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Financial Statement 2012

Report and Financial Statements For the year ended 31 March 2012


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Contents Board Members, Senior Executives, Advisers and Bankers

4

Mission and Values

5

Report of the Board of Management

6-13

Statement on Corporate Governance 14-16 Report of the Chairperson on Remuneration

17

Five Year Financial Summary

18-19

Report of the Auditors

20-21

Income and Expenditure Account

22

Balance Sheet

23

Cash Flow Statement

24

Notes to the Cashflow Statement

25

Notes to the Financial Statements

26-47

Financial Statement 2012

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Board Members, Senior Executives, Advisors and Bankers Registered Office Industrial and Provident Societies Registered Number Welsh Assembly Government Registered Number

197 Newport Road, Cardiff CF24 1AJ 18805R L019

Board of Management Chair

Mr J Bevan

Vice-Chair

Ms J Low

Other Members

Mr S Cranston Mr N Speed Ms S Finch Mr I Jones

Ms C Goddard Ms A Willis Mr J Roberts Mr T Minty

Ms S Watt (stood down July 2011) Ms N Macdonald (stood down July 2011) Ms H Selway (resigned March 2012) Ms M Rudman (resigned July 2011) Ms M Parker (resigned Feb 2012)

Senior Executives

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Chief Executive / Company Secretary

Ms C. O’Meara

Director of Technical Services

Mr A. Bateson

Director of Housing & Community Services

Ms H. Armstrong

Director of Finance & IT

Mrs S. Cole

External Auditors

Haines Watts Wales LLP Pagefield House 24 Gold Tops Newport, NP20 4EY

Internal Auditors

Orbit Group Ltd T/A “Audit Matters” Garden Court Harry Weston Road, Binley Business Park Coventry, CV3 2SU

Principal Solicitors

Hugh James Hodge House 114-116 St Mary Street Cardiff, CF10 1DY

Principal Bankers

Barclays Bank PLC Windsor Court, 3 Windsor Place Cardiff, CF10 3BT


Mission and Values Our Mission To provide good quality homes and build communities through partnership and innovation.

Our Vision • To be leading and innovative, enabling people and communities to realise their potential

Our Values • • • • • • • •

To aim for excellence in everything we do To empower staff and tenants To be committed to sustainability To be innovative To have both personal and organisational integrity To be business like To achieve equality and diversity in the services we provide and the opportunities we offer To be accountable

Outcomes we are working to achieve • • • •

Environmentally sustainable homes, workplaces and communities People have access to well managed and maintained homes Communities are strong and resilient Cadwyn is a strong and independent social enterprise valued for our contribution

Our Strategic Aims • To meet diverse housing needs using all available resources • To reduce our environmental impact and ensure our stock substantially meets Welsh Housing Quality Standard (WHQS) by 2012 • To work with tenants to deliver the best services • To contribute to sustaining communities • To achieve continual improvement through innovation, efficiency and collaboration • To ensure financial viability, probity and independence • To attract and retain the best people

Financial Statement 2012

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Report of the Board The Board of Management presents its report and the audited financial statements for the year ended 31st March 2012. Principal activities The Association’s primary activity is the provision of good quality affordable homes and services for those in housing need.

Board Members and Senior Executives The Board Members and Senior Executives of the Association who served during the year are set out on page 4. This year saw several board members resigning due to other commitments. These included Miss S Watt, Ms N Macdonald, Ms H Selway, Ms M Rudman and Ms M Parker. All other Board Members served throughout the year.

Responsibilities of the Board of Management The Board is responsible for preparing the annual financial statements in accordance with applicable law and United Kingdom Generally Accepted Accounting Practice. The Industrial and Provident Societies Acts and other registered social housing legislation require the Board to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Association and of the Income and Expenditure of the Association for that period.

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In preparing those financial statements the Board are required to:• select suitable policies and apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards and the Statement of Recommended Practice: "Accounting by Registered Housing Associations" have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Association will continue to operate. The members of the Board of Management are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Association and enable it to ensure that the financial statements comply with the relevant legislation. The Board are also responsible for maintaining an adequate system of internal control and safeguarding the assets of the Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


The Board confirms that:• all necessary steps have been taken to make themselves aware of matters which would be relevant for audit purposes and have communicated such matters to the auditors; and • so far as they are aware, at the date of approval of the financial statements there are no matters relevant to the audit of the financial statements which have not been disclosed to the auditors.

Reserves and Donations Transfers to and from reserves are set out in note 16. The accounting policies for general, restricted and designated reserves are set out in note 2. There were no donations made in the year. Annual General Meeting The Annual General Meeting will be held on 23th July 2012 at the Welsh College of Music and Drama, Cardiff.

Auditors A resolution to appoint Haines Watts Wales LLP, as external auditors will be proposed at the Annual General Meeting.

C.O'Meara Chief Executive

Financial Statement 2012

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Operating and Financial Review During the year we changed our performance management system from one based on Performance Indicators to one based on outcomes. Whilst there is a need to collect baseline data to show progress in future years, there is already an understanding that this approach has helped in focussing our work.

Outcome 1: Environmentally sustainable homes, workplaces and communities We are committed to making a positive contribution to tackling climate change and the impact it has on our communities. This extends to our place of work and to the homes we provide. We want our tenants to live in homes that are energy efficient. We want to ensure that we work and deliver services in a way that minimises our carbon footprint. We believe that by providing high quality homes, maximising office energy efficiency and improving our working practices, we can reduce the energy we use and help reduce the energy costs for tenants.

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What do we think it will look like? • Tenants live in homes that are energy efficient and they spend less of their disposable income on energy bills. • Tenants understand the green technology in their homes and tell us that they are satisfied with how much it costs them to heat their homes and can pay for the electricity they use. • The priority we place on sustainable working practices achieves a year on year reduction in our carbon footprint per employee

Standard Assessment Procedure (SAP) for the energy rating of dwellings: This year we were able to improve energy efficiency through Welsh Housing Quality Standard (WHQS) investment. We also installed PhotoVoltaic (solar panels) to over 170 homes reducing fuel bills for those tenants. Reduction in Cadwyn’s carbon footprint: As a growing organisation we are focussing our efforts on reducing carbon emissions per employee. Currently the data is based on energy consumption and transportation costs and we are further developing our methodology for measuring our carbon emissions.


Outcome 2: People have access to well managed and maintained homes Providing good quality homes and services to our tenants and access to homes for as many people as possible is our core business. As well as continuing to develop traditional housing for rent we operate a leasing scheme for homeless people and a social lettings agency providing an alternative to the private rented sector. We want our tenants to value their homes and the services we provide, and to feel proud to live in them. We believe good quality, safe and secure housing can provide the foundation for people to live fulfilled lives and contribute to their community's wellbeing.

What do we think it will look like? • Our properties are of a good standard and are well looked after • People are safe, tenants choose to stay with us and we deal with Anti-Social Behaviour (ASB) well when it happens • We continue to provide more homes through the private sector as well as through traditional ownership • We don’t have many complaints and we learn from those we do

Financial Statement 2012

Welsh Housing Quality Standard (WHQS): the Welsh Government requires that all property meets the WHQS by 2012 and we have been directing our expenditure to meet this date since 2002. The specifications and definitions have changed and we have reforecast our date so that all properties that are capable of meeting the standard will do so by the end of the financial year. Reactive repairs: Speed of repairs and repairs by appointment has been a priority for tenants and we have “leaned” the process, introduced a direct works organisation ‘Cadwyn Works’, reconfigured the customer service team and introduced ‘tablets’ giving the operatives real time data and information. Time taken to complete repairs is now under 10 days. Tenants, residents and staff are safe: Gas safety checks are carried out by Cadwyn Works team for our own stock and the Temporary Accommodation scheme. We have achieved an excellent performance by timely monitoring and swift action if we are not given access by tenants. ASB cases: We have recently reviewed processes and have bought software to improve monitoring. Tenant satisfaction levels of this service have increased in the tenant’s survey 2011 but remains a priority.

