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