YHN Limited Tuesday 11 October 2016 at 5.00 pm YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX Contact Officer: Jill Davison
– Tel: (0191) 2788624 Email: jill.davison@yhn.org.uk
AGENDA Page No Introduction Items 1.
Reminder to switch off mobile phones
2.
Apologies for Absence
3.
Declarations of Interests
4.
Chairs Items
Items for approval 5.
Minutes of the Previous Meeting held on 2 August 2016
1-8
6.
Annual Accounts and Financial Statements 2015/16
9 - 74
Items for information (a)
Officer Delegated Decisions
75 - 78
(b)
Board Forward Plan
79 - 80
(c)
Committee minutes:
81 - 84
Group Audit Committee 19 May
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
To exclude the press and public during discussion of agenda item 8 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of what is considered confidential are contained within Section 16 of the Company's Standing Orders Protect - not for publication Items for approval 8.
Confidential Minutes of the Previous Meeting held on 2 August 2016
9.
Private session - Board members only
10.
Date and Time of Next Meeting - 1 November 2016 AGM 4-5pm Board meeting 5-7pm YHN House
2
85 - 86
Board 2 August 2016 (5.00pm to 6.25pm) Present: O Grant (Chair), P Dibbs, L Doherty, P Dutton, V Dunn, D Huddart, J McCarty, A Mirza, T Moore, M Page, J Purvis, J Reid, P Scope, E Snaith, L Stephenson. In attendance: J Davison
Group Governance Manager & Company Secretary
T Drury
Managing Director
N Scott
Director of Tenancy Services
L Forrest
Head of Finance
B Elder
Strategic HR Manager
J Urwin
Head of Housing Options
M Burn
Head of Support and Care
J Vinton
Head of Assets & Regeneration
R Clark
Acting Care Services Manager
H Garbutt
Environmental Services
J Gallon
Environmental Services
J Clifford
Financial Controller
D McGuinness
Business Strategy
C McMullen
Newcastle City Council
A Baker
Governance Support Officer
485
WELCOME The Chair welcomed everyone to the meeting and noted the new style meeting table layout. The chair also noted the Council members using their tablets to access papers, and offered the facility to other Board members who wished to receive electronic papers to contact Jill Davison. The Chair welcomed Stephen Bull to the meeting as an observer. The selection interviews took place last week to appoint consultants to undertake the governance review and Campbell Tickell were the successful company. All board members will have the opportunity to meet with Stephen and his team during the review and there will be a longer session at the September meeting.
486
APOLOGIES Apologies were received from J Streather, M Talbot, D Slesenger
487
DECLARATIONS OF INTERESTS V Dunn declared an interest in item 5 and 6.
488
CHAIRS ITEMS The Chair noted that since the last meeting, we had the Pride weekend in July, there was a fantastic turnout for the 5k run on the Friday night, with 30 members of staff taking part and YHN were the biggest organisation representation there. On Saturday 16th July was the very colourful Pride Parade and the Board was represented by Tony Moore, and Tina and other staff all represented YHN with a large banner as they walked through the streets of Newcastle. A very successful event. Another event since the last Board, was the Finance training, this was really well attended and the Chair expressed the Board’s thanks to Lisa Forrest who delivered the training.
489
FINANCE AND PERFORMANCE REPORT – QUARTER ONE Submitted: Report by the Director of Tenancy Services and Head of Finance (previously circulated, copy attached to Official Minutes). Neil Scott introduced the report which presented the performance information for quarter one. A set of 43 targets are set out in the Delivery Plan and were developed to give assurances to key stakeholders that business critical areas are on track. Of the 43 targets, 29 were reported as green, 7 amber and 7 blue. The report also noted performance on targets for the contracts with Leazes Homes and Byker Community Trust. N Scott brought to the attention of the Board section 3.1 of the report, which gave an update regarding the telecare service Ostara. It was noted that good progress had been made with the conversion of customers following the removal of funding, but this had not been as high as originally hoped. It was noted that Board should be aware of a possible additional deficit of £100,000, but that further updates would be brought to Board and further scrutiny will be undertaken at the Asfaleia Board. The report presented the non-financial performance graphs as well as additional information on recovery actions being undertaken on amber targets. Questions/comments A Board member asked for more detail regarding the £100,000 deficit. N Scott responded that there were 600 customers still to be contacted or who had not informed us of their decision. There had also been 700 terminations of the service which is not an unusually high level but this has been affected by less referrals coming in. YHN are working closely with NCC to encourage referrals. A Board member commented that the implication of the 700 customer leaving the service may result in vulnerable people being left and could create pressure on other support services. N Scott responded that for all NCC budget decisions an EINA (Equalities Impact Needs Assessment) is completed but he was not aware of any tracking of the negative impact the council were doing following the removal of funding and this is for NCC to consider.
A Board member commented that at a recent council health scrutiny committee other councillors did not know about the service, so the service does need to be marketed better, as concerned about the loss of income. T Drury added that there are markets that haven’t been explored yet as the team have been concentrating on the conversions and then the marketing can be escalated so we do a lot more to encourage new customers. With regard to vulnerability of older persons, we are looking at making the service a condition of tenancy in our older persons accommodation so that all tenants in sheltered blocks are signed up to the service. A Board member commented that at the last Abri Trading board meeting they discussed undertaking commercial reviews and we need as a board to understand if this service is viable? Don’t want to experience drift and need to come back to look at this. N Scott commented that the Ostara service comes under the remit of Asfaleia Board and they will be keeping it under review, it was just important to flag this up early with the Board and will bring regular updates back to this Board. A Board member noted that a recent letter received had John Lee, Chief Executive on the letter head, and we needed to ensure that correspondence was up to date. T Drury reassured the Board that template letters had been amended and a communications sent to all staff, but unfortunately some do slip through where staff have saved letters to their own personal folders. A Board member commented on the target related to reducing sickness levels and was impressed with the actions put in place. With regard to the target relating to tenant employability it was questioned how the new staff were managed in the scheme due to the levels of resignations and disciplinary actions. N Scott responded that there is a dedicated employability team and new staff are supported from the individual managers in the area of work as well as Advice and Support workers to advise on financial aspects. The board were reassured that dismissal was a last resort and only for extreme cases. B Elder commented that the employability team are looking at how trainees and apprenticeships were recruited to ensure the right people are recruited into the positions. It was discussed that pre-employment courses were a good idea. O Grant declared an interest as Chair of Newcastle Futures. A Board member commented that NCC subscribe to a telephone counselling service and do YHN have this service for employees. B Elder confirmed that YHN do subscribe to a service which is used and employees are actively referred to it. The service is reporting a higher than average usage, and the highest level of use is by males over 45. A Board member commented they were worried about the higher than planned spend on responsive repairs, and was interested to hear feedback on the voids response. N Scott responded that in relation to voids, the transfers pilot had just started but it was likely to see some feedback from September.
D Langhorne responded that there was a slight overspend on M&E contracts but should profile by the end of the year. As Board are aware the Coordinators were brought over from BCE to ensure value for money and to be in a better place to control costs. There have been a couple of large spends early in the year, but this shouldn’t be repeated. The coordinators are working well and the process is becoming leaner and more efficient. A Board member questioned the performance on the Leazes Homes and BCT contract as quarter one performance looked concerning. N Scott responded that Leazes Homes Board met yesterday and were assured that the four amber targets would recover and weren’t concerned. With regard to BCT this is only a half year contract as it will end on 3 October 2016, when BCT take the services in house. The red targets relate to void turnover and rent loss as there has been a significant increase in terminations. This time last year there were 40 terminations, this year has been 71. The target positions relates to turnover of properties and not performance levels. L Forrest introduced the financial performance. This was presented in a new format from previous reports, with year to date figures not forecasts, so Board could see what is happening compared to budget. Looking at the income and expenditure (I&E) information this was presented as total income but also split by service and contract, so in the previous discussion regarding Ostara, the I&E by service clearly shows the I&E for the Ostara service to give Board more detail. With regard to performance in the first quarter L Forrest reported no concerns and that the Group was £214,000 ahead of budget. This was due to approx. £100k additional income earned in YHN from new contracts and contingency budgets not being required to date. L Forrest noted that we must still be cautious that this is only quarter 1 and early days, depreciation is a big factor in the accounts and the figure was still an estimate. Palatine looks negative, but the figures are collated up to period 2 and this has seen an upturn over the past two months. The group balance sheet shows a better position with lower debtors due to the cycle of invoices becoming more regular, this has improved the position of the “invoices not yet paid” and “NCC current account”. Questions/comments A Board member noted the text on “cost per major void” (page 13) related to standard voids. L Forrest confirmed this should read major void and was a typing error. A Board member questioned the effect of the loss of the Byker contract from October. LF responded that whilst the Byker contract was a loss making contract, it didn’t require entire full time equivalent employees carrying out the work. Heads of service have plans to remove the costs from the services where staff are not TUPE which leaves us in a better position. A Board member commented that it was great report, clear and concise. It was questioned whether the HRA investment over programming of 3% was a bit light.
