Financial Statement Year ending 31st March 2012
Financial Statements 2012 – Meres & Mosses Housing Association
Meres & Mosses Housing Association Financial Statements for the year ended 31 March 2012 Page
Contents
1
Chair’s Statement - review of activities
2
Housing Association Governance
3
Statement of Board of Management’s Responsibilities
4–5
Statement on Internal Controls Assurance
6
Board Members’ Report
7
Operating and Financial Review
8
Auditors’ Report
9
Income and Expenditure Account
9
Statement of Total Recognised Surpluses and Deficits
10
Balance Sheet
11
Cash Flow Statement
12
Notes to the Cash Flow Statement
13 – 26
Notes to the Financial Statements
Registered Office The Gateway, The Auction Yard, Craven Arms, Shropshire SY7 9BW
Homes & Communities Agency Registration No. LH 4493
Financial Statements 2012 – Meres & Mosses Housing Association Chair’s Statement strong commitment to the Association, in ensuring we deliver our objectives of providing good quality homes and related services for the communities we serve, and to the Group Executive team for their ongoing support.
Meres & Mosses Housing Association has, once again, produced good results. The net position is a surplus of £2,704,067 against a budgeted surplus at the revised stage of £2,288,515. I would like to pay tribute to the staff in continuing to seek value for money and savings against budget.
My thanks go to TARCA and the other tenant groups for their input and organised activities in their communities.
Approximately £3.6 million spent as improvement works to our homes this year. As a result both the Government Decent Homes Standard and the enhanced Meres and Mosses standard have been achieved, meeting our commitments to our funders and our tenants. We have also successfully delivered the promises made to our tenants 5 years ago.
Finally, I look forward to the next year which I expect to be challenging but which should see us consolidate our position and begin a sustainable building programme.
Gordon Hodgkiss Chair
I want to take this opportunity to thank both the staff and my fellow Board Members for their dedication and 16th July 2012
1
Financial Statements 2012 – Meres & Mosses Housing Association Housing Association Governance managing the affairs of the Association. The role of the co-opted persons appointed by the Board, who may not be members of the Association, is to act as specialist advisers.
Status of the Association The Association is registered with and regulated by the Financial Services Authority under the Industrial and Provident Societies Act 1965, Registered No. 30241R. It is also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH 4493. The Association has charitable objects and is a charity for tax purposes, reference XT4980.
There are 4 elected Tenant Members and Shropshire Council also nominates 4 Council Members to attend the Board of Management. These rights were transferred from North Shropshire District Council to Shropshire Council when it was established in April 2009. (The Council nominees are not required to be shareholding members of the Association).
Purposes of the Association
The Board members are drawn from a wide background bringing together professional, commercial and local experience. The Group’s Remuneration and Nominations Committee periodically reviews skills available and skills required. Effectiveness is regularly reviewed and monitored. The Board is responsible for the Association’s continuing strategy and policy framework. It delegates the day-to-day management and implementation of that framework to the Executive. The Board meets six times a year for regular business. Other meetings take place as required, and for training and development purposes.
The Association was formed for the benefit of the community in providing housing, accommodation and related services for people in need.
Statement of Compliance with the NHF Code of Governance Shropshire Housing Group has formally adopted the National Housing Federation Code of Governance. The Shropshire Housing Board reviews compliance with the Code each year on behalf of all members of the Group and confirms that Shropshire Housing and its subsidiaries, including Meres and Mosses Housing Association comply with all material principles in the Code.
Our Board of Management is responsible for the Association’s operating activities which includes setting strategy and policy in relation to development of new homes, improvement, modernisation and repair of existing homes, housing and estate management, tenant involvement, rent collection and arrears management. The Shropshire Housing Board is responsible for providing strategic direction and policy development, overall financial control and support, developing performance systems and monitoring compliance with all regulatory requirements.
Members of the Association There are two categories of shareholding membership with each holding a £1.00 share: Tenant Members of which there are 12 and Independent Members of which there are 9 including Shropshire Housing Limited and Shropshire Council. Members have voting rights at Annual and Special General Meetings. Members of the Association are eligible to be elected to sit on the Board and Sub Committees. The detailed arrangements regarding membership are set out in the Rules of the Association.
The Chair is appointed annually by Members of the Board.
The Board of Management
Remuneration of Board Members
The Board comprises up to 12 members and up to 5 co-optees and is responsible for
Our Board members received no fee from the Association during the year but will receive payment from 1st April 2012. Reasonable reimbursement is made for travel and subsistence in appropriate circumstances.
2
Financial Statements 2012 – Meres & Mosses Housing Association Statement of Board of Management’s Responsibilities
Disclosure of Information to Auditors
The Industrial and Provident Societies Acts 1965 to 2003 require the Board of Management to arrange for the preparation of financial statements for each financial year which give a true and fair view of the state of affairs of the Association as at the end of the financial year and of the surplus or deficit for that period.
