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1 South Shropshire Housing Association 1


Shropshire Housing Limited &

Shropshire Housing Group Financial Statements for the year ended 31 March 2011 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

11

Balance Sheets

12

Group Cash Flow Statement

13

Notes to the Cash Flow Statement

14 – 33

Notes to the Financial Statements

Registered Office The Gateway, The Auction Yard, Craven Arms, Shropshire SY7 9BW

Tenant Services Authority Registration No. LH 4494 2 South Shropshire Housing Association 1


Financial Statements 2011 – Shropshire Housing Limited & Group Chair’s Statement The 2010/11 financial year has again been one of achievement for the Shropshire Housing Group. We have performed well against our budgets, as well as hitting other key targets. This is a remarkable achievement, given the continuing challenging economic climate. The net position is a surplus of £2,992,555 against a surplus in 2010 of £3,309,875.

We have restructured the organisation to make us more efficient and customer focussed and the new structure has now been in place for a year with the changes bedding in well. Combined with recent improvements to our infrastructure, we are confident that this puts our services on a really sound, efficient and effective footing for the future.

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 once again, 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 £7 million.

Finally, as always, I would like to thank both the staff at the Group 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 development programme has also seen another successful year. Across the Group, a total of 30 new properties were completed with other new schemes such as Ashbook in Church Stretton nearly complete at the end of the year. Shared Ownership sales have gone well, significantly boosting our cashflow.

Shena Latto Chair

18th July 2011

1


Financial Statements 2011 – Shropshire Housing Limited & Group Housing Association Governance Status of the Association 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 Tenant Services Authority 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.

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 regularly 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.

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

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.

The Shropshire Housing Limited Board ensures and reviews compliance in all material respects in line with the principal recommenddations of the Code of Governance issued by the National Housing Federation which was updated in July 2010.

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 fee. Reasonable reimbursement is made for travel and subsistence in appropriate circumstances.

The Board of Management The Board currently comprises 8 members and is responsible for managing the affairs of the Group. The Board may include up to three coopted persons appointed by the Board who, may not be members of the Association, to act as specialist advisers. The Board members are drawn from a wide background bringing together professional,

2


Financial Statements 2011 – Shropshire Housing Limited & Group Statement of Board of Management’s Responsibilities

Disclosure of Information to Auditors

The Industrial and Provident Societies Acts 1965 to 2002 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 2010/2011 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 an 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 2002, 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 2011 – Shropshire Housing Limited & Group Statement on Internal Controls Assurance Responsibility 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:-

Group’s Standing Orders, Financial Regulations, Treasury Management Controls and Risk Management Strategy and procedure. These delegations and authority levels are reviewed annually.

 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.

Procedure manuals 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 27th May 2011, 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, and quarterly financial returns to our principal lenders. There are regular meetings of the 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 2011 – 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 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.

5


Financial Statements 2011 – 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 Overton Lesley Hyde Richard Jaboor Gordon Hodgkiss Stuart McLaren Martin Buxey John Thomas Tim Ralph

The Group now holds properties at a historical cost of £86.1 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 at around £144.8 million.

(retired 29.09.10) (appointed 29.09.10)

During the year, 30 new properties were developed, and a further 14 went out of management. At the year end, the number of housing and commercial properties managed by the Group totalled 4,530.

The Board reports that the Group produced a surplus of £2,992,555. This surplus is after charging £823,145 for depreciation on housing stock, as required by Financial Reporting Standard 15 and the Statement of Recommended Practice for Registered Social Landlords.

Cashflow and Liquidity The cashflow from operating activities during the year was £7.3 million. Loans increased by Nil during the year leaving total borrowings unchanged for the Group at £77.85 million at the year end.

Turnover of the Group was £20.7million. Interest charges amounted to approximately £3.2 million. Future developments

By order of the Board

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.

Shena Latto Chair

18th July 2011

6


Financial Statements 2011 – Shropshire Housing Limited & Group Operating and Financial Review Background

Meres and Mosses Housing Association is a relatively new organisation. 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.

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 Tenant Services Authority. 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 is progressing well with 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 very different stages of development.

The Group completed 30 new properties across Shropshire during the year with a significant development programme planned for 2011/12 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 currently comprises 8 members. 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 2011 – Shropshire Housing Limited & Group Continuous Improvement

Risks and uncertainties

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.