D Langhorne responded by agreeing that normal over programming would sit at 5-10%, but as a result of vastly improved controls put in place on programme spend 3% remains appropriate. This is evidenced by the delivery of the 2015/16 programme. A Board member enquired how the target for staff turnover was secured. L Forrest responded that it is historically higher level this year but we are comfortable that it is a normal level and vacant posts are being managed. The detail is shown within individual services not the income and expenditure and this will be addressed in the way it is presented in the future. The Chair noted that the Board had previously discussed the importance of financial information coming to the Board and it was good to see the new report presentation was well received. T Drury advised the Board on some additions to performance which the team would be working on to enhance the performance information. Firstly, looking to develop the customer satisfaction surveys, being mindful that we don’t experience the service and whilst we report the performance of services we provide it doesn’t tell the board whether the customer was happy with the service. The team will be looking at what data to collect, how often and how it is presented. The second area is complaints, not presenting the detail of all complaints to Board but advising on the area and what learning and improvements have been made as a result. Finally, in relation to voids whilst there has been a review and should see some improvements from September onwards, we need to start looking at voids as a whole not the separate targets. We may hit the target for average void rent loss, but this may mean the property stays empty longer, and by spending more money it could be let sooner and reduce the void rent loss. Need to look at the bottom line, not in isolation as focussing on individual targets doesn’t present the full picture of what is happening. RESOLVED that the Board noted the performance for quarter one. 490
2017/18 INVESTMENT PROGRAMME Submitted: Report by the Director of Property Services (previously circulated, copy attached to Official Minutes). D Langhorne presented the report regarding the 2017/18 Investment Programme. Board agreed a four year investment programme in 2012, and agreed to receive updates and agree a rolling annual programme. The report set out further challenges which may impact on the programme as a result of the Housing and Planning Act 2016, and the need for a two stage approval process for the 2017/18 programme. The Board were presented with a summary of investment which was considered essential (lifecycle replacements, void improvements, health and safety and landlord obligations) which amounted to £28,244,000. YHN would look to seek approval from NCC cabinet in October, the remainder £9,142,000, of the total programme £37,386,000 would then require approval later this financial year once the implications of the Housing and Planning Act were understood.
The report outlined the risk to Right to Buy receipts as within the new build programme there is a requirement to spend 1-4-1 receipts. The report also outlined the items included in the £9.1m which would seek approval for at a later date. Questions/comments A Board member questioned if there was a time limit on spending the right to buy receipts and what amount we could potentially lose. D Langhorne responded that the calculation of the 1-4-1 receipts is complicated. The report details the total amount which is required to be spent each year. 30% of this amount is the 1-4-1 receipt which would need to be repaid. This amounts to £600k in 17/18 and £310k in 18/19. The remainder of the required spend comes from funding within the new build block budget but this will not be approved until later this year as it is included within the second stage of the investment programme approval. This potentially puts the 1-4-1 receipts at risk as there are lead in times for procurements, planning and consultation. The spend required is phased throughout the year; the first requirement in 2017/18 is to spend a total of £62k by the end of June 2017. Staff are doing as much preparatory work as possible ahead of the final investment programme approval which includes site feasibility studies and design options as well as looking at other opportunities to purchase properties. This is to minimise delays and ensure starts on site and spend can be achieved as soon as possible. A Board member commented that the report outlined a very pragmatic approach, but concerned that investment in energy efficiency and fuel poverty was on hold as these incentives help tenants who are struggling and needs to be prioritised, along with the remodelling of the sheltered housing. D Langhorne responded that it was difficult to prioritise, the budget had already been leaned out as the budget reduced. There will still be investment in the betterment of properties including insulation and new windows, but can take another look at the fuel poverty work. With regards to the sheltered schemes the work will continue and a bid put into the next round of HCA funding and if achieved will go up the priority list. The Chair commented that hopefully the £9.1m will be approved, we just require the approval of the essential £28m to start projects and keep momentum and if we have enough capacity we will do all the projects. A Board member questioned the commercial viability of upgrading communal areas in blocks where there are voids, and welcomed T Drury comments on a holistic view of voids and the cost to ensure we maximise future money. D Langhorne confirmed that communal works are not carried out on blocks which are under review, and it is always a priority to ensure the best impact from any investment. A Board member commented that in relation to performance and customer satisfaction the remodelling of communal blocks has made a big difference to tenants feeling safe.
A Board member questioned what the expectation was regarding receiving the remaining £9.1m, and whether if it wasn’t received what staff and organisational implications that would have. D Langhorne responded that it was hoped to receive all the funding, but it was dependent on the Housing and Planning Act and the detail surrounding new areas such as the higher value voids, more will be known in March. RESOLVED that the Board agreed to; Approve the essential investment for 2017/18 and recommend this to the City Councils October Cabinet. Agree to receive a further report later this year to approve the remainder of the 2017/18 programme and the rolling four year programme for recommendation to the City Council’s Cabinet. 491
SERVICE AND STRATEGY DELIVERY COMMITTEE ANNUAL REPORT Submitted: Report by the Chair of Service and Strategy Committee (previously circulated, copy attached to Official Minutes). The Chair of the Service and Strategy Delivery Committee introduced the report which outlined the work of the committee over the first eight months. The committee was a new committee and began in a turbulent time, but the Chair noted that the committee had grown in value and was dealing with strategic issues and providing useful scrutiny. The Chair noted the members and officers worked well and thanked everyone for their constructive contributions. RESOLVED that the Board agreed to; note the report.
492
MINUTES RESOLVED – that the Board considered the minutes of the meeting held on the 21 June 2016 and approved them as a correct record. A Board member asked for an update on the Own your own scheme at a future meeting.
493
ITEMS FOR INFORMATION RESOLVED that the following information be received for information;
UNIVERSAL CREDIT UPDATE
REPAIRS AND MAINTENANCE REVIEW
DELEGATED DECISIONS
BOARD FORWARD PLAN
COMMITTEE MINUTES – Service and Strategy Delivery Committee 17 May 2016
494
EXCLUSION OF PRESS AND PUBLIC RESOLVED – That in accordance with the organisation’s Access to Information provisions, the press and public were excluded from the meeting during the consideration of all further agenda items.
……………………………………….. Mrs O Grant Chairman 11 October 2016
Board 11 October 2016 YHN 2015-16 Financial Statements Report by Head of Finance For Approval 1.
Background information
1.1
This report introduces the Your Homes Newcastle (YHN) Financial Statements for the financial year 2015-16. These statements have been prepared in conjunction with EY, YHN’s external auditors. The Strategic Report, Directors’ Report and Financial Statements are attached in Appendix 1.
1.2
The Report of the members of the Board and Financial Statements are a requirement for all companies and will be presented along with the Annual Report at the Annual General Meeting on 1st November 2016.
1.3
EY have conducted a full audit of the Report and Financial statements and reported to Audit Committee. They have given the statements a ‘clean’ audit report, that is, the statements give a “true and fair view of the company’s affairs” and no material errors have been found.
1.4
Audit Committee has had the opportunity to review the financial statements and audit results report from EY and has recommended that Board approve: •
The Strategic Report and Directors’ report;
•
The financial statements and notes to the statements; and
•
The Letter of Representation
•
The Going Concern Letter
1.5
The Group accounts include the results of Asfaleia and Abri Trading Limited. Abri Trading Board have reviewed their draft accounts and will formally approve them at their next meeting. Asfaleia is not yet required to produce financial statements and will look at the results included in the group accounts next year.
1.6
There is still the possibility of changes to the statutory accounts up to the time of their acceptance at the AGM should a significant post balance sheet event occur.
1.7
This report also provides a summary of any adjustments since Board were given the draft outturn position in May.
2.
YHN Financial Statements and Audit Results
2.1
The key issues for Board’s attention are discussed in detail in sections 2.2 to 2.8.
2.2
Significant accounting policy changes from previous statements There are significant accounting policy changes to the YHN Financial Statements for 2015-16.
Group accounts: as the YHN group now includes Abri Trading Limited and Asfaleia Limited, YHN must produce group accounts as well as accounts for YHN as a single entity; FRS102: The introduction of the FRS102 reporting standard has changed the rules for accounting for some particular items in the financial statements. An impact assessment considered: i. Holiday Pay accrual ii. Grants treatment iii. Financial instruments iv. Lease Agreements v. Pension Accounting: discussed in section 2.3 The assessment showed that i to iii have no impact on YHN accounting policy. The assessment showed that the vehicle leasing agreements YHN has following acquisition of the furniture service need to be shown on the balance sheet at a value that represents the future cash obligations. The vehicles were also included as assets.