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Operating and Financial Review (Cont’d) Number of homes provided: Growth of general needs homes has been modest and reducing grant levels mean this trend will continue. Calon/Temporary Accommodation scheme is operating successfully in Cardiff with modest growth planned. There is the potential to grow this scheme in other areas. CanDo growth is a key part of the budget and a new team has been established to help deliver it. Complaints and compliments: We have introduced a new procedure making it faster and easier to complain. A case management approach and ensuring complaints are a standard meeting agenda item will ensure complaints are learned from, not repeated, and that customer service is improved.

Outcome 3: Communities are strong and resilient Our core purpose is to provide affordable good quality homes and manage and maintain them well. However, we know that while a home is essential for health and wellbeing, so being part of, and contributing to, a strong and resilient community makes a positive difference to people’s lives. Our key partner, Cardiff Council, has also adopted an outcomes approach to evaluating its service delivery, and values the contribution we make to the wider community agenda.

What do we think it will look like? • Tenants are equipped to participate with us and in the broader community through their engagement with us, they feel they understand about services and satisfied with their ability to influence and participate through traditional and digital means. Debt is minimised and people have access to financial services and assistance to help them into work. • Tenants feel positively about the communities they live in and access to housing and services is fair to all sections of the community. • Tenants have access to employment and training opportunities to enhances their chances of getting into work

Involvement: Last year we revamped arrangements for Tenant Participation and started using social network sites to encourage wider engagement. We have a good track record of involving tenants in a number of ways but need to concentrate further on hard to reach groups.

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Financial Health: 60% of our tenants are either on benefit or in low paid employment, and during the recession many costs have risen and welfare benefits are being reduced. Enabling tenants to obtain money advice, access affordable loans, build savings, and maximise benefit take up will help ensure financial stability and security of tenure. Data collection has been patchy and a new system is being developed to fit in with the Financial Inclusion strategy and provide us with a platform for preparing for the implementation of the welfare benefit changes Employment & Training: Providing more opportunities for training and work will increase skills and experience and make individuals more work ready and have more skills to offer. We have been successful in obtaining external funding to help us do this and will continue to develop this as part of our role. Equality & Diversity: One of our values relates to being fair to all sections of the community in terms of the quality of service and opportunities we offer. Access to the homes we let to minorities is a good proxy for ensuring that our policies and procedures achieve this objective.

Financial Statement 2012

Outcome 4: Cadwyn is a strong and independent social enterprise valued for its contribution At a time when public investment for providing homes is being drastically reduced, we need to ensure that the organisation is strong enough to achieve the outcomes we want to deliver. This means that we need have good financial management systems in place, generate income from other sources and optimise our resources both to create new homes and to help strengthen communities. Essential to both are having a strong committed board and well trained and motivated staff. Challenge from the board and from independent sources will help us improve.

What do we think it will look like? • Our external and internal audits are clean and we are accredited by external agencies for the standard of our service. • We are financially viable and have robust financial and risk management systems. • Board members and staff are of a high quality and committed to Cadwyn • We are innovative, exploring new ways to diversify and generate income to support core services.

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Operating and Financial Review (Cont’d) External validation: Apart from use of external and internal auditors for reporting on strength of governance and financial measures and controls, we use many other methods to support our outcomes approach. These include the external stakeholder survey, accreditation by external agencies, (Investors In People, Best Companies, Customer Service Excellence, etc.). The external auditors have been changed this year which has introduced a different perspective and given us assurance that we have a robust financial framework. The internal auditors have identified one fundamental issue relating to Business Continuity Plan. There is now an action plan to correct this within 6 months. Financial viability: Cadwyn is improving on its cashflow forecasting and has good relationships with its lenders. We produce long term plans that demonstrate our stability as we continue to ensure we meet our covenants. This year will see Cadwyn accessing £5million in bond finance. High performing board and staff: The growth of the organisation brings opportunities and challenges for everyone. Staff sickness levels are well below average, and we work hard to ensure that Cadwyn is a great place to work. The turbulent external environment and the new regulatory regime has resulted in the Board developing their strategic leadership role, equipping them for future challenge.

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Income generated from other sources: The Private sector housing now accounts for 30% of our turnover and this is now forecast to increase in line with other growth. New opportunities are being constantly being sought. We also have solar energy income estimated at over ÂŁ100k due to installations that Cadwyn completed in 2011/12.


The results for the past five years are set out on page 18-19 with details of Cadwyn’s accounting policies on pages 21 to 47. The surplus before transfers to reserves was £151,000. This is considered satisfactory by the Board, who believe the Association has adequate resources to continue its operations for the foreseeable future. As such the accounts have been prepared on a “going concern” basis. The surplus was below that budgeted mainly due to the impact of component accounting. The depreciation figures were higher than estimated. Also growth in the private leasing schemes was slower than forecast. In the year the Association fully established its private sector leasing schemes within Cardiff with a total of 595 homes at the 31st Mar 2012 being provided via private landlords. All private leasing schemes were making a positive contribution to Cadwyn’s surplus by the year end. The component accounting has resulted in a prior year adjustment with 2011 figures being restated throughout. Full details are provided in disclosures. In the five year summary this shows as an apparent decrease in maintenance expenditure in the years ending March 2012 and 2011 as the majority of planned maintenance is now capitalised for future depreciation. Interest payable remains low as much of the loan book is fixed at an affordable rate or otherwise enjoying the benefit of current low market interest. Next year Cadwyn will be receiving another £5million to fund further development of homes. This year Cadwyn handovers amount to 35 with private landlords adding a further 135 making a total of 1889 homes being managed by the Association.

Key risks These have been identified as • A threat to rental income; caused by Welfare Reform and increasing costs of living. We are looking to better understand our tenants, helped by profiling, to produce solutions that match their needs including increasing access to bank accounts. Currently our rent arrears figures are the best they have ever been. • Increasing homelessness is a threat to communities; we are working with our partners on whole city solutions, examining our current portfolio for any opportunities, and working to further extend the private rented schemes. • Inability to access capital funding for new development; we are looking at market opportunities for shorter ownership periods and pursuing alternative funding mechanisms.

Treasury, Cashflow and Liquidity The Association has a treasury policy approved by the Board and a strategy that is updated annually with the production of new budget and business plan. The treasury policy seeks to address the funding and liquidity risk and covenant compliance. All covenants were met in the year. After initial conversations with our lenders we are positive that these may be renegotiated to eliminate the impact of component accounting which has substantially increased our gearing and could otherwise limit our ability to use our reserves for future developments. The revenue cashflow income of rents received is sufficient to meet its obligations including interest payable and to make contributions to repayment of debt. Cadwyn still continues to receive grant for development of new homes with £221,000 received in the year. Cadwyn benefits from a revolving loan facility of £3million and a further £500,000 overdraft.

Financial Statement 2012

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Statement on Corporate Governance Community Housing Cymru (CHC) Charter for Good Governance

Applications are considered by the Board of Management and if accepted, shareholders pay a non returnable £1 in receipt for a share certificate. (As a not for profit organisation, shareholders receive no dividend.)

As members of our representative body, we are committed to working in ways that are consistent with the Code of Conduct and guidance on governance.