Shropshire Housing Group uses risk modelling software to help embed risk management to all levels of the Group. Financial Review The 2010/11 financial year has produced good results with an operating surplus being achieved. The net position is a surplus of £2,992,555 against a surplus in 2010 of £3,309,875. The Group paid over £10 million in acquisition and construction of housing properties and received over £1.8 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.

8


Financial Statements 2011 – 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 2011 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 2011 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 2002, 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 2002 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 2011 – Shropshire Housing Limited & Group Income and Expenditure Account for the year ended 31st March 2011 2011 GROUP £

2010 GROUP £

2010 SHL only £

2011 SHL only £

Note Turnover Operating costs

2 2

20,768,760 (14,607,466)

21,153,583 (14,544,969)

4,256,476 (4,256,688)

2,340,631 (2,342,533)

Operating surplus / (deficit)

2

6,161,294

6,608,614

(212)

(1,902)

Share of deficit in joint ventures Surplus on sale of fixed assets

10 9

(187) 16,868

(10,095) 18,075

-

1,752

Surplus / (deficit) on ordinary activities before interest

5

6,177,975

6,616,594

(212)

(150)

Interest receivable and similar income Interest payable and similar charges

3 4

28,821 (3,214,241)

76,578 (3,383,297)

212 -

150 -

2,992,555

3,309,875

-

-

-

-

-

-

2,992,555

3,309,875

-

-

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 and Deficits for the year ended 31 st March 2011 2011 GROUP £

2010 GROUP £

2010 SHL only £

2011 SHL only £

Note Surplus for the year Actuarial gain / (loss) Total recognised surpluses relating to the year

19

2,992,555 455,000

3,309,875 (614,000)

-

-

3,447,555

2,695,875

-

-

Shropshire Housing Limited has no recognised gains or losses for the period other from profit or loss.

10


Financial Statements 2011 – Shropshire Housing Limited & Group GROUP Balance Sheet at 31st March 2011 Note

2011 Group £

£

2011 SHL only

2010 Group £

£

£

2010 SHL only

£

£

£

Tangible fixed assets Tangible assets cost Less Depreciation Less Social Housing grant Other capital grants Investments / Joint Ventures

9 9

128,388,644 (6,859,756)

117,403,367 (5,932,678)

1,182,472 (508,625)

594,305 (215,236)

9

(33,662,848)

(31,549,245)

-

-

9

(823,690) 87,042,350

(823,690) 79,097,754

673,847

379,069

10

(21,349) 87,021,001

(21,162) 79,076,592

-

-

673,847

379,069

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

469,558 131,598 1,484,380

959,367 127,560 1,547,624

-

-

106,607

116,983

14

22,853,836

28,728,718

-

-

15

52,193 1,610,416

52,193 7,550,000

-

-

583,026 27,185,007

(130,358) 38,835,104

54,692 161,299

87,302 204,285

(4,082,368)

(4,611,675)

(835,138)

(583,346)

Creditors: amounts falling due within one year

16

Net current assets / (liabilities) Total assets less current liabilities

23,102,639

34,223,429

(673,839)

(379,061)

110,123,640

113,300,021

8

8

17

100,188,344

106,040,285

-

-

20

1,192,000

1,964,000

-

-

Creditors: amounts falling due after more than one year Provision for pension liability

Capital and reserves: Called up share capital Revenue reserve

8 8 th These financial statements were approved by the Board of Management on 18 July 2011 and were signed on its behalf by Shena Latto Chair Board Member 18 19

106 8,743,190 110,123,640

101 5,295,635 113,300,021

Jen Hayball Secretary

11

8 8


Financial Statements 2011 – Shropshire Housing Limited & Group GROUP Cash Flow Statement for the year ended 31st March 2011 2011 GROUP Note

Net cash inflow from operating activities

£

£

2010 GROUP £

2011 SHL only £

£

£

2010 SHL only £

£

a

7,323,697

Returns on investments and servicing of finance Interest received Interest paid

96,977 (3,084,453)

9,659,832

20,068 (3,147,966) (2,987,476)

550,629

212 (3,127,898)

376,289

150 212

150

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

(10,681,314)

(14,274,901)

-

-

-

-

-

12,246

(70,622)

(89,931)

-

-

1,825,258

2,532,350

-

-

(606,561)

(365,413) (9,533,239)

Financing Principal lease repayments Net housing loans received

b

Net shares issued

(Decrease) / increase in cash

(334,451) (577,761)

