Page 1

1 South Shropshire Housing Association 1


South Shropshire Housing Association 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

Operating and Financial Review

8

Auditors’ Report

9

Income and Expenditure Account

10

Balance Sheet

11

Cash Flow Statement

12

Notes to the Cash Flow Statement

13 – 30

Notes to the Financial Statements

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

2 South Shropshire Housing Association 1


Tenant Services Authority Registration No. LH 3943

3 South Shropshire Housing Association 1


Financial Statements 2011 – South Shropshire Housing Association Chair’s Statement The 2010/11 financial year has produced reasonable results for us in continued difficult economic conditions, with a budgeted deficit being experienced. The net position is a deficit of £34,443 better than the budgeted deficit (at the revised budget stage) of £103,570.

Our development programme has also seen another successful year. We built 30 new properties during the year. This increases the total number of our properties by 43, as detailed in Note 9, as a further 13 properties were brought back into management.

Much of this deficit relates to the accounting treatment of our maintenance spend. Since this expenditure does not increase the capital value of our stock, it is treated as revenue and is offset against income in the year it is incurred. This creates a deficit but is all accommodated within the business plan.

Once again the association has been able to meet its objectives of providing good quality homes and services for our customers. This is largely due to the service and dedication of staff and Board members who have again met the challenges of another demanding year. I would like to thank all involved, including our tenants who work with us to help provide the desired services.

Drawdowns during the year were Nil as we had drawn down the maximum allowed in 2009/10 to ensure availability of cash in 2010/11.

Neville Stephens Chair

Once again, in 2010/11, we received more income for aids and adaptations work than anticipated. This enabled us to do more work for our tenants. It should be noted that it also shows up in the accounts as an increase in other repair costs. 18th July 2011 Administration costs and estate costs were significantly within budgets. Once again we were able to invest significant amounts of money into routine and planned maintenance including bathrooms, doors, windows, kitchens and roofing. This contributes significantly to improving the environment for our tenants and also helps ensure that we continue to we meet the Decent Homes Standards and our commitments to our funders, The Royal Bank of Scotland and Newcastle Building Society. 1


Financial Statements 2011 – South Shropshire Housing Association Housing Association Governance Status of the Association The Association is registered with and regulated by the Financial Services Authority under the Industrial and Provident Societies Act 1965, Registered No. 27191R and is 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, and is a charity for tax purposes (reference XT4981).

by the Board who may not be members of the Association, is to act as specialist advisers. There are 2 elected Tenant Members and Shropshire Council also nominates 1 Council Member to attend the Board of Management. (The Council nominees are not required to be shareholding members of the Association). These rights were transferred from South Shropshire District Council to the unitary authority when it was established in April 2009.

Purposes of the Association The Association was formed for the benefit of the community in providing housing, accommodation and assistance to help house people.

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 skills available and skills required. Effectiveness is regularly reviewed and monitored. The Board is responsible for the Association’s continuing strategy and policy framework. It delegates the day-to-day management and implementation of that framework to the Executive. The Board now meets six times a year for regular business. Other meetings take place as required and for training and development purposes.

Statement of Compliance with the NHF Code of Governance The Shropshire Housing Board reviews compliance in all material respects with the principal recommendations of the Code of Governance issued by the National Housing Federation which was updated in July 2010. Members of the Association There are two categories of shareholding membership: Tenant Members of which there are 36 and Voluntary Members of which there are 42, each holding a £1.00 share. Shropshire Housing Limited is also a member and holds 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.

Our Board of Management is responsible for the operating activities of the Registered Provider which includes setting strategy and policy in relation to development of new homes, improvement, modernisation and repair of existing homes, housing and estate management, tenant involvement, rent collection and arrears management. The Shropshire Housing Group Board is responsible for providing strategic direction and policy development, overall financial control and support, developing performance systems and monitoring compliance with all regulatory requirements.

The Board of Management The Board comprises up to 10 members and up to 5 co-optees and is responsible for managing the affairs of the Association. The role of the Co-opted persons appointed

The Chair is appointed Members of the Board. 2

annually

by


Financial Statements 2011 – South Shropshire Housing Association Remuneration of Board Members

Board Members’ Indemnity

Our Board Members receive a fee from the Association and this is agreed on an annual basis. Reasonable reimbursement is made for travel and subsistence in appropriate circumstances.

