway House, Haddenham Business Park, Haddenham, Buckinghamshire, HP17 8LJ
Accord Group / Financial Statements / 2013
11
REPORT OF THE BOARD 12
Accord Group / Financial Statements / 2013
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, 2013. The principal activity of the Group is the provision and management of housing and appropriate support services for people in need.
Mission and core values The Accord Group make 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!
Putting people first People matter. We respond to need and promote choice by listening to our customers 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 £3.003 million (2012: £1.711 million). Our financial performance remains strong. Turnover of £91.4 million represented a 44 per cent increase on the prior year, which reflects the acquisition of Direct Health Group Limited on 18 June, 2012. The operating surplus was £15.860 million in 2012/13, compared to £12.489 million in 2011/12. This continuing strong performance has enabled Accord to further strengthen its financial position and continue its sustained investment in both properties and services. 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.
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: • Select 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 for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board is responsible for the maintenance and integrity of the corporate and financial information on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Disclosure of information to auditors In so far as each of the directors is aware: • 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 / 2013
13
Going concern The Board has reviewed the Association and Group budgets, borrowing facilities and funding requirements for the year to July 2014 and forward projections. At 31 March 2013, the Group has £79.5 million of available funding facilities in place which is more than sufficient to meet the Group’s strategic growth ambitions and development plans. 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.
Corporate governance During the period, the Board complied in all material respects with the current NHF ‘Excellence in Governance’ (2010) issued by the National Housing Federation. 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.
part of the accord group
Caldmoreaccord Board
Each of the Committees/Boards, including Direct Health’s Board, 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 Board. Effective 1 May, 2012 Moseley and District ceased to exist following a transfer of engagements into Accord Housing Association Limited, accordingly its governance arrangements have changed with the management board becoming a committee of Accord. On 18 June, 2012 Direct Health Group Limited was acquired by Accord. Direct Health’s Board of Management meets monthly and formally reports into the Accord Group Board.
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Accord Group / Financial Statements / 2013
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. The process has been in place throughout the year to 31 March, 2013 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 2012/13. The main policies which the Board has established, and which are designed to provide effective internal control, are summarised below: • Internal audit – 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. Management assurances are received by the Resources and Audit Committee to confirm that recommendations have been implemented as agreed. Subsequent internal audit reviews are undertaken to check recommendations have been properly implemented. Quarterly Management Accounts are also presented to the Committee for review and scrutiny. • Risk management – the Board and Resources and Audit Committee oversee the risk management cycle which governs the on-going 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. • 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. The Group also complies with a number of other recognised quality management systems including
Investors in Excellence, ISO14001 and ISO 20001 (related to Environmental and Information Technology quality management systems respectively). •R egulatory reports - the Group reports to the Homes and Communities Agency through a range of regulatory returns all of which were submitted on time. The Executive Board ensures that regulatory matters are dealt with promptly and efficiently, co-ordinates the self-monitoring system operated by the Board, and monitors compliance with performance standards. • Performance indicators – key performance indicator reports are produced regularly for the Group and are reported through the Executive Board to the various Boards/Committees. These reports include performance monitoring on housing management, care quality compliance, maintenance, development, customer satisfaction, staff and financial results. •F raud – The Group has a rigorous approach to fraud as set out in the Fraud Strategy and Policy. An annual fraud report is reviewed by the Group Resources and Audit Committee. This includes an analysis of the fraud and losses register for the year and how surrounding controls have been improved. The Resources and Audit Committee meets with the members of the Executive Team, the internal auditors and external auditors to review specific reporting and internal control matters and to satisfy itself that the systems are operating effectively. he Governance Committee ensures that the Group attains T the highest standards of effective governance. A review of Direct Health’s control environment was undertaken following acquisition and the Group Internal Audit Plan amended accordingly to take account of Direct Health’s activities and associated risks. 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 Group Resources and Audit Committee has received the 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 auditor’s report on the financial statements.
Accord Group / Financial Statements / 2013
15
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, Executive 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. The emphasis remains on ensuring risks and opportunities are continuously monitored, understood and evaluated. This supports effective and strategic decisionmaking and ensures the Association is able to adapt to changing circumstances.
Health and safety The Board acknowledges its duty of care to employees and customers in respect of all matters relating to health, safety and the environment. A dedicated member of staff, operating under the supervision of the Finance Director, regularly reviews and updates relevant policies and procedures, supervises risk assessments and provides staff with training and support on health and safety issues.
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Accord Group / Financial Statements / 2013
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 customers 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 Accord Group treat all people fairly and with respect, recognising and responding to their individuality. The Group’s policies reflect its commitment to fairness and the value it places on diversity in all aspects of its work. We: • 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 •A im to be an excellent organisation, demonstrating our accountability and promoting fairness for all.
Charitable donations The Association made donations to charitable organisations of £13,785 during the year (2012: £4,519).
General meeting The Annual General Meeting will be held on 12 September, 2013.
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
B. Blower, MBE (Chairman) 25 July, 2013
Accord Group / Financial Statements / 2013
17
Operating and Financial Review
Overview of business The most notable highlight for the Group this year was the acquisition of Direct Health Group Limited (further details provided in note 30). This transaction reinforces the Group’s commitment and focus on its core business and services for people in need through the provision of general needs, sheltered and supported housing, care and support services and the provision of low-cost home ownership solutions. The extent and nature of our activities has widened further to Direct Health joining the Group. In addition to providing services to over 60,000 people in the Midlands, we now also serve customers in the North, North West and North East of England and provide 70,000 hours of care and support each week. The development of new homes to provide affordable social housing remains a fundamental objective for the Group. As a housing provider we recognise the contribution that a wider range of tenures can make to the achievement of balanced, sustainable communities. There were 10,906 units in management at 31 March, 2013 as shown below: Group Group 2013 2012 Property Numbers Property Numbers General needs housing Affordable rents Supported housing Residential care homes Shared ownership accommodation Other
7,203 174 1,314 287 1,180 748
7,245 1 1,333 294 1,159 767
Total
10,906
10,799
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 HCA Affordable Housing Programme. Accord will be delivering 600 new homes as part of this programme. As at 31 March, 2013 Accord and the Matrix partners were ahead of development commitments agreed with the HCA.
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Accord Group / Financial Statements / 2013
Accord Group’s mission and the public benefit Our mission and values highlight our commitment 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.
Value-for-money The new HCA 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. In August 2012 the Group’s Board approved the implementation of a new Value-for-Money Strategy. The Strategy focuses on how the key requirements of the new regulatory standards will become embedded in our everyday working practices. The standard has particular focuses on four key strategic themes: • To understand and manage our costs; including how and to what we commit financial resources, and understanding the opportunity cost of the financial commitments we make. There is a commitment to ensuring resources are used in the most effective manner and therefore providing the greatest return. The principles of value-for-money are wholly embedded in the budget-setting process as the Finance team continue to challenge colleagues to provide quality services with appropriate resources. • To understand return on assets; including an assessment and appraisal of our outputs relative to inputs, ensuring that we are providing value-for-money services and that we can demonstrate we are an effective organisation • To become a better buyer; in delivering our core services we commit some of our financial resource to external organisations that complement our in-house skills and support us in delivering excellent services to our customers and communities. Our approach to buying and procurement is robust so we can ensure the maximum return from the commitment invested in products and services. Being a better buyer also means that we are committed to being a responsible buyer, sourcing goods and services from ethical providers which are committed to our local economy and our neighbourhoods. • To increase accountability and transparency in reporting value-for-money; we continue to provide our Board and committees with regular reports and data related to value-for-money to provide members with the assurance that we are an organisation which is committed to providing efficient services and also that we are able to deliver against agreed value-for-money targets/objectives.
As part of further reinforcing and embedding the importance of a value-for-money culture within the Accord Group a detailed action plan accompanies the Value-for-Money Strategy. Progress against the implementation of this action plan is reported to the Resources and Audit Committee. The action plan also includes a requirement for all functions in the Group to have a departmental action plan outlining their value-for-money commitment within each discrete area of the business. In total there are over 260 individual initiatives and actions currently being implemented across the Group to ensure we continue to provide value-for-money services. 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 underlying strategic themes of ‘Make it Count’ are:
Effectiveness 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?”
Economy 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 actively engage in benchmarking exercises, and place significant importance in using results to drive through service improvements. The Group procurement function continues to perform strongly and its commitment to a collaborative and strategic approach to buying continues to achieve significant benefits for the Group. During the financial year end 31 March, 2013 Group-wide procurement efficiencies identified from the re-procurement of contracts for goods and services amounted to an impressive £481,000. Going forward we will continue our commitment to making the best use of our available resources and reinvesting savings in core services and new innovations for the benefit of our customers and communities.
Accord Group / Financial Statements / 2013
19
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 and care markets in which we operate • Consultation with our customers to maintain and develop excellent services • Research into the local demographics and how demand for our service 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 • Robust risk analysis of the activities we are engaged in. Our analysis of the operating environment suggests that the key factors and drivers are: • Better value for the taxpayer • Quality service provision • Working with customers to help them understand and manage increasing financial pressures • More empowerment of local communities • Supporting the sustainability of local economies • Greater accountability to service users/communities • The need for greater joined up working between Registered Providers, Local Authorities and other key partners continues to be very important. We are now five years into a period of significant and sustained economic challenge, 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 on-going reductions in public spending. The social housing sector has already experienced reduction in grant funding to support the development of new social housing and now the sector continues to prepare itself for the implementation of welfare reform and the financial challenges this brings. Accord is committed to identifying solutions to these on-going financial pressures and is equally committed to working alongside our customers to ensure they understand how these financial challenges also impact upon them. In the short and medium-term Accord, in common with other associations, will be reviewing its business plans in order to reflect the current economic environment and equip ourselves appropriately to manage these on-going pressures. The Accord Group remains confident that growth opportunities will continue for strong organisations like ourselves.