(322,205)

(29,189)

(24,662)

(5,690)

11,996

-

-

-

-

7

c

(577,761) (12,197,895)

9

-

-

(29,182)

(24,653)

(5,690)

11,996

(5,226,200)

(5,690,614)

(32,610)

66,230

12


Financial Statements 2011 – Shropshire Housing Limited & Group Notes to the Cash Flow Statement for the year ended 31st March 2011 (a)

Reconciliation of operating surplus to net cash inflow from operating activities 2011 GROUP £

Operating surplus / (deficit) Depreciation (Increase) / Decrease in debtors Current assets held for resale (Increase) in stock (Decrease) / Increase in creditors Movement in provisions Increase in share capital Net cash inflow from operating activities

(b)

2011 SHL

£

£

2010 SHL £

6,161,294 1,318,920 (64,390) 489,809 (4,038) (164,911) (413,000) 13

6,608,614 1,072,627 (946,110) 2,709,405 (22,498) 319,786 (82,000) 8

(212) 293,389 10,373 247,079 -

(1,902) 146,691 35,672 195,828 -

7,323,697

9,659,832

550,629

376,289

Reconciliation of net cashflow to movement in net debt 2011 GROUP £

(Decrease) / increase in cash in the year Housing loans received Change in net debt Net debt brought forward Net debt carried forward

(c)

2010 GROUP

2010 GROUP £

2011 SHL £

2010 SHL £

(5,226,200)

(5,690,614)

(32,610)

66,230

(5,226,200)

(5,690,614)

(32,610)

66,230

(70,430,358) (75,656,558)

(64,739,744) (70,430,358)

87,302 54,692

21,072 87,302

Analysis of changes in net debt - GROUP At 31st March 2010 £

At 31st March 2011 £

Cash Flow £

7,550,000 (130,358) 7,419,642

(5,939,584) 713,384 (5,226,200)

1,610,416 583,026 2,193,442

Debt due after 5 years

(77,850,000)

-

(77,850,000)

Total

(70,430,358)

(5,226,200)

(75,656,558)

Investments Cash at bank and in hand

13


Financial Statements 2011 – 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 2008 Statement of Recommended Practice “Accounting by Registered Social Landlords� 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 Shropshire Housing Limited Board on 27th May 2011 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 Landlords, 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.

14


Financial Statements 2011 – Shropshire Housing Limited & Group Notes (continued) Enhancement expenditure to our existing stock is capitalised where it results in an increase of economic benefits of the asset. Works are recognised as an addition to the asset only to the extent that they provide an enhancement to its economic benefits in excess of the standard of performance anticipated when the asset was first acquired or constructed or last replaced. Any works which do not result in an enhancement of economic benefits of a property are charged to the income and expenditure account. This includes expenditure incurred to ensure that the property can maintain its existing level of net rental income or the standard of performance anticipated when the asset was first acquired or constructed or last replaced. Depreciation on freehold housing properties is charged on the straight line basis over the expected useful lives of the assets as follows: Sheltered housing schemes with lower demand All other housing properties

- 10 years - 99 years

Shared Ownership properties are accounted for in accordance with the 2008 SORP. This means that profit or loss on 1st tranche sales are reported within operating surplus in the Income and Expenditure Account. 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. Operating leases Rentals payable under operating leases are charged on a straight-line basis over the term of the lease. Finance Leases Assets acquired under finance leases are capitalised and interest charged to revenue. 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.

15


Financial Statements 2011 – Shropshire Housing Limited & Group Notes (continued) 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 4.44% per annum. 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”.

16


Financial Statements 2011 – Shropshire Housing Limited & Group Notes (continued)

2

Turnover, operating costs and operating surplus 2011 GROUP Operating Operating Costs Surplus

Turnover

2010 GROUP Turnover Operating Surplus

Turnover

2011 SHL only Operating Costs

Operating

2010 SHL only Turnover Operating Deficit

£ Lettings Other Social Housing: Supporting People Agency management 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

£ 17,953,027

£ 12,381,210

£ 5,571,817

£ 17,467,322

£ 6,181,984

631,978

528,208

103,770

542,981

13,279 69,319 714,576

13,279 541,487

69,319 173,089

-

(413,000)

