YHN Limited Tuesday 30 July 2019 at 5.00 pm YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX Contact Officer: Jill Davison
– Tel: 0191 278 8624
Email: jill.davison@yhn.org.uk
AGENDA Page No Introduction Items 1.
Welcome and Apologies for Absence
2.
Declarations of Interests
3.
Chair's Items
4.
Health and Safety
To exclude the press and public during discussion of remaining agenda items because of the likely disclosure of confidential information. The definitions of what is considered confidential are contained within Section 16 of the Company’s Standing Orders. 5.
Business Update
1 - 10
6.
Minutes of 4 June 2019
11 - 12
7.
Annual Report and Financial Statements - to be considered during YHN Board Item 8
Main Business Items 8.
Annual Report and Financial Statements
13 - 182
9.
Risk Management Update
183 - 198
10.
Housing Investment Programme
199 - 224
11.
General Data Protection Regulation Compliance Progress Update and YHN Data Protection Policy
225 - 248
Your Homes Newcastle Limited. Registered in England and Wales Registration Number 5076256 Registered Office: Newcastle Civic Centre, Barras Bridge, Newcastle upon Tyne NE1 8PR. A company controlled by Newcastle City Council
12.
Slavery and Human Trafficking Statement
249 - 256
13.
Managing Director Report
257 - 284
14.
Re-election of Directors and Vice Chair
285 - 288
Minutes/Forward Plan 15.
Minutes of 4 June 2019
289 - 294
16.
Confidential Minutes of 4 June 2019
295 - 304
17.
Matters Arising and Action Log
305 - 306
18.
Board Forward Plan
307 - 310
19.
Assurances From Subsidiaries Asfaleia Ltd. 25th July
20.
Assurances from Committees/Groups -
21.
Finance and Performance 14th May Group Audit and Risk 21st May Remuneration and Nominations 28th May Property Group 24th June Health and Safety 8th July Group Audit and Risk 11th July
Date and Time of Next Meeting 24th September 5pm
2
311 - 354
Agenda Item 8
To be first for housing
Your Homes Newcastle Board 30 July 2019 TITLE
Annual Report and Financial Statements
AUTHOR
Rachel Morrissey – Finance and Commercial Director
COMPANY
Your Homes Newcastle, Asfaleia Ltd, Abri Ltd
ACTION REQUIRED
For Approval
SUMMARY
To approve the Annual Accounts for the Group and Abri Trading Ltd.
DELIVERY PLAN OBJECTIVE
N/A – statutory requirement
STRATEGIC RISK REGISTER
NUMBER & TITLE LIKELIHOOD
GR6: Failure to comply with regulatory requirements
IMPACT
4 (High)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS CUSTOMER IMPACT / VIEWS EQUALITY & DIVERSITY CONSIDERATIONS
1 (Rare)
This report summarises the group financial position for the period to 31 March 2019 There are no specific customer impacts arising from this report There are no specific equality and diversity considerations arising from this report
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Your Homes Newcastle Annual Report and Financial Statements 1.
Purpose of report
1.1 This report introduces the Annual Accounts for the financial year ended 31 March 2019 for: • • •
YHN Company and Group (Appendix 1); Abri Trading Ltd (Appendix 2); and Asfaleia Ltd (Appendix 3).
The final set of Accounts will be brought to the Board meeting once the final audit checks are completed, in line with the expected audit timetable; in the meantime, the draft versions taken to Group Audit and Risk Committee are included as Appendices 1-3. The Board should note that two further adjustments will be made to the final accounts 1) relating to a provision for bad debt in Abri Ltd of £110K and 2) A final adjustment to the Pension provision as a result of the McCloud judgement (see section 3.4). 1.2 The Annual Accounts go through a structured approval process, with the table below setting this out and showing the current status of the approval process: 1
YHN finance staff produce the draft Annual Accounts
2
The Reports and Statements are tested by the Independent External Auditors (EY) for errors and weaknesses in internal processes.
3
EY produce a report of their findings.
4
Group Audit and Risk Committee scrutinises the Annual Accounts and provides a recommendation to Boards (11 July).
5
The Asfaleia Board, with reference to Group Audit and Risk Committee’s recommendation, approve their Annual Accounts (25 July).
6
The Common Purpose Board approves the Group Annual Accounts as well as the Abri company Accounts (30 July).
7
The Reports and Statements are presented to (or “laid before”) the shareholder in September.
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8
The Reports and Statements are filed with Companies House, Financial Conduct Authority, and Her Majesty’s Revenue and Customs (HMRC) (as appropriate).
1.3 Group Audit and Risk Committee’s role with regards to the Annual Accounts is to: •
Monitor the integrity of the financial statements of the Group and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them; and
•
Review the narrative included in the Strategic Report and Directors Reports, to be recommended to the YHN and Asfaleia Boards for approval.
At its meeting on 11 July, the Committee was satisfied that the information contained in the Accounts stood to scrutiny and can be relied upon. In practice this means that the Committee: • • • •
2.
Ensured there is a robust internal audit process to test the controls of the company; Ensured an external audit team is appointed to review the statements in detail, and receive their report; In doing so, ensured that the external audit team is independent; and Reviewed in detail the Annual Accounts and supporting information and question the Finance and Commercial Director or external auditors on any items that require explanation.
Background information
2.1 All companies are required to produce Annual Accounts. These will usually contain the following items: Directors’ Report
Statements of Board’s responsibilities with regard to employees, equalities, controls, and disclosure of information to audit. The statement also includes the Board’s ‘going concern’ judgement.
Strategic Report
A review of the business for the past year and the year to come including performance against targets and the main risks considered by the company.
Independent Auditors’ Report
A statement from EY setting out the terms of reference of their audit, and their main findings.
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Comprehensive Income Statement
The profit and losses of the company, throughout the year. The outturn performance in this report is different to the figure reported to Finance and Performance Committee and Board, but this is due to the statutory accounts included additional accounting requirements, notably pension costs. There is a full reconciliation between the statutory and management accounts. See Section 2.1 below for a summary.
Statement of Financial Position
The balance sheet. This statement shows all the assets and liabilities on the 31st March.
Cash Flow Statement
This statement shows how the company has earned and spent cash during the year.
Notes to the financial statements
Notes to the three items above explaining the numbers in more detail and setting out the policies and judgements used when presenting financial figures.
2.1 The below table shows a reconciliation between the results reported at Q4 and scrutinised by the Finance and Performance Committee on 14th May 2019 and those reported in the draft Financial statements Abri (£000’s) P12/ Q4 Accounts
361
Stock/cost of sale adjustments Other adjustments Deferred Tax adjustments
Asfaleia
YHN
(£000’s) (£000’s) (£000’s) (6)
1,146
1,501
(25)
(13)
(38)
(3)
3
0
(25)
(25)
Pension deficit increase Profit/ (loss) in the year end accounts
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Group
308
(6)
(3,260)
(3,260)
(2,124)
(1,822)
2.2 As well as the three sets of Accounts in Appendices 1-3, the following documents are included for the Committee’s attention: Going concern assessment There is a requirement for a letter to the auditors evidencing to them YHN’s status as a going concern, which will be approved at the AGM. This is an assessment of going concern and liquidity risk by the Board. EY requires evidence that cash flows for 12 months following the date of signing the accounts demonstrate a going concern as this is a fundamental basis for the preparation of the accounts. If it was not possible to demonstrate the going concern status, the assets and liabilities would have to be valued on a ‘winding up’ or emergency sell-off basis. See Appendix 4. Pension support Letter A key piece of evidence in the going concern assessment, NCC provides a letter of support confirming that increases to pension contribution rates in future will be covered by increases to the YHN management fee, and that in the unlikely event that YHN becomes insolvent, NCC will step in and subsume the pension deficit. The letter gives the same assurances as previous years. See Appendix 5. Audit results report EY produce a summary to management setting out their overview of the audit process, and any material errors, misstatements or control failures they have identified. See Appendix 6. Letter of representation Each set of Annual Accounts is accompanied by the relevant Board’s letter of representation to the external auditors. This letter gives an undertaking to the auditors that all relevant information has been disclosed to them by Board. EY have included a template letter in their report to us. See Appendix 7.
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3.
Issues and concerns
3.1 Pension deficit update: As the Committee will be aware from previous discussions on the Accounts and budget setting for YHN, the group has a substantial pension deficit, which is in line with the majority of organisations in the public sector. The table below summarises the key changes in the year: 2016-17
2017-18
2018-19
(£’m)
(£’m)
(£’m)
14.36
23.19
25.54
Past and current service shortfall
1.97
3.49
3.26
Actuarial estimate changes
6.86
-1.14
-7.79
23.19
25.54
21.01
Opening deficit
Closing deficit
The pension fund actuaries have independently reviewed the pension fund deficit. The deficit has fallen this year and the deficit and now stands at £21.01m. As with previous years, the deficit will be recovered through YHN’s on-going employer’s contribution, with the actuaries assumed it is recovered over 20 years rather than crystallising immediately. 3.2 Furniture stock system: A control weakness has been highlighted within the Audit Results Report (page 6) relating to the use of a spreadsheet to record Fixed Assets. This spreadsheet is in use because of previously reported issues with the implementation of the My Furniture System. The new furniture stock system was implemented in April 2019. However, issues were uncovered subsequently which highlighted that asset movement transactions were not being recorded correctly in the new system. These issues were highlighted within the internal audit report issued in November 2019. Consequently, Finance officers have needed to maintain the fixed asset register, including stock movements: additions, transfers and disposals, offline on a spreadsheet in order to be able to correctly reflect the value of fixed assets held in the financial accounts. In January 2019 the incoming Finance Director commissioned a review of the My Furniture Service by external consultants. Since then the team have worked alongside the consultants to understand what fixes to the system are needed to rectify the issues. The outcome is an action plan of improvements, some of which have already been implemented. The action plan includes system fixes and re-testing of asset transactions followed by a reloading of the My furniture system with assets. The estimated timeline for completion is October 2019.
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3.3 NCC and YHN/ Abri inter-company balances As part of the year end procedures it is a requirement to confirm balances between NCC and YHN. During this procedure a total of £363k was recognised in Abri (Palatine) as a Debtor with NCC relating to rental invoices and invoices for doors purchased from Palatine by NCC. This balance was initially disputed but subsequently agreed by NCC. Consequently, it is not reflected in the NCC accounts at 31st March 2019. It is acknowledged that there is a requirement for YHN to strengthen the internal control to reconcile balances between NCC and Palatine formally on a more frequent basis and to complete the required housekeeping. 3.4 Pension liability and the McCloud/ Sargeant case and GMP equalisation In December 2018 the government lost a Court of Appeal case (McCloud/ Sargeant) which found that the transitional protection arrangements put in place when the firefighters and judge’s pension schemes were reformed were discriminatory. The ruling potentially has implications for all public sector schemes which were reformed around the same time (including the LGPS and Police schemes) and could lead to members who were discriminated against being compensated. We have been advised by our external auditors to request a restatement of our pension liability from our Actuaries taking into account this, and a recent gender equality ruling. Depending on the materiality of the change in estimate, we may need to adjust the pension accounting. 3.5 Group Audit and Risk Committee decision: After considering all of the information presented, as well as taking the opportunity to speak to EY without YHN Officers present, the Group Audit and Risk Committee concluded that it was happy to recommend Board to approve the Accounts and the letter of representation. 4.
Asfaleia letter of support
4.1 At the March Board meeting it was agreed that a letter of support, reconfirming the terms of the Service Agreement with Asfaleia, would be issued. This is included as Appendix 8. 5.
Board Options
5.1 The Board has three options available: 1. Board can accept that the Annual Accounts give a true and fair view of the state of the Group; 2. If Board has an issue of principle with the Annual Accounts, they can amend them. This would require additional audit testing by EY; or 3. Board can choose not to agree the Annual Accounts or sign the required letters of representation. This would effectively imply that Board does not agree with the validity of the Annual Accounts.
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6.
Conclusion and recommendations
6.1 Board is recommended to approve the following items: • • • • • • 7.
The Directors’ Reports; The Strategic Reports; The financial statements and notes; The going concern assessment The letters of representation; and The letter of support to Asfaleia.
Implementation
7.1 Once approved and signed by Board representatives, the Accounts will be 1. Counter signed by EY; 2. Laid before the shareholder; and 3. Filed with Companies House, the Financial Conduct Authority and HMRC. Background Papers Group Audit and Risk Committee papers 11 July 2019 Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Rachel Morrissey - telephone on 0191 277 4317 or email Rachel.Morrissey@yhn.org.uk
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Your Homes Newcastle Limited
Annual Report and Financial Statements Year 2018-19 Registered Company No: 5076256
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1
Your Homes Newcastle Limited
Contents
Page
Corporate Information: Board Members, Company Secretary and Advisors
3
Strategic Report
5
Directors’ Report
12
Independent Auditor’s Report
17
Financial Statements
20
Notes to the Financial Statements
25
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2
Your Homes Newcastle Limited
Corporate Information Registered Office Address
Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR
Company registration
The Company is incorporated as a private company limited by guarantee under the Companies Act (company number 5076256).
YHN Board Members and Company Secretary Position
Name
Appointed
Chair
Jo Totton
19 September 2017
Independent Board Members
Elaine Snaith
21 September 2010
Paul Scope
5 May 2015
Malcolm Page
22 September 2015
Richard Clark
19 September 2017
Helen Simpson
19 September 2017
Kevin Lowry
19 September 2017
Veronica Dunn
23 May 2012
Doreen Huddart
23 May 2012
Joyce McCarty
8 July 2014
Alistair Chisholm
24 May 2018
Chair of Group Audit and Risk Committee
Richard Clark
19 September 2017
Vice Chair of Group Audit and Risk Committee
Veronica Dunn
19 September 2017
Company Secretary
Jill Davison
8 August 2017
Council nominated Board members
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3
Your Homes Newcastle Limited Retired Directors in the year Position
Name
Retired
Independent Board Member
Lisa Doherty
26 March 2019
YHN Advisors Internal Auditors
Newcastle City Council Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
External Auditors
Ernst and Young LLP Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JD
Solicitor
Mr John Softly, Assistant Director – Legal Services Chief Executive’s Office, Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
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4
Your Homes Newcastle Limited
Strategic Report The members of the Board of Your Homes Newcastle Limited (trading as ‘YHN’) present their strategic report for the year ended 31 March 2019. Principal business The principal activity of YHN is the provision of housing management and improvement services to Newcastle City Council’s housing revenue account (‘HRA’) and other external organisations. In addition, YHN is also responsible for the delivery of housing related support services that improve the sustainability of tenancies and neighbourhoods and promote independent living across the City of Newcastle. As at 31 March 2019, YHN managed: • 25,497 council homes on behalf of Newcastle City Council; and • 746 homes on behalf of Leazes Homes. The YHN group includes a trading subsidiary – Abri Trading Limited – and a community benefit society – Asfaleia Limited. The latter has been recognised by HMRC as having charitable status. The principal activity of Abri Trading Limited is the rental and sale of home furnishings to social landlords and others. The purpose and objectives are guided by those of the Parent company, Your Homes Newcastle Limited. The objects (purpose) of Asfaleia are to benefit the public by: i) the provision of relief of those in need by reason of poverty, homelessness, youth, age, family circumstance, unemployment, ill-health or any mental or physical disability; and ii) the promotion of education and training. Asfaleia is responsible for the provision of the activities of Support and Progression (formerly Advice and Support, Young People’s Service), Ostara, Housing Plus (formerly Sheltered Housing) and Employability. These services are provided in the context of contracts with Your Homes Newcastle Limited and the Ostara service is also made available to the wider public. Organisational structure YHN is a local authority controlled company (“arm’s length management organisation – ALMO”) under the control of Newcastle City Council, established with no share capital and limited by guarantee. Newcastle City Council (NCC) has delegated to
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5
Your Homes Newcastle Limited YHN responsibility for overseeing the management and maintenance of its residential stock and of HRA services provided to the City’s housing tenants. The YHN Group is structured as follows:
Your Homes Newcastle Ltd Abri Trading Ltd Group Audit & Risk Committee
Group Finance & Performance Committee
Asfaleia Ltd Group Remuneration & Nominations Committee
Customer Service Committee
Review of the Business During 2018 the business had been operating under the four-year Business Strategy, which defined the statement of purpose as “Delivering great services, enabling people to thrive in great communities, supporting a great city”. This purpose was underpinned by three service objectives and six cross-cutting objectives. The three service objectives were: • • •
Keep the housing stock decent, and neighbourhoods clean and safe Collect the rent and let properties efficiently Promote health and wellbeing and support vulnerable people to enjoy independence.
The cross-cutting objectives were to: • Use modern technology and innovation to challenge and redefine service delivery; • Achieve efficiency at every level and direct resources to where they are needed most; • Have high performing people who understand how to contribute to our purpose; • Trade profitably to support core services; • Work proactively with NCC and our other landlords; and
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6
Your Homes Newcastle Limited •
Maximise partnerships to improve services.
More recently, the Board undertook a review of the current Business Strategy 20162020 and agreed a refresh in line with changing demands on the business. The new business strategy – Destination 2022 was approved by the Board in December 2018, setting a clear vision of being ‘first for housing’ and purpose of ‘making living easier’, underpinned by four guiding organisational values; ready, amazing, revolutionary and energetic. Three strategic objectives were identified to keep the strategy simple and clear: 1) Revolutionary services that support successful living 2) Amazing places where people are proud to live 3) Strong business fit for today, ready for tomorrow YHN performance against the key performance indicators (KPIs) agreed with NCC, as part of the management agreement, was strong. All targets were achieved during the year. Details of the KPIs are set out in the following section. The overall group financial position saw the budgetary targets being exceeded, with an in-year surplus on operations before the planned transformation costs were applied. Abri Trading Limited experienced a further challenging year, with a decline in NFS sales linked to the continuing impact of Welfare Reform and resulting downturn in customer confidence. However, the rate of sales downturn for NFS, resulting from a combination of a small decline in customers and customers choosing smaller furniture packs, has slowed compared to the previous year. Despite the downturn in sales, overall profit has increased compared to the previous year, predominately as a result of lower depreciation costs. Palatine had a positive year, operating ahead of budget, aided by securing a large contract and cost reduction through efficiency savings. Asfaleia Limited had a positive year, meeting or exceeding the vast majority of its performance targets set. The Society recorded a small in year deficit which was significantly ahead of budget. How we do business YHN has a Management Agreement with NCC, which lasts for 10 years and commenced on 1 April 2016. During the year YHN has continued to work closely with Elected Members and senior officers from NCC, being a true strategic partner for the Council, especially around housing matters.
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7
Your Homes Newcastle Limited Key Performance Indicators The following table highlights our performance against our management agreement commitments with NCC. Target theme
2018-19 target
2018-19 actual
Satisfied
Satisfied
92%
92.32%
Satisfied
Satisfied
98.48%
99.21%
8.6%
8.17%
1.57%
1.46%
Achieved
Achieved
HRA programme board satisfied with delivery of R&M service Customers satisfied with repairs and maintenance service HRA programme board satisfaction with delivery of the capital programme Rent collected from current and former tenants Tenancy turnover under 8.6% Overall void rent loss not to exceed 1.57% Budget target achieved
Principal Risks and Uncertainties YHN has a well-established assurance framework which, along with audit, performance management, accreditation and service reviews, includes risk management. A strategic risk register is maintained which outlines the most significant risks to the achievement of our business objectives. The strategic risk register highlights the perceived threat level of a risk, the controls in place to mitigate the risks and the actions required to improve the controls. The assurance framework and the strategic risk register are applied across the YHN group. The current approach to the management of strategic risks via the framework consists of: • •
Annual review of the register approved by the Board; and Quarterly monitoring of the strategic risk register by the Group Audit and Risk Committee with Board updates provided following each meeting.
In order to assess risk, the likelihood of a risk is assessed against its potential impact. The assessment generates a score which in turn is assigned a traffic light (red, amber or green) based on controls that YHN has in place. The current risk register was approved by Board in March 2019. Group Audit and Risk Committee are currently reviewing the Group’s approach to risk management to further enhance local arrangements.
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8
Your Homes Newcastle Limited YHN and its subsidiaries have a robust risk management strategy in place which flows from the strategic risks identified in the risk register. Set out below are the key mitigation measures which address the fundamental risk to financial stability and continuity. Financial Risk Management Policy YHN currently holds no complex financial instruments. The majority of cash balances are held at Newcastle City Council. Other financial assets and liabilities, such as trade creditors and related party balances, arise directly from the organisation's operating activities. The main risks associated with YHN's financial assets and liabilities are set out below. Interest Rate Risk YHN received interest rates from Newcastle City Council relating to cash held on its behalf. Financial assets, liabilities, interest income and cash flows can be affected by movements in interest rates. The Board Members do not consider there to be any significant exposure. Credit Risk During the financial year YHN received almost its entire turnover from Newcastle City Council and payment terms are 30 days from the date of invoice. Individual exposures and overdue debts are monitored, with customers subject to credit limits to ensure that YHN's exposure to bad debts is not significant. Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The group aims to mitigate liquidity risk by managing cash generation by its operations, applying cash collection targets throughout the group. The group also manages liquidity risk via revolving credit facilities and loan funding from NCC. Foreign Currency Risk YHN does not engage in any foreign currency transactions. All of its activities take place within the United Kingdom and consequently, YHN is not exposed to any foreign currency risk. Future Developments Destination 2022 is not only our new Business Strategy, but the roadmap for YHN’s transformation. Built on our strategic framework it sets out our key priorities for future development. Our Corporate Leadership Team (Directors and Assistant Directors) have been tasked with delivering Destination 2022. The exciting new areas we are ambitious about developing over the next year include:
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9
Your Homes Newcastle Limited Revolutionary services which support successful living: • becoming easy to do business with, though continued work with NCC to develop and improve our telephone, digital and face-to-face services, delivered through the hubs • developing the vision for our Housing Plus Service, which provides housing and support services to older people, to improve the customer experience • working towards Institute of Customer Service accreditation. Amazing places where people are proud to live • bringing YHN services and BCE (Building and Commercial Enterprise - part of NCC) into one team, under a single point of leadership, to deliver our repairs and maintenance service. Our focus this year will be to begin to improve the customer journey through developing a more modern and efficient service • working with NCC to develop a new Asset Management Strategy which sets out our approach to maintaining and improving NCC’s Housing Revenue Account (HRA) assets • following completion of work with partners to review the Tyne and Wear Homes Choice Based Lettings Scheme, we will consider the findings and look at how we can make improvements to the way we allocate and let homes • reviewing our approach to community investment so that we support lasting change in our communities and maximise the social value that is achieved through our investment. Strong business fit for today, ready for tomorrow • implementing our People Strategy to help us to nurture and retain a diverse range of talent • supporting NCC to become a UNICEF recognised child-friendly city • delivering 4% growth and optimise profit from commercial businesses to enable investment in housing services • developing an ICT Infrastructure Strategy to ensure that staff are equipped for agile working, again helping us to improve the customer experience. Underpinning all of our transformation is a continued commitment to social housing and providing services that support customers and ultimately make living easier. Our customers will always be integral to all our plans and we are strengthening the role of our Customer Service Committee to ensure the customers voice is heard at the highest level and influences all our decision making. Safety of residents The safety of residents still remains a high priority for YHN, and whilst lots of work has been completed over the last year in relation to fire safety, we never stop looking for ways to continually improve. YHN has been selected to join a new Ministry for Housing, Communities and Local Government (MHCLG) group (Social Sector (Building Safety) Engagement Best Practice Group ) to improve communication on building safety issues between social landlords and tenants. The group will consists of eight social landlords, and some of their residents, and will trial innovative methods of communicating building safety matters to residents. YHN is the only member of the group from the North East. The focus of YHN’s pilot project (on which
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10
Your Homes Newcastle Limited we’ll be working with Stockport Homes and Chelmer Housing Partnership) is ‘Information and Understanding’ which includes: • Face to face and digital communication • Clarity and accessibility of safety information and • How safety information should be provided to residents at the start of their tenancy. The future for YHN is focussed on providing revolutionary services which support successful living, providing amazing places where people are proud to live and ultimately having a strong business fit for today and ready for tomorrow. Closer working with NCC on construction, repairs and maintenance YHN formally assumed responsibility of Newcastle City Council’s repairs and construction service, known as Building and Commercial Enterprise (BCE), on 1st August 2018. A Memorandum of Understanding was agreed by both parties to outline the relationship and working arrangements, which affirms that whilst YHN now oversees the operation, NCC will continue to remain the employer and ultimately responsible for the service. A transformation programme to reform and improve the service began upon commencement of the new arrangements and is currently ongoing. The strategic report was approved by the Board on 30 July 2019 and signed on its behalf on 30 July 2019 by:
Jo Totton Chair
Jill Davison Company Secretary
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11
Your Homes Newcastle Limited
Directors’ Report The members of the Board of Your Homes Newcastle Limited (trading as ‘YHN’) present their directors’ report for the year ended 31 March 2019. The Group has chosen, in accordance with Section 414C(ii) of the Companies Act 2006 to set out in the Strategic Report the following, which the directors believe to be of strategic importance: • • • •
Review of the business Principal risks and uncertainties Risk management strategy and mitigation plans Future developments.
Interests of Board Members YHN is a private company limited by guarantee which is wholly controlled by the local authority, Newcastle City Council. Four Board members are Newcastle City Councillors. The remaining eight Board members are independently appointed, and all financial transactions are carried out under normal commercial terms. In establishing and monitoring the strategy, the Board considers the impact of its decisions on wider stakeholders including Newcastle City Council, tenants, employees, suppliers and the environment. Our Employees Employee Communication and Involvement We use many different channels to ensure our internal communications engage staff with corporate messages, as well as provide opportunities for them to provide feedback and share their own ideas and news. These include our intranet, which features regular internal news articles, staff forums, collaborative working areas and the option to personalise alerts and feeds. We have recently implemented a staff survey system which allows monthly feedback to be obtained, rather than solely waiting for the formal staff survey to be undertaken every two years. We send regular e-newsletters to staff containing a broad range of articles to keep colleagues up to date with organisational news, raise awareness of selected issues, boost morale and inform staff about the wider social and political landscape in which we operate. These digital channels are supported by more traditional methods such as posters, flyers and events to ensure we reach all staff and provide information in an integrated way. We also design campaigns around specific issues taking care to match communications channels to corporate objectives.
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Your Homes Newcastle Limited In addition, we have a formal annual appraisal mechanism that includes regular 1-21s for all staff to receive feedback on their performance, identify training needs and gain an understanding of how their targets feed into the achievement of the organisation’s goals. There are also formal and informal communication and consultation mechanisms with trade unions. Equality, Diversity and Human Rights “Equality and Diversity is everybody’s business” We ensure our commitment to equality and diversity goes far wider than our legislative obligations. Our ultimate aim is to ensure that our commitment to equality and diversity is rooted in the core values of everything we do. Our collective efforts to create an inclusive environment for our lesbian, gay, bi and trans colleagues have been recognised by Stonewall in this year’s Workplace Equality Index. We received special recognition for our work with trans inclusion and were highlighted in the top ten in this area, overall we are ranked 77th in the index. We implement policies, practices and procedures that actively promote equality, diversity and human rights and support the elimination of barriers that prevent fairness for all of our employees and customers. As an organisation with extensive contact with the public, we expect to take account of human rights in our day to day work, whether delivering services or developing policies and procedures. Many of the everyday decisions taken in the workplace have no human rights implications. However, by understanding human rights we are more likely to know when they are relevant and when they are not. It should also help us to make decisions more confidently and ensure those decisions are sound and fair. YHN is committed to ensuring that people with disabilities should have full and fair consideration for vacancies. During the year we continued to demonstrate our commitment to interviewing people with disabilities who fulfil the minimum criteria and endeavour to retain employees in the workforce if they become disabled during employment. If appropriate we would actively retrain and make adjustments to the working environment to allow our employees to remain in the business. Statement of Directors’ Responsibilities The directors are responsible for preparing the Strategic Report, Directors’ Report and financial statements in accordance with applicable law and regulations. Company law requires the directors 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 law). Under company law 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 of the group
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13
Your Homes Newcastle Limited and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: • • •
•
Select suitable accounting policies and then apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board takes its responsibilities in relation to bribery seriously and continues to support initiatives to emphasise the organisation’s anti-corruption culture. National Housing Federation Code of Governance The Board have adopted the National Housing Federation Code of Governance – promoting excellence for housing associations. An annual assessment is undertaken to review arrangements are clear and effective. A compliance checklist exercise is conducted, which involves evaluation of the following areas: • • • • • • •
Constitution and composition of the Board Essential functions of the Board, including duties and responsibilities Board skills, renewal and review Conduct of Board and Committee business Audit and risk The Managing Director; working arrangements with the Board Conduct, probity and openness
Having reviewed the checklist, the Board are satisfied that high standards of corporate governance are being upheld and concluded that the YHN Group is compliant with all areas of the Code.