The Board has confirmed that the Association does have Board member and Officers Insurance in place.

Financial Instruments The Association does not have any abnormal exposure to price, credit, liquidity and cash flow risks arising from its trading activities. The Association does not enter into any hedging transactions and no trading in financial instruments is undertaken.

Statement of Board of Management’s Responsibilities 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 Association as at the end of the financial year and of the surplus or deficit for that period.

Disclosure of Information to Auditors

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.

In the case of each of the persons who are Board members of the Association at the date when this report was approved:

The Board of Management is responsible for making the appropriate arrangements for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Association and to enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 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 Association and to prevent and detect fraud and other irregularities.

So far as each of the Board members is aware, there is no relevant audit information of which the Association’s auditors are unaware; and

Each of the Board members has taken all the steps that they ought to have taken as a Board member to make them aware of any relevant audit information (as defined) and to establish that the Association’s auditors are aware of that information.

Going Concern After reviewing the Association’s Budget for 2011/2012 and based on normal business planning and control procedures, the members of the Board have a reasonable expectation that the Association has adequate resources to continue in operational existence for the foreseeable future. The financial statements have therefore been prepared on a going concern basis. 3


Financial Statements 2011 – South Shropshire Housing Association Statement on Internal Controls Assurance

Control Environment

Responsibility

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

The Shropshire Housing Group’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: 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.

 Control Procedures 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

We have 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. We are also satisfied that those systems were aligned to an ongoing process for the management of the significant risks facing the Group. No weaknesses were identified which would have resulted in material misstatement or loss and which would have required disclosure in the financial statements.

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. In accordance with regulations, annual financial returns are submitted to the Tenant Services Authority, and quarterly financial returns to the Association’s principal lenders. There are regular meetings of the Management Team to review and monitor revenue and capital 4


Financial Statements 2011 – South Shropshire Housing Association spending against budget assumptions. Cash balances are checked daily, coupled with revised forecast of borrowing requirements at regular intervals as necessary. There are a number of annual reports on other functions to the Board, and these include insurance arrangements and treasury management.  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 – South Shropshire Housing Association Board Members’ Report Members of the Board

Housing Properties and Other Fixed Assets

The members of the Board who served during the year were as follows:

We now hold properties at a historical cost of £59.6 million net of Housing Grants and depreciation. These were financed through grants, and internal funds.

Neville Stephens Chair John Thomas (retired 29.09.10) Nicholas Holcombe Tim Ralphs Colin Harrison John Stringer Irene Overton David Mullins Ian Graves Amie Smout (resigned 23.02.11) James Williamson (appointed 24.11.10) Clare Ratcliffe (co-opted appointed 26.01.11)

The value for existing use by a housing association of these properties is professionally assessed at in excess of £91.07 million. As a stock transfer association our debt to asset gearing ratio is considered to be in line with similar associations. During the year, our units in management increased by 43. There were 30 new properties completed. 13 units came back into management. At the year end, the number of housing and commercial properties we managed totalled 2,231.

The Board reports that we produced a deficit of £34,443 compared to the previous year’s deficit of £47,798.

Cashflow and Liquidity

Turnover has reduced slightly to just under £11.4 million compared to £11.5 million the previous year. Interest charges amounted to approximately £2.67 million.

The cashflow from operating activities during the year was £3 million, compared to £5.7 million in 2010. Loans remained static during the year resulting in total borrowings of £60.55 million at the year end.

Future developments The Board are continuing to look at new ways to develop new dwellings and to repair and improve existing properties. It is continuing to look to partnerships with other agencies in order to best secure these aims.

By order of the Board

Neville Stephens Chair

18th July 2011

6


Financial Statements 2011 – South Shropshire Housing Association Operating and Financial Review Background

Reporting Structure

South Shropshire Housing Association is an independent not for profit business formed in the early 1990’s to provide high quality affordable social housing in the South Shropshire area, together with properties in Herefordshire and Shrewsbury. We manage approximately 2,200 houses and aim to build about 50 new houses a year.

The Board comprises up to 10 members and up to 5 co-optees and is responsible for managing the affairs of the Association. The Board Members are drawn from a wide background bringing together professional, commercial and local experience. The Board is responsible for our continuing strategy and policy framework. It delegates the day to day management and implementation of that framework to the Executive. The Board meets six times a year.

