Financial Statement Year ending 31st March 2012
Financial Statements 2012 – Shropshire Housing Limited & Group
Shropshire Housing Limited &
Shropshire Housing Group 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
7–8
Operating and Financial Review
9
Auditors’ Report
10
Income and Expenditure Accounts
10
Statement of Total Recognised Surpluses & Deficits
11
Balance Sheets
12
Group Cash Flow Statement
13
Notes to the Cash Flow Statement
14 – 35
Notes to the Financial Statements
Registered Office The Gateway, The Auction Yard, Craven Arms, Shropshire SY7 9BW
Homes & Communities Agency Registration No. LH 4494
Financial Statements 2012 – Shropshire Housing Limited & Group Chair’s Statement I am pleased to be able to report that the 2011/12 financial year has once again been one of achievement for the Shropshire Housing Group. We have performed well against our budgets and been successful in hitting other key targets. This is a remarkable achievement given the continuing challenging economic climate. The net position is a surplus of £3.0 million against a surplus in 2011 of £1.9 million.
Our development programme has also seen another successful year. Across the Group, a total of 45 new properties were completed at Ashbook in Church Stretton and Claverley. Shared Ownership sales have gone well, significantly boosting our cashflow. Finally, as always, I would like to thank both the staff and my fellow Board Members for their dedication and strong commitment to the Group and our objective of providing good quality homes and related services for the communities we serve. It has been an exceptionally demanding year and everyone has risen to the challenge admirably. I would also like to record my thanks and appreciation to the increasing number of tenants who work with us to ensure that we provide the services they wish to see.
Our expenditure on maintenance has once again been significant across the Group. South Shropshire Housing Association has maintained its expenditure and met its target in this area and Meres & Mosses Housing Association has made fantastic progress against its improvement works programme. In total, planned works and improvements have been undertaken to the value of over £6.2 million.
Shena Latto Chair
Meres and Mosses Housing Association is soon to hold its 5 year celebrations and everyone involved can be proud of what has been achieved in such a short time.
16th July 2012
1
Financial Statements 2012 – Shropshire Housing Limited & Group Housing Association Governance Status 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 regularly reviews the skills available within the Board against the skills required. Effectiveness is periodically reviewed and monitored. The Board is responsible for the Group’s continuing strategy and policy framework. It delegates the day-to-day management and implementation of that framework to the Chief Executive Officer. The Board meets six times a year for regular business. Other meetings take place as required, including training and development activities.
Shropshire Housing Limited is registered with and regulated by the Financial Services Authority under the Industrial and Provident Societies Act 1965, Registered No. 30269R and is also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH 4494. The Parent Association, unlike its subsidiary Housing Associations, does not have charitable objects.
Purposes of the Association The Parent Association was formed for the benefit of the community in providing housing, accommodation and related services for people in need.
There are 2 representatives from South Shropshire Housing Association and 2 representatives from Meres & Mosses Housing Association on the Board of Management.
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 comply with all material principles in the Code.
The Board of Management has overall strategic and regulatory control of the Group but does not own any housing assets. Its role is to develop the business, forge new opportunities, and strengthen existing relationships. The subsidiaries (South Shropshire Housing Association, Meres & Mosses Housing Association, and Total Response Limited) are responsible for the day to day operating activities. An Intra-group agreement between the organisations sets out the commitments which each member makes to the Group and the responsibilities of each member.
Members of the Association There is one category of shareholding membership within Shropshire Housing Limited, with each of the 8 members holding a £1.00 share. 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.
Remuneration of Board Members The Independent Board Members receive a co-optee fee. Reasonable reimbursement is made for travel and subsistence in appropriate circumstances.
The Board of Management The Board comprises 8 members and a cooptee and is responsible for managing the affairs of the Group. The Board may include up to three co-opted persons appointed by the Board who, may not be members of the Association, to act as specialist advisers.
2
Financial Statements 2012 – Shropshire Housing Limited & Group 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 Group 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 were Board members of the Group 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 Group’s auditors are unaware; and
•
each Board member has taken all the steps that they ought to have taken as a Board member to inform themselves of any relevant audit information (as defined) and to establish that the Group’s auditors are aware of that information.
Going Concern After reviewing the Group’s Budget for 2012/2013 and based on normal business planning and control procedures, the members of the Board have a reasonable expectation that the Group has 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 Group 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 Group and to prevent and detect fraud and other irregularities.
Board Members’ Indemnity The Board members have confirmed that the Group does have Board member and Officers Insurance in place.
Financial Instruments The Group does not have any abnormal exposure to price, credit, liquidity and cash flow risks arising from its trading activities. The Group does not enter into any hedging transactions and no trading in financial instruments is undertaken.
3
Financial Statements 2012 – Shropshire Housing Limited & Group Statement on Internal Controls Assurance Responsibility
Group’s Standing Orders, Financial Regulations, Treasury Management Controls and Risk Management Strategy and procedure. These delegations and authority levels are reviewed annually.
The Shropshire Housing Limited’s 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 periodically updated. 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.
The Board 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 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. The Board is 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, now the Homes & Communities Agency, and quarterly financial returns to our 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 forecasts of borrowing requirements at regular intervals as necessary. There are a number of annual reports on other functions to the Board; these include 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 – Shropshire Housing Limited & Group • 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 Group. 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.