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Your Homes Newcastle Limited Future developments affecting the balance sheet The Board considers that there have been no events since the financial year end that have had a significant effect on the financial position. Going Concern Having made enquiries, the Board consider that the Company’s current and future prospects and its availability of financing are adequate to enable it to continue business for the foreseeable future and that they are also satisfied that the Company can continue to pay its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial statements. The Board consider that a robust going concern assessment process was undertaken and the results discussed and challenged formally at the Group Audit and Risk Committee on 11 July 2019. At that meeting the Audit and Risk Committee recommended that the Board should endorse these annual accounts. The process for determining whether or not the Company is a going concern involved a number of considerations including an assessment of the financial budgets and forecasts for YHN to August 2020, in the context of the current business strategy to 2022 and in the light of the management agreement between YHN and Newcastle City Council, as endorsed by Cabinet in January 2016. The outlook also considered the continued and possible further effects of Welfare Reform. This period is considered to be the ‘foreseeable future’ as required for this ongoing assessment only and is in accordance with company law and accounting rules. The assessment also considered the solvency and liquidity risks involved in delivering the financial forecasts for the foreseeable future. There were no major changes to YHN’s significant liquidity and solvency risks in the year. The Company has net liabilities of £13,132,000 (2018: £19,100,000), including a pension deficit of £21,010,000 (2018: £25,540,000). The Company has a management agreement in place with Newcastle City Council which underpins the Company’s budgets and forecasts, which show that the Company is expected to be able to meet its liabilities as they fall due for the foreseeable future, in particular, for a period of at least twelve months from the date of approval of these financial statements. These budgets and forecasts include contributions payable to the pension scheme on the current agreed contribution schedule, which has been drawn up by the actuary on the basis of a 22-year schedule for the recovery of the deficit. In addition, the Company has received confirmation from Newcastle City Council that the Council would assist Your Homes Newcastle in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise
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Your Homes Newcastle Limited available to YHN to meet such liabilities. For this reason, the Board continues to adopt the going concern basis of preparation for these financial statements. Disclosure of information to auditors All of the Board members, appointed at the date upon which these report and accounts were approved, were not aware of any relevant audit information which was required by the auditors in connection with the preparation of the report and accounts, of which the auditor was unaware. Having made enquiries of fellow Board members and YHN’s auditors, each Board member has taken all the steps that he/she is obliged to take as a member of the Board in order to make himself/herself aware of any relevant audit information and to establish that the auditor is aware of that information. Auditors EY LLP are the external auditors of Your Homes Newcastle Limited for the period 2018-19. The report of the members of the Board was considered and approved by the Board on 30 July 2019 and signed on its behalf on 30 July 2019 by:
Jo Totton Chair
Jill Davison Company Secretary
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Your Homes Newcastle Limited INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YOUR HOMES NEWCASTLE LIMITED Opinion We have audited the financial statements of Your Homes Newcastle Limited (‘the parent company’) and its subsidiaries (‘the Group’) for the year ended 31 March 2019 which comprise the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Company Statement of Changes in Equity, the Group Statement of Financial Position, the Company Statement of Financial Position, the Group Statement of Cash Flows and the related notes 1 to 21, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). In our opinion the financial statements: • • •
give a true and fair view of the group’s and of the parent company’s affairs as at 31 March 2019 and of the group’s loss for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • •
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
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Your Homes Newcastle Limited Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • •
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • •
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.
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Your Homes Newcastle Limited Responsibilities of directors As explained more fully in the Statement of Directors’ Responsibilities set out on pages 13 to 14, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Nicola Wright (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Newcastle upon Tyne 30 July 2019
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Financial Statements
Group Statement of Comprehensive Income for the 12 months ended 31 March 2019 Note
2019 ÂŁ'000
2018 ÂŁ'000
Income
2
36,038
38,074
Operating costs
3
(36,930)
(41,787)
Operating (loss)
4
(892)
(3,713)
7a 7b
16 5 (926)
35 15 (876)
(1,797)
(4,539)
(25)
94
(1,822)
(4,445)
7,790
1,140
5,968
(3,305)
Gain on disposal of fixed assets Interest receivable and other income Interest payable and other charges Loss on ordinary activities before taxation Taxation
8
Loss for the financial year Actuarial gain on defined benefit pension Total comprehensive gain/(loss) for the period
20
All amounts relate to continuing activities in the period.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Financial Statements (continued)
Group Statement of Changes in Equity for the 12 months ended 31 March 2019 Profit and loss ÂŁ000 Balance as at 1 April 2017 Total comprehensive loss for the year Balance as at 31 March 2018 Total comprehensive gain for the year Balance as at 31 March 2019
(15,795) (3,305) (19,100) 5,968 (13,132)
Company Statement of Changes in Equity for the 12 months ended 31 March 2019 Profit and loss ÂŁ000 Balance as at 1 April 2017 Total comprehensive loss for the year Balance as at 31 March 2018 Total comprehensive gain for the year Balance as at 31 March 2019
(17,925) (3,207) (21,132) 5,667 (15,465)
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Financial Statements (continued)
Group Statement of Financial Position As at 31 March 2019
Registered Company No: 5076256 2019 2018 Note ÂŁ'000 ÂŁ'000
Fixed assets Tangible assets Current assets Stocks Debtors: amounts falling due within one year Cash at bank and in hand
Less Creditors: amounts falling due in less than one year Net current assets Total assets less current liabilities Creditors: amounts falling due in more than one year Net assets excluding pension liability Defined benefit pension liability Net liabilities Reserves and capital Profit and loss reserve
9
4,467 4,467
3,214 3,214
11 12
537 6,561 6,779 13,877
485 11,543 4,062 16,090
13
(3,909) 9,968 14,435
(6,219) 9,871 13,085
14
(6,557)
(6,645)
20
7,878 (21,010) (13,132)
6,440 (25,540) (19,100)
(13,132) (13,132)
(19,100) (19,100)
These financial statements were approved by the Board and authorised for issue on 30 July 2019.
Signed on behalf of the Board
Jo Totton Chair
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Financial Statements (continued)
Company Statement of Financial Position As at 31 March 2019
Registered Company No: 5076256 2019 2018 Note £'000 £'000
Fixed assets Tangible assets Other investments Current assets Stocks Debtors: amounts falling due within one year Cash at bank and in hand
Less Creditors: amounts falling due in less than one year Net current assets Total assets less current liabilities Creditors: amounts falling due in more than one year Net assets excluding pension liability Defined benefit pension liability Net liabilities Reserves and capital Profit and loss reserve
9 10
3,098 3,900 6,998
1,948 3,900 5,848
11 12
182 8,544 2,951 11,677
264 8,471 1,672 10,407
13
(6,573) 5,104 12,102
(5,202) 5,205 11,053
14
(6,557)
(6,645)
20
5,545 (21,010) (15,465)
4,408 (25,540) (21,132)
(15,465) (15,465)
(21,132) (21,132)
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and not presented a statement of comprehensive income for the Company alone. The gain for the year is £5,667,000 (2018: £3,207,000 loss). These financial statements were approved by the Board and authorised for issue on 30 July 2019. Signed on the Board's behalf:
Jo Totton Chair
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Financial Statements (continued)
Group Statement of Cash Flows for the 12 months ended 31 March 2019 2019 ÂŁ'000
2018 ÂŁ'000
4,567
556
Investing activities Interest received Payments to acquire tangible fixed assets Proceeds on sale of fixed assets
15 (1,468) 23
4 (1,074) 158
Net cash flow from investing activities
(1,430)
(912)
Financing activities Interest paid Repayment of finance leases
(295) (125)
(306) (125)
Net cash flow from financing activities
(420)
(431)
Net change in cash and cash equivalents
2,717
(787)
Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March
4,062 6,779
4,849 4,062
Note Net cash flow from operating activites
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24
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies 1.1 Statement of Compliance Your Homes Newcastle was incorporated and is registered in Newcastle upon Tyne, England under the Companies Act 2006 (Registered Number 5076256). The Registered Office is Civic Centre, Barras Bridge, Newcastle Upon Tyne, NE1 8PR. The principal place of business is YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX. Your Homes Newcastle Limited is a company limited by guarantee and does not have any share capital. There is only one “member” of the organisation. That “member” is Newcastle City Council (NCC) and the Company’s articles of association state that no other person other than the Council Member shall be admitted to membership of the organisation. The financial statements have been prepared on a going concern basis and in compliance with FRS102 as it applies to the financial statements of the Group for the year ended 31 March 2019.
1.2 Basis of preparation The financial statements were authorised for issue by the Board of Directors on 30 July 2019. The financial statements have been prepared in accordance with applicable accounting standards. The financial statements are prepared in sterling which is the functional currency of the group and rounded to the nearest £’000, or where applicable nearest £'m.
1.3 Basis of consolidation The Group financial statements consolidate the financial statements of Your Homes Newcastle Limited and all its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are consolidated from their date of acquisition, being the date on which the Group obtains control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities. The Group statement of comprehensive incomes include the results and cash flows of: • Asfaleia Limited for the 12-month period from 1 April 2018 and • Abri Trading Limited for the 12-month period from 1 April 2018. In the parent company financial statements, investments in subsidiaries are accounted for at cost less impairment.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
1. Accounting Policies (continued) 1.4 Going concern The directors have prepared the financial statements on a going concern basis which assumes that the Company will continue in operational existence for the foreseeable future and meet its liabilities as they fall due. The Group has net liabilities of £13,132,000 (2018 £19,100,000), including a pension deficit of £21,010,000 (2018 £25,540,000). The Company has a management agreement in place with Newcastle City Council which underpins the Group’s budgets and forecasts which show that the Company is expected to be able to meet its liabilities as they fall due for the foreseeable future, in particular, for a period of at least twelve months from the date of approval of these financial statements. These budgets and forecasts include contributions payable to the pension scheme on the current agreed contribution schedule which has been drawn up by the actuary on the basis of a 22-year schedule for recovery of the deficit. In addition, the Group has received confirmation from Newcastle City Council that the Council would assist Your Homes Newcastle (“YHN”) in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to YHN to meet such liabilities. Accordingly, the directors of the Group believe that it is appropriate to prepare the financial statements on a going concern, on the grounds that they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. 1.5 Judgements and key sources of estimation uncertainty The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date, and the amounts reported for revenues and expenses during the period. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements and sources of estimation uncertainty have had the most significant effect on the financial statements: Provisions A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. There can be estimation involved in determining the provision to be made. Operating and Finance Lease Commitments As a lessee, the Group obtains use of plant and equipment. The classification of such leases as operating or finance lease commitments requires the Group to determine, based on evaluation of the terms and conditions of the arrangements, whether it acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires a liability to be recognised in the statement of financial position.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies (continued) 1.5 Judgements and key sources of estimation uncertainty Pension costs The cost of a defined benefit pension plan is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty. In determining the appropriate discount rate, management considers the interest rates of high quality bonds with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on the recent actual mortality experience within the Fund and allows for expected future mortality rates. Future salary increase and pension increases are based on expected future inflation rates for the UK. Further details are given in note 20. Impairment of non-financial assets Where there are indicators of impairment of individual assets, the Group performs impairment tests based on fair value less costs to sell or a value in use calculation. The fair value less costs to sell is based on observable market prices, less incremental costs for disposing of an asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next three years, and does not include significant future investments that will enhance the performance of the cash generating asset that is being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model, as well as the expected future cash flows and growth rate used for extrapolation purposes. Taxation Judgement is required when determining the provision for taxes. Tax benefits are not recognised unless it is probable that the benefit will be obtained. Tax provisions are made if it is possible that a liability will arise. The Group reviews each significant tax liability or benefit to assess the appropriate accounting treatment. Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future profits. Determination of financial instruments as basic There is judgement in determining whether financial instruments meet the definition of basic or complex in accordance with Section 11 of FRS 102. Management has determined that the Group and Company’s financial instruments are deemed as basic on the basis of the following: • Interest paid on the loans is on a fixed rate basis. • The loan agreements with Newcastle City Council do not contain two way break clauses and are therefore recognised at amortised historical cost.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
1. Accounting Policies (continued) 1.5 Judgements and key sources of estimation uncertainty Fixed assets accounting and stock accounting The Parent undertaking's fixed assets are comprised of items of furniture rented to Newcastle City Council under the NFS brand, ICT equipment, office equipment following the refurbishment of YHN House, leasehold improvements of the YHN warehouse and the YHN fleet held under lease. The Group’s fixed assets are comprised of the items above and furniture rented to other landlords in Abri Trading, and Ostara alarm equipment in Asfaleia Ltd. Palatine Beds Inventory is held within Abri Trading for raw materials and finished goods held in relation to sales under the Palatine Beds and 1907 brands. See note 1.6 for information on stock valuations. Overview of NFS (Newcastle Furniture Service) Brand NFS operations are split between Your Homes Newcastle and Abri Trading. Resources and fixed assets employed to deliver furniture services to Newcastle City Council are recorded in the Parent’s accounts. Commercial contracts with other landlords are delivered by Abri Trading. Asset purchases and transfers All furniture is initially purchased by the Parent undertaking, where it is held at cost price as inventory. Subsequently, when an item of furniture is rented out to an Abri Trading customer, a purchase from the Parent is recorded. The furniture is then held within Abri Trading as a fixed asset and held at historic cost less depreciation. The sale is not expensed in the Parent’s income statement. If the item is rented out under the Newcastle City Council contract, the furniture is recorded as a fixed asset within the Parent and held at historic cost less depreciation. If a customer returns an item of furniture (from either a YHN or Abri Trading contract), an assessment is made of the condition of the asset and it is either 1. disposed and recorded as a disposal with no proceeds, or 2. returned to the Parent’s stock where it is held at the net book value of the asset at the time of its return. A fixed asset disposal is recorded . All repair costs for items within inventory are minor and are expensed as they arise. Presentation of fixed assets The YHN Group uses a global fixed asset register across NFS to control the assets of Abri Trading and the Parent undertaking. To clarify the transactions to the reader, and to aid the reconciliation of the Financial Statements to the asset register, additional lines have been added to the fixed asset register to show the additions and disposals within the Group.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
1. Accounting Policies (continued) 1.5 Judgements and key sources of estimation uncertainty Fixed assets accounting and stock accounting (continued) Ostara Asfaleia holds stock and fixed assets in relation to its Ostara care alarm services. These assets take the form of remote alarms, key safes and other support equipment. Supplies of equipment that have not been allocated to a customer are held as stock at cost price. Once an item is allocated to a customer it is transferred from stock to fixed assets and is held at depreciated cost value. If an item is returned by a customer, an assessment is made of the condition of the asset and it is either disposed, or returned to stock where it is held at the net book value of the asset at the time of its return. All repair costs to items are minor, and are expensed as they arise. Sales from stock are recorded as a cost of sale and expensed to the income statement. 1.6 Significant accounting policies Revenue Recognition Revenue is recognised to the extent that the group obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and VAT. The following criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity, and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of services Revenue from the provision of management services is recognised, according to the individual contract, by: ¡ Fixed fee per period; or ¡ Reference to labour hours incurred to date; or ¡ Fee per unit managed. Where contract income cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
1. Accounting Policies (continued) 1.6 Significant accounting policies (continued) Interest Income Revenue is recognised as interest accrues using the effective interest method. Government Grants Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants are of a revenue nature, and as such are credited to income so as to match them with the expenditure to which they relate. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended. Depreciation is provided on all property, plant and equipment, at rates calculated to write off the asset on a systematic basis over its expected useful life as follows: • Equipment - over 1 ½ to 7 years The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Impairment of non-financial assets The Group assesses at each reporting date whether an asset may be impaired. If any such indication exists, the Group estimates recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. The recoverable amount of an asset or cash generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount through an impairment in profit and loss, unless the asset is carried at a revalued amount where the impairment loss of a revalued asset is a revaluation decrease. An impairment loss recognised for all assets is reversed in a subsequent period if, and only if, the reasons for the impairment loss have ceased to apply. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at banks and in hand, and short term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
1. Accounting Policies (continued) 1.6 Significant accounting policies (continued) Short-term debtors and creditors Debtors and creditors, with no stated interest rate, receivable or payable within one year are recorded at transaction price. Any losses arising from any associated impairment are recognised in the income statement in other operating expenses. Stocks Stocks comprise NFS furniture holdings at the parent company, "Ostara" alarm equipment within Asfaleia and raw materials and finished goods for Palatine Beds within Abri Trading Ltd. Stocks are stated at the lower of cost and net realisable value. Costs include all costs incurred in bringing each product to its present location and condition, as follows: · Raw materials, consumables and goods for resale - purchase cost on a first-in, first-out · Work in progress and finished goods – cost of direct materials and labour plus attributable overheads based on a normal level of activity · Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal. Taxation The Group establishes provisions based on reasonable estimates, for possible consequences of audits by the UK tax authorities. The amount of such provision is based on various factors, such as differing interpretations of tax regulations by the taxable entity and the tax authority. Deferred Tax Deferred tax is recognised in respect of all timing differences which are differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements except that: · Where there are differences between amounts that can be deducted for tax for assets and liabilities compared with the amounts that are recognised for those assets and liabilities in a business combination a deferred tax asset shall be recognised; and · Unrelieved tax losses and other deferred tax assets are recognised to the extent that the directors consider that it probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
1. Accounting Policies (continued) 1.6 Significant accounting policies (continued) Leasing and hire purchase commitments Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to the Group, and hire purchase contracts are capitalised in the balance sheet and are depreciated over the shorter of the lease term and the asset’s useful life. A corresponding liability is recognised for the lower of the fair value of the leased asset and the present value of the minimum lease payments in the balance sheet. Lease payments are apportioned between the reduction of the lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term. Lease incentives are recognised over the lease term on a straight line basis. Interest bearing loans and borrowings All interest bearing loans and borrowings which are basic financial instruments are initially recognised at the present value of cash payable to the lender (including interest). After initial recognition they are measured at amortised cost using the effective interest rate method less impairment. The effective interest rate amortisation is included in finance revenue in the statement of comprehensive income. Pensions benefits The company participates in the Local Government Pension Scheme, through membership of the Tyne and Wear Pension Fund. The scheme is a final salary pension scheme (‘defined benefit’) where retirement benefits to employees of the Company are funded by contributions from all participating employers and employees in the scheme. The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligations) and is based on actuarial advice. The net interest element is determined by multiplying the net defined benefit liability by the discount rate, at the start of the period taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
2 . Analysis of Group Turnover Housing management fees Sales of goods Other income
2019 £'000 30,153 604 5,281 36,038
2018 £'000 32,102 2,536 3,436 38,074
2019 £'000 25,074 1,320 825 6,004 1,476 763 10 1,458 36,930
2018 £'000 29,708 1,265 778 5,539 2,498 424 (12) 1,587 41,787
2019 £'000 1,476 538 2,221
2018 £'000 2,922 622 1,587
20 15
20 9
3 . Analysis of Group Operating Costs Employee costs Premises costs Transport costs Supplies & services Depreciation Fixed asset write offs Bad debt expense Materials and purchases
4 . Group Operating Loss This is stated after charging: Depreciation of tangible assets Operating leases Stock expensed Auditors’ fees: For audit services For non-audit services
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33
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
5 . Employee information a) Staff costs The average number of persons employed during the year, expressed as equivalent of whole time employees was:
Housing management Administration and clerical
Costs for the above employees were: Wages and salaries Social security costs Employers pension contributions Past and current pension service costs above cash contributions
b) Directors’ emoluments Aggregate emoluments payable to directors (including pension contribution and benefits in kind) The full time equivalent number of staff who received emoluments in the following bandings are:
2019 No's 555 123 678
2018 No's 593 133 726
2019 £'000 18,058 1,539 2,847
2018 £'000 21,013 1,726 4,050
2,630
2,920
25,074
29,708
2019 £'000
2018 £'000
47
42
2019 No's £60,001 to £70,000 8 £70,001 to £80,000 3 £80,001 to £90,000 7 £90,001 to £100,000 5 £100,001 to £110,000 1 £110,001 to £120,000 £120,001 to £130,000 3 £130,001 to £140,000 1 £140,001 to £150,000 1 29 The 2019 figures include 20 employees whose emoluments include severance payments (2018: 13).
Page 54
2018 No's 7 3 1 2 3 2 2 20
34
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
6 . Key Management Personnel All directors and certain senior employees who have authority and responsibility for planning, directing and controlling the activities of the Group are considered to be key management personnel. Total remuneration in respect of these individuals is £515,000 (2018: £484,000). During the year ended 31 March 2019, there was one YHN Board Member who was a NCC housing tenant. This board member was not in post at the year end. Any Board member tenancies are granted on normal commercial terms. Tenant Board Members do not use their position to gain any commercial advantage. Four YHN Board Members are Newcastle City Councillors. The Councillors do not use their position as YHN Board Members to gain any commercial advantage. Where conflicts do arise they are fully disclosed either in advance of a Board/Committee meeting or at such a meeting. If appropriate the Councillor would leave the meeting to enable the matter to be discussed in their absence thereby avoiding a conflict of interest.
7 a. Interest receivable Interest on balances held at NCC
2019 £'000 5 5
2018 £'000 15 15
2019 £'000 293 3 630 926
2018 £'000 293 13 570 876
7 b. Interest payable and similar charges Loans from NCC Finance charges payable under leases Interest on net pension liability
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35
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
8 . Tax Group a) Tax on profit on ordinary activities The tax charge is made up as follows: 2019 £'000
2018 £'000
Current tax: UK Corporation tax on profits for the period Adjustment in respect of previous periods Total current tax Deferred tax: Origination and reversal of timing differences Effect of changes in tax rates Total deferred tax
-
10 10
25 25
(104) (104)
Total tax per income statement
25
(94)
2019 £'000
2018 £’000
(1,797)
(4,539)
(341)
(862)
2 (245) (94)
52 59
1,480
217
(777) 25
441 (94)
b) Tax charge reconciled to total comprehensive income The tax charge is made up as follows:
Loss on ordinary activities before tax Loss on ordinary activities multiplied by standard rate of corporation tax of 19% Fixed asset timing differences Effects of not taxable income and expenditure Tax rate changes Amounts (charged)/credited directly to the statement of comprehensive income or otherwise transferred Deferred tax not recognised Tax charge for the period
c) Factors affecting future tax charges The standard rate of UK corporation tax for the period was 19.00% (2018: 19.00%). A reduction in the rate to 17% from 1 April 2020 was substantively enacted prior to the balance sheet date.
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36
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
9 .Tangible Assets Total Equipment ÂŁ'000
Group Cost: At 1 April 2018 Additions Net transfer to/from inventory Disposals and write offs At 31 March 2019 Depreciation and impairment: At 1 April 2018 Provided during the year Net transfer to/from inventory Disposals and write offs At 31 March 2019 Net book value: At 31 March 2019 As at 1 April 2018
6,925 1,404 1,790 (2,268) 7,851 (3,711) (1,476) 240 1,563 (3,384) 4,467 3,214
Total Equipment ÂŁ'000
Company Cost: At 1 April 2018 Additions Net transfer to/from inventory Disposals At 31 March 2019 Depreciation and impairment: At 1 April 2018 Provided during the year Net transfer to/from inventory Disposals At 31 March 2019 Net book value: As at 31 March 2019 As at 1 April 2018
3,918 1,313 977 (986) 5,222 (1,970) (895) 112 629 (2,124) 3,098 1,948
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37
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
9 .Tangible Assets (continued) Included within the group net book value of £4,467,000 is £159,000 (2018 - £258,000) relating to assets held under a finance lease. The depreciation charged to the financial statements in the year in respect of such assets amounted to £99,000 (2018 - £125,000). See note 1.5 for further information on fixed asset transactions and presentation.
10 . Investments 2019 £'000
2018 £'000
Company Loans to other Group companies
3,900 3,900 3,900 3,900 Loans to group companies were made at prevailing rates on a fixed interest basis. The fair value of the investment is deemed to be the underlying loan principle.
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38
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
11 . Stock Group Raw materials and consumables Finished goods
2019 £'000
2018 £'000
156 381 537
141 344 485
Company Finished goods
182 182 The difference between purchase price or production cost of stocks and their replacement value is not material.
264 264
Stocks recognised as an expense in the period were £2,221,000 for the Group (2018: £1,587,000) and £486,000 for the parent (2018: £7,000). Stock values are shown net of a stock provision value of £21,000 (2018: £56,000).
12 . Debtors Group Amounts owed from NCC Trade debtors VAT debtor Prepayments and accrued income Tax asset
Company Amounts owed from YHN Group companies Amounts owed from NCC Trade debtors Prepayments and accrued income
Page 59
2019 £'000 3,564 1,297 1,412 288 6,561 2019 £'000 4,950 2,526 95 973 8,544
2018 £'000 8,906 1,429 63 832 313 11,543 2018 £'000 868 6,850 129 624 8,471
39
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
13 . Creditors: amounts falling due within one year Group Creditors and other accruals Other Tax and Social Security Amounts due to NCC Income in advance Interest accrual due to NCC Redundancy and other pay provisions Tax liability Amounts due in respect of finance leases held with NCC (Note 16)
Company Creditors and other accruals Other Tax and Social Security Amounts due to NCC Income in advance Amounts due to other YHN Group companies Interest accrual due to NCC Redundancy and other pay provisions Amounts due in respect of finance leases held with NCC (Note 16)
Page 60
2019 £'000 1,326 780 1,024 14 122 555 -
2018 £'000 1,360 1,048 1,704 8 122 1,842 10
88 3,909 2019 £'000 1,092 778 928 14 2,996 122 555
125 6,219 2018 £'000 1,201 678 708 8 518 122 1,842
88 6,573
125 5,202
40
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
14 . Creditors: amounts falling due after one year Group and Company Amounts due in respect of finance leases held with NCC (Note 16) Loans from NCC (Note 15)
2019 £'000
2018 £'000
57 6,500 6,557
145 6,500 6,645
15 . Loans 2018 2019 £'000 £'000 Group and Company 6,500 6,500 Loans from NCC 6,500 6,500 Interest is payable on amounts owed to parent undertakings at rates of 4.5% per annum. The loan is repayable in 2020 and is shown in Creditors falling due in more than one year.
16 . Other financial commitments The Group and Company use finance leases to acquire vehicles. Future minimum lease payments due under finance leases: Group and Company Within one year In two to five years In over five years Less: future interest charges Analysed: Creditors: amounts falling due within one year Creditors: amounts falling due in more than one year
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2019 £'000 93 65 158 (13) 145
2018 £'000 128 157 1 286 (16) 270
88 57
125 145
41
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
17 . Financial instruments 2019 £'000
Restated 2018 £'000
Group financial liabilities measured at amortised cost: Obligations under finance lease (note 16) Loans from parent undertaking (note 15)
145 6,500
270 6,500
Group financial liabilities measured at cost: Trade creditors Interest payable Accruals
251 122 2,338
292 122 3,066
Group financial assets measured at cost: Trade debtors (note 12) Other debtors Cash
1,687 4,176 6,779
1,430 8,415 4,062
The 2018 figures have been restated to ensure the presentation of the note is compliant with FRS 102.
18 . Notes to the statement of cash flows a) Reconciliation of loss for the year to net cash flow from operating activities
Group loss for the year
2019 £'000 (1,822)
2018 £'000 (4,445)
Adjustments for non-cash items: Depreciation and amortisation of tangible fixed assets Net increase in fixed assets from stock transfers Impairment and write off of fixed assets Gain on disposal of tangible fixed assets Decrease/(increase) in debtors (Increase)/decrease in stocks (Decrease)/increase in creditors
1,476 (2,030) 698 (16) 4,822 (52) (2,050)
2,498 (953) 552 (35) (3,655) 228 2,659
296 630 (5) 2,630 (10) 4,567
306 570 (15) 2,920 (74) 556
Adjustments for investing or financing activities: Interest payable Interest on defined benefit pension net liability Interest receivable Difference between pension charge and cash contributions Corporation tax paid Net cash inflow from operating activities b) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand only.