72,631

30,423

£

£

£

£

-

-

-

30,147

-

-

-

66,314 12,224 38,150 659,669

38,150 68,297

-

-

-

413,000

-

82,000

-

-

-

42,208

75,450 -

53,818 -

4,256,476

(4,256,688)

(212)

2,340,631

(1,902)

991,900 736,088

972,080 794,728

19,820 (58,640)

2,062,280 643,205

189,884 32,631

-

-

-

-

-

196,979 103,559 20,768,760

196,979 103,559 14,607,466

6,161,294

245,657 21,153,583

6,608,614

4,256,476

(4,256,688)

(212)

2,340,631

(1,902)

17


Financial Statements 2011 – Shropshire Housing Limited & Group Notes (continued) 2

Income and expenditure from lettings (continued) - GROUP 2011 GROUP

2010 GROUP

Housing Accommodation

Supported Housing / Older People

Foyer

Refuge

Shared Ownership

Total

Total

£

£

£

£

£

£

£

Income Net Rental Income

14,481,518

1,560,847

41,003

34,408

304,137

16,421,913

16,040,531

Net Service Charges Income Charges for Support Services Net rental Income Revenue grants from Homes and Communities Agency and Local Authority Aids & Adaptations Grant

235,350 14,716,868

236,858 39,527 1,837,232

66,664 107,667

39,992 74,400

19,237 323,374

598,101 39,527 17,059,541

524,318 44,498 16,609,347

250,884

372,252 -

116,120 -

108,573 -

-

596,945 250,884

678,277 137,545

Other Revenue Grants

-

-

-

23,650

-

23,650

25,634

Other Income

21,916

-

-

91

-

22,007

16,519

Total income from lettings

14,989,668

2,209,484

223,787

206,714

323,374

17,953,027

17,467,322

Management

3,071,010

399,004

65,020

8,634

54,492

3,598,160

3,290,211

Expenditure on lettings Services

390,061

253,920

70,823

51,973

9,934

776,711

765,345

Care and support

69,689

455,235

115,661

117,697

-

758,282

811,811

Routine maintenance

3,537,019

462,389

12,648

2,767

-

4,014,823

3,462,172

Planned maintenance

1,892,183

286,603

-

-

-

2,178,786

2,071,004

Rent losses from bad debts

201,654

32,812

979

(79)

-

235,366

111,929

Depreciation

694,099

104,494

4,063

2,026

14,400

819,082

772,866

Total expenditure on lettings

9,855,715

1,994,457

269,194

183,018

78,826

12,381,210

11,285,338

Operating surplus/(deficit)

5,133,953

215,027

(45,407)

23,696

244,548

5,571,817

6,181,984

Void Losses

(122,643)

(22,812)

(6,699)

(22,282)

-

(174,436)

(200,030)

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 2011 – Shropshire Housing Limited & Group Notes (continued) 3

Interest receivable and similar income

Interest receivable from bank deposits

4

2010 GROUP £ 76,578

2011 SHL £ 212

2010 SHL £ 150

2011 GROUP £ 96,000

2010 GROUP £ 122,000

2011 SHL £ -

2010 SHL £ -

3,277,152 (158,911) 3,214,241

3,427,183 (165,886) 3,383,297

-

-

2011 SHL £

2010 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

2011 GROUP £ 28,821

Surplus / (deficit) on ordinary activities before interest 2011 GROUP £

2010 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

1,318,920

1,072,627

293,389

146,691

40,789 6,070

36,720 4,211

40,789 6,070

36,720 4,211

2011 SHL £

2010 SHL £

Staff costs 2011 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 MD and customer services TRL Sheltered/Domestic Support

19

2010 GROUP £

5,232,218 404,972 447,003 6,084,193

5,072,264 392,918 447,258 5,912,440

1,882,530 138,883 230,785 2,252,198

778,363 61,092 143,023 982,478

230

223

74

26

30 9 14 52 6 97 22 230

26 11 9 51 9 95 22 223

30 13 25 6 74

26 26


Financial Statements 2011 – 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

2011 GROUP £ 452,268

2010 GROUP £ 410,053

2011 SHL £ 452,268

2010 SHL £ 261,624

The emoluments of directors disclosed above (excluding pension contributions) includes the following amounts paid: 108,389 96,144 108,389 96,144 Group Chief Executive 95,153 78,736 95,153 78,736 Group Director of Resources Group Assistant Director of 60,200 59,051 60,200 59,051 Performance & Governance Group Executive Director Development 76,029 73,591 76,029 and Assets 74,836 58,549 74,836 Group Executive Neighbourhoods 414,607 366,071 414,607 233,931 Aggregate amount of directors’ pension 37,661 43,982 37,661 27,693 contributions Fees payable by way of expenses and 63,112 63,060 40,050 26,861 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 2010/2011 was £19,285 (£2009/10 £17,541).