5
Financial Statements 2012 – Shropshire Housing Limited & Group 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: Shena Latto Irene Grant Lesley Hyde Richard Jaboor Gordon Hodgkiss Stuart McLaren Martin Buxey Tim Ralphs Paul Turner John Stringer
The Group now holds properties at a historical cost of £93.6 million net of Housing Grants and depreciation. These were financed through grants, external loans and internal funds.
Chair
The value for existing use by a housing association of these properties is professionally assessed in excess of £143 million. During the year, 45 new properties were developed, 40 were demolished for redevelopment and a further 6 went out of management. At the year end, the number of housing and commercial properties managed by the Group totalled 4,529.
(co-optee appointed on 30.03.12)
The Board reports that the Group produced a surplus of £3.0 million. This surplus is after charging £2.1 million 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 significantly as a result of component accounting.
Cashflow and Liquidity The cashflow from operating activities during the year was £10.0 million. Loans increased by £6.7 million during the year leaving total borrowings for the Group at £84.55 million at the year end.
Turnover of the Group was £21 million. Interest charges amounted to approximately £3 million.
By order of the Board
Future developments
Shena Latto
The Board are continuing to look at developing new dwellings and to repair and improve existing properties. It is also continuing to look at new approaches to services and to partnerships with other agencies to best secure these aims.
Chair
16th July 2012
6
Financial Statements 2012 – Shropshire Housing Limited & Group Operating and Financial Review Meres and Mosses Housing Association is about to celebrate its 5th year. Formed by North Shropshire District Council, the housing stock transferred on 30th July 2007 and Meres and Mosses Housing Association is now well on the way to delivering the promises made by the Council to its tenants and anticipates exceeding the Decent Homes Standard by 2012. The Association is an Industrial and Provident Society with Charitable Rules.
Background The Group has been created to provide a partnership framework enabling South Shropshire Housing Association and Meres and Mosses Housing Association to work together to deliver new affordable homes and first class housing services across Shropshire, Herefordshire and the Marches. Shropshire Housing is an association which is registered by the Homes & Communities Agency. As the Group Parent, Shropshire Housing has overall strategic and regulatory control of the Group but does not own any housing assets. Its role is to develop the business, forge new opportunities and strengthen existing relationships. It is doing this by setting new and challenging targets for the housing service and by developing new and creative policies to ensure that the Group is recognised as “the” housing group in the region. It also provides a range of back office services for the operational organisations. Shropshire Housing is an Industrial and Provident Society but does not have charitable objects.
Total Response Ltd is a limited company, wholly owned by Shropshire Housing, and its function is to provide maintenance and other property services to all members of the Group. Where possible this will be on a ‘for profit’ basis with all profits being retained in the Group. It also actively seeks to undertake work for private individuals. Operating Review The Group has seen a successful year in terms of its maintenance programme. Meres and Mosses Housing Association has accomplished its 5 year improvement programme, and South Shropshire Housing Association as it has consistently in recent years, again increased its expenditure on repairs.
The two associations which form the housing arm of the Group are at different stages of development.
The Group completed 45 new properties across Shropshire during the year with a significant development programme planned for 2012/13 and beyond, subject to funding.
South Shropshire Housing Association was formed in 1990 and, following a programme of Trickle Transfers, completed a full stock transfer of the Council’s housing stock in 1994. The Association completed all of its promises to tenants and has now developed a robust asset management strategy. The Association is an Industrial and Provident Society and converted to charitable status when it joined the Group.
Reporting Structure The Board comprises 8 members and one cooptee. The Board Members are drawn from a wide background bringing together professional, commercial and local experience. It also includes 2 representatives from South Shropshire Housing Association and 2 representatives from Meres & Mosses Housing Association. 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 subsidiaries. The Board meets at least six times a year.
7
Financial Statements 2012 – Shropshire Housing Limited & Group Continuous Improvement The Group is committed to achieving excellent performance across the whole of its 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.
in place procedures to mitigate and manage risk. It is the Performance Committee’s responsibility to review and assess these risks. Financial Review The 2011/12 financial year has produced good results with an operating surplus being achieved. The net position is a surplus of £3,030,226 against a restated surplus in 2011 of £1,898,245. The Group paid over £10 million in acquisition and construction of housing properties and received over £1.4 million in capital grants relating to this.
The Board has a specific Performance Committee which meets regularly. This is complemented by the Performance Management Group which is made up mainly of senior managers from across the Group. These bodies monitor benchmarked data together with performance indicators, reports and best practice visits.
The results have been impacting by the change of accounting practice to follow component accounting and the prior year figures restated to reflect the effect.
Risks and uncertainties The Group’s managers have a clear responsibility for identifying risk facing each of the areas in which they operate and for putting
8
Financial Statements 2012 – Shropshire Housing Limited & Group Report of the Auditors to the members of Shropshire Housing Limited We have audited the financial statements of Shropshire Housing Limited for the year ended 31 March 2012 which, for both the Group and the Parent entity, comprise the Income and Expenditure Accounts, the Statement of Total Recognised Surpluses and Deficits, the Balance Sheets, the Cash Flow Statements 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).
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.
Opinion on financial statements In our opinion the financial statements; • give a true and fair view of the state of the Group’s and the Parent entity’s affairs as at 31 March 2012 and of the Group’s and the Parent entity’s 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 Parent entity’s 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 (APB’s) Ethical Standards for Auditors.
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 • Shropshire Housing Limited 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.