In the case of each of the persons who are Board members of the Association at the date when this report was approved:
In preparing those financial statements, the Board of Management is required to: • adopt suitable accounting policies and apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting policies have been followed subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on a going concern basis.
•
So far as each of the Board members is aware, there is no relevant audit information of which the Association’s auditors are unaware; and
•
Each of the Board members has taken all the steps that they ought to have taken as a Board member to make them aware of any relevant audit information (as defined) and to establish that the Association’s auditors are aware of that information.
Going Concern After reviewing the Association’s Budget for 2012/2013 and based on normal business planning and control procedures, the members of the Board have a reasonable expectation that we have adequate resources to continue in operational existence for the foreseeable future. The financial statements have therefore been prepared on a going concern basis.
The Board of Management is responsible for making the appropriate arrangements for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Association and to enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 2003, and the Housing and Regeneration Act 2008. It has responsibility for taking such steps as are reasonably open to it to safeguard the assets of the Association and to prevent and detect fraud and other irregularities.
Directors’ Indemnity The Directors have confirmed that the Association does have Directors and Officers Insurance in place.
Financial Instruments The Association does not have any abnormal exposure to price, credit, liquidity and cash flow risks arising from its trading activities. The Association does not enter into any hedging transactions and no trading in financial instruments is undertaken.
3
Financial Statements 2012 – Meres & Mosses Housing Association Statement on Internal Controls Assurance Responsibility
Group’s Standing Orders, Financial Regulations, Treasury Management Controls and Risk Management strategy and procedures. These delegations and authority levels are reviewed annually.
The Shropshire Housing Board of Management, as the ultimate governing body, is responsible for the system of internal control, which is designed to provide reasonable but not absolute assurance regarding:-
• Control Procedures
• the safeguarding of assets against unauthorised use or disposal; and • the maintenance of proper accounting records and the reliability of financial information used within the business or for publication.
Procedures are maintained for all the main functions and service areas, and in particular there are clearly defined policies for development projects and capital expenditure, including the appropriate authorisation levels. Information Technology procedures are updated periodically. All capital projects require Board approval before commencement and commitment of any funds. Completed development projects are also subjected to a post investment appraisal, comparing actual results to original forecasts.
Key procedures have been established and are designed to provide effective internal control. These key areas cover control, reporting information systems, monitoring and risk management. The Board has a clear and well communicated strategy and policy covering the prevention and detection of fraud, and procedures are followed where fraud is suspected or detected. A clearly established whistle blowing policy is in place.
• Information Systems The Group has a comprehensive system of financial reporting. The Annual Budget and Business Plan are approved by the Board. Actual results are reported against budget headings to each subsidiary Board meeting with any significant variances being reported together with explanations. The current borrowing and investment position is reported at each Board meeting, as well as to the Group’s Performance Committee.
Performance Committee on behalf of the Group and all its subsidiaries has reviewed the effectiveness of the system of internal control, including the sources of assurance agreed by the Board as being appropriate for that purpose. On the basis of the evidence provided by the Assistant Director of Performance and Governance in her report presented to the Shropshire Housing Group Board on 1st June 2012, we are satisfied that there is sufficient evidence to confirm that adequate systems of internal control existed and operated throughout the year. We are also satisfied that those systems were aligned to an ongoing process for the management of the significant risks facing the Group. No weaknesses were identified which would have resulted in material misstatement or loss and which would have required disclosure in the financial statements.
In accordance with regulations, annual financial returns are submitted to the Tenant Services Authority or now to the Homes & Communities Agency, and quarterly financial returns to the Association’s principal lenders. There are regular meetings of the Operational Management Team to review and monitor revenue and capital spending against budget assumptions. Cash balances are checked daily, coupled with revised forecast of borrowing requirements at regular intervals as necessary. There are a number of annual reports on other functions to the Performance Committee; these include the insurance arrangements and treasury management.
• Control Environment The Group Board has put in place an organisational structure with clearly defined lines of responsibility and delegations of authority. These are found in detail in the
4
Financial Statements 2012 – Meres & Mosses Housing Association • Monitoring System The control system is monitored by internal audit and within the annual plan the work is focused on the areas of greatest risk to the Association. Monitoring is also done by senior officers and managers.
• Risk Management The Group’s officers have a clear responsibility for identifying risk facing each of the areas in which they operate and for putting in place procedures to mitigate and monitor risk. It is the Performance Committee’s responsibility to review and assess these risks. Performance Committee includes a member of the Meres and Mosses Housing Association Board.