Board of Management

Governance During the year the Board reporting structure had the meetings equally split so that half dealt primarily with strategic matters and the other half with operational information. Appraisals for each individual member are carried out in pairs and the performance of those fulfilling Honorary positions were also reviewed. This then leads to an assessment of strengths and weakness with a training plan put in place to address the findings during the following year.

Policy for Admitting New Shareholders The obligations of shareholders are to act at all times in the interests of the Association and for the benefit of the community. The Board welcomes applications from those who may feel excluded due to race, colour, religion, gender, disability, age or sexual orientation and also from any individuals or organisations that can demonstrate this commitment. Those interested in becoming shareholders will receive a pack of information and are requested to complete an application form. This will require them to sign a statement confirming that they understand and accept our mission and values, and the obligations of shareholding membership. Those under the age of 18 or employees cannot be shareholders. Further information is contained in our rules, a copy of which is available on request.

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The Board of Management ("the Board") comprises up to ten shareholding members and up to five elected tenant members. It is responsible for managing the affairs of the Association. The existing Board Members have been drawn from a wide background, bringing together professional, commercial and local experience. The Board meets on the first Wednesday of each month, ten months of the year. The Chair and Vice Chair are elected annually with maximum consecutive periods of office limited to four years. Each year one third of the longest serving members of the Board must retire from office. They may stand again, and other shareholders are encouraged to stand. The main obligations of the Board are to agree the mission, vision and values of the organisation. Seven strategic aims have been set which are now replaced by four outcomes that we will work to achieve. Staff report bi-monthly on the performance in delivery. The day to day management and implementation of the aims is undertaken by the Directors’ team, led by the Association's Chief Executive. The remainder of the Directors’ Team comprises the Director of Finance & IT, Director of Technical Services and the Director of Housing Management and Community Services. The Directors’ team meets formally on a fortnightly basis and attends monthly Board Meetings.


Election of Board Members

Board Structure

Every year, one third of the longest standing Board members stand down from the Board. They may re-stand for election without nomination.

In order to ensure a consistent and corporate approach by the Board, all matters are considered by the full Board of Management. Training is provided to all Board Members to ensure that they are equipped to deal with the full range of issues that come before them.

Invitations will go out to all shareholders in advance of the Annual General Meeting with instructions as to how they can stand for the shareholder category of Board membership. Nomination from another shareholder is necessary and nomination papers are included. The papers will include information on the skills, knowledge and experience of those remaining on the Board and those standing for election. If there are more nominations and retired members who wish to stand again than vacancies available, a ballot will be held at the Annual General Meeting. This year we have actively sought new candidates for board membership. Vacancies are created in the same way for Tenant Board members. Existing members can re-stand for election, provided that they have attended three tenant events during the previous year being eligible to stand. Those standing in this category do not have to be shareholders, and can be nominated by tenants who do not need to be shareholders. Candidates are invited to submit a short summary of their skills and experience and what they could contribute, and this is sent to all tenants with ballot papers. Votes are returned in sealed envelopes, being held in a sealed box until a specified date, where they are opened in front of candidates, a Board member and an external scrutiniser. The results are then announced at the AGM Vacancies that arise during the year in either category can be filled until the AGM by individuals co-opted by the Board.

Financial Statement 2012

Audit Committee The audit committee comprises of five board members who manage the relationship with external and internal auditors. They also agree and monitor progress of the internal audit plan. They will make recommendations to be discussed at meetings of the full Board.

Internal Financial Control The Board is ultimately responsible for the Association's system of internal financial control which is designed to provide reasonable, but not absolute assurance regarding the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. In fulfilling these responsibilities, the Board has reviewed the effectiveness of the system of internal financial controls on the basis of the criteria set out in the Cadbury Report published in 1994, "Internal control and financial reporting" and HFW Circular 2/10 "Internal financial control and financial reporting". The Board believes that it has considered the major business and financial risks. The internal audit function is provided by “Audit Matters�, a subsidiary of the Orbit Housing Group, who report quarterly to the Audit committee. The Board has reviewed the effectiveness of the Association's internal financial control system for the period 1 April 2010 to the date of approval of the financial statements. There have been no material developments since the Balance Sheet date.

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Statement on Corporate Governance (Cont’d) The following mechanisms have operated and are designed to provide effective internal control:• Clearly defined management reporting structures and delegations of authority. • Careful recruitment followed by an effective induction and balanced training programme. • Policy and procedural guidance. • Management information and accounting systems with monthly reporting of performance. • Audit Committee working with Cadwyn’s internal and external functions. • Inspection of Landlord services by the Wales Audit Office (completed March 2007). • Compliance reporting of loan covenants. • An annually updated 5 year business plan • 30 year financial forecast No weaknesses have been discovered, the scale of which would result in any material losses, contingencies or uncertainties which would require disclosure as recommended by the above mentioned HFW Circular. On the basis that such a system can provide only reasonable but not an absolute assurance that it relates to the needs of the business, the system as a whole was found at the time of approving the Report and Financial Statements, to be generally appropriate to the scale of the Association's activities.

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Report of the Chairperson on Remuneration The Board of Management are responsible for, amongst other things, setting the Association's remuneration policy for Board Members, senior executives and officers.

the remuneration packages of the senior executives. Basic salaries are set having regard to each executive officer's responsibilities and pay levels for comparable positions, as well as affordability.

Pensions

Whilst no remuneration is paid to Board Members acting in their capacity as Board Members, a policy exists for reimbursement of out-of-pocket expenses incurred whilst undertaking Association business.

Most senior executives are members of the Social Housing Pension Scheme. It is a defined benefit final salary pension scheme. They participate in the scheme on the same terms as all other eligible staff. The Association contributes to the scheme on behalf of its employees.

The Greenbury Report

Other Benefits

Listed companies are required to disclose details of their remuneration policies for directors and their individual remuneration packages in their financial statements following the publication of the Greenbury report in July 1995. As a publicly accountable organisation, we strive to demonstrate openness and responsiveness in the conduct of our business. Accordingly, we wish to comply with the recommendations of the Greenbury report and provide details of our remuneration policy for Board Members and senior executives and their individual remuneration packages below.

The senior executives are also entitled to the provision of a car, with business mileage being met by the Association.

Service Contracts The senior executives are employed on the same terms as other staff except that their notice periods range up to three months. Individual Remuneration Package Full details of senior executives' individual remuneration packages are included in note 4 to the audited financial statements.

The Association's Remuneration Policy The Board of Management is involved with the appointment of senior executives. Their remuneration is considered from time to time, after taking external advice, by a Remuneration and Personnel Committee, of board members who make recommendations to the full Board of Management. It also agrees the brief within which the Chief Executive can negotiate staff salaries. The Board pays close attention to remuneration levels in the sector in determining

Financial Statement 2012

John Bevan Chair

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Five Year Financial Summary Year ended 31st March 2012 Income and Expenditure Account

2012 £'000

2011 £'000

2010 £'000

2009 £'000

2008 £'000

Restated

Operating Income:Net Rents and Service Charges (incl Grants) Surplus on Sale of Housing Property

Less:Repairs and Maintenance Management Costs Service Costs

Operating Surplus Profit / (Loss) on disposal on other fixed assets Interest Payable and Similar Charges Interest Receivable and Other Income Surplus For the Year before transfers (to) / from Reserves

18

9,350 -

8,256 -

7,086 -

6,428 -

5,693 -

9,350

8,256

7,086

6,428

5,693

2,275 5,508 498

2,080 4,808 321

2,382 3,252 171

2,245 2,824 297

2,044 2,404 227

8,281

7,208

5,805

5,366

4,675

1,069

1,048

1,281

1,062

1,018

(923)

(6) (900)

(873)

(944)

(817)