This report is made solely to Shropshire Housing Limited’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 Shropshire Housing Limited’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 Shropshire Housing Limited and its 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
9
Financial Statements 2012 – Shropshire Housing Limited & Group Income and Expenditure Account for the year ended 31st March 2012 2012 GROUP £
2011 GROUP £ Restated
Note
2011 SHL only £
2012 SHL only £
Turnover Operating costs
2 2
21,472,418 (15,268,506)
20,768,760 (15,701,776)
4,831,586 (4,859,349)
4,256,476 (4,256,688)
Operating surplus / (deficit)
2
6,203,912
5,066,984
(27,763)
(212)
Share of deficit in joint ventures (Deficit) / Surplus on sale of fixed assets
10 9
(256) (2,350)
(187) 16,868
(2,364)
-
Surplus / (deficit) on ordinary activities before interest
5
6,201,306
5,083,665
(30,127)
(212)
Interest receivable and similar income Interest payable and similar charges
3 4
11,796 (3,182,876)
28,821 (3,214,241)
189 -
212 -
3,030,226
1,898,245
(29,938)
-
-
-
-
-
3,030,226
1,898,245
(29,938)
-
Surplus /(Deficit) on ordinary activities before taxation Taxation on surplus on ordinary activities
8
Surplus/(Deficit) for the year transferred to reserves
19
All of the above relate to continuing activities.
Statement of Total Recognised Surpluses and Deficits for the year ended 31st March 2012 2012 GROUP £ Note Surplus for the year Actuarial (loss) / gain Prior year adjustment Total recognised surpluses/deficit relating to the year
20 26
2011 GROUP £
2012 SHL only £
2011 SHL only £
Restated 3,030,226 (424,000) 1,629,006
1,898,245 455,000 -
(29,938) -
4,235,232
2,353,245
(29,938)
-
10
Financial Statements 2012 – Shropshire Housing Limited & Group GROUP Balance Sheet at 31st March 2012 2011 Group Restated
Note
2012 Group £
£
£
2012 SHL only £
£
2011 SHL only
£
£
£
Tangible fixed assets Tangible assets cost Less Depreciation Less Social Housing grant Other capital grants Investments / Joint Ventures
9 9
149,179,753 (19,085,357)
140,230,747 (17,072,852)
1,370,995 (825,928)
1,182,472 (508,625)
9 9
(34,985,386) (823,690) 94,285,320
(33,662,848) (823,690) 88,671,357
545,067
673,847
10
(21,605)
(21,349)
-
-
94,263,715
88,650,008
545,067
673,847
Current assets Assets held for resale Stock Debtors Debtors due in more than 1 yr Non cash investments Investments Cash at bank and in hand
11 12 13
308,463 148,015 1,238,301
469,558 131,598 1,484,380
173,457
106,607
14
18,907,360
22,853,836
-
-
15
52,193 5,903,940
52,193 1,610,416
-
-
552,743
583,026
28,815
54,692
27,111,015
27,185,007
202,272
161,299
(3,889,396)
(4,082,370)
(777,269)
(835,138)
Creditors: amounts falling due within one year
16
Net current assets / (liabilities) Total assets less current liabilities
23,221,619
23,102,637
(574,997)
(673,839)
117,485,334
111,752,645
(29,930)
8
17
102,964,809
100,188,344
-
-
20
1,542,000
1,192,000
-
-
103 12,978,422
105 10,372,196
8 (29,938)
8 -
117,485,334
111,752,645
(29,930)
8
Creditors: amounts falling due after more than one year Provision for pension liability
Capital and reserves: Called up share capital Revenue reserve
18 19
These financial statements were approved by the Board of Management on behalf by Shena Latto Chair Board Member
Jen Hayball Secretary
11
July 2012 and were signed on its
Financial Statements 2012 – Shropshire Housing Limited & Group GROUP Cash Flow Statement for the year ended 31st March 2012 Note
Net cash inflow from operating activities
2011 GROUP Restated
2012 GROUP £
£
£
£
10,029,390
£
£
6,099 (3,117,026)
7,460,775
96,977 (3,084,453) (3,110,927)
Capital expenditure Acquisition and construction of housing properties Proceeds on disposal of fixed assets Proceeds from sale of Right To Buy properties & miscellaneous land Capital grants received Purchase of other tangible fixed assets
£
Net shares issued
189 -
212 189
212
(10,790,141)
(10,818,392)
12,000
-
252,570
(70,622)
-
1,499,158
1,825,258
-
(259,705)
b
550,629
157,743
(2,987,476)
-
12,000
(606,561) (9,286,118)
Increase / (Decrease) in cash
£
2011 SHL only
a
Returns on investments and servicing of finance Interest received Interest paid
Financing Principal lease repayments Net housing loans received
2012 SHL only
-
(205,801) (9,670,317)
(577,761) (193,801)
(577,761)
(69,108)
(29,189)
9,992
(5,690)
6,700,000
-
-
-
4
7
-
-
6,630,896
(29,182)
9,992
(5,690)
4,263,241
(5,226,200)
(25,877)
(32,610)
c
12
Financial Statements 2012 – Shropshire Housing Limited & Group 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 GROUP £
Operating surplus / (deficit) Depreciation Decrease / (Increase) in debtors Current assets held for resale (Increase) in stock Increase / (Decrease) in creditors Movement in provisions Net cash inflow from operating activities
(b)
2012 SHL
2011 SHL
£
£
6,203,912 2,623,230 246,079 161,095 (16,417) 461,491 350,000
5,066,984 2,550,308 (64,390) 489,809 (4,038) (164,898) (413,000)
(27,763) 331,666 (66,850) (79,310) -
(212) 293,389 10,373 247,079 -
10,029,390
7,460,775
157,743
550,629
Reconciliation of net cashflow to movement in net debt 2012 GROUP £
Increase / (Decrease) in cash in the year Housing loans received Change in net debt Net debt brought forward Net debt carried forward
(c)
2011GROUP Restated £
2011 GROUP £
2012 SHL £
2011 SHL £
4,263,241 (6,700,000) (2,436,759)
(5,226,200) (5,226,200)
(25,877) (25,877)
(32,610) (32,610)
(75,656,558) (78,093,317)
(70,430,358) (75,656,558)
54,692 28,815
87,302 54,692
Analysis of changes in net debt - GROUP At 31st March 2011 £
Cash Flow £
At 31st March 2012 £
1,610,416 583,026 2,193,442
4,293,524 (30,283) 4,263,241
5,903,940 552,743 6,456,683
Debt due after 5 years
(77,850,000)
(6,700,000)
(84,550,000)
Total
(75,656,558)
(2,436,759)
(78,093,317)
Investments Cash at bank and in hand
13
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (forming part of the financial statements) 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
14
Financial Statements 2012 – Shropshire Housing Limited & Group 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. 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.