We have developed services and expertise in a wide range of housing and related services. For example, in addition to improving, managing and maintaining our general needs homes, we run a foyer for young people, a refuge for women fleeing domestic violence, sheltered schemes for older people and run supported housing projects for vulnerable and homeless people.

Continuous Improvement We are committed to achieving excellent performance across the whole of our business and services. The Group has a comprehensive performance management framework which ensures a clear focus on performance and clear responsibility for scrutiny on performance at various levels.

Our vision is to provide quality homes and services involving people in building communities where they choose to live.

The Performance Management Group monitors the benchmarked data together with performance indicators, reports and best practice visits. The group is made up mainly of senior managers from across the Shropshire Housing Group.

Operating Review On 30th July 2007 we became part of the Shropshire Housing Group, with the newly formed Meres & Mosses Housing Association and Total Response Limited. At this time we adopted charitable rules. The formation of the Group has created efficiencies in administrative costs which are being used to improve frontline services, following consultation with tenants.

Risks and uncertainties The Group’s officers have a clear responsibility for identifying risk facing each of the areas in which they operate and for putting in place procedures to mitigate and monitor risk. It is the Performance Committee’s responsibility to review and assess these risks.

We have seen another successful year, developing 30 new properties and bringing 13 more back into management.

Financial Review

Once again, the combined expenditure on routine and planned maintenance has increased from the previous year’s level, with specific attention being directed towards bathrooms, doors, windows, kitchens and roofing.

The 2010/2011 financial year has produced good results with a smaller deficit than the previous year being achieved. The net position was a deficit of £34,443 against last year of £47,798. We paid over £5.4 million in acquisition and construction of housing properties and received over £1.8 million in capital grants relating to this.

7


Financial Statements 2011 – South Shropshire Housing Association Report of the Auditors to the members of South Shropshire Housing Association We have audited the financial statements of South Shropshire Housing Association for the year ended 31st March 2011 which comprise the Income and Expenditure Account, the Statement of Total Recognised Surpluses and Deficits, the Balance Sheet, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

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 Association’s affairs as at 31 March 2011 and of its income and expenditure for the year then ended; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and • have been properly prepared in accordance with the Industrial and Provident Societies Acts, 1965 to 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 Board is responsible for the preparation of financial statements and for being satisfied that they give a true and fair view.

Matters on which we are required to report by exception

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 Practice Board’s (APB’s) Ethical Standards for Auditors.

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 • the Association has not kept proper accounting records; or • the financial statements are not in agreement with the books of account; or • we have not received all the information and explanations we need for our audit.

This report is made solely to the Association’s members, as a body, in accordance with section 9 of the Friendly and Industrial and Provident Societies Act 1968 and the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the Association’s members as a body for our audit work, for this report, or for the opinions we have formed.

Date: Mazars LLP Chartered Accountants and Statutory Auditor 45 Church Street Birmingham B3 2RT

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s

8


Financial Statements 2011 – South Shropshire Housing Association Income and Expenditure Account for the year ended 31st March 2011 2011 £

2010 £

Note Turnover Operating costs

2 2

11,377,367 (8,754,664)

11,457,353 (8,749,874)

Operating surplus

2

2,622,703

2,707,479

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

10 9

(187) 6,203

(10,095) 11,162

2,628,719

2,708,546

Surplus on ordinary activities before interest Interest receivable and similar income Interest payable and similar charges

3 4

10,932 (2,674,094)

38,731 (2,795,075)

Deficit on ordinary activities before taxation

5

(34,443)

(47,798)

Taxation on deficit on ordinary activities

8

-

-

(34,443)

(47,798)

Deficit 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 £

2010 £

Note Deficit for the year Actuarial gain / (loss)

18

Total recognised surplus / (deficits) relating to the year

9

(34,443) 154,000

(47,798) (232,000)

119,557

(279,798)


Financial Statements 2011 – South Shropshire Housing Association Balance Sheet at 31st March 2011 2011 Note

£

2010 £

£

Tangible fixed assets Tangible assets cost Less Depreciation Less Social Housing grant Other capital grants

9 9 9 9

Investments/Joint Ventures

10

Current assets Assets held for resale Debtors Investments Cash at bank and in hand

11 12 13

469,558 1,012,110 303,088 226,132 2,010,888

959,367 1,023,352 3,650,000 (34,563) 5,598,156

14

(1,877,328)

(2,745,432)