5
Financial Statements 2012 – Meres & Mosses Housing Association Board Members’ Report Members of the Board
Housing Properties and Other Fixed Assets
The members of the Board who served during the period were as follows: Gordon Hodgkiss Heather Pattimore Dewi Davies Brian Williams Pauline Dee Marguerite Ashley Richard Jaboor Paul Turner Chris Mellings Stephen Donkersley Mark Colclough
We now hold properties at a historical cost of £28.8 million net of Housing Grants and depreciation. These were financed through external loans and internal funds.
(Chair)
The value for existing use by a housing association of these properties is professionally assessed at in excess of £53 million. As a new Stock Transfer Association our debt to asset gearing ratio is considered to be in line with similar associations. At the end of the year, our units in management totalled 2,291
The Board reports that we produced a surplus of £2,704,067, compared to the budgeted £2,288,515 at the revised stage. This surplus is after charging £756,710 for depreciation on housing stock, as required by Financial Reporting Standard 15 and the Statement of Recommended Practice for Registered Social Housing Providers. This has increased as a result of component accounting.
Cashflow and Liquidity The cashflow from operating activities during the year was £4.1 million. By order of the Board Gordon Hodgkiss Chair
Turnover was over £8.9 million, and interest charges amounted to approximately £518,000.
16th July 2012
Future developments The Board are continuing to look at developing new dwellings and to repair and improve existing properties. It is continuing to look to partnerships with other agencies in order to best secure these aims.
6
Financial Statements 2012 – Meres & Mosses Housing Association Operating and Financial Review Background
framework. It delegates the day to day management and implementation of that framework to the Senior Management team. The Board now meets six times a year.
Meres & Mosses Housing Association is an independent not for profit business formed in July 2007 to provide high quality affordable social housing in the North Shropshire area. We manage around 2,300 houses and, with South Shropshire Housing Association, aim to build further new homes over the next five years.
Continuous Improvement We are committed to achieving excellent performance across the whole of our business and services. The Group has a comprehensive performance management framework which ensures a clear focus on performance improvement and clear responsibility for scrutiny on performance at various levels.
Our vision is to provide quality homes and services involving people in building communities where they choose to live. Operating Review
The Performance Management Group monitors the benchmarked data together with performance indicators, reports and best practice visits. The group is made up mainly of senior managers from across the Shropshire Housing Group.
th
On 30 July 2007 North Shropshire District Council transferred its housing stock to Meres & Mosses Housing Association. At the same time, the Shropshire Housing Group was formed, with South Shropshire Housing Association and the newly formed Total Response Limited. By joining the Group, we were able to benefit from lower central support costs, allowing more money to be directed on improving homes and services for tenants.
Risks and uncertainties The Group’s officers have a clear responsibility for identifying risk facing each of the areas in which they operate and for putting in place procedures to mitigate and monitor risk. It is the Performance Committee’s responsibility to review and assess these risks.
Improvement works have continued, with around £3.6 million being spent on doors, kitchens, windows and central heating systems through the course of the year.
Financial Review
Reporting Structure
2011/12 has been another turbulent year in terms of recession in the UK economy. Meres & Mosses Housing Association has performed well, however, achieving a surplus of £2.7 million against a projected surplus at the revised stage of £2.2 million. Approximately £4 million has been spent on improving existing homes.
The Board comprises up to 12 members and up to 5 co-optees and is responsible for managing the affairs of the Association. The Board Members are drawn from a wide background bringing together professional, commercial and local experience. The Board is responsible for the Association’s continuing strategy and policy
7
Financial Statements 2012 – Meres & Mosses Housing Association Report of the Auditors to the members of Meres & Mosses Housing Association We have audited the financial statements of Meres and Mosses Housing Association for the year ended 31 March 2012 which comprise the Income and Expenditure Account, the Statement of Total Recognised Surpluses and Deficits, the Balance Sheet, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Opinion on financial statements In our opinion the financial statements; • give a true and fair view of the state of the Association’s affairs as at 31 March 2012 and of its income and expenditure for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been properly prepared in accordance with the Industrial and Provident Societies Acts, 1965 to 2003, the Housing and Regeneration Act 2008 and the Accounting Requirements for Registered Social Landlords General Determination 2006.
Respective responsibilities of the Board and Auditors As explained more fully in the Statement of Board’s Responsibilities set out on page 3, the Board is responsible for the preparation of financial statements and for being satisfied that they give a true and fair view.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts, 1965 to 2003 require us to report to you if, in our opinion; • a satisfactory system of control over transactions has not been maintained; or • the Association has not kept proper accounting records; or • the financial statements are not in agreement with the books of account; or • we have not received all the information and explanations we need for our audit.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. This report is made solely to the Association’s members, as a body, in accordance with section 9 of the Friendly and Industrial and Provident Societies Act 1968 and the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the Association’s members as a body for our audit work, for this report, or for the opinions we have formed.