8

Taxation 2011 GROUP £

United Kingdom Corporation Tax Current (Credit)/Charge in accounts

-

2010 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

20

2,992,555

3,309,875

778,064

992,962

(797,537) 19,473

(1,004,530) 11,568

-

-


Financial Statements 2011 – 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 2010 106,763,324 Additions 5,673,870 Schemes completed 4,616,894 Disposals (449,187)

6,629,504 5,536,833 (4,616,894) -

1,943,704 -

1,680,344 610,617 (391,842)

386,491 4,986 -

117,403,367 11,826,306 (841,029)

At end of year 116,604,901

7,549,443

1,943,704

1,899,119

391,477

128,388,644

Depreciation and impairment At beginning of year Charge for the year Eliminated on disposals

4,521,722 815,019 -

-

74,081 8,126 -

1,096,134 397,906 (391,842)

240,741 97,869 -

5,932,678 1,318,920 (391,842)

At end of year

5,336,741

-

82,207

1,102,198

338,610

6,859,756

21


Financial Statements 2011 – 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

£

£

£

£

27,420,282 3,829,493 31,249,775

3,768,993 2,113,603 (3,829,493) 2,053,103

359,970 359,970

-

-

31,549,245 2,113,603 33,662,848

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 2011

79,818,385

5,496,340

877,837

796,921

52,867

87,042,350

At 31st March 2010

74,621,320

2,860,511

885,963

584,210

145,750

79,097,754

Works to existing properties during the year amounted to £7,726,375. This has been accounted for as follows:Planned maintenance - revenue £2,178,786 Improvements - capital £5,547,589 Assets held under finance leases: Cost Acc. Depreciation NBV

£ 239,354 (172,333) 67,021

22


Financial Statements 2011 – 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

532,820 588,167 -

61,485 -

594,305 588,167 -

At end of year

1,120,987

61,485

1,182,472

At beginning of year Charge for the year Eliminated on disposals

191,676 278,018 -

23,560 15,371 -

215,236 293,389 -

At end of year

469,694

38,931

508,625

Net book value At 31st March 2011

651,293

22,554

673,847

At 31st March 2010

341,144

37,925

379,069

Depreciation

Assets held under finance leases: Cost Acc. Depreciation NBV

£ 28,727 (14,363) 14,364

23


Financial Statements 2011 – Shropshire Housing Limited & Group Notes (continued) 9

Tangible fixed assets (continued) – GROUP ONLY

Housing properties and housing properties in the course of construction include £2,264,742 (2010: £2,105,831) of accumulated capitalised interest. 2011 GROUP

2010 GROUP

45

98

4,508 4 18 4,530

4,491 5 18 4,514

2011 GROUP

2010 GROUP

£ 16,868 (391,842) 391,842 16,868

£ 32,900 (120,984) 106,159 18,075

2011 GROUP

2010 GROUP

£

£

At 1st April 2010 Addition

40 -

40 -

At 31st March 2011

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 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.

24


Financial Statements 2011 – 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 2011 £ Share of turnover Share of loss before tax Taxation

(187) -

Loss after tax Balance brought forward

11

587 587

(21,848) (33)

(21,756) (33) (21,202)

40 (21,349)

40 (21,162)

2011 GROUP £ 100,958 368,600 469,558

2010 GROUP £ 548,989 410,378 959,367

2011 GROUP £ 131,598

2010 GROUP £ 127,560

Stock

Consumable maintenance stock

13

(21,389)

Assets held for resale

Shared ownership completed units Shared ownership work in progress

12

(10,095) (11,067) (21,162)

492 492

Shares held 40 ordinary £1 shares

£ -

(10,095) (187) (21,162) (21,349)

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

2010 £

£ -

Debtors

Due within one year Gross rental arrears Less: Provision for bad debts

Prepayments and accrued income

2011 GROUP £ 1,042,885 (500,744) 542,141

2010 GROUP £ 1,065,618 (569,843) 495,775

2011 SHL £ -

2010 SHL £ -

942,239 1,484,380

1,051,849 1,547,624

106,607 106,607

116,983 116,983

25


Financial Statements 2011 – Shropshire Housing Limited & Group Notes (continued) 14