Creditors: amounts falling due within one year

99,148,469 (5,216,523) (33,662,848) (623,690) 59,645,408 (21,349) 59,624,059

Net current assets

£ 94,237,256 (4,936,878) (31,549,245) (623,690) 57,127,443 (21,162) 57,106,281

133,560

2,852,724

Total assets less current liabilities

59,757,619

59,959,005

Creditors: amounts falling due after more than one year

15

60,217,069

60,200,017

Provision for pension liability

18

841,000

1,179,000

Capital and reserves Called up share capital Revenue reserve

16 17

79 (1,300,529)

74 (1,420,086)

59,757,619

59,959,005

These financial statements were approved by the Board of Management on 18th July 2011 and were signed on its behalf by Neville Stephens Chair

Board Member

Jen Hayball Secretary

10


Financial Statements 2011 – South Shropshire Housing Association Cash Flow Statement for the year ended 31st March 2011 2011 Net cash inflow from operating activities

Notes (a)

£

2010 £

£

£

3,036,193

Returns on investments and servicing of finance Interest received Interest paid

53,372 (2,591,578)

5,721,416

6,869 (2,591,734) (2,538,206)

Capital expenditure Acquisition and construction of housing properties Proceeds from sale of Right To Buy properties & miscellaneous land Capital grants received Purchase of other tangible fixed assets

(2,584,865)

(5,400,354)

(7,814,701)

(8,517) 1,825,258

11,162 2,532,350

(598)

(3,584,211)

(5,271,189)

Taxation Financing Net housing loans received Net shares issued

-

(c)

7

3 3 7

Decrease in cash

(c)

(3,086,217)

11

(2,134,635)


Financial Statements 2011 – South Shropshire Housing Association 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 £

Operating surplus Depreciation Increase in debtors Shared ownership cost of sales / Decrease in stock (Decrease) / Increase in creditors Movement in provisions Increase in share capital Net cash inflow from operating activities

(b)

2010 £

2,622,703 638,063 (33,577) 489,809 (440,810) (240,000) 5 3,036,193

2,707,479 598,506 (129,325) 2,122,888 498,866 (77,000) 2 5,721,416

Reconciliation of net cashflow to movement in net debt 2011 £

2010 £

(3,086,217) -

(2,134,635) -

Change in net debt Net debt brought forward

(3,086,217) (56,934,563)

(2,134,635) (54,799,928)

Net debt carried forward

(60,020,780)

(56,934,563)

Decrease in cash in the year Housing loans received

(c)

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

Investments Cash at bank and in hand

At 31st March 2011 £

Cash Flow £

3,650,000 (34,563)

(3,346,912) 260,695 (3,086,217)

303,088 226,132

Debt due after 5 years

(60,550,000)

-

(60,550,000)

Total

(56,934,563)

(3,086,217)

(60,020,780)

12


Financial Statements 2011 – South Shropshire Housing Association 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

- 15% to 25%

Housing Properties As required by Financial Reporting Standard 15 and the Statement of Recommended Practice for Registered Social Landlords, the Association has reviewed the useful economic lives of its housing properties and with effect from 1 st 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.

13


Financial Statements 2011 – South Shropshire Housing Association 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 surplus or deficit 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. 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. 14


Financial Statements 2011 – South Shropshire Housing Association 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 Association’s pension scheme 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 SSHA from 6 th August 2007. This is due to HMRC accepting our Charitable Objects. Shropshire Housing Limited, the parent undertaking and Total Response Limited a fellow subsidiary will still be 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. Supported People Income and Expenditure Separately identifiable accommodation based rent, service and support charge income along with any related costs for accommodation based supported housing are disclosed under “Supported Housing” within Note 2. Charges for and costs of support services funded under Supporting People are shown under “Supporting People” within Note 2 “Other Social Housing”.