Date: Mazars LLP Chartered Accountants and Statutory Auditor 45 Church Street Birmingham B3 2RT
Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/ private.cfm.
8
Financial Statements 2012 – Meres & Mosses Housing Association Income and Expenditure Account for the year ended 31st March 2012 Restated 2011 £
2012 £ Note 2 2
Turnover Operating costs Operating surplus
2
8,928,677 (5,715,788)
8,354,767 (5,234,173)
3,212,889
3,120,594
-
10,665
Surplus on sale of fixed assets Surplus on ordinary activities before interest
5
3,212,889
3,131,259
Interest receivable and similar income Interest payable and similar charges
3 4
9,900 (518,722)
17,711 (540,147)
2,704,067
2,608,823
-
-
2,704,067
2,608,823
Surplus on ordinary activities before taxation Taxation on surplus on ordinary activities
8
Surplus for the year transferred to reserves All of the above relate to continuing activities.
Statement of Total Recognised Surpluses & Deficits for the year ended 31st March 2012 2012 £
Restated 2011 £
Note Surplus for the year Actuarial (loss) / gain Prior year adjustment
16 23
Total recognised surplus relating to the year
9
2,704,067 (249,000) (1,568,444)
2,608,823 301,000 -
886,623
2,909,823
Financial Statements 2012 – Meres & Mosses Housing Association Balance Sheet at 31st March 2012 2012 Note Tangible fixed assets Tangible assets cost Less Depreciation Less Social Housing Grant Other capital grants
Current assets Debtors Debtors due after more than one year Investments Cash at bank and in hand Creditors: amounts falling due within one year
£
£
Restated 2011 £ £
32,296,123 (3,175,180) (200,000) 28,920,943
9 9 9 9
27,675,515 (2,388,090) (200,000) 25,087,425
10
973,453
1,206,875
11 12
18,907,360 5,501,732 25,382,545
22,853,836 1,307,328 275,928 25,643,967
13
(1,661,266)
(1,842,653)
Net current assets
23,721,279
23,801,314
Total assets less current liabilities
52,642,222
48,888,739
Creditors: amounts falling due after more than one year
14
40,980,688
39,971,275
Provision for pension liability
17
640,000
351,000
Capital and reserves Called up share capital Revenue reserve
15 16
21 11,021,513
18 8,566,446
52,642,222
48,888,739
These financial statements were approved by the Board of Management on July 2012 and were signed on its behalf by
Gordon Hodgkiss Chair
Board Member
Jen Hayball Secretary
10
Financial Statements 2012 – Meres & Mosses Housing Association Cash Flow Statement for the year ended 31st March 2012 2011
2012 Net cash inflow from operating activities
Notes (a)
£
£
£
£
4,096,653
Returns on investments and servicing of finance Interest received Interest paid
4,184 (498,696)
3,737,387
43,215 (492,875) (494,512)
Capital expenditure Acquisition and construction of housing properties Proceeds from sale of Right To Buy properties & miscellaneous land Capital grants received Purchase of other tangible fixed assets
(449,660)
(4,850,629)
(5,299,921)
251,420 -
(62,105) -
(34,458)
(15,438) (4,633,667)
(5,377,464)
Taxation Financing Net housing loans received Net shares issued
Increase/(Decrease) in cash
(b)
4,950,000 2
(c)
11
-
4,950,002
-
3,918,476
(2,089,737)
Financial Statements 2012 – Meres & Mosses Housing Association Notes to the Cash Flow Statement for the year ended 31st March 2012 (a)
Reconciliation of operating surplus to net cash inflow from operating activities 2012 £
Restated 2011 £
Operating surplus Depreciation Decrease in debtors (Decrease) in creditors Movement in provisions / current assets for resale
3,212,889 800,149 233,422 (438,807) 289,000
3,120,594 729,611 87,620 (27,438) (173,000)
Net cash inflow from operating activities
4,096,653
3,737,387
(b)
Reconciliation of net cashflow to movement in net debt 2012 £
2011 £
3,918,476 (4,950,000)
(2,089,737) -
Change in net debt Net debt brought forward
(1,031,524) (15,716,744)
(2,089,737) (13,627,007)
Net debt carried forward
(16,748,268)
(15,716,744)
Increase / (Decrease) in cash in the period Housing loans received
(c)
Analysis of changes in net debt At 31st March 2011 £
Cash Flow £
At 31st March 2012 £
1,307,328 275,928
4,194,404 (275,928) 3,918,476
5,501,732 -
Debt due after 5 years
(17,300,000)
(4,950,000)
(22,250,000)
Total
(15,716,744)
(1,031,524)
(16,748,268)
Investments Cash at bank and in hand
12
Financial Statements 2012 – Meres & Mosses Housing Association 1
Accounting policies
The financial statements have been prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), and in line with the Statement of Recommended Practice “Accounting by Registered Social Housing Providers” Update 2010 and the Accounting Requirements for Registered Social Landlords General Determination 2006. A summary of the more important accounting policies, which have been consistently applied is set out below. The accounting policies were reviewed by the Performance Committee on 9th May 2012 in accordance with FRS18. Accounting convention The financial statements are prepared under the historical cost convention. Turnover Turnover represents rents and service charges receivable in respect of tenanted properties, residential care charges and amounts invoiced in respect of the provision of management services. Fixed assets and depreciation Other tangible fixed assets are stated at cost and are written down to their residual value over their expected useful life on a straight line basis at the following annual rates: Office equipment, fixtures & fittings Plant & machinery Vehicles
- 15% to 25% - 15% to 25% - 25%