5

26

10

3

-

151

168

418

121

201


Year ended 31st March 2012 Balance Sheet

2012 £'000

2011 £'000

2010 £'000

2009 £'000

2008 £'000

70,154

69,405

63,448

Restated

Housing Properties Less: Social Housing Grant / Other Grants

73,966

69,472

(47,192) (46,971) (45,954) (46,895) (42,682)

Other Fixed Assets / Property Investment

26,774 1,435

22,501 1,394

24,200 1,279

22,510 1,303

20,766 1,378

Net Current Assets/ (Liabilities)

28,209 (338)

23,896 1,312

25,479 (92)

23,813 2,732

22,144 52

Long Term Liabilities

(25,056) (22,543)

(17,772) (19,348) (15,120)

Net Assets

2,815

2,664

7,615

7,197

7,076

Share Capital and Reserves

2,815

2,664

7,615

7,197

7,076

Financial Ratios Gearing Interest Cover Surplus (before reserves transfer) to turnover Capital (property) growth

50.10% 45.42% 33.18% 33.55% 30.70% 1.16 1.19 1.48 1.13 1.25 1.62% 2.03% 5.90% 1.88% 3.54% 6.93% 7.42% 5.75% 9.48% 11.74%

The above summary represents the trading results of Cadwyn Housing Association Limited for the last five year period, as outlined within the Income and Expenditure Account, together with an overview of the Balance Sheet position as at each year end. The impact of component accounting can clearly be seen. The net reserve adjustment is £5.2million.

Financial Statement 2012

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Independent Auditors’ Report to the Members of Cadwyn Housing Association Limited Year Ended 31st March 2012 We have audited the financial statements of Cadwyn Housing Association Limited (‘the Association’) for the year ended 31 March 2012 which comprise the Income and Expenditure Account, 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). This report is made solely to the Association’s members, as a body corporate, in accordance with the requirements of the Industrial and Provident Societies Acts 1965 to 2002, schedule 1 to the Housing Act 1996 and the Accounting Requirements for Social Landlords Registered in Wales - General Determination 2009. 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.

Respective responsibilities of the Board of Management and the auditor As explained more fully in the Statement of Board of Management’s responsibilities, set out on page 9, the Board of Management is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law

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and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practice Board’s Ethical standards for Auditors. We review whether the Board of Management’s statement on internal financial control reflects the Association’s compliance with the Housing for Wales Circular HFW 02/10 “Internal controls and reporting” and we report whether the statement is not inconsistent with the information of which we are aware from our audit of the financial statements. We are not required to form an opinion on the effectiveness of the Association’s corporate governance procedures or its internal financial control.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Association’s circumstances and have been consistently applied and adequate disclosed; the reasonableness of significant accounting estimates made by the Board of Management; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Board of Management’s report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.


Opinion on Internal Control In our opinion, with respect to the Board of Management’s statement on internal financial control: • the Board of Management has provided the disclosures required by the Circular and the statement is not inconsistent with the information of which we are aware from our audit work on the financial statements.

Opinion on financial statements In our opinion the financial statements: • give a true and fair view of the state of the Association’s affairs as at 31 March 2012 and of its income and expenditure for the year then ended; • have been properly prepared in accordance with the Industrial and Provident Societies Acts 1965 to 2002, schedule 1 to the Housing Act 1996 and the Accounting Requirements for Social Landlords Registered in Wales - General Determination 2009;

Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts 1965 to 2002 require us to report to you if, in our opinion: • a satisfactory system of control over transactions has not been maintained; or • 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. Haines Watts Wales LLP Statutory Auditor Pagefield House 24 Gold Tops Newport NP20 4PG

........................................................................... Date

Financial Statement 2012

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Income and Expenditure Account Year ended 31st March 2012 Notes Turnover - Continuing Activities Less: Operating costs Operating Surplus - Continuing Activities Profit / (Loss) on disposal Other Fixed Assets Interest receivable and similar income Interest payable and similar charges Surplus on ordinary activities before taxation Tax on surplus on ordinary activities Surplus for the year

3 3 6 7 8 9

2012 £'000 9,350 (8,281) 1,069 5 (923) 151 -

2011 £'000 8,256 (7,208) 1,048 (6) 26 (900) 168 -

151

168

There is no difference between historical cost surpluses and deficits

Continuing Operations None of the Association's activities were acquired or discontinued during the above two financial years Statement of Total Recognised Gains and Losses For the year ended 31st March 2012 Profit for the year attributable to shareholders of the company Prior year adjustment Restated Surplus 2011 Unrealised surplus / (deficit) on revaluation of service charge asset Total recognised gains and losses for the year Prior year adjustment Total gains and losses recognised since last annual report

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2012 £'000 151 151 151 -

2011 £'000 193 (25) 168 27 195 (5,146)

151

(4,951)


Balance Sheet Tangible Fixed Assets Housing properties: Cost less accumulated depreciation Less: Other grants

Other tangible fixed assets Investment Total Fixed Assets Current Assets Short-term Investment Debtors - due within one year Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors:amounts falling due after more than one year Capital and reserves Called up share capital Revenue reserve Designated reserves

Notes

2012 ÂŁ'000

2011 ÂŁ'000

10(a) 10(b) 10(b)

73,966

69,472

46,763 429

11(a) 11(b)

46,542 429 47,192 26,774

46,971 22,501

1,422 13 28,209

1,381 13 23,895

12

889 419 1,308

1,000 612 1,525 3,137

14

1,646

1,825 (338) 27,871

1,312 25,207

15

25,056 2,815

22,543 2,664

18 16 16

-

-

2,545 270

2,399 265 2,815 2,815

2,664 2,664

These financial statements were approved by the Board of Management on 23rd July 2012 and were signed on its behalf by:` J Bevan J Low C.O'Meara Chair Board Member Chief Executive / Secretary

Financial Statement 2012

23


Cash Flow Statement Year ended 31st March 2012 Notes £'000 Net cash inflow from operating activities

(a)

2012 £'000 1,506

£'000

2011 £'000 1,690

Returns on investments and servicing of finance Interest received Interest paid and similar charges Net cash outflow from returns on investments and servicing of finance

5 (923)

25 (896) (918)

Capital expenditure Purchase and construction of housing properties Social Housing Grant received Purchase of other fixed assets Other capital grants received Receipts from sale of fixed assets Grant Repaid by Association

(5,163) 236 (243) -

(871)

(4,920) 793 (282) (5,170)

Financing Issue of ordinary share capital Housing loans received Movement of finance charges to housing properties Housing loans repaid

Increase/(Decrease) in cash

24

2,725 (250)

(b)

(4,409)

5,000 (223) 2,475

4,777

(2,107)

1,187


Notes to Cash Flow (a). Reconciliation of Operating Surplus to Net Cash Inflow from Operating Activities Restated

2012 £'000 1,069 991

2011 £'000 1,048 861

2,060

1,909

(291) (263)

(194) (25)

1,506

1,690

(2,107) (2,475)

1,187 (4,777)

(4,582)

(3,590)

Operating surplus Depreciation of tangible fixed assets

Working capital movements Debtors Creditors Net cash (outflow)/inflow from operating activities (b). Reconciliation of net cashflow to movement in net debt Increase/(decrease) in cash Cash (inflow)/outflow from (increase)/decrease in debt and lease finances (Increase)/ decrease in net debt from cash flows (Increase) in net debt Net debt at 31st March 2011

(20,304) (16,714)

Net debt at 31st March 2012

(24,886) (20,304)

(c). Analysis of net debt Cashflow

Other

Cash at bank and in hand Current asset investments

1st April 2011 £'000 2,525 -

£'000 (2,107) -

£’000 -

31st March 2012 £'000 419 -

Housing loans

(22,828)

(2,475)

-

(25,303)

Changes in debt

(22,828)

(2,475)

-

(25,303)

Changes in net debt

(20,303)

(4,582)

-

(24,884)

The Cashflow for the year ended 31 March 2011 has been restated. Operating surplus reduced by £25,000 which is made up of £517,000 increase in depreciation £18,000 loss on disposal of assets and £510,000 decrease in expenditure due to planned maintenance capitalisation.