2.3
Pension Fund Deficit In previous years YHN understood that Newcastle City Council (NCC) would assume any current or future funding surpluses or deficits and accordingly, whilst disclosure of the pension scheme deficit was made in the YHN accounts, the scheme deficit was restricted to nil and the pension cost recorded in the income statement based on contributions payable. There has been further discussion with NCC on the pension liabilities and NCC clarified the position with respect to YHN’s pension deficit in respect of the current and prior years. Following this clarification, it was determined that the full YHN pension deficit should be recorded in the balance sheet and adjustments made to reflect service costs, finance costs and actuarial gains and losses in the Total Comprehensive Income Statement, rather than just the contributions payable. This change has been accounted for as a prior year adjustment. The support available from NCC has been described in 2.8 below. The impact on the results for March 2015 have been restated as follows:
At 31 March 2015
£’000 2,043 (1,640)
Profit for the financial year (as previously stated) Re-statement of pension liabilities Profit for the financial year (as restated)
403 At 31 March 2015
2.4
Total Comprehensive Income (as previously stated) Re-statement of pension liabilities
£’000 2,043 (5,110)
Total Comprehensive Income (as restated)
(4,707)
At 1 April 2014
At 31 March 2015
Capital and reserves (as previously stated) Re-statement of pension liabilities
£’000 33 (12,740)
£’000 2,076 (19,490)
Capital and reserves (as restated)
(12,707)
(17,414)
Tax Position In 2015-16 YHN Group has a potential tax liability of £2k arising from 201516 activities in Abri Trading. This is not material and has therefore been excluded from the accounts.
2.5
Palatine accounting issues Palatine uses a separate accounting system. Some accounting issues have arisen which meant that some debtors could not meet the virtual certainty test at the time of drafting the accounts. A provision was raised for these accounts. Audit Committee and Abri Board have discussed this issue. Work is going on to correct this situation and Audit Committee will receive an update at its meeting in November.
2.6
Audit Committee Recommendations Audit Committee have considered the annual financial statements and received EY’s audit results report for the year ended 31 March 2016. EY has reported that there are no material errors in the Financial Statements and no material weaknesses in internal controls have been identified during the audit.
Audit Committee has recommended that Board:
2.7
accept the financial statements as a true and fair view of the financial status of YHN
approve the Report of the members of the Board;
approve the Letter of Representation (section 2.7); and
approve the Going Concern Letter (section 2.8)
Letter of Representation The letter of representation which should be approved by Board in relation to the Report of the members of the Board and Financial Statements is attached as Appendix 2. This letter gives an undertaking to the auditors that all relevant information has been disclosed to them by the Board. It is recommended that approval of this letter is delegated to the Chair and the Company Secretary.
2.8
Going Concern: The Group has net liabilities of £9,728,000 (2015 £17,414,000), including a pension deficit of £14,360,000 (2015 £19,490,000). YHN has a management agreement in place with NCC which underpins our 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 22year schedule for recovery of the deficit. In addition, the Group has received confirmation from NCC that the Council would assist 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. The Chair and Vice Chair of Audit Committee have been provided with detailed evidence to support the going concern basis to scrutinise on behalf of the Board. This is summarised in a letter from the Directors (Appendix 3) to be provided to EY on the signing of the accounts. It is recommended that approval of this letter is delegated to the Chair and the Company Secretary.
2.9
Possible Outcomes The Report of the members of the Board and Financial Statements present YHN’s operations for the year to 31 March 2016. The Board has the following options available: 1. The Board can accept that the Financial Statements give a true and fair view of the state of affairs of the company.
2. If the Board has an issue of principal with the Report of the members of the Board and Financial Statements they can amend them. Any revisions would be subject to further audit scrutiny. Any amendment to the Report of the members of the Board and Financial Statements may prevent them being taken to the AGM. If the Board were not to sign the letter of representation the auditors would be unable to sign off the accounts. Board would effectively be implying that the accounts are not representative of the financial situation of the company and that the auditors had been misled. 3.
Reconciliation to Draft outturn reported to Board in May 2016
3.1
At the meeting of 10 May, Board was presented with an unaudited draft position for 2015-16. It was understood there was further valuation work to do and there may be audit adjustment required. The reconciliation of these movements is set out in the table below.
3.2
ÂŁ'000 Draft Outturn Board May 2016
YHN 1,527
Bad debt provision Reconciliation of furniture asset acquisition
(141)
Group 2,652 (141)
(67)
Tax estimate reversed Interest on net pension liability recognised from 1 April 2015
Abri Asfaleia Trading 584 541
(67) 111
111
(590)
(590)
FRS102 Pension cost per actuary
(4,510)
(4,510)
Reversal of pension contributions in previous draft
2,780
2,780
Sundry adjustments Revised Profit in final accounts
9
(8)
(851)
546
1 541
236
4.
The Business Implications
4.1
YHN Mission and Strategic Objectives: A healthy YHN financial position supports the achievement of all YHN’s strategic objectives. Although YHN now has negative net assets it still has sufficient cash flow and parent support to be a going concern.
4.2
Value for money/efficiencies; Detailed, timely and accurate financial information allows YHN to identify areas of concern with regards to Value for Money, the need to generate efficiency savings and the ability to monitor progress in achieving those savings.
4.3
Financial Implications: YHN Group begins 2016/17 with reserves of £ (9.7) m including a defined benefit liability of £ (14,360) k.
4.4
Other Resources (property, technological or human): None
4.5
Impact on services/performance: A healthy financial position enables YHN to invest in services as appropriate to support the achievement of strategic goals and improve performance.
4.6
Outcomes for tenants/leaseholders: A healthy financial position enables YHN to invest in services as appropriate to support the achievement of strategic goals and the impact of services on tenants and leaseholders.
4.7
Risk (reputation, relationship): The Financial Statements are a legislative requirement. Failure to approve the financial statements would damage YHN’s reputation. The Audit findings provide assurance that internal controls are appropriate and that the accounts are a true and fair reflection of YHN’s performance.
4.8
Environmental: Financial resources are required to implement actions to reduce YHN’s environmental impact.
4.9
Equality and Diversity and Community Cohesion: The Reports and Statements contain our commitments to Equality and Diversity.
4.10 Legal: The statutory financial statements relating to the YHN outturn will be published after approval and files with Companies House. 4.11 Stakeholder Involvement/Consultation: These accounts will be presented to an NCC representative at the AGM. 5.
Conclusion and recommendations
5.1
Board are asked to approve: •
The Directors Report and Strategic Report;
•
The Financial Statements and notes to the Statements;
•
The Letter of Representation;
•
The Going Concern Letter
•
That the Directors’ Report, Strategic Report and Financial Statements, Letter of Representation and Going Concern Letter are duly signed by the Chair and Company Secretary;
6.
Implementation
6.1
Once approved by Board the Report of the members of the Board and Financial Statements will be presented to the Member at the AGM and filed with Companies House.
Background Papers Board Q4 Performance Report 10 May 2016 Group Audit Committee 11 August 2016 Group Audit Committee 26 Sept 2016 Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact: Lisa Forrest (Head of Finance) by telephone on 0191 2788616 or email lisa.forrest@yhn.org.uk
Annual Report and Financial Statements Year 2015-16 Registered Company No: 5076256
Your Homes Newcastle Limited
Contents
2
Page
Corporate Information: Board Members, Company Secretary and Advisors
3
Strategic Report
5
Directors’ Report
11
Independent Auditors Report
15
Financial Statements
17
Notes to the Financial Statements
22
Your Homes Newcastle Limited
3
Corporate Information Board Members, Company Secretary and Advisors Chair
Marjorie Olivia Grant OBE, DCL, DL
Tenant Directors
Lisa Doherty
Vice Chair as of 22 Sept 2015
Paul Dutton Tony Moore Julie Purvis John Reid Loraine Wilson Independent Directors
Phil Dibbs Ammar Mirza CBE Nitin Shukla
Vice Chair resigned 22 Sept 2015
Elaine Snaith
Council Nominated Directors
Lynn Stephenson
Vice Chair as of 22 Sept 2015
Paul Scope
Appointed 5 May 2015
Malcolm Page
Appointed 22 Sept 2015
David Down
Resigned 22 Sept 2015
Veronica Dunn Doreen Huddart Joyce McCarty John Stokel-Walker
Resigned 27 May 2015
Marion Talbot Jane Streather
Appointed 27 May 2015
David Slesenger
Appointed 22 Sept 2015
Your Homes Newcastle Limited
4
Board Members, Company Secretary and Advisors (continued) Chair of the Audit Committee
George Clark
Vice Chair of Audit Committee
Paul Scope
Resigned 20 August 2015
Gordon Burns
Appointed 18 February 2016
Company Secretary
Jill Davison
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).
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, Chief Legal Officer Chief Executive’s Office, Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
Your Homes Newcastle Limited
5
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 2016. 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. YHN currently manages:
25,947 council homes on behalf of Newcastle City Council; 1,817 homes on behalf of the Byker Community Trust; and 529 homes on behalf of Leazes Homes.