Housing Properties As required by Financial Reporting Standard 15 and the Statement of Recommended Practice for Registered Social Housing Providers, the Group has reviewed the useful economic lives of its housing properties and with effect from 1st April 1999 depreciates the property costs, less grants, freehold land and residual value. Housing properties in the course of construction are stated at cost and are transferred into housing properties when complete. The cost of properties is their purchase price or construction cost together with enhancement expenditure and other acquisition and development costs, including capitalised interest and directly attributable overheads. Freehold land is not depreciated. Depreciation is charged so as to write down the cost (net of social housing grant) of freehold housing properties other than freehold land to their estimated residual value on a straight line basis over their expected useful economic lives at the following annual rates: Housing Properties – 99 years Major components are treated as separable assets and depreciated over their expected useful economic lives or the lives of the properties to which they relate, if shorter, as the following average annual rates, these are approximate as there are sub-elements under each component: Roofs Kitchens Bathrooms Windows/Doors Central heating
60 years 15 years 30 years 20 years 25 years
This represents a change in accounting policy to comply with the 2010 SORP update. This has resulted in a prior year adjustment the effects of which are set out in the notes to the financial statements.
13
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) Shared Ownership Properties All properties are split between fixed and current assets in line with the expectation relating to the first tranche sale percentage. The expected first tranche proportion is classified as a current asset until the point of the first tranche sale. The current asset is then transferred to cost of sales and matched against sales proceeds within the operating surplus in the Income and Expenditure Account. Any operating surplus is restricted to the overall surplus which takes into account the Existing Use Value-Social Housing (EUV-SH) of the remaining fixed asset element. The remaining element of the asset is classified as a fixed asset and included in housing properties at cost less SHG, less any provision for depreciation or impairment. Impairment The properties are reviewed for impairment annually, and where housing properties have suffered a permanent diminution in value, the fall in value will be recognised after taking account of any related capital gains. In view of the current economic conditions, a full review for impairment has been carried out, looking at revised property valuations, particularly for shared ownership properties. Where a risk of impairment has been identified, external property valuations have been obtained. Social Housing and Other Grants When developments have been financed wholly or partly by social housing and other grants, the costs of those developments have been reduced by the amount of the grant received. Social housing grant received in advance of the costs of housing properties in the course of construction is shown as a current liability. Provision is made in the balance sheet for repayments of social housing grants where it is likely that properties will be sold in the foreseeable future. Stock Stock is stated at the lower of cost and net realisable value. Liquid Resources These represent the total of assets which a business can use immediately to make payments. In general they include cash in hand, in bank, assets that can quickly be changed into cash. Operating leases Rentals payable under operating leases are charged on a straight-line basis over the term of the lease. Interest charges Interest charges represent the actual cost of financing purchased and transferred properties, completed property acquisitions, new developments and major repairs schemes where mortgages and loans have been received from external sources. Capitalisation of interest Interest on the loan financing a development is capitalised up to the date of practical completion, after adjustment for interest received on social housing grant in advance of the relevant expenditure. Interest has been charged at 5.17% per annum.
14
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) Pension costs Contributions payable to the Group’s pension schemes are charged to the income and expenditure account so as to spread the cost of pensions over the service lives of employees in the schemes. FRS 17 is followed. Taxation The charge for taxation is based on the results for the year and takes into account taxation deferred (or accelerated) because of timing differences between the treatment of certain items for taxation and accounting purposes. Provision is made for deferred tax on a full provision basis. We obtained charitable status confirmation from the HMRC for Meres and Mosses Housing Association from its first day of trading and for South Shropshire Housing Association from 6th August 2007. This is due to HMRC accepting our Charitable Objects. Shropshire Housing Limited and its subsidiary Total Response Limited are still subject to taxation. VAT policy The Group is VAT registered, but a large proportion of its income namely rents, is exempt for VAT purposes. This gives rise to a partial exemption calculation. Expenditure is shown inclusive of VAT and the input VAT recovered is shown in the Income and Expenditure Account. VAT sharing agreement Meres and Mosses Housing Association via the transfer agreement with North Shropshire District Council shares VAT savings arising out of the transfer in equal amounts. The related expenditure is shown gross and the VAT recovered is shown as a credit against capital to identify it separately for future use. Under the terms of the transfer agreement Meres and Mosses Housing Association has contracted to refurbish transferred properties and the amount due to the Association from the work is shown under debtors. The obligation to carry out these works is shown in the provisions for liabilities and charges. Supported People Income and Expenditure Separately identifiable accommodation based rent, service and support charge income along with any related costs for accommodation based supported housing are disclosed under “Supported Housing” within Note 2. Charges for and costs of support services funded under Supporting People are shown under “Supporting People” within Note 2 “Other Social Housing”.