Debtors due after more than one year

Improvement works

15

2010 GROUP £ 28,728,718

Current asset investments

Cash on short term deposit

16

2011 GROUP £ 22,853,836

2011 GROUP £ 1,610,416

2010 GROUP £ 7,550,000

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

2011 GROUP £ 2,069,184 140,232 180,935 65,283 1,626,734 4,082,368

2010 GROUP £ 2,520,136 141,566 141,811 353,627 1,454,535 4,611,675

2011 SHL £ 106,159 47,148 681,831 835,138

2010 SHL £ 79,578 20,345 483,423 583,346

* Includes recycled capital grant £ 18,750 18,750

Opening balance Grant element of Homebuy Closing Balance

This will be recycled into another capital scheme in 2012.

17

Creditors: amounts falling due after more than one year – GROUP ONLY 2011 22,853,836

Improvement Works

2010 £28,728,718

Housing loans The Group has a combined borrowing facility of £120,000,000 of which £77,850,000 had been utilised at 31st March 2011 (£42,150,000 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 4.7% and 5.8% including margin.

Amounts repayable by instalments and not wholly repayable within five years: Repayable after five years Refinancing costs Total

26

77,850,000

77,850,000

(515,492)

(538,433)

£100,188,344

£106,040,285


Financial Statements 2011 – Shropshire Housing Limited & Group 18

Called up share capital 2011 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

101 5 106

2010 GROUP £

2011 SHL £

93 8 101

2010 SHL £

8 8

8 8

The shareholders do not have rights to dividends, redemptions, distributions etc.

19

Reserves – GROUP ONLY 2011 Revenue reserve £ 5,295,635

2010 Revenue reserve £ 2,599,760

Surplus in the year Actuarial gain / (loss) on pension scheme

2,992,555 455,000

3,309,875 (614,000)

Balance carried forward

8,743,190

5,295,635

Balance as at 1st April 2010

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 £447,003 (2010: £447,258) covering 97 (2010: 109) employees. This includes £66,000 (£66,000 in 2010) 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. 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

27


Financial Statements 2011 – Shropshire Housing Limited & Group 20

Pension obligations (continued)

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 80.0%. The next triennial formal valuation of the Scheme is due as at 30 September 2011. The results of the valuation will be available in the Autumn of 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 20.3% during the accounting period. Member contributions vary between 5.9% and 7.5%. The employer contribution rate will be 20.2% for the next year but will additionally pay the lump sum of £151,800 for the next 5 years. Meres & Mosses Housing Association Ltd paid contributions at the rate of 14.1% during the accounting period. Member contributions were 5.9%. The employer contribution rate was set at 15% for the next 3 years. Financial assumptions A qualified independent actuary, Mercer Limited, carried out an actuarial valuation at 31st March 2011 for disclosure purposes. The major assumptions used were:

Rate of inflation Rate of increase in salaries Rate of increase in pensions Discount rate

31 March 11 3.4% 4.4% 2.9% 5.5%

31 March 10 3.3% 5.05% 3.3% 5.6%

28


Financial Statements 2011 – 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 2011 7.5% 5.1% 4.4% 6.5% 0.5% 7.5%

(841)

63

(1,179)

77

Analysis of the amount which has been charged to interest costs under Financial Reporting Standard 17 2011 2010 £’000 £’000 128 96 Expected return on assets (184) (177) Interest on liabilities (56)

Net return iv)

Value at 31st March 2010 £’000 1,354 229 281 92 96 92 2,144

Analysis of the amount which has been charged to operating surplus under Financial Reporting Standard 17 2011 2010 £’000 £’000 (49) (35) Current service cost 112 112 Employer contribution Total operating charge

iii)

Rate of return expected at 31st March 2010 7.5% 5.2% 4.5% 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. 2011 2010 £’000 £’000 2,256 2,144 Plan assets (3,097) (3,323) Benefit obligations Deficit in scheme

ii)

Value at 31st March 2011 £’000 1,470 226 257 86 115 102 2,256

(81)