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42
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
19 . Related party transactions Group During the year the Group entered into transactions in the ordinary course of business with other related parties. Entities with significant influence over the group Newcastle City Council (NCC) The Company is a local authority controlled company within the meaning of Part V of the Local Government and Housing Act 1989, being a company under the control of NCC. Copies of the financial statements are available on request from Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR. The Directors consider that NCC is the ultimate controlling party. With the exception of petty cash and some sundry income and expenditure transactions, all cash book payments and receipts are made via NCC's banking intermediaries, with the net balance owing to, or from, the City Council being disclosed as a current asset or liability as appropriate. Entities over which the group has joint control or significant influence Leazes Homes Limited For 9 months of the year ended 31 March 2019 Leazes Homes' Finance Director was also employed by YHN in the capacity of Assistant Director. YHN is also a major supplier to Leazes Homes Limited. Company The related parties of the parent company are the same as those considered for the Group with the addition of the other Group undertakings; Asfaleia Ltd and Abri Trading Ltd. The transactions entered into and the trading balances outstanding at 31 March for the Parent and Group are set out as follows:
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43
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
19 . Related party transactions (continued) Purchases Amounts from owed from related related party party £’000 £’000 £’000
Sales to related party
Amounts owed to related party £’000
Group Entities with significant influence over the group 2019 2018
28,497 29,051
4,462 4,660
3,564 8,906
7,791 8,596
Entities over which the group has joint control or significant influence 2019 2018
1,162 1,175
-
153 55
-
137 55
-
Company Entities over which the YHN has joint control or significant influence 2019 2018
917 966
-
Other group undertakings 2019 2018
3,787 6,615
Page 64
3,387 5,482
8,850 4,769
2,296 518
44
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
20 . Pensions The Company participates in the Tyne and Wear Pension Fund, which is a funded defined benefit scheme where contributions payable are held in a trust separately from the company. The main results and assumptions of the most recent valuation of the Tyne and Wear Pension Fund are as follows. Contributions to the scheme have been charged to the statement of comprehensive income on a cash basis. A qualified actuary has determined contribution rates on the basis of triennial valuations using the projected unit method. The actuaries determined that in order to meet the funding target, the contribution rate would be set at 14.6% for 2018-19 (2017-18: 14.6%). Under the requirements of FRS 102, the Company is required to account for and disclose further information on its share of assets and liabilities of the Tyne and Wear Pension Fund at the end of the accounting period. The valuation at 31 March 2016 has been updated by an independent qualified actuary on an FRS 102 basis as at 31 March 2019. As required by FRS 102 the defined benefit liabilities have been measured using the projected unit credit method. This information is set out below: 2019 2018 ÂŁ'm ÂŁ'm Fair value of scheme assets 158.45 146.43 Present value of scheme liabilities 179.46 171.97 Funded Status
(21.01)
(25.54)
2019 % 65.0 8.8 4.1 11.7 2.7 7.7 100.0
2018 % 67.0 8.5 4.0 11.7 3.7 5.1 100.0
The scheme assets are made up of the following allocations:
Equities Property Government Bonds Corporate Bonds Cash Other Total
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45
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
20 . Pensions (continued) The amounts recognised in the Group Statement of Comprehensive Income and in the Group Statement of Other Comprehensive Income for the Year are analysed as follows: 2019 £'m
2018 £'m
Current service cost
4.87
5.36
Past service costs
1.15
0.43
Interest on net defined benefit liability
0.63
0.57
Total recognised in the Statement of Comprehensive Income
6.65
6.36
8.47
2.84
(0.68)
(1.70)
7.79
1.14
2019 %
2018 %
2017 %
2.5 3.2 2.1 2.1 2.1 3.6
2.6 3.1 2.0 2.0 2.0 3.5
2.6 3.1 2.0 2.0 2.0 3.5
2019
2018
22.2 23.9 25.3 27.2
22.9 26.4 25.1 28.7
Recognised in the Statement of Comprehensive Income
Recognised in other comprehensive income Remeasurement Gains on assets taken to other comprehensive income Remeasurement Gains on liabilities taken to other comprehensive income Total amount recognised in other comprehensive income / (loss)
Main assumptions: Discount rate Inflation assumption (RPI) Inflation assumption (CPI) Rate of pension increase Pension accounts revaluation rate Rate of salary increases Mortality assumptions Post retirement mortality Retiring today at 65 – male Retiring today at 65 – female Future pensioners at 65 – male Future pensioners at 65 - female
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46
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
20 . Pensions (continued) Changes to the present value of the defined benefit obligations are analysed as follows: Opening defined benefit obligation at 1 April 2018 Current service cost Interest cost Contributions by participants Remeasurement gain on liabilities Net benefits paid out Past service cost Closing defined benefit obligation at 31 March 2019
2019 £'m 171.97 4.87 4.43 1.01 0.68 (4.65) 1.15 179.46
2018 £'m 162.40 5.36 4.20 1.10 1.70 (3.22) 0.43 171.97
2019 £'m 146.43 3.80 8.47 3.39 1.01 (4.65) 158.45
2018 £'m 139.21 3.63 2.84 2.87 1.10 (3.22) 146.43
2019 £'m 3.80 8.47 12.27
2018 £'m 3.63 2.84 6.47
Changes to the fair value of assets during the accounting period
Opening fair value of assets at 1 April Interest income on assets Remeasurement gain on assets Contributions by the employer Contributions by the participants Net benefits paid out Closing fair value of assets at 31 March Actual return on assets
Interest income on assets Gain on assets Net return
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47
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
21 . Contingent Liabilities Pension accounting In December 2018 the Court of Appeal ruled against the Government in the 'McCloud/Sargeant' judgment which found that the transitional protection arrangements put in place when the firefighters' and judges' pension schemes were reformed were age discriminatory. The ruling potentially has implications for all public sector schemes which reformed around the same time and could lead to members who were discriminated against being compensated. The transitional protections applied to all active members of public service schemes who were within 10 years of their Normal Pension Age on 1 April 2012. In relation to the LGPS, all members were moved into the new 2013 Scheme, but members within 10 years of normal retirement were given an underpin (or 'better of both') promise, so their benefits would be at least as valuable in terms of amount and when they could be drawn than if they had remained in the 2008 scheme. The Government has applied to the Supreme Court for permission to appeal the judgement. If the appeal in unsuccessful, the case would be referred back to the Employments Tribunal to agree what the remedy would be following appropriate consultation. For the purpose of reporting a contingent liability it would be prudent to assume the remedy would be equivalent to extending the 'best of both' underpin to all members. The Government Actuary's Department (GAD), under instruction of the LGPS Scheme Advisory Broad, has calculated a potential IAS19 accounting liability of 0.5% to 1% of defined benefit obligation, should the government be unsuccessful in its application to appeal or if the Court of Appeal's judgement is upheld by the Supreme Court and the agreed remedy for the LGPS is to extend the 'underpin' protections for all members. This estimate is at Scheme level encompassing a range of different assumptions typically used by employers to report pension costs. The eventual impact on Your Homes Newcastle's Accounts will depend on the remedy chosen by government to compensate members (which may not be the scenario modelled by the GAD); the membership profile (age/sex/salary) of Your Homes Newcastle's membership, and the assumptions used to report pension costs at time of recognition. The estimated liability makes a number of simplifications including: Assuming that all post2012 joiners would be compensated; assuming members would receive 'better of both' pre2014 Scheme benefits and post-2014 Scheme benefits by the time they reach their pre2014 normal pension age; assuming the underpin applies only to members on retirement, and not in the case of members voluntarily leaving the scheme before retirement, and assuming no compensation would be granted to employees who paid higher contribution rates in the 2015 Scheme.
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Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
21 . Contingent Liabilities Pension accounting - continued It is unknown what impact this will have in future employer contributions to the Tyne and Wear Pension Fund (the Fund). The Fund is a funded arrangement with employers paying contributions based on the results of regular local valuations, with the next valuation due as at 31 March 2019. Where additional liability arises in the Fund in relation to past service this will result in increased employer contribution rates in the future. Employer contributions towards future service may also increase if the 'better of both' test is extended beyond members within the 10 years of normal pension age at 1 April 2012. However, legislation requires government to monitor and control the underlying costs of the Scheme. If the cost of the LGPS, as monitored by both the LGPS Scheme Advisory Board and HM Treasury and separate legislation, moves out of line with the envelope cost set when the Scheme was reformed, this could trigger amendments to member benefits, or contributions, to bring the cost to the Employer/taxpayer back into line. The SAB in England and Wales had agreed recommended changes to member benefits and contributions to increase the cost by 0.9% of pay as required by the SAB cost management process. However, the Cost Management process across all of the public service schemes is currently on hold pending the outcome of the government's appeal to the McCloud judgement, so the net effect of both the McCloud judgement and the Cost Management processes is currently unknown. Guaranteed Minimum Pension (GMP) is a portion of pension that was accrued by individuals who were contracted out of the State Second Pension prior to 6 April 1997. All the public service schemes, including the LGPS were contracted out. Reforms to the State pension system on 6 April 2016 removed the facility by which central government paid top-up payments to members with GMP who reached State Pension Age after that date. Before 6 April 2016 the LGPS was not required to pay full CPI increases on GMPs, so the top up payments had ensured that both state and scheme pensions, when combined, kept pace with inflation. In March 2016 the government introduced an 'interim solution' which made the LGPS responsible for paying the full increases on GMPs for individuals reaching State Pension Age (SPA) from 5 April 2016 through 6 December 2018. This cost was accounted for in 2017. In January 2018 Government extended the interim solution to individuals reaching SPA before 5 April 2021, passing further cost to the LGPS. This has not yet been accounted for. Government policy is to fully index and equalise GMP pensions for men and women reaching SPA after 5 April 2021 but has not yet enacted this in legislation.
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49
Your Homes Newcastle Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements (continued) at 31 March 2019
21 . Contingent Liabilities Pension accounting - continued Separately, on 26 October 2018 the High Court ruled in the Lloyds Bank case that equalisation for the effect of unequal GMPs is required. The ruling confirmed that trustees have a duty 'to equalise benefits for men and women so as to alter the result which is at present produced in relation to GMPS'. HM Treasury have responded to confirm that public sector schemes already have a method to equalise guaranteed minimum pension benefits (through the interim solutions and commitment to pay full GMPs) and they do not plan to change their method as a result of that judgment. Aon, as the Fund's actuary has estimated that the potential IAS19 accounting liability of full GMP indexation (and equalisation) for members reaching SPA from 6 December 2018 to be in the region of 0.3% of the defined benefit obligation. This estimate had been calculated for a typical LGPS Fund and is indicative of an additional liabilty for a typical employer and does not reflect the individual characteristics of Your Homes Newcastle's membership. Costs could be higher for employers with a membership that is older than average (who predominantly accrued service between 1978 and 1997 when the GMPs were being accrued). The Fund is a funded arrangement with employers paying contributions based on the results of regular local valuations, with the next valuation due as at 31 March 2019. The 2019 valuation of the Fund is expected to include the liability of the second interim solution to April 2021. It is currently not known if the 2019 valuation will allow for indexation beyond 2021, as this will depend on the timing of any Scheme changes announced by HM Treasury and the Administering Authority's policy on reflecting the risk within contribution rates. Where an additional liability arises in the Fund in relation to past service this will result in increased employer contribution rates in the future. Legal cases Three claims for unfair dismissal have been lodged with an Employment Tribunal against the Company during the financial year. The company has disclaimed liability and is defending the action in all three cases. The cases will be heard in December 2019 and outcome of each is uncertain. The directors are of the view that no material losses will arise in respect of the legal claims at the date of these financial statements.
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50
Abri Trading Limited
Abri Trading Limited A YHN Group Company
Annual Report and Financial Statements Year 2018-9
Page 71
1
Abri Trading Limited
Contents
Page
Corporate Information: Board Members, Company Secretary and Advisors
3
Strategic Report
4
Directors’ Report
6
Independent Auditor’s Report
9
Financial Statements
12
Notes to the Financial Statements
14
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2
Abri Trading Limited
Corporate Information Board Members, Company Secretary and Advisors Position Directors
Chair of the Group Audit and Risk Committee Company Secretary
Registered Office Address Company registration Internal Auditors
Name Joyce McCarty
Appointed 22 September 2015
Paul Scope
22 September 2015
Malcolm Page
19 September 2017
Richard Clark
19 September 2017
Jill Davison
25 July 2017
YHN House, Benton Park Road, Newcastle upon Tyne, Tyne and Wear, NE7 7LX The Company is incorporated as a private Company limited by shares under the Companies Act (Company number 09772167) Newcastle City Council Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
Corporate Information External Auditors
Ernst and Young LLP Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JD
Solicitor
Mr John Softly, Chief Legal Officer Chief Executive’s Office, Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
Trading names
“Abri Trading”, “Palatine Beds”, “1907”, “Newcastle Furniture Service (NFS)”.
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3
Abri Trading Limited
Strategic Report The members of the Board of Abri Trading Limited (trading as ‘Newcastle Furniture Service’, ‘Palatine Beds’ and ‘1907 Beds’) present their strategic report for the year ended 31 March 2019. The Company has chosen in accordance with Section 414C(ii) of the Companies Act 2006 to set out in this report the following which the Directors believe to be of strategic importance: • •
Review of the business Principal risks and uncertainties
Principal business The principal activity of Abri Trading Limited is the rental and sale of home furnishings to social landlords and others. The purpose and objectives are guided by those of the Parent Company, Your Homes Newcastle Limited. Review of the Year Abri Trading Limited was incorporated on 10 September 2015, and commenced trading on 1 October 2015 following a transfer of business and assets from Newcastle City Council and Your Homes Newcastle Limited. During the 2018-19 trading year, the Company has performed below budgetary expectations as it has continued to respond to the pressures associated with austerity and Welfare Reform. The rate of sales downturn for NFS, due to a combination of a decline in customers and customers choosing smaller furniture packs, has slowed compared to the previous year. Overall profit has increased compared to the previous year predominately as a result of comparatively lower depreciation costs. The result for the year after taxation amounted to £308,000 (2017-18: £120,000). Principal Risks and Uncertainties The risks facing the Company are considered at each quarterly Group Audit and Risk Committee meeting, with a formal update of the Risk Register taking place annually at the Board. The Board considers its risks to be commercial and financial. The commercial risks relate to loss of business through increased competition, or customers’ reduced ability to afford our products. The financial risks are set out below. Financial Risk Management Policy Abri Trading Limited holds no complex financial instruments. Cash balances generated from trade are initially held at Newcastle City Council before settlement.
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4
Abri Trading Limited
Strategic Report (Continued) Financial Risk Management Policy (Continued) Other financial assets and liabilities, such as trade creditors and related party balances, arise directly from the Company's operating activities. The main risks associated with Abri Trading Limited’s financial assets and liabilities are set out below. Interest Rate Risk Financial assets, liabilities, interest income and cash flows can be affected by movements in interest rates. The Board Members do not consider there to be any significant exposure. The Company’s loans have fixed interest rates. Credit Risk Individual exposures and overdue debts are monitored with customers subject to credit limits to ensure that Abri Trading Limited's exposure to bad debts is not significant. Liquidity Risk Abri Trading Limited’s short term liquidity risks are reduced as its daily cash transactions are managed as part of the larger Newcastle City Council bank balances. Long term liquidity risks are managed through robust business modelling. Foreign Currency Risk Abri Trading Limited’s foreign currency transactions are of low value. All of its activities take place within the United Kingdom and consequently, the Company is not exposed to any significant foreign currency risk. The Strategic Report was approved by the Board on 30 July 2019 and signed on its behalf on that date by:
Joyce McCarty Director
Jill Davison Company Secretary
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5
Abri Trading Limited
Directors’ Report The members of the Board of Abri Trading Limited present their Directors’ Report for the year ended 31 March 2019. Interests of Board Members Abri Trading Limited has three Board members and is part of a Common Purpose Board arrangement, although there are nominated Board members of Abri Trading Limited as set out on page 1. Share structure At incorporation a single ordinary share was issued to Your Homes Newcastle Limited (Your Homes Newcastle, the Parent). No share issues or changes of ownership have occurred since. The Directors recommend a nil dividend for the year. Complex financial instruments Abri Trading Limited holds no complex financial instruments. Indemnities granted to Directors No indemnities have been granted to Directors during the financial year. Employee Communication and Involvement Abri Trading Limited does not employ any staff. Staff resources are provided by Your Homes Newcastle through service agreements. The Your Homes Newcastle Group is committed to the involvement of its entire staff in the development and improvement of all areas of work and understands the importance of effective communication to achieve change. The organisation employs a number of different approaches to encourage staff involvement and communication. Statement of Directors’ Responsibilities The directors are responsible for preparing the Strategic Report, Directors’ Report and financial statements in accordance with applicable law and regulations. Company law requires the Directors 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 law).
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6
Abri Trading Limited
Directors’ Report (Continued) Statement of Directors’ Responsibilities (Continued) Under Company law 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 of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: • • •
•
Select suitable accounting policies and then apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors takes its responsibilities in relation to bribery seriously and continues to support initiatives to emphasise the organisation’s anti-corruption culture. Going Concern Having made enquiries, the Board consider that the Company’s current and future prospects and its availability of financing are adequate to enable it to continue in business for the foreseeable future and that they are also satisfied that the Company can continue to pay its liabilities as they fall due for a period of at least 12 months from the signing of the audit opinion of these financial statements (i.e. to August 2020). The Board considers that a robust going concern assessment process was undertaken and the results discussed and challenged formally at the Group Audit and Risk Committee on 11 July 2019. At that meeting the Group Audit and Risk Committee recommended the Board’s approval of these annual accounts. The process for determining whether or not the Company is a going concern involved a number of considerations including an assessment of the financial
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7
Abri Trading Limited
Directors’ Report (Continued) budgets and forecasts to March 2020, the continued and possible future effects of Welfare Reform, and other trading conditions. This period is considered to be the Going Concern (Continued) ‘foreseeable future’ as required for this ongoing assessment only and is in accordance with Company law and accounting rules. The assessment also considered the solvency and liquidity risks involved in delivering the financial forecasts for the foreseeable future. Future Developments The Directors will continue to look for opportunities to grow the business and mitigate the budget pressures felt by our customers. The actions from a recent review of the business will be carried out to reduce costs and improve information systems. Events Since Balance Sheet Date The Board considers that there have been no events since the year end that have had a significant effect on Abri Trading Limited’s financial position. Disclosure of information to auditors All the Board members, appointed at the date upon which these report and accounts were approved, were not aware of any relevant audit information which was required by the auditors in connection with the preparation of the report and accounts, of which the auditor is unaware. Having made enquiries of fellow Board members and Your Homes Newcastle’s auditors, each Board member has taken all the steps that he/she is obliged to take as a member of the Board in order to make himself/herself aware of any relevant audit information and to establish that the auditor is aware of that information. Auditors EY LLP are the external auditors of the Your Homes Newcastle Group for the period 2018-19. EY LLP have indicated that they are willing to continue in this role. The report of the members of the Board was considered and approved by the Board on 30 July 2019 and signed on its behalf on 30 July 2019 by:
Joyce McCarty Director
Jill Davison Company Secretary
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8
Abri Trading Limited INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ABRI TRADING LIMITED Opinion We have audited the financial statements of Abri Trading Limited (the company) for the year ended 31 March 2019 which comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Financial Position and the related notes 1 to 18, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK” (United Kingdom Generally Accepted Accounting Practice). In our opinion, the financial statements: • • •
give a true and fair view of the company’s affairs as at 31 March 2019 and of its profit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • •
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
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9
Abri Trading Limited Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • •
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or Directors’ Report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • •
adequate accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.
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10
Abri Trading Limited Responsibilities of directors As explained more fully in the Statement of Directors’ Responsibilities set out on pages 6 to 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Nicola Wright (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Newcastle upon Tyne 30 July 2019
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11
Abri Trading Limited Annual Report and Financial Statements
2018-19
Financial Statements
Statement of Comprehensive Income for the 12 month period ended 31 March 2019 2019 £'000
2018 £'000
2 3 4
6,663 (6,177) 486
7,472 (7,314) 158
Gain on disposal of fixed assets Interest payable and other charges Profit on ordinary activities before taxation
6
14 (167) 333
35 (167) 26
Taxation
8
(25)
94
308 308
120 120
Note Income Operating costs Operating Profit
Profit for the financial period Total comprehensive income for the period All amounts relate to continuing activities.
Statement of Changes in Equity for the 12 month period ended 31 March 2019
Balance as at 31 March 2017 Total comprehensive income for the year
Profit and loss reserve £000 1,518 120
Total £000 1,518 120
Balance as at 31 March 2018 Total comprehensive income for the year
1,638 308
1,638 308
Balance as at 31 March 2019
1,946
1,946
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12
Abri Trading Limited Annual Report and Financial Statements
2018-19
Financial Statements (continued)
Statement of Financial Position as at 31 March 2019
Registered company: 9772167 2019 ÂŁ'000
2018 ÂŁ'000
9
1,238 1,238
1,150 1,150
10 11
312 3,059 3,032 6,403
184 3,643 1,148 4,975
12
(1,988) 4,415 5,653
(780) 4,195 5,345
13
(3,707)
(3,707)
1,946
1,638
1,946 1,946
1,638 1,638
Note Fixed assets Tangible assets Current assets Stocks Debtors: amounts falling due within one year Cash at bank and in hand
Less Creditors: amounts falling due in less than one year Net current assets Total assets less current liabilities Creditors: amounts falling due in more than one year Total net assets Reserves and capital Share capital Profit and loss reserve
15 16
These financial statements were approved by the Board and authorised for issue on 30 July 2019. Signed on behalf of the Board
Director
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13
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies 1.1 Statement of Compliance Abri Trading Limited (‘the Company’) is incorporated and registered in Newcastle upon Tyne, England under the Companies Act 2006 (Registered Number 9772167). The Registered Office is YHN House, Benton Park Road, Newcastle upon Tyne, NE7 7LX. The principal place of business is YHN House, Benton Park Road, Newcastle upon Tyne, NE7 7LX. Abri Trading Limited is a company limited by shares. The sole shareholder is Your Homes Newcastle Ltd, a company controlled by Newcastle City Council. The financial statements have been prepared on a going concern basis and in compliance with FRS102 as it applies to the financial statements of the company for the period ended 31 March 2019. The financial statements have been prepared for the 12 months to 31 March 2019 in alignment with the accounting period of the parent company Your Homes Newcastle Ltd. In these financial statements, the Company has applied the exemptions available under FRS 102 in respect of the following disclosures: • the requirements of Section 4 Statement of Financial Position paragraph 4.12(a)(iv) • the requirements of Section 7 Statement of Cash Flows • the requirements of Section 11 Basic Financial Instruments paragraphs 11.39 to 11.48A • the requirements of Section 33 Related Party Disclosure paragraph 33.7 The group in which the results of the Company are consolidated is Your Home Newcastle Limited. Consolidated financial statements of Your Homes Newcastle Limited are available on request from Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR. 1.2 Basis of preparation The financial statements were authorised for issue by the Board of Directors on 30 July 2019. The financial statements have been prepared in accordance with applicable accounting standards. The financial statements are prepared in sterling which is the functional currency of the Company and rounded to the nearest £’000. 1.3 Judgements and key sources of estimation uncertainty The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date, and the amounts reported for revenues and expenses during the period. However, the nature of estimation means that actual outcomes could differ from those estimates.
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14
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies (continued) 1.3 Judgements and key sources of estimation uncertainty (continued) The following judgements and sources of estimation uncertainty have had the most significant effect on the financial statements: Impairment of non-financial assets Where there are indicators of impairment of individual assets, the Company performs impairment tests based on fair value less costs to sell or a value in use calculation. The fair value less costs to sell is based on observable market prices less incremental costs for disposing of an asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next three years and does not include significant future investments that will enhance the performance of the cash generating asset that is being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and growth rate used for extrapolation purposes. Recoverability of stock and debtors Where there are indicators of slow moving or obsolete stock or slow recovery of debtors, the Company assesses whether a provision is required based on the assessment of the individual items and historic knowledge. Fixed asset accounting Overview of NFS (Newcastle Furniture Service) Brand Abri Trading’s fixed assets are comprised of items of furniture rented to landlords under the NFS brand. NFS operations are split between Your Homes Newcastle and Abri Trading. Resources and fixed assets employed to deliver furniture services to Newcastle City Council are recorded in the Parent’s accounts. Commercial contracts with other landlords are delivered by Abri Trading. Asset purchases and transfers All furniture is initially purchased by the parent undertaking, where it is held at cost price as inventory. Subsequently, when an item of furniture is rented out to an Abri Trading customer, a purchase from the parent is recorded. The furniture is then held with Abri Trading as a fixed asset and held at historic cost less depreciation. The sale is not expensed in the Parent’s income statement. If a customer returns an item of furniture, an assessment is made of the condition of the asset and it is either 1. disposed and recorded as a disposal with no proceeds, or 2. returned to the Parent’s stock where it is held at the net book value of the asset at the time of its return. A fixed asset disposal is recorded.
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15
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies (continued) 1.3 Judgements and key sources of estimation uncertainty (continued) Fixed asset accounting (continued) Presentation The YHN Group uses a global fixed asset register across NFS to control the assets of Abri Trading and the Parent undertaking. To clarify the transactions to the reader and to aid the reconciliation of the Financial Statements to the asset register, additional lines have been added to the fixed asset register to show the additions and disposals within the Group. Stocks Stocks in Abri Trading consist solely of the raw materials and finished goods relating to Palatine Beds. There are no inventory holdings in relation to NFS operations, as these are owned by the Parent undertaking.
1.4 Significant accounting policies Revenue recognition Revenue is recognised to the extent that the Company obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and VAT. The following criteria must also be met before revenue is recognised: Rendering of services Revenue from the provision of management services is recognised, according to the individual contract, by: ¡ Fixed fee per period; or ¡ Reference to labour hours incurred to date; or ¡ Fee per unit managed. Where contract income cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. Grants Grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants are of a revenue nature and as such are credited to income so as to match them with the expenditure to which they relate.
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16
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies (continued) 1.4 Significant accounting policies (continued) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended. Depreciation is provided on all property, plant and equipment, at rates calculated to write off the asset on a systematic basis over its expected useful life as follows: ·
Tenant furniture packs
- over 1.5 to 4 years
The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Impairment of non-financial assets The Company assesses at each reporting date whether an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. The recoverable amount of an asset or cash generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount through an impairment in profit and loss unless the asset is carried at a revalued amount where the impairment loss of a revalued asset is a revaluation decrease. An impairment loss recognised for all assets is reversed in a subsequent period if and only if the reasons for the impairment loss have ceased to apply. Stocks Stocks are stated at the lower of cost and net realisable value. Costs include all costs incurred in bringing each product to its present location and condition, as follows: · Raw materials, consumables and goods for resale - purchase cost on a first-in, first-out basis · Work in progress and finished goods – cost of direct materials and labour plus attributable overheads based on a normal level of activity Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal. All stocks related to operations at Palatine Beds. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.
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17
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
1. Accounting Policies (continued) 1.4 Significant accounting policies (continued) Short-term debtors and creditors Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from the impairment are recognised in the income statement in other operating expenses. Deferred Tax Deferred tax is recognised in respect of all timing differences which are differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements except that: ¡ Where there are differences between amounts that can be deducted for tax for assets and liabilities compared with the amounts that are recognised for those assets and liabilities in a business combination a deferred tax asset shall be recognised; and ¡ Unrelieved tax losses and other deferred tax assets are recognised to the extent that the directors consider that it probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
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18
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
2 . Analysis of Turnover Income from Furniture Rentals Sales of goods Other income
2019 £'000 3,935 993 1,735 6,663
2018 £'000 4,418 2,825 229 7,472
2019 £'000 1,249 567 1,281 132 53 76 1,767 11 530 311 200 6,177
2018 £'000 1,363 556 1,506 134 8 74 1,892 30 1,295 206 250 7,314
3 . Analysis of Operating Costs
Recharges from Parent undertaking - direct staff costs Recharges from Parent undertaking - direct non-staff costs Recharges from Parent undertaking - support costs Premises costs Transport costs Supplies & services Materials and purchases Bad debt expense Depreciation Stock expensed Gift aid
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19
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
4 . Operating Profit 2019 £'000 530 2,078
Depreciation of tangible assets Stock expensed during the year Auditors' fees For audit services For non audit services
2018 £'000 1,501 1,715
5 3
5 1
5 . Employee Information There are no employees within Abri Trading Limited.
6 . Interest Payable 2019 £'000 167
Interest on group loans
2018 £'000 167
7 . Key Management Personnel All directors and certain senior employees who have authority and responsibility for planning, directing and controlling the activities of the Group are considered to be key management personnel. The Key Management Personnel of Abri Trading are employees or directors of the Parent, and do not receive remuneration from Abri Trading. The recharge of related costs paid by Abri Trading during the year totalled £48k (2018: £49k).
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20
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
8 . Tax (a) Tax on surplus on ordinary activities The tax charge is made up as follows: 2019 £'000
2018 £'000
-
10 10
Deferred tax: Origination and reversal of timing differences Effect of changes in tax rates Total deferred tax
25 25
(104) (104)
Total tax per income statement
25
(94)
Current tax: UK Corporation tax on profits for the period Adjustment in respect of previous periods Total current tax
(b) Tax charge reconciled to total comprehensive income The tax charge is made up as follows: Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax of 19% Effects of group relief Tax rate changes Tax charge for the period (c) Unprovided deferred tax (asset)/liability Fixed asset timing differences At 31 March 2019
2019 £'000 333
2018 £'000 26
63 (36) (3) 25
5 (111) 12 (94)
2019 £'000 -
2018 £'000 -
(d) Factors affecting future tax charges The standard rate of UK corporation tax for the period was 19.00% (2018 19.00%). A reduction in the rate to 17% from 1 April 2020 was substantively enacted prior to the balance sheet date and have been applied to the Company's deferred tax balance at the balance sheet date
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21
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
8 . Tax (continued) (e) Deferred tax The movement in the deferred taxation asset during the year was: At 1 April Statement of Comprehensive Income At 31 March The Company's asset for deferred taxation consists of the tax effect of timing differences in respect of: Fixed asset timing differences At 31 March
2019 £'000 (313) 25 (288)
2018 £'000 (209) (104) (313)
2019 £'000 (288) (288)
2018 £'000 (313) (313)
9 . Tangible assets Equipment £'000 Cost: At 1 April 2018 Additions Net transfer from parent undertaking Disposals At 31 March 2019
2,841 814 (1,288) 2,367
Depreciation and impairment: At 1 April 2018 Provided during the year Net transfer to parent undertaking Disposals At 31 March 2019
(1,691) (530) 123 969 (1,129)
Net book value: As at 31 March 2019
1,238
As at 1 April 2018
1,150
See note 1.3 for further information on fixed asset transactions and presentation.