15
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 2
Turnover, operating costs and operating surplus
Lettings Other Social Housing Supporting People VAT Contribution to pension scheme Shared Ownership First Tranche sales
Turnover
2012 Operating Costs
£
£
Operating Surplus/ (Deficit) £
Restated 2011 Turnover Operating Surplus/ (Deficit) £ £
8,872,674
5,640,779
3,231,895
8,287,893
2,939,552
47,836 8,167 56,003 8,928,677
48,009 48,009 27,000 5,715,788
(173) 8,167 7,994 (27,000) 3,212,889
52,344 14,530 66,874 8,354,767
(6,488) 14,530 8,042 173,000 3,120,594
Income and expenditure from lettings
Housing Accommodation
2012 Supported Housing / Older People
Shared Ownership
Total
Total
£
£
£
£
£
2011
Income Net Rental Income Net Service Charges Income Net rental Income
7,801,297 91,327 7,892,624
623,105 111,384 734,489
48,134 12,209 60,343
8,472,536 214,920 8,687,456
7,919,380 211,446 8,130,826
Revenue grants from Homes & Communities Agency and Local Authority Other Income
28,796
156,422 -
-
156,422 28,796
146,680 10,387
Total income from lettings
7,921,420
890,911
60,343
8,872,674
8,287,893
Expenditure on lettings Management Services Care and support
1,632,491 177,864 -
149,368 123,249 213,755
9,775 3,322 -
1,791,634 304,435 213,755
1,673,548 215,156 203,579
Routine maintenance Planned maintenance Rent losses from bad debts Depreciation
1,784,436 460,183 111,690 692,927
164,254 42,359 11,323 63,783
-
1,948,690 502,542 123,013 756,710
1,956,442 535,246 95,004 669,366
Total expenditure on lettings
4,859,591
768,091
13,097
5,640,779
5,348,341
Operating surplus
3,061,829
122,820
47,246
3,231,895
2,939,552
Void Losses
(50,346)
(9,135)
(45)
(59,526)
(59,197)
The supported housing project is property based. The rental income quoted refers to the rental due while the tenant is using the facility.
16
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 3
Interest receivable and similar income 2012 £ 9,900
Interest receivable from bank deposits
4
2011 £
Interest payable and similar charges 2012 £
Net finance charge on pension (note 17) On bank loans, overdrafts and other loans repayable - wholly or partly in more than 5 years Less: interest capitalised
5
17,711
2011 £
13,000
40,000
521,968 (16,246) 518,722
500,147 540,147
Surplus on ordinary activities before interest 2012
Restated 2011 £
£ Surplus on ordinary activities before interest is stated after charging: Depreciation of tangible fixed assets Auditors’ remuneration (including VAT). (This item is shown within Group costs): In their capacity as auditors In respect of other services
6
800,149
729,611
-
-
Staff costs
Wages and salaries Social security costs Other pension costs Average number of full-time equivalent persons employed during the period These were categorised as: Development (recharged) Housing Asset Management Sheltered
17
2012 £ 290,316 20,006 8,644 318,966
2011 £ 206,165 15,683 11,436 233,284
14
12
5 3 6
2 1 9
14
12
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 7
Directors’ emoluments 2012 £
Fees payable by way of expenses to Board Members
8
2011 £ -
3,413
Taxation
Meres & Mosses Housing Association obtained charitable status from its first day of trading on 30th July 2007 and, as such, is exempt from corporation tax.