15
Financial Statements 2012 – Shropshire Housing Limited & Group 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”. Basis of consolidation The Financial Statements consolidated the results of Shropshire Housing Limited, together with its subsidiaries, South Shropshire Housing Association, Meres and Mosses Housing Association and Total Response Limited.
16
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued)
2
Turnover, operating costs and operating surplus 2012 GROUP Operating Operating Costs Surplus
Turnover
Lettings Other Social Housing: Supporting People Foyer non letting VAT
Contribution to pension scheme Non social housing lettings Group activities Shared ownership sales External work TRL External facilities management External CBL
2011 GROUP Turnover Operating Surplus Restated £ £ 17,953,027 4,487,999
£ 18,936,996
£ 13,157,626
£ 5,779,370
640,001 10,198 31,897 682,096
553,581 10,198 563,779
86,420 31,897 118,317
631,978 13,279 69,319 714,576
-
(124,000)
124,000
179,343
27,930
151,413
Turnover
2012 SHL only Operating Costs
£
£
Operating Deficit £
2011 SHL only Turnover Operating Deficit £
£
-
-
-
103,770 69,319 173,089
-
-
-
-
413,000
-
-
-
72,631
31,716
4,831,586
(4,859,349)
(27,763)
4,256,476
(212)
761,170 649,141
676,238 703,261
84,932 (54,120)
991,900 736,088
19,820 (58,640)
-
-
-
-
185,641 78,031 21,472,418
185,641 78,031 15,268,506
6,203,912
196,979 103,559 20,768,760
5,066,984
4,831,586
(4,859,349)
4,256,476
(212)
17
(27,763)
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 2
Income and expenditure from lettings (continued) - GROUP 2011 GROUP Restated
2012 GROUP Housing Accommodation
Supported Housing / Older People
Foyer
Refuge
Shared Ownership
Total
Total
£
£
£
£
£
£
£
Income Net Rental Income
15,422,585
1,620,818
43,313
33,100
350,009
17,469,825
16,421,913
Net Service Charges Income
221,077 15,643,662
227,525 41,592 1,889,935
67,922 111,235
39,452 72,552
27,374 377,383
583,350 41,592 18,094,767
598,101 39,527 17,059,541
162,461 7,709 57,807 15,871,639
371,418 2,261,353
116,120 227,355
108,573 18,120 21 199,266
377,383
596,111 162,461 25,829 57,828 18,936,996
596,945 250,884 23,650 22,007 17,953,027
3,406,618 508,890 82,684 3,446,736 1,126,873 186,439 1,860,533 10,618,773 5,252,866 (162,418)
418,916 245,776 449,975 421,984 147,414 25,252 253,233 1,962,550 298,803 (39,655)
68,385 71,087 110,595 12,720 1,269 10,492 274,548 (47,193) (5,188)
27,878 54,135 90,750 5,720 1,593 2,040 182,116 17,150 (27,017)
67,809 13,294 38,536 119,639 257,744 (2,851)
3,989,606 893,182 734,004 3,887,160 1,274,287 214,553 2,164,834 13,157,626 5,779,370 (237,129)
3,598,160 776,711 758,282 4,014,823 2,041,708 235,366 2,039,978 13,465,028 4,487,999 (174,436)
Charges for Support Services Net rental Income Revenue grants from Homes & Communities Agency and Local Authority Aids & Adaptations Grant Other Revenue Grants Other Income Total income from lettings Expenditure on lettings Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation Total expenditure on lettings Operating surplus/(deficit) Void Losses
The supported housing project is property based. The rental income quoted refers to the rental due while the tenant is using the facility.
