YHN Limited Tuesday 8 August 2017 at 5.00 pm YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX Contact Officer: Jill Davison
– Tel: 0191 278 8624 Email: jill.davison@yhn.org.uk
AGENDA Page No Introduction Items 1.
Welcome and Apologies for Absence
2.
Declarations of Interests
3.
Chair's Items
Items to Receive 4.
Asfaleia Limited Annual Report 2016/17
1 - 10
5.
Service and Strategy Delivery Committee Annual Report 2016/17
11 - 20
Items for Discussion 6.
Health & Safety: the responsibilities of the Board individually and corporately (presentation by Colin Hewitt, Partner, Wardhadaway)
7.
Q1 2017/18 Performance
21 - 42
Items for Approval 8.
Minutes of 20th June 2017
43 - 48
9.
Matters Arising and Action Log
49 - 50
10.
Tenancy Agreement - changes
51 - 58
Regulatory and Governance 11.
Appointment of Company Secretary
59 - 60
Your Homes Newcastle Limited. Registered in England and Wales Registration Number 5076256 Registered Office: Newcastle Civic Centre, Barras Bridge, Newcastle upon Tyne NE1 8PR. A company controlled by Newcastle City Council
12.
Annual Report and Accounts 2016/17
61 - 144
13.
Delegated Decisions
145 - 148
14.
Slavery and Human Trafficking Statement
149 - 158
To exclude the press and public during discussion of remaining agenda items because of the likely disclosure of confidential information. The definitions of what is considered confidential are contained within Section 16 of the Company’s Standing Orders. Protect - not for publication Items for Approval 15.
Confidential Minutes of 20th June 2017
159 - 160
16.
Matters Arising and Action Log
161 - 162
17.
Notes of the Board Away Day 20th June 2017
163 - 172
18.
Confidential Minutes of 12th July 2017
173 - 180
Items for Discussion 19.
Fire Safety in High-Rise Blocks - update
181 - 200
Items to Receive 20.
Feedback from Group Audit Committee meeting of 13th July 2017 (draft Minutes attached)
201 - 206
21.
Abri Trading Limited Annual Report 2016/17
207 - 212
22.
Date and Time of Next Meeting: 4-00pm, Tuesday 19th September 2017 in The Board Room, YHN House, Benton Park Road, Newcastle upon Tyne, NE7 7LX
2
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Asfaleia Limited Annual Update
AUTHOR
Matthew Foreman – Customer Services Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For Information
SUMMARY
This report provides an update of activity for Asfaleia during the 2016/17 financial year.
DELIVERY PLAN OBJECTIVE
2. Collect the rent and let properties efficiently. 3. Promote health and wellbeing and support vulnerable people to enjoy independence.
STRATEGIC RISK REGISTER
NUMBER & TITLE
GR1: Ostara customer numbers are below expectations
LIKELIHOOD
3 (moderate)
IMPACT
2 (minor)
NUMBER & TITLE
GR10: Internal failings within YHN result in performance targets or delivery of major programmes failing to meet the required level
LIKELIHOOD
1 (rare)
IMPACT
3 (moderate)
STRATEGIC RISK REGISTER
NUMBER & TITLE
GR11: Major event or occurrence which prevents us delivering key services
LIKELIHOOD
2 (unlikely)
IMPACT
2 (minor)
NUMBER & TITLE
GR13: Failure to realise the outcomes of the gap year programme
LIKELIHOOD
3 (moderate)
IMPACT
3 (moderate)
NUMBER & TITLE
GR14: failure to deliver the key service reviews and projects on time, on budget with the right outcome
LIKELIHOOD
3 (moderate)
IMPACT
2 (minor)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
This report summarises Asfaleia’s financial and nonfinancial performance for the year.
CUSTOMER IMPACT / VIEWS
Relevant customer impacts are detailed in the body of the report.
EQUALITY & DIVERSITY CONSIDERATIONS
Equality is integrated into our processes to ensure compliance with statutory obligations and to promote diversity throughout our work.
Asfaleia Limited Annual Update
1.
Background Information & Governance Arrangements
1.1 At the Board meeting in December 2016, members received a summary of activity for the Asfaleia Limited charitable subsidiary, spanning its formation in September 2015 through to the end of the 2015/16 financial year. It was agreed that a subsequent report would follow, summarising the whole 2016/17 financial year.
2.
Performance against Delivery Plan 2016/17
2.1 2016/17 Throughout 2016/17 Asfaleia have delivered strong performance and made a significant positive impact on the lives of customers across the city. The following are some of the key highlights and challenges against the delivery plan: Advice and Support • • • • • • • • •
Generated £ 6,165,818 income for tenants from benefits, grants and debt “write-offs” Facilitated the rehousing of 77 refugee households (given Leave to Remain via the National Dispersal Programme) into council tenancies Resettled 16 Syrian families as part of the Syrian Vulnerable Persons Scheme Resettled 10 Afghani Interpreter households into council tenancies as part of the Afghani Interpreters Resettlement Scheme Referred 179 cases to employability activities, including 59 to YHN Employability Services Provided pre tenancy support for 446 new tenants to set up home Reduced rent arrears for clients supported by an Advice and Support Worker by an average of £254 per client Moved 114 clients through the Pathways service into independent council tenancies during the year from hospital or supported accommodation Supported 2,640 service users during the year
Young People’s Service • •
Supported 186 sixteen/seventeen year olds through the homeless prevention service, of which 68 were seen at the Housing Advice Centre Received 179 referrals into the Floating Support Service, including 49 care leavers
• • • • •
Accommodated 29 young people aged sixteen to twenty one years in the Hostel Accommodated 26 young people aged sixteen to twenty one years old in the North Kenton supported block Family Intervention service supported 16 families, incorporating 61 children Youth Voice ran 103 group sessions and 245 Employability one to one sessions totalling 482 attendees Generated £121,626 of income for tenants by accessing benefits and grants and relieving debt.
Care Services (Sheltered Housing, Extra care and Ostara) • • • • •
Sheltered Housing exceeded the rent collection target of 100%, achieving 100.8% Exceeded void re-let period target of 53.3, achieving 40.6 compared to 49 days in 2015/16 Exceeded rent loss due to void target or 2%, achieving 1.8% Retained the Telecare Services Authority Platinum Award Ostara numbers fell from 4399 to 3188 following the removal of subsidy grant.
Employability • • • •
•
83% of apprentices and Your Homes Your Jobs Trainees progressed into employment or further education. Worked with the Northern Learning Trust to launch the Galafield Learning Hive in Newbiggin Hall. Collectively, the Learning Hives engaged with and provided employability support for 239 new learners. Successful in obtaining a £75,000 grant to be a delivery partner on the National Lottery and European Structural Fund, Wise Steps Programme. Delivered over 350 volunteer hours to support a range of different community projects. This included community clean up events, careers advice and guidance in schools and providing support in preparing food parcels for Fareshare. Received the Chartered Institute of Personnel Development award for initiatives in supporting tenants into education, employment and training
2.2 Headline performance targets for 2016-17 The table below sets out the main performance measures reported for Asfaleia services. Service
2016-17 target
2016-17 actual performance
Advice and Support: sustaining tenancies
98.0%
99.7%
Sheltered Housing: void rent loss
Less than 2%
1.8%
Sheltered Housing: rent collection
100%
100.8%
Young Peoples Service: sustaining tenancies
98.0%
98.9%
Employability: apprentices moving onto education, training or employment
85%
83%
Employability: customer volunteering time
350 hours
359 hours
RAG rate
3.