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Accord Group / Financial Statements / 2013
Business plan priorities 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 2013-18 business planning process which builds on the 2012-17 plan, includes management’s assessment of strengths, weaknesses, opportunities and threats. Our core business objectives are aligned to our four values and include: • Regenerating and building sustainable communities – working together with partners to help regenerate areas, build and maintain sustainable communities and enhance and protect the environment •M eeting individual needs – giving people real choice in assessing the services that they want to help them shape the communities they wish to live in • 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 •P roviding outstanding and affordable homes and delivering excellent services in ways which are appropriate, accessible and accountable to our customers.
Group objectives and strategy The Group’s objectives and strategy are set out in the Strategic Five Year Plan that is reviewed annually and approved by the Board. Accord sees identifying and managing its risks and opportunities as integral to the way we do business. The Group’s main objectives and strategies are taken from the Strategic Plan 2013-18, are summarised in the following table:
Value
Committed to communities
Making a difference
Putting people first
Excellence through innovation
Key objective
Regenerating and building sustainable communities
Meeting individual needs
Involving residents, tenants and service users in our work
Providing outstanding and affordable homes and delivering excellent services
Strategy statement
Working in partnership to regenerate areas, build and maintain sustainable communities and enhance and protect the environment.
Giving people real choice in assessing the housing and services that they want to help them shape the communities they wish to live in.
Encouraging people to shape the way their homes and services are managed and to influence the level and quality of services they receive.
Providing outstanding and affordable homes and delivering excellent services in ways which are appropriate, accessible and accountable to our customers.
We will achieve this through:
We will achieve this through:
We will achieve this through:
We will achieve this through:
Key targets
• Expanding the range of our core and diverse activities increasing our turnover by five per cent year on year over the Plan period • Each organisation developing one tenant management organisation per year over the Plan period within the Black Country and Birmingham • Introducing a range of in-house apprenticeships, volunteering and employment opportunities for our residents • Building the capacity of communities to respond to the needs of individual areas by engaging effectively with colleagues, customers and local residents • Generating value-for-money efficiencies in order to reinvest in local communities • Continuing to strive to be the leading housing association in delivering on environmental sustainability.
• Supporting our customers to manage the impact of welfare reform by investing in resources and technology to ensure our rent collection rate remains about 95 per cent • Managing the impact of welfare reform on our business • Committing to provide a range of apprenticeships in all areas of our work and giving a 100 per cent commitment of a permanent job to those who successfully complete the apprentice programme • Reviewing policies, procedures and business processes to create a better choice and service to customers • Ensuring that every customer receives a quality service designed to meet their needs by embedding the personalisation strategy across the Accord Group • Making digital inclusion a reality for every customer to improve their engagement with welfare reform, employment opportunities and social media • Developing effective coworking arrangements with local authorities, stakeholders and other partner agencies to produce positive outcomes for customers.
• Continuing to expand the Accord Group’s leadership academy which invests in its future leaders, thereby creating a more resilient organisation • Increasing the use of sophisticated customer profiling information to refine and enhance the delivery of tailored services • Embedding a “customer first” approach by valuing, training and rewarding our colleagues through inspired leadership • Engaging with our customers to provide the maximum opportunities for the co-production of products and services • Developing the model of a mutual home ownership scheme • Developing and extending our pathways into work offering a range of opportunities for our customers through our initiative AddVentures.
• To develop 672 homes by 2015 as part of our commitment to the HCA and the Affordable Housing Programme and ensuring that at least 35 per cent of these homes are manufactured locally in our timber frame factory • Commence building our own homes with the objective to reduce costs and improve efficiency with an integrated project team • Expanding the work and remit of our internal services company and increasing its turnover from £1 million (2012) to £3 million by 2015, as means of improving the offer to our customers and giving better value • Employ technology, new processes and build people skills to deliver a range of competitive care and support services that deliver the highest quality standards • Research good practice in all sectors of customer service and transfer that learning into a continual improvement of existing products and services • Developing a market rent programme to provide non-state aided initiatives to a different target audience to our traditional customers.
Accord Group / Financial Statements / 2013
21
Risks and opportunities As part of our risk management framework, Accord operates a comprehensive risk management process which incorporates all subsidiaries and major Group functions. Risk management informs our business planning cycle and in the current economic climate proactive risk management becomes an increasingly important management tool. Our updated approach to Risk Management Strategy was approved by the Group Board in January 2013. Quarterly risk management updates are subject to review by the Group Resources and Audit Committee, the Executive Board and local management teams. This supports effective and strategic decision-making and ensures the Group is able to adapt to changing circumstances. The Group’s emphasis remains on ensuring risks and opportunities are continuously monitored and evaluated. Key risks facing the sector currently include:
Care and support income Local Authority partners continue to apply downward pressure on care and support finances as well as scaling back the provision of care services as result of wider central government public sector funding cuts.
Housing benefit and the welfare reform agenda The early stages of welfare reform were being rolled out from April 2013, starting with the implementation of the ‘Bedroom Tax’, this will be followed up by the commencement of the Universal Credit and direct payment systems after October 2013. These three aspects of the welfare reform agenda will place increased pressure on rent collection and therefore rent arrears.
Pension scheme liabilities There is a growing concern that defined benefit pension fund deficits are becoming an increasing risk to the sector. The economic performance of pension assets has deteriorated significantly due to the downturn in economic conditions, resulting in pension scheme liabilities exceeding the value of these assets significantly.
Financial performance: Income and overheads 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.
22
Accord Group / Financial Statements / 2013
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 on-going 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 on-going basis.
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 has sufficient finance and funding in place to fulfil our strategic commitments following our last large scale refinancing deal. New funding streams such as bonds, private placements and bi-lateral arrangements are becoming increasingly popular sources of long-term finance to the sector.
Changes to the regulatory framework The sector is required to respond to regulatory changes associated with recent structural changes at the Homes and Communities Agency, the release of the latest Regulatory Standard, and on-going announcements made by the regulator in order to ensure the appropriate protection of public funded assets are in place.
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.
Accounting changes The sector is preparing itself for the implementation of new accounting standards as part of the next SORP release. Consultation is on-going throughout 2013 with a new SORP expected to be applicable for the 2016 year end. Providers are responding to consultation opportunities and planning for the impact of implementing the new accounting requirements.
Performance in the period
2012/13
2011/12
2010/11 (restated)
2009/10
100,000 90,000 80,000 70,000 70,000 60,000 £’000 50,000 40,000 30,000 20,000 10,000 0
£3.0m increased by £1.3 million
Surplus for the year - Group
4,000 3,500 2,500 2,000
£’000
2012/13
1,500 2011/12
2010/11 (restated)
3,000
1,000 500 0
£15.7m increased by £3.4 million
Operating surplus - Group
18,000 16,000 14,000 12,000 10,000 8,000
£’000
2012/13
6,000 2011/12
2010/11 (restated)
Total revenue expenditure on repairs and maintenance in the year was £12.782 million (2012: £13.990 million) of which £3.192 million of repairs have been capitalised in the year (2012: £2.452 million). This demonstrates the Group’s continued commitment to investing in its existing stock and the impact of increased capitalisation under component accounting.
increase 44%
Turnover - Group
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, 2013 has continued to see additional provision of social housing and further consolidation of a sound financial position. The results for the year show Group turnover up from £63.3 million in 2011/12 to £91.4 million in 2012/13. The Group’s surplus for the year before taxation was £3 million (2012: £1.7 million) which is above the budgeted surplus of £2.7 million. Group operating surplus was £15.7 million (2012: £12.5 million) which represents 17 per cent of Group turnover.
£91.4m
2009/10
Our business strategy provides a clear balance between growth and excellent customer service. Our strong track record of prudent financial management will ensure that we continue to meet the needs of existing customers as well as building new homes. By adopting a rigorous approach to financial planning we are better placed to meet the needs of our business. Our finances are managed through the annual budget process and delivery against key performance targets.
4,000 2,000 0
Accord Group / Financial Statements / 2013
23
ACCORD GROUP
turnover and operating surplus/(deficit) by activity are shown below: Turnover Operating Surplus/(Deficit) Year 2013 2012 2013 2012 £’000 £’000 £’000 £’000 Total General needs housing Supported housing Domiciliary care services Residential care homes Shared Ownership accommodation First tranche shared ownership Other
31,901 29,841 14,144 11,881 11,495 10,538 2,332 1,057 26,136 1,080 275 65 7,460 7,754 (28) (347) 1,867 1,805 618 535 565 701 (14) 118 11,975 11,567 (1,645) (820)
Total
91,399 63,286 15,682 12,489
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 55.1 per cent of our turnover from social housing lettings (2012: 38.6 per cent). However the lack of an inflationary increase on care and support income (including Supporting People) in most local authority areas during the year has required continual review in light of the financial pressures being faced.
Turnover 2013
Turnover 2012
47%
34%
17%
17%
13%
12% 1% 3%
2%
1%
Key General needs housing Supported housing Domiciliary care services Residential care homes Shared Ownership accommodation First tranche shared ownership Other
24
Accord Group / Financial Statements / 2013
28% 8%
2%
12%
During the year Accord Housing Association Limited acquired Direct Health Group Limited, a domiciliary care service provider. The acquisition of Direct Health has changed the focus of the Group’s primary source of income from the provision of general needs housing to the provision of care related services. In the year 34.9 per cent of income was derived from general needs compared to 47.2 per cent in 2012. During the year, the Group received £5.320 million (2012: £5.752 million) from local authority administered Supporting People budgets, which are continuing to diminish. Across the Group we continue to monitor the financial viability of the care and support business closely at an executive level.