We also manage leasehold properties on behalf of Newcastle City Council and the Byker Community Trust. Organisational structure YHN is a local authority controlled company under the control of Newcastle City Council established with no share capital and limited by guarantee. Newcastle City Council (NCC) has contracted YHN to manage and oversee maintenance of its residential stock, and to provide services to HRA tenants. During 2015 YHN established a new group structure with two new subsidiary companies. Asfaleia Limited, a community benefit society and Abri Trading Limited a private company limited by shares. This new group structure enables us to operate in the most tax efficient way, make the best use of our financial resources and better reflects the breadth of activity we carry out. Further information can be found in our Group Governance Handbook: https://www.yhn.org.uk/who-we-are/yhn-board/governance/ How we do business Since our incorporation in 2004, we have delivered housing management and improvement services to NCC under a Management Agreement.
Your Homes Newcastle Limited
6
Strategic Report (continued) How we do business (continued) In March 2013 a three year Business Strategy was approved by the Board which defined our statement of purpose as; ‘to enable positive living for people in our homes and neighbourhoods’ The purpose is underpinned by three strategic objectives; To make the money deliver; To create homes and neighbourhoods we can all be proud of; and Work together to realise a better future Through the management agreement we are required to develop an annual Delivery Plan which translates the Business Strategy into actions for the year ahead. The Delivery Plan is predominately an operational document. Every team within the organisation has a service plan which helps ensure that all outputs contribute towards service objectives and in turn the broader business strategy priorities and strategic objectives. The Business Strategy and Delivery Plan can be found on our website at; https://www.yhn.org.uk/who-we-are/publication-scheme/ Key Performance Indicators 2015-16 The table below provides a summary of our performance against our strategic targets in 2015-2016. Make the money deliver Target Collect £113.33m (99.49%) of rent by 31/03/2016 The void rent loss not to exceed £1.48m (1.28%) by 31/03/2016
Actual 99.84% £1.71m (1.48%)
87.5% customers who are satisfied with the service provided by YHN by 31/03/2016
85.2%
80% of people in our employability programme move onto education, employment or training by 31/03/2016
80.7%
Engage with 700 tenants to ensure that they are digitally included by 31/03/2016 Deliver 4,061 life cycle improvements by 31/03/2016 in order to maintain 100% decency
Result
747 4797
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Strategic Report (continued) 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 the business's 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 current approach to the management of strategic risks was approved by the Board in May 2013. The framework consists of:
Annual review of the register approved by the Board; and Quarterly monitoring of the strategic risk register by the Audit Committee.
During 2015-2016 the Audit Committee monitored the following seven strategic risks and uncertainties facing the business: 1. Procedure for agreeing 2016-17 management fee does not meet YHN expectations 2. Substantial reduction in budget position of externally traded services 3. YHN services unable to meet contractual requirements without substantial funding above agreed budgets 4. Staff skills and experience do not meet current and future service delivery requirements. 5. Significant disruption to continuity of service provision 6. Failure to comply with statutory health and safety (H&S) requirements. 7. Substantial damage to YHN’s reputation/public image Our Group Audit Committee scrutinise the Strategic Risk Register to ensure the organisation is taking the most appropriate approach to risk, this includes monitoring the;
Current controls; Actions to improve controls; Likelihood and impact score, and Effectiveness of our current controls to manage the risk.
During 2015 YHN Board also completed a series of stress testing scenarios on the business to understand which situations would most impact the organisation financially so that risk mitigation could be developed. In addition, Board agreed a series of responses to develop for use in a materially adverse situation.
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Strategic Report (continued) Financial Risk Management Policy YHN currently holds no complex financial instruments. 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. Loans have been taken out with fixed interest rates. 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 YHN’s exposure to short-term liquidity risks is low as its cash balances are held and managed on our behalf as part of the larger NCC bank balances. NCC carries out the vast majority of YHN’s cash transactions. Long term liquidity risks are managed through robust modelling including multi-factor scenarios (“stress-testing”). 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 The world we operate in has changed a lot since we were established in 2004. The economy is in recovery but the pressure to reduce public spending remains. Our parent organisation Newcastle City Council (NCC) has already lost £191 million as a result of government cuts and unfunded cost pressures like inflation and rising energy costs (£1,567 for every household in Newcastle). NCC predict that it will need to reduce costs by a further £100 million over the next three years.
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Strategic Report (continued) Future Developments (continued) This pressure is compounded by the government requirement on social landlords to reduce social rents by 1% for each of the next four years. This will mean a reduction of income into the Housing Revenue Account (HRA) of £593m over the next 30 years. Welfare Reform and the introduction of Universal Credit pose a further threat to income from rent, and the Housing and Planning Act will bring significant changes to social housing. Planned changes include an extended Right to Buy, the end of lifetime tenancies, Pay to Stay and the sale of high value council housing. From April 2016 we have a new ten year management agreement with NCC. This enables us to plan for the future and gives us a great opportunity to continue to deliver NCC’s housing services. However, given the financial pressures NCC faces, the management fee we will receive has been reduced to reflect the reduced income into the HRA. This will mean we have to innovate and transform our organisation so we can continue to deliver our vision. In March 2016 a new three year Business Strategy was approved by the Board which defined that our statement of purpose is to ‘delivering great services, enabling people to thrive in great communities, supporting a great city’. Our vision for 2020: We will be high performing, innovative and focussed on providing quality housing management and support services. We will make the money deliver across everything we do while continuing to create positive outcomes for our customers Our statement of purpose will be underpinned by three new strategic objectives:
Keep the housing stock decent, and neighbourhoods clean and safe Collect rent and let properties efficiently; and Promote health and wellbeing and support vulnerable people to enjoy independence.
More than ever before we will need to make sure the money delivers; spending money where the need is greatest and focusing on services where we know it will make the biggest difference. We must continue to build and strengthen our already excellent relationship with our key shareholder NCC, and work collaboratively with other partners to help the city achieve their key objectives in an incredibly challenging financial climate. We may need to make some difficult decisions along the way and be prepared to re-direct resources to ensure the best possible outcomes from the services that we provide on behalf of our landlords.
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Strategic Report (continued) The strategic report was approved by the Board on 11 October 2016 and signed on its behalf on 11 October 2016 by:
Olivia Grant Chair
Jill Davison Company Secretary
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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 2016. The company has chosen in accordance with Section 414C(ii) of the Companies Act 2006 to set out in the company strategic report the following which the members believe to be of strategic importance: • How we do business • Financial risk management policy • 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. Six Board members are Newcastle City Councillors. In establishing and monitoring the business 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 YHN 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 including: Established, regular communication channels including staff focus groups, regular team brief sessions, staff newsletters, team meetings and staff surveys; A formal annual appraisal mechanism that includes regular 1-2-1s 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; and Formal and informal communication and consultation mechanisms with trade unions.
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Directors’ Report (continued) Equality and Diversity In September 2015, we were re-assessed against the Social Housing Equality Framework (SHEF) and were successfully re-accredited at the excellence level. The framework comprises five performance areas: Knowing your customers Leadership, partnership and organisational commitment Involving your customers Responsive services, access and customer care A skilled and committed workforce. The feedback we received reflected the good work happening across the organisation and how we integrate our commitments to promote equality and diversity into our day-to-day work. We entered the Stonewall Workplace Equality Index for 2016 and achieved a place in the Top 100 employers placing at 36, one of only seven housing organisations to be placed in the Top 100, and a significant improvement from last years placing of 98. We received some excellent feedback from Stonewall and will be focusing on the areas where we know we still have room to improve. We will be also replicating the framework as an assessment tool for other demographic groups in the future. Employees with disabilities 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 the Board’s Responsibilities The Board is responsible for preparing the Strategic Report, the Directors’ Report and financial statements in accordance with UK Accounting Standards and applicable UK law (UK Generally Accepted Accounting Practice). Company law requires members of the Board to prepare financial statements for each financial year. Under company law the Members of the Board must not approve the financial statements unless they are satisfied that taken as a whole the financial statements are fair, balanced and understandable and provide the information necessary for the sole member to assess the company’s performance, business model and strategy for the period ending 31 March 2016.
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Directors’ Report (continued) Statement of the Board’s Responsibilities (continued) In preparing these financial statements, the Board is required to: select suitable accounting policies and then apply then consistently; make judgements and estimates which are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on a going concern basis unless it is inappropriate to presume YHN will continue in business. Members of the Board are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of YHN and to enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. The Board are also responsible for safeguarding the assets of YHN and for taking all 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. 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 Audit Committee on 26 September 2016. At that meeting the Audit 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 budgets and forecasts for YHN to March 2018 and the continued and possible future 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.
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Directors’ Report (continued) Going Concern (continued) The Group has net liabilities of £9,728,000 (2015 £17,414,000), including a pension deficit of £14,360,000 (2015 £19,490,000). The Company has 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. For this reason, the Board continue to adopt the going concern basis of preparation for these financial statements. 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 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 Ernst & Young LLP are the external auditors of Your Homes Newcastle Limited for the period 2015-16. Ernst & Young LLP have indicated that they are willing to continue in this role and a resolution to re-appoint them to this role will be put to the AGM on 1 November 2016. The report of the members of the Board was considered and approved by the Board on 11 October 2016 and signed on its behalf on 11 October 2016 by:
Olivia Grant Chair
Jill Davison Company Secretary
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF YOUR HOMES NEWCASTLE LIMITED We have audited the Company financial statements for the year ended 31 March 2016 which comprise the Group Statement of Comprehensive Income, Group and Parent Company Statement of Financial Position, Group and Parent Statement of Changes in Equity, Group Statement of Cash Flows and the related notes 1 to 22. 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. 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. Respective responsibilities of the Board and the auditor As explained more fully in the Statement of Board's Responsibilities set out on pages 13 and 14, the Board is responsible for the preparation of financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the board; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Financial Statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.