2016/17 Budget
3.1 YHN Group set Asfaleia a budget to restrict its net losses to £715k for 201617. Asfaleia’s actual net loss from operations was only £280k. The level of Gift Aid required from Abri Trading was reduced and so the Group had more freedom to optimise its reserves position across the different companies. Abri Trading provided Gift Aid of £351k to Asfaleia, giving an eventual surplus for the year of £71k, and maintaining Asfaleia’s reserves at a healthy level. During the year, Asfaleia benefitted from lower overhead charges from YHN than had been budgeted for (£474k). The main reason for this was that the 2016-17 budget included a share of Transformation costs that are now planned for 2017-18, after the end of the YHN Gap Year. 3.2 The main financial concern for the Asfaleia Board during the year was Ostara income pressures. Throughout the year this has been monitored closely and has culminated in an independent review that was considered and supported by Board and the resulting recommendations will put the service on a firmer financial footing in future. We have closing reserves of £612k, which is 183% of the target reserves, meaning we report a position of good financial health. 3.3 Ostara Service Review A full independent review of Ostara has taken place over 2016/17. The outcomes were incorporated into a report outlining recommendations and key areas of work to ensure future financial viability and sustainability of the service. This report was presented to YHN Board where the following three key priorities were agreed: 1. Stabilise the service 2. Integrate the service with a newly developed older persons’ offer 3. Develop the service for the future An action plan incorporating these recommendations and details of how we will achieve them has been approved by Asfaleia and following YHN Board’s recommendation that Asfaleia monitor the progress of this work, the action plan has been built into business reporting for the year ahead (and beyond) to ensure delivery is achieved in accordance with agreed timescales. One of the actions contained in the plan is to increase customer numbers by 1000 and make 30% efficiencies within service delivery. The efficiencies will be addressed within the restructure whilst the increase in referral numbers will be the result of a suite of actions outlined in the plan over a period of time. The overall plan will deliver financial viability whilst pulling together a better offer for older or vulnerable people.
4.
Audit/Risk
4.1 The group strategic risk register was approved by group board in May 2016. The view of Asfaleia Board and the Group Audit Committee (at which Gordon Burns attends as the subsidiary representative) were taken into account when developing the risk register. The strategic risks identified were: 1. 2. 3. 4. 5.
Group income does not meet expectations and plans Group costs fail to meet requirements and expectations Failure to comply with statutory Health and Safety (H&S) regulations Substantial damage to YHN Group’s reputation Significant disruption to service provision affecting YHN, Abri Trading Ltd. or Asfaleia Ltd. 6. Ineffective governance of YHN Group 7. Inability of YHN staff to fulfil the business needs of the Group 4.2 The Independent Chair of Group Audit Committee attends an Asfaleia meeting annually to provide an update on the work of that committee, which includes the quarterly monitoring and assessment of the group strategic risk register. 4.3 Asfaleia Board continues to receive updates on mitigating actions taken on risks encountered with their component services as part of regular finance and performance updates. The Board has also received regular updates on the progress of the Ostara review, as well as the final recommendations for improving the service. 5.
Future Plans/Challenges
5.1 Plans and challenges will be set against a backdrop of change over the coming year as Asfaleia service delivery is reviewed as part of our transformation. Our goal will be to implement change whilst ensuring that customers see improvements in service. Advice and Support Advice and Support will be working closely with NCC over the next year to assist in the delivery and development of the homelessness trailblazer. The aim of the project is to gather information from across various services impacting upon the stability of the lives of vulnerable people to identify issues and take preventative action to reduce and/or eliminate their risk of becoming homeless. Whilst the work is complex and at the early stages of development, there will be an increase in joint working across services and teams within YHN and across our partner agencies in the community as well as NCC.
Young People’s Service In addition to social and policy issues, emphasis will be upon monitoring and mitigating the impact of changes to benefits for young people to enable YHN to carry on providing vital services and young people to be able to access them. We continue to work with some of the most challenging people to reduce their risk to themselves and their community, against a backdrop of increased threats to young people. Supported Housing Supported Housing will continue to work in partnership with commissioners and external services to develop and enhance the offer to people needing Extra Care and Learning Disability housing solutions across the city. We will further embed ourselves in the role of providing a responsive, flexible support service, to reduce admissions to residential and nursing homes, ensuring we are establishing high quality services whilst producing efficiencies across increasingly integrated Care, Health and Housing services. During 2017/18 two additional extra care schemes will be introduced to our portfolio, this includes the Tree Top Village sheltered housing development. Employability Maintaining the high levels of progression for apprentices and Your Homes Your Jobs trainees will remain a priority and the challenge comes with continuing to deliver a programme that is tailored to the individuals who need it the most and that is bespoke to the wider job market. A key focus for the Employability Team however is continuing to develop pathways for tenants to gain employment outside of YHN. A ‘recruitment agency’ strand of the service has been developed and reputable employers are starting to get on board. The challenge is to put ourselves at the forefront of employers’ minds whenever they are recruiting. The Employability Team will also have a pivotal role in directing apprenticeship levy funding as well as working with the North East Local Enterprise Partnership on their North East Ambition programme, aimed at strengthening links between business and education. Ostara ICT Systems During 2016/17 we will be making progress to improve two key IT systems used within the Asfaleia services. Jontek is the ICT system that we use to manage our data base and enables us to receive alarm calls for the Ostara service both from hard wired schemes and dispersed alarms.
The current system is reliable and meets the core functionality required to provide an alarm service, however it is difficult to access data, it’s not flexible and is an analogue system with some digital developments; this may hamper its long term viability as digital services become the norm. Re-procuring the system will enable us to test the market to see if there is another system that may help us serve customers better in the future. This work is captured within the Ostara action plan and progress will be reported back to board within this framework. We are also replacing the ASH Annual Invoicing System. The current invoice system is a legacy system inherited from Newcastle City Council, however it is not fit for purpose so we will be moving the Ostara payment and invoicing onto the Northgate system during 2017/18. 6.
Conclusion and recommendations
6.1 Board is recommended to note the work of Asfaleia over the period covered by this report.
Background Papers - Asfaleia Ltd. Board 1 December 2016 - Asfaleia Ltd. Board 19 January 2017 - Asfaleia Ltd. Board 20 April 2017 - Asfaleia Ltd. Board 27 July 2017 Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Matthew Foreman by telephone on 0191 278 3419 or email matthew.foreman@yhn.org.uk
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Service and Strategy Delivery Committee Annual Update
AUTHOR
David Langhorne – Assets and Development Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For Information
SUMMARY
This report provides board with an update regarding activity of the committee between November 2016 – June 2017.
DELIVERY PLAN OBJECTIVE
1. Keep the housing stock decent and neighbourhoods clean and safe. 2. Collect the rent and let properties efficiently. 3. Promote health and wellbeing and support vulnerable people to enjoy independence.
STRATEGIC RISK REGISTER
NUMBER & TITLE
GR14: Failure to deliver the key service reviews and projects on time, on budget with the right outcome
LIKELIHOOD
3 (moderate)
IMPACT
2 (minor)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
Relevant financial impacts are detailed in the body of the report.
CUSTOMER IMPACT / VIEWS
There are a number of areas within the report which would impact on customers.
EQUALITY & DIVERSITY CONSIDERATIONS
Equality is integrated into our processes to ensure compliance with statutory obligations and to promote diversity throughout our work.
Service and Strategy Delivery Committee Annual Update
1.
Background information
1.1
This report provides a summary of the work undertaken by Service and Strategy Delivery Committee from November 2016 to June 2017.
1.2
The purpose of the Service and Strategy Delivery Committee is to gain assurance that services are being delivered effectively and service objectives are being met by • •
Agreeing the scope of service reviews, ensuring that they are conducted according to the scope and project plan, agreeing the subsequent service improvement plans and monitoring their delivery and associated risk When strategies have been approved by Board, monitoring and scrutinising the delivery of their action plans
1.3
Committee dates scheduled within the reporting period included 29 November 2016, 14 February 2017, and a planned meeting on 6 June which was cancelled due to issues of quorum, though members had received and read the content of the agenda pack, which included items for discussion and for information. No items requiring a decision or approval were being presented.