Group-wide interest payable increased to £13.242 million (2012: £11.498 million) as debt increased from £303.224 million to £326.495 million. Our increased debt position highlights our commitment to the development of new homes and the regeneration of the communities we serve.
Development The Group continues to build on its strong reputation and proven track record the development of 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 over 600 new homes over the life of the programme. 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. Operations at Accord’s LoCaL (Low Carbon Living) Homes factory remain strong and this year saw half of all our new housing customers move into LoCaL Homes. The factory produces high-quality, energy efficient wood frame homes from sustainable materials which continue to supply Accord’s development programme. The factory is based in Walsall with a number of employees being Accord Group tenants.
Accord Group / Financial Statements / 2013
25
Capital structure Total funds including long-term creditors at the end of the period amounted to £401.893 million (2012: £376.394 million), of which £80.983 million (2012: £77.979 million) comprised the income and expenditure account reserve. The increase compared to 2012 is largely due to an increase in tangible fixed assets, social housing grant, investments increased borrowing and the surplus for the year. Long-term borrowings at the end of the period have increased to £322.7 million from £300.5 million in 2012.
The net movement in cash for the year was an outflow of £18.314 million (2012: £4.369 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 4.48 per cent (2012: 4.15 per cent). Interest cover stands at 158.5 per cent (2012: 137.5 per cent) and remains comfortably within our funding covenants.
26
Accord Group / Financial Statements / 2013
growth in housing assets £000 650,000 640,000 630,000 620,000 610,000
580,000 570,000 560,000 550,000
Housing Assets at Cost
£649.7m increase 4%
2012/13
590,000
2011/12
600,000 2010/11 (restated)
The Group has access to undrawn borrowing facilities of £79.5 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.
ACCORD GROUP
2009/10
Balance sheet gearing of the Association at the year end is 56.5 per cent (2012: 51.3 per cent) and remains comfortably within our funding covenants. All other members of the Group comply with their funding covenants, including those covenants introduced under the Group funding facility.
Treasury management and control 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. 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 and regulatory requirements. Cash flow requirements are monitored through Accord’s on-going 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 long-term, 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. The Group’s policy is that a level of 60 per cent of its total borrowing should be at fixed rates of interest. At the year end, 66 per cent (2012:72 per cent) of the Group’s borrowings were at fixed rates of interest; this rate will reduce further with all new drawdowns being at variable rate. Accord has not used stand-alone derivative financial instruments to manage its interest rate exposure during the year. However, Accord does have the Wider Rule Change and approval from the Homes and Communities Agency to use stand-alone derivative financial instruments, and has facilities in place with three funding institutions to utilise these instruments. Continuity of funding is ensured by arranging for short-term borrowings and committed facilities and by limiting the amount of debt repayable in any one year. At the year end, the undrawn committed facilities of the Accord Group were £79.5 million, and undrawn facilities for Accord Housing Association amounted to £43.5 million (2012: £49 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 the Group’s operations.
ACCORD GROUP
interest rate management
66% Fixed Debt 34% Variable Debt Debt Repayment Group 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
2013 2012 £’000 £’000 2,958 2,712 4,191 2,919 7,040 4,215 12,568 13,415 53,490 43,838 85,738 84,149 71,361 61,238 68,977 62,972 20,067 27,671 105 115 326,495
303,244
Accord Group / Financial Statements / 2013
27
Key operational indicators General Needs Year 2008/09 2009/10 2010/11 2011/12 2012/13 Accord Group % of rent debit in arrears - - 4.51 2.48 3.35 % of rent debit lost due to voids - - 0.82 0.75 0.72 Average re-let time (days) - - 18 16 31 Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
4.96 1.32 34
2.20 1.35 41
2.71 1.21 27
2.00 0.68 20
2.04 0.92 27
Supported Housing Year 2008/09 2009/10 2010/11 2011/12 2012/13 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
2.32 5.86 34
Accord Housing Association % of rent debit in arrears % of rent debit lost due to voids Average re-let time (days)
3.10 3.51 35
3.83 2.90 21
5.91 2.33 27
1.33 3.63 34
0.39 4.13 54
Prior to 2010/11 Group-wide data for housing management KPIs was not collated.
Year 2012/13 Accord Group % first time fix repairs completed 74.20 % customer satisfaction in respect of repairs 94.74 % repairs appointments kept 96.50 Accord Housing Association % first time fix repairs completed % customer satisfaction in respect of repairs % repairs appointments kept
28
Accord Group / Financial Statements / 2013
74.90 94.50 96.55
During the year the Group-wide Corporate Asset Management team was formed. As part of the commencement of this team a new set of customer centric key performance indicators have been introduced. These indicators represent a departure from the traditional KPIs for a repairs service. The indicators were developed in conjunction with our customers and measure aspects of the service which they consider to be most important to them. The Group’s average creditor payment period at 31 March, 2013 was 31 days (2012: 30 days).
Accord Group’s commitment to environmental matters Accord remains committed to being at the forefront on delivering innovative service delivery solutions which impact favourably on our environment and communities. As part of this commitment we have accomplished a number of key achievements: • Accord Group became one of the first housing associations in the country to obtain the ISO14001 Environmental Management Standard. This accreditation was recertified following a successful stringent audit process • Accord Group is the first housing association to achieve the much more demanding European Eco Management and Audit Scheme (EMAS) standard • Environmental factors are considered on all key project investment decisions considered by the Group’s Project Approval Panel. • Accord successfully achieved approval to our revised EMAS statement which embraces the latest requirements of the initiative to EMAS III • We are already committed to the development of low and zero carbon homes with our partnership with a Norwegian manufacturer of timber framed homes that are generally 50 per cent more efficient when compared to traditionally built homes. High quality, highly efficient timber frame homes are also being produced at Accord’s LoCaL Homes factory. LoCaL Homes have been produced, built and lived in by our customers. These homes will continue to supply Accord’s 2011-2015 Affordable Homes development programme.
Accounting policies 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.
Looking to the future Financially, we continue to operating in both challenging but exciting and opportunistic times. The current year financial results highlight Accord’s ability to deliver strategic growth in economically challenging conditions. We are a Group which is committed to continuing to seek out further strategic growth opportunities whilst continuing to provide excellent services and meet local social needs.
We passionately believe in what we do and have created a platform from which we can continue to grow and seek out those commercial opportunities which will further support our wider social purpose. In 2013/14 we expect to see the continuation of austerity measures being applied in a backdrop of growing public need. This requires the social housing and care sectors to continue to find new and innovative operating and funding solutions to ensure that both strategic and social objectives continue to be delivered despite the current economic environment. The Accord Group remains committed to delivering excellent value to our customers and working effectively and openly with our wider stakeholders. Our business plan and our robust approach to managing risk demonstrates the strength of our business operations whilst continuing to grow to meet housing and care needs.
Lakhbir Jaspal Deputy Group Chief Executive 25 July, 2013
Accord Group / Financial Statements / 2013
29
INDEPENDENT AUDITORS’ REPORT 30
Accord Group / Financial Statements / 2013
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, 2013 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 nine and 13 of the Friendly and Industrial and Provident Societies Act 1968. Our audit work has been undertaken so that we might state to the housing association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the housing association and the housing association’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the Board and the auditor
Matters on which we are required to report by exception
As explained more fully in the Statement of Responsibilities of the Board, set out on page 13, 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.
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:
Scope of the audit of the financial statements
• 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.
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.
Opinion on financial statements In our opinion the financial statements:
Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Milton Keynes, England 31 July, 2013
• Give a true and fair view of the state of the Group’s and Association’s affairs as at 31 March, 2013 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 Direction for Private Registered Providers of Social Housing 2012 • Have been prepared in accordance with the requirements of the Statement of Recommended Practice (SORP): Accounting for registered social housing providers.
Accord Group / Financial Statements / 2013
31
Income and expenditure account Group Group Group Association Association Notes 2013 2013 2012 2013 2012 £’000 £’000 £’000 £’000 £’000 Turnover Continuing operations 66,373 Acquisitions 25,026 91,399 63,286
44,439
36,022
Operating costs Continuing operations (50,438) Acquisitions (24,700) (75,138) (50,214) Cost of sales
(579)
(583)
(31,939) (579)
(26,159) (583)
Operating surplus 2 Continuing operations 15,356 Acquisitions 326 15,682 12,489 Surplus/(deficit) on sale of fixed assets 4 Interest receivable and similar income Interest payable and similar charges 7 Exceptional item 8
11,921
9,280
405 134 347 (19) 55 186 48 156 (13,242) (11,498) (9,906) (7,630) 103 400 - -
Surplus for the financial year before Taxation 8 3,003 1,711 Taxation 19 (3) (13)
2,410 1,787 - -
Surplus for the financial year after Taxation
2,410
20 3,000 1,698
All amounts relate to continuing activities. The notes on pages 36 to 64 form an integral part of the Financial Statements. All recognised surpluses and deficits have been included in the income and expenditure account.