18
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 3
Interest receivable and similar income
Interest receivable from bank deposits
4
2011 GROUP £ 28,821
2012 SHL £ 189
2011 SHL £ 212
2012 GROUP £ 50,000
2011 GROUP £ 96,000
2012 SHL £ -
2011 SHL £ -
3,261,005 (128,129) 3,182,876
3,277,152 (158,911) 3,214,241
-
-
Restated 2011 GROUP £
2012 SHL
2011 SHL
£
£
2,623,230
2,550,308
332,666
293,389
44,616 6,293
40,789 6,070
44,616 6,293
40,789 6,070
2012 SHL £
2011 SHL £
Interest payable and similar charges
Net finance charge on pension (note 20) On bank loans, overdrafts and other loans repayable - wholly or partly in more than 5 years Less: interest capitalised
5
2012 GROUP £ 11,796
Surplus / (deficit) on ordinary activities before interest 2012 GROUP £
Surplus / (deficit) on ordinary activities before interest is stated after charging: Depreciation of tangible fixed assets Auditors’ remuneration (including VAT): In their capacity as auditors In respect of other services
6
Staff costs 2012 GROUP £
Wages and salaries Social security costs Other pension costs Average number of full-time equivalent persons employed during the year These were categorised as: Central Support Development Asset Management Housing TRL Sheltered/Domestic Support/SP
19
2011 GROUP £
5,613,556 460,318 551,553 6,625,427
5,232,218 404,972 447,003 6,084,193
2,161,455 185,022 264,108 2,610,585
1,882,530 138,883 230,785 2,252,198
230
230
77
74
31 9 16 35 98 41 230
30 9 14 35 97 45 230
31 16 30 77
30 13 31 74
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 7
Directors’ emoluments
The remuneration paid to the Officer and Board Members of the Group (the Board of Management, the Chief Executive, Director of Resources and other Directors) was:
Total emoluments
2012 GROUP £ 455,827
2011 GROUP £ 452,268
2012 SHL £ 455,827
2011 SHL £ 452,268
The emoluments of directors disclosed above (excluding pension contributions) includes the following amounts paid: 105,426 108,389 105,426 108,389 Group Chief Executive 84,020 95,153 84,020 95,153 Group Director of Resources Group Assistant Director of 62,609 60,200 62,609 60,200 Performance & Governance Group Executive Director Development 79,650 76,029 79,650 76,029 and Assets 80,845 74,836 80,845 74,836 Group Executive Neighbourhoods 412,550 414,607 412,550 414,607 Aggregate amount of directors’ pension 43,276 37,661 43,276 37,661 contributions Fees payable by way of expenses and 78,500 63,112 78,500 40,050 Remuneration to Board Members The Chief Executive is an ordinary member of the pension scheme. No additional contributions to any pension scheme have been made and there were no special or enhanced terms which apply. The employer’s contribution to the pension scheme on behalf of the Chief Executive in 2011/2012 was £19,670 (£2010/11 £19,285). Board members, excluding Meres and Mosses Board members who only received expenses, were paid at the following rates during the year: Role / Position Group Chair Group Vice Chair Subsidiary Chair Subsidiary Vice Chair Group Committee Chair Subsidiary Committee Chair Group Board Member (incl. co-optees) Subsidiary Board Member (incl. co-optees)
£ 8,275 5,517 6,047 3,517 5,517 3,517 3,310 2,653
Meres and Mosses Board members received payment from April 2012.
20
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 8
Taxation 2012 GROUP £
United Kingdom Corporation Tax Current (Credit)/Charge in accounts
-
Restated 2011 GROUP £ -
Factors affecting current tax charge for the year: The tax assessed for the year is lower than the standard rate of corporation tax in the UK (30%). The differences are explained below: Surplus on ordinary activities before tax Tax on surplus on ordinary activities at 26% Costs not deductible for tax purposes (primarily depreciation of properties) Surpluses arising during period with charitable status Capital allowances Land remediation and adjustments Utilisation of tax losses Unrelieved tax losses carried forward Adjustment to tax charge in respect of previous periods
21
3,030,226
1,898,245
787,858
493,543
(777,468) (10,390)
(513,016) 19,473
-
-
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 9
Tangible fixed assets – GROUP Freehold housing properties
Freehold housing properties in the course of construction
Foyer
Office equipment, fixtures & fittings
Plant and machinery & vehicles
Total
£
£
£
£
£
£
Cost As at 1st April 2011 116,604,901 Restated for previous year 11,719,867 Restated opening balance 128,324,768 Additions 9,300,852 Schemes completed 6,578,638 Disposals (1,163,488)
7,549,443 7,549,443 1,079,848 (6,578,638) (420,082)
1,943,704 122,236 2,065,940 17,261 -
1,899,119 1,899,119 232,229 (107,812)
391,477 391,477 38,925 (28,727)
128,388,644 11,842,103 140,230,747 10,669,115 (1,720,109)
At end of year 143,040,770
1,630,571
2,083,201
2,023,536
401,675
149,179,753
Charge for the year Eliminated on disposals
5,336,741 9,897,110 15,233,851 2,154,341 (488,550)
-
82,207 315,986 398,193 20,986 -
1,102,198 1,102,198 405,109 (107,812)
338,610 338,610 42,794 (14,363)
6,859,756 10,213,096 17,072,852 2,623,230 (610,725)
At end of year
16,899,642
-
419,179
1,399,495
367,041
19,085,357
Depreciation and impairment At beginning of year
Restated for previous year Restated opening balance
22
Financial Statements 2012 – Shropshire Housing Limited & Group 9
Tangible fixed assets (continued) - GROUP Freehold housing properties
£ Social Housing grants At beginning of year Receivable Schemes completed At end of year
Freehold housing properties in the course of construction £
Foyer
Office equipment, fixtures & fittings
Plant and machinery & vehicles
Total
£
£
£
£
31,249,775 1,109,470 2,053,103 34,412,348
2,053,103 213,068 (2,053,103) 213,068
359,970 359,970