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22
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
10 . Stocks Abri Trading's stocks comprise the raw materials and finished goods relating to sales of Palatine Beds. 2019 2018 £'000 £'000 Raw materials and consumables 156 141 Finished goods 156 43 312 184 Stocks recognised as an expense in the period were £2,078,000 (2018: £1,750,000) included in Operating Costs (Note 3). Stock values are shown net of a stock provision value of £11,000 (2018: £73,000).
11 . Debtors
Amounts owed from YHN Group companies Amounts owed from NCC Trade debtors Other debtors and prepayments Tax asset
Page 93
2019 £'000 352 873 1,125 421 288 3,059
2018 £'000 109 1,892 1,120 208 313 3,643
23
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
12 . Creditors: amounts falling due within one year
Amounts owed to YHN Group companies Amounts due to NCC Creditors and other accruals Other tax and social security Tax liability
2019 £'000 1,666 96 226 1,988
2018 £'000 333 67 370 10 780
13 . Creditors: amounts falling due in more than one year 2019 2018 £'000 £'000 Loans payable to parent undertaking 3,707 3,707 3,707 3,707 Interest is payable on amounts owed to parent undertakings at rates of 4.5% per annum. The loan is repayable in 2020 and is shown in Creditors falling due in more than one year.
14 . Financial Instruments 2019 £'000
Restated 2018 £'000
Financial liabilities measured at amortised cost: Loans from parent undertaking
3,707
3,707
Financial liabilities measured at cost: Trade Payables Accruals
51 1,937
31 750
Financial assets measured at cost: Trade Receivables Other debtors Cash
1,444 1,483 3,032
1,135 2,547 1,148
The 2018 figures have been restated to ensure the presentation of the note is compliant with FRS 102.
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24
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
15 . Share Capital 2019 £1 £1
Unpaid share capital
2018 £1 £1
One share of £1 was issued to the parent Your Homes Newcastle at the time of incorporation. No further issues or changes of ownership have occurred to 31 March 2019.
16 . Reserves Profit and loss reserve This reserve represents the cumulative comprehensive income recognised in the Company, less any dividends paid.
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25
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
17 . Related party transactions During the year the Group entered into transactions, in the ordinary course of business, with other related parties. Entities with significant influence over the group Newcastle City Council (NCC) The Directors consider that NCC is the ultimate controlling party. With the exception of petty cash transactions, all cash book payments and receipts are made via NCC's banking intermediaries with the net balance owing to or from the City Council being disclosed as a current asset or liability as appropriate. Entities over which the group has joint control or significant influence Leazes Homes Limited For 9 months of the year ended 31 March 2019 Leazes Homes' Finance Director was also employed by YHN in the capacity of Assistant Director. YHN is also a major supplier to Leazes Homes Limited. Othe group companies The YHN Group consists of the Parent Your Homes Newcastle, and the subsidiary undertakings Abri Trading Ltd and Asfaleia Ltd.
Transactions with related parties during the year were as follows: Purchases Amounts Sales to from owed from related related related party party party £’000 £’000 £’000 Entities with significant influence over the group 2019 724 302 873 2018 987 142 1,892 Entities over which the group has joint control or significant influence 2019 2018
245 209
Page 96
-
Amounts owed to related party £’000
96 -
9 -
-
26
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
17 . Related party transactions - continued
Sales to related party £’000
Purchases Amounts from owed from related related party party £’000 £’000
Amounts owed to related party £’000
Parent undertakings 2019 2018
393 508
234 170
352 109
5,373 4,042
-
-
-
-
Other group undertakings 2019 2018
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27
Abri Trading Limited Annual Report and Financial Statements
2018-19
Notes to the Financial Statements at 31 March 2019
18 . Parent undertaking and controlling party The Company’s immediate parent undertaking is Your Homes Newcastle Limited, a Company incorporated in England. Your Homes Newcastle Limited is the smallest group in which Abri Trading Limited is consolidated within. Consolidated financial statements of Your Homes Newcastle Limited are available on request from the Company Secretary, YHN House, Benton Park Road, Newcastle NE7 7LX. The Company’s ultimate parent undertaking and controlling party is Newcastle City Council. Newcastle City Council is the largest group in which Abri Trading Limited is consolidated within. Consolidated financial statements are available on request from available on request from Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR.
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28
Asfaleia Limited (Community Benefit Society)
A YHN Group Subsidiary
Trustees’ report and financial statements For the year to 31 March 2019
Financial Conduct Authority Registration No: 7221
Page 99
1
Contents
Page
Corporate Information: Board members, Company Secretary and Advisors
3
Chair’s Report
4
Structure, Governance and Management and Objectives and Activities
5
Trustees’ Report
7
Independent Auditor’s Report
13
Financial Statements
16
Notes to the Financial Statements
19
Page 100
2
Corporate Information Board members, Company Secretary and Advisors Position
Name
Appointed
Chair
Steve Bramwell
19 September 2017
Independent board member
Rachel Taylor
19 September 2017
Dennis Hall
19 September 2017
YHN nominated board member
Doreen Huddart
3 December 2015
Helen Simpson
19 September 2017
Company Secretary
Jill Davison
Registered Office Address
YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX
Company registration
A Community Benefit Society registered with the Financial Conduct Authority (registration number 7221)
Internal Auditors
Newcastle City Council Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
External Auditors
Ernst and Young LLP Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JD
Solicitor
Mr John Softly, Assistant Director – Legal Services Chief Executive’s Office, Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
Trading names
“Asfaleia”, “Ostara”
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3
Chair’s Report This report provides a summary of the activity of Asfaleia Limited (Asfaleia) for the year ended 31 March 2019. Asfaleia was registered as a Community Benefit Society on 5 October 2015 under the Co-operative and Community Benefit Societies Act 2014 with the Financial Conduct Authority (FCA). Your Homes Newcastle Limited is the sole member, as outlined in the Rules of the organisation. As a Community Benefit Society, Asfaleia can receive gift aid payments from the commercial profits of Abri Trading Limited without risk of incurring Corporation Tax. Other income sources for Asfaleia include: • • • •
Sub-contract income from YHN Telecare income Income via grants Income via Newcastle City Council for specific projects
During the year, the Board met quarterly, with a focus on the finances and performance of Asfaleia services, and the development of a business plan for Ostara. To aid their understanding of the services provided by Asfaleia, members have also spent time with officers who work in these areas, taken part in tours of the range of schemes in the city, as well as receiving briefings and presentations over the year to develop their knowledge of the services. Asfaleia had a positive year, meeting or exceeding the majority of its performance targets set. The Society recorded a small in year deficit which was significantly ahead of budget. Further detail is set out in the Trustees’ Report below. Both the Board and officers have worked well to help make positive progress with Ostara, developing the business plan and monitoring an action plan to ensure its success as a valuable service to customers. Since October 2015, we have built a sound foundation for the continuing development of a young but thriving enterprise. I am pleased to pay tribute to all of the staff who have contributed to our achievements and to my fellow Trustees and Board members for their support, counsel and guidance.
Steve Bramwell Chair
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Structure, Governance and Management and Objectives and Activities Organisational Structure Asfaleia was registered as a Community Benefit Society on 5 October 2015 under the Co-operative and Community Benefit Societies Act 2014 with the Financial Conduct Authority (FCA). As outlined in the Rules, the Board members are the shareholders of Asfaleia Limited, each holding one share. No other membership is admitted. Asfaleia Limited is a subsidiary of Your Homes Newcastle Limited, which owns a minority Shareholding in Asfaleia. Your Homes Newcastle Limited is a company registered in England that is controlled by Newcastle City Council. Governance and Management Governing Document Asfaleia Limited is a Community Benefit Society registered with the Financial Conduct Authority (registration number 7221). The Rules of Asfaleia Limited set out its governance arrangements. Appointment of Trustees The Rules require the independent members of the Board to be in the majority; with up to three nominees from the Board of Your Homes Newcastle Limited and up to four independent members, including the Chair. The independent members are appointed through an open, public recruitment process, which assesses candidates against a skills and experience matrix in addition to an interview. Trustee Induction and Training New Trustees receive an orientation which briefs them on their legal obligations under charity and company law, the Charity Commission guidance on public benefit, the content of the Rules, the Board and decision-making processes, the business plan and recent financial performance of the Society. Trustees are encouraged to attend appropriate external training events where these will facilitate the undertaking of their role. Organisation The Board, which can have up to seven Members, administers the Society. The Board normally meets quarterly. The audit function is carried out by the YHN Group Audit and Risk Committee. The management staff are seconded from YHN and the principles of the scheme of delegation for YHN are applied within Asfaleia. In
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summary, the strategic decisions are reserved to the Board, while the day to day management of the organisation’s activities is delegated to appointed managers. Aims and Objectives The aims of the organisation are aligned to and flow from its objects, namely the objects (purposes) of the Society are to benefit the public by: i)
the provision of relief by reason of poverty, homelessness, youth, age, family circumstances, unemployment, ill-health or any mental or physical disability; and
ii)
the promotion of education and training.
Public Benefit The Trustees confirm that in the course of their considerations throughout the year they have had regard to the Charity Commission guidance on public benefit. Our Activities Asfaleia is responsible for the provision of the activities of Support and Progression (formerly Advice and Support, Young People’s Service), Ostara (previously CCASCommunity Care Alarm Service), Housing Plus (formerly Sheltered Housing) and Employability. These services are provided in the context of contracts with Your Homes Newcastle Limited and the Ostara service is also made available to the wider public. Related Parties and Co-operation with Other Organisations Any connection between a Trustee or a senior manager of the Society with any supplier or contractor with which Asfaleia conducts any business must be disclosed to the Board of Trustees in the same way as other contractual relationships with a related party. In the current year no such related party transactions were reported. Pay Policy for Senior Staff The directors consider the Board of directors, who are the Trustees, and the senior management team, comprise the key management personnel of the Society in charge of directing and controlling, running and operating Asfaleia on a day to day basis. Board members receive an allowance of £3,000 per annum, with the Chair receiving an additional £1,000. Details of directors’ expenses and related party transactions are disclosed in note 11 to the accounts. The pay of the senior staff, who are seconded from YHN, falls under the remit of the YHN Board.
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Trustees’ Report The Trustees and Members of the Board of Asfaleia present their annual report together with the financial statements of the Society for the year ending 31 March 2019, which are also prepared to meet the duty to prepare revenue accounts under the Cooperative and Community Benefit Society Act 2014. The financial statements comply with the Charities Act 2011, the Companies Act 2006, the Rules of Asfaleia Limited and Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) (effective 1 January 2015). Review of the Year Financial Review This year has seen a strong financial performance by Asfaleia. The Society recorded a small in year deficit which was significantly ahead of budget. A major focus area has been the performance of Ostara, the Telecare alarm service. Following a fall in Ostara customer numbers during 2017/18 there was concern for the financial viability of the business and a business plan was put into place by the Management Team in Quarter 1, 2018/19. The business plan included an improvement plan and a number of performance targets specifically relating to the Ostara Service. The business is performing well against this plan, achieving an increase in customer numbers during the year and meeting financial targets. The Trustees receive a quarterly report and action plan to monitor performance. Financial Performance and Key Performance Indicators Asfaleia’s income sources include: • • •
Sub-contract income from YHN; Telecare income (Ostara), i.e. payments received from customers of the community alarm service; and Other income from Newcastle City Council for the supply and installation of equipment.
As a Community Benefit Society, Asfaleia can receive Gift Aid payments, including from the commercial profits of Abri Trading Ltd, a subsidiary of Your Homes Newcastle. The income and expenditure position at 31 March 2019 was £(6,000).
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The headline 2018-19 performance for Asfaleia services against the agreed key performance indicators was as follows: Service Area Reduce rent arrears for customers supported by Advice and support Voids rent loss from sheltered housing not to exceed Tenancy turnover from sheltered housing not to exceed Percentage of tenancies sustained which are support by Asfaleia services Percentage of rent collected from sheltered housing Percentage of Your Homes Your Jobs trainees and YHN apprentices to move into education, training or employment
2018/19 Target £150
Performance against target £151.82
3.44%
2.56%
12%
14.06%
99%
99.5%
100% 85%
99.65% 87.5%
Principal Risk and Uncertainties The organisation has a risk register throughout the year that is reviewed on a quarterly basis by the Group Audit and Risk Committee. Controls and additional improvement actions implemented during the year by the services to manage risk included an improvement plan in place to drive improvements within the Ostara service to help ensure continuing financial viability. Risk Management The Trustees have a risk management strategy which comprises: • • •
An annual review of the principal risks and uncertainties that the Society faces; The establishment of policies, systems and procedures to mitigate those risks identified in the annual review; and The implementation of procedures designed to minimise or manage any potential impact on the Society should those risks materialise.
This work has identified that financial sustainability is the major financial risk. A key element in the management of financial risk is a regular review of available liquid funds to settle debts as they fall due, regular liaison with the bank, and active management of trade debtors and creditors balances to ensure sufficient working capital is held.
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Identified non-financial risks include fire, health & safety, and recruitment. These risks are managed through robust policies and procedures and regular training for staff. Financial Risk Management Policy Asfaleia Limited holds no complex financial instruments. Cash balances generated from activities are initially held at Newcastle City Council before settlement. Other financial assets and liabilities, such as trade creditors and related party balances, arise directly from the Society's operating activities. The main risks associated with financial assets and liabilities are set out below. Interest Rate Risk Financial assets, liabilities, interest income and cash flows can be affected by movements in interest rates. The Board Members do not consider there to be any significant exposure. The Society’s loans have fixed interest rates. Investment Powers and Policy The Rules of Asfaleia state that the funds of or monies borrowed by the Society (Asfaleia) may be invested by the Board in such manner as it determines. Asfaleia currently has no such investments, and cash balances are held at bank. Reserves Policy and Going Concern Reserves are needed to bridge the gap between the spending and receiving of income and to cover any unforeseen expenditure requirements. The Gift Aid received from Abri Trading Limited optimises the balance between tax efficiencies and the need for reserve levels to be balanced across the Group. The Trustees consider that the ideal level of reserves as at 31 March 2019 would be £333,000, as the table below illustrates, balances are in excess of this: Closing reserves at 31 March 2019 Target reserves
390,000 333,000
These reserves are all unrestricted, and no commitment has been made against them. Going Concern The Trustees have reviewed the circumstances of Asfaleia and in particular the availability of the Gift Aid from Abri Trading and the other sources of income described in the financial statements and consider that adequate resources continue to be available to fund the activities of the organisation for the foreseeable future. The Trustees are of the view that Asfaleia is a going concern.
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Plans for Future Periods The Trustees are pleased to set out here the outlook for the 2019-20 financial year, by service. Support and Progression Our focus over the next 12 months will be to build on our offer of delivering effective: • • • •
Pathways into independent tenancies for vulnerable customers Tenancy sustainment and homeless prevention Benefit and debt advice Refugee resettlement
In particular we will be developing a housing first offer for a small group of vulnerable adults with complex needs. We will be offering immigration advice for the first time with our newly granted permissions from the Office of the Immigration Service Commissioner (OISC) in order to assist our tenants who are EU Nationals to gain their settled status to remain in the UK and continue to be able to access public funds. We will also be exploring, in partnership with the Council, the possibility of resettling more unaccompanied minors from UN refugee camps. Housing Plus Housing Plus manage accommodation for older people and specialist accommodation (including Extra Care, Learning Disability) and Ostara. Future key priorities for this service area include: • • • • •
Develop and implement the Housing Plus vision with a flexible service offer for older people to support independent living Prevent homelessness and sustain tenancies by providing appropriate support to vulnerable individuals and households Provide a responsive, flexible support service to reduce admissions to residential care and nursing homes Work closely with partners in the implementation and allocation of new build and remodelled schemes, ensuring that they meet the needs of vulnerable residents in the City Work closely with partners to contribute towards meeting health and social needs across the City
Employability The Employability team will continue to be mindful of the changing labour market, tailoring specific support and targeting areas of under representation. Whilst maintaining and developing current partnerships with organisations, new
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opportunities will be explored for employment, training and courses with local businesses. They will focus on developing employer engagement, working with NCC to explore opportunities for adult education provision and continuing to progress a model for supported internal partnerships. Ostara A business plan has been developed to help inform the future direction of the service. Key priorities include; reviewing the pricing and product offer, strengthening links with trusted referrers, exploring new markets and leading-edge technology, maintaining TSA accreditation through outstanding service delivery and preparing for the digital switchover. Trustees’ Responsibilities in Relation to the Financial Statements The Trustees (who are also the Directors for the purposes of company law) are responsible for preparing a Trustees’ annual report and financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Company law requires the Trustees to prepare financial statements for each year which give a true and fair view of the state of the affairs of the Society and of the incoming resources and application of resources, including the income and expenditure, of the Society for that period. In preparing the financial statements, the Trustees are required to: • • • • •
Select suitable accounting policies and then apply them consistently Observe the methods and principles in the Charities SORP Make judgements and estimates that are reasonable and prudent State whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Society will continue in business.
The Trustees are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Society and to enable them to ensure that the financial statements comply with the Co-operative and Community Benefit Societies Act 2014. They are also responsible for safeguarding the assets of the Society and hence taking reasonable steps for the prevention and detection of fraud and other irregularities.
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The Trustees are responsible for the maintenance and integrity of the corporate and financial information. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Statement as to Disclosure to Our Auditors In so far as the Trustees are aware at the time of approving our Trustees’ annual report: • •
There is no relevant information, being information needed by the auditor in connection with preparing their report, of which the auditor is unaware; and The Trustees, having made enquiries of fellow directors and the auditor that they ought to have individually taken, have each taken all steps that he/she is obliged to take as a director in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.
By order of the Board of Trustees
Steve Bramwell Chair
Jill Davison Company Secretary
25 July 2019
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ASFALEIA LIMITED Opinion We have audited the financial statements of Asfaleia Limited (the Society) for the year ended 31 March 2019 which comprise the Statement of Financial Activities (including income and expenditure account), the Statement of Financial Position, the Statement of Cash Flows and the related notes 1 to 22, including a summary of significant accounting policies. 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), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. In our opinion the financial statements: • • •
give a true and fair view of the Society’s affairs as at 31 March 2019 and of its income and expenditure for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Co-operative and Community Benefit Societies Act 2014.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the Society in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • •
the Trustees’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or the Trustees have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Society’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
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Other information The other information comprises the information included in the Trustees’ report, other than the financial statements and our auditor’s report thereon. The Trustees are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Co-operative and Community Benefit Societies Act 2014 require us to report to you if, in our opinion: • • • •
a satisfactory system of control over transactions has not been maintained; or the Society 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 require for our audit.
Responsibilities of trustees As explained more fully in the Trustees’ Responsibilities in Relation to the Financial Statements set out on page 16, the trustees are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the trustees determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the trustees are responsible for assessing the Society’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the trustees either intend to liquidate the Society or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or
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error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Society’s members, as a body, in accordance with section 87 of the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the Society’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 Society and the Society’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Ernst & Young LLP Statutory Auditor Newcastle upon Tyne 25 July 2019
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Asfaleia Limited Annual Report and Financial Statements 2019
Financial Statements
Statement of financial activities (including income and expenditure account) for the year ended 31 March 2019
2019 ÂŁ'000
2018 ÂŁ'000
3 4 5
235 6,182 77 6,494
278 5,940 66 6,284
5
(31)
(20)
6 8 9
(5,115) (1,349) (5) (6,500)
(5,085) (1,390) (5) (6,500)
(6)
(216)
396 390
612 396
(6)
(216)
Note Income Donations and legacies Income from charitable activities Other income Total Income Expenditure Costs of raising funds: Other costs Expenditure on charitable activities: Direct costs Support costs Governance costs Total Expenditure Net loss and fund movement for the year Reconciliation of funds Total funds at beginning of the period Total funds at the end of the period Total comprehensive loss for the period
The statement of financial activities includes all gains and losses recognised in the year. All income and expenditure derive from continuing activities.
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Asfaleia Limited Annual Report and Financial Statements 2019
Financial Statements (continued)
Statement of financial position as at 31 March 2019
FCA number: 7221
Note
2019 ÂŁ'000
2018 ÂŁ'000
12
132
117
13 14
42 2,905 796
37 730 1,240
3,743
2,007
Fixed assets Tangible assets Current Assets Stock Debtors Cash in bank and in hand
Creditors falling due within one year Net current assets Total assets less current liabilities
15
(3,292) 451 583
(1,535) 472 589
Creditors falling due after more than one year
17
(193)
(193)
Total net assets
390
396
The funds of the charity Unrestricted income funds
390
396
Total charity funds
390
396
These financial statements have been prepared in accordance with the Co-operative and Community Benefit Societies Act 2014, FRS 102 and the Charities Statement of Recommended Practice (Charities SORP 2015). These financial statements were approved by the Board on:
25 July 2019
Signed S Bramwell Chair
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Asfaleia Limited Annual Report and Financial Statements 2019
Financial Statements (continued)
Statement of cash flows for the year ended 31 March 2019
Note
2019 ÂŁ'000
2018 ÂŁ'000
18
(353)
274
Cash flows from investing activities: Purchase of property, plant and equipment Disposal of property, plant and equipment
(91) -
(59) 23
Net cash flow provided by investing activities
(91)
(36)
Cash flows from financing activities: Cash inflows from new borrowing
-
-
Net cash flow used in financing activities
-
-
(444)
238
1,240
1,002
796
1,240
Net cash flow provided by operating activities
Change in cash and cash equivalents in the period Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements 1. Accounting policies and basis of preparation 1.1 Statement of compliance
Asfaleia Limited ("the Society") is registered as a Community Benefit Society in England with the Financial Conduct Authority, under the Co-operative and Community Benefit Societies Act 2014 (Registration no. 7221). The Registered Office is YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX. Asfaleia Limited is a non-profit Society limited by shares, with nothing allowed to be paid or transferred by way of profit to Shareholders of the Society. The financial statements have been prepared on a going concern basis and in accordance with the Cooperative and Community Benefit Societies Act 2014, FRS 102 and the Statement of Recommended Practice for Charities (SORP) 2015. Asfaleia Limited ('the Society') meets the definition of a public benefit entity under FRS 102. The financial statements have been prepared for the 12 months to the 31 March 2019. In these financial statements, the Society has applied the exemptions available under FRS 102 in respect of the following disclosures: - the requirements of Section 4 Statement of Financial Position paragraph 4.12 (a)(iv) The group in which the results of the Society are consolidated is Your Homes Newcastle Limited. Consolidated financial statements of Your Homes Newcastle are available on request from Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR.
1.2 Basis of preparation The financial statements were authorised for issue by the Board Members on 25 July 2019. The financial statements have been prepared in accordance with applicable accounting standards. The financial statements are prepared in sterling which is the functional currency of the group and rounded to the nearest ÂŁ'000.
1.3 Public Benefit Entity The Society is a public benefit entity whose objects are: - the charitable provision of relief of those in need by reason of poverty, youth, age, unemployment, illhealth or any mental or physical disability; - the promotion of education and training; and - the advancement of such charitable purposes (according to the law of England and Wales) as the Board Members see fit from time to time.
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 1. Accounting policies and basis of preparation (continued) 1.4 Judgements and key sources of estimation uncertainty The preparation of the Society’s financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date, and the amounts reported for revenues and expenses during the period. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements and sources of estimation uncertainty have had the most significant effect on the financial statements: Recoverability of stock and debtors Where there are indicators of slow moving or obsolete stock or slow recovery of debtors, the Society assesses whether a provision is required based on the assessment of the individual items and historic knowledge. Fixed assets and stock accounting Asfaleia holds stock and fixed assets in relation to its Ostara care alarm services. These assets take the form of remote alarms, key safes and other support equipment. Supplies of equipment that have not been allocated to a customer are held as stock at cost price. Once an item is allocated to a customer it is transferred from stock to fixed assets and is held at depreciated cost value. If an item is returned by a customer, an assessment is made of the condition of the asset and it is either disposed and recorded as a loss on disposal, or returned to stock where it is held at the net book value of the asset at the time of its return. All repair costs to items are minor, and are expensed as they arise. Sales from stock are recorded as a cost of sale and expensed to the income statement.
1.5 Incoming resources Income is recognised when the Society has entitlement to the funds, any performance conditions attached to the item(s) of income have been met, it is probable that the income will be received and the amount can be measured reliably. Donations, legacies and other forms of voluntary income are recognised as incoming resources when receivable, except insofar as they are incapable of financial measurement.
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 1. Accounting policies and basis of preparation (continued) 1.6 Fund accounting Income is recognised when the Society has entitlement to the funds, any performance conditions attached to the item(s) of income have been met, it is probable that the income will be received and the amount can be measured reliably. Restricted funds - funds that can only be used for particular restricted purposes within the objects of the Society. Restrictions arise when specified by the donor or when funds are raised for particular restricted purposes.
1.7 Resources expended Expenditure is recognised once there is a legal or constructive obligation to make a payment to a third party, it is probable that settlement will be required and the amount of the obligation can be measured reliably. Irrecoverable VAT is charged as a cost against the activity for which the expenditure was incurred.
1.8 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life as follows: Ostara alarm equipment:
5-10 years on cost
1.9 Financial instruments The Society only has financial assets and financial liabilities that qualify as basic financial instruments. Basic financial instruments are initially recognised at transaction value and subsequently measured at their settlement value.
1.10 Debtors Trade and other debtors are recognised at the settlement amount due after any trade discount offered. Prepayments are valued at the amount prepaid net of any trade discounts due.
1.11 Cash at bank and in hand Cash at bank and in hand includes cash and short term highly liquid investments with a short maturity of three months or less from the date of acquisition or opening the deposit or similar account.
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 1. Accounting policies and basis of preparation (continued) 1.12 Creditors and provisions Creditors and provisions are recognised where the Society has a present obligation resulting from a past event that will probably result in the transfer of funds to a third party and the amount due to settle the obligation can be measured or estimated reliably. Creditors and provisions are normally recognised at their settlement amount after allowing for any trade discounts due.
1.13 Financial instruments All interest bearing loans and borrowings which are basic financial instruments are initially recognised at the present value of cash payable to the lender (including interest). After initial recognition they are measured at amortised cost using the effective interest rate method less impairment. The effective interest rate amortisation is included in finance revenue in the income statement.
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 2 . Legal status of the Society Asfaleia is a community benefit society limited by shares and is incorporated in England under the Co-operative and Community Benefit Societies Act 2014.
3 . Income from donations and legacies Unrestricted funds: Donations Gifts
2019 £'000
2018 £'000
235
278
235
278
2019 £'000
2018 £'000
952
978
4,675 555
4,498 464
6,182
5,940
2019 £'000
2018 £'000
8 69 (31)
66 (20)
46
46
4 . Income from charitable activities Unrestricted funds: Ostara Telecare Income Subcontract income from parent company for services to: Newcastle City Council tenants Leazes Homes tenants
5 . Other income and associated costs Unrestricted funds: Revenue grant funding Ostara equipment sales Cost of sales
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 6. Analysis of expenditure on charitable activities
YHN direct staff charges Other YHN direct charges: Premises Transport Supplies and services SLAs and recharges ICT applications Restructuring costs Interest payable Bad debt and stock write off Depreciation Direct costs total Support costs (note 8) Governance (note 9)
Support and Progres Employa sion bility £'000 £'000 (1,739) (520)
Support ed Housing Ostara Living Plus General £'000 £'000 £'000 £'000 (907) (823) (505) -
Total 2019 £'000 (4,494)
Total 2018 £'000 (4,541) (63) (46) (309) (31) (48) (9) 10 (48) (5,085) (1,390) (5) (6,480)
(2) (22) (36) (5) (1,804) (478) -
(3) (65) (588) (155) -
(20) (32) (105) (21) (45) (9) (10) (51) (1,200) (324) -
(1) (2) (95) (921) (245) -
(12) (3) (28) (8) (556) (147) -
(46) (46) (5)
(35) (62) (329) (34) (45) (46) (9) (10) (51) (5,115) (1,349) (5)
Total 2019
(2,282)
(743)
(1,524)
(1,166)
(703)
(51)
(6,469)
Total 2018
(1,261)
(789)
(1,357)
(1,226)
(1,847)
-
(6,480)
-1
0
-1
0
1
-1
check
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24
Asfaleia Limited Annual Report and Financial Statements 2019 Notes to the Financial Statements (continued)
7. Summary analysis of expenditure and related income for charitable activities Support and Progres Employa sion bility £'000 £'000 Costs
(2,282)
(743)
Income Ostara Telecare Income
Support ed Housing Ostara Living Plus £'000 £'000 £'000 (1,524)
(1,166)
(703)
952
Total 2019 £'000
Total 2018 £'000
(6,418)
(6,480)
952
978
Subcontract income from parent company for service to: Newcastle City Council tenants Leazes Homes tenants Net income/(cost) funded from other income 2019 Net income/(cost) funded from other income 2018
3,167 -
624 -
-
181 555
703 -
4,675 555
4,498 464
885
(119)
(572)
(430)
-
(236)
(540)
(30)
(176)
(379)
(73)
118
(540)
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 8. Analysis of support costs Support and Progress Employa ion bility £'000 £'000
Support ed Housing Ostara Living Plus £'000 £'000 £'000
Total 2019 £'000
Total 2018 £'000
YHN Overhead Charges: Finance Governance HR ICT Other
(95) (58) (56) (111) (158)
(31) (19) (18) (36) (51)
(65) (39) (38) (75) (107)
(49) (30) (28) (57) (81)
(29) (18) (17) (34) (49)
(269) (164) (157) (313) (446)
(180) (186) (171) (253) (600)
Total 2019
(478)
(155)
(324)
(245)
(147)
(1,349)
(1,390)
Total 2018 (270) (170) (293) (262) (395) (1,390) Support functions are provided by the Parent, Your Homes Newcastle Limited, and are apportioned to the activities of Asfaleia based on total direct operating expenditure.