32
Accord Group / Financial Statements / 2013
1,787
Group balance sheet Intangible fixed assets Goodwill
Notes 2013 2012 £’000 £’000 £’000 £’000
31 25,555
-
Tangible fixed assets Housing properties less depreciated costs 621,535 602,995 Social housing and other grants (252,459) (247,696)
9 369,076 355,299
Other fixed assets 10 7,759 7,511 Investments 11 86 89 Current assets Properties for sale 12 5,633 292 Stock and work in progress 13 1,068 136 Debtors 14 13,805 8,793 Cash at bank and in hand 3.741 21,946 24,247 31,167 Creditors: Amounts falling due within one year 15 (24,029) (17,672) Net current assets
218
13,495
Total assets less current liabilities
402,694
376,394
Creditors: Amounts falling due after more than one year
321,648
298,348
Capital and reserves Share capital 18 - Revenue reserves 20 80,983 Designated reserves 20 11 Consolidation reserves 20 43 Minority Interest reserve 20 9
77,979 15 43 9
16
402,694 376,394 The Financial Statements were approved by the Board of Management on 25 July, 2013 and signed on its behalf by:
CHAIRMAN
BOARD MEMBER
COMPANY SECRETARY
The notes on pages 36 to 64 form an integral part of the Financial Statements.
Accord Group / Financial Statements / 2013
33
Association balance sheet
Notes 2013 2012 £’000 £’000 £’000 £’000
Tangible fixed assets Housing properties less depreciated costs 444,240 363,960 Social housing and other grants (170,267) (133,991)
9 273,973 229,969
Other fixed assets 10 5,536 4,749 Investments 11 29,123 89 Current assets Properties for sale 12 5,633 292 Stock and work in progress 13 1,068 136 Debtors 14 7,651 7,757 Cash at bank and in hand 965 19,456 15,317 27,641 Creditors: Amounts falling due within one year 15 (17,618) (12,634) Net current (liabilities)/assets (2,301) 15,007 Total assets less current liabilities
306,331
249,814
Creditors: Amounts falling due after more than one year
258,466
226,670
Capital and reserves Share capital 18 - Revenue reserves 20 47,865
23,144
16
306,331 249,814
The Financial Statements were approved by the Board of Management on 25 July, 2013 and signed on its behalf by:
CHAIRMAN
BOARD MEMBER
The notes on pages 36 to 64 form an integral part of the Financial Statements.
34
Accord Group / Financial Statements / 2013
COMPANY SECRETARY
Consolidated Group cash flow statement Net cash inflow from operating activities
Notes 2013 2012 £’000 £’000 £’000 £’000 21a
Returns on investments and servicing of finance Interest received Exceptional item re: icelandic bank/loan breakage costs
22,748
55
15,914
186
8 103 200
Interest paid (14,114) (13,270) Net cash outflow from returns on investments and servicing of finance (13,956) (12,884) Corporation tax paid (21) (11) Capital expenditure and financial investment Acquisition and construction of housing properties Social housing grant received 21d Purchase of other fixed assets Sales of housing properties Investments
(29,223) 7,430 (1,852) 2,231 3
Acquisition of Direct Health Group Limited, net of cash
(29,037)
-
Net cash acquired with Direct Health Group Limited, acquisition
237
-
(18,991) 2,367 (1,585) 3,909 -
Net cash outflow from capital expenditure (50,211) (14,300) Cash outflow before movement of liquid resources and financing (41,440) (11,281) Management of liquid resources Financing Loans received Loans repaid Net cash inflow from financing (Decrease)/increase in cash
28,818 (5,692)
21c
29,000 (13,350)
23,126
15,650
(18,314) 4,369
The accompanying notes on pages 36 to 64 form an integral part of the Financial Statements.
Accord Group / Financial Statements / 2013
35
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 and have remained unchanged from the prior year. A summary of accounting policies is set out below.
Basis of consolidation The consolidated accounts incorporate the financial statements of Accord Housing Association Limited and all of its subsidiary undertakings. Accord Group acquired Direct Health Group Limited on 18 June, 2012. Direct Health Group Limited’s financial performance information is included in the consolidated financial statements from the date of acquisition.
Turnover and revenue recognition Turnover represents rental and service charge income receivable, fees receivable, revenue grants from the Tenant Services Authority and other public authorities and sale proceeds from first tranche shared ownership sales. Income is recognised from the point when properties are first let. Income from first and subsequent tranches sales, and properties built for sale is recognised at the point of legal completion of the sale. Revenue grants are receivable when the conditions for receipt of agreed grant funding have been met. Charges for care and support services funded are recognised as they fall due under contractual arrangements.
Sale of housing properties Where properties built for sale are disposed of during the year, the disposal proceeds are included in turnover, and the attributable costs included in cost of sales. The surplus or deficit on disposal of housing properties held as fixed assets, including second or subsequent tranches of shared ownership properties, is accounted for on the face of the income and expenditure account. Where any Social Housing Grant (SHG) 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.
Loan expenses Expenses incurred in raising loan finance are recorded as a deduction from gross proceeds of the loan and charged to the income and expenditure account over the loan term. Loan termination costs are charged to the income and expenditure account in the year that they are incurred.
Supporting people (SP) subsidy income Supporting People funding was introduced on 1 April, 2003 and replaced Supported Housing Management Grant. Supporting People contracts are entered into with local authorities and are of two types: • 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.
36
Accord Group / Financial Statements / 2013
Housing properties, impairment and property improvements During the year ended 31 March, 2012 the Group adopted full component accounting in relation to the capitalisation and depreciation of its completed housing property stock. Previously the Association depreciated housing properties over the estimated useful life of the asset as a whole. From 1 April, 2011, all housing properties have been split between their land, structure costs and their major components which require periodic replacement. Refurbishment or replacement of such major components is capitalised and depreciated over the estimated useful life of the component. The estimated useful economic life for each component has been arrived at based on the Association’s experience of component replacement. The Association will continue to monitor and review the useful economic lives of all components and make revisions where sustained material changes arise. Estimated useful economic life for each component: Building
125 years
Bathroom
30 years
Windows and doors
35 years
Kitchen
20 years
Boiler and central heating
20 years
Lifts (where applicable)
30 years
Improvements to properties are works, which result in an increase in the net rental income, such as a reduction in future maintenance costs, or result in a significant extension of the useful economic life of the property in the business. All other major repairs expenditure is charged to the income and expenditure account for the year. Housing properties in the course of construction are stated at cost and are not depreciated. Housing properties are transferred to completed properties when they are ready for letting and are stated at cost less depreciation. Shared ownership properties are split proportionally between current and fixed assets based on the element relating to expected first tranche sales. The first tranche proportion is classed as a current asset and related sales proceeds included in turnover and the remaining element is classed as fixed asset and included in housing properties at cost, less any provisions needed for depreciation or impairment.
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: non-housing properties Depreciation is charged on a straight-line basis over the expected useful economic lives of fixed assets to write off the cost less estimated residual value at the following annual rates: Freehold offices
50 years
Furniture and equipment Computer equipment
six years 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 Income and Expenditure Account.
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.
Accord Group / Financial Statements / 2013
37
Stock, work in progress and finished goods Relates to activities at Accord’s LoCaL Homes factory. Raw materials used in the construction of timber frame homes/panels are valued at the lower of cost and net realisable value. Work in progress is valued on the basis of direct costs, including raw materials and labour, incurred in bringing part complete timber frame panels to their present location and condition. Finished goods comprise completed timber frame panels ready for despatch and construction which are valued at the contracted transfer value.
Capitalisation of interest and development administration costs Interest on borrowings is charged to housing properties under construction up to the date of completion of each scheme. The interest charged is either on borrowing specifically for a scheme or on net borrowings, to the extent that they are deemed to be financing a scheme based on the Group’s weighted average cost of capital in 2012/13 of 4.48 per cent (2012: 4.15 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 long-term funding. These amounts are amortised over the period of the underlying financial instrument.
Leases Rentals paid under operating leases are charged to the Income and Expenditure Account on a straight line basis over the lease term.
Properties for sale Shared ownership first tranche sales, completed properties for outright sale and property under construction are valued at the lower of cost and net realisable value. Cost comprises materials direct labour and direct development overheads. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal.
38
Accord Group / Financial Statements / 2013
Goodwill Goodwill arises on business combinations in respect of acquisitions and represents the difference between the consideration given and the fair value of the net assets of the acquired subsidiary or business. Goodwill is amortised over the deemed useful life (20 years) of the value of the net assets of the subsidiary or business acquired. The Association reviews goodwill for impairment on an annual basis. Any permanent diminution in the carrying value is charged to the Income and Expenditure Account
Recycled capital grant fund Grants repayable on property disposals are calculated in accordance with relevant Homes and Communities Agency procedures and included within a recycled capital grant fund. Interest is credited to the fund and calculated on a daily basis with the interest rate being determined by the level of total deposits. The fund can be used in the same manner as a new project funded with social housing grant with certain permitted uses. It is intended to use the fund in the provision of either new social housing for rent and/or housing for sale on shared ownership terms or to supplement the major repair programme. Grants are repayable in certain specific circumstances including where the Homes and Communities Agency concludes that the Group is unlikely to use the fund for a permitted purpose within three years. The fund is included within long-term creditors.
Disposal proceeds fund Net proceeds from the disposal of property under voluntary purchase grant and statutory right to acquire legislation and regulations are included within a disposal proceeds fund. Interest is credited to the fund and calculated on a daily basis with the interest rate being determined by the level of total deposits. The fund can be applied for specific purposes ranging from acquisition of dwellings for letting, to repairs or improvement of vacant dwellings or buildings otherwise subject to demolition. The fund may be repayable at the discretion of the Homes and Communities Agency, in certain specific circumstances. The fund is included in long-term creditors.