-
-
33,662,848 1,322,538 34,985,386
Other capital grants brought forward
200,000
-
623,696
-
-
823,690
At end of year
200,000
-
623,696
-
-
823,690
Net book value At 31st March 2012
91,528,780
1,417,503
680,362
624,041
34,634
94,285,320
At 31st March 2011
91,569,437
5,496,340
968,888
796,921
52,867
88,671,357
Works to existing properties during the year amounted to £6,255,322. This has been accounted for as follows:Planned maintenance - revenue £1,291,376 Improvements - capital £4,963,946 Assets held under finance leases: Cost Acc. Depreciation NBV
£ 31,049 (7,762) 23,287
23
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 9
Tangible fixed assets – SHROPSHIRE HOUSING LIMITED Office equipment, fixtures & fittings
Plant and machinery & vehicles
Total
£
£
£
Cost At beginning of year Additions Disposals
1,120,987 186,201 -
61,485 31,049 (28,727)
1,182,472 217,250 (28,727)
At end of year
1,307,188
63,807
1,370,995
At beginning of year Charge for the year Eliminated on disposals
469,694 315,715 -
38,931 15,951 (14,363)
508,625 331,666 (14,363)
At end of year
785,409
40,519
825,928
Net book value At 31st March 2012
521,779
23,288
545,067
At 31st March 2011
651,293
22,554
673,847
Depreciation
Assets held under finance leases: Cost Acc. Depreciation NBV
£ 31,049 (7,762) 23,287
24
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 9
Tangible fixed assets (continued) – GROUP ONLY
Housing properties and housing properties in the course of construction include £2,392,871 (2011: £2,264,742) of accumulated capitalised interest. 2012 GROUP
2011 GROUP
15
45
4,501 4 24 4,529
4,508 4 18 4,530
2012 GROUP
2011 GROUP
£ 12,014 (136,539) 122,175 (2,350)
£ 16,868 (391,842) 391,842 16,868
2012 GROUP
2011 GROUP
£
£
At 1st April 2011 Addition
40 -
40 -
At 31st March 2012
40
40
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
Disposal of fixed assets
Proceeds Cost Depreciation eliminated on disposal (Deficit) / Surplus on disposal
10
Investments – GROUP ONLY
Shares in Joint Venture undertaking:
In 2005, the South Shropshire Housing Association acquired 40 ordinary shares of £1 each in South Shropshire Local Homes Limited, out of a total of 99 issued. The principal activity of the company in the year under review was that of the provision and sale or rent of affordable housing for local people. Dividends on sale or winding up of the company will entitle the 3 shareholders equal amounts on distribution irrespective of share numbers held. The accounting period is the year ended 31st March.
25
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 10
Investments (continued) – GROUP ONLY
South Shropshire Housing Association’s share of the joint venture, South Shropshire Local Homes Limited 2012 £ Share of turnover Share of loss before tax Taxation
(256) -
Loss after tax Balance brought forward
11
492 492
(22,001)
(21,848)
(33)
(21,389)
40 (21,605)
40 (21,349)
2012 GROUP £ 220,753 87,710 308,463
2011 GROUP £ 100,958 368,600 469,558
2012 GROUP £ 148,015
2011 GROUP £ 131,598
Stock
Consumable maintenance stock
13
(33) (21,645)
Assets held for resale
Shared ownership completed units Shared ownership work in progress
12
(187) (21,162) (21,349)
389 389
Shares held 40 ordinary £1 shares
£ -
(187) (256) (21,349) (21,605)
Share of assets Fixed assets Current assets Share of liabilities Due within one year or less Due after more than one yearshares Share of net liabilities
2011 £
£ -
Debtors
Due within one year Gross rental arrears Less: Provision for bad debts
Prepayments and accrued income
2012 GROUP £ 1,259,708 (652,583) 607,125
2011 GROUP £ 1,042,885 (500,744) 542,141
2012 SHL £ -
2011 SHL £ -
631,176 1,238,301
942,239 1,484,380
173,457 173,457
106,607 106,607
26
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 14
Debtors due after more than one year
Improvement works
15
2011 GROUP £ 22,853,836
Current asset investments
Cash on short term deposit
16
2012 GROUP £ 18,907,360
2012 GROUP £ 5,903,940
2011 GROUP £ 1,610,416
Creditors: amounts falling due within one year
Trade creditors Other taxation and social security Rent in advance Social Housing Grant in advance* Accruals and deferred income
2012 GROUP £ 1,795,297 164,894 203,409 241,902 1,483,894 3,889,396
2011 GROUP £ 2,069,186 140,232 180,935 65,283 1,626,734 4,082,370
2012 SHL £ 117,241 59,191 600,837 777,269
2011 SHL £ 106,159 47,148 681,831 835,138
* Includes recycled capital grant £ 18,750 176,620 195,370
Opening balance Homebuy Grant element of Shared Ownership Closing Balance
It is envisaged that this will be recycled into another capital scheme in 2012.
17
Creditors: amounts falling due after more than one year – GROUP ONLY 2012 £18,907,360
Improvement Works
2011 £22,853,836
Housing loans The Group has a combined borrowing facility of £125,000,000 of which £84,550,000 had been utilised at 31st March 2012 (£40,450,000 undrawn). The facility is for a term of 35 years on both fixed and variable rate terms. The Group 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 Group; variable rates are at LIBOR plus the agreed margin. Fixed rate loans were between 3.83% and 5.8% including margin. 2012 £ Amounts repayable by instalments and not wholly repayable within five years: Repayable after five years Refinancing costs Total
27
2011 £
84,550,000
77,850,000
(492,551)
(515,492)
102,964,809
100,188,344
Financial Statements 2012 – Shropshire Housing Limited & Group 18
Called up share capital 2012 GROUP £
Issued and fully paid shares of £1 each: At beginning of year Issued during the year Relinquished during the year At end of year
105 4 (6) 103
2011 GROUP £
2012 SHL £
100 5 105
2011 SHL £
8 8
8 8
The shareholders do not have rights to dividends, redemptions, distributions etc.