15


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 2

Turnover, operating costs and operating surplus

Turnover

2011 Operating Costs

£ 9,665,134

£ 7,509,506

579,634 0 13,279 54,789 647,702

Operating Surplus

2010 Turnover Operating Surplus

£ Lettings Other Social Housing Supporting People Agency management Foyer non letting VAT

Sale of shared ownership first tranche Contribution to pension scheme Non social housing lettings

2,155,628

£ 9,332,097

£ 2,500,367

469,376 0 13,279 0 482,655

110,258 0 0 54,789 165,047

490,284 66,314 12,224 20,984 589,806

37,736 20,984 58,720

991,900

972,080

19,820

1,460,000

17,574

0

(240,000)

240,000

-

77,000

72,631 11,377,367

30,423 8,754,664

42,208 2,622,703

75,450 11,457,353

53,818 2,707,479

16


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 2

Income and expenditure from lettings (continued) 2011 Housing Accommodation £

Supported Housing for Older People £

2010

Foyer £

Refuge £

Shared Ownership £

Total £

Total £

Income Net Rental Income Net Service Charges Income Charges for Support Services

7,190,924 133,110 -

977,903 136,908 39,527

41,003 66,664 -

34,408 39,992 -

258,295 9,981 -

8,502,533 386,655 39,527

8,251,450 327,315 44,498

Net rental Income Revenue grants from Homes and Community Agency and Local Authority Aids & Adaptations Grant

7,324,034

1,154,338

107,667

74,400

268,276

8,928,715

8,623,263

250,884

225,572 -

116,120 -

108,573 -

-

450,265 250,884

534,919 137,545

Other Revenue Grants Other Income

11,529

-

-

23,650 91

-

23,650 11,620

25,634 10,736

Total income from lettings

7,586,447

1,379,910

223,787

206,714

268,276

9,665,134

9,332,097

Expenditure on lettings Management Services Care and support Routine maintenance Planned maintenance Rent losses from bad debts Depreciation

1,546,691 294,356 72,084 1,784,011 1,397,865 115,498 474,915

257,782 138,888 251,656 306,548 240,196 23,964 84,080

65,020 70,823 115,661 12,648 979 4,063

8,634 51,973 117,697 2,767 (79) 2,026

46,485 7,875 14,400

1,924,612 563,915 557,098 2,105,974 1,638,061 140,362 579,484

1,814,176 507,108 605,292 1,710,779 1,625,102 38,421 530,852

Total expenditure on lettings Operating surplus/(deficit) Void Losses

5,685,420 1,901,027 (71,268)

1,303,114 76,796 (14,990)

269,194 (45,407) (6,699)

183,018 23,696 (22,282)

68,760 199,516 -

7,509,506 2,155,628 (115,239)

6,831,730 2,500,367 (130,833)

The supported housing project is based on support given to individual tenants, and is property based. The rental income quoted refers to the rental due while the tenant is using the facility. 17


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 3

Interest receivable and similar income 2011 £

Interest receivable from bank deposits 4

2010 £

10,932

Interest payable and similar charges 2011 £

Net finance charge on pension (note 18) On bank loans, overdrafts and other loans repayable wholly or partly in more than 5 years Less: interest capitalised

5

38,731

2010 £

56,000

81,000

2,777,005 (158,911) 2,674,094

2,879,961 (165,886) 2,795,075

Deficit on ordinary activities 2011 £

2010 £

638,063

598,506

-

-

Deficit on ordinary activities is stated after charging: Depreciation of tangible fixed assets Auditors’ remuneration including VAT. (This is shown within the Group costs): In their capacity as auditors In respect of other services 6

Staff costs 2011 £

Wages and salaries Social security costs Other pension costs Average number of full-time equivalent persons employed during the year These were categorised as: Development Housing Sheltered/Domestic Support

18

2010 £

980,040 79,792 102,475 1,162,307

1,423,496 107,593 154,874 1,685,963

47

66

9 25 13 47

11 42 13 66


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 7

Directors’ emoluments

The remuneration paid to the Directors of the Association (the Board of Management and Managing Director) was: 2011 £

2010 £

Total emoluments

-

83,077

The emoluments of directors disclosed above (excluding pension contributions) include amounts paid to the highest paid director and Managing Director

-

73,591

-

9,486

19,649

31,868

Aggregate amount of directors pension contributions Fees payable by way of expenses and Remuneration to Board Members

The Managing Director is an ordinary member of the pension scheme and is now paid by Shropshire Housing Limited. No additional contributions to any pension scheme have been made and there were no special or enhanced terms which apply. The employers’ contribution to the pension scheme on behalf of the Managing Director was £9,486 in 2010.

8

Taxation

The Association was accepted as a charity with effect from 6 August 2007.