Pension costs The Group primarily operates a money purchase pension scheme, the costs of which are written off to the Income and Expenditure account in the period to which they relate. There are a very limited number of employees who participate in a multi employer defined benefit scheme to which the Association contributes, the cost of which is written off to the Income and Expenditure Account on an accruals basis. Contributions to the defined benefit pension scheme are calculated as a percentage of pensionable salaries of the employees, determined in accordance with actuarial advice. It is not possible to identify the share of underlying assets and liabilities belonging to individual participating employers.
Notes to the FINANCIAL STATEMENTS 2. T urnover, operating costs, cost of sales and operating surplus - Group
Operating surplus/ (deficit) £’000
Cost of sale £’000
Operating costs £’000
Turnover £’000
Operating surplus/ (deficit) £’000
Cost of sale £’000
Operating costs £’000
Turnover £’000
Year 2013 2012
Social housing lettings General needs housing 31,901 (17,757) - 14,144 29,841 (17,960) - 11,881 Supported housing 11,495 (9,163) - 2,332 10,538 (9,481) - 1,057 Residential care home 7,460 (7,488) - (28) 7,754 (8,101) - (347) Shared ownership 1,867 (1,249) - 618 1,805 (1,270) - 535 Total social housing
52,723
(35,657)
- 17,066
49,938
(36,812)
- 13,126
Other social activities Supporting people contract income 2,396 (2,286) - 110 2,469 (2,342) - 127 Development administration - (11) - (11) - (56) - (56) Management administration 806 (2,291) - (1,485) 739 (1,266) - (527) First tranche shared ownership sales 565 - (579) (14) 701 - (583) 118 Other 191 (237) - (46) 233 (311) - (78) Total social housing activity 3,958 (4,825) (579) (1,446) 4,142 (3,975) (583) (416) Non social housing activity Registered nursing homes 531 (649) - (118) 569 (943) - (374) Market rents 576 (549) - 27 680 (787) - (107) Amortisation of goodwill - (656) - (656) - - - - Domiciliary care services 26,136 (25,861) - 275 1,080 (1,015) - 65 Other 7,475 (6,941) - 534 6,877 (6,682) - 195 Total non social housing activity 34,718 (34,656) - 62 9,206 (9,427) - (221) Total 91,399 (75,138) (579) 15,682 63,286 (50,214) (583) 12,489 Surplus on sale of housing properties 405 134 Interest receivable and similar income 55 186 Interest payable and similar charges (13,242) (11,498) Exceptional item 103 400 Surplus for the financial year before taxation 3,003 1,711
Accord Group / Financial Statements / 2013
39
Notes to the FINANCIAL STATEMENTS 2. T urnover, operating costs, cost of sales and operating surplus - Association
Operating surplus/ (deficit) £’000
Cost of sale £’000
Operating costs £’000 (restated)
Turnover £’000
Operating surplus/ (deficit) £’000
Cost of sale £’000
Operating costs £’000
Turnover £’000
Year 2013 2012
Social housing lettings General needs housing 18,754 (11,831) - 6,923 12,240 (7,589) - 4,651 Supported housing 6,686 (4,878) - 1,808 5,736 (4,221) - 1,515 Residential care home 6,958 (6,901) - 57 6,495 (6,299) - 196 Shared ownership 1,546 (1,050) - 496 1,466 (1,088) - 378 Total social housing
33,944
(24,660)
-
9,284
25,937
(19,197)
-
6,740
Other social activities Supporting people contract income 82 (83) - (1) 86 (103) - (17) Development administration - (10) - (10) - (56) - (56) Management administration 2,162 (894) - 1,268 2,861 (1,191) - 1,670 First tranche shared ownership sales 565 - (579) (14) 701 - (583) 118 Other 440 (35) - 405 534 (26) - 508 Total social housing activity 3,249 (1,022) (579) 1,648 4,182 (1,376) (583) 2,223 Non social housing activity Registered nursing homes 531 (649) - (118) 569 (943) - (374) Other 6,715 (5,608) - 1,107 5,334 (4,643) - 691 Total non social housing activity 7,246 (6,257) - 989 5,903 (5,586) - 317 Total 44,439 (31,939) (579) 11,921 36,022 (26,159) (583) 9,280 Surplus /(deficit) on sale of housing properties 347 (19) Interest receivable and similar income 48 156 Interest payable and similar charges (9,906) (7,630) Surplus for the financial year 2,410 1,787
40
Accord Group / Financial Statements / 2013
Notes to the FINANCIAL STATEMENTS
Residential care homes £’000
Low cost home ownership £’000
29,786 2,103 12
5,091 4,589 1,815
1,328 2,346 3,786
1,208 658 1
37,413 9,696 5,614
35,045 9,736 5,157
Net rental income
31,901
11,495
7,460
1,867
52,723
49,938
Turnover from social housing lettings
31,901
11,495
7,460
1,867
52,723
49,938
2012 Group total £’000
Supported housing and housing for older people £’000
Rent receivable net of identifiable service charges Service income Charges for support services
2013 Group total £’000
General needs housing £’000
3. Income and expenditure from social housing lettings - Group
Management (4,162) (1,491) (735) (305) (6,693) (6,478) Services (2,276) (3,762) (2,366) (647) (9,051) (9,214) Care and support - (1,934) (3,929) - (5,863) (5,762) Routine maintenance (5,950) (1,052) (265) (92) (7,359) (8,345) Planned maintenance (1,730) (320) (92) (89) (2,231) (3,193) Rent losses from bad debts (250) 260 3 1 14 (404) Depreciation on housing properties (3,389) (864) (104) (117) (4,474) (3,416) Operating costs on social housing lettings Operating surplus on social housing lettings Void losses
(17,757)
(9,163)
(7,488)
(1,249)
(35,657) (36,812)
14,144
2,332
(28)
618
17,066
13,126
490
620
45
2
1,157
836
Accord Group / Financial Statements / 2013
41
Notes to the FINANCIAL STATEMENTS
Rent receivable net of identifiable service charges Service income Charges for support services
17,320 2,911 1,189 910 22,330 15,144 1,422 1,960 2,210 635 6,227 5,634 12 1,815 3,559 1 5,387 5,159
Net rental income
18,754
6,686
6,958
1,546
33,944
25,937
Turnover from social housing lettings
18,754
6,686
6,958
1,546
33,944
25,937
Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation on housing properties
(4,153) (359) (637) (1,452) (1,909) (2,206) - (1,139) (3,626) (3,000) (611) (253) (1,173) (202) (77) (195) (4) (3) (1,858) (654) (99)
Operating costs on social housing lettings
(11,831)
(4,878)
(6,901)
Operating surplus on social housing lettings
6,923
1,808
57
Void losses
(158) (5,307) (3,278) (611) (6,178) (5,445) - (4,765) (4,291) (88) (3,952) (2,993) (89) (1,541) (1,180) 1 (201) (201) (105) (2,716) (1,809)
(1,050) (24,660) (19,197) 496
9,284
Sale proceeds Grant abated Cost of sale Incidental sale expenses Surplus/(deficit) on sale
Accord Group / Financial Statements / 2013
6,740
302 307 40 - 649 324
4. Surplus on sale of housing properties
42
2012 Association total £’000
2013 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. I ncome and expenditure from social housing lettings - Association
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000 1,947 3,994 1,219 2,623 233 2,455 189 941 (1,653) (5,951) (895) (3,394) (122) (364) (166) (189) 405
134
347
(19)
Notes to the FINANCIAL STATEMENTS 5. Directors’ Emoluments
The Directors are defined as the members of the Group Board, the Group Chief Executive and any member of the Executive team. Non-executive members received remuneration totalling £100,663 (2012: £88,458) during the period. 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.
2013 2012 £’000 £’000 Aggregate emoluments payable to directors (including pension contributions and benefits in kind) 1,128 1,213 Emoluments payable to the highest paid director, the Chief Executive Officer (excluding pension contributions but including benefits in kind)
147
145
The full time equivalent number of staff who received emoluments:
2013 2012 No. No. £60,000 to £70,000 £70,001 to £80,000 £80,001 to £90,000 £90,001 to £100,000 £100,001 to £110,000 £110,001 to £120,000 £120,001 to £130,000 £130,001 to £140,000 £150,001 to £160,000
- 2 - 1 - 2 2 1 1
2013 £’000 Total expenses reimbursed to the directors not chargeable to United Kingdom income tax
3 1 1 3 1 1 1 2012 £’000
18 15
Accord Group / Financial Statements / 2013
43
Notes to the FINANCIAL STATEMENTS 6. Employee information
The average number of persons employed during the year was:
Group Group Association Association 2013 2012 2013 2012 Persons FTE Persons FTE Persons FTE Persons FTE Office staff, care support workers, wardens, caretakers and cleaners
3,824
2,900
1,303
1,113
1,031
843
934
£’000 17,592 1,110 681
£’000 15,984 1,093 631
Staff costs (for the above persons) Wages and salaries Social security costs Other costs (incl. Pension)
£’000 41,183 2,731 1,117
Total
45,031 26,958 19,383 17,708
£’000 24,055 1,728 1,175
7. Interest payable and similar charges
44
On loans repayable within five years On loans repayable in more than five years
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
Add: Other interest payable and similar charges Less: Capitalised in respect of housing properties
13,036 12,376 9,894 8,980
13,242 11,498 9,906 7,630
Accord Group / Financial Statements / 2013
- 13,036
- 12,376
- 9,894
8,980
1,073
1,374
841
700
(867)
(2,252)
(829)
(2,050)
773
Notes to the FINANCIAL STATEMENTS 8. Surplus for the financial year
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
Surplus for the financial year is stated after charging: Depreciation on housing properties: Depreciation charge – social housing (Note 3) 4,474 3,416 Depreciation charge – other social housing (Note 2) 89 112 Depreciation charge – non social housing (Note 2) 21 12 Total depreciation charge Less: write off component disposals
4,584 (438)
3,540 (260)
2,716
1,809
644
521
12
12
3,372 (292)
2,342 (106)
Depreciation Charge (Note 9) 4,146 3,280 3,080 2,236 Depreciation on other tangible fixed assets 1,940 1,306 1,074 839 Auditors’ remuneration (excluding VAT) - in their capacity as auditors 52 67 25 22 - in respect of other services 1 26 - 22 Surplus on disposal of tangible fixed assets other than development for outright sales 405 134 347 (19) Operating lease payments 452 531 267 296 Repairs and maintenance expenditure 9,590 11,538 5,493 4,173
In addition £3.192 million of repairs expenditure has been capitalised in the year (2012: £2.452 million). An exceptional item has been reported in the Group Income and Expenditure account totalling £103,000. This balance relates to ongoing dividend income in Caldmore as funds lost in the Icelandic banking failure continue to be recovered. £63,000 was received during the year, a further £40,000 was confirmed as payable as at the year end and was provided for accordingly. In 2012, £400,000 was recovered and reported as an exceptional item.