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Opinion on financial statements 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 2016 and of the group’s profit for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 “The Financial Reporting standard applicable in the UK and Republic of Ireland; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion 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. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, 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.
Caroline Mulley (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Newcastle upon Tyne Date
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Financial Statements Group Statement of Comprehensive Income for the 12 months ended 31 March 2016 Notes 2016 ÂŁ'000
Restated* 2015 ÂŁ'000
Income
2
38,572
31,904
Operating Costs
3
(37,627)
(31,013)
Operating Profit
4
945
891
Interest receivable and other income Interest payable and other charges
7b 7a
11 (720)
1 (490)
236
402
-
1
236
403
Actuarial gain/(loss) on defined benefit pension
7,450
(5,110)
Total comprehensive income for the year
7,686
(4,707)
Profit on ordinary activities before taxation
Taxation Profit for the financial year
All amounts relate to continuing activities. *See note 21 for details of restatement
8
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Financial Statements Group Statement of Changes in Equity for the 12 months ended 31 March 2016 Profit and Loss reserve ÂŁ'000 Balance as at 1 April 2014 (restated*)
(12,707)
Total comprehensive income for the year (restated*)
(4,707)
Balance as at 31 March 2015 (restated*)
(17,414)
Total comprehensive income for the year
7,686
Balance as at 31 March 2016
(9,728)
*See note 21 for details of restatement
Company Statement of Changes in Equity for the 12 months ended 31 March 2016 Profit and Loss reserve ÂŁ'000 Balance as at 1 April 2014 (restated*)
(12,707)
Total comprehensive income for the year (restated*)
(4,707)
Balance as at 31 March 2015 (restated*)
(17,414)
Total comprehensive income for the year
6,599
Balance as at 31 March 2016 *See note 21 for details of restatement
(10,815)
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Financial Statements
Registered Company No: 5076258
Group Statement of Financial Position As at 31 March 2016 Notes
2016 ÂŁ'000
Restated* 2015 ÂŁ'000
Fixed Assets Tangible Assets
9
5,890 5,890
-
Current assets Stocks
11
638
Debtors
12
7,400
5,286
7,733
2
15,771
5,288
(10,279)
(3,212)
5,492
2,076
11,382
2,076
(6,750)
-
4,632
2,076
(14,360)
(19,490)
(9,728)
(17,414)
(9,728) (9,728)
(17,414) (17,414)
Cash at bank and in hand Creditors: amounts falling due within one year
13
Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Net assets excluding pension liability Defined benefit pension liability Net assets
14
Reserves and Capital Profit and loss account *See note 21 for details of restatement
These financial statements were approved by the Board and authorised for issue on 11 October 2016. Signed on behalf of the Board Olivia Grant Chair
Your Homes Newcastle Limited
Financial Statements
20 Registered Company No: 5076258
Company Statement of Financial Position As at 31 March 2016 Notes
2016 ÂŁ'000
Restated* 2015 ÂŁ'000
Fixed Assets Tangible Assets
9
2,491
-
Other investments
10
3,900 6,391
-
Stocks
11
390
Debtors
12
4,846
5,286
5,551
2
10,787
5,288
(6,883)
(3,212)
3,904
2,076
10,295
2,076
(6,750)
-
Net assets excluding pension liability
3,545
2,076
Defined benefit pension liability
(14,360)
(19,490)
Net assets
(10,815)
(17,414)
(10,815) (10,815)
(17,414) (17,414)
Current assets
Cash at bank and in hand
Creditors: amounts falling due within one year
13
Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year
14
Reserves and Capital Profit and loss account *See note 21 for details of restatement
These financial statements were approved by the Board and authorised for issue on 11 October 2016. Signed on behalf of the Board Olivia Grant Chair
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Financial Statements Group Statement of Cash Flows for the 12 months ended 31 March 2016 Notes
2016 ÂŁ'000
2015 ÂŁ'000
18
8,444
(1)
Investing activities Interest received Payments to acquire tangible fixed assets Receipt from sale of fixed assets
11 (7,211) 51
1 -
Net cash flow from investing activities
(7,149)
1
Financing activities Interest paid New long-term loans Repayment of finance leases
(22) 6,500 (42)
-
Net cash flow from financing activities
6,436
-
Increase in cash and cash equivalents
7,731
-
2
2
7,733
2
Net Cash flow from operating activities
Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March
Your Homes Newcastle Limited
Notes to the financial statements at 31 March 2016 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 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 2016. The Group transitioned from previously extant UK GAAP to FRS102 as at 1 April 2014. An explanation of how transition to FRS 102 has affected the reported financial position and financial performance is given in note 21. 1.2 Basis of preparation and change in accounting policy The financial statements were authorised for issue by the Board of Directors on 11 October 2016. 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. 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.
22
Your Homes Newcastle Limited
Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.3 Basis of consolidation (continued) Abri Trading Limited has been included in the group financial statements using the purchase method of accounting. Accordingly, the group profit and loss account and statement of cash flows include the results and cash flows of Abri Trading Limited for the 6-month period from its acquisition on 1 October 2015. The purchase consideration has been allocated to the assets and liabilities on the basis of fair value at the date of acquisition. The group profit and loss account include the results and cash flows of:
Asfaleia Limited for the 6-month period from its incorporation on 5 October 2015 and Abri Trading Limited for the 6-month period from its incorporation on 1 October 2015.
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act 2006 and not presented a Statement of Income for the Company alone. The total comprehensive income for the period for parent company is £6,599,000. In the parent company financial statements investments in subsidiaries are accounted for at cost less impairment. 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 £9,728,000 (2015 £17,414,000), including a pension deficit of £14,360,000 (2015 £19,490,000). The Company has 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.
23
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Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.4 Going concern (continued) 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 source 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. 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
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Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.5 Judgements and key source of estimation uncertainty (continued) 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 allow 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 assets 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 Interest paid on the loans is on a fixed rate basis.
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Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.5 Judgements and key source of estimation uncertainty (continued) •
The loans agreements are with Newcastle City Council and these loan agreements do not contain two way break clauses. These loans have therefore been recognized at amortised historical cost. 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. 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.
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Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.6 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: 
Equipment
- over 1½ 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. Impairment of non-financial assets (continued) 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 net of outstanding bank overdrafts.
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Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.6 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. 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. 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
Your Homes Newcastle Limited
29
Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.6 Significant accounting policies (continued)
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 revers, based on tax rates and laws enacted or substantively enacted at the balance sheet date. 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 lease 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 income statement. 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’) and 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
Your Homes Newcastle Limited
30
Notes to the financial statements at 31 March 2016 1
Accounting Policies (continued)
1.6 Significant accounting policies (continued) 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. The net interest is recognised in profit or loss as other finance revenue or cost. Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling and the return on the net defined benefit liability (excluding amounts included in net interest) are recognised immediately in other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit and loss in subsequent periods. The defined net benefit pension asset or liability in the balance sheet comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid price. Provisions for liabilities 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. 2
Analysis of Group Turnover Landlord Services 2016 2015 ÂŁ'000 ÂŁ'000 Housing Management Fees
35,122
31,218
Sales of goods
1,232
-
Other Income
2,218
686
38,572
31,904
Your Homes Newcastle Limited
31
Notes to the financial statements at 31 March 2016 3
Analysis of Group Operating Costs 2016 £'000 Employee costs Premises Costs Transport Costs Supplies & Services Depreciation Impairment of assets
4
restated 2015 £'000
28,215 954 887 5,915 1,517 139 37,627
26,896 186 608 3,323 -
2016 £'000 1,517 139
2015 £'000 -
16 15
10 5
31,013
Group Operating Profit This is stated after charging: Depreciation of owned assets Impairment loss on fixed assets Auditors’ Fees For audit services For non-audit services
5
Employee information a) Staff costs The average number of persons employed during the year, expressed as equivalent of whole time employees was: 2016 2015 Housing Management Administration and Clerical
649 170 819
677 194 871
2016 £'000
restated 2015 £'000
21,779 1,449 3,257
21,692 1,480 2,574
1,730 28,215
(1,150) 26,896
Costs for the above employees were:
Wages and salaries Employers NI Employers pension contributions Past and current pension service costs above cash contributions
Your Homes Newcastle Limited
32
Notes to the financial statements at 31 March 2016 5
Employee information b) Directors’ Emoluments Aggregate emoluments payable to directors (including pension contribution and benefits in kind)
2016 £'000
2015 £'000
39
40
The full time equivalent number of staff who received emoluments in the following bandings are: 2016 2015 £60,001 to £70,000 4 2 £70,001 to £80,000
9
7
£80,001 to £90,000
1
2
£90,001 to £100,000
2
-
£100,001 to £110,000
-
3
£110,001 to £120,000
1
-
£120,001 to £130,000
2
2
£140,001 to £150,000
1
£150,001 to £160,000
-
1
£160,000 and above
2
-
The 2016 figures include 12 employees whose emoluments include severance payments (2015: six)
Your Homes Newcastle Limited
33
Notes to the financial statements at 31 March 2016 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 ÂŁ249,000. Six YHN Board Members are NCC housing tenants. All Board member tenancies are granted on normal commercial terms. Tenant Board Members do not use their position to gain any commercial advantage. Six 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.