9. Analysis of governance costs
Audit fees Total
2019 £'000 (5)
2018 £'000 (5)
(5)
(5)
2019 £'000 (51) (9)
2018 £'000 (48) (9)
(5)
(5)
10. Net expenditure for the year This is stated after charging: Depreciation Group interest payable Auditor's remuneration: Audit fees
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Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 11 . Employee information a) Directors’ emoluments Aggregate emoluments payable to directors (including pension contribution and benefits in kind)
2019
2018
£'000
£'000
3
6
The board members and YHN Executive comprise the key management personnel of the Society. No board member received payment for professional or other services or supplies to the Society. The board's remuneration and a share of the costs of the YHN executive team are charged to Asfaleia by the parent undertaking as a support cost.
12 . Tangible fixed assets Ostara Equipment £'000
Total £'000
Costs As at 1 April 2018 Opening value adjustment Additions Transfers to inventory Disposals
166 53 91 (1) (47)
166 53 91 (1) (47)
As at 31 March 2019
262
262
Depreciation As at 1 April 2018 Opening value adjustment Charge for period Transfers to inventory Disposals
(49) (55) (51) 5 20
(49) (55) (51) 5 20
(130)
(130)
As at 31 March 2019
132
132
As at 1 April 2018
117
117
As at 31 March 2019 Net book value
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27
Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 13 . Stock
Ostara equipment
2019 £'000
2018 £'000
42
37
42
37
£37,000 (2018:£43,000) of inventories were recognised as an expense during the period, being £31,000 (2018:£20,000) cost of sales, and £7,000 (2018:£23,000) of stock written off.
14 . Debtors
Amounts owed from YHN Group companies Amounts owed from Newcastle City Council Trade debtors Prepayments VAT debtors
2019 £'000
2018 £'000
2,645 165 77 18 -
409 164 94 63
2,905
730
2019 £'000
2018 £'000
3,284 8
534 996 5
3,292
1,535
15 . Creditors
Amounts due to YHN Group companies Amounts due to Newcastle City Council Accruals
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28
Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 16 . Corporation tax Asfaleia Ltd is exempt from tax on income and gains within section 505 of the Taxes Act 1988 or section 252 of the Taxation of Chargeable Gains Act 1992 to the extent that these are applied to its charitable objectives.
17 . Creditors: amounts falling due after more than one year
Loans payable to parent undertaking
2019 £'000
2018 £'000
193
193
193
193
2019 £'000
2018 £'000
(6)
(216)
51 (4) 29 (2,175) (5) 1,757
48 (128) 9 561
(353)
274
The loan is repayable in full in 2020.
18 . Notes to the statement of cash flows
a) Reconciliation of net income for the period to net cash Net income for the period Adjustments for: Depreciation charges Loss/(profit) on the sale of fixed assets Net increase of fixed assets from stock transfers Fixed asset write offs (Increase) in debtors (Increase)/decrease in stocks Increase in creditors Net cash provided by operating activities
b) Analysis of cash and cash equivalents All cash and cash equivalents are held in the form of bank deposits at Asfaleia's current account facility.
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29
Asfaleia Limited Annual Report and Financial Statements 2019 Notes to the Financial Statements (continued) 19 . Non-equity share capital 2019 £
2018 £
Opening Issued during the period Cancelled during the period
5 -
6 4 (5)
As at 31 March
5
5
Allotted and issued
The par value of each share is £1. The shares do not have a right to any dividend or distribution in a winding-up, and are not redeemable. Each share has full voting rights, and all members of the board own one share each.
20 . Financial instruments 2019 £'000
Restated 2018 £'000
193
193
Financial instruments measured at cost: Trade payables Accruals
2 3,291
1,536
Financial assets measured at cost: Trade receivables Other debtors Cash
87 2,828 796
101 227 1,240
Financial instruments measured at amortised cost: Loans from parent undertaking (note 17)
The 2018 figures have been restated to ensure the presentation of the note is compliant with FRS 102.
21 . Parent undertaking and controlling party The Society's immediate parent undertaking is Your Homes Newcastle Limited, a company incorporated in England. Your Homes Newcastle Limited is the smallest group in which Asfaleia is consolidated within. Consolidated financial statements of Your Homes Newcastle limited are available upon request from Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR. Newcastle City Council is the largest group in which Asfaleia is consolidated within. Consolidated financial statements are available on request from Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR. The trustees consider Newcastle City Council to be the ultimate controlling party.
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30
Asfaleia Limited Annual Report and Financial Statements 2019
Notes to the Financial Statements (continued) 22 . Related parties Newcastle City Council Newcastle City Council is the sole shareholder of Your Homes Newcastle Limited (Asfaleia's parent company). Your Homes Newcastle holds a minority shareholding of Asfaleia Limited.
Sales to related party £'000 Entities with significant influence over Asfaleia (Newcastle City Council): 2019 2018
Immediate parent undertaking (Your Homes Newcastle): 2019 2018 Other group undertakings (Abri Trading): 2019 2018
Purchases from related party £'000
Amounts owed from related party £'000
Amounts owed to related party £'000
936 43
-
164 164
996
2,993 4,974
3,644 6,445
2,645 409
3,476 727
-
-
-
-
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31
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Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
30 July 2019
Dear Sirs
Your Homes Newcastle Limited (YHN) The Directors of the company have performed an assessment of the appropriateness of the going concern basis of preparation of the statutory financial statements for the year ended 31 March 2019. The Directors have concluded that the company can continue to pay its liabilities as they fall due, or otherwise agreed with creditors, for a period of at least 12 months from the date of approval of the financial statements. In making that assessment the Directors confirm that they have considered the following factors:• • • • • •
The basis on which the conclusion has been drawn has been discussed and agreed with all Directors; Forecasts and budgets prepared for the year ending March 2019, extended for 12 months from the date of signing of the accounts and various sensitivities and risks associated within the assumptions thereon (including “stress testing” scenarios); Contingency plans in the event that trading forecasts were not met or major changes to anticipated cash flows arose; The availability of continuing finance from Newcastle City Council (NCC); The 10-year Management Agreement with NCC which came into force from 1st April 2016; The support from NCC to assist YHN in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to meet these liabilities.
Based on the above we can confirm that we believe that adequate finance facilities (bank facilities) will continue to be made available to the company for a period until at least 12 months after date of approval of the financial statements and that they will be satisfactorily renewed at their respective review dates. Yours faithfully, on behalf of the Board of Directors Jo Totton
Jill Davison
Chair
Company Secretary
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Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
30 July 2019
Dear Sirs
Abri Trading Limited (Abri) The Directors of the company have performed an assessment of the appropriateness of the going concern basis of preparation of the statutory financial statements for the year ended 31 March 2019. The Directors have concluded that the company can continue to pay its liabilities as they fall due, or otherwise agreed with creditors, for a period of at least 12 months from the date of approval of the financial statements. In making that assessment the Directors confirm that they have considered the following factors:• • • • • •
The basis on which the conclusion has been drawn has been discussed and agreed with all Directors; Forecasts and budgets prepared for the year ending March 2019, extended for 12 months from the date of signing of the accounts and various sensitivities and risks associated within the assumptions thereon (including “stress testing” scenarios); Contingency plans in the event that trading forecasts were not met or major changes to anticipated cash flows arose; The availability of continuing finance from Newcastle City Council (NCC); The 10-year Management Agreement with NCC which came into force from 1st April 2016; The support from NCC to assist Abri in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to meet these liabilities.
Based on the above we can confirm that we believe that adequate finance facilities (bank facilities) will continue to be made available to the company for a period until at least 12 months after date of approval of the financial statements and that they will be satisfactorily renewed at their respective review dates. Yours faithfully, on behalf of the Board of Directors Jill Davison
Abri Trading Ltd. Director
Company Secretary
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Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
25 July 2019
Dear Sirs
Asfaleia Limited The Trustees and Directors of the company have performed an assessment of the appropriateness of the going concern basis of preparation of the statutory financial statements for the year ended 31 March 2019. The Trustees and Directors have concluded that the company can continue to pay its liabilities as they fall due, or otherwise agreed with creditors, for a period of at least 12 months from the date of approval of the financial statements. In making that assessment the Directors confirm that they have considered the following factors:• • • • • •
The basis on which the conclusion has been drawn has been discussed and agreed with all Directors; Forecasts and budgets prepared for the year ending March 2019, extended for 12 months from the date of signing of the accounts and various sensitivities and risks associated within the assumptions thereon (including “stress testing” scenarios); Contingency plans in the event that trading forecasts were not met or major changes to anticipated cash flows arose; The availability of continuing finance from Newcastle City Council (NCC) as the ultimate parent entity; The 10-year Management Agreement with NCC which came into force from 1st April 2016; The support from NCC to assist Your Homes Newcastle and hence Asfaleia Limited in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to meet these liabilities.
Based on the above we can confirm that we believe that adequate finance facilities (bank facilities) will continue to be made available to the company for a period until at least 12 months after date of approval of the financial statements and that they will be satisfactorily renewed at their respective review dates. Yours faithfully, on behalf of the Trustees and Board of Directors Stephen Bramwell
Jill Davison
Chair
Company Secretary
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The person dealing with this matter is: Mark Nicholson Newcastle City Council Civic Centre Newcastle upon Tyne NE1 8QH Phone: 0191 211 5115 Fax: 0191 211 4840 Email: mark.nicholson@newcastle.gov.uk www.newcastle.gov.uk
Your Homes Newcastle YHN House Benton Park Rd Newcastle upon Tyne NE7 7LX 24 June 2019 Dear Sirs
We refer to your request to provide you with confirmation of support from Newcastle City Council (“NCC”) to assist Your Homes Newcastle (“YHN”) in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to you to meet such liabilities. For the purpose of clarity, this support includes the following:
As part of the triennial actuarial valuation process, NCC will agree with the Tyne & Wear Pension Fund (“TWPF”) that YHN’s pension assets / liabilities should be assessed on the same basis as is used for NCC. In the event YHN is assessed as having a pension deficit as part of the triennial actuarial valuation process, NCC would agree with TWPF that any deficit payments could be spread over a similar period to NCC itself (at present this is 18.5 years although this may change in the future). In the event YHN are required to make annual payments to TWPF (in line with above) then NCC would agree this could be funded via the HRA management fee. In the event YHN was ever deemed not to be a going concern then NCC would subsume YHN’s pension deficit (if one exists) and recover the annual costs arising from doing so directly from the HRA (as we currently do for the element of the pension deficit that relates to the period before YHN was set up).
We confirm we will continue to provide the support outlined above for a period of at least 12 months from the date of approval of YHN’s accounts. Should any matter set out within this letter be unclear then please do not hesitate to contact the signatory for further clarification. We undertake to inform you immediately in the unlikely event that circumstances change, and we are no longer able to provide such support to you. Yours faithfully
Mark Nicholson Assistant Director Financial Services
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Your Homes Newcastle Limited Audit Results Report Year ended 31 March 2019 July 2019
Page 139
Private and Confidential
July 2019
Dear Group Audit and Risk Committee Members We have substantially completed our audit of Your Homes Newcastle Limited (“YHN” or “the Group”) for the year ended 31 March 2019, including the subsidiary organisations. Subject to the adequate resolution of the outstanding matters listed in our Audit Results Report, we confirm that we will issue an unqualified audit report on the financial statements in the form that appears in Section 3. This Audit Results Report is intended solely for the information and use of the Group Audit and Risk Committee, Board and management, and should not be used for any other purpose nor given to any other party without our prior written consent.
Page 140
We would like to thank your staff for the assistance provided to us during the engagement. I look forward to the opportunity of discussing with you any aspects of this Audit Results Report or any other issues arising from our work. Yours faithfully
Nicola Wright Associate Partner For and on behalf of Ernst & Young LLP United Kingdom
2
Contents 01
Executive Summary
02
Areas of Audit Focus
03
Audit Report
Page 141
04
Audit Differences
05 Appendices
The contents of this report are subject to the terms and conditions of our appointment as set out in our engagement agreement of 2 October 2017. This report is made solely to the Group Audit and Risk Committee, Board and management of Your Homes Newcastle Limited in accordance with our engagement agreement. Our work has been undertaken so that we might state to the Group Audit and Risk Committee, Board, and management of Your Homes Newcastle Limited those matters we are required to state to them in this 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 Group Audit and Risk Committee, Board and management of Your Homes Newcastle Limited for this report or for the opinions we have formed. It should not be provided to any third-party without our prior written consent.
3
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01 Executive Summary 4
Executive Summary
Executive Summary Overview of the Audit
Scope and materiality In our Audit Planning Report, presented at the March 2019 Group Audit and Risk Committee meeting, we provided you with an overview of our audit scope and approach for the audit of the financial statements. We carried out our audit in accordance with this Audit Planning Report. We planned our procedures using a materiality of £768,000. We have reassessed this based on the actual results for the financial year and have decreased this amount to £721,000. The threshold for reporting audit differences has been set at £36,000. The basis of our assessment of materiality has remained consistent with prior year at 2% of turnover.
Page 143
Status of the audit
We have substantially completed our audit of the financial statements of the Group for the year ended 31 March 2019. Subject to satisfactory completion of the following outstanding items, we will issue an unqualified audit opinion in the form which appears in Section 3. However, until we have completed our outstanding procedures, it is possible that further matters requiring amendment may arise: • • • • • •
Completion of sample testing on operating costs and other debtors; Receipt of IAS19 letter from the auditors of the Pension Fund; Consideration of the impact of the McCloud/Sargeant case and GMP indexation and equalisation, currently under consideration by the pension fund’s actuaries; Receipt of corporation tax computations; Final review of the narrative report and updated accounts, including final review of the audit file; and Audit completion procedures.
Audit differences There are no unadjusted audit differences, however we made some adjustments to the financial statements. These are included in more detail in Section 4, however a summary is detailed below: • Amendments to the financial instruments note; and • Amendments to the related parties’ note. There were also a small number of typographical errors which have been corrected. In addition, adjustments have been identified by management, including an adjustment to the related party balance in both the YHN Group position and Abri due to a restatement between Amounts owed from NCC and Trade Debtors. 5
Executive Summary
Executive Summary (continued) Areas of audit focus In our Audit Planning Report, we identified a number of key areas of focus for our audit of the financial statements of the Group. This report sets out our observations and conclusions in relation to these areas, including our views on areas where there is potential risk. Our consideration of these matters, and others identified during the period, is summarised within Section 2 of this report. We request that you review the matters set out in this report to ensure: • There are no residual further considerations or matters that could impact these areas of focus; • You concur with our response to each area; and • There are no further significant issues you are aware of to be considered before the financial statements are finalised.
Page 144
There are no matters, other than those reported by management or disclosed in this report, which we believe should be brought to the attention of the Group Audit and Risk Committee.
Control observations
During the audit, we identified one control observation that requires reporting to the Group Audit and Risk Committee. The spreadsheet used to document the Tangible Fixed Assets held by Newcastle Furniture Service is large and complex. It requires a significant amount of staff time to maintain and a significant amount of audit effort has been required to understand and test the movements in the spreadsheet. We recommend that the Group consider if alternative methods of record-keeping would be more efficient for the management of the Newcastle Furniture Service assets. We are aware that a new stock system is in the process of being implemented, and that management’s aim is for the new system to automate and improve the record keeping of these assets. However there have been some difficulties with the implementation and this new system is not yet able to be used in place of the previous spreadsheet. As part of this review, we recommend that the Group consider a de minimis level for record-keeping. For example smaller items such as gloves could be expensed in year to reduce the burden of recording of assets. Annual Report We have reviewed the information presented in the Annual Report for consistency with our knowledge of the Group. We have no matters we believe should be brought to the attention of the Group Audit and Risk Committee.
Independence Please refer to Appendix B for our update on Independence. We have no issues to draw to the attention of the Group Audit and Risk Committee. 6
Page 145
02 Areas of Audit Focus 7
Areas of Audit Focus
Audit issues and approach: Risk of fraud in revenue and expenditure recognition
Page 146
What are our conclusions?
Our testing has not identified any material misstatements with respect to revenue or expenditure recognition. Overall our audit work did not identify any material issues or unusual transactions which indicate that there has been any misreporting of the Group’s financial position.
What is the risk?
What did we do?
Risk of fraud in revenue and expenditure recognition Under ISA 240, there is a presumed risk that revenue may be misstated due to improper revenue recognition. We also consider the risk that material misstatements may occur by the manipulation of expenditure recognition.
We have completed the following work in this area: • We have reviewed and tested revenue recognition policies as part of our review of accounting policies; • We have reviewed and tested a sample of accounting estimates for evidence of bias; • We have substantively tested material revenue and expenditure streams, including consideration of revenue and capital expenditure to ensure correct classification; and • We have completed cut-off testing around the period end date. The main areas of revenue and expenditure recognition judgment we considered were: • Impairment of trade receivables; and • Year-end accruals and provisions. As part of the year end confirmation process, the Group identified that a debtor balance of £362,696 relating to Palatine beds had not been accrued by Newcastle City Council. The Council acknowledge this debt, but do not propose to adjust their own financial statements on grounds of materiality. No other significant issues have been identified as part of this testing.
8
Areas of Audit Focus
Audit issues and approach: Risk of fraud or error
Page 147
What are our conclusions?
What is the risk?
What did we do?
Risk of management override of controls As identified in ISA 240, management is in a unique position to perpetrate fraud because of its ability to manipulate accounting records directly or indirectly and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. We identify and respond to this fraud risk on every audit engagement.
We have completed the following work in this area: • We tested the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial statements; • We reviewed accounting estimates for evidence of management bias (as noted above relating to revenue and expenditure recognition); and • We evaluated the business rationale for any significant unusual transactions. The main areas of audit focus we considered were:
We have not identified any evidence of material management override.
• Year-end accruals and provisions; and • Pension entries for LGPS schemes.
We have not identified any instances of inappropriate judgements being applied.
No significant issues have been identified as part of this work.
We did not identify any transactions during our audit which appeared unusual or outside the Group’s normal course of business.
9
Areas of Audit Focus
Other areas of audit focus Other matters Newcastle Furniture Service – Property, plant and equipment (PPE) and stock accounting In our Audit Planning Report, we highlighted that items of furniture and equipment are classified as stock or fixed assets depending upon their leased status. In previous years, there have been adjustments made by management and through the audit process relating to the classification, valuation and existence of these items. We therefore focussed on ensuring the items were correctly classified as either PPE or stock, that the classification was compliant with accounting standards and the appropriateness of the useful economic life of the assets.
Page 148
In the year end accounts, the Group has a balance of £2.6 million held as tangible fixed assets that are leased to tenants/customers via the Newcastle Furniture Service. We completed the following work on this balance: • • • • •
We agreed the balance of the assets reported in the financial statements to the detailed records of the assets held by Newcastle Furniture Service, via the spreadsheet used to record these assets. We tested a sample of additions purchased in year to invoice. We tested a sample of disposals in year to the stock record showing that the item had been removed from the stock system as it had been disposed of. We reperformed a sample of depreciation calculations. We looked at the split of where the assets were recorded (in Your Homes Newcastle or Abri Trading).
We noted that the spreadsheet used to document the assets held by Newcastle Furniture Service is large and complex. It requires a significant amount of staff time to maintain and a significant amount of audit effort has been required to understand and test the movements in the spreadsheet. We are aware that a new stock system is in the process of being implemented, and that management’s aim is for the new system to automate and improve the record keeping of these assets. However there have been some difficulties with the implementation and this new system is not yet able to be used in place of the previous spreadsheet. We also noted there is no de minimis level for items that are recorded via the system hence there are entries for smaller items such as gloves and dishcloths that form part of the furniture packs issued, which have a life of less than one year. We have no other matters to bring to your attention relating to the Newcastle Furniture Service.
10
Areas of Audit Focus
Other areas of audit focus (continued) Other matters (continued) Pension Accounting In our Audit Planning Report, we highlighted Funding of Your Homes Group’s participation in the local government pension scheme will continue to have an impact on both Your Homes Group cash flows and balance sheet liabilities. The pension liability is the most significant liability on the Group’s balance sheet and is calculated through use of a number of actuarial assumptions. A small movement in these assumptions could have a material impact on the balance sheet. The Group’s pension fund deficit is a material estimated balance and is disclosed on the Group’s balance sheet. At 31 March 2019, this totalled £21.01 million. The information disclosed is based on the IAS 19 report issued to the Group by the actuary to the Tyne and Wear Pension Fund.
Page 149
Accounting for this scheme involves significant estimation and judgement and therefore management engages an actuary to undertake the calculations on their behalf. ISAs 500 and 540 require us to undertake procedures on the use of management experts and the assumptions underlying fair value estimates. As at the time of writing this report, our work on the pension liability valuation was outstanding. When we receive the assurances from the audit team of the Tyne and Wear Pension Fund, we will update this report to reflect any findings we wish to draw to the attention of the Group. There are ongoing discussions about the impact of the McCloud/Sargeant case and GMP indexation and equalisation on the pension liabilities within local authority financial statements. We have requested that the Group liaise with the Pension Fund and its actuary to establish if the impact of these items will have a material impact on the pension liability. We will provide a verbal update to the Group Audit and Risk Committee on this issue at the meeting on 11 July 2019.
11
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03 Audit Report 12
Audit Report
Draft audit report Our opinion on the financial statements
Page 151
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YOUR HOMES NEWCASTLE LIMITED Opinion We have audited the financial statements of Your Homes Newcastle Limited (‘the parent company’) and its subsidiaries (‘the group’) for the year ended 31 March 2019 which comprise the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Company Statement of Changes in Equity, the Group Statement of Financial Position, the Company Statement of Financial Position, the Group Statement of Cash Flows and the related notes 1 to 21, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice). In our opinion the financial statements: • give a true and fair view of the state of the group’s and of the parent company’s affairs, as at 31 March 2019, and of the group’s loss for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where: • the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or • the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group or parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The members are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. 13
Audit Report
Draft audit report (continued) Our opinion on the financial statements (continued) In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard.
Page 152
Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page X, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and parent company or to cease operations, or have no realistic alternative but to do so.
14
Audit Report
Draft audit report (continued) Our opinion on the financial statements (continued) Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditors responsibilities. This description forms part of our auditor’s report.
Page 153
Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors' 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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Nicola Wright, (Senior Statutory Auditor) For and on behalf of Ernst & Young LLP, Statutory Auditor Newcastle upon Tyne July 2019
15
Page 154
04 Audit Differences 16
Audit Differences
Audit differences In the normal course of any audit, we identify misstatements between amounts we believe should be recorded in the financial statements and the disclosures and amounts actually recorded. These differences are classified as ‘known’ or ‘judgemental’. Known differences represent items that can be accurately quantified and relate to a definite set of facts or circumstances. Judgemental differences generally involve estimation and relate to facts or circumstances that are uncertain or open to interpretation.
Summary of unadjusted/adjusted differences Uncorrected misstatements
Page 155
There are no uncorrected misstatements. Corrected misstatements • Amendments to the financial instruments note; and • Amendments to the related parties note. We also made a small number of typographical amendments to the financial statements. The Group made changes to the draft financial statements to update the tax disclosures, contingent liability disclosures and pension disclosures. A further amendment was made to the debtors position within both the YHN Group and Abri financial statements, which contain a number of balances owed from Newcastle City Council (NCC) that, whilst being agreed by the two parties, due to materiality are not included within the financial statements of NCC. There has been an adjustment to the related party balance in the YHN Group and Abri to restate between Amounts owed from NCC and Trade Debtors.
17
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05 Appendices 18
Appendix A
Required communications with the Group Audit and Risk Committee There are certain communications that we must provide to the Audit Committees of UK clients. We have detailed these here together with a reference of when and where they were covered: Our Reporting to you Required communications Terms of engagement
Planning and audit approach
Page 157
Significant findings from the audit
Going concern
Misstatements
What is reported?
When and where
Confirmation by the Group Audit and Risk Committee of acceptance of terms of engagement Engagement Agreement as written in the engagement letter signed by both parties. October 2017 Communication of the planned scope and timing of the audit, including any limitations. Audit Planning Report
• • • • • •
Our view about the significant qualitative aspects of accounting practices including accounting policies, accounting estimates and financial statement disclosures Significant difficulties, if any, encountered during the audit Significant matters, if any, arising from the audit that were discussed with management Written representations that we are seeking Expected modifications to the audit report Other matters if any, significant to the oversight of the financial reporting process
Events or conditions identified that may cast significant doubt on the entity’s ability to continue as a going concern, including: • Whether the events or conditions constitute a material uncertainty • Whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements • The adequacy of related disclosures in the financial statements. • Uncorrected misstatements and their effect on our audit opinion • The effect of uncorrected misstatements related to prior periods • A request that any uncorrected misstatement be corrected • In writing, corrected misstatements that are significant.
March 2019 Audit Results Report June 2019
Audit Results Report June 2019
Audit Results Report June 2019
19
Appendix A
Required communications with the Group Audit and Risk Committee (continued) Our Reporting to you
Required communications Fraud
What is reported? •
Page 158
•
Related parties
•
Subsequent events
• • • • • •
Other information
External confirmations
•
• •
When and where
Enquiries of the Group Audit and Risk Committee to determine whether they have knowledge of any actual, suspected or alleged fraud affecting the entity Unless all of those charged with governance are involved in managing the entity, any fraud that we have identified or information we have obtained that indicates that a fraud may exist involving: (a) management; (b) employees who have significant roles in internal control; or (c) others where the fraud results in a material misstatement in the financial statements. A discussion of any other matters related to fraud, relevant to Group Audit and Risk Committee responsibility Significant matters arising during the audit in connection with the entity’s related parties including, when applicable: Non-disclosure by management Inappropriate authorisation and approval of transactions Disagreement over disclosures Non-compliance with laws and regulations Difficulty in identifying the party that ultimately controls the entity Enquiry of the Group Audit and Risk Committee where appropriate regarding whether any subsequent events have occurred that might affect the financial statements.
Audit Results Report
Where material inconsistencies are identified in other information included in the document containing the financial statements and management refuses to make the revision.
Audit Results Report
Management’s refusal for us to request confirmations Inability to obtain relevant and reliable audit evidence from other procedures.
Audit Results Report
June 2019
Audit Results Report June 2019
Audit Results Report June 2019
June 2019
June 2019
20
Appendix A
Required communications with the Group Audit and Risk Committee (continued) Our Reporting to you
Required communications Consideration of laws and regulations
What is reported? • •
Page 159
Significant deficiencies in • internal controls identified during the audit Group Audits
• • • • •
When and where
Audit Results Report Audit findings regarding non-compliance where the non-compliance is material and believed to be intentional. This communication is subject to compliance with legislation June 2019 on tipping off Enquiry of the Group Audit and Risk Committee into possible instances of non-compliance with laws and regulations that may have a material effect on the financial statements and that the Group Audit and Risk Committee may be aware of. Significant deficiencies in internal controls identified during the audit. Audit Results Report June 2019 An overview of the type of work to be performed on the financial information of the components An overview of the nature of the group audit team’s planned involvement in the work to be performed by the component auditors on the financial information of significant components Instances where the group audit team’s evaluation of the work of a component auditor gave rise to a concern about the quality of that auditor’s work Any limitations on the group audit, for example, where the group engagement team’s access to information may have been restricted Fraud or suspected fraud involving group management, component management, employees who have significant roles in group-wide controls or others where the fraud resulted in a material misstatement of the group financial statements.
Audit Results Report June 2019
21
Appendix A
Required communications with the Group Audit and Risk Committee (continued) Our Reporting to you
Required communications Independence
What is reported?