Accord Group / Financial Statements / 2013
45
Notes to the FINANCIAL STATEMENTS 9. Tangible fixed assets housing properties - Group
Cost At 1 April, 2012 581,281 15,749 27,073 - 2,107 Additions - works to existing properties 3,192 - - - - Additions - new properties (661) 17,859 4,216 - - Schemes completed in the year 7,195 (7,195) - - - Disposals (1,943) - (434) - (81)
46
2013 total £’000
Non-social housing properties held for letting £’000
Long leasehold social housing properties £’000
Shared ownership properties under construction £’000
Completed shared ownership housing properties £’000
Housing properties under construction £’000
Housing properties held for letting £’000
1,317 - - - -
627,527 3,192 21,414 (2,458)
At 31 March, 2013 589,064 26,413 30,855 - 2,026 Social Housing Grant and other Grants At 1 April, 2012 235,067 2,840 8,120 - 1,504 Received and receivable during year 1,922 3,011 658 - - Schemes completed in year - - - - - (Repaid)/abated on disposals (547) - (203) - (78)
1,317
649,675
165 - - -
247,696 5,591 (828)
At 31 March, 2013 236,442 5,851 8,575 - 1,426 Depreciation At 1 April, 2012 23,138 - 974 - 335 Charge for year 3,931 - 155 - 25 Eliminated in respect of disposals (525) - (12) - (1)
165
252,459
85 35 -
24,532 4,146 (538)
At 31 March, 2013 26,544 - 1,117 - 359 Net book value at 31 March, 2013 326,078 20,562 21,163 - 241
120
28,140
1,032
369,076
Net book value at 31 March, 2012
1,067
355,299
Accord Group / Financial Statements / 2013
323,076
12,909
17,979
-
268
Notes to the FINANCIAL STATEMENTS 9. Tangible fixed assets housing properties - Association
2013 total £’000
460,676
165 - - - -
133,991 2,499 34,318 (541)
At 31 March, 2013 156,618 5,325 7,060 - 1,099 Depreciation At 1 April, 2012 12,691 - 885 - - Charge for year 2,889 - 143 - 13 Eliminated in respect of disposals (293) - (12) - -
165
170,267
85 35 -
13,661 3,080 (305)
At 31 March, 2013 15,287 - 1,016 - 13 Net book value at 31 March, 2013 232,525 21,064 19,186 - 166
120
16,436
1,032
273,973
Net book value at 31 March, 2012
1,067
229,969
Long leasehold social housing properties £’000
1,317
Shared ownership properties under construction £’000
At 31 March, 2013 404,430 26,389 27,262 - 1,278 Social Housing Grant and other Grants At 1 April, 2012 124,490 2,840 6,496 - - Received and receivable during year 14 2,485 - - - Transfer of engagements 33,052 - 89 - 1,177 Tenure reclassification (657) - 657 - - (Repaid)/abated on disposals (281) - (182) - (78)
Completed shared ownership housing properties £’000
377,621 2,141 32,846 49,553 (1,485)
Housing properties under construction £’000
1,317 - - - -
Housing properties held for letting £’000
Non-social housing properties held for letting £’000
Cost At 1 April, 2012 337,239 15,812 23,252 - 1 Additions - works to existing properties 2,141 - - - - Additions - new properties 18,054 10,577 4,215 - - Transfer of engagements 47,993 - 203 - 1,357 Disposals (997) - (408) - (80)
200,058
12,972
15,871
-
1
Accord Group / Financial Statements / 2013
47
Notes to the FINANCIAL STATEMENTS 9. Tangible fixed assets - housing properties (continued) Work to existing properties
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
Revenue
9,590 11,538 5,493 4,173
Amounts capitalised: – Improvements – Replaced components
- 9 - 3,192 2,443 2,141 950
12,782 13,990 7,634 5,123
10. Tangible fixed assets - Other
Freehold offices £’000
Plant and machinery £’000
Office furniture and equipment £’000
2013 total £’000
8,469 1,389 472
At 31 March, 2013
413
6,686 10,330
413
10,373
2013 Total £’000
5,378 1,002 306
Office furniture and equipment £’000
399 14 -
Freehold offices £’000
Cost At 1 April, 2012 5,119 399 8,621 14,139 2,692 Additions 10 14 1,752 1,776 373 Transfer of engagements (161) - - (161) 166 4,968
Plant and machinery £’000
Association Group
15,754
3,231
Other Grants At 1 April, 2012 and 31 March, 2013 107 306 - 413 107 Depreciation At 1 April, 2012 1,264 8 4,943 6,215 542 Charge for year 99 14 1,415 1,528 65 Transfer of engagements (151) - (10) (161) - At 31 March, 2013 1,212 22 6,348 7,582 607
Net book value at 31 March, 2013 Net book value at 31 March, 2012
48
Accord Group / Financial Statements / 2013
3,649 3,748
85 85
4,025 3,678
7,759 7,511
2,517 2,043
306
-
413
8 14 - 22
2,757 995 - 3,752
3,307 1,074 4,381
85 85
2,934 2,621
5,536 4,749
Notes to the FINANCIAL STATEMENTS 11. Investments At beginning of year Addition in the year (see note 30) Repaid during year At end of year
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000 89 - (3)
89 - -
89 29,037 (3)
89 -
86
89
29,123
89
See Note 26 for a list of subsidiary undertakings and joint ventures.
12. Properties for sale Properties under construction Completed properties
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000 5,633 -
- 292
5,633 292
5,633 -
292
5,633
292
13. Stock, work in process and finished goods Raw materials Work in progress Finished goods
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000 95 - 973
62 - 74
1,068 136
95 - 973 1,068
62 74 136
Accord Group / Financial Statements / 2013
49
Notes to the FINANCIAL STATEMENTS 14. Debtors
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
Arrears of rent and service charge Provision for bad and doubtful debts
2,207 (1,075)
Social Housing Grant receivable Corporation tax debtor Amounts owing by subsidiary undertakings Other debtors and prepayments
1,132 1,289 1,839 1,684 19 - - - 10,815 5,820
593 543 1,839 1,684 - 518 1,531 4,701 3,999
13,805 8,793
7,651 7,757
2,614 (1,325)
1,202 (609)
949 (406)
15. Creditors: Amounts falling due within one year
Housing and other loans Bank overdraft Trade creditors Amounts owing to subsidiary undertakings Corporation tax Social Security and other taxes Other creditors Accruals and deferred income Recycled capital grant fund (note 17)
50
Accord Group / Financial Statements / 2013
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000 2,958 109 9,337 - 13 522 8,429 2,661 -
2,712 - 7,008 - 12 504 4,428 2,943 65
2,108 - 6,868 1,013 - 388 5,569 1,672 -
1,777 4,398 877 335 3,766 1,444 37
24,029 17,672 17,618 12,634
Notes to the FINANCIAL STATEMENTS 16. Creditors: Amounts falling due after more than one year
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
Housing loans Repayable by annual instalment
323,537
300,532
260,191
228,529
Total housing loans Financing costs capitalised
323,537 (3,429)
300,532 (3,304)
260,191 (2,778)
228,529 (2,391)
Net housing loans Recycled capital grant fund (note 17)
320,108 1,540
297,228 1,120
257,413 1,053
226,138 532
321,648 298,348
258,466 226,670
Loans repayable by instalments fall due as follows: Between one and two years Between two and five years In five or more years
4,191 19,608 299,738
323,537 300,532
260,191 228,529
Floating borrowings Fixed borrowings
110,563 215,932
89,385 172,915
326,495 303,244
Weighted average interest rate Weighted average time for which rate is fixed
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
2,919 17,630 279,983
85,355 217,889
3,328 16,247 240,616
1,943 12,191 214,395
63,497 167,609
262,300 231,106
% 4.48
% 4.20
% 4.07
% 4.01
Years
Years
Years
Years
10.4
12.5
9.1
9.2
The loans are secured by specific charges on the Association’s and Group’s housing properties. The Association has arrangements in order to hedge against the long-term risk of an increase in variable interest rates under its principal loan facility. As an Industrial and Provident Society with charitable objectives and a registered provider of social housing with the Homes and Communities Agency, the Association does not trade for profit and is regulated by the HCA which has issued extensive guidelines on the use of derivative instruments by providers of social housing. The Association has applied this guidance in entering into 16 cancellable swap transactions totalling £94.5 million with the Royal Bank of Scotland Plc. The rates of interest range from 2.63 per cent to 5.39 per cent and maturity dates range from December 2014 to March 2029.