Financial Statement 2012

25


Notes to the Financial Statements Year Ended 31 March 2012 1. Establishment of the Association Cadwyn Housing Association Limited was established and registered under the provisions of the Industrial and Provident Societies Act 1965 and is registered with the Welsh Assembly Government.

2. Principal Accounting Policies Format and Basis of Accounting The principal accounting policies of the Association are set out in paragraphs below. These Financial Statements have been prepared under the historical cost convention as modified by the revaluation of office premises and in accordance with applicable Accounting Standards, the Statement of Recommended Practice for Registered Social Housing Providers Update 2010 and the Accounting Requirements for Social Landlords Registered in Wales – General Determination 2009.

Turnover Turnover represents rental and service charge income receivable (net of voids), income from revenue based Government grants and management fees receivable (including contributions towards running costs) from managing agents net of VAT where applicable.

Housing Properties Housing properties are shown at cost less depreciation and the amount financed by Social Housing Grant (SHG) or other capital grant received. The year ended 31 March 2012 accounts are the first to be prepared under the new component accounting rules. The move to a component based split on a property from a single housing component resulted in a number of significant changes in accounting policies and practice. The result of the change in policy includes • Housing properties are now split into 10 components all with varying lifecycles as detailed below • The Land component is not depreciated, all other components are depreciated on a monthly basis depending on the lifecycles (detailed below) • Relacement components are identified separately and allocated to specific housing properties • Where a net book value exists on a replaced component, the value is written off to the Income and Expenditure Account. As a result of the implementation of component accounting a prior year adjustment was included in the comparative figures for the year ended 31 March 2012. The restated Income and expenditure now shows a net decrease of £25k in the surplus and a net decrease of £230k to the housing properties at cost. A prior, prior year adjustment was also included within the opening balance of the housing properties at cost for the year ended 31 March 2012. This amounted to a net decrease in housing properties of £4,941k as a result of the component accounting adjustment. The cost of properties represents the cost of

26


acquiring land and buildings, development costs and those costs relating to administration within the Technical Services Department of the Association. Interest on loans raised to finance developments are capitalised up to two months after the last day of the month in which practical completion occurred.

Social Housing Grant/ Other Grants Social Housing Grants (SHG) are receivable from the Welsh Assembly Government. SHG is repayable under certain circumstances primarily following the sale of a property, but will normally be restricted to the net proceeds of sale. However the Association is now able to recycle the grant over an unspecified period although this will be periodically reviewed by WAG. SHG is subordinated in respect of loans by agreement with the Welsh Assembly Government. Other grants shown in the Balance Sheet include grant monies received from CADW for the refurbishment of Old Ty Bronna House, a Grade 2* listed building owned by the Association and run in partnership with Church Army, together with recycled capital grant received upon the sale of homes acquired under the Home Release Scheme. Under the new component accounting methodology SHG is allocated to Land and Structure on the split 21% and 79% respectively

Financial Statement 2012

Other Fixed Assets and Depreciation Other (non housing) tangible fixed assets are stated at cost less accumulated depreciation. Depreciation has been provided to write them down to their estimated residual values over their expected useful lives. No depreciation is provided on freehold land. The principal annual rates used are:-

• Lifecycles Components Structure Rehabilitated Properties Newbuild Properties

100 years 150 years

Depreciation on structure is calculated on cost less allocated SHG Roof Electrical Bathrooms External works Windows and doors Kitchens Heating

100 years 30 years 26 years 26 years 26 years 16 years 16 years

• Motor Vehicles Depreciated over the term of expected useful life, down to the estimated net realisable value, using the reducing balance method.

27


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) • Office/Property Furniture and Equipment Office furniture and equipment is depreciated at 15% per annum on a reducing balance method. Property furniture and equipment is depreciated on a reducing balance method over the anticipated useful lives of the assets.

• Computer Equipment Depreciated on a straight line basis over four or ten years depending on anticipated useful life.

• Office Premises Depreciated at 2% per annum on a straight line basis.

Investments Investments when undertaken, are valued at the lower of cost and net realisable value.

Development Administration Development administration costs are capitalised only to the extent that they are directly attributable to bringing the property into working condition for its intended use. Such costs represent specific development costs together with the incremental cost to the Association that would have been avoided if the property had not been constructed or acquired.

Cash and Bank The Association has a treasury policy which is concerned with the effective control of the risks associated with the management of its cashflows. The Association has a mixed loan portfolio and this will include tools available to maximise interest received and reduce interest payable. Therefore the Association has entered into a revolving credit facility with Barclays Bank and this is presented in the accounts in accordance with FRS 5, ‘Reporting the substance of transactions’.

28

Accounting for VAT The majority of the Associations business is exempt from VAT and the partial exemption method is applied to recover amounts where applicable. The Association will seek to agree a special method of VAT recovery with HMRC when appropriate. Therefore in the accounts amounts are generally shown gross with VAT costs incurred however any taxable income and associated costs will be shown net.

Accounting for Interest Interest is accrued for the period to which it relates. Interest payable on material development cashflows that are funded by the Association are capitailised to the cost of that development at the cost of available funding for the period

Reserves The Association’s Revenue (or general) Reserve has built up over a number of years from annual surpluses generated from its core business. The Property Dilapidations reserve will be utilised to fund repairs (if so required) to those properties currently leased under the Calon Adref project, prior to handover back to the Lessors (after three years) and properties leased for Temporary Accommodation.


Pension Costs The Association participates in the Social Housing Pension Scheme (SHPS) a multiemployer defined benefit scheme and retirement benefits to employees of the Association are funded by contributions from all participating employers and employees of the scheme. The Scheme is funded and is contracted out of the state scheme. The SHPS Scheme is a multi-employer defined benefit scheme. Employer participation in the Scheme is subject to adherence with the employer responsibilities and obligations as set out in the “SHPS House Policies and Rules Employer Guide”

Apportionment of Employee and Administration Costs Costs are attributable to activities where they can be identified and are apportioned to the relevant sections of the Income and Expenditure Account where such an attribution is not possible. This apportionment is generally made in relation to the full time equivalent numbers of staff within each area.

Hostels Nightingale House is a directly managed family hostel which came into management in November 2005. The rental income and grant monies receivable have been included within the supported housing column in note 3(b).

the financial risk. Where the Agency carries the financial risk, the Income and Expenditure Account includes only that income and expenditure which relates solely to the Association. Other income and expenditure relating to the hostels (within this category) is excluded in the Income and Expenditure Account. (See note 3(a))

Leasing Schemes – Calon Adref / CanDo Lettings / Temporary Accommodation These leasing schemes involve Cadwyn working in partnership with Cardiff County Council and private landlords. The Calon Adref and Temporary Accommodation schemes enables Cadwyn to lease family accommodation from private landlords. The CanDo Lettings scheme aims to get homeless people rehoused in the Private Rented Sector (PRS), speeding up the move-on from hostels and reducing the blocking up of hostel bed spaces. All costs incurred in bringing the scheme on-line have been written off as incurred to the Income and Expenditure Account.

Taxable Activities During the year ended March 2012 the Association fitted over 170 solar photovoltaic installations which will produce taxable income from the Feed In Tariff as energy is sold to the National Grid. There are currently no tax liabilities.