When and where
Page 160
Audit Results Report Communication of all significant facts and matters that bear on EY’s objectivity and independence. June 2019 Communication of key elements of the audit engagement leader’s consideration of independence and objectivity such as: • The principal threats • Safeguards adopted and their effectiveness • An overall assessment of threats and safeguards • Information about the general policies and process within the firm to maintain objectivity and independence Communications whenever significant judgments are made about threats to objectivity and independence and the appropriateness of safeguards put in place, The Group Audit and Risk Committee should also be provided an opportunity to discuss matters affecting auditor independence
22
Appendix B
Independence As part of our reporting on our independence, we set out below a summary of the fees you have paid us in the year ended 31 March 2019. We confirm there are no changes in our assessment of independence since our confirmation in our Audit Planning Report we presented to the Group Audit and Risk Committee in March 2019. We complied with the FRC’s Ethical Standard and, in our professional judgement, the firm is independent and the objectivity of the audit engagement leader and audit staff has not been compromised within the meaning of regulatory and professional requirements.
2018/19 £ Audit fee (excluding VAT)
19,550
Total fees payable
19,550
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We consider that our independence in this context is a matter that should be reviewed by both you and ourselves. It is therefore important that you consider the facts of which you are aware and come to a view. If you wish to discuss any matters concerning our independence, we will be pleased to do so at the forthcoming meeting of the Group Audit and Risk Committee in July 2019. Please note that EY has provided risk management support to the Group in 2019/20, with a value of £5,000.
23
Appendix C
Management representation letter Management representation letter Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
Page 162
This letter of representations is provided in connection with your audit of the consolidated and parent company financial statements of Your Homes Newcastle Limited (“the Group and Company�) for the year ended 31 March 2019. We recognise that obtaining representations from us concerning the information contained in this letter is a significant procedure in enabling you to form an opinion as to whether the consolidated and parent company financial statements give a true and fair view of the Group and Company financial position of Your Homes Newcastle Limited as of 31 March 2019 and of its financial performance and its cash flows for the year then ended in accordance with, for the Group and Company, UK GAAP and FRS 102. We understand that the purpose of your audit of our consolidated and parent company financial statements is to express an opinion thereon and that your audit was conducted in accordance with International Standards on Auditing (UK), which involves an examination of the accounting system, internal control and related data to the extent you considered necessary in the circumstances, and is not designed to identify - nor necessarily be expected to disclose - all fraud, shortages, errors and other irregularities, should any exist. Accordingly, we make the following representations, which are true to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: A. Financial Statements and Financial Records 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement agreement dated 2 October 2017, for the preparation of the financial statements in accordance with, for the Group and Company, UK GAAP and FRS 102. 2. We acknowledge, as members of management of the Group and Company, our responsibility for the fair presentation of the consolidated and parent company financial statements. We believe the consolidated and parent company financial statements referred to above give a true and fair view of the financial position, financial performance and cash flows of the Group in accordance with for the Group and Company, UK GAAP and FRS 102, and are free of material misstatements, including omissions. We have approved the financial statements. 3. The significant accounting policies adopted in the preparation of the Group and Company financial statements are appropriately described in the Group and Company financial statements. 4. As members of management of the Group and Company, we believe that the Group and Company have a system of internal controls adequate to enable the preparation of accurate financial statements in accordance with, for the Group and Company, UK GAAP and FRS 102, that are free from material misstatement, whether due to fraud or error.
24
Appendix C
Management representation letter (continued) Management representation letter (continued) 5. There are no unadjusted audit differences identified during the current audit and pertaining to the latest period presented.
Page 163
B. Non-compliance with Laws and Regulations, including Fraud 1. We acknowledge that we are responsible to determine that the Group and Company’s business activities are conducted in accordance with laws and regulations and that we are responsible to identify and address any non-compliance with applicable laws or regulations, including fraud. 2. We acknowledge that we are responsible for the design, implementation and maintenance of internal controls to prevent and detect fraud. 3. We have disclosed to you the results of our assessment of the risk that the consolidated and parent company financial statements may be materially misstated as a result of fraud. 4. We have no knowledge of any identified or suspected non-compliance with laws or regulations, including fraud, that may have affected the Group or Company (regardless of the source or form and including without limitation, any allegations by “whistleblowers”), including non-compliance matters: • Involving financial improprieties • Related to laws or regulations that have a direct effect on the determination of material amounts and disclosures in the consolidated and parent company financial statements • Related to laws or regulations that have an indirect effect on amounts and disclosures in the consolidated and parent company financial statements, but compliance with which may be fundamental to the operations of the Group and Company’s business, its ability to continue in business, or to avoid material penalties • Involving management, or employees who have significant roles in internal control, or others • In relation to any allegations of fraud, suspected fraud or other non-compliance with laws and regulations communicated by employees, former employees, analysts, regulators or others. C. Information Provided and Completeness of Information and Transactions 1. We have provided you with: • Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; • Additional information that you have requested from us for the purpose of the audit; and • Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. 2. All material transactions have been recorded in the accounting records and are reflected in the consolidated and parent company financial statements. 3. We have made available to you all minutes of the meetings of shareholders, directors and committees of directors (or summaries of actions of recent meetings for which minutes have not yet been prepared) held through the period to the most recent meeting on the following date: [list date].
25
Appendix C
Management representation letter (continued) Management representation letter (continued) 4. We confirm the completeness of information provided regarding the identification of related parties. We have disclosed to you the identity of the Group and Company’s related parties and all related party relationships and transactions of which we are aware, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements, guarantees, non-monetary transactions and transactions for no consideration for the period ended, as well as related balances due to or from such parties at the year end. These transactions have been appropriately accounted for and disclosed in the consolidated and parent company financial statements. 5. We believe that the significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable. 6. We have disclosed to you, and the Group and Company has complied with, all aspects of contractual agreements that could have a material effect on the consolidated and parent company financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt.
Page 164
D. Liabilities and Contingencies 1. All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the consolidated and parent company financial statements. 2. We have informed you of all outstanding and possible litigation and claims, whether or not they have been discussed with legal counsel. 3. We have recorded and/or disclosed, as appropriate, all liabilities related litigation and claims, both actual and contingent, and have disclosed in the notes to the consolidated and parent company financial statements all guarantees that we have given to third parties. 4. No claims in connection with litigation have been or are expected to be received. E. Subsequent Events 1. There have been no events subsequent to period end which require adjustment of or disclosure in the consolidated and parent company financial statements or notes thereto. F. Group Audits 1. There are no significant restrictions on our ability to distribute the retained profits of the Group because of statutory, contractual, exchange control or other restrictions other than those indicated in the Group financial statements. 2. Necessary adjustments have been made to eliminate all material intra-group unrealised profits on transactions amongst parent company, subsidiary undertakings and associated undertakings. G. Other information 1. We acknowledge our responsibility for the preparation of the other information. The other information comprises the strategic report and the directors’ report. 2. We confirm that the content contained within the other information is consistent with the financial statements. 26
Appendix C
Management representation letter (continued) Management representation letter (continued) H. Going concern 1. Note 1 to the consolidated and parent company financial statements discloses all of the matters of which we are aware that are relevant to the Group and Company’s ability to continue as a going concern, including significant conditions and events, our plans for future action, and the feasibility of those plans.
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I. Estimates 1. We believe that the measurement processes, including related assumptions and models, used to determine the accounting estimate(s) have been consistently applied and are appropriate in the context of, for the Group and Company, UK GAAP and FRS 102. 2. We confirm that the significant assumptions used in making accounting estimates appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity, where relevant to the accounting estimates and disclosures. 3. We confirm that the disclosures made in the consolidated and parent company financial statements with respect to the accounting estimate(s) are complete and made in accordance with, for the Group and Company, UK GAAP and FRS 102. 4. We confirm that no adjustments are required to the accounting estimate(s) and disclosures in the consolidated and parent company financial statements due to subsequent events. J. Retirement benefits 1. On the basis of the process established by us and having made appropriate enquiries, we are satisfied that the actuarial assumptions underlying the scheme liabilities are consistent with our knowledge of the business. All significant retirement benefits and all settlements and curtailments have been identified and properly accounted for. Yours faithfully
YHN Signatory
27
EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Š 2019 EYGM Limited. All Rights Reserved. ED None
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
ey.com
30 July 2019 Ernst & Young LLP Citygate St. James’ Boulevard Newcastle upon Tyne NE1 4JD Dear Sirs This letter of representations is provided in connection with your audit of the consolidated and parent company financial statements of Your Homes Newcastle Limited (‘the Group and Company’) for the year ended 31 March 2019. We recognise that obtaining representations from us concerning the information contained in this letter is a significant procedure in enabling you to form an opinion as to whether the consolidated and parent company financial statements give a true and fair view of (or ‘present fairly, in all material respects’,) the Group and Company financial position of Your Homes Newcastle Limited as of 31 March 2019 and of its financial performance and its cash flows for the year then ended in accordance with, for the Group, UK GAAP, FRS 102, and for the Company, UK GAAP, FRS 102. We understand that the purpose of your audit of our consolidated and parent company financial statements is to express an opinion thereon and that your audit was conducted in accordance with International Standards on Auditing (UK), which involves an examination of the accounting system, internal control and related data to the extent you considered necessary in the circumstances, and is not designed to identify - nor necessarily be expected to disclose - all fraud, shortages, errors and other irregularities, should any exist. Accordingly, we make the following representations, which are true to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: A. Financial Statements and Financial Records 1.
We have fulfilled our responsibilities, as set out in the terms of the audit engagement agreement dated 2 October 2017, for the preparation of the financial statements in accordance with, for the Group, UK GAAP, FRS 102, and for the Company, UK GAAP, FRS 102.
2.
We acknowledge, as members of management of the Group and Company, our responsibility for the fair presentation of the consolidated and parent company financial statements. We believe the consolidated and parent company financial statements referred to above give a true and fair view of (or ‘present fairly, in all material respects’) the financial position, financial performance and cash flows of the Group in accordance with UK GAPP, FRS 102, and for the Company in accordance with UK GAAP, FRS 102, and are free of material misstatements, including omissions. We have approved the financial statements.
3.
The significant accounting policies adopted in the preparation of the Group and Company financial statements are appropriately described in the Group and Company financial statements.
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4.
As members of management of the Group and Company, we believe that the Group and Company have a system of internal controls adequate to enable the preparation of accurate financial statements in accordance with UK GAAP, FRS 102 for the Group and UK GAAP, FRS 102 for the Company that are free from material misstatement, whether due to fraud or error.
5.
There are no unadjusted audit differences identified during the current audit and pertaining to the latest period presented.
B. Non-compliance with Laws and Regulations, including Fraud 1. We acknowledge that we are responsible to determine that the Group and Company’s business activities are conducted in accordance with laws and regulations and that we are responsible to identify and address any noncompliance with applicable laws or regulations, including fraud. 2. We acknowledge that we are responsible for the design, implementation and maintenance of internal controls to prevent and detect fraud. 3. We have disclosed to you the results of our assessment of the risk that the consolidated and parent company financial statements may be materially misstated as a result of fraud. 4. We have no knowledge of any identified or suspected non-compliance with laws or regulations, including fraud, that may have affected the Group or Company (regardless of the source or form and including without limitation, any allegations by “whistleblowers”), including non-compliance matters: •
Involving financial improprieties;
•
Related to laws or regulations that have a direct effect on the determination of material amounts and disclosures in the consolidated and parent company financial statements;
•
Related to laws or regulations that have an indirect effect on amounts and disclosures in the consolidated and parent company financial statements, but compliance with which may be fundamental to the operations of the Group and Company’s business, its ability to continue in business, or to avoid material penalties;
•
Involving management, or employees who have significant roles in internal control, or others; and
•
In relation to any allegations of fraud, suspected fraud or other noncompliance with laws and regulations communicated by employees, former employees, analysts, regulators or others.
C. Information Provided and Completeness of Information and Transactions 1.
We have provided you with: •
Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
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2
•
Additional information that you have requested from us for the purpose of the audit; and
•
Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
2.
All material transactions have been recorded in the accounting records and are reflected in the consolidated and parent company financial statements.
3.
We have made available to you all minutes of the meetings of shareholders, directors and committees of directors (or summaries of actions of recent meetings for which minutes have not yet been prepared) held through the period to the most recent meeting.
4.
We confirm the completeness of information provided regarding the identification of related parties. We have disclosed to you the identity of the Group and Company’s related parties and all related party relationships and transactions of which we are aware, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements, guarantees, non-monetary transactions and transactions for no consideration for the period ended, as well as related balances due to or from such parties at the period end. These transactions have been appropriately accounted for and disclosed in the consolidated and parent company financial statements.
5.
We believe that the significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable.
6.
We have disclosed to you, and the Group and Company has complied with, all aspects of contractual agreements that could have a material effect on the consolidated and parent company financial statements in the event of noncompliance, including all covenants, conditions or other requirements of all outstanding debt.
D. Liabilities and Contingencies 1.
All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the consolidated and parent company financial statements.
2.
We have informed you of all outstanding and possible litigation and claims, whether or not they have been discussed with legal counsel.
3.
We have recorded and/or disclosed, as appropriate, all liabilities related to litigation and claims, both actual and contingent, and have disclosed in the notes to the consolidated and parent company financial statements all guarantees that we have given to third parties.
4.
No claims in connection with litigation have been or are expected to be received.
E. Subsequent Events 1.
There have been no events subsequent to period end which require adjustment of or disclosure in the consolidated and parent company financial statements or notes thereto.
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3
F. Group audits 1.
There are no significant restrictions on our ability to distribute the retained profits of the Group because of statutory, contractual, exchange control or other restrictions other than those indicated in the Group financial statements.
2.
Necessary adjustments have been made to eliminate all material intra-group unrealised profits on transactions amongst parent company, subsidiary undertakings and associated undertakings.
G. Other information 1. We acknowledge our responsibility for the preparation of the other information. The other information comprises the Strategic Report and Director’s Report. 2. We confirm that the content contained within the other information is consistent with the financial statements. H. Going Concern 1. Note 1.4 to the consolidated and parent company financial statements discloses all of the matters of which we are aware that are relevant to the Group and Company’s ability to continue as a going concern, including significant conditions and events, our plans for future action, and the feasibility of those plans. I.
Estimates
1. We believe that the measurement processes, including related assumptions and models, used to determine the accounting estimate(s) have been consistently applied and are appropriate in the context of UK GAAP, FRS 102. 2. We confirm that the significant assumptions used in making accounting estimates appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity, where relevant to the accounting estimates and disclosures. 3. We confirm that the disclosures made in the consolidated and parent company financial statements with respect to the accounting estimate(s) are complete and made in accordance with UK GAAP, FRS 102. 4. We confirm that no adjustments are required to the accounting estimate(s) and disclosures in the consolidated and parent company financial statements due to subsequent events. J.
Retirement benefits
1.
On the basis of the process established by us and having made appropriate enquiries, we are satisfied that the actuarial assumptions underlying the scheme liabilities are consistent with our knowledge of the business. All significant retirement benefits and all settlements and curtailments have been identified and properly accounted for.
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4
Yours faithfully,
_______________________ (YHN Signatory) _______________________ (YHN Signatory)
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5
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30 July 2019 Ernst & Young LLP Citygate St. James’ Boulevard Newcastle upon Tyne NE1 4JD Dear Sirs This letter of representations is provided in connection with your audit of the financial statements of Abri Trading Limited (‘the Company’) for the year ended 31 March 2019. We recognise that obtaining representations from us concerning the information contained in this letter is a significant procedure in enabling you to form an opinion as to whether the financial statements give a true and fair view of (or ‘present fairly, in all material respects’,) the financial position of Abri Trading Limited as of 31 March and of its financial performance and its cash flows for the year then ended in accordance with UK GAAP, FRS 102. We understand that the purpose of your audit of our financial statements is to express an opinion thereon and that your audit was conducted in accordance with International Standards on Auditing (UK), which involves an examination of the accounting system, internal control and related data to the extent you considered necessary in the circumstances, and is not designed to identify - nor necessarily be expected to disclose - all fraud, shortages, errors and other irregularities, should any exist. Accordingly, we make the following representations, which are true to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: A. Financial Statements and Financial Records 1.
We have fulfilled our responsibilities, as set out in the terms of the audit engagement agreement dated 2 October 2017, for the preparation of the financial statements in accordance with UK GAAP, FRS 102.
2.
We acknowledge, as members of management of the Company, our responsibility for the fair presentation of the financial statements. We believe the financial statements referred to above give a true and fair view of (or ‘present fairly, in all material respects’) the financial position, financial performance and cash flows of the Company in accordance with UK GAAP, FRS 102 and are free of material misstatements, including omissions. We have approved the financial statements.
3.
The significant accounting policies adopted in the preparation of the financial statements are appropriately described in the financial statements.
4.
As members of management of the Company, we believe that the Company has a system of internal controls adequate to enable the preparation of accurate financial statements in accordance with UK GAAP, FRS 102 that are free from material misstatement, whether due to fraud or error.
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5.
There are no unadjusted audit differences identified during the current audit and pertaining to the latest period presented.
B. Non-compliance with Laws and Regulations, including Fraud 6.
We acknowledge that we are responsible to determine that the Company’s business activities are conducted in accordance with laws and regulations and that we are responsible to identify and address any non-compliance with applicable laws and regulations, including fraud.
7.
We acknowledge that we are responsible for the design, implementation and maintenance of internal controls to prevent and detect fraud.
8.
We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
9.
We have no knowledge of any identified or suspected non-compliance with laws or regulations, including fraud that may have affected the Company (regardless of the source or form and including without limitation, any allegations by “whistleblowers”), including non-compliance matters: •
Involving financial improprieties;
•
Related to laws or regulations that have a direct effect on the determination of material amounts and disclosures in the Company’s financial statements;
•
Related to laws and regulations that have an indirect effect on amounts and disclosures in the financial statements, but compliance with which may be fundamental to the operations of the Company’s business, its ability to continue in business, or to avoid material penalties;
•
Involving management, or employees who have significant roles in internal control, or others; and
•
In relation to any allegations of fraud, suspected fraud or other noncompliance with laws and regulations communicated by employees, former employees, analysts, regulators or others.
C. Information Provided and Completeness of Information and Transactions 1.
2.
We have provided you with: •
Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
•
Additional information that you have requested from us for the purpose of the audit; and
•
Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
All material transactions have been recorded in the accounting records and are reflected in the financial statements.
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2
3.
We have made available to you all minutes of the meetings of shareholders, directors and committees of directors (or summaries of actions of recent meetings for which minutes have not yet been prepared) held through the period to the most recent meeting.
4.
We confirm the completeness of information provided regarding the identification of related parties. We have disclosed to you the identity of the Company’s related parties and all related party relationships and transactions of which we are aware, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements, guarantees, non-monetary transactions and transactions for no consideration for the period ended, as well as related balances due to or from such parties at the period end. These transactions have been appropriately accounted for and disclosed in the financial statements.
5.
We believe that the significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable.
6.
We have disclosed to you, and the Company has complied with, all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt.
D. Liabilities and Contingencies 1.
All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the financial statements.
2.
We have informed you of all outstanding and possible litigation and claims, whether or not they have been discussed with legal counsel.
3.
We have recorded and/or disclosed, as appropriate, all liabilities related to litigation and claims, both actual and contingent, and have disclosed in notes to the financial statements all guarantees that we have given to third parties.
4.
No other claims in connection with litigation have been or are expected to be received.
E. Subsequent Events 1.
There have been no events subsequent to period end which require adjustment of or disclosure in the financial statements or notes thereto.
F. Other information 1. We acknowledge our responsibility for the preparation of the other information. The other information comprises the Strategic Report and Director’s Report. 2. We confirm that the content contained within the other information is consistent with the financial statements. G. Going Concern 1. The financial statements disclose all of the matters of which we are aware that are relevant to the Company’s ability to continue as a going concern, including
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3
significant conditions and events, our plans for future action, and the feasibility of those plans. H. Estimates 1. We believe that the measurement processes, including related assumptions and models, used to determine the accounting estimate(s) have been consistently applied and are appropriate in the context of UK GAAP, FRS 102. 2. We confirm that the significant assumptions used in making accounting estimates appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity, where relevant to the accounting estimates and disclosures. 3. We confirm that the disclosures made in the Company financial statements with respect to the accounting estimate(s) are complete and made in accordance with UK GAAP, FRS 102. 4. We confirm that no adjustments are required to the accounting estimate(s) and disclosures in the Company financial statements due to subsequent events. Yours faithfully,
_______________________ (Abri Signatory) _______________________ (Abri Signatory)
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4
25 July 2019 Ernst & Young LLP Citygate St. James’ Boulevard Newcastle upon Tyne NE1 4JD Dear Sirs This letter of representations is provided in connection with your audit of the financial statements of Asfaleia Limited (‘the Company’) for the year ended 31 March 2019. We recognise that obtaining representations from us concerning the information contained in this letter is a significant procedure in enabling you to form an opinion as to whether the financial statements give a true and fair view of (or ‘present fairly, in all material respects’,) the financial position of Asfaleia Limited as of 31 March and of its financial performance and its cash flows for the year then ended in accordance with UK GAAP, FRS 102. We understand that the purpose of your audit of our financial statements is to express an opinion thereon and that your audit was conducted in accordance with International Standards on Auditing (UK), which involves an examination of the accounting system, internal control and related data to the extent you considered necessary in the circumstances, and is not designed to identify - nor necessarily be expected to disclose - all fraud, shortages, errors and other irregularities, should any exist. Accordingly, we make the following representations, which are true to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: A. Financial Statements and Financial Records 1.
We have fulfilled our responsibilities, as set out in the terms of the audit engagement agreement dated 2 October 2017, for the preparation of the financial statements in accordance with UK GAAP, FRS 102.
2.
We acknowledge, as members of management of the Company, our responsibility for the fair presentation of the financial statements. We believe the financial statements referred to above give a true and fair view of (or ‘present fairly, in all material respects’) the financial position, financial performance and cash flows of the Company in accordance with UK GAAP, FRS 102 and are free of material misstatements, including omissions. We have approved the financial statements.
3.
The significant accounting policies adopted in the preparation of the financial statements are appropriately described in the financial statements.
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4.
As members of management of the Company, we believe that the Company has a system of internal controls adequate to enable the preparation of accurate financial statements in accordance with UK GAAP, FRS 102 that are free from material misstatement, whether due to fraud or error.
5.
There are no unadjusted audit differences identified during the current audit and pertaining to the latest period presented.
B. Non-compliance with Laws and Regulations, including Fraud 6.
We acknowledge that we are responsible to determine that the Company’s business activities are conducted in accordance with laws and regulations and that we are responsible to identify and address any non-compliance with applicable laws and regulations, including fraud.
7.
We acknowledge that we are responsible for the design, implementation and maintenance of internal controls to prevent and detect fraud.
8.
We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
9.
We have no knowledge of any identified or suspected non-compliance with laws or regulations, including fraud that may have affected the Company (regardless of the source or form and including without limitation, any allegations by “whistleblowers”), including non-compliance matters: •
Involving financial improprieties;
•
Related to laws or regulations that have a direct effect on the determination of material amounts and disclosures in the Company’s financial statements;
•
Related to laws and regulations that have an indirect effect on amounts and disclosures in the financial statements, but compliance with which may be fundamental to the operations of the Company’s business, its ability to continue in business, or to avoid material penalties;
•
Involving management, or employees who have significant roles in internal control, or others; and
•
In relation to any allegations of fraud, suspected fraud or other noncompliance with laws and regulations communicated by employees, former employees, analysts, regulators or others.
C. Information Provided and Completeness of Information and Transactions 1.
We have provided you with: •
Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters;
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2
•
Additional information that you have requested from us for the purpose of the audit; and
•
Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
2.
All material transactions have been recorded in the accounting records and are reflected in the financial statements.
3.
We have made available to you all minutes of the meetings of shareholders, directors and committees of directors (or summaries of actions of recent meetings for which minutes have not yet been prepared) held through the period to the most recent meeting.
4.
We confirm the completeness of information provided regarding the identification of related parties. We have disclosed to you the identity of the Company’s related parties and all related party relationships and transactions of which we are aware, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements, guarantees, non-monetary transactions and transactions for no consideration for the period ended, as well as related balances due to or from such parties at the period end. These transactions have been appropriately accounted for and disclosed in the financial statements.
5.
We believe that the significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable.
6.
We have disclosed to you, and the Company has complied with, all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt.
D. Liabilities and Contingencies 1.
All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the financial statements.
2.
We have informed you of all outstanding and possible litigation and claims, whether or not they have been discussed with legal counsel.
3.
We have recorded and/or disclosed, as appropriate, all liabilities related to litigation and claims, both actual and contingent, and have disclosed in notes to the financial statements all guarantees that we have given to third parties.
4.
No other claims in connection with litigation have been or are expected to be received.
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3
E. Subsequent Events 1.
There have been no events subsequent to period end which require adjustment of or disclosure in the financial statements or notes thereto.
F. Other information 1. We acknowledge our responsibility for the preparation of the other information. The other information comprises the Strategic Report and Director’s Report. 2. We confirm that the content contained within the other information is consistent with the financial statements. G. Going Concern 1. The financial statements disclose all of the matters of which we are aware that are relevant to the Company’s ability to continue as a going concern, including significant conditions and events, our plans for future action, and the feasibility of those plans. H. Estimates 1. We believe that the measurement processes, including related assumptions and models, used to determine the accounting estimate(s) have been consistently applied and are appropriate in the context of UK GAAP, FRS 102. 2. We confirm that the significant assumptions used in making accounting estimates appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity, where relevant to the accounting estimates and disclosures. 3. We confirm that the disclosures made in the Company financial statements with respect to the accounting estimate(s) are complete and made in accordance with UK GAAP, FRS 102. 4. We confirm that no adjustments are required to the accounting estimate(s) and disclosures in the Company financial statements due to subsequent events. Yours faithfully,
_______________________ (Finance Director) _______________________ (Asfaleia Signatory)
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4
Steve Bramwell Chair of Asfaleia Ltd YHN House Benton Park Road Newcastle Upon Tyne NE7 7LX
30 July 2019
Dear Steve Continued YHN support to Asfaleia Ltd I am writing on behalf of the Board to reconfirm that YHN will support Asfaleia through its delivery of its budget and performance targets. At its meeting on 30 July 2019, Board members confirmed that the terms of the Service Agreement between YHN and Asfaleia remain in place. In particular, Clause 12.1 confirms that YHN “shall provide and evidence such support for the Subsidiary as shall be required to enable the Subsidiary’s auditors to confirm from time to time to the Subsidiary’s board of directors that the Subsidiary is and will continue to be able to meet its debts as they fall due and is otherwise a ‘going concern’”. Yours faithfully, on behalf of the Board
Jo Totton Chair
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Agenda Item 11
To be first for housing
Your Homes Newcastle Board 30 July 2019
TITLE
General Data Protection Regulation Compliance Progress Update and YHN Data Protection Policy
AUTHOR
Jill Davison- Assistant Director Business Support
COMPANY
Your Homes Newcastle
ACTION REQUIRED
GDPR update- For Information YHN Data Protection Policy- For Approval
SUMMARY
The purpose of this report is to provide Board with an update on our progress towards ensuring YHN is compliant with the General Data Protection Regulations 2018. As part of our response we have also developed a new Data Protection Policy that Board are asked to review and approve.
STRATEGIC OBJECTIVES
3. Strong business fit for today, ready for tomorrow
STRATEGIC RISK REGISTER
NUMBER & TITLE
GR12: Failure to deliver effective governance of the Group
LIKELIHOOD
1 (Rare)
IMPACT
4 (High)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
Considerable financial implications would result from non-compliance.
CUSTOMER IMPACT / VIEWS
Customers rights have been strengthened as a result of the legislation however their views or consultation were not required to enact any changes.
EQUALITY & DIVERSITY CONSIDERATIONS
An Equality Analysis has been completed on the Data Protection Policy.
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Your Homes Newcastle General Data Protection Regulation Compliance Progress Update and YHN Data Protection Policy 1.
Purpose of report
1.1
This report is to provide Board with an update on the progress we have made to date towards ensuring organisational compliance with the General Data Protection Regulations since their implementation in May 2018. As part of our response we have developed a Data Protection Policy which sets out how Your Homes Newcastle will handle the personal data of its customers, suppliers, employees, workers and other third parties. YHN Board are also asked to discuss and approve this document.
2.
Background information
2.1
The General Data Protection Regulation (or GDPR for short) brought into force one single set of data protection law, across all 28 European member states.
2.2
The GDPR was introduced to give citizens back the control of their personal data and simplify regulations across the EU. Although the UK is expected to leave the EU later this year, GDPR will remain part of UK law through our Data Protection Act 2018 which is the UK’s implementation of the General Data Protection Regulation (GDPR).