19
Reserves GROUP £
GROUP
SHL £
At 1st April 2011
8,743,190
-
Prior year adjustment
1,629,006
-
10,372,196
-
Surplus/(deficit) for the year
3,030,226
(29,938)
Actuarial (loss)/gain on pension scheme
(424,000)
-
12,978,422
(29,938)
At 1st April 2011 restated
At 31st March 2012
20
Pension obligations
The Group’s employees are members of the Social Housing Pension Scheme (SHPS) or the Shropshire County Pension Scheme. Total pension cost for the Group was £551,553 (2011: £447,003) covering 101 (2011: 97) employees. This includes £151,800 (£66,000 in 2011) lump sum payment for the Shropshire County Pension Scheme funding deficit.
(a)
Social Housing Pension Scheme
South Shropshire Housing Association participates in SHPS (the Scheme). The Scheme is funded and is contracted-out of the State Pension scheme. It is not possible in the normal course of events to identify on a consistent and reasonable basis the share of underlying assets and liabilities belonging to individual participating employers. This is because the Scheme is a multi-employer scheme where the Scheme assets are co-mingled for investment purposes, and benefits are paid from total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to address the level of future contributions required so that the Scheme can meet its pension obligations as they fall due.
28
Financial Statements 2012 – Shropshire Housing Limited & Group 20
Pension obligations (continued)
The last formal valuation of the Scheme was performed as at 30 September 2008 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme’s assets at the valuation date was £1,527 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £663 million, equivalent to a past service funding level of 69.7%. The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the Scheme as at 30 September 2010. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The funding update revealed an increase in the assets of the Scheme to £1,985 million and indicated a reduction in the shortfall of assets compared to liabilities to approximately £497 million, equivalent to a past service funding level of 80%. The next triennial formal valuation of the Scheme is due as at 30 September 2011. The results of the valuation will be available by December 2012.
(b)
Shropshire County Superannuation fund
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 Equities 495 Bonds 238 Other 218 Market Value 951 Past Service liabilities (1,177) Past Service deficits (226) South Shropshire Housing Association paid contributions at the rate of 20.2% during the accounting period which is also set for the next 2 years. Member contributions vary between 5.9% and 7.5%. We additionally pay the lump sum of £151,800 which is set for the next 2 years. 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 rate 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% 4.0% 2.5% 4.9%
29
31 March 2011 3.4% 4.4% 2.9% 5.5%
Financial Statements 2012 – Shropshire Housing Limited & Group
20
Pension obligations (continued)
South Shropshire Housing Association & Shropshire Housing Limited 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)
Rate of return expected at 31st March 2012 7.0% 4.1% 3.1% 6.0% 0.5% 7.0%
(902)
151
(841)
63
Analysis of the amount which has been charged to interest costs under Financial Reporting Standard 17 2012 2011 £’000 £’000 132 128 Expected return on assets (169) (184) Interest on liabilities (37)
Net return iv)
Value at 31st March 2011 £’000 1,470 226 257 86 115 102 2,256
Analysis of the amount which has been charged to operating surplus under Financial Reporting Standard 17 2012 2011 £’000 £’000 (46) (49) Current service cost 197 112 Employer contribution Total operating charge
iii)
Rate of return expected at 31st March 2011 7.5% 5.1% 4.4% 6.5% 0.5% 7.5%
Liability and funding status under Financial Reporting Standard 17 of South Shropshire Housing Association’s part of the fund. 2012 2011 £’000 £’000 2,395 2,256 Plan assets (3,297) (3,097) Benefit obligations Deficit in scheme
ii)
Value at 31st March 2012 £’000 1,269 249 345 86 115 331 2,395
(56)
Analysis of amount which has been recognised in the statement of total recognised surpluses and deficits (STRSD) 2012 2011 £’000 £’000 (82) (19) Asset (loss) / gain (93) 173 Liability (loss) / gain Changes in assumptions underlying the present value of the scheme liabilities (175) 154 Actuarial (deficit) / surplus for recognition in the STRSD
30
Financial Statements 2012 – Shropshire Housing Limited & Group
20
Pension obligations (continued)
v)
Movement in Financial Reporting Standard 17 deficit during the year
Deficit at the beginning of the year Restated Movement in year: - Past service loss - Current service cost - Contributions - Net return from other financial income - (Deficit) / Surplus in STRSD
2012 £’000 (841) -
2011 £’000 (1,179) -
(46) 197 (37) (175)
177 (49) 112 (56) 154
(902)
(841)
Deficit at the end of year vi)
History of experience surpluses (deficits) calculated under Financial Reporting Standard 17 2012 As a % of Scheme assets/ liabilities
2012 £’000
Asset (loss) (82) (93) (175)
Change in assumptions Experience gain on liabilities Total amount recognised in the STRSD
3.4% 2.8% 5.3%
Meres & Mosses Housing Association 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 vii)
Value at 31st March 2012 £’000
Rate of return expected at 31st March 2012 7.0% 4.1% 3.1% 6.0% 0.5% 7.0%
1,697 333 461 115 154 442 3,202
Rate of return expected at 31st March 2011 7.5% 5.1% 4.4% 6.5% 0.5% 7.5%
Value at 31st March 2011 £’000 1,983 304 347 116 155 137 3,042
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 (640)
Deficit in scheme
31
(351)
Financial Statements 2012 – Shropshire Housing Limited & Group 20
Pension obligations (continued)
viii)
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)
(163)
ix)
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
x)
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 Actuarial (deficit) / surplus for recognition in the STRSD
xi)
(249)
301
2012 £’000 (351) -