Other Hostels are managed by agencies. Social Housing Grants and other revenue grants are claimed by the Association as owner of the hostel premises. The grants are included in the Income and Expenditure Account and Balance Sheet of the Association. The treatment of other income and expenditure in respect of hostels depends upon whether the Association carries

Financial Statement 2012

29


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 3a) Turnover: operating surplus and surplus before taxation by class of business Restated 2012 Operating Operating Surplus Turnover Costs (Deficit)

£'000

£'000

Social Housing Lettings Housing accommodation - Fully rented

4,896

(4,312)

Supported Housing

1,266

(993)

6,162

(5,305)

Non-Social Housing Activities Leasing Scheme Properties Other

3,188 -

Total Income from Social Housing Lettings

9,350

Operating surplus for the year

£'000

2011 Operating Operating Surplus Turnover Costs (Deficit)

£'000

£'000

584

4,473

(4,000)

473

273

1,200

(890)

310

857

5,673

(4,890)

783

(2,976) -

212 -

2,559 24

(2,318) -

241 24

(8,281)

1,069

8,256

(7,208)

1,048

1,069

£'000

1,048

Restated figures for 2011 include an increase for operating costs for fully rented housing accommodation of £25,000 resulting in a corresponding decrease in operating surplus.

30


3b) Turnover from lettings General Needs and Sheltered Housing

Supported Housing

Leasing Scheme

2012 Total

Restated 2011 Total

Income Rents receivable Service charges Income Income for Support Services Other Revenue Grants

£'000 4,654 190 52

£'000 559 27 671 9

£'000 2,778 322 88

£'000 7,991 539 671 149

£'000 6,898 638 676 44

Turnover from Social Housing Lettings

4,896

1,266

3,188

9,350

8,256

Cost Management Costs Service Charge Costs Routine Maintenance Major Repairs expenditure Bad Debts Depreciation of Housing Properties Other Costs

1,057 459 1,278 700 16 716 87

926 39 13 14 -

2,623 498 284 69 -

4,606 1,575 700 98 716 87

4,045 321 1,345 735 21 676 65

Operating Costs on Social Housing Activities

4,313

992

2,976

8,281

7,208

Operating surplus / (deficit) on Social Housing Lettings

583

274

212

1,070

1,048

Rent Loss Due to Voids (memorandum note)

(38)

(6)

(271)

(315)

(372)

-

102

-

102

103

123

-

-

123

-

Payment of Grants (memorandum note)

Tenant Support and Community Developement (memorandum note)

Restated Turnover from lettings for 2011 includes £18,000 increase of management costs from loss of disposal, £510,000 decrease in major repairs and increase of £517,000 depreciation charge. A resulting net increase on costs of £25,000 and subsequent decrease in surplus.

Financial Statement 2012

31


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 4

Board Members and senior executives

No emoluments were paid to the Board Members during the year (2011: Nil ). Total expenses reimbursed to Board Members for the year amounted to £951 (2011: £3,105) The emoluments paid to the highest paid director, the Chief Executive, excluding pension contributions were £92,630 (2011: £87,938). In comparison to the lowest paid employee this represents a ratio of 5:1. The emoluments of the senior executives were:Basic salary (Gross & ER's NIC) £'000 C.O'Meara (Chief Executive) 90,842 A.Bateson 67,111 H. Armstrong 70,028 S.Cole Aggregate emoluments

Benefits in kind £'000 1,788 4,922 2,598

Pension contributions £'000 5,760 4,307 4,446

2012 Total £'000 98,390 76,340 77,072

2011 Total £'000 97,472 74,971 76,347

65,813

3,556

4,215

73,584

71,071

293,794

12,864

18,728

325,386

319,861

Pension costs are shown as contributions paid on the senior executives' behalf. The Chief Executive is a member of the Social Housing Pension Scheme on the same basis as other members of the Association. Pension contributions made to the Social Housing Pension Scheme on behalf of the Chief Executive were calculated on the same basis as other eligible pension scheme members. Total expenses reimbursed to the senior executives for the year amounted to £1,400 (2011: £3,489)

32


5 Employees The average number of full time equivalents (including executives) employed during the year was:

2012 No.

2011 No.

96

88

46 7 18 25

42 4 20 22

2012 £'000 2,434 217 171

2011 £'000 2,168 165 176

2,822

2,509

2012 £'000

2011 £'000

991 13 2 100

861 13 85

Analysis by function:Housing Management/Maintenance Development Supported Housing Administration

Staff costs Wages and salaries Social security costs Pension costs (note 19)

6 Operating surplus The operating surplus is stated after charging:Depreciation Auditors' remuneration in their capacity as auditors Auditors' remuneration in respect of other services Losses from Bad debts for service charges and rents receivable Depreciation costs have been restated in 2011 to include the reclassification of loss on disposals for components replaced in the year

Financial Statement 2012

33


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 7 Interest receivable and other income Interest receivable Miscellaneous Income

2012 £'000 5 -

2011 £'000 26 -

2012 £'000 -

2011 £'000 -

923

900

923

900

8 Interest payable and similar charges Interest on loans repayable in instalments within five years Interest on loans repayable in instalments wholly or partly in more than five years

9 Taxation No liability to UK taxation arises from the surplus on the Income and Expenditure Account.

34


10(a)Housing properties held for letting Completed Cost At 31st March 2011 Prior year adjustment

£'000 72,764 1,029

Under Construction £'000 3,206 -

Schemes completed in year Additions Grants receivable

73,793 5,507 1,030 -

3,206 (5,507) 4,237 -

76,999 5,267 -

(340)

-

(340)

At 31st March 2012

79,990

1,936

81,926

Depreciation At 31st March 2011 Prior year adjustment

1,327 6,200

-

1,327 6,200

Charge for the year Eliminated on disposal

7,527 716 (283)

-

7,527 716 (283)

At 31st March 2012

7,960

-

7,960

At 31st March 2012

72,030

1,936

73,966

At 31st March 2011 - Restated

66,266

3,206

69,472

Disposals

Total Housing properties £'000 75,970 1,029

Net book value

Development administration costs amounting to £160,077 (2011:£149,948) have been capitalised and included in the above.

Financial Statement 2012

35


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d)

The total net book value of housing properties comprises:Freehold land and buildings Long leasehold land and buildings Short leasehold land and buildings

2012 £'000

Restated 2011 £'000

72,718 581 667

68,215 585 671

73,966

69,472

Tangible fixed assets have been restated for the introduction of component accounting. The costs of homes completed has been increased by £1,028,000 by capitalisation of planned maintenance. Depreciation has also increased by £6,200,000 for the writing down of component lives. The net book value at 31 March 2011 being reduced by £5,171,000. During the year £4,237,000 capital additions have all been allocated to Work in Progress and £1,030,000 capital additions to costs of components. Amounts of planned maintenance written off to revenue in the year amounted to £486,169.

10 (b) Social Housing Grant and Other Grants Housing properties held for letting Completed

At 1st April 2011 Schemes completed Receivable during year Disposals during year At 31st March 2012

£'000 45,450 1,313 -

Under Construction £'000 1,092 (1,313) 221

Total SHG £'000 46,542 221

Other Grants £'000 429 -

-

-

-

-

46,763

-

46,763

429

Other grants received include various grants from Cardiff City Council and Cadw grants in respect of the Old Ty Bronna House site. All SHG received by the Association to date has been capitalised and is represented above as £46,763,000.