2.3
Failure to comply with GDPR is punishable by a fine of up to 4% of annual worldwide turnover (or, if greater, €20,000,000) for breaches of certain provisions, and up to 2% (or, if greater €10,000,000) for other specified breaches. The Information Commissioner's Office (ICO) also has the power in some circumstances to stop organisations from processing data until remedial action is taken. Since their new powers have come into place there have already been some high-profile fines as a result of non-compliance. Most recently British Airways were fined £183million due to a data breach resulting in thousands of customer’s personal details being unlawfully obtained.
2.4
For YHN, the introduction of GDPR has required us to significantly increase our organisational awareness about the rights that individuals have with regards to their personal data. We have had to change and improve the way in which we look after personal data and how we respond to data incidents and breaches. We now have in place a dedicated resource within our Governance and Implementation Team who have undertaken and coordinated an extensive programme of activity in order to help ensure compliance with the law.
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3.
Previous board update
3.1
Board received a report and presentation on GDPR in March 2018 which set out YHN’s approach covering the period pre and post implementation of GDPR.
4.
Current position as of July 2019
4.1
The table below provides Board with an overview of all the key tasks that we have undertaken since the last update: Table A: GDPR actions March 2018- to date
Identified action
Status as of July 2019
Establish a central Information Asset Register and ensure its ongoing integrity and quality.
Complete
Develop and implement new information governance system (MetaPrivacy) for the management of Privacy impact assessments, reviews and risk.
Complete
Establish GDPR Risk Register
Complete
Complete an extensive data mapping exercise for all personal data across the business, identifying any areas of high and moderate risk.
Complete
Complete Privacy Impact Assessments (PIA’s) on all areas of the business that process personal data
Complete
Of the PIA’s completed, review any business processes that have been identified HIGH risk and work with service managers to implement improvements in order to eliminate/dramatically reduce a data security incident or breach
Complete
Review any business processes that have been identified MEDIUM risk and work with service managers to implement improvements in order to eliminate/dramatically reduce a data security incident or breach
On-going
Review all legal basis for processing including consent requirements and implement changes
Complete
Develop a Data Protection Policy underpinned by a range of new or refreshed supporting
Complete (subject to approval)
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244 in total
policies and procedures aimed at ensuring compliance with the law. Framework to include: -
Data Protection Policy Customer Privacy Notice Records Retention and Disposal Policy and Schedule Records Management Policy Subject Access Procedure
Ensure all staff complete bespoke GDPR awareness e-learning module.
On-going
Review all contracts, Data Sharing Agreements and Privacy Notices to ensure they are GDPR compliant.
Complete
Review and improve the way in which Freedom of Information Requests and Subject Access Requests are identified, recorded, processed and monitored.
Complete
Review and improve the way in which data security incidents and personal data breaches are identified, recorded, processed and monitored.
Complete
Carry out comprehensive audit of data that is being physically stored, procure new off-site storage for information that needs to be retained and securely destroy all information for which there is no legitimate reason to retain.
On-going
Develop robust approach for the retention and disposal of data and provide information owners with face to face guidance and support via our Governance and Implementation Team
On-going
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(98% of all YHN staff compliant)
*3898 documents archived and indexed, 7499 documents securely destroyed to date
The table below lists a number of outstanding actions that we have identified to be completed in the next phase: Table B- Identified actions still to be completed: Identified action
Target completion
Following Board approval of Data Protection Policy, disseminate this and all other related policies and procedures to all staff.
September 2019
Launch a campaign to test organisational resilience to cyber-attacks etc. phishing.
October 2019
Undertake a series of face to face good practice workshops with staff across the business to further embed new policies and processes
December 2019
Ensure all BCE and contact centre staff are compliant in GDPR awareness through completion of e-learning module.
August 2019
Undertake privacy impact assessments on all data processed by new BCE and Contact Centre services
March 2020
Develop a more systematic approach to obtaining, recording and monitoring customer consent for use of personal data.
March 2020
Options appraisal for the procurement and implementation of a Document Management System
March 2020
Implement information protection tagging system to prevent accidental data loss
March 2020
5.1
Key emerging data protection themes
5.1
As the tables above illustrate, YHN have been working through an extensive programme of activity since the last update in order to ensure compliance with GDPR. Throughout our work, three themes in particular have emerged, a brief summary of which is provided for information below: •
Retention of personal information
One of the areas where we have really focused our attention is the retention of personal information. It quickly became apparent that organisational awareness with regard to appropriate retention and disposal of personal data was limited and our approach unsystematic. A particular concern was around the retention of paper records and the retention of house files. Not only was this a historic problem in the way the house files were archived by property and not by tenancy, it was also an
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ever-growing risk in terms of the costs, security of storage and also in terms of GDPR compliance. To address this issue, we have developed a retention policy and have systematically applied the policy to historic and current document archives – this has resulted in a positive reduction of documents being retained outside of their legally required retention period. •
Security/loss of equipment
Another area of focus has been around the security of equipment that may provide unwarranted access to personal data for example laptops, work mobile phones, USB drives etc. In direct response to an incident that was reported, we communicated with all staff about the importance of ensuring that equipment is used and stored safely and securely to reduce the risk of data loss. Another incident highlighted the potential risk of personal data being visible to members of the public in office areas. In direct response to this we have now introduced privacy screens in order to restrict the visibility of information on pc’s. •
Accidental sharing of information
The third area of focus has been around addressing the risks associated with accidentally sharing information. Over the course of the year we have closely monitored the trends and types of data incidents and breaches which has enabled us to respond pre-emptively and reactively. As a pre-emptive measure to manage the security and confidentiality of personal data that is shared, we have created and rolled out a GDPR footnote that is automatically applied to all emails sent to external recipients and another GDPR note that has been applied to all letter envelopes Reactively we have communicated with staff after a data incident to advise best practice approach to sending emails (checking the communication recipient is correct, attachments are protected etc) Also, as part of the reactive approach and analysing our data we have improved processes, systems and identified teams in need of extra training. 6.
Personal Data Incidents and Data Breaches
6.1
The GDPR has tightened up regulation and responsibility with regard to organisational response to personal data breaches. A personal data breach means: “a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to, personal data. This includes breaches that are the result of both accidental and deliberate causes” Recital 87 of the GDPR makes clear that when a security incident takes place or is suspected, we must be able to quickly establish whether a personal data breach has occurred and, if so, promptly take steps to address it, including telling the ICO if required within 72 hours. Once all our identified actions are complete then we would hope to be in a position whereby data incidents and data breaches become exceptionally rare. However in the meantime to ensure compliance with the legislation we
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needed to develop a more consistent and systematic approach to both the detection of a potential incident and our organisational response. One of the steps we have taken is to transfer responsibility for managing and responding to these situations to our Governance and Implementation Team which became effective as of March 2019. Our new approach provides the organisation with a clear central point of contact and the necessary information governance expertise to aid detection and reporting. We are now better able to provide a full audit trail, gather the necessary insight and ensure immediate remedial action is taken. Crucially we are also better positioned to be able to capture lessons learnt, continuously improve the way in which we manage personal data and reduce the risk of further data security incidents and personal data breaches occurring. 6.2
The table below illustrates the number of cases the Governance and Implementation Team have handled since March 2019. Since March 2019: Total number of data security incidents
28
Number of data security incidents confirmed as data breaches
16
Number of data breaches reportable to the ICO
1
7.
YHN Data Protection Policy
7.1
One of our priority actions in ensuring organisational compliance has been the development of a new Data Protection Policy which all YHN employees will be expected to comply with. A Data Protection Policy is an internal policy that sets out how an organisation protects personal data. It contains a set of principles, rules and guidelines that informs how we will ensure ongoing compliance with data protection laws. Though it is not explicitly stated in the GDPR that every data controller must have a written policy, Article 24 of the GDPR states that the data controller must put in place appropriate "measures to ensure and demonstrate" that its processing complies with the GDPR. Where proportionate, this should include the: “...implementation of appropriate data protection policiesâ€? Taking this into consideration, together with guidance by the Information Commissioners Office, YHN decided at an early stage that an overarching Data Protection Policy was essential particularly due to the nature and scale of the personal data that we manage. The benefits of YHN having a Data Protection Policy in place include: •
A written policy will help us more easily address any deficiencies in any technical and organisational measures, ensuring compliance as well as good practice. This is an important part of achieving the GDPR's Accountability principle.
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•
A policy helps to provide a clear, consistent message and ensure that all YHN employees understand our expectations in relation to the way in which we handle personal data in our care. Deliberate or careless mishandling of personal data by an individual/s will be easier to address and evidence when supported by policy.
•
In the event of investigation by the Information Commissioners’ office, proving that we have an effective policy in place is likely to be taken into consideration as evidence of our commitment to compliance with the law.
•
Other organisations who we share personal information with to carry out essential business could ask us to demonstrate compliance with data protection laws.
•
External funders or companies to which we may tender to provide services, may require us to have a policy in place and ask for evidence throughout the application process.
8.
Information Governance Policy Framework
8.1
Guided by the ICO, YHN’s Data Protection Policy has been designed to be the umbrella document that brings together a range of supporting policies, procedures and guidance. This currently includes: -
Customer Privacy Notice (Published and in use)
-
Records Retention and Disposal Policy and Schedule
-
Records Management Policy
-
Subject Access Procedure
-
Information Security Policy
9.
Collaboration with Newcastle City Council
9.1
Your Homes Newcastle have a shared Data Protection Officer (DPO) with Newcastle City Council. Our Governance and Implementation Team work very closely with the DPO and his team and have sought their advice and guidance when developing our Data Protection Policy.
10.
Conclusion and recommendations
10.1 The substantial financial sanctions and reputation implications associated with GDPR non-compliance should ensure that all of the members of the Board and Executive Team recognise the importance of compliance and of the work and resources that YHN have deemed necessary to ensure this. This report is intended to maintain awareness of the regulations and provide assurance on the on-going steps that YHN is taking to maintain compliance including the introduction of our Data Protection Policy. 10.2 Board are recommended to: a) Receive the update on GDPR implementation and consider the information that has been provided
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b) Receive and approve YHN’s Data Protection Policy. 11.
Implementation
11.1 Following approval of YHN’s Data Protection Policy work will begin to disseminate this and the accompanying information governance policy framework to the rest of the organisation. We are keen to be able to demonstrate both compliance in terms of employees having both received and read the policies but also to assess understanding as a result. To achieve this we will be using MetaCompliance technology which enables us to track and report on all employees who have interacted with the policy and successfully completed the built-in assessment modules. We will be following up the dissemination of the policies with a programme of bespoke awareness face to face workshops which will give employees the opportunity to ask questions specific to their own working practices. Our Governance and Implementation Team will also be developing a range of top tip guides and case study examples to help bring the policies to life and help embed the importance of good data management practices right across the business. Background Papers - YHN Data Protection Policy Contact Officer: If you have any questions about this report that you would like clarifying before the meeting or would like more detail on any of the actions outlined in the report, you can contact Karen Hedley- Governance and Implementation Manager by telephone on 0191 2781543 or email: karen.hedley@yhn.org.uk
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YHN Data Protection Policy (DRAFT)
Page 235
Click here for link to interactive version: https://view.pagetiger.com/GDPR/data-protection-policy-
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1.
What this policy is about
1.1
This Data Protection Policy sets out how Your Homes Newcastle will handle the personal data of its customers, suppliers, employees, workers and other third parties. It also sets out what is expected in order for YHN to comply with data protection legislation. It applies to all personal data that we collect and process regardless of the media on which that data is stored or whether it relates to past or present employees, workers, customers, clients or supplier contacts, shareholders, website users or any other Data Subject.
1.2
Data protection is the fair and proper use of information about people. It’s part of the fundamental right to privacy – but on a more practical level, it’s about building trust between people and organisations. It’s about treating people fairly and openly, recognising their right to have control over their own identity and their interactions with others, and striking a balance with the wider interests of both organisations and society.
1.3
Related legislation YHN is committed to a policy of protecting the rights and privacy of individuals in accordance with the General Data Protection Regulations (GDPR) and Data Protection Legislation.
1.4
The Data Protection Legislation lays down regulations and safeguards for the collection, recording and use of personal information whether on paper, in a computer or recorded on other material. YHN needs to collect and use certain types of information about people with whom it deals in order to operate. These include employees, employment applicants, customers, housing applicants, suppliers and others with whom it communicates.
1.5
Certain information may be required for regulatory or monitoring purposes as laid down by law. Other information may be required for the purpose of establishing a contract. In any case, YHN recognises that the information must be dealt with lawfully and correctly under the principles laid down within legislation.
1.6
Related policies and guidance Related policies and guidance are available to help interpret and act in accordance with this policy. This Data Protection Policy should be read in conjunction with: • • • •
1.7
Records Retention Policy and Schedule Subject Access Request procedure YHN Records Management policy YHN Privacy Statement.
Link with YHN Business Strategy- Destination 2022 This policy is intended to support our Destination 202 Business Strategy. In particular it supports our strategic objective:
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“Strong business fit for today, ready for tomorrow” which is about ensuring that we run our business well and minimise the risks that may jeopardise our reputation and financial viability.
2.
Who this policy is for
2.1
All YHN employees must read, understand and comply with this policy when processing Personal data on YHN’s behalf and attend training on its requirements. This policy sets out what is expected in order for YHN to comply with applicable law and compliance with this policy is mandatory. Failure to do so may lead to disciplinary action.
3.
Responsibility for compliance with this policy
3.1
All YHN employees: are responsible for ensuring compliance with this policy and implement appropriate practices, processes, controls and training to ensure such compliance.
3.2
Data Protection Officer (DPO): YHN has a named DPO who is employed by Newcastle City Council and registered with the Information Commissioner’s Office. The DPO is responsible for overseeing data protection strategy and implementation to ensure YHN’s compliance with GDPR requirements
3.3
Information Governance Team: In addition to the DPO we also have a dedicated Information Governance Team who are responsible for ensuring that YHN employees adhere to our Data Protection policies and procedures and who give advice and guidance on their application. The team is also responsible for carrying out impact assessments and ensuring fulfilment of Subject Access Requests.
4.
Personal data protection principles
4.1
YHN adheres to the principles relating to processing of personal data set out in the GDPR which require personal data to be: • Processed lawfully, fairly and in a transparent manner (lawfulness, fairness and transparency). • Collected only for specified, explicit and legitimate purposes. (purpose limitation) • Adequate, relevant and limited to what is necessary in relation to the purposes for which it is processed (data minimisation). • Accurate and where necessary kept up to date. (accuracy) • Not kept in a form which permits identification of data subjects for longer than is necessary for the purposes for which the data is processed. (storage limitation) • Processed in a manner that ensures its security using appropriate technical and organisational measures to protect against unauthorised or unlawful processing and against accidental loss, destruction or damage. (security, integrity and confidentiality) YHN is responsible for ensuring compliance with these principles at all times.
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4.2
Lawfulness, fairness and transparency YHN will: •
identify valid grounds under the GDPR (known as a ‘lawful basis’) for collecting and using personal data
•
ensure that we do not do anything with the data in breach of any other laws.
•
use personal data in a way that is fair. This means that we must not process the data in a way that is unduly detrimental, unexpected or misleading to the individuals concerned.
• Be clear, open and honest with people from the start about how we will use
their personal data. We will do this through our Privacy Notices which we will make available in hard copy and on our website and include the following information: - the identity of the Data Controller (YHN) - the identity of the Data Protection Officer , - how and why the information will be used, protected and retained.
4.3
Purpose limitation YHN will: • Be clear about what our purposes are for processing personal data from the
start.
• Record our purposes and specify them in the privacy information we
provide the individual.
• Only use the personal data for a new purpose if either this is compatible with
the original purpose for which it was obtained, we get consent from the individual (Data Subject), or we have a clear basis in law.
4.4
Data minimisation YHN will ensure that the personal data we are processing is: • Adequate – personal data should be collected and processed for the purpose
intended
• Relevant – has a rational link to that purpose; and • Limited to what is necessary – we do not hold more data than we need for
that purpose. When personal data is no longer needed for the specified purpose it will be deleted or anonymised in accordance with YHN’s Data Retention Policy and Schedule
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4.5
Accuracy YHN will: • Take all reasonable steps to ensure the personal data we hold is not
incorrect or misleading as to any matter of fact.
• Keep personal data updated, although this will depend on what we are using
it for.
• If we discover that personal data is incorrect or misleading, we will take
reasonable steps to correct or erase it as soon as possible.
• Carefully consider any challenges to the accuracy of personal data that we
hold. Storage limitation
4.6
4.7
YHN will: •
Not keep personal data in a form which permits the identification of the Data Subject for longer than needed for the legitimate business purpose or purposes for which the data was originally collected.
•
Maintain a Data Retention Schedule which sets out the retention period for each category of personal data along with the criteria used to determine this period including any statutory obligations where YHN has to retain the data.
•
Periodically review the data we hold, and erase or anonymise it when it is no longer needed.
•
Carefully consider any challenges to the retention of data. Individuals have a right to erasure if we no longer need the data.
•
Only keep personal data for longer if we are keeping it for public interest archiving, scientific or historical research, or statistical purposes.
Security integrity and confidentiality YHN will: •
Ensure that data is processed in a manner that ensures its security using appropriate technical and organisational measures to protect against unauthorised or unlawful processing and against accidental loss, destruction or damage.
•
Develop, implement and maintain safeguards appropriate to its size, scope and business, available resources and the amount of personal data that is held or maintained on behalf of others.
•
Ensure that YHN employees follow all procedures in place to maintain the security of all personal data from the point of collection to the point of destruction. Personal data may only be transferred to third-party service providers who agree to comply with the required policies and procedures
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(Data Processing Agreements) and who agree to put adequate measures in place, as requested. •
Maintain data security by protecting the confidentiality, integrity and availability of the personal data, defined as follows: -
‘Confidentiality’ means that only people who have a need to know and are authorised to use the personal data can access it.
-
‘Integrity’ means that personal data is accurate and suitable for the purpose for which it is processed.
-
‘Availability’ means that authorised users are able to access the personal data when needed for legitimate authorised purposes.
4.7.1
Whilst much of YHN’s personal data is held electronically, some data will also be in hard copy. In the interests of confidentiality and security of information, employees must ensure that they clear their desk of personal data at the end of every day.
4.7.2
Our IT Security Policy outlines ‘acceptable usage’ for various aspects of IT equipment and services with a focus on the security and protection of systems and data. It includes mobile devices, personal devices and remote working. All employees are expected to be aware of and adhere to this policy.
5.
Lawful basis for processing data
5.1
YHN must only process personal data on the basis of one or more of the lawful bases set out in the GDPR, which includes consent, legal, contractual or legitimate business interests.
5.2
Most processing of personal data will be undertaken because YHN has either a legal, contractual or legitimate business interest to do so. For example, it is a legal requirement to report an accident under Health and Safety legislation; a contractual requirement to deal with matters under the Tenancy Agreement; or a legitimate business interest to hold emergency contact details for a member of staff.
5.3
Where specific consent is needed a Data Subject consents to processing of their personal data if they indicate agreement clearly either by a statement or positive action to the processing. Consent requires affirmative action so silence, pre-ticked boxes or inactivity are unlikely to be sufficient. If consent is given in a document which deals with other matters, then the consent must be kept separate from those other matters.
5.4
Data Subjects must be easily able to withdraw consent to processing at any time and YHN must promptly honour that request. Consent may need to be refreshed if we intend to process personal data for a different and incompatible purpose which was not disclosed when the Data Subject first consented.
5.5
Unless relying on another legal basis for processing, explicit consent is usually required for processing sensitive personal data and for Automated Decision-Making (ADM). Usually YHN will be relying on another basis (and not require explicit consent) to process most types of sensitive data. Where explicit consent is required, you must issue a Privacy Notice to the Data Subject to capture explicit consent.
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YHN must evidence consent captured and keep records of all consents so that compliance can be demonstrated.
6
Individual’s (Data subjects) rights under GDPR
6.1
Individuals (Data Subjects) is anyone who we hold data on such as employees, tenants, leaseholders, suppliers etc. All have the following rights regarding data processing, and the data that is recorded about them: It should be noted that dependant on the circumstances of the request these rights may not apply dependant on the legal bases for processing:
6.2
The right to be informed Individuals must be informed about the use of their personal data in a clear manner. They must also be informed about any rectification, erasure or change of use of their personal data. This information is provided in our Privacy Notice which is issued at the start of a tenancy. We also publish our Privacy Notice on our website.
6.3
The right of access Under GDPR individuals have the right to access the data collected on them by the Data Controller. The Data Controller (YHN) must respond to that request within 30 days. That request is often known as a ‘Subject Access Request’.
6.4
The right to rectification Individuals have the right to request modification of their data including the correction of errors and the updating of incorrect data for example wrong date of birth.
6.5
The right to erasure The right to erasure, also known as the right to deletion or the right to be forgotten, allows an individual to request that we stop all processing of their personal data and request for it to be erased. Individuals can make this request verbally or in writing and we have one calendar month to respond to the request.
6.6
The right to restrict processing Individuals have the right to request the restriction or suppression of their personal data. This is not an absolute right and only applies in certain circumstances. When processing is restricted we are permitted to store the personal data but not use it. An individual can make a request to restrict processing verbally or in writing and we have one calendar month to respond to the request.
6.7
The right to data portability
The right to data portability allows individuals to obtain and reuse their personal data for their own purposes across different services. It allows them to move, copy or transfer personal data easily from one IT environment to another in a safe and secure way, without affecting its usability.
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6.8
The right to object Individuals have the right to object to the processing of their personal data in certain circumstances. Individuals have an absolute right to stop their data being used for direct marketing. In other cases where the right to object applies we may be able to continue processing if we can show that we have a compelling reason for doing so. An individual can make an objection verbally or in writing and we have one calendar month to respond to the request.
6.9
Rights in relation to automated decision making and profiling Individuals have the right to refuse the automated processing of their personal data to make decisions about them if that significantly affects or produces legal effectsprofiling for example.
6.10
YHN will ensure that individuals can exercise these rights when appropriate dependant on the legal bases for processing.
6.11
Individuals may make data access requests as described in our ‘Subject Access Request Procedure’ this procedure also describes how YHN will ensure that its response to the data access request complies with the requirements of the GDPR.
6.12
Individuals have the right to complain to YHN relating to the processing of their personal data, the handling of a request to exercise one of their rights and appeals on how their complaint has been handled
7.
Personal data breaches
7.1
What is a data breach? A personal data breach means a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorised disclosure of, or access to, personal data. This includes breaches that are the result of both accidental and deliberate causes. It also means that a breach is more than just about losing personal data. Example: Personal data breaches can include: • • • • • •
7.2
access by an unauthorised third party; deliberate or accidental action (or inaction) by a controller or processor; sending personal data to an incorrect recipient; computing devices containing personal data being lost or stolen; alteration of personal data without permission; and loss of availability of personal data.
YHN are committed to looking after personal data in line with the law and as such it is every single employees responsibility to keep personal data safe, secure and confidential. However in the event of our failure to do so we have procedures in place
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to deal with any suspected personal data breach and will notify the individual concerned or any applicable regulator where it is legally required to do so. 7.3
Reporting a data breach Any YHN employee who becomes aware of a suspected data breach or data security incident must in the first instance immediately report this to YHN ICT Service desk either: • Using the portal • By calling the service desk on: 0191 278 7766 • By email: ICTServiceDesk@yhn.org.uk Following this initial report, you receive confirmation that this has been logged and you will then be contacted by our Information and Governance Team who will determine any action that is required. Any breach which is likely to result in a risk to the rights and freedoms of individuals will be reported by our Information Governance Team to the ICO. As required by GDPR legislation, YHN will do this within the required 72 hours’ time period of YHN becoming aware of the breach.
7.4
Employees who become aware of a data breach but fail to take the necessary action may face disciplinary action.
8
Transfer of data
8.1
All exports of data from within the European Economic Area (EEA) to non-European Economic Area countries (referred to in the GDPR as ‘third countries’) are unlawful unless there is an appropriate “level of protection for the fundamental rights of the Data Subjects”. For further detail on this please refer to YHN’s ICT Security Policy
9.
Direct marketing
9.1
YHN has only limited direct marketing activities however under GDPR is subject to certain rules and privacy laws when marketing to our customers. For example, a Data Subject's prior consent is required for electronic direct marketing (for example, by email, text or automated calls). The limited exception for existing customers known as "soft opt in" allows organisations to send marketing texts or emails if they have obtained contact details in the course of a sale to that person, they are marketing similar products or services, and they gave the person an opportunity to opt out of marketing when first collecting the details and in every subsequent message.
9.2
The right to object to direct marketing must be explicitly offered to the Data Subject in a clear manner so that it is easily distinguishable from other information.
9.3
A Data Subject's objection to direct marketing must be promptly honoured. If a customer opts out at any time, their details should be suppressed as soon as possible. Suppression involves retaining just enough information to ensure that marketing preferences are respected in the future.
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10
Information sharing
10.1
The default position is that YHN should not share personal data with third parties unless certain safeguards and contractual arrangements have been put in place and there is a clear legal basis.
10.2
Personal data may only be shared with another employee, contractor, agent or representative of YHN if the recipient has a clear job-related need to know the information.
10.3
Personal data may only be shared with third parties, such as service providers if: •
they have a need to know the information for the purposes of providing the contracted services;
•
sharing the personal data complies with the Privacy Notice provided to the Data Subject and, if required, the Data Subject's consent has been obtained;
•
the third party has agreed to comply with the required data security standards, policies and procedures and put adequate security measures in place; and
•
a fully executed written contract that contains GDPR approved third party clauses has been obtained.
11
Record keeping
11.1
YHN will keep full and accurate records of all data processing activities. To ensure this an Information Asset Register (IAR) has been produced and will be maintained by relevant identified senior managers responsible for the service which is collecting and or managing the data.
12
Training
12.1
All YHN employees are required to carry out mandatory training to ensure compliance with data protection laws. Failure to do so may result in disciplinary action.
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Key Definitions Automated decision making (ADM) – when a decision is made based solely on automated processing (including profiling) which produces legal effects or significantly affects an individual. Data Controller – the person or organisation that determines when, why and how to process Personal data. It is responsible for establishing practices and policies in line with the GDPR. Coastline is therefore the Data Controller of all personal data used in its business activities. Data Privacy Impact Assessment (DPIA) – assessments used to identify and reduce risks of data processing activity and should be conducted for all major system or business change programmes involving the processing of personal data. Data Processing Agreement – agreement between YHN and third party confirming that processing of personal data safeguards are in place. Data Processor – the organisation performing activities as required by the Data Controller. Data Protection Officer (DPO) – the person with overall responsibility for Data Protection compliance. Data Subject – a living, identified or identifiable individual about whom personal data is held. (anyone who we hold data on such as employees, tenants, leaseholders, suppliers etc) EEA – currently the 28 countries in the European Union and Iceland, Norway and Liechtenstein. Employees – staff, agency staff, temps, consultants and volunteers undertaking YHN business activities. Information Asset Register (IAR) – internal document which registers the nature of information held, location, format and accessibility, responsible manager, who the information is shared with, the purpose and the basis for holding the information (legal, contractual, consent or legitimate business interest). Information Commissioners Office (ICO) - is the supervisory body for Data Protection in the UK. Personal data – any information relating to an identified or identifiable natural person. This is someone who can be identified directly or indirectly by reference to an identifier such as a name, identification number, location data or online identifier of that natural person. Privacy Notice– separate notices setting out information which may be provided to Data Subjects when information is collected about them. These notices may take the form of general privacy statements applicable to a specific group of individuals (for example employee privacy notices or the website privacy notice) or they may be standalone statements covering processing related to a specific purpose. Sensitive personal data – information revealing racial or ethnic origin, political opinion, religious or similar beliefs trade union membership, physical or mental health conditions, sexual life, sexual orientation, biometric or genetic data and Personal Data relating to criminal offenses and convictions.
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Current version: Date published: Date of next review: Author: Owner: Approved by:
1.0 30/05/2019 30/05/2021 Lisa Ainscough – Policy and Innovation Officer Karen Hedley- Governance and Implementation Manager YHN Board Date:
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Agenda Item 12
To be first for housing
Your Homes Newcastle Board 30 July 2019 TITLE
Slavery and Human Trafficking Statement
AUTHOR
David Langhorne – Assets and Development Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For Approval
SUMMARY
This report includes the 2018/19 Modern Slavery Statement, as required under the Modern Slavery Act 2015, for approval by Board.
STRATEGIC OBJECTIVES
3. Strong business fit for today, ready for tomorrow
STRATEGIC RISK REGISTER
NUMBER & TITLE
N/A – regulatory requirement
LIKELIHOOD IMPACT FINANCIAL / VALUE FOR MONEY IMPLICATIONS
There are no financial/VFM implications associated with this report.
CUSTOMER IMPACT / VIEWS
The incorporation of Modern Slavery into our mandatory safeguarding training will help ensure our staff are equipped to recognise and report any related concerns across our customer base.
EQUALITY & DIVERSITY CONSIDERATIONS
Compliance with the Modern Slavery Act 2015 will help YHN promote equality and diversity across its business, the City and its supply chain.
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Your Homes Newcastle Slavery and Human Trafficking Statement 1.
Purpose of report
1.1
The purpose of the report is to seek Board approval of the Statement covering the 2018-19 financial year.