Accord Group / Financial Statements / 2013
51
Notes to the FINANCIAL STATEMENTS 17. Recycled capital grant fund and disposal proceeds fund
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
Fund at beginning of year Transferred to fund during year Interest credited to fund Utilised during the year Repaid during year
1,185 592 7 (244) -
953 527 4 (299) -
569 696 4 (216) -
421 221 1 (74) -
Fund at end of year
1,540
1,185
1,053
569
Withdrawals from the recycled capital grant fund were used for the purchase of properties under the flexible tenure scheme. Withdrawals from the disposal proceeds fund were used for the development of new housing schemes for letting.
18. Share capital Shares of £1 each issued and fully paid At beginning of year Issued during year Surrendered during year At end of year
Group Group Association Association 2013 2012 2013 2012 Number Number Number Number 22 9 (1)
25 - (3)
22 9 (1)
25 (3)
30
22
30
22
The share capital of the Association consists of shares with a nominal value of £1 each which carry no rights to dividends or other income. Shares in issue are not capable of being repaid or transferred. When a shareholder ceases to be a member, this person’s share is cancelled and the amount paid up thereon becomes the property of the Association. Therefore all shareholdings relate to non-equity interests.
19. Taxation Corporation tax The taxation liability arises solely from bchs.
52
Accord Group / Financial Statements / 2013
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000 3
13
-
-
Notes to the FINANCIAL STATEMENTS
Total £’000
Minority interest £’000
Other reserves consolidation reserve £’000
Designated reserve £’000
Revenue reserves £’000
20. Reserves
Group At 1 April, 2012 77,979 15 43 9 78,046 Surplus for the year 3,000 - - - 3,000 Transfer to income and expenditure account 4 (4) - - At 31 March, 2013 80,983 11 43 9 81,046 Association At 1 April, 2012 23,144 - - - 23,144 Transfer of engagements 22,311 - - - 22,311 Surplus for the year 2,410 - - - 2,410 At 31 March, 2013
47,865
-
-
-
47,865
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 May, 2012 the assets and liabilities of Moseley and District Churches Housing Association were transferred into Accord Housing Association through a transfer of engagements. Prior to the transfer of engagements Moseley and District Churches Housing Association was a separate entity, but a subsidiary of Accord Housing Association Limited. The effects of this transfer are outlined above.
Accord Group / Financial Statements / 2013
53
Notes to the FINANCIAL STATEMENTS 21. Cash flow statement a) Reconciliation of operating surplus to net cash inflow from operating activities
2013 £’000
2012 £’000
Operating surplus 15,682 Depreciation charges and amortisation of finance costs 7,143 Decrease in debtors 522 Increase in creditors (599) Sale of fixed asset -
12,489 4,586 148 (1,351) 42
Net cash flow from operating activities 22,748
15,914
b) Reconciliation of net cash flow to movement in net debt (Decrease)/ increase in cash in the year Cash inflow from debt increase
2013 £’000
2012 £’000
(18,314) (23,126)
4,369 (15,650)
Cash inflow from management of liquid resources (41,440) (11,281) Net debt at 1 April, 2012 (277,994) (266,713) Net debt at 31 March, 2013 (319,434) (277,994)
c) Analysis of changes in net debt Cash at bank and in hand Bank overdraft Debt due within one year Debt due after one year
54
Accord Group / Financial Statements / 2013
At 31 March, Cash Flow At 1 April, 2013 2012 £’000 £’000 £’000 3,741
(18,205)
21,946
3,741 (18,205) 21,946 (109) (109) (2,958) (246) (2,712) (320,108) (22,880) (297,228) (319,434)
(41,440) (277,994)
Notes to the FINANCIAL STATEMENTS 21. Cash flow statement (continued) d) Analysis of changes in capital grant funding 2013 £’000 Balance at beginning of year 248,109 Cash inflow from capital grant funding 7,430 Movement in debtors/creditors (net) (2,083) (Repaid)/abated on disposals (236) Transfer to grant funding (348)
247,317 2,367 887 (2,234) (228)
Balance at end of year
248,109
252,872
2012 £’000
22. 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 7 per cent and 4 per cent respectively of pensionable earnings. The total employer cost of pension contributions for the year was £616,967 (2012: £557,895). 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 166 (2012: 142). The Direct Health Group contributes to money purchase pension schemes for the benefit of certain directors and employees. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension contributions payable for the financial year ended 30 September were £68,983 and an amount of £77,499 was owing to the schemes at the year end. Ashram Housing Association, Caldmore Area Housing Association and Accord Housing Association, following the transfer of engagement, participate in the Social Housing Pension
Scheme (the Scheme). The Scheme is funded and is contractedout 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. 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 currently operates final salary with a 1/60th accrual rate, Caldmore Area Housing Association and Accord Housing Association operate final salary with a 1/60th accrual rate and Career average revalued earnings (CARE) with a 1/60th accrual rate. Ashram Housing Association and Caldmore Area Housing Association closed their final salary with 1/60th accrual rate
Accord Group / Financial Statements / 2013
55
Notes to the FINANCIAL STATEMENTS 22. Pension costs (continued) to new contracts in previous accounting periods. Accord Housing Association also closed its final salary and career average related earning schemes with 1/60th accrual rate to new entrants in previous accounting periods. The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to determine the level of future contributions required, in respect of each benefit structure, so that the Scheme can meet its pension obligations as they fall due. From April 2007 the split of the total contribution rate between member and employer is set at individual employer level, subject to the employer paying no less than 50 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: • Ashram Housing Association paid contributions at the rate of 10.1 per cent and made past service deficit contributions of £29,784 (2012: £28,452). Member contributions varied between 9.1 per cent and 11.1 per cent. As at the balance sheet date there were three active members of the Scheme (2012: 4). The annual pensionable payroll in respect of these members was £146,810. • 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 £138,972 (2012: £132,732). 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 32 active members of the Scheme (2012: 43). The annual pensionable payroll in respect of these members was £773,793
56
Accord Group / Financial Statements / 2013
• Accord 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 £39,540 (2012:£37,764). 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 17 active members of the Scheme (2012:7). The annual pensionable payroll in respect of these members was £571,995. It is not possible in the normal course of events to identify on a reasonable and consistent basis the share of underlying assets and liabilities belonging to individual participating employers. The Scheme is a 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, 2011 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme’s assets at the valuation date was £2,062 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £1,035 million, equivalent to a past service funding level of 67.0 per cent. The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the Scheme as at 30 September, 2012. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The market value of the Scheme’s assets at the date of the Actuarial Report was £2,327 million. The Actuarial Report revealed a shortfall of assets compared with the value of liabilities of £1,241 million, equivalent to a past service funding level of 65 per cent. The financial assumptions underlying the valuation as at 30 September, 2011 were as follows: Valuation Discount Rates
% pa
Pre retirement
7.0
Non Pensioner Post retirement
4.2
Pensioner Post retirement
4.2
Pensionable earnings growth: for 3 yrs, thereafter
2.5 4.4
Price inflation
2.9
Notes to the FINANCIAL STATEMENTS 22. Pension costs (continued) 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 – 41 per cent SAPS S1 Male/Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5 per cent p.a. for Males and 1.25 per cent p.a. for Females. * Mortality post retirement – 97 per cent SAPS S1 Male/Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5 per cent p.a. for Males and 1.25 per cent p.a. for Females. The long-term joint contribution rates required from April 2013 from employers and members to meet the cost of future benefit accrual were assessed at:
Benefit Structure
Long-term Joint Contribution Rate (% of pensionable salaries)
Final salary with a 1/60th accrual rate
19.4
Final salary with a 1/70th accrual rate
16.9
Career average revalued earnings (CARE) with a 1/60th accrual rate
18.1
Final salary with a 1/80th accrual rate Career average revalued earnings (CARE) with a 1/80th accrual rate Career average revalued earnings (CARE) with a 1/120th accrual rate
14.8. 14.0 9.7
If an actuarial valuation reveals a shortfall of assets compared to liabilities the Trustee must prepare a Recovery Plan setting out the steps to be taken to make up the shortfall. Following consideration of the results of the actuarial valuation it was agreed that the shortfall of £1,035 million would be dealt with by the payment of deficit contributions as shown in the table below:
From 1 April, 2013 to 30 September, 2020
A cash amount(*) equivalent to 7.5 per cent of Members’ Earnings per annum (payable monthly and increasing by 4.7 per cent per annum each 1 April)
From 1 October, 2020 to 30 September, 2023
A cash amount(*) equivalent to 3.1 per cent of Members’ Earnings per annum (payable monthly and increasing by 4.7 per cent per annum each 1 April)
From 1 April, 2013 to 30 September, 2026
£30,640,000 per annum (payable monthly and increasing by 3 per cent per annum each 1 April; first increase on 1 April 2014)
(*) The contributions of 7.5 per cent will be expressed in nominal pound terms (for each Employer), increasing each year in line with the Earnings growth assumption used in the 30 September, 2008 valuation (i.e. 4.7 per cent per annum). The contributions of 3.1 per cent will be calculated by proportioning the nominal pound payment at the time of the change. Earnings at 30 September, 2008 (for each Employer) will be used as the reference point for calculating these contributions. The deficit contributions are in addition to the long-term joint contribution rates as set out in the table above. The Scheme Actuary will provide an approximate update on the funding position of the Scheme as at 30 September, 2013. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The results of this approximate update will be available in Spring 2014 and will be included in next year’s Disclosure Note. Employers that participate in the Scheme on a non-contributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). Employers that have closed the defined benefit section of the Scheme to new entrants are required to pay an additional employer contribution loading of 2.5 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
Accord Group / Financial Statements / 2013
57
Notes to the FINANCIAL STATEMENTS 22. Pension costs (continued) until 1 April, 2010 do not contribute towards the deficit until two valuations have been completed after their date of joining. New employers joining the Scheme after 1 April, 2010 will be liable for past service deficit contributions from the valuation following joining. Contribution rates are changed on the 1 April that falls 18 months after the valuation date. A copy of the Recovery Plan, setting out the level of deficit contributions payable and the period for which they will be payable, must be sent to The Pensions Regulator. The Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or Recovery Plan are inappropriate. For example the Regulator could require that the Trustee strengthens the actuarial assumptions (which would increase the Scheme liabilities and hence impact on the Recovery Plan) or impose a schedule of contributions on the Scheme (which would effectively amend the terms of the Recovery Plan). A response regarding the 30 September, 2011 valuation is awaited.