7a
Interest payable and similar charges
Loans from NCC Finance charges payable under leases Interest on net pension liability
2016
2015
122
-
8
-
590
490
720
490
2016
2015
11
1
11
1
7b Interest receivable
Interest on balances held at NCC
Your Homes Newcastle Limited
34
Notes to the financial statements at 31 March 2016 8
Tax Group (a) Tax on profit on ordinary activities The tax charge is made up as follows: 2016 £'000
2015 £'000
Current Tax Adjustment in respect of previous periods Total current tax
-
(1) (1)
Total tax per income statement
-
(1)
(b) Tax charge reconciled to the 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 20% Effects of income not taxable Movement on unrecognised tax losses Adjustment from previous periods Tax charge for the period
2016 £'000
2015 £’000
236
402
47
80
(524) 477 -
(524) 444 (1) (1)
Your Homes Newcastle Limited
35
Notes to the financial statements at 31 March 2016 c) Factors affecting future tax charges The standard rate of UK corporation tax reduced from 21% to 20% from 1 April 2015. A rate of 20.00% therefore applies to the current tax charge arising during the period ended 31 March 2016. In addition to the change in rate of Corporation Tax identified above, further reductions in the rate to 19% from 1 April 2017 and 18% from 1 April 2020 were substantively enacted prior to the balance sheet date and have been applied to the company’s deferred tax balance at the balance sheet date. An announcement in the 2016 Budget also noted the intention to amend the rate from 1 April 2020 to 17%. Had this rate been enacted at the balance sheet date, the effect on the provision for deferred taxation would not have been material.
Your Homes Newcastle Limited
36
Notes to the financial statements at 31 March 2016 9
Tangible Assets Equipment £'000
Total £'000
7,597 (51) 7,546
7,597 (51) 7,546
(1,517) (139) (1,656)
(1,517) (139) (1,656)
5,890
5,890
As at 1 April 2015
-
-
Parent Company
Equipment £'000
Total £'000
Cost: At 1 April 2015 Additions Disposals At 31 March 2016
3,228 (26) 3,202
3,228 (26) 3,202
Depreciation and impairment: At 1 April 2015 Provided during the year Impairments Disposals At 31 March 2016
(671) (40) (711)
(671) (40) (711)
As at 31 March 2016
2,491
2,491
-
-
Group Cost: At 1 April 2015 Additions Disposals At 31 March 2016 Depreciation and impairment: At 1 April 2015 Provided during the year Impairments Disposals At 31 March 2016 As at 31 March 2016
As at 1 April 2015
Your Homes Newcastle Limited
37
Notes to the financial statements at 31 March 2016 9
Tangible Assets (continued) Included within the next book value of £5,890,000 is £340,000 (2015 - £Nil) relating to assets held under hire purchase agreements. The depreciation charged to the financial statements in the year in respect of such assets amounted to £47,000 (2015 - £Nil).
10
Investments
Parent Company Loans to other Group companies
2016 £'000
2015 £'000
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. 11
Stocks
Group Raw materials and consumables
Parent Company Raw materials and consumables
2016 £'000
2015 £'000
638 638
-
2016 £'000
2015 £'000
390 390
-
The difference between purchase price or production cost of stocks and their replacement value is not material. Stocks recognised as an expense in the period were £889,000 for the Group (2015: £Nil) and £40,000 for the parent (2015: £Nil)
Your Homes Newcastle Limited
38
Notes to the financial statements at 31 March 2016 12
Debtors Group Amounts owed from NCC Other debtors and prepayments VAT
Parent Amounts owed from NCC Amounts owed from YHN Group companies Other debtors and prepayments 13
2016 £'000
2015 £'000
4,520 2,302 578 7,400
2,972 2,314 5,286
2016 £'000
2015 £'000
3,443 241 1,162 4,846
2,972 2,314 5,286
Creditors: amounts falling due within one year 2016 £'000
2015 £'000
2,187 6,660 15 1,040 161 94 122 10,279
2,180 3 93 621 301 14 3,212
Parent
£'000
£'000
VAT Amount due to NCC Income received in advance Accruals Amounts due to other YHN Group companies Redundancy and other pay provisions Amounts due in respect of finance leases (Note 16) Interest payable to NCC
2,187 1,010 14 910 2,385 161 94 122 6,883
2,180 3 93 621 301 14 3,212
Group VAT Amounts due to NCC Income received in advance Other Accruals Redundancy and other pay provisions Amounts due in respect of finance leases (Note 16) Interest payable to NCC
Your Homes Newcastle Limited
39
Notes to the financial statements at 31 March 2016 14
Creditors: amounts falling due in more than one year Group and Parent Amounts due in respect of finance leases (Note 16) Loans (Note 15)
15
2016 £'000
2015 £'000
250 6,500 6,750
-
2016 £'000
2015 £'000
6,500 6,500
-
Loans
Group and Parent Loans from NCC
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 Parent 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
2016 £'000
2015 £'000
94 256 24 374 (30) 344
-
94
-
250
-
Your Homes Newcastle Limited
40
Notes to the financial statements at 31 March 2016 17
Financial instruments
Financial liabilities measured at amortised cost Obligations under finance lease Loans from parent undertaking
18
2016 £'000
2015 £'000
344 6,500
6,500
Notes to the statement of cash flows Group a) Reconciliation of profit for the year to net cash flow from operating activities
Group profit for the year Adjustments to reconcile profit for the year to net new cash flow from operating activities: Depreciation and amortisation of tangible fixed assets Impairment of fixed assets Net finance costs Difference between pension charge and cash contributions Working capital movements: Increase in debtors Increase in stocks Increase in creditors Corporation tax paid Net cash inflow/(outflow) from operating activities
2016 £'000
2015 £'000
234
403
1,517 139 709
489
1,730
1,150
(2,182) (638) 6,935
(1,634)
-
(1)
8,444
(1)
b) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand only.
(408)
Your Homes Newcastle Limited
Notes to the financial statements at 31 March 2016 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 for Your Homes Newcastle Limited can be obtained from the Company Secretary, YHN House, Benton Park Road, Newcastle NE7 7LX 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 Many of its senior management team are employed by YHN, and YHN is a major supplier to Leazes Homes. Blakelaw Community Partnership Limited (‘BCP’) BCP is a company controlled by Newcastle City Council. YHN employs one member of staff who works exclusively for BCP. Normal commercial terms. Parent The related parties of the parent 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:
41
Your Homes Newcastle Limited 41
Notes to the financial statements at 31 March 2016
19
Related Party transactions (continued) Sales to related party
Purchases from related party
£’000
£’000
Amounts owed from related party £’000
Amounts owed to related party £’000
Group Entities with significant influence over the group 2016 2015
29,304 28,102
9,511 2,316
4,520 2,972
13,625 17
Entities over which the group has joint control or significant influence 2016 2015
3,035 2,792
-
543 1,858
10 -
4,907 -
3,111 -
4,140 -
2,385 -
Parent Other group undertakings 2016 2015
Your Homes Newcastle Limited
42
Your Homes Newcastle Limited
43
Notes to the financial statements at 31 March 2016 20
Pensions The company participates in the Tyne and Wear Pension Fund, which is a funded defined benefit scheme where contributions payable is 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 14.2% for 2015-16 (2014-15: 14.2%) 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 2013 has been updated by an independent qualified actuary on an FRS 102 basis as at 31 March 2016. As required by FRS 102 the defined benefit liabilities have been measured using the projected unit credit method. This information is set out below: 2016 ÂŁm
2015 ÂŁm
Fair Value of Scheme Assets Present Value of Scheme Liabilities
114.59 128.95
111.29 130.78
Funded Status
(14.36)
(19.49)
The scheme assets are made up of the following allocations:
Equities Property Government Bonds Corporate Bonds Cash Other Total
2016 %
2015 %
66.1 10.4 3.7 11.6 2.6 5.6 100.0
66.4 9.5 3.7 11.7 2.4 6.3 100.0
Your Homes Newcastle Limited
44
Notes to the financial statements at 31 March 2016 20
Pensions 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:
Recognised in the Statement of Comprehensive Income Current service cost Past service costs Interest on net defined benefit liability Total recognised in the Statement of Comprehensive Income Recognised in other comprehensive income Remeasurement (gains)/losses on assets taken to other comprehensive income Remeasurement gains/(losses) on liabilities taken to other comprehensive income Total amount recognised in other comprehensive income
Main assumptions: Rate of salary increases Rate of pension increase Discount rate Inflation assumption (RPI) Inflation assumption (CPI) Pension accounts revaluation rate
2016 £m
2015 £m
4.21 0.30 0.59 5.10
3.62 0.22 0.49 4.33
(1.84)
7.83
9.29
(12.94)
7.45
(5.11)
2016
2015
2014
%
%
%
3.3 1.8 3.5 2.9 1.8 1.8
3.4 1.9 3.3 3.0 1.9 1.9
3.9 2.4 4.3 3.4 2.4 N/A
2016
2015
23.2 24.8 25.3 27.1
23.1 24.7 25.1 27.0
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
Your Homes Newcastle Limited
45
Notes to the financial statements at 31 March 2016 20
Pensions Changes to the present value of the defined benefit obligations are analysed as follows:
Opening defined benefit obligation at 1 April 2015 Current service cost Interest cost Contributions by participants Remeasurement (gains)/losses on liabilities Net benefits paid out Past service cost Closing defined benefit obligation at 31 March 2016
2016 £m
2015 £m
130.78
110.86
4.21 4.29 1.16 (9.29) (2.50) 0.30
3.62 4.73 1.15 12.94 (2.74) 0.22
128.95
130.78
Changes to the fair value of assets during the accounting period
Opening fair value of assets at 1 April 2016 Interest income on assets Remeasurement (losses)/gains on assets Contributions by the employer Contributions by the participants Net benefits paid out Closing fair value of assets at 31 March 2016
2016 £m
2015 £m
111.29 3.70 (1.84) 2.78 1.16 (2.50) 114.59
98.12 4.24 7.83 2.69 1.15 (2.74) 111.29
2016 £m
2015 £m
3.70 (1.84) 1.86
4.24 7.83 12.07
Actual return on assets
Interest income on assets (Loss)/gain on assets Net return
Your Homes Newcastle Limited
46
Notes to the financial statements at 31 March 2016 21
Transition to FRS 102 The Group and Company transitioned to FRS 102 from previously extant UK GAAP as at 1 April 2014. The Company and Group made no adjustments to equity or profit and loss as a result of the transition to FRS102 as at either 1 April 2014 or 1 April 2015 due to there being no significant accounting policy differences.