19


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 9

Tangible fixed assets

Freehold housing properties

£

Freehold housing properties in the course of construction £

Foyer

Office equipment, fixtures & fittings

Total

£

£

£

Cost At the beginning of the year 84,838,452 Additions 181,387 Schemes completed 4,616,894 Disposals (449,187)

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

1,943,704 -

825,596 598 (358,418)

94,237,256 5,718,818 (807,605)

At end of year 89,187,546

7,549,443

1,943,704

467,776

99,148,469

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

4,137,224 575,421 -

-

74,081 8,126 -

725,573 54,516 (358,418)

4,936,878 638,063 (358,418)

At end of year

4,712,645

-

82,207

421,671

5,216,523

20


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 9

Tangible fixed assets (continued) Freehold housing properties

£ Social Housing grants At beginning of year 27,420,282 Receivable Schemes completed 3,829,493

Freehold housing properties in the course of construction £

Foyer

Office equipment, fixtures & fittings

Total

£

£

£

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

359,970 -

-

31,549,245 2,113,603 -

2,053,103

359,970

-

33,662,848

-

-

-

-

-

-

-

623,690

-

623,690

Net book value At 31st March 2011

53,225,126

5,496,340

877,837

46,105

59,645,408

At 31st March 2010

53,280,946

2,860,511

885,963

100,023

57,127,443

At end of year 31,249,775 Other capital grants At beginning of year & end of year

Works to existing properties during the year amounted to £1,769,593. This has been accounted for as follows:Planned maintenance - revenue £1,638,061 Improvements - capital £131,532

21


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 9

Tangible fixed assets (continued)

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

2011

2010

45

98

2,209 4 18 2,231

2,165 5 18 2,188

2011

2010

£ 6,203 (358,418) 358,418 6,203

£ 11,162 (104,820) 104,820 11,162

Disposal of fixed assets

Proceeds Cost Depreciation eliminated on disposal Surplus on disposal 10

Investments 2011 £

2010 £

At 1st April 2010 Addition

40 -

40 -

At 31st March 2011

40

40

Shares in Joint Venture undertaking:

In 2005, the 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.

22


Financial Statements 2011 – South Shropshire Housing Association 10

Investments (notes continued)

South Shropshire Housing Association share of the joint venture, South Shropshire Local Homes Limited £

£

Share of turnover

-

Share of loss before tax Taxation Loss after tax Balance brought forward

(187) (187) (21,162) (21,349)

Share of assets Fixed assets Current assets

492 492

Share of liabilities Due within one year or less Due after more than one year-shares

(21,848) (33)

Share of net liabilities

(21,389)

Shares held 40 ordinary £1 shares 40 (21,349) 11

Assets held for resale

Shared ownership completed units Shared ownership work in progress

12

2010 £ 548,989 410,378 959,367

2011 £ 583,566 (319,379) 264,187

2010 £ 611,643 (359,084) 252,559

747,923 1,012,110

770,793 1,023,352

Debtors

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

Prepayments and accrued income

13

2011 £ 100,958 368,600 469,558

Current asset investments 2011 £ 303,088

Cash on short term deposit 23

2010 £ 3,650,000


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 14

Creditors: amounts falling due within one year 2011 £ Trade creditors 383,104 Other taxation and social security 73,901 Rent in advance 108,137 Social Housing Grant in advance* 65,283 Accruals and deferred income 1,246,903 1,877,328

2010 £ 682,871 86,430 86,164 353,627 1,536,340 2,745,432

* 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. 15

Creditors: amounts falling due after more than one year

Housing loans The Association has a combined borrowing facility of £65,000,000 of which £60,550,000 had been utilised at 31st March 2011 (£4,450,000 undrawn). The facility is for a term of 35 years on both fixed and variable rate terms. The Association is able to choose from time to time to select fixed term borrowing from variable rates. The borrowings are secured by fixed and floating charges over the assets of the Association, variable rates are at LIBOR plus the agreed margin. Fixed rate loans were between 4.7% and 5.8% including margin.