36


11(a) Other Tangible Fixed Assets

Cost

Freehold Offices £'000

Office Property Motor furniture and furniture and Vehicles equipment equipment £'000 £'000 £'000

Total Other Fixed Assets £'000

At 1st April 2011 Schemes completed in year Additions Grants receivable Disposals Transfer Adjustment

671 -

193 88 -

1,139 133 -

502 38 (13) 111

2,505 259 (13) 111

At 31st March 2012

671

281

1,272

638

2,862

Depreciation At 1st April 2011 Charge for the year Eliminated on disposal Transfer Adjustment

237 13 -

80 27 -

547 150 -

260 27 (12) 111

1,124 217 (12) 111

At 31st March 2012

250

107

697

386

1,440

At 31st March 2012

421

174

575

252

1,422

At 31st March 2011

434

113

592

242

1,381

2012 £'000

2011 £'000

13

13

Net book value

11(b) Investment Home Release Scheme

The long term investment relates to the investment made by Cadwyn in acquiring a higher equity proportion of a property originally purchased (by the owner) under the Home Release Scheme (H.R.S). This followed a request to Cadwyn by the property owner to assist him due to his poor health and employment concerns. The investment is shown at cost and represents an equity stake of 9.354% of proportion of a property originally purchased (by the owner) under the Home Release Scheme (H.R.S).

Financial Statement 2012

37


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 12 Debtors - amounts falling due within one year

Arrears of rent and service charges Less:Provision for bad and doubtful debts

Capital debtors Other debtors and prepayments

2012 £'000 227 (85)

2011 £'000 240 (64)

142

176

11

-

736

436

889

612

13 Cash at bank and in hand The Association currently has a £3,000k revolving credit facility with its bankers. The outstanding amount available for drawing without prior notice is £275K which is in addition to the £500K overdraft facility that we have arranged with our bank (2011 - £3,000K). As stated in the accounting policies use of this facility allows the Association to maintain minimum cash balances and therefore maximize savings on interest payable.

14 Creditors: amounts falling due within one year Loan interest under construction Other taxation and social security Rent and service charges paid in advance Trade Creditors Other Creditors Housing Loans

38

2012 £'000 29 540 77 151 402 174

2011 £'000 26 435 71 128 544 312

273

310

1,646

1,826


15 Creditors: amounts falling due after more than one year

Housing loans Recycling Capital Grant Fund

2012 £'000 25,030 26

2011 £'000 22,517 26

25,056

22,543

The Recycling Capital Grant Fund has arisen through Social Housing Grant retained on the sale of a property under the Statutory Right to Acquire.The Social Housing Grant has to be used within three years to fund new developments or capital major repairs to existing schemes.

Housing loans: Housing loans are secured by specific charges on the association's housing properties. The interest rates are fixed at between 5.20% and 12.48% or vary with the market rate. The loans are repayable in the years 2010 to 2039. Loans are repayable in instalments due as follows:-

One year or less Due between one and two years Due between two and five years Due in five years or more

2012 £'000 273 1,101 3,502 20,427

2011 £'000 310 639 958 20,920

25,303

22,827

During January 2012 Cadwyn Housing Association subscribed to a bond issue and committed to placing property secruity in order to receive £2m in bond finance within 12 months.

Financial Statement 2012

39


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 16 Reserves 1st April 2011

Prior year adjustment

Restated

£’000

Net Transfer to / (from) reserve £’000

Surplus for the year £’000

At end of year £’000

Designated Reserves Planned Maintenance Service Charge Assets Property Dilapidations Legacies

3,841 297 265 1

(3,841) (297) (1)

265 -

5 -

-

270 -

Total

4,404

(4,139)

265

5

-

270

Revenue Reserve

3,431

(1,032)

2,399

(5)

151

2,545

2012 Total

7,835

(5,171)

2,664

-

151

2,815

27

168

2,664

2011 Total - Restated

7,615

(5,146)

2,469

The reserves balances brought forward from last year have been restated with a reduction in planned maintenance of £3,841,000, £297,000 service charge asset, £1,007,000 in revenue reserves and £25,000 reduction in the surplus for the year ended 31 March 2011. Making an overall reduction in reserves of £5,171,000. The accounting policies adopted in respect of designated reserves are explained in note 2.

40


17 Called up share capital Allotted, issued and fully paid At beginning of year Shares issued during the year Shares surrendered during the year At end of year

2012 £ 87 -

2011 £ 86 1 -

87

87

2012 £'000

2011 £'000

774

2,830

3,463

7,310

The shareholders have no equity interest in the Association and have no right to dividends or distributions on winding up. Shares cancelled or redeemed are written back to reserves.

18 Capital Commitments Capital expenditure that has been contracted for but has not been provided for in the financial statements Capital expenditure that has been authorised by the Board of Management but has not yet been contracted for Capitial commitments are to be funded primarily with private finance raised with some Social Housing grant anticipated.

Financial Statement 2012

41


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 19 Pensions The SHPS scheme Cadwyn Housing Association participates in the Social Housing Pension Scheme (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 comingled 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 scheme offers several benefit structures. An employer can elect to operate different benefit structures for their active members and new entrants. Cadwyn has operated the final salary scheme with 1/60th accrual rate for their active members and the Career average revalued earning (CARE) with 1/60th accrual rate for new entrants. 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%.

42

The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the Scheme as at 30 September 2010. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The funding update revealed an increase in the assets of the Scheme to £ 1,985 million and indicated a reduction in the shortfall of assets compared to liabilities to approximately £497 million, equivalent to a past service funding level of 80.0%. The Scheme’s 30 September 2011 valuation is currently in progress and will be finalised by 31 December 2012. The results of the 2011 valuation will be included in next year’s Disclosure Note. Cadwyn 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 2011. At this date the estimated employer debt for Cadwyn was £5,713,254. Growth Plan Cadwyn Housing Association participates in The Pensions Trust’s Growth Plan (the Plan). The Plan is funded and is not contracted-out of the State scheme. The Plan is a multi-employer pension plan. Contributions paid into the Plan up to and including September 2001 were converted to defined amounts of pension payable from Normal Retirement Date. From October 2001 contributions were invested in personal funds which have a capital guarantee and which are converted to pension on retirement, either within the Plan or by the purchase of an annuity.


The rules of the Plan allow for the declaration of bonuses and/or investment credits if this is within the financial capacity of the Plan assessed on a prudent basis. Bonuses/investment credits are not guaranteed and are declared at the discretion of the Plan’s Trustee.

of such contributions and may provide that the employer shall pay the whole of them. Cadwyn Housing Association does not contribute to the scheme. Members paid contributions at the rate of £200 per annum during the accounting period.

The Trustee commissions an actuarial valuation of the Plan every three years. The purpose of the actuarial valuation is to determine the funding position of the Plan by comparing the assets with the past service liabilities as at the valuation date. Asset values are calculated by reference to market levels. Accrued past service liabilities are valued by discounting expected future benefit payments using a discount rate calculated by reference to the expected future investment returns.

As at the balance sheet date there were 8 active members of the Plan employed by Cadwyn Housing Association which continues to offer membership of the Plan to its employees

The rules of the Plan give the Trustee the power to require employers to pay additional contributions in order to ensure that the statutory funding objective under the Pensions Act 2004 is met. The statutory funding objective is that a pension scheme should have sufficient assets to meet its past service liabilities, known as Technical Provisions. If the actuarial valuation reveals a deficit, the Trustee will agree a recovery plan to eliminate the deficit over a specified period of time either by way of additional contributions from employers, investment returns or a combination of these. The rules of the Plan state that the proportion of obligatory contributions to be borne by the member and the member’s employer shall be determined by agreement between them. Such agreement shall require the employer to pay part

Financial Statement 2012

It is not possible in the normal course of events to identify on a reasonable and consistent basis the share of underlying assets and liabilities belonging to individual participating employers. The Plan is a multi-employer scheme, where the assets are co-mingled for investment purposes, and benefits are paid out of the Plan’s total assets. Accordingly, due to the nature of the Plan, the accounting charge for the period under FRS17 represents the employer contribution payable. The valuation results at 30 September 2008 were completed in 2009 and have been formalised. The valuation of the Plan was performed by a professionally qualified Actuary using the Projected Unit Method. The market value of the Plan’s assets at the valuation date was £742 million and the Plan’s Technical Provisions (i.e. past service liabilities) were £771 million. The valuation therefore revealed a shortfall of assets compared with the value of liabilities of £29 million, equivalent to a funding level of 96%.