2011 £’000 (785) -
(147) 120 (13) (249)
222 (163) 114 (40) 301
(640)
(351)
Movement in Financial Reporting Standard 17 deficit during the year
Deficit at the beginning of the year Restated Movement in year: - Past service loss - Current service cost - Contributions - Net return from other financial income - (Deficit) / Surplus in STRSD Deficit at the end of year
32
Financial Statements 2012 – Shropshire Housing Limited & Group 20
Pension obligations (continued)
xii)
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
21
496 (195)
2011 As a % of Scheme assets/ liabilities 16.3% 5.7%
301
8.9%
2011 £’000
Capital commitments – GROUP ONLY 2012 £
2011 £
Capital expenditure contracted for but not provided in the financial statements
2,553,930
957,678
Capital expenditure authorised by the Board of Management but not yet under contract
7,281,961
2,772,000
The Board of Management expects the expenditure it has authorised to be fully financed by a combination of Social Housing Grant, private loan finance, or from the Group’s own funds. There is a formal borrowing facility in place with Newcastle Building Society, The Royal Bank of Scotland plc and Shropshire Council to fund all planned capital expenditure requirements for South Shropshire Housing Association. For Meres & Mosses Housing Association a formal borrowing facility is in place with Lloyds TSB plc to fund all planned capital expenditure requirements.
22
Other financial commitments
The Group and Association were committed to making the following annual payments under noncancellable operating leases:
Operating leases which expire: 2012 GROUP £ Property Plant Within 1 year 1 - 2 years 2 - 5 years over 5 years
9,000 9,000
86,859 67,161 6,371 160,391
Total 95,859 67,161 6,371 169,391
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2011 GROUP £ Total 87,961 27,774 38,535 97,027 251,297
2012 SHL £ Property & Total 9,000 9,000
2011 SHL £ Property & Total -
Financial Statements 2012 – Shropshire Housing Limited & Group Notes (continued) 23
Contingent liabilities – GROUP ONLY
South Shropshire Housing Association has been notified by the Pension Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme based on the financial position of the Scheme at 30th September 2011. As of this date the estimated employer debt for South Shropshire Housing Association was £6,919,296. This has not been provided for, as no such decision has been taken.
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Legislative provisions
The Group consists of four members: 1)
Shropshire Housing Limited, which is incorporated by the Financial Services Authority under the Industrial and Provident Societies Act 1965, registered no 30269R, and is also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, registered no L4494;
2)
A wholly owned private limited company Total Response Limited, company number 6178863; and two subsidiaries
3)
South Shropshire Housing Association (incorporated under the Industrial and Provident Societies Act 1965. Registered No. 27191R and also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH 3943) The Association has charitable objects with effect from 6th August 2007, reference XT4981;
4)
Meres & Mosses Housing Association (incorporated under the Industrial and Provident Societies Act 1965. Registered No. 30241R and also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH4493. The Association has charitable objects with effect from first day of trading, reference XT4980.
The entity has taken advantage of FRS 8 exemption from disclosing certain intra-group transactions.
25
Related Party Transactions
Marches Housing & Charitable Trust (MHCT), which is a registered charity, was registered on 9th December 2003, having an accounting reference date of 30th June. The activities of Marches Housing & Charitable Trust were raising funds for the relief of poverty, sickness and old age and to advance education and provide leisure facilities in Shropshire and other specified areas. Marches Housing & Charitable Trust has more recently reviewed its objectives to include promotion of social and financial inclusion building of community capacity in partnership with the local community and local agencies. Some of the trustees are our Board Members and the Secretary is a member of the Shropshire Housing Limited staff. The decision was taken during the year to return the unused portion of SSHA funded money of £29,095.92 in September. The remaining money is being used on projects at the discretion of SSHA staff. It has since been decided that MHCT will not be wound up as a charity but will be relaunched under a different name with different trustees and objectives. There is no intention for SSHA to provide financial support in the future. In the year to March 2012, South Shropshire Housing Association paid out £3,082 of donations on behalf of grants approved by Marches Charitable Trust.
34
Financial Statements 2012 – Shropshire Housing Limited & Group Any tenants who sit on the board of South Shropshire Housing Association 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. Shropshire Housing Limited is one of the funding members of CHIC, the Central Housing and Investment Consortium. In 2012 we paid in £24,000. CHIC has been set up to deliver efficiencies in buying through bulk discounts. The founding members should be able to recoup some of the initial spend, should members join at a later date.
26
Prior Year Adjustment
Shropshire Housing Group 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. Significant costs referring to the replacement of major components were previously treated as revenue expenditure. Comparative figures have been restated to reflect this change of accounting policy. Cumulative effect to 31 March 2010
Prior year adjustment 2010/2011
Cumulative effect to 31 March 2011
2,723,316
(1,094,310)
1,629,006
Balance sheet Reserves – revenue reserves
Income and expenditure account Increase in operating costs
1,094,310
Reduction in operating surplus
(1,094,310)
35