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

2011 £

2010 £

60,550,000

60,550,000

The balance sheet shows the position net of refinancing costs of £332,931 (2010: £349,983). 16

Called up share capital 2011 £

Issued and fully paid shares of £1 each: At beginning of year Issued during the year Relinquished during the year At end of year

2010 £ 74 5 79

72 2 74

The shareholders do not have the right to dividends, redemptions, distributions etc. 24


Financial Statements 2011 – South Shropshire Housing Association Notes (continued) 17

Reserves 2011 Revenue reserve £

2010 Revenue reserve £

Balance brought forward Deficit in the year Actuarial gain / (loss) on pension scheme

(1,420,086) (34,443) 154,000

(1,140,288) (47,798) (232,000)

Balance carried forward

(1,300,529)

(1,420,086)

18

Pension obligations

The Association’s employees are members of the Social Housing Pension Scheme (SHPS) or the Shropshire County Pension Scheme. Total pension cost for the Association was £102,475 (2010: £154,873) covering 16 (2010: 28) 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 Sousing 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 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 25


Financial Statements 2011 – South Shropshire Housing Association 18

Pension obligations (continued)

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 495 238 218 951 (1,177) (226)

Equities Bonds Other Market Value Past Service liabilities Past Service deficits

South Shropshire Housing Association Limited 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 3 years but will additionally pay the lump sum of £151,800 for the next 5 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 RPI inflation Rate of increase in salaries Rate of increase in pensions Discount rate

31 March 11 3.4% 4.4% 2.9% 5.5%

26

31 March 10 3.3% 5.05% 3.3% 5.6%


Financial Statements 2011 – South Shropshire Housing Association 18

Pension obligations (continued)

The assets of the scheme and the expected rate of return were:

Equities Bonds Government bonds Property Cash liquidity Other

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

Total market value of assets

i)

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

Liability and funding status under Financial Reporting Standard 17 of South Shropshire Housing Association’s part of the fund.

Deficit in scheme

2011 £’000 2,256 (3,097)

2010 £’000 2,144 (3,323)

(841)

(1,179)

Analysis of the amount which has been charged to operating surplus under Financial Reporting Standard 17

Current service cost Employer contribution Total operating charge iii)

1,470 226 257 86 115 102

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

2,256

Plan assets Benefit obligations

ii)

Value at 31st March 2011 £’000

2011 £’000 (49) 112

2010 £’000 (35) 112

63

77

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

(56)

27

(81)


Financial Statements 2011 – South Shropshire Housing Association 18

Pension obligations (continued)

iv)

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

v)

Movement in Financial Reporting Standard 17 deficit during the year 2011 £’000 Deficit at the beginning of the year (1,179) Movement in year: - Past service gain 177 - Current service cost (49) - Contributions 112 - Net return from other financial income (56) - Surplus / (Deficit) in STRSD 154 Deficit at the end of year

vi)

154

(841)

2010 £’000 (943) (35) 112 (81) (232) (1,179)

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

Asset loss Experience gain on liabilities

(19) 173

2011 As a % of Scheme assets/ liabilities 0.8% 5.6%

Total amount recognised in the STRSD

154

5%

2011 £’000

19

(232)

Capital commitments 2011 £

2010 £

Capital expenditure contracted for but not provided in the financial statements

957,678

7,468,000

Capital expenditure authorised by the Board of Management but not yet under contract

195,000

-

28


Financial Statements 2011 – South Shropshire Housing Association 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 Association’s own funds. There is a formal borrowing facility in place with Newcastle Building Society and Royal Bank of Scotland plc to fund all planned capital expenditure requirements.

20

Other financial commitments

The Association was committed to making the following annual payments under noncancellable operating leases: Operating leases which expire: 2011 £ Property

Plant

-

-

Within 1 year 1 - 2 years 2 - 5 years over 5 years

21

2010 £ Total -

Total -

Contingent liabilities

The Association has been notified by the Pensions Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme based on the financial position of the Scheme as at 30 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, since there is currently no intention to withdraw from the scheme. 22

Legislative provisions

The Association is incorporated under the Industrial and Provident Societies Act 1965. Registered No. 27191R and is 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. The ultimate parent undertaking is Shropshire Housing Limited, an Industrial and Provident Society regulated by the Tenant Services Authority. The entity has elected to take advantage of FRS 8 exemption from disclosing certain intragroup transactions. 23

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 proposed activities of Marches Housing & Charitable Trust are raising funds for the relief of poverty, sickness and old age and to advance education and provide leisure facilities in Shropshire 29


Financial Statements 2011 – South Shropshire Housing Association 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. In the year to March 2011, South Shropshire Housing Association paid out £11,500 of donations on behalf of grants approved by Marches Charitable Trust. 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.

30

Financial Statements SSHA 0511  

1 1 2 Housing Association Governance 9 Income and Expenditure Account 8 Auditors’ Report 1 Chair’s Statement - review of activities 7 Operat...

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