22
Restatement of Prior Period Pension Liabilities As described in note 2, the company participates in the Tyne and Wear Pension Fund, which is a funded defined benefit scheme where contributions payable is held in a trust separately from the company. In previous years YHN understood that Newcastle City Council would assume any current or future funding surpluses or deficits and accordingly, whilst disclosure of the pension scheme deficit was made in the YHN accounts, the scheme deficit was restricted to nil and the pension cost recorded in the income statement based on contributions payable. During the year there has been further discussion with Newcastle City Council on the pension liabilities and Newcastle City Council clarified the position with respect to YHN’s pension deficit in respect of the current and prior years. Following this clarification, it was determined that the full YHN pension deficit should be recorded in the balance sheet and adjustments made to reflect service costs, finance costs and actuarial gains and losses in the Total Comprehensive Income Statement, rather than just the contributions payable. This change has been accounted for as a prior year adjustment. The support available from Newcastle City Council has been described in note 1.4. The following notes to the financial statements describe the differences between the capital and reserves and profit and loss previously presented, and the amounts as restated to reflect the clarification of support for pension liabilities from Newcastle City Council for the accounting period 31 March 2015 (i.e. comparative information), as well as capital and reserves presented in the opening statement of financial position (i.e. at 1 April 2014).
Reconciliation of group and company capital and reserves At 1 April 2014
At 31 March 2015
Capital and reserves (as previously stated) Re-statement of pension liabilities
£’000 33 (12,740)
£’000 2,076 (19,490)
Capital and reserves (as restated)
(12,707)
(17,414)
Your Homes Newcastle Limited
47
Reconciliation of group profit for the year At 31 March 2015 £’000 2,043 1,640
Profit for the financial year (as previously stated) Re-statement of pension liabilities Profit for the financial year (as restated)
403
Reconciliation of group total comprehensive income for the year At 31 March 2015 Total Comprehensive Income (as previously stated) Re-statement of pension liabilities
£’000 2,043 (5,110)
Total Comprehensive Income (as restated)
(4,707)
Restatement of Group and Company Financial position as at 31 March 2015 Reported at 31 March 2015
Impact of Restated Pension Liabilities
Restated as at 31 March 2015
Fixed Assets
£’000 -
£’000 -
£’000 -
Current Assets Debtors Cash at bank and in hand
5,286 2
-
5,286 2
Creditors: amounts falling due within one year Net current assets
(3,212)
-
(3,212)
2,076
-
2,076
Total assets less current liabilities
2,076
-
2,076
Net Assets excl. pension liability
2,076
-
2,076
-
(19,490)
(19,490)
2,076
(19,490)
(17,414)
2,076
(19,490)
(17,414)
Defined benefit pension liability Net assets Reserves and Capital Profit and loss account
(i)
Your Homes Newcastle Limited
48
Restatement of Group and Company Financial position as at 1 April 2014 Reported at 31 March 2015
Impact of Restated Pension Liabilities
Restated as at 31 March 2015
Fixed Assets
£’000 -
£’000 -
£’000 -
Current Assets Debtors Cash at bank and in hand
3,650 2
-
3,650 2
Creditors: amounts falling due within one year Net current assets
(3,619)
-
(3,619)
33
-
33
Total assets less current liabilities
33
-
33
Net Assets excl. pension liability
33
-
33
-
(12,740)
(12,707)
Net assets
33
(12,740)
(12,707)
Reserves and Capital Profit and loss account
33
(12,740)
(12,707)
Defined benefit pension liability
Your Homes Newcastle Limited
Your Homes Newcastle Limited Registered Company No: 5076256 Address: Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR
Your Homes Newcastle Ltd Registered Company no: 5076256 Your Homes Newcastle Limited, YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX.
49
Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
11 October 2016
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 2016. The Directors have concluded that the company and group 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:a. The basis on which the conclusion has been drawn has been discussed and agreed with all Directors; b. Forecasts and budgets prepared for the year ending March 2016, 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); c. Contingency plans in the event that trading forecasts were not met or major changes to anticipated cash flows arose; d. The viability of the subsidiaries; e. A new management agreement has come into force from 1st April 2016 confirming NCC’s continuing commitment to YHN. f. The availability of continuing finance from Newcastle City Council (NCC); and g. The continuing support from Newcastle City Council 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 meet such 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
Olivia Grant
Jill Davison
Chair
Company Secretary
Board 11 October 2016 Delegated Decisions – Schedule of non-confidential Delegated Decisions taken between 18th July 2016 and 28th September 2016 Directorate/ No. Delegated Officer
Scheme
Cost/ Budget provision
Units
Contractor
Wards
1
David Langhorne Property Services
Repairs to Rooftop lighting at Riverside Dene
Funding of £6,189 from R&M Revenue
1
Stage Electronics
Elswick
2
David Langhorne Property Services
Smarter Storage
Funding of £163,996 from Energy Efficiency/Fuel Poverty measures
108
VCharge, Energy Assets, Future Energy
Elswick
3
David Langhorne Property Services
Blakelaw 165 Estate
Funding of £3,542,739 from Environmental Work and Communal Areas
149
Keepmoat Regeneration
Blakelaw
4
David Langhorne Property Services
ENV0017 Deighton Walk Environmental
Funding of £83,234 from Environmental works on estates
15
Landscape Management Services
Denton
Overspend of £527,627 on originally approved £3,749,545 to be funded from Cruddas Park House Investment Programme
159
Wates Living Space
Benwell/ Scotswood
5
David Langhorne Property Services
Cruddas Park House External Wall Insulation and New Windows
6
David Langhorne Property Services
Fuel Switch Clarence and Stoddart House
Funding of £389,020 from Energy Efficiency/Fuel Poverty measures
66
British Gas
Ouseburn
7
David Langhorne Property Services
Citywide laundry equipment repairs
Funding of £50,100 from Revenue
154
P&N laundry service
Cross City
8
David Langhorne Property Services
Wansbeck House patio and ramp PB10
Funding of £24,930 from Participatory budget
20
Aaran Builders
Lemington
9
David Langhorne Corporate Services
Health and Safety Module addition to Apex
Funding of £21,200 from YHN Improving Customer Services
N/A
Apex
Cross City
10
David Langhorne Property Services
Re Issue Heat Meter Mop Up
Funding of £153,700 from Lifecycle Other
68
H Malone and Son
Cross City
11
David Langhorne Property Services
Central Walker Retirement Village
Overspend of £983,923 on originally approved £8,477,368 funded from Regeneration
75
Wates Living Space
Walker
Central Walker ( phase 2)
Overspend of £464,645 on originally approved £4,078,398 funded from Regeneration
44
Wates Living Space
Walker
David Langhorne Property Services
Underfloor insulation pilot phase 2
Funding of £15,900 from Energy Efficiency/Fuel Poverty measures
7
Q-Bot
Cross City
14
David Langhorne Property Services
INT0010 Former Aqua Scheme
Funding of £73,651.21 from Lifecycle
50
Building and Commercial Enterprise
Cross City
15
David Langhorne Property Services
BKW Boundary Walls
Funding of £1,152,248 from Lifecycle Other
156
NEP Framework Mini Competition - Pringle Building Services
Elswick
16
David Langhorne Property Services
PB01 Elm Grove and Maple dene Metal Fencing
Funding of £151,939 from Participatory budget
108
Highways and Localised Services
Fawdon
17
David Langhorne Property Services
PB36 West Denton F Roads
Funding of £122,717 from Participatory budget
71
Highways and Localised Services
Denton
18
David Langhorne Property Services
EXT0011 Brunswick Village ECO Surveys
Funding of £21,200 from Lifecycle
89
Haycock & Jay Associates
Castle
12
David Langhorne Property Services
13
19
David Langhorne Property Services
37 Thornley Road
Funding of £56,074 From Property Purchase
1
N/A
Denton
20
David Langhorne Property Services
WD0018 The Minories
Overspend of £64,077 on originally approved £49,861 funded from Lifecycle
24
Straightline (NE) Ltd.