18
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 9
Tangible fixed assets
Cost
Freehold housing properties
Office equipment, fixtures & fittings
Total
£
£
£
st
As at 1 April 2011 Additions Schemes completed Transfer to current assets Disposals
27,399,337 4,850,629 (264,479)
276,178 34,458 -
27,675,515 4,885,087 (264,479)
At end of year
31,985,487
310,636
32,296,123
Depreciation and impairment At beginning of year Prior year adjustment st Restated balance at 1 April 2011 Charge for the year Eliminated on disposals
624,096 1,568,444 2,192,540 756,710 (13,059)
195,550 195,550 43,439 -
819,646 1,568,444 2,388,090 800,149 (13,059)
At end of year
2,936,191
238,989
3,175,180
Social Housing grants At beginning of year Receivable Schemes completed At end of year
-
-
-
Other capital grants At beginning of year & end of year
200,000
-
200,000
28,849,296
71,647
28,920,943
25,006,797
80,628
25,087,425
Net book value st At 31 March 2012 st
At 31 March 2011 - Restated
Works to existing properties during the year amounted to £4,069,154. This has been accounted for as follows:Planned maintenance - revenue £ 502,542 Improvements - capital £3,566,612
Number of units Under development at end of year: Housing accommodation Under management at end of year: Housing accommodation Managed for private landlords Commercial units
19
2012
2011
-
-
2,291 2,291
2,299 2,299
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 10
Debtors
Due within one year Gross rental arrears Less: Provision for bad debts Prepayments and accrued income
11
647,291
928,921
973,453
1,206,875
2012 £ 18,907,360
2011 £ 22,853,836
2012 £ 5,501,732
2011 £ 1,307,328
2012 £ 1,050,848 27,607 86,106 496,705 1,661,266
2011 £ 1,354,845 19,183 72,798 395,827 1,842,653
Current asset investments
Cash on short term deposit
13
2011 £ 459,319 (181,365) 277,954
Debtors due after more than one year
Improvement works
12
2012 £ 619,659 (293,497) 326,162
Creditors: amounts falling due within one year
Trade creditors Other taxation and social security Rent in advance Accruals and deferred income
20
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 14
Creditors: amounts falling due after more than one year 2012
Improvement Works
2011
£
£
18,907,360
22,853,836
Housing loans The Association has a combined borrowing facility of £55,000,000 of which £22,250,000 had been utilised at 31st March 2012 (£27,750,000 undrawn). The facility is for a term of 35 years on both fixed and variable rate terms. The Association is able to choose from time to time to select fixed term borrowing from variable rates. The borrowings are secured by fixed and floating charges over the assets of the Association; variable rates are at LIBOR plus the agreed margin. Fixed rate loans were between 4.915% and 5.515% including margin. Amounts repayable by instalments and not wholly repayable within five years: Repayable after five years
2012 £
2011 £
22,250,000
17,300,000
£(176,672)
£(182,561)
£40,980,688
£39,971,275
Refinancing costs The balance sheet shows the position net of refinancing costs of: Total
15
Called up share capital 2012 £
Issued and fully paid shares of £1 each: At beginning of period Issued during the period Relinquished during the period At end of period
2011 £ 18 3 21
18 18
The shareholders do not have the right to dividends, redemptions, distributions etc.
16
Revenue Reserves £ At 1 April 2011
10,134,890
Prior year adjustment
(1,568,444)
At 1 April 2011 restated
8,566,446
Surplus for the year
2,704,067
Actuarial (loss) on pension scheme
(249,000)
At 31 March 2012
11,021,513
21
Financial Statements 2012 – Meres & Mosses Housing Association 17
Pension obligations
The Association’s employees are members of the Shropshire County Pension Scheme. Total pension cost for the Association was £8,644 (£11,436 in 2011) covering 3 employees (4 in 2011). The Shropshire County Superannuation fund is a local Government Pension Scheme and is a multi-employer defined benefit scheme. The scheme is funded and is contracted out of the state scheme. The last formal valuation of the Scheme was performed at 31st March 2010 by a professionally qualified actuary using the “projected unit credit actuarial cost” method. The market value of the Scheme’s assets at the last valuation date was £951 million. The valuation revealed a Past Service deficit of some £226 million (equivalent to a past service funding level of 81%. The share of fair value of assets at 31st March 2010 (last full actuarial valuation) was as follows: £m 495 238 218 951 (1,177) (226)
Equities Bonds Other Market Value Past Service liabilities Past Service deficits
Meres & Mosses Housing Association paid contributions at the rate of 15% during the accounting period. Member contributions vary between 5.9% and 7.2%. The employer contribution was set at 15% for the next 2 years.