43


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) The financial assumptions underlying the valuation as at 30 September 2008 were as follows: % p.a Rate of return pre retirement Rate of return post retirement: Active/Deferred Pensioners Bonuses on accrued benefits Rate of price inflation

7.6 5.1 5.6 0.0 3.2

In determining the investment return assumptions the Trustee considered advice from the Scheme Actuary relating to the probability of achieving particular levels of investment return. The Trustee has incorporated an element of prudence into the pre and post retirement investment return assumptions; such that there is a 60% expectation that the return will be in excess of that assumed and a 40% chance that the return will be lower than that assumed over the next 10 years. The preliminary triennial valuation results as at 30 September 2011 were received in March 2012 but, as the valuation will not be finalised until later this year, this disclosure note must still refer to the 2008 valuation results as the last completed valuation. The Scheme Actuary’s preliminary results for 30 September 2011 show that the Plan’s assets at that date were £780 million and the Plan’s Technical Provisions (i.e. past service liabilities) were £928 million. The valuation therefore revealed a shortfall of assets compared with the value of liabilities of £148 million, equivalent to a funding level of 84%.

44

If an actuarial valuation reveals a shortfall of assets compared to liabilities, the Trustee must prepare a recovery plan setting out the steps to be taken to make up the shortfall. The Pensions Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or recovery plan are inappropriate. For example, the Regulator could require that the Trustee strengthens the actuarial assumptions (which would increase the Plan liabilities and hence impact on the recovery plan) or impose a schedule of contributions on the Plan (which would effectively amend the terms of the recovery plan). A copy of the recovery plan in respect of the September 2008 valuation was forwarded to The Pensions Regulator on 18 December 2009, as is required by legislation. 36 Following a change in legislation in September 2005 there is a potential debt on the employer that could be levied by the Trustee of the Plan and The Pensions Act 2011 has more recently altered the definition of Series 3 of the Growth Plan so that a liability arises to employers from membership of any Series except Series 4. (Our recent correspondence to all employers refers.) The debt is due in the event of the employer ceasing to participate in the Plan or the Plan winding up. The debt for the Plan as a whole is calculated by comparing the liabilities for the Plan (calculated on a buy-out basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the Plan. If the liabilities exceed assets there is a buy-out debt.


The leaving employer’s share of the buy-out debt is the proportion of the Plan’s liability attributable to employment with the leaving employer compared to the total amount of the Plan’s liabilities (relating to employment with all the currently participating employers). The leaving employer’s debt therefore includes a share of any ‘orphan’ liabilities in respect of previously participating employers. The amount of the debt therefore depends on many factors including total Plan liabilities, Plan investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time. Following a change in legislation in September 2005 there is a potential debt on the employer that could be levied by the Trustee of the Plan. The Trustee’s current policy is that it only applies to employers with pre October 2001 liabilities in the Plan. The debt is due in the event of the employer ceasing to participate in the Plan or the Plan winding up.

20 Home Release Scheme The Association participated in the Home Release Scheme over a number of years. The scheme enabled tenants to receive a loan or grant towards the purchase of their own home. The Association received the monies from Housing For Wales and passed them to such tenants. The total amounts received at 31st March 2008 was £334,760, made up of £185,691 in loans and £149,069 in grants. The loans become repayable when such tenants sell the property purchased under the scheme. A pro rata amount of the grant received becomes repayable when the property is disposed of within a three year period. During the Financial Year 1997/1998, the Association received notification from Housing For Wales that the scheme was suspended following consultation with the Welsh Office. Consequently, no further HRS grants have been received since the end of that Financial Year.

Defined Contribution Cadwyn Housing also offers a defined contribution pension scheme as an option but to date no one has taken this up.

Financial Statement 2012

45


Notes to the Financial Statements Year Ended 31 March 2012 (Cont’d) 21 Number of Units in Management The number of units of housing accommodation under development and in management at 31st March was:-

Owned by Cadwyn Cadwyn Properties - units Hostel Accommodation - bedspaces Substance Mis-use - bedspaces Hostel Familly - bedspaces

Managed by Cadwyn CanDo Lettings Calon Adref Temporary Accommodation Units in Development Cadwyn Properties

Total Units

2012

2011

Increase

1,215 44 9

1,185 39 9

30 5 -

26

26

-

1,294

1,259

35

303 68

171 99

132 (31)

224 595

190 460

34 135

13 13

39 39

(26) (26)

1,902

1,758

144

The Association schemes have been developed primarily within the Inner City with the exception of those situated in Caerphilly. CanDo lettings works on a agency basis and has grown throughout the year. The Calon Adref and Temporary accommodation Schemes are where properties leased from private landlords are managed and let by Cadwyn has increased its stock during the year.

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22 Related Parties The Association lets accommodation to both current and former tenant Board Members. Currently, five tenants have been appointed to the Board. All tenant Board Members have tenancies let on the Association's standard terms and cannot use their position to their advantage.

23 Post Balance Sheet Events The Board consider that there are no post Balance Sheet events worthy of disclosure.

As the information available to apportion the 2011 PYA was more than available for earlier years, the basis of apportionment for 2011 differs from that for earlier years. The Cashflow Statement has also been restated for comparatives to show both the net £25,000 reduction in surplus and the recognition of £510,000 costs of planned maintenance that was classed as expenditure in year ended March 2011 now being reclassified as capital additions. Details on notes to the cashflow.

25 Contingent Liability 24 Prior Year Adjustment (PYA) In the Balance Sheet the method recognised that £1,028,000 planned maintenance costs that had previously accounted for as a revenue cost would instead be recognised as part of the housing property cost in the balance sheet. As a consequence of this costs in the balance sheet had to be written off as the associated component had been replaced. Also depreciation was effectively accelerated by £6,200,000 in recognition of the shorter life cycles of the components that make up the housing property. These movements have been detailed in Note 10a) Tangible Fixed Assets. The net effect of these transactions has been to reduce the Associations reserves by £5,172,000. Details in Note 16 Reserves.

The Association participates in two multiemployer pension schemes. 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 September 2011. At this date the estimated employer debt for Cadwyn was £5,713,254, and for the Growth Plan for the Association was £8,196. As crystallisation of this debt is not considered to be a likely event no provision has been made within the accounts and full disclosure under FRS17 was not considered necessary. Further information regarding pensions is disclosed in note 19.

As the information available to apportion the 2011 PYA was more than available for earlier years, the basis of apportionment for 2011 differs from that for earlier years. The Income and Expenditure Statement has been restated for last year to recognise comparative movements with a net reduction in surplus of £25,0000. Details Note 3b)

Financial Statement 2012

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Registered Office: 197 Newport Road, Cardiff, CF24 1AJ Telephone: 029 2049 8898 Fax: 029 2046 4222 Email: mail cadwyn.co.uk Website: www.cadwyn.co.uk

Cadwyn Financial Statements 2012  

Statutory audited accounts for Cadwyn Housing Association