South Jesmond
21
David Langhorne Property Services
PB13 Kirkwood Drive
Funding of £61,819 from Participatory Budget
13
Highways & Localised Services
Kenton
Board 11 October 2016 Board Forward Plan 1
Board Forward Plan
1.1
This Board Forward Plan lists the reports known at the present time that will be presented at the next two Board meetings in 2016 (or amended date subject to confirmation).
1 November 2016 AGM Minutes of AGM 2015
For approval
Appointment of External Auditors
For approval
Retirement and Appointment of Board members
For approval
Annual Accounts and Financial Statements
For approval
Board Meeting Income Management Strategy
For approval
Tenancy Agreement Changes
For approval
Customer Access and Digital by Choice
For discussion
Group Audit Committee Annual Report
For discussion
Finance and Performance Quarter 2 Report
For discussion
Investment Programme Update
For discussion
Universal Credit Update
For information
Safeguarding annual Report
For information
13 December 2016 Health & Wellbeing Strategy
For approval
Housing and Planning Act update
For discussion
Abri Trading Limited Annual Report
For discussion
Asfaleia Limited Annual Report
For discussion
Voids Time Limited Committee Recommendations Update
For discussion
Health & Safety 6 monthly report
For discussion
For discussion
Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Jill Davison, Company Secretary by telephone on 0191 278 8624 or email jill.davison@yhn.org.uk
Group Audit Committee 19 May 2016 (5.00 pm - 6.25 pm) Present: G Clark J Reid M Talbot L Stephenson T Moore G Burns
(In the Chair)
IN ATTENDANCE N Scott L Horsefield J Clifford J Davison I Pattison A Lister J Miller 28
Director of Tenancy Services Head of Business Strategy Financial Controller Company Secretary Internal Audit, Lead Corporate Accountant, NCC Democratic Services
APOLOGIES FOR ABSENCE Apologies for absence were received from D Slesenger.
29
DECLARATIONS OF INTERESTS None.
30
ANNUAL ACCOUNTS TRAINING J Davison and J Clifford gave a presentation on the process for producing the annual accounts (copy of presentation material attached to Official Minutes) It was noted that clarification was being sought as to whether Asfaleia Ltd needed to produce accounts this year as it was created on 5 October 2015 and would not have 6 months of accounts by the time they were due. RESOLVED – that the presentation be noted.
31
MINUTES OF THE PREVIOUS MEETING HELD ON 18 FEBRUARY 2016
2
The minutes of the meeting held on 18 February 2016 were approved as a correct record and signed by the Chair. 32
ACTION LIST REVIEW Community Care Alarm Service (CCAS) N Scott updated the committee in relation to CCAS. The procurement process for a new IT system would commence in the late summer with a view to the new system being in place by late spring 2017. In response to a comment by a NCC member N Scott undertook to check with NCC Member’s Services that the CCAS leaflets he had provided had been circulated to councillors. RESOLVED – that the action list be noted and updated accordingly.
33
2016/17 INTERNAL AUDIT PLAN Submitted: Report by Head of Internal Audit (previously circulated and copy attached to Official Minutes) I Pattison introduced the report which set out the draft Annual Internal Audit Plan for 2016/17 and Strategic Internal Audit Plan 2016/17 to 2018/19. He commented that sometimes in the past there had been a number of contingency days in the plan, there was no contingency allocation in this year’s plan but he advised that the plan was flexible and could be amended if risks arose that were felt to be of higher priority. The following issues/ comments were raised during debate:
It was explained whilst Right to Buy was historically a low risk there had been an increase in the fraud risk and 2 potential right to buy fraud cases were investigated in 2015/16. In response to a query as to why if Right to Buy was a high risk it was not included in years 2 and 3 of the plan, I Pattison explained that whether it was included in the later years would depend on the outcome of the audit. N Scott commented that had Right to Buy not been part of the Management Agreement it might not have been considered as high priority. It was noted that the scope of the voids audit would be agreed once the Time Limited Committee on Voids had reported to Board.
RESOLVED – that: i. ii. 34
The Annual Internal Audit Plan for 2016/17 and Strategic Internal Audit Plan 2016/17 be agreed. The proposed performance indicators be agreed.
ANNUAL ASSURANCE STATEMENT
3
Submitted: Report by Company Secretary (previously circulated and copy attached to Official Minutes) J Davison introduced the report which presented YHN’s Annual Assurance Statement for 2015/16. She advised that Abri Trading Ltd and Asfaleia Ltd had been added into the statement. I Pattison explained that the statement was based on a clean completed internal audit plan, there were still two audits to be completed but there was nothing to date in the work on these audits that indicated anything that would impact upon the Annual Assurance Statement. RESOLVED – that the Annual Assurance Statement be approved, subject to the members being informed if there were any changes needed once the two outstanding audits were completed. 35
INTERNAL AUDIT PROGRESS UPDATE 2015 -16 Submitted: Report by Head of Internal Audit (previously circulated and copy attached to Official Minutes) I Pattison introduced the report which provided details of internal audit activity undertaken as part of the 2015/16 audit plan. Members noted that in the case of right to buy fraud, whilst YHN could seek to recover the discount given when the property was purchased the property could not be recovered. In terms of the garden care audit, N Scott advised that YHN had requested this audit, adding that the scale of the service was minor when compared to other customer facing activity. The issues related to none core work of the service. Members commented that this was the part of the service that was a business and stressed the need to resolve the issues to ensure that it was fit for purpose. N Scott confirmed that the issues would be relatively straightforward to rectify. RESOLVED – that:i. ii.
36
Progress against the Internal Audit plan and performance indicators be noted. Progress on the implementation of audit recommendations be noted.
STRATEGIC RISK REGISTER 2015- 16 - QUARTER FOUR UPDATE Submitted: Report by Head of Business Strategy (previously circulated and copy attached to Official Minutes) L Horsefield introduced the report which provided the quarterly update against the 2015-16 Strategic Risk Register. The following issues/ comments were raised during debate:
4
In response to a member’s query re the difference between the status ‘ partially complete’ and ‘not complete’, L Horsefield confirmed that for those with a status of ‘not complete’ had not yet started and commented that the status could instead have been ‘not started’. N Scott advised that the improvement action to achieve a 3% increase in CCAS Telecare by 31/03/16 had not been achieved. There had, however, been an increase in the sign up of new customers to Ostara in quarter 4, the detail of which would be reported to Asfaleia Board. N Scott commented there had been a decrease in the number of referrals via NCC. Discussions were being held with NCC to understand and develop solutions to the blockage in the process for referrals to Ostara from NCC. Wellbeing, Care and Learning had been asked to release staff for training with YHN in relation to Ostara to ensure they stayed engaged with the service and made referrals. It was noted that the improvement actions in relation to the People Strategy, the Finance Strategy and succession planning had been put on hold until the new Managing Director started in June so she could be involved in this work. In response to a member’s concern particularly in relation to the People Strategy actions being put on hold, L Horsefield explained that only the improvement actions had been put on hold not all the work being undertaken, it was very much ‘business as usual’ with a lot of activity relating to the People Strategy still taking place. In response to a member’s query as to whether the organisation could wait until March 2017 to produce a Financial Strategy, N Scott advised that much of the financial planning for the next 3 years had already been done. In addition the cash value of the Management Fee over the next 3 years was known. Things that could be delivered this financial year still would be. In future the Financial Strategy would be merged with looking at growth activities.
RESOLVED – that the actions taken to manage the risks be noted. 37
COMMITTEE WORK PLAN Submitted: Report by Head of Business Strategy (previously circulated and copy attached to Official Minutes) RESOLVED – that the Work Plan be noted.
38
DATE AND TIME OF NEXT MEETING 7 JULY 2016, 5PM - 7PM It was noted that the next meeting was on Thursday 7 July at 5pm – 7pm.