As a result of pension scheme legislation there is a potential debt on the employer that could be levied by the Trustee of the Scheme. The debt is due in the event of the employer ceasing to participate in the Scheme or the Scheme winding up. The debt for the Scheme as a whole is calculated by comparing the liabilities for the Scheme (calculated on a buy-out basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the Scheme. If the liabilities exceed assets there is a buy-out debt. The leaving employer’s share of the buy-out debt is the proportion of the Scheme’s liability attributable to employment with the leaving employer compared to the total amount of the Scheme’s liabilities (relating to employment with all the currently participating employers). The leaving employer’s debt therefore includes a share of any ‘orphan’ liabilities in respect of previously participating employers. The amount of the debt therefore depends on many factors including total Scheme liabilities, Scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time. The assets and liabilities of the Moseley and District Churches Housing Association Plan were novated into Accord Housing Association on 1 May, 2012 following its transfer of engagements.
58
Accord Group / Financial Statements / 2013
Notes to the FINANCIAL STATEMENTS 23. Capital commitments
Capital expenditure that has been contracted for but has not been provided for in these financial statements Capital expenditure that has been authorised by the Board of Management but has not yet been contracted for
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
19,338
23,491
24,062 43,947
15,306
17,513
16,380 43,947
24. Commitments under operating leases As at 31 March, 2013 the Group and Association had annual commitments under operating leases as set out below.
Operating leases which expire: Less than one year Between one and five years Over five years Total
Group Group Association Association 2013 2012 2013 2012 £’000 £’000 £’000 £’000
97 355 -
113 418 -
80 187 -
75 221 -
452
531
267
296
25. Contingent liabilities The Group has contingent liabilities in respect of 10 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 / 2013
59
Notes to the FINANCIAL STATEMENTS 26. Group structure Accord Housing Association Limited’s group structure comprises:
Subsidiary
% Share Capital Owned
Nature of Business
Accord Care Services Limited
N/A
Not yet trading
Accord Group Treasury Limited
100%
Group Treasury Vehicle
Ashram Housing Association Limited
76%
Charitable Housing Association
Services Limited
N/A
Non-Charitable Housing Association
Caldmore Area Housing Association Limited
100%
Charitable Housing Association
Fry Housing Trust Limited
N/A
Charitable Housing Association
Redditch Co-operative Homes Limited
N/A
Registered Charity and Housing Association
Catherine Walker Almshouse
N/A
Almshouse Charity
Direct Health Group Limited*
100%
Provision of care services
Direct Health (UK) Limited*
100%
Provision of care services
At Your Service (Care) Limited*
100%
Provision of care services
Parkmore Services Limited
N/A
Dormant 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. * Acquired during the year. Please refer to note 30 for further details.
27. Related party transactions All inter Association charges relate to the recovery of common costs in the usual course of business. Exemptions under FRS8 regarding the disclosure of intercompany and related party transactions have been applied.
60
Accord Group / Financial Statements / 2013
Notes to the FINANCIAL STATEMENTS 28. Housing stock The number of units at the year end was:
Group Group Association Association 2013 2012 2013 2012 Number Number Number Number Social housing General needs housing: social rent 7,127 7,169 4,780 3,839 Affordable rents 174 1 85 - Long leasehold 78 78 64 2 Supported housing and housing for older people 1,314 1,333 970 756 Residential care homes 287 294 260 208 Shared ownership accommodation 1,178 1,157 1,046 1,015 Other 654 654 174 174 Total social housing
10,812
10,686
7,379
5,994
Non-social housing Registered nursing homes Market rent
11 83
11 102
11 -
11 -
Total non-social housing
94
113
11
11
10,906
10,799
7,390
6,005
9,667 826 413
9,526 846 427
5,959 394 1,037
4,527 220 1,258
7,390
6,005
Grand total Being: Owned and managed Managed only Owned but managed by others Housing under development
10,906 10,799 331
205
284
176
Accord Group / Financial Statements / 2013
61
Notes to the FINANCIAL STATEMENTS 29. Transfer of engagements
Fair value £’000
Moseley and District Churches Housing Association
Fair value adjustment £’000
The assets and liabilities of the entity as at the date of transfer into Accord Housing Association are set out below Housing assets were subject to revaluation review at the point of Moseley and District Churches Housing Association joining Accord Group in 2008. The fair value adjustment reflects the difference between the net book value of the assets acquired in 2008 and the revalued amount which has crystallised as a result of the transfer of engagements. Other specific entity adjustments are outlined below:
Book value £’000
On 1 May, 2012 the assets and liabilities of Moseley and District Churches Housing Association were transferred into Accord Housing Association through a transfer of engagements. This transfer has been incorporated into both the Association’s financial statements, and also the consolidated Group financial statements. Prior to the transfer of engagements Moseley and District Churches Housing Association was a separate entity, but a subsidiary of Accord Housing Association Limited.
Assets Tangible fixed assets - Property cost 52,512 15,820 68,332 - Property depreciation (2,959) 2,959 - Property grant (34,317) - (34,317) - Operating assets 472 367 839 Debtors 340 - 340 Cash 480 - 480 16,528 Liabilities - Creditors due within one year (1,786) - Creditors due in more than one year (11,577) Net assets
3,165
19,146
35,674
- -
(1,786) (11,577)
19,146
22,311
Consideration Gain on business combination arising from transfer of engagements
62
Accord Group / Financial Statements / 2013
-
22,311
Notes to the FINANCIAL STATEMENTS 30. Acquisitions
Assets Intangible fixed assets - goodwill Tangible fixed assets: Debtors Cash at bank and in hand
Fair value £’000
Direct Health Group Limited
Fair value adjustment £’000
In calculating the goodwill arising on acquisition, the fair value of Direct Health Group Limited’s net assets has been assessed and adjustments to book value have been made where necessary, where the fair value adjustments relate to specific items negotiated in structuring the acquisition. The details of the transactions are shown in the table below:
Book value £’000
On 18 June, 2012 the Group acquired 100 per cent of the share capital of Direct Health Group Limited and its subsidiary undertakings for a total consideration of £27.9 million plus costs directly associated with the acquisition. The transaction was completed on the basis that Direct Health Group Limited was acquired free of any financial liabilities. Additional consideration may become payable based on future performance criteria. The extent of this consideration is dependent on the financial performance of Direct Health Group for its accounting period end 30 September, 2013.
10,107 337 4,204 237
- - 1,252 -
10,107 337 5,456 237
1,252
16,137
14,885 Liabilities - Creditors due within one year - Creditors due in more than one year
(2,604) (1,591)
(4,195)
(1,144) 1,591 447
(3,748) (3,748)
Net assets acquired 10,690 1,699 Goodwill arising on acquisition (see note 31)
12,389 16,648
Consideration (constituting cash and acquisition costs)
29,037
-
1 October, 2011 to 17 June, 2012 £’000
-
The financial results of Direct Health Group Limited prior to its acquisition were as follows:
Profit and loss account
Turnover 23,710 Operating costs (22,107) Earnings before interest, taxation, depreciation and amortisation (EBITDA)
1,603
Depreciation and amortisation Net interest Loss for the financial year
(682) (1,755) (834)
Accord Group / Financial Statements / 2013
63
Notes to the FINANCIAL STATEMENTS 31. Goodwill
previously in Direct Health and related to previous acquisitions. Goodwill amortisation charged in the current year has also been pro-rated to reflect the post-acquisition period only.
Group 2013 £’000
On 18 June, 2012 the Group acquired 100 per cent of the share capital of Direct Health Group Limited and its subsidiary undertakings for a total consideration of £27.9 million plus costs directly associated with the acquisition. An intangible asset, goodwill, has arisen on the difference between the price paid for the business and the fair value of the net assets and is being amortised over 20 years. Goodwill acquired and amortised in the current year includes goodwill which existed
Cost At 1 April 2012 Goodwill arising on acquisition 16,648 Acquired goodwill 10,106 At 31 March, 2013 26,754 Amortisation At 1 April, 2012 Amortised in year (1,199) At 31 March, 2013 (1,199) Total as at 31 March, 2013
64
Accord Group / Financial Statements / 2013
25,555
We are delighted to work with the Accord Group in helping to shape our local communities. As a Midlands based contractor and developer we share similar values in using local suppliers and subcontractors to provide competitive, high-quality award-winning affordable homes. Clive Jessup, Managing Director of Jessup
NOTES
66
Accord Group / Financial Statements / 2013
Accord Group / Financial Statements / 2013
67
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Financial Statements 2013