Analysis of amount which has been recognised in the statement of total recognised surpluses and deficits (STRSD) 2011 2010 £’000 £’000 (19) 453 Asset (loss) / gain 173 (685) Liability gain / (loss) Changes in assumptions underlying the present value of the scheme liabilities 154 (232) Actuarial surplus / (deficit) for recognition in the STRSD

29


Financial Statements 2011 – 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

2011 £’000 (1,179) -

2010 £’000 (943) -

177 (49) 112 (56) 154

(35) 112 (81) (232)

(841)

(1,179)

Deficit at the end of year vi)

History of experience surpluses(deficits) calculated under Financial Reporting Standard 17 2011 As a % of Scheme assets/ liabilities

2011 £’000

Asset (loss) (19) 173 154

Change in assumptions Experience gain on liabilities Total amount recognised in the STRSD

0.8% 5.6% 5.0%

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 2011 £’000

Rate of return expected at 31st March 2011 7.5% 5.1% 4.4% 6.5% 0.5% 7.5%

1,983 304 347 116 155 137 3,042

Rate of return expected at 31st March 2010 7.5% 5.2% 4.5% 6.5% 0.5% 7.5%

Value at 31st March 2010 £’000 1,293 219 268 88 92 88 2,048

Liability and funding status under Financial Reporting Standard 17 of Meres & Mosses Housing Association’s part of the fund. 2011 2010 £’000 £’000 3,042 2048 Plan assets (3,393) (2,833) Benefit obligations (351)

Deficit in scheme

30

(785)


Financial Statements 2011 – 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 2011 2010 £’000 £’000 (163) (77) Current service cost Past service cost curtailment loss (163)

Total operating (charge)

(77)

ix)

Analysis of the amount which has been charged to interest costs under Financial Reporting Standard 17 2011 2010 £’000 £’000 133 88 Expected return on assets (173) (129) Interest on liabilities (40) (41) Net (charge) / return

x)

Analysis of amount which has been recognised in the statement of total recognised surpluses and deficits (STRSD) 2011 2010 £’000 £’000 496 417 Asset gain (195) (799) Liability (loss) / gain Changes in assumptions underlying the present value of the scheme liabilities Actuarial surplus / (deficit) for recognition in the STRSD

xi)

301

(382)

2011 £’000 (785) -

2010 £’000 (367) -

222 (163) 114 (40) 301

(77) 82 (41) (382)

(351)

(785)

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

31


Financial Statements 2011 – Shropshire Housing Limited & Group 20

Pension obligations (continued)

xii)

History of experience surpluses(deficits) calculated under Financial Reporting Standard 17

Asset gain Change in assumptions Experience (deficits) / gain on liabilities

496 (195)

2011 As a % of Scheme assets/ liabilities 16.3% 5.7%

Total amount recognised in the STRSD

301

8.9%

2011 £’000

21

(799)

2010 As a % of Scheme assets/ liabilities 20.4% 28.2%

(382)

13.5%

2010 £’000

417

Capital commitments – GROUP ONLY 2011 £

Capital expenditure contracted for but not provided in the financial statements Capital expenditure authorised by the Board of Management but not yet under contract

2010 £

957,678

7,468,000

2,772,000

3,100,000

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 and The Royal Bank of Scotland plc 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: 2011 GROUP £ Property Plant Within 1 year 1 - 2 years 2 - 5 years over 5 years

13,000 9,225 97,027 119,252

74,961 18,549 38,535 132,045

Total 87,961 27,774 38,535 97,027 251,297

32

2010 GROUP £ Total 12,245 102,359 34,939 95,125 244,668

2011 SHL £ Plant & Total -

2010 SHL £ Plant & Total -


Financial Statements 2011 – 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 2010. As of this date the estimated employer debt for South Shropshire Housing Association was £5,026,000. This has not been provided for, as no such decision has been taken.

24

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 Tenant Services Authority 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 Tenant Services Authority 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 Tenant Services Authority 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 Charitable Trust, which is a registered charity was registered on 9th December 2003, having an accounting reference date of 30th June. The proposed activities of Marches Charitable Trust are 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. Some of the trustees are our Board Members and the Secretary is a member of the Association’s staff. In the year to March 2011, South Shropshire Housing Association paid out £15,000 of donations on behalf of grants approved by Marches Charitable Trust. 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. Shropshire Housing Limited is one of the funding members of CHIC, the Central Housing and Investment Consortium. In 2011 we paid in £30,570 plus VAT. 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.

33


Financial Statements SHG 0511 (amended)