Financial assumptions A qualified independent actuary, Mercer Limited, carried out an actuarial valuation at 31st March 2012 for disclosure purposes. The major assumptions used were:
Rate of CPI inflation Rate of increase in salaries Rate of increase in pensions Discount rate
31 March 2012 2.5% 4% 2.5% 4.9%
31 March 2011 3.4% 4.4% 2.9% 5.5%
22
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 17
Pension obligations (continued)
The assets of the scheme and the expected rate of return were:
Equities Bonds Government bonds Property Cash liquidity Other Total market value of assets i)
Value at 31st March 2012 £’000
Rate of return expected at 31st March 2012 7% 4.1% 3.1% 6% 0.5% 7%
1,697 333 461 115 154 442 3,202
(640)
1,983 304 347 116 155 137 3,042
(351)
Analysis of the amount which has been charged to operating surplus under Financial Reporting Standard 17 2012 2011 £’000 £’000 (147) (163) Current service cost Past service cost curtailment loss (147)
Total operating (charge) iii)
Value at 31st March 2011 £’000
Liability and funding status under Financial Reporting Standard 17 of Meres & Mosses Housing Association’s part of the fund. 2012 2011 £’000 £’000 3,202 3,042 Plan assets (3,842) (3,393) Benefit obligations Deficit in scheme
ii)
Rate of return expected at 31st March 2011 7.5% 5.1% 4.4% 6.5% 0.5% 7.5%
(163)
Analysis of the amount which has been charged to interest costs under Financial Reporting Standard 17 2012 2011 £’000 £’000 177 133 Expected return on assets (190) (173) Interest on liabilities (13) (40) Net (charge) / return
23
Financial Statements 2012 – Meres & Mosses Housing Association Notes (continued) 17
Pension obligations (continued)
iv)
Analysis of amount which has been recognised in the statement of total recognised surpluses and deficits (STRSD) 2012 2011 £’000 £’000 (109) 496 Asset (loss) / gain (140) (195) Liability (loss) / gain Changes in assumptions underlying the present value of the scheme liabilities (249)
301
2012 £’000 (351)
2011 £’000 (785)
(147) 120 (13) (249)
222 (163) 114 (40) 301
(640)
(351)
Actuarial (deficit) / surplus for recognition in the STRSD v)
Movement in Financial Reporting Standard 17 deficit during the year
Deficit at the beginning of the year Movement in year: - Past service cost - Current service cost - Contributions - Net interest - (Deficit) / Surplus in STRSD Deficit at the end of year vi)
History of experience surpluses(deficits) calculated under Financial Reporting Standard 17
Asset (loss) / gain Change in assumptions Experience (deficits) / gain on liabilities
(109) (140)
2012 As a % of Scheme assets/ liabilities 3.4% 3.6%
Total amount recognised in the STRSD
(249)
6.5%
2012 £’000
24
496 (195)
2011 As a % of Scheme assets/ liabilities 16.3% 5.7%
301
8.9%
2011 £’000
Financial Statements 2012 – Meres & Mosses Housing Association 18
Capital commitments 2012 £
Capital expenditure contracted for but not provided in the financial statements Capital expenditure authorised by the Board of Management but not yet under contract
2011 £ -
-
7,153,154
910,000
The Board of Management expects the expenditure it has authorised to be fully financed by a combination of private loan finance and / or from the Association’s own funds. There is a formal borrowing facility in place with Lloyds TSB Bank plc to fund all planned capital expenditure requirements.
19
Other financial commitments
The Association was committed to making the following annual payments under non-cancellable operating leases:
Operating leases which expire: 2012 £ Property
Plant
Total
-
-
-
Within 1 year 1 - 2 years 2 - 5 years over 5 years
20
2011 £ Total 14,949 14,949
Contingent liabilities
There were no contingent liabilities at 31st March 2012.
21
Legislative provisions
The Association is incorporated by the Financial Services Authority under the Industrial and Provident Societies Act 1965. Registered No. 30241R and is also registered with the Homes & Community Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH 4493. The Association has charitable objects with effect from commencing trading, reference XT4980. The entity has elected to take advantage of FRS 8 exemption not to disclose intra-group transactions. The ultimate parent undertaking is Shropshire Housing Limited, an Industrial and Provident Society regulated by the Homes & Communities Agency.
22
Related Party Transactions
• Any tenants who sit on the board are charged for rent and other services on normal business terms. • Board members who are appointed by councils do not affect the way we receive any grants; they are all at arm’s length. • Members who are involved with any business with whom we trade have to declare their interests and take no part in the letting of any contracts involving the same.
25
Financial Statements 2012 – Meres & Mosses Housing Association 23
Prior Year Adjustment
Meres and Mosses Housing Association has adopted the Statement of Recommended Practice (SORP): Accounting by Registered Social Housing Providers Update 2010 in this current year ended 31st March 2012. This has resulted in the provisions for component accounting being implemented this year. Major components are now treated as separable assets and depreciated over their expected useful economic lives or the lives of the properties to which they relate, if shorter. Comparative figures have been restated to reflect this change in accounting policy. Cumulative effect to 31 March 2010
Prior year adjustment 2010/2011
(1,138,676)
(429,768)
Balance sheet Reserves – revenue reserves Income and expenditure account Increase in operating costs
429,768
Reduction in operating surplus
(429,768)
26
Cumulative effect to 31 March 2011
(1,568,444)