1.4
At the YHN Board meeting on 20 June 2017 members were informed that with approval from the YHN Chair - the committee had ended. When it is discussed and agreed at a later date, former content will be reported to a designated forum as part of the ongoing governance review.
2.
Work plan summary
2.1
Reviews Tenancy Agreement Review At the meeting in November 2016, members received a presentation on the review of Newcastle City Councils Tenancy Agreement, covering three main areas: • the agreement had not been reviewed for a number of years, existing clauses required amendments and new clauses were deemed necessary • there were two versions of the agreement which could potentially cause issues where legal action is required • formatting of the document would ensure all relevant information is contained in one area There are a wide range of areas within the tenancy agreement being considered as part of the changes, these included: • Data protection privacy notices – clarification on the use of personal information • Data sharing with utility companies to help pursuit of debts from former tenants • Explanation of ownership of and access to solar panels • Strengthening of domestic abuse clause • Reasonable access to shared areas such as pathways, driveways and gardens • A move from 49 to 52 week rent year • Moving from a Monday only to an any day tenancy • The impact of the Housing and Planning Act 2016 on the succession policy As a result of the proposed changes NCC were considering amending the tenancy agreement and implementing the changes in early April 2017 in line with the new financial year. However following the Committee meeting, it was agreed with NCC that the tenancy agreement would be implemented with effect from April 2018 to allow sufficient time for the statutory consultation with tenants to be completed and any changes to the financial systems to be implemented well ahead of the start to a new financial year. Repairs and Maintenance Contract Review The February 2017 report provided committee with information on the progress made on the repairs and maintenance contract review. The report detailed that the review was split into the following areas of consultation and detailed the progress made towards each area: • • • •
Customer and Staff Engagement Value for Money Review Lean Systems Review Transformational change and Strategic Direction
The report also detailed the next steps including draft timelines. It was agreed any updates will be taken to Service and Strategy Delivery Committee following any decisions or feedback from Cabinet. 2.2
Updates reports Health and Wellbeing Members received and subsequently discussed a presentation delivered at the November 2016 meeting, updating the committee about emerging policy development alongside actions and activities undertaken in relation to the people strategy and health and wellbeing. A further discussion report followed at the February 2017 meeting, covering a strengthened approach to health and wellbeing via implementation of a number of initiatives and activities in the workplace, which had been reflected in revisions to the Wellbeing at Work policy and Stress Management policy. With stress, anxiety and depression accounting for the largest proportion of sickness absence at YHN, and through continuous dialogue with staff, the Health and Wellbeing Group have worked with the Strategic HR team in developing policies and actions to enhance the work-life balance. Reported actions to date included: • Free and discounted exercise classes • Coordinated bike rides • Reflexology and Indian head massage at discounted rates • Pedometer challenge • Stress buster sessions to coincide with World Mental Health Day • Free health checks for all staff via Healthworks, with a more detailed ‘mini MOT’ offered for staff over 40, which resulted in the development of a Drugs and Alcohol Misuse Policy and e-learning module • A Health and Wellbeing page within the HR intranet site, a platform dedicated specifically to provide information and signpost staff to elearning, activities and more • Continuation of the Employee Assistance Programme and the RELATE counselling service Housing Investment Programme update Reports were provided in July 2016 and February 2017, covering progress against each aspect of the programme. The report in July gave an update on the final outturn on the 2015/16 programme, including key challenges and achievements, and informed the committee of the current progress of the 2016/17 Investment Programme. It highlighted challenges posed by the confirmed 1% rent reduction to the HRA investment programme, of which a £28M reduction was approved by Cabinet in January 2016. It was noted that further pressures are likely when additional information on the Housing and Planning Act 2016 is made available, that there may be a requirement to carry out a further review of the programme in order to make necessary savings. The committee also received information regarding
customer satisfaction. The report in February 2017 provided a further update on progress of the 2016/17 programme and also an update on the preparation being carried out for the 2017/18 programme. The report detailed a two stage approval process for the 2017/18 programme due to the potential challenges presented by the Housing and Planning Act 2016, which may impact the programme. The report detailed the two stage approval process which provided approval in stage one for £28.2M for the essential work (lifecycle replacements, void improvements, health and safety work and landlord obligations) and also any expenditure relating to work already started in 2016/17 but which was programmed and committed into 2017/18. The remainder of the 2017/18 programme/second stage which totalled £9.1M was approved at January 2017 Cabinet. Information Governance At the November 2016 meeting, the committee received an update report for information on the operation of the YHN Information Policy throughout 2015/16, with particular reference to data protection, requests for official information, breaches and complaints. Within 2015/16, KPI targets for both freedom of information requests (74% of 27 requests) and subject access requests (73% of 11 requests) did not reach their target of 90% of responses within the timescales set out by the ICO. There are no financial penalties for responding outside of timescales, whereas the Information Commissioner’s Office can impose fines of up to £500,000 for inappropriate disclosure; for this reason, when faced with a choice between getting the response correct and meeting the timescale, the former is given greater weight. The committee accepted the proposal that the responsibilities of the disbanded Finance & Resources Committee (with respect to information governance) transfer to the Strategy & Service Delivery Committee. For the June 2017 meeting, the committee were due to receive a further report detailing updated information for the financial year 2016/17, of which KPI targets for both freedom of information requests (88% of 17 cases) and subject access requests (67% of 9 cases) again did not reach their target of 90% of responses within the timescales set out by the ICO. The June 2017 report also provided information to the committee on the EU General Data Protection Regulations (GDPR) due to come into force in May 2018. This regulation will enforce one single set of data protection law across all 28 European member states, replacing their own legislations by 2018. Under GDPR, regulatory bodies will be able to impose significantly harsher penalties on organisations, with fines of up to €20 million or 4% of annual turnover for the most serious breaches. It was noted that YHN must give consideration to the approach taken by Newcastle City Council with regards to GDPR. YHN ICT and the wider
business will need to dedicate an appropriate level of resource to preparation for GDPR, and for subsequent management of information governance. Leasehold and Right to Buy Update Updates were provided to Service and Strategy Delivery Committee in November 2016 and June 2017. The reports provided detail on the Right to Buy trend in applications, sales, open market leasehold transfers, buy-backs and capital receipts from sales. The report explained that Right to Buy sales have increased by around a third in 2016/17 from 2015/16. The updates also provided an update on additional measures the team are taking to combat Right to Buy fraud, detail on legal cases regarding non-payment of service charges, current major works schemes and also an update following internal audit in November 2016 which the Right to Buy service was awarded the positive rating of substantial assurance. Modern Slavery Policy Committee received a report in November 2016 for decision on the adoption of a Modern Slavery Policy. The development of the policy was identified as part of the annual Slavery and Human Trafficking Statement, approved by Board in August 2016, and underpins a zero tolerance approach to Modern Slavery. The policy was approved by Committee. Transformational Change Programme In February 2017 Committee received a presentation to provide an update on our transformation programme which is called our Gap Year. The presentation detailed some of the key findings from the journey so far. At this stage we were mid-way through our 100 days of insight which gathered information from staff and customers. The themes being investigated were around four key areas: • Customer Service • Culture • Productivity • Knowing our City Voids Performance A summary of void performance against targets and the surrounding context was provided to members in November 2016, with an accompanying appendix that provided further information of trends across stock which have been influenced by voids. The key highlights reported to the committee included: 1. Average re-let for all void properties not to exceed 53.3 days by 31/03/2017 – green at 44.2 days 2. Average re-let for non-Walker Multi storey void properties not to exceed 28 days by 31/03/2017 – green at 27.7 days 3. Turnover of properties not to exceed 2,210 (8.5%) by 31/03/2017 – amber with 1,178 terminations, with a projected expectation of red by quarter three
4. Void Rent Loss (including Walker multis) amount not to exceed 1.26% (£1.4m) by 31/03/2017 – red at 1.53% 5. 61% of Properties accepted on First Offer during 2016/17 – amber at 59.3% Voids Recommendations and Performance & Time Limited Committee Update Intended for the cancelled June committee, the report provided members with an update on five recommendations improvement actions by the board in June 2016: Action 1. As half of the citywide voids are within the Walker hub multi-storey blocks a clear strategic position needs to be taken on their future and what reasonable interventions could take place • Housing Options, with NCC, are working on increasing the number of properties leased to other agencies • Assets and Programme Service are leading a number of appraisals in relation to the Churchwalk multi-storey blocks as part of a wider strategic approach for the Walker area Action 2. Across the city certain property types do not perform well and can be difficult to let such as high rise blocks, a range of mid to low-rise blocks and some 3 bed houses and bungalows • Remodelling over a 30 year period would produce a loss of £3,263,784 therefore the team have not progressed with this recommendation, but may revisit the option in future Action 3. Carry out a robust and detailed examination of the wider housing market and the tools available which could assist YHN to better enable it to stimulate demand and improve access to the accommodation it manages • Housing Options have worked with Business Strategy to identify potential to improve demand in areas, understand current customers and their access of services, and pilot marketing tools to attract potential new customers • Improvements have been made to e-newsletters , digital advertising and the application process • A product portfolio analysis has informed targeting of staff resources • Promotional advertising using the ACORN subscription which utilises demographic data to target customers according to localities of profile groups across the city
Action 4. Elements of the end to end void process sit across a number of service areas, which can cause some disjoint in our ability to have full oversight of the end to end process, the impact on performance, void spend and our ability to respond effectively. • The review of the process has completed, and has led to greater alignment of teams using an enhanced task manager system • Other areas of improvement will be identified and developed as the overall transformation project continues Action 5. Board are to approve delegation of ongoing oversight of the Void process to Service and Strategy Delivery Committee. it is intended that this committee would receive quarterly information on performance, which would be scrutinised to ensure: • Key performance indicators are improving in line with forecast • Any decline in performance is challenged and that committee can give Board assurance that measures are in place to mitigate performance decline • The service improvements are meeting their intended outcomes and that customers are seeing the benefits • That assurance can be given to the Board as part of its quarterly performance report that relevant officers are proactively supporting positive change in the organisation and aiming for top quartile performance 2.3
Action plan monitoring Environmental Sustainability Action Plan An action plan update was provided at the November 2016 regarding environmental sustainability; the Sustainable Homes Index for Tomorrow (SHIFT) Gold award was achieved in November 2016 as per YHN’s Corporate Target for 2016/17.YHN was one of only 10 Landlords from the 44 SHIFT members to achieve this level. YHN also surpassed the annual target for improving the energy efficiency performance of housing stock as measured using Standard Assessment Procedure (SAP). At the start of 2016/17 YHN’s SAP rating was 68.69 with a target for improving the score by 0.44 in year. By the end of the year a score of 70.24 was achieved, an improvement of 1.98 points, or 2.25%. This rating puts YHN ahead of the average SAP achieved by SHIFT members (69.9), the housing association sector (67.1) and the private rented sector (59.7). This score also moves YHN’s average SAP rating into the “C” band for the first time.
Procurement Strategy Action Plan At the November 2016 meeting the Committee received a report for decision on a refreshed action plan to underpin the Corporate Procurement Strategy that was originally approved by Board in January 2015. The action plan, which was approved by Committee, detailed 21 actions under the headings •
Efficiency and Value for Money
•
Doing Business Electronically
•
Collaboration
•
Equality and Diversity
•
Social Value
•
Focus on Service Need
Procurement Strategy Action Plan Annual Update An annual action plan progress report was to be presented to the committee for information in June 2017, detailing the 21 actions previously approved by Committee in November 2016. 18 were noted as complete, with two ongoing for completion in future periods. Further information was provided on the “amber” status action (Capital framework benchmarking). The action plan will be refreshed and returned to the agreed designated reporting area of the new board and committee structure once it is finalised in September 2017. 3.
Conclusion and recommendations
3.1
Board is recommended to: • Note the work of Service and Strategy Delivery Committee over the period covered by this report; • Acknowledge the committee has ceased as of June 2017
Background Papers Service and Strategy Delivery Committee Annual Update to YHN Board August 2016 Service and Strategy Delivery Committee 29 November 2016 Service and Strategy Delivery Committee 14 February 2017 Service and Strategy Delivery Committee 6 June 2017 Service and Strategy Delivery Committee terms of reference Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, please contact David Langhorne by telephone on 0191 278 7701 or email david.langhorne@yhn.org.uk
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Quarter One (April-June) Financial and Non-Financial Performance
AUTHOR
Jon Ritchie - Finance and Commercial Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For discussion
SUMMARY
This report sets out the Group’s financial and non-financial performance at the end of quarter one. This cover report provides Board with the most important information, with appendices providing additional information on the areas of performance that are not on track and detailed budget breakdown.
DELIVERY PLAN OBJECTIVE
STRATEGIC RISK REGISTER
1. Keep the housing stock decent and neighbourhoods clean and safe. 2. Collect the rent and let properties efficiently. Promote health and wellbeing and support vulnerable people to enjoy independence. NUMBER & GR1: Ostara customer numbers are below TITLE expectations LIKELIHOOD
3 (moderate)
IMPACT
2 (minor)
NUMBER & TITLE
GR2: Additional costs on YHN balance sheet from pension liabilities
LIKELIHOOD
4 (likely)
IMPACT
3 (moderate)
NUMBER & TITLE
GR3: Brexit leads to greater financial uncertainty in the economy and increase in exchange rate, inflation and interest rate
LIKELIHOOD
3 (moderate)
IMPACT
2 (minor)
NUMBER & TITLE
GR4: Government welfare changes (Universal Credit roll out, LHA cap) makes furniture pack less affordable for our customers and clients
LIKELIHOOD
4 (likely)
IMPACT
3 (moderate)
NUMBER & TITLE
GR9: External pressures arising from Government initiatives (including welfare reform, further role out of universal credit) result in worsening performance for rent collection and void loss.
LIKELIHOOD
3 (moderate)
IMPACT
3 (moderate)
NUMBER & TITLE
GR10: Internal failings within YHN result in performance targets or delivery of major programmes failing to meet the required level.
LIKELIHOOD
3 (moderate)
IMPACT
2 (minor)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
This report summarises our financial and nonfinancial performance for the first quarter.
CUSTOMER IMPACT / VIEWS
Relevant customer impacts are detailed in the body of the report.
EQUALITY & DIVERSITY CONSIDERATIONS
There are no specific equality and diversity matters arising from this report
Quarter One Financial and Non-Financial Performance 1.
Background information
1.1
This report details our financial and non-financial performance at the end of quarter one (April to June 2017). The key messages from the performance and financial information are set out in sections two and three. This summary is supplemented by the attached appendices which provide further detail on each indicator.
1.2
At the time of drafting this report, this information is also being shared with senior officers at Newcastle City Council as part of the monitoring of the Delivery Plan.
1.3
Following feedback from the Board we have reduced the number of appendices in this report and placed more information in the main body of the report. We have developed a new executive summary of the eight strategic targets which is attached as appendix one. As this is a new development, we would welcome feedback from Board members.
2.
Performance summary
2.1
There are 8 targets reported to Board. At the end of quarter one we are on track to meet two of these, Of the six we are not on track to meet, four are close to the profile target (reported as amber) and two are causing us concern (reported as red). Appendix two contains further detail for these performance measures.
2.2
The sections below highlight those measures which are not on track at the end of the quarter.
2.3
Red targets: Targets 6: Void rent loss not to exceed 1.61% And Target 7: void rent loss (Excluding Walker multis) not to exceed 0.90% Overall void rent loss has risen to 1.92% at the end of quarter one and is at 1.25% when Walker multis are excluded. Both of these measures are 0.3 percentage points above target and have shown a decline.
This main reasons for these variances are: 1. An increase in the average relet time for void properties across the city. However, the West End and Walker are most affected. This is due to a combination of demand issues and for the Walker area, the condition of void properties has also been an issue due to a number of long standing tenancies within the older population ending.
Relet time for whole city (2016-17 in brackets)
Relet time excluding Walker multi storey blocks (2016-17)
Standard voids
Major void
44.34 days
41.84 days
(37.53 days)
(31.44 days)
52.15 days
48.36 days
(46.97 days)
(40.60 days)
2. An increase in void properties in the Walker area, which is largely driven by the number of transfers as shown below. Walker’s figure is impacted by the opening of Tree Top Village.
3. A continued decline in demand for properties in the Outer West and West End areas of the city. This is mainly attributed to two and three bed flats in low rise blocks in Throckley, along with age designated blocks for over 55s in the Benwell area of the city.
In order to address current performance, improvements reported to Customer Service and Strategy Delivery Committee will continue to be rolled out. This includes greater emphasis on performance monitoring and more focused approaches to marketing void properties, which is complemented by a more efficient application process 2.4
Amber target: Target 3: 95% of customers are satisfied with the R&M service Satisfaction with the repairs service is 93.37% at the end of June, with a downward trend in the first quarter. However, this is still higher than satisfaction last year. Analysis of potential service improvements from customer satisfaction is required to improve the situation. We are addressing this with BCE senior managers and we expect the delivery of these improvements will see a rise in customer satisfaction in the latter half of the year.
2.5
Amber target: Target 4: Spend no more than ÂŁ21.13m on repairs and maintenance (BCE contract) The BCE contract was overspent by ÂŁ559K at the end of quarter one. The area of greatest concern, as shown below, is the voids budget which is ÂŁ763K overspent, as shown in the graphic below. This is partly driven by the increase in void properties from the start of this year, but also the amount of work required to bring these voids up to the property standard.
To improve performance we are working collaboratively with Housing Options and Assets and Regeneration to identify ways in which we can work smarter with regards to void expenditure. 2.6
Amber target 5: Collect 98.72% of rent due from current and former tenants At the end of quarter one, the rent collected was 0.9% behind the profile target. This position improved in the weeks after the end of quarter following the receipt of income from Alternative Payment Arrangements, used to collect income from customers receiving Universal Credit. We are seeing a growth in the number of customers claiming Universal Credit, although these are currently in line with expectations. However officers are spending additional time supporting customers with the transition to Universal Credit, which is placing pressure on our ability to collect rent from customers who do not receive Universal Credit. Measures are therefore being put in place to more rigorously monitor all rent accounts. In order to release time to do this, work is underway to identify areas of the system where processes may be automated, such as Alternative Payment Arrangements.
2.7
Amber target 8: Tenancy turnover not to exceed 8.5% Turnover is slightly above target at the end of quarter one. Tenancy turnover was 2.33% against a profile turnover of 2.03%. This means there were 604 terminations this year, which is 84 more than target. The main driver for the increase of terminations this year is from tenants moving to another council tenancy. This is 44 more terminations compared to last year and can be attributed to tenants who transferred to the new development at Tree Top Village.
2.8
Whilst gas safety is not a strategic target, Board need to be aware of the current position so that it can satisfy itself that the operational controls over this important Health and Safety requirement are robust. The table below details the position at the end of the quarter.
Total numbers of council properties managed by YHN
25795
Number of properties without a gas supply
3995
Properties requiring gas safety check during the year
21800
Gas certificates in place Properties currently void with gas capped and annual check completed (including long term voids and pending demolition)
21336 463
Gas certificate due but outstanding during period
Properties requiring gas safety check
1
21800
The outstanding gas safety check was completed in early July after we applied for a warrant to ensure we were able to carry out the gas safety check. 3.
Finance summary
3.1
Performance for the year At the end of quarter 1 YHN Group recorded a surplus of £569k against a budgeted surplus of £277k, ahead of plan by £292k. The key variances contributing to this early positive variance are:
Lower than budgeted furniture depreciation charges (£143k); Some discretionary budgets (e.g. training) not used at this early stage of the year (£58k); and There have been no costs relating to new refugee families so far, but these are expected later when new families arrive (£41k).
These positive items are partially offset by furniture rental income being lower than expected, particularly with the Byker contract ending at the end of
April. This contract previously provided a contribution to overheads of £290k per annum. We are monitoring this area closely, as our forecasts predict that income is dropping more quickly than we had expected when the contingency budgets were set at the start of the year. Taken overall, we are forecasting an adverse variance at the year-end of circa £600k in relation to furniture service, although this does not include the compensating upside impact of rental schemes that are close to completion, notably in South Wales and London. Whilst the quarter 1 position is positive, being significantly above the profiled budget at this stage of the year, work is continuing to forecast the expected position by the year-end, which will take into account the impact of the furniture rentals and the achievement of transformation savings which are concentrated in the second half of the year. The quarter 2 report will provide the updated view on expected position at the year end. 3.2
Draft Balance Sheet and Reserves YHN Group’s bank balances are growing, and its net current assets are in a healthy position. YHN Group has £8,823k of available cash to meet short term funding requirements. Excluding the pension liability, YHN has reserves of £7,964k to act as a contingency against income pressures and to pump prime efficiency savings.
4.
Recommendations
4.1
Board are recommended to: a) Receive this report for information and comment
5.
Implementation
5.1
Board will receive an update on quarter two performance at the November Board meeting.
Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Jon Ritchie by telephone on 0191 277 4317 or email jon.ritchie@yhn.org.uk
Group Finance Reporting Pack Quarter 1 April - June 2017
Contents
4
Executive Summary Financial KPIs Group I&E summaries - year to date - by category Staff analysis
5
Group Balance sheet summary
6
Company summaries - year to date
1 2 3
- YHN - Asfaleia - Abri Trading
Executive Summary Group profit vs budget (£'000s)
Income and Expenditure At the end of Q1 YHN Group recorded a surplus of £569k against a budgeted surplus of £277k, ahead of plan by £292k. The key variances contributing to this early positive variance are: • Lower than budgeted furniture depreciation charges (£143k); • Some discretionary budgets (e.g. training) not used so far at this early stage of the year (£58k); and • There have been no costs relating to new refugee families so far, but these are expected later (£41k). These positive items are partially offset by furniture rental income being lower expected, particularly with the Byker contract ending at the end of P1 which previously provided a contribution to overheads of £290k. Contingency budgets are in place and will partially mitigate the losses.
Surplus (£'000) £1,400
£1,243
£1,200 £1,000 £800
£569
£600 £400 £200 £0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Actual / forecast
Target
Balance Sheet YHN Group is showing a healthy current assets position with £8,823k of cash in bank and with NCC to deliver transformation and growth projects. The Group's reserves position prior to pension accounting is £7,964k. 1
Financal KPIs
F1 - Bank balances (£'m)
F2 - YTD Profit by company (£'k)
£9.00
£3.50
£500
£8.82
£8.00
£3.00
£400
£7.00
£338
£2.50
£300
£6.00
£'m
£562
£600
£10.00
F3 - Commercial Surpluses (£'m)
£168
£200
£5.00
£100
£4.00 £3.00
£0
£2.00
-£100
£1.00
-£200
£1.50
£7
£1.00 £0.50
-£88 YHN
£0.00
£2.00
-£161
ASFALEIA
ABRI
£0.00 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Bank
NCC current account
Budget
Total
Actual
Actual
Target
Target (with contingency)
Comments:
Comments:
Comments:
NCC continues to provide our daily banking activities, but the project to give YHN cash reponsibilities will continue this year.
Abri and Asfaleia are behind plan mainly from falling behind on the challenging income targets that were set for the year.
YHN operations are generating cash and cash totals are rising. We are managing any immediate requirements by drawing down from the NCC currrent account into the YHN bank at need.
YHN is benefitting from underspends on depreciation, office costs and charges for direct debit transactions.
The effect of Byker's withdrawal from their furniture rental contract has started to take effect, and other rental contracts are not performing to target. We have contingencies built in to the budget for these reasons. However, across YHN and Abri Trading, commerical surpluses are ahead of the realistic targets that include contingencies. Depreciation on NFS furniture in YHN is helping to improve the position.
Group I&E Summary - by Category Year to date Operating Income HRA Management Fee Other Landlord Fees Service Charge Fee (Inc.) Furniture Rentals (External) Furniture Sales Telecare Income Leaseholder charges Other Income Grants and Donations Operating Expenditure Staff Premises Transport Supplies and Services Furniture cost of sales SLAs and recharges Depreciation Grants and Donations Bad debt expense Efficiencies identified Gain on Disposal Finance Costs Interest Costs
Income contingency
Group total to reserves
£'000
£'000
£'000
£'000
Annual Budget
YTD Budget
YTD Actuals
YTD Variance
17,821 2,025 8,438 5,894 3,052 1,209 54 1,567 52 40,113
4,455 506 2,204 1,474 719 302 23 395 13 10,093
4,455 380 2,211 1,194 834 254 23 457 16 9,822
(0) (127) 7 (279) 114 (48) (1) 62 2 (270)
(24,560) (1,268) (1,012) (2,972) (1,897) (2,193) (3,687) (52) (10) (210) 0 (37,861)
(6,298) (307) (250) (707) (462) (571) (922) (13) (2) (31) 0 (9,564)
(6,233) (288) (222) (575) (591) (483) (765) (15) (48) 0 39 (9,180)
65 20 28 132 (129) 88 157 (2) (45) 31 39 384
(292) (292)
(73) (73)
(73) (73)
(0) (0)
(718)
(180)
0
180
1,243
277
569
292
Manager summary: Furniture rental income is lower than budget, as customers reduce pack sizes. The shortfall from the loss of the Byker contract is shown against "other landlord fees". Supplies and services costs are lower than planned because spend delivering the refugee contracts has not come through so far in the year as we expected (the income is unaffected). There are also numerous small underspends on discretionary budgets that we expect to be used during the year. Depreciation costs are lower than estimates as we reuse more furniture. A prudent bad debt provision for Ostara has been made, greater than budget.
We have recorded a gain on disposal of £39,000 which represents the surplus on the furniture that Byker bought from Abri Trading at the end
Group balance sheet summary £'000 Current 8,194 773 (4,994)
£'000 Mar-17 7,866 740 (4,260)
3,972
4,346
(374)
749 1,333 (285) 383 5,738 (5) 3,371 3,085
713 851 (235) 513 3,578 0 2,454 4,849
36 482 (50) (130) 2,159 (5) 917 (1,763)
14,368
12,722
1,647
(686) (823) (1,798) (49) (74) (72)
(63) (1,249) (1,243) (122) (74) (175)
(624) 425 (554) 73 (0) 103
(3,502)
(2,925)
(577)
Loans Finance Leases
(6,500) (374)
(6,500) (247)
0 (127)
Net Assets before Pension liability
7,964
7,395
569
Pension Liability
(23,190)
(23,190)
0
(15,226)
(15,795)
569
(15,795) 569
(15,795) 0
0 569
(15,226)
(15,795)
569
Fixed Assets
Current Assets
Current Liabilities
Non current liabilities
Non current liabilities
Operational Assets Other equipment Depreciation
Inventory Accrued income Provision for bad debt Prepayments Balances with NCC VAT debtors Invoices not yet paid Bank and petty cash
Income in advance VAT Creditors Accrued Expenditure Interest Payable Tax Liability Accounts Payable
Total net Assets Reserves
Total reserves
Opening Reserves Surplus/(loss) for the year
£'000 Change 328 32 (734)
Comments
Fixed Assets Fixed asset values have reduced during Q1. Depreciation of furniture assets is running faster than new purchases, and there was a sale to Byker Trust. Current Assets and Liabilities Balances with NCC are growing, and more than offestting the reduction in bank balances, whicjh shows that operations continue to generate cash.
Net Assets Excluding the pension deficit, YHN Group has reserves of £7,964k.
YHN Company Income and Expenditure Annual Buget
Operating Income Operating Expenditure Finance Costs
YTD Budget
YTD Actuals
Variance
£'000 39,928
£'000 9,935
£'000 9,920
(39,073)
(9,895)
(9,329)
566
(131)
(33)
(29)
3
724
7
562
554
YHN Total
£'000 (15)
Balance Sheet Current £'000
Fixed Assets Bank and Cash Other Current assets
6,149 546 5,490
Current Liabilities Long Term Liabilities
515 (30,064)
Net assets
(17,363)
Opening reserves YTD actuals Reserves
(17,925) 562 (17,363)
Comments: YHN (the parent company) has produced a positive £554k variance from budget at Q1, which, as previously stated, is largely down to the underspend on depreciation and underspends on discretionary budgets. This surplus is positively contributing to the opening reserves of -£17,925k.
The parent has positive cumulative reserves of £5,793k before the adjustment for the pension liability.
Abri Trading Ltd Income and Expenditure (including contingency budgets)
Operating Income Operating Expenditure Finance Costs YHN Total
Annual Buget
YTD Budget
YTD Actuals
Variance
£'000
£'000
£'000
£'000
9,099
2,243
2,102
(141)
(7,799)
(1,867)
(1,892)
(25)
(152) 1,148
(38) 338
(42) 168
(4) (170)
Balance Sheet Current £'000
Fixed Assets
1,607
Bank and Cash Other Current assets
1,468 2,629
Current Liabilities Loans
(310) (3,707)
Net assets
1,687
Opening reserves YTD actuals Reserves
1,519 168 1,687
Comments: Operating income is below budget owing to a higher than anticipated reduction in customer numbers. This is despte the inclusion of an annual income contingency budget of £559k which prudently reduces the expected annual income for Abri Trading. The loss of contribution from Byker is approximately £23k per month.
Despite this, Abri continues to make a positive contribution - £168k up to Q1.
Asfaleia Ltd Income and Expenditure (including contingency budgets)
Operating Income Operating Expenditure Finance Costs YHN Total
Annual Buget
YTD Budget
YTD Actuals
Variance
£'000
£'000
£'000
£'000
6,092
1,523
1,510
(13)
(6,713)
(1,609)
(1,668)
(59)
(9) (629)
(2) (88)
(2) (161)
(0) (73)
Balance Sheet
Comments: Current £'000
Fixed Assets Bank and Cash Other Current assets Current Liabilities Loans Net assets Opening reserves YTD actuals Reserves
115 1,071 1,931 (2,474) (193) 451 612 (161) 451
Operating income is almost in line with budget, however this is in part due to inclusion of an annual income contingency budget of £119k which prudently reduces the expected annual income for Asfaleia Ltd. Operating expenditure is worse than planned, mainly due to the bad debt provision that we have made against our older Ostara debts.
Your Homes Newcastle
2017-18 Quarter 1 (Q1) April 1 - June 30 2017
Performance has been challenging in Q1. We are on track with two targets, slightly behind profile position with four targets and concerned about two targets. We are finding it a greater challenge to let homes in different parts of the city, and are increasing support to customers claiming universal credit. There are improvement plans for the targets which are reported as amber
Target
To date
Investment and repairs
Rent collection and void management
Our budgets
Spend against the Cabinet approved (£47.80m) Capital programme budget
Collect 98.72% of rent from current and former tenants
Budget surplus generated
£9.0m
£10.2m
Complete 99.6% of repairs on time
99.6%
99.98%
97.39%
96.49%
Tenancy turnover not to exceed 8.5%
2.03%
2.33%
£267K
£497K
Performance is in line with expectations
Performance remains strong with only 4 repairs not completed on time
We were 0.9% behind profile target, but this improved soon after the end of the quarter
There has been 84 more transfers this year compared to last
Overall the budget position is healthy. This is driven by underspend in the transformation budget
95% of customers are satisfied with the R&M services
Spend no more than £21.13m on Repairs and Maintenance (BCE contract)
Void rent loss (excluding Walker multis) not to exceed 0.90%
Overall void rent loss not to exceed 1.61%
Cash in the bank
95%
93.36%
Satisfaction has fallen during Q1, with 452 customers being dissatisfied with the service
£
£5.35m
£5.87m
£
The BCE contact is over spent by £559K the end of Q1. The voids budget currently overspent by £763K
0.90%
1.25%
See other void rent loss target
1.61%
1.92%
Higher void rent loss is now affecting other areas of the city and different property types
TBC
TBC
This is not available as NCC continue to hold our cash. This should change by Q3
Board 20 June 2017 (10.10am to 11.15am) Present: O Grant (Chair), P Dibbs, L Doherty, P Dutton, D Huddart, I Graham, J McCarty, T Moore, P Scope, E Snaith, L Stephenson, J Streather, M Talbot In attendance: A Baker
Governance Support Officer
J Davison
Company Secretary and Group Governance Manager
T Drury
Managing Director
M Foreman
Customer Services Director
D Langhorne
Assets and Development Director
S Reed
Interim Company Secretary
J Ritchie
Finance and Commercial Director
554
Welcome and Apologies for Absence
Apologies were received from V Dunn, A Mirza and M Page. 555
Declarations of Interests
Those councillors present declared an interest in all matters pertaining to Newcastle City Council. E Snaith declared an interest as a volunteer for Depaul Trust, which worked in the area of homelessness. P Scope declared an interest in Ward Hadaway law firm, which had provided legal advice in relation to the Rules of Asfaleia Limited (minute ref. 563 below). 556
Chair’s Items
i)
Grenfell Tower Fire – Fire Safety in High-Rise Buildings
The Chair spoke of the recent terrible fire in a tower block Kensington, which had attracted national publicity. The Executive Team’s response to concerned tenants, to councillors and to the wider public had been rapid, open, honest and informative. Particular thanks were given to I Gallagher, Assistant Director – Operational Property Services, who had collated significant evidence of the precautionary measures taken by YHN in relation to fire safety in the course of its construction, refurbishment and upgrading projects. T Drury added that, in the immediate aftermath of the Grenfell Tower incident and the government response
to it, Board Members had received communications from the Chair. D Langhorne advised that the communication to tenants had been in a similar vein. He highlighted that there were 3,000 flats in high-rise blocks managed by YHN. A variety of questions had been received from councillors. A Q & A had been issued. The Concierge team had delivered 3,000 newsletters by hand over the previous weekend. The tenant feedback had been positive. It was highlighted that none of the blocks managed by YHN were clad with the material which was implicated in the Grenfell Tower fire. In fact, YHN used cladding which was rated as Class 0 (the highest category), which was fire resistant and did not transfer heat. All of the tower bocks had either wet or dry risers, to ensure that the Fire & Rescue Service had access to water at all levels of each building. All flats in these blocks were fitted with smoke detectors, which were linked to the central Enquiry Centre, allowing for check-backs with residents. Some ÂŁ3 million had been spent in 2013, the majority of which had been for Health & Safety improvements, including fire precautions. There were no blocks of a Lakanal House or Grenfell Tower design, albeit there were some older blocks which had been built with a single staircase. Concierge was increasing vigilance in relation to flammable items and refuse left in communal areas. Further work was underway in relation to information for customers whose first language was not English, or who had vision or hearing impairment, or were disabled or had mobility issues. A single, dedicated team was now managing these communications and monitoring what was coming from central government in relation to Grenfell Tower, in order to ensure that YHN issued consistent messages from a single source. The team would maintain open and continuing communications with residents, including when no further action was required or there was no fresh news to convey. Directors had met with the Chief Fire Officer on 16 June regarding actions taken to date and what might need to be done in future. There had been 30 calls to the Enquiry Centre from residents in the immediate aftermath of the Grenfell Tower fire. Sample surveys were to be conducted to check compartmentalisation and fire stopping measures. It was important now to deal in facts, not assumptions or opinions. Evacuation protocols were under review with the Fire & Rescue Service. L Doherty asked whether NCC had a contingency plan for events such as this. It was noted that there was a joint NCC/YHN Major Incident Plan in place. E Snaith requested a written report at the next meeting regarding the Newcastle position, including a summary of the technical assessments by the Fire & Rescue Service. Boards Members were to feed in any further specific requirements for the report. The Chair thought that the report should set out the best understanding of the response to date, facts on risers, alarms, exits and the like, and the ongoing impact. J Streather asked what the Board responsibility was with regard to procurement policy. P Scope spoke of the need to ensure that there were systems in place to minimise risk and to take cognisance of the Corporate Manslaughter and Corporate Homicide Act. The report should include issues such as staircases and sprinkler systems. P Dibbs asked for clarity of the Board responsibilities. P Dutton
noted that some premises had been inspected in the past by the Fire & Rescue Service which had subsequently had breakthrough of the fire compartments. D Langhorne advise that monitoring of containment was an ongoing issue and millions were spent in terms of reacting to breaches by e.g. cable TV companies. Safety inspections had been completed across the estate in February and March 2017. The role of Concierge and the Enquiry Centre was highlighted by T Moore in terms of initial response to alarms and this should not be diluted in future. T Drury noted that the service had changed and as the income of tenants reduced through, for example, Welfare Reform, there would be a challenge in terms of continued affordability to tenants of the current service. The Chair thought that a special meeting of the Board should be held to specifically address all of these issues and this was agreed. The Grenfell Tower public inquiry was likely to take years to complete and in the meantime the Board was concerned to ensure that the learning was received and acted upon prior to the eventual publication of the inquiry report. The report for the Board would need to set out the context in terms of planning, building regulations and the like, especially given the privatisation in recent years of inspection services. I Graham raised the issue of other new build tower blocks in the city which complied with building regulations but were not necessarily constructed to the best standards. He asked what systems were in place for monitoring of those residents with a disability or who were otherwise vulnerable. M Foreman advised that at present it was only at the point of changing housing that YHN would have the capability to monitor the status of individuals. Many tenants might have a housing “career” in excess of 20 years. Some might be reluctant to move, even when new premises might be more appropriate for their needs. D Huddart spoke of the human factors, including the extent of any fire safety training and awareness of how quickly smoke could spread and how toxic it might be. There was also the issue of risks arising from gas supplies in high-rise settings. D Langhorne advised that most YHN blocks were all-electric; and there was a stringent gas safety programme in place. P Dibbs wondered whether there was scope to lobby central government in due course. T Drury advised that the National Federation of ALMOs was already collating information, for a meeting with the Department for Communities and Local Government. The Northern Housing Consortium was doing the same across the North East, including examples of good practice. L Stephenson commented that multi-storey buildings were often ideal for vulnerable people. The key issue was how YHN would know who was in and out of each flat, including visitors and relatives. M Foreman advised of the proposed change to tenancy agreements so that tenants would be required to advise of visitations and their duration but it would be important to strike the right balance, without dictating people’s lives. P Scope was concerned about management of risks, including terrorist attack. The Chair thought that there were also issues of rehousing and resupplying those who might end up being in need of urgent relocation.