2.
Background information
2.1
Legislation, in the form of the Modern Slavery Act 2015 (the Act), received Royal Assent on 26 March 2015.
2.2
The Act consolidates various offences relating to human trafficking and slavery. It covers
2.3
•
Slavery – where ownership is exercised over a person;
•
Servitude – involving the obligation to provide services imposed by coercion;
•
Forced or compulsory labour involving work or services exacted from any person under the menace of a penalty and for which the person has not offered himself voluntarily and;
•
Human trafficking involving arranging or facilitating the travel of another with a view to exploiting them.
The act includes provisions to:•
Enable the Secretary of State to make regulations relating to the identification of and support for victims;
•
Make provision for independent child trafficking advocates;
•
Introduce a new reparation order to encourage the courts to compensate victims where assets are confiscated from perpetrators;
•
Close gaps in the law to enable law enforcement to stop boats where slaves are suspected of being held or trafficked; and
•
Require businesses over a certain size and threshold to disclose each year what action they have taken to ensure there is no modern slavery in their business or supply chain.
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2.4
An additional clause was added retrospectively and came into force in October 2015, which requires all commercial businesses in the UK with a turnover of £36 million or more to disclose, in an annual slavery and human trafficking statement on their website, what steps they have taken during the financial year to ensure their business and supply chains are slavery free.
2.5
Failure to produce the required statement, where applicable, could result in the Secretary of State seeking an injunction but in practice is more likely to risk being “named and shamed”.
2.6
The Statement must be approved by the Board and signed by a director before being published on the company’s website with a prominent link on the homepage within six months of the financial year end i.e. 30th September.
2.7
YHN published its first Slavery and Human Trafficking Statement for 2015/16 following Board Approval in June 2016, and has since presented annual Statements.
3.
The Options
3.1
Whilst a Statement template is not provided under the legislation, the Act does recommend that it contains: •
An outline of the organisation’s structure, business and supply chains;
•
Policies in relation to slavery and human trafficking;
•
Due diligence processes in relation to slavery and human trafficking in the organisation’s business and supply chains;
•
Identification of parts of the business and supply chains where there is a risk of slavery and human trafficking and the steps taken to assess and manage that risk;
•
An assessment of its effectiveness in ensuring slavery and trafficking are not taking place in its business or supply chains measured against performance indicators it considers appropriate; and
•
Information about training concerning slavery and human trafficking that’s available to staff.
3.2
Appendix 1 details YHN’s 2018/19 Statement, which represents an ongoing commitment to address the issue of Modern Slavery.
3.3
It should be noted that the annual Statement only applies to YHN’s supply chain and does not include suppliers that undertake work for the Council that YHN manages but are funded through the Housing Revenue Account. The Council was consulted about this and agrees with the approach we are taking.
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3.4
Whilst there is no requirement and it is perhaps impossible to guarantee that slavery and trafficking does not exist somewhere within an organisation’s supply chain, the annual Statement is:•
Designed to demonstrate that an organisation is aware of the issue;
•
Is not driving the use of modern day slavery practices through purchasing and procurement practices; and is
•
Taking effective steps to stop modern day slavery practices in its supply chains.
4.
Conclusion and recommendations
4.1
Board is recommended to: -
Approve the Slavery and Human Trafficking Statement (Appendix 1) for signature by a director and for publication on the YHN website by 30 September 2019.
Background Papers - Slavery and Human Trafficking Statement (2017/18), YHN Board, 31 July 2018 - Slavery and Human Trafficking Statement (2016/17), YHN Board, 8 August 2017 - Slavery and Human Trafficking Statement (2015/16), YHN Board, 21 June 2016 Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact John Henderson by telephone on 0191 278 7770 or email john.henderson@yhn.org.uk
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Your Homes Newcastle Your Homes Newcastle (YHN) Slavery and Human Trafficking Statement Financial Year Report - 2018 / 2019
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Introduction Your Homes Newcastle ("the company") is a not-for-profit Arms-Length Management Organisation (ALMO) and a wholly owned subsidiary of Newcastle City Council. We were set up in 2004 to manage the Council's properties, to improve housing in order to meet the Government's Decent Homes standard and to provide a range of support services for Newcastle City Council and other landlords. We currently manage:• •
27,400 council and leasehold homes on behalf of Newcastle City Council; and Over 750 homes on behalf of Leazes Homes.
Our Structure, Business and Supply Chains We have a group structure with Your Homes Newcastle as the parent company along with two subsidiaries. The two subsidiaries are Asfaleia Limited a charitable subsidiary, and Abri Trading Limited, a trading subsidiary. • •
•
Your Homes Newcastle provides our core housing management and administrative functions; Asfaleia Limited delivers our community care alarm service, sheltered housing service, young peoples' service, advice and support service and employability services; and Abri Trading Limited includes the Newcastle Furniture Service (NFS) and Palatine Beds.
Further information about our activities is detailed on our web site at http://www.yhn.org.uk/ Our tier one supply chain is made up of UK/European based Suppliers. Total buying value in 2018/2019 for the group was £9.78m across 359 Suppliers with the top 5% (20) of Suppliers accounting for just over 78% (£7.67m) of expenditure. The main categories are summarised below: White Goods, Small Electrical & Furniture Items for NFS
£2.75m (28%)
Information Technology & Telephony
£1.44m (15%)
Healthcare Services
£0.32m (3%)
Utilities
£0.21m (2%)
Printing
£0.17m (2%)
Miscellaneous Other
£4.90m (50%)
TOTAL
£9.79m (100%)
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n.b. Please note that the figure relating to ‘Raw materials to manufacture beds for Palatine’ which is usually included within this category detail is not yet available and therefore can’t be included within this Report. Policies in Relation to Slavery and Human Trafficking YHN has a zero-tolerance approach to any form of modern slavery and trafficking. This is supported by our Modem Slavery Policy that was developed and implemented during 2016/2017. As well as setting out our approach the Policy details how it will be communicated and how we will ensure compliance, as well as deal with any breaches. During 2018, we agreed that Your Homes Newcastle would align their Procurement Procedure Rules to Newcastle City Council’s and we have been working with the Council to replace our Corporate Procurement Strategy with a new Commissioning and Procurement Plan which can be found on our external website. The new Plan is supported by a number of Policies including Anti Bribery, Fraud and Corruption, Whistle blowing and Corporate Equality, as part of our Public Sector equality duty which includes the elimination of unlawful discrimination. During 2019, a combined Modern Slavery Policy will be developed in conjunction with Newcastle City Council for implementation Autumn 2019. YHN are also committed to continually assess the recruitment procedures and practices in order to comply with current employment legislation, and recruit staff according to best practice. During 2016/2017 we updated our Employee Code of Conduct and Whistleblowing Policies to include reference to Modem Slavery. Equality impact assessments are also carried out on all HR related Policies to ensure they promote equality of opportunity. Finally, as an organisation we have been assessed as excellent under the Social Housing Equality Framework and are a Stonewall top 100 employer 2019 (ranked 77th), demonstrating our commitment to equality. Due Diligence Processes in Relation to Slavery and Human Trafficking in our Business and Supply Chains As a group we are governed by the Public Contract Regulations 2015 (as amended), which are underpinned by our Financial Regulations. As part of our commissioning and procurement activity, Suppliers are assessed for their suitability to perform the Contract specification using a Supplier Selection Questionnaire (SQ) which incorporates requirements for Modern Slavery checks relating to a Supplier’s economic and financial standing, as well as compliance with Labour Law. In addition, our standard Contract terms require our Suppliers to adhere to all of our Policies and Rules, together with compliance at all times with the Law, including specifically the Modem Slavery Act, in the performance of the Contract.
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Parts of our Business where there is a risk of Slavery and Human Trafficking taking place, and the steps we have taken to assess and manage that risk. We have analysed our third party spend and categorised the supply areas we think are most at risk of modern slavery. The areas we think that are most at risk are due to their relatively high level of spend and the lack of supply chain visibility below our tier one Suppliers: • •
Supplies of white goods, small electrical and furniture items for NFS. Supplies of raw materials to manufacture beds for Palatine (figures not yet available).
During 2016/2017 we undertook the mapping of our NFS supply chain, securing the signed commitment to tackle Modern Slavery and action plan from our first-tier Supplier. They in turn secured the same commitment from the majority of our secondtier Suppliers. Going forward we continue to pursue any outstanding commitments and plan to undertake a similar exercise for the raw material Suppliers to Palatine Beds. Effectiveness in ensuring that slavery and human trafficking is not taking place in our business or supply chains We are confident that slavery and human trafficking is not taking place amongst our first-tier Suppliers due to the due diligence processes that we currently have in place. Whilst we cannot be as certain that slavery and human trafficking is not taking place further down our Supply Chains, since the introduction of our new Policy and revised procedures, together with the work we have undertaken in conjunction with our NFS supply chain, we have had no reported instances of Modern Slavery. Training about slavery and human trafficking available to staff Since 2016/17, Modern Slavery training has been incorporated into our Safeguarding Adults and Children Level 1 and Level 2 training, which is mandatory for all staff who may have to make a safeguarding alert. In addition, Supplier guidance in relation to Modern Slavery has also been developed and made available on our website.
This Statement is made pursuant to section 54(1) of the Modern Slavery Act 2015 and has been approved and published by the YHN Board and will be reviewed annually. Signed: Position:
Date:
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social landlords, and some of their residents, and will trial innovative methods of communicating building safety matters to residents. YHN is the only member of the group from the North East. The focus of YHN’s pilot project (on which we are working with Stockport Homes and Chelmer Housing Partnership) is ‘Information and Understanding’ which includes: • Face to face and digital communication • Clarity and accessibility of safety information and • How safety information should be provided to residents at the start of their tenancy. Experience and insight gained through this work will put YHN in a good position to meet these proposed regulatory requirements. The consultation document implies that complaints related to fire/structural safety would be considered immediately from the building safety manager and be distinct from the usual corporate complaints system. We would need to consider how to make the process clear, transparent and user-friendly. YHN’s Tenancy Agreement is already clear about tenants’ responsibilities that promote fire safety including that they should: •
‘Not obstruct or place objects in any corridor, path, staircase, refuse chute or bin room which may cause a hazard to the health and safety of other tenants and/or their visitors, employees or other agents.
•
Ensure that any items of bulky waste are disposed of appropriately and are not left in internal or external communal areas
•
Not interfere with services or security and safety equipment in communal blocks. Doors should not be jammed open.’
6. A more effective and accountable regulatory framework for buildings The consultation proposes a new building safety regulator with responsibility for: •
Oversight of the new regulatory regime for buildings in scope of the new regime;
•
Setting standards
•
Advising Government on changes to the scope of that regime; and
•
Oversight of work to drive increased competence of professions and trades working on buildings across the whole of the built environment.
(The new building safety regulator will undertake functions that Dame Judith earmarked for the ‘Joint Competent Authority’, as well as the functions that she had proposed assigning to the overarching competency body and oversight structure.) The role of the new safety regulator would include: •
Maintaining a register of buildings in scope and who the dutyholder(s) are for those buildings
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•
Ensuring an effective system is in place for inspecting buildings and building safety information to ensure that dutyholders are complying with the regime throughout the lifetime of the building (using gateways, safety cases and other mechanisms);
•
Ensuring that whistle-blowing, resident concerns and mandatory occurrence reports are effectively collected and acted upon by regulators and industry appropriately
•
Maintaining a register of those competent to undertake key roles in the new regulatory system for buildings in scope of the new regime (Principal Designer, Principal Contractor and building safety manager)
•
Providing guidance on selecting competent people and signposting dutyholders to organisations which approve competent individuals to work on buildings in scope.
The consultation document is also proposing that there should be stronger regulation of construction products which will be achieved by: •
Making manufacturers’ responsibilities clearer in legislation, focussing on construction products that are critical to safety, and requiring clear labelling and information so that it is clear how the product should be used safely;
•
Strengthening national regulation of construction products, with a national complaints system and a stronger focus on enforcement, so that problems are dealt with effectively; and
•
Setting minimum standards for independent assurance schemes and encouraging their use, so people can be confident that construction products meet the standards manufacturers claim.
Implications for YHN The consultation document does not identify how the building safety regulator would be funded, but it seems inevitable that there would be costs for YHN associated with registering buildings and building safety managers and other parts of the regulatory process. This would be additional to any increased staffing and training required in relation to the ‘accountable person’ and ‘building safety manager role’ and their team. The increased focus on an evidenced-based approach in establishing the ‘golden thread’ of information for all blocks could also require significant resources. The potential resource implications of the proposed new regulation need to be considered as part of our high-rise review which is one of the workstreams which have been established as a framework for gathering and presenting information which will be used to formulate the new 10-year Asset Management Strategy. 7. Enforcement, compliance and sanctions The consultation document proposes a three-step system people are safe, and feel safe, in their homes: (i) Reinforcement of operating standards and provision of professional guidance: Initially, the building safety regulator will seek to achieve compliance by informally working with the dutyholders/accountable persons, evidencing its intervention.
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(ii)
Proactive intervention and monitoring: Where the above collaboration approach fails to achieve the desired outcome, or where the building safety regulator determines that the offence in question warrants more serious action, it will stage interventions to secure compliance. Generally, this could be through taking action such as (but not limited to) issuing stop notices or improvement notices.
(iii)
Enforcement action: Where the stages above fail to achieve compliance, the building safety regulator moves to take enforcement action against dutyholders/accountable persons. This may be through formal orders, penalties, or by reviewing the building safety certificate which may, ultimately, lead to revocation. The building safety regulator may also decide to prosecute the dutyholders/accountable persons.
It is likely that the government will introduce new criminal and civil sanctions for:• Gateways - During design and construction, refusal of permission to proceed at the various gateway points by the building safety regular will be the primary enforcement tool to incentivise compliance with the new regime. Carrying out work without having acquired the necessary permission by the building safety regulator to proceed through the gateway regime could lead to criminal offences. •
Building safety certificate registration – it would be a criminal offence for an accountable person not to make a valid application for the building’s registration within the relevant time limit. For new buildings, the building would not be permitted to be occupied until a certificate has been issued. For existing buildings, we are proposing a transitional implementation period that the accountable person must comply with.
•
Building safety certificate conditions - when issuing, reviewing or renewing a building safety certificate for a building, breaching conditions agreed by the building safety regulator would be a criminal offence.
Proposals, to give local authorities more time to serve enforcement notices, so that they can take action where problems are uncovered later; and enabling private individuals to make a claim for damages where work on a building has not met building regulations standards, and they have suffered harm as a result, are also included. Implications for YHN The severity of the proposed sanctions underlines the necessity of assigning time and resources to ensure that the necessary preparations are made to meet new regulation.
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Next Steps • To work with NCC to respond to the consultation. As part of this the Policy Team will hold a meeting with key YHN colleagues to gather their views on those questions most relevant to YHN. A full list of the consultation questions can be seen at Appendix 1: •
To prepare a report for information and discussion on the consultation document for the Health and Safety Committee
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Agenda Item 14
To be first for housing
Your Homes Newcastle Board 30 July 2019 TITLE
Re-election of Directors and Vice Chair
AUTHOR
Jill Davison - Company Secretary
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For Approval
SUMMARY
This report considers the recommendation from the Remuneration & Nominations Committee to re-appoint Board members eligible for reelection, and the recommendation for the position of Vice Chair.
STRATEGIC OBJECTIVES
1. Revolutionary services that support successful living 2. Amazing places where people are proud to live 3. Strong business fit for today, ready for tomorrow
STRATEGIC RISK REGISTER
NUMBER & TITLE LIKELIHOOD
N/A
IMPACT
N/A
N/A
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
Board members are paid an allowance of £3,000
CUSTOMER IMPACT / VIEWS
N/A
EQUALITY & DIVERSITY CONSIDERATIONS
YHN recruitment and selection policies and procedures
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Your Homes Newcastle Re-election of Directors and Vice Chair 1.
Purpose of report
1.1 The purpose of this report is to update Board on the recommendations of the Remuneration and Nominations committee regarding Directors reappointments and to seek approval for the appointment of a Vice Chair. 2.
Background information
2.1 The YHN Board is made up of 12 Board members from two constituent groups (eight independent members and four Council nominated members). The current Articles of Association require the independent members to stand down on a rotational basis. 2.2 Our current governance documents state that Board Members can serve a maximum of three terms (i.e. a maximum of nine years) and are eligible to put themselves forward at the end of their first and second terms. 2.3 The terms of reference for the Remuneration & Nominations committee set out the delegations from Board, and the committee has the following responsibilities regarding Board appointments; • •
to make recommendation to the YHN Board on Board appointments Regularly review the structure, size, composition and balance of skills, knowledge, experience and diversity of the Board and make recommendations to the Board with regard to any changes, giving due regard to the outcomes of the annual board evaluation and appraisal process
2.4 The Remuneration and Nominations committee have considered the supporting statements of the Board members seeking re-election and the skills of the current Board composition. 3.
Vice Chair In accordance with the current article 27 (8); The Board may appoint up to two vice or deputy chairs to act in the absence of the Chair on such terms as the Board shall think fit. At the YHN Board meeting in July 2018, the Board approved the appointment of Joyce McCarty as Vice Chair, subject to annual review.
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3.1 The responsibilities of the Vice Chair are: •
to assist and support the Chair in fulfilling his/her duties and responsibilities;
•
to deputise for the Chair in his/her absence;
•
to attend Board agenda setting meetings
•
to assume responsibility for a particular area of responsibility or interest as may be agreed by the Board, such as chairing committees;
•
to meet with the Chair and Managing Director as required in between Board meetings; and
•
to undertake such other duties as may be delegated to them by Board
3.2 In 2018, Joyce McCarty was re-appointed as the Vice Chair for a second term. This was a decision made during the governance review to maintain consistency. To ensure transparency and good governance, this year we will open nominations to the whole Board. 3.3 Board members interested in putting themselves forward for the Vice Chair positions are asked to let Jill Davison (Company Secretary) know by email by 31 August 2019. In the event that there are more than two nominations for the position then a ballot will be held via email. 4.
Conclusion and recommendations
4.1 The Remuneration and Nominations committee are recommending to the Board the following Directors are reappointed to the YHN Board; •
Paul Scope
4.2 Board are recommended to: a) Accept the recommendation of the Remuneration and Nominations Committee for the appointment of the Board members list above, and b) Approve the process for the appointment of a Vice Chair
Background Papers - Articles of association - Group Governance Handbook Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Jill Davison by telephone on 0191 278 8624 or email jill.davison@yhn.org.uk
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Agenda Item 15
Board 4 June 2019 (2:30pm to 4:15pm) Present: J Boaden (Chair), R Higgins, L Hobson, K Lowry, J McCarty, M Page, P Scope, E Snaith, H Simpson, B Tebay In attendance: A Baker-Daley
Governance Officer
J Davison
Company Secretary
T Drury
Managing Director
M Foreman
Customer Services Director
D Hall
Board Member (Asfaleia)
K Hedley
Governance and Implementation Manager
D Langhorne
Assets and Development Director
R Morrissey
Finance and Commercial Director
R Taylor
Board Member (Asfaleia)
679
Welcome and Apologies for Absence
The Chair welcomed new Council Members to the Board and the meeting. Apologies were received from D Huddart and R Clark. 680
Declaration of Interests
P Scope declared an interest as Partner at Ward Hadaway in relation to the legal advice provided. 681
Governance Report
J Davison presented the report which highlighted the position of membership of the YHN Board, proceedings following the final AGM in 2018, and sought approval to confirm compliance with the National Housing Federation (NHF) Code of Governance within the annual accounts and financial statements. Post-2018 AGM proceedings J Davison reminded the Board that the requirement to hold an AGM has been removed from the Articles of Association, as it is not compulsory for private limited
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companies. The external auditor will be appointed by Pat Ritchie or a representative of the sole member, and will be reported to Board in September. Financial statements, once signed off by the Board in July, will be sent to the member electronically afterwards. Membership A vacancy is being carried following L Doherty’s resignation, E Snaith is approaching the end of her nine year term, creating a second vacancy, and P Scope is approaching the end of his second term and is eligible for re-election. A statement in support of re-election will be required, which will be considered by the Remuneration and Nominations Committee later in the year as part of their remit. The Remuneration and Nominations Committee met on 28th May to discuss the two vacancies. They considered the composition, balance of skills and diversity of the Board, and concluded that it would be imperative that the customer voice and experience brought by L Doherty should not be lost, therefore if possible, another tenant or leaseholder should be recruited. It was felt that opening the vacancy only to the Customer Service Committee would be too narrow and that a wider more open and transparent campaign should be undertaken by the Customer Engagement Team, to include leaseholders. With regards to the second vacancy, the Committee suggested that commercial skills should be a targeted area, and that a recruitment consultant should be engaged to search for a non-executive director. The timeline was outlined as follows: • YHN Board/Asfaleia Board appraisals scheduled for June • Remuneration and Nominations Committee meet to consider statements of support for re-elections • Advertise vacancies between June and August • Interviews conducted by the Remuneration and Nominations Committee in August • The Remuneration and Nominations Committee recommends new appointments to Board in September R Higgins recalled their previous membership on the Board, where there were five tenant representatives, asking why there was a reduction. J Davison replied that in adopting the NHF Code the size of the Board needed to reduce. Though there was no longer a tenant constitution as such, the eight independent non-executive director posts could be taken by tenants and non-tenants, widening the opportunity. The governance review highlighted the need for a skills-based Board to run the company, but in not wanting to lose the customer voice the Customer Service Committee was created. The Customer Service Committee includes 11 tenants engaged in areas of the business that matter the most to them as customers. It is felt that this approach has improved the customer voice. NHF Code of Governance There is an annual requirement to produce a statement of compliance against the provisions of the Code within the annual accounts and financial statements.
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Following a self-assessment by the Governance Team, all areas are deemed compliant. RESOLVED – that: • • 682
The Board agreed to the post-AGM arrangements The Board approved the proposed NHF Code of Governance compliance statement for inclusion in the annual report and financial statements Health and Safety Annual Report
D Langhorne presented the report, which gave a summary of Health and Safety performance during 2018/19. Highlights included: •
• • • • •
Near misses are being monitored, and the importance of reporting is being encourage. The information will help avoid actual accidents happening. It is felt that a fear of being disciplined is partially behind some hesitation in reporting Accident trends are falling consistently over the last three years RIDDOR related notifications have fallen from ten in 2016/17 to four in 2017/18 and four the last financial year Three serious incidents were escalated to the Safe Living Team Following Cabinet approval, the deployment of a lone worker solution has commenced with a trial group Compliance reporting will be considered and monitored in more detail by the Health and Safety Committee to give Board assurance of scrutiny.
M Page asked when BCE health and safety processes were last audited by Internal Audit. D Langhorne confirmed there hasn’t been an audit, but confirmed that within BCE the health and safety procedures are governed by more legislative processes, of which have been audited by the Health and Safety Executive, who visits regularly unannounced. T Drury added that Group Audit and Risk Committee have approved the internal audit plan, and debated whether 18 allocated days was enough, asking for it to be brought forward on the plan. P Scope noted that at the first Health and Safety Committee the Internal Audit plan would be discussed. E Snaith commented that the report gives an interesting cultural insight and is a good example of when an operational risk becomes a strategic matter and should remain a strategic risk, especially given the incoming BCE workforce. M Page asked for a reiteration of where health and safety accountability sits with regards to BCE issues. D Langhorne confirmed that through SPOL arrangements the culpability does sit with YHN, adding that monthly meetings review detailed information for assurance, of which the Health and Safety Committee will be sighted. In terms of context of information presented, B Tebay asked if benchmarking with other organisations has been undertaken. D Langhorne confirmed that benchmarking is an item on the agenda for the Health and Safety Committee. P
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Scope reiterated the importance of near misses being reported despite what appears to be high figures. RESOLVED – that: • The report be received and information noted • The Board approved future health and safety compliance reporting is directed to Health and Safety Committee • Agreed that any risks to compliance be reported to Group Audit and Risk Committee 683
Minutes of 26 March 2019
The minutes of the Board held on 26 March were agreed as a correct record and signed by the Chair. 684
Matters Arising and Action Log
The action log was received and noted for information. J Davison confirmed that the new version of the learning and development plan will be circulated in due course. 685
Board Forward Plan
The forward plan was received and noted for information. J Davison confirmed that compliance with the Consumer Standard will be added to the forward plan for the September meeting. 686
Assurances from Committees
Customer Services Committee 13 March The Committee held detailed discussions on the Sorry Fund, community investment, and how they would like to influence the joint work with the Institute of Customer Service. 687
Petitions Monitoring
T Drury presented the report for information, which informed Board of a petition received during April from the residents of Adelaide House, requesting installation of new lifts in the block. The issue is now resolved; the Compliance Team have met with the lift contractor to discuss concerns and have aligned plans for the block with the wider scope of the Asset Management Team’s lift refurbishment programme. RESOLVED – that the report be received and information noted. Date and Time of Next Meeting 30th July at 5pm.
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The Board were reminded of the planned bus tour and homelessness prevention briefing on 24th July, and the upcoming risk workshop on 4th July. J Boaden Chair 30 July 2019
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YHN Board 30 July 2019 Action Log (Public) Minute ref.
Action required
By whom
Target date for completion
Current status
643
Governance Review Update The Learning and Development Plan is to be populated with dates and recirculated to members
Jill Davison
December 2018
2019 L&D Plan attached to forward plan
Board members
No end date
On-going
Board members to contact Jill Davison regarding any work areas they would like further information on or additional involvement with
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Agenda Item 17
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YHN Board Forward Plan 2019 Meeting 24 September 2019
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Report Name Appointment of Vice Chair Retirement & Appointment of Board Members Committee Membership 2020 Board and Committee Calendar
Purpose Approval Decision Approval Approval
Confidential? Report Author × Company Secretary × × ×
Housing Plus Vision
Information
Company Secretary
Consumer Standards Self-Assessment
Information
Managing Director
Strategic Risk Register
Discussion
Finance & Commercial Director
Environmental Report
Discussion
×
Finance & Commercial Director
Assurances from subsidiaries: • Asfaleia Ltd. 25th July
Discussion
Customer Services Director
Assurances from Committees: • Group Audit and Risk 11th July • Finance and Performance 27th August • Property Group 11th September • JCC 24th September
Discussion
N/A
Agenda Item 18
Comments
Meeting 26 November 2019
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Report Name Business Strategy Update
Purpose Discussion
Confidential? Report Author Managing Director
Health and Safety Policy
Approval
×
Housing Investment Update
Discussion
Committee Terms of Reference
Approval
×
Company Secretary
Governance Documents Review
Approval
×
Company Secretary
Assurances from subsidiaries: • Asfaleia Ltd. 24th October
Discussion
Customer Services Director
Assurances from Committees: • Property Group 24th September • Customer Service Committee 25th September • Property Group 23rd October • Health and Safety Committee 30th October • Finance and Performance 5th November • Group Audit and Risk 12th November
Discussion
ABRI TRADING Abri Trading – Business Activity Update
×
Assets and Development Director Assets and Development Director
N/A
Discussion
Finance & Commercial Director
Comments
Board and Committee Calendar 2019 Month
Date
Meeting
Timing
January
17 17 29
Asfaleia Services inc. Refugee Service Briefing Asfaleia Board YHN Board
4-5pm 5-7pm 5-7pm
February
12
Finance & Performance Committee
5-7pm
March
12 13 26 26
Group Audit & Risk Committee Customer Service Committee Pat Ritchie – NCC and ALMO relationship YHN Board
5-7pm 5.30-7pm 5-6pm 5-7pm
April
30 30
Housing Plus Vision Briefing Asfaleia Board
4-5pm 5-7pm
May
8 14 21
NFS Strategy Session Finance & Performance Committee Group Audit & Risk Committee
2-4pm 5-7pm 5-7pm
June
4
10am-4pm
4 19
Strategic Away Day Customer Service & Risk YHN Board Customer Service Committee
July
1 8 11 25 25 25 30
Risk appetite session Health and Safety Committee Group Audit and Risk Committee Bus Tour – regeneration projects Homelessness Prevention Briefing Asfaleia Board & AGM YHN Board
4-6pm 5-7pm 5-7pm 12-4pm 4-5pm 5-7pm 5-7pm
August
27 27
Asset Management Strategy Briefing Finance & Performance Committee
4-5pm 5-7pm
September
24 24
Fire Safety and Fire Risk Assessment Briefing YHN Board
4-5pm 5-7pm
October
7-11 24 24 TBC
Customer Service Week Child Friendly City Briefing Asfaleia Board Health and Safety Training Bevan Britton
4-5pm 5-7pm 5-7pm
November
5 12 12 26 26
Finance & Performance Committee Tyne and Wear Homes – Application process Briefing Group Audit & Risk Committee Digital Strategy Briefing YHN Board
5-7pm 4-5pm 5-7pm 4-5pm 5-7pm
December
3
Board Away Day (Topics for 2020 briefings can be agreed at the away day)
10am-4pm
Green = learning & development sessions open to all members
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4–5pm 5.30-7pm
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