ii)
Governance Review – Implementation
The Chair thanked all those who had contributed to the work of the current committees and noted that the Strategy and Services Delivery Committee was now being wound up. P Dutton was thanked for Chairing the Committee. 557
Minutes of 9th May 2017
The minutes were agreed to be a correct record and were signed accordingly. 558
Matters Arising/Action Log
There were no matters arising on this occasion. The action log was received and agreed. 559
Receipt of a Petition
As required by Standing Orders, T Drury informed the Board of a petition which had been received during May 2017, in relation to a tenant’s allegedly dangerous dog. The matter had been addressed through the appropriate channels, including a site visit and a meeting with the dog’s owner and a number of measures had been agreed. This was now resolved and closed. RESOLVED, the Board agreed:
To receive the report and note the outcome
560
Governance Review Update
The Chair introduced a briefing, including announcement of the appointment of a new Chair, following an open advert and independent recruitment process by Newcastle City Council. Jo Boaden, Chief Executive of the Northern Housing Consortium, would take up the post at the AGM on 19 September. NCC would issue a press release today. Regrettably there was still no news as yet from the NCC Independent Remuneration Panel with regard to Board Members’ remuneration. With regard to the appointment of Members to the new Board, the recruitment process had commenced in recent days. Current Members whose service to date did not exceed the limit set out in the NHF Code of Governance would be eligible to apply. Interviews for shortlisted candidates were to be held in late July, with a view to the new Board being in place by the time of the AGM in September. It was noted that the Rules of Asfaleia Limited needed to be redrafted, to ensure continued alignment with YHN’s objectives; and in this regard the YHN Board first had to give its permission for the Rules to be amended. This matter was addressed in detail under minute ref. 563 below.
The final matter for consideration was whether the responsibility for approving the terms of reference of the new committees could or should be delegated to the Executive Team. This matter was considered in detail under minute ref. 562 below. RESOLVED, the Board agreed:
To receive the report
561
Delegated Decisions
RESOLVED – that the schedule was received for information. 562
Committee Terms of Reference: Delegated Authority to Approve
The Chair introduced a briefing which proposed that the Board might consider delegating the approval of terms of reference to the Executive Team. Given the current transition to a new Board, it was suggested by the Chair that the Board could offer its support to the Executive Team as Terms of Reference were developed. It would however be more appropriate for the new Board to approve them, not this Board. A final decision was deferred to the 8 August 2017 meeting, when the new Chair and, potentially, new Board Members, could take a view. For the time being, the Board would retain its powers in this regard. RESOLVED, the Board agreed:
To receive the report and to bring the proposal back to the 8 August 2017 meeting for further consideration
563
Rules of Asfaleia Limited: Proposed Amendments
The Chair introduced a briefing, which set out the requirement for the YHN Board to give permission to the Board of Asfaleia Limited before any amendments to its Rules could be made. Four key changes were necessary as part of the ongoing governance review. The amendments would also need to be endorsed by the Financial conduct Authority before they could come into effect. RESOLVED, the Board agreed:
To receive the report and to grant permission to the Board of Asfaleia Limited to amend the Rules as described
564
Board Forward Plan
RESOLVED – that the plan was received for information.
565
Exclusion of Press and Public
RESOLVED – that in accordance with the organisation’s Access to Information provisions, the press and public were excluded from the meeting during the consideration of all further agenda items.
……………………………………….. Mrs O Grant Chair 8 August 2017
YHN Board Meeting, 20th June 2017 Action Log (Public) Minute ref.
By whom
Target date for completion
Review of format and presentation of performance reports
YHN Managing Director with Executive Team
Following governance review changes
521
Updates for YHN Board on sustainability of Ostara services
Chair of Asfaleia Ltd, with YHN Managing Director
Throughout 2017
First update delivered to YHN Board May 2017
524
Board Forward Plan to be updated for each meeting and included with Information items
Company Secretary
For each YHN Board meeting
Ongoing
562
Board to make a final decision regarding new Committee Terms of Reference and where it would be most appropriate to approve them
Company Secretary
8th August 2017
Decision deferred to YHN Shadow Board meeting
563
Board of Asfaleia Limited to amend the Rules as discussed at the YHN Board meeting
Company Secretary
27th July 2017
Item to be presented for approval at 27th July Asfaleia Board meeting
518
Action required
Current status
Ongoing
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Proposed Changes to the Council’s Tenancy Agreement
AUTHOR
Matthew Foreman – Customer Services Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For discussion/information
SUMMARY
This report provides an update on the proposed key changes to the Council’s Tenancy Agreement and summarises the key drivers and challenges.
DELIVERY PLAN OBJECTIVE
NUMBER & TITLE OBJECTIVE
STRATEGIC RISK REGISTER STRATEGIC RISK REGISTER
NUMBER & TITLE
GR4: Government welfare changes (Universal Credit roll out, LHA cap) makes furniture pack less affordable for our customers and clients
LIKELIHOOD
4 (almost certain)
IMPACT
3 (significant)
NUMBER & TITLE
GR9: External pressures arising from Government initiatives (including welfare reform, further roll out of universal credit) result in worsening performance for rent collection and void loss.
LIKELIHOOD
3 (possible)
1. Collect the rent and let properties efficiently. 2. Keep the housing stock decent and neighbourhoods clean and safe
IMPACT
4 (almost certain)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
This report summarises possible financial implications for YHN and our customers as a result of welfare reform and UC.
CUSTOMER IMPACT / VIEWS
Relevant customer impacts are detailed within this report.
EQUALITY & DIVERSITY CONSIDERATIONS
Consultation has gone above and beyond statutory requirements by ensuring customers are informed about changes via various channels and have the opportunity to feedback in a way that best meets their needs and preferences. Accessibility of the final version of the tenancy agreement is being reviewed to take account of the diverse customer base.
Proposed Changes to the Council’s Tenancy Agreement
1.
Background information
1.1 The Tenancy Agreement is a legally binding document between the Council, as landlord, and the Tenant, with Your Homes Newcastle managing the contract. It specifies the terms and conditions of the agreement. 1.2 It has been a number of years since the current Tenancy Agreement has been reviewed and there are a number of drivers for updating it: − Implementation of the Housing and Planning Act 2016 − Introduction of Welfare reform − A desire to reduce the size of the existing agreement and associated tenants handbook to make it easier for customers and staff to use − The need to drive efficiencies and reduce costs − The need to reflect changes in the way tenancies are now managed − The need to reflect customer and organisational expectations 1.3 A tenancy agreement review project team was established with a remit of appraising the existing Tenancy Agreement and making recommendations for improvements. 1.4 The Housing and Planning Act 2016 takes the discretionary element of fixed term tenancies from the Localism Act 2011 and makes them mandatory. This part of the Act is not enacted as yet and the regulatory guidance has not been issued, with no confirmed date for enactment. Rather than delaying implementation, the Agreement has been future proofed by adding an option for staff to select whether a Secure Tenancy or a Fixed Term Tenancy is granted. 1.5 To help mitigate against future changes in legislation and regulations, the revised tenancy agreement refers to specific policies. This means that policy and service changes can be made without the need to change the Agreement. However, tenants would continue to be consulted prior to major changes in policy and service delivery.
2.
Key Proposals
2.1 A summary of the key proposals is set out below, more detail can be provided upon request. 2.2 Any day Tenancy starts All tenancies currently commence on a Monday. It is proposed to change this so they can be started on any working day, enabling new tenants to choose their moving date. The key business drivers for this change are offering customers greater flexibility, the maximisation of rental income and reducing the time a property remains unoccupied. 2.3 Payments for your home The existing clause has been amended to state that rent must be paid in advance every week/month. This promotes a positive payment culture. Newcastle City Council have previously approved the collection of rent over 52 weeks rather than 49, to be implemented at a later date. The current practice of collecting rent over 49 weeks in a year has created the perception that tenants receive three ‘rent free’ weeks per year. Tenants in fact overpay on average £5.46 per week to cover these weeks. The introduction of Universal Credit has given further impetus to changing the number of weeks over which rent is collected. Universal Credit claimants who are entitled to the housing element of the benefit receive payment based on a 52 week calendar year. The proposed changes would align tenant’s income with rent charges. This proposal is expected to; • • • •
Give the customer choice to over pay if and when they choose to do so Reduce administration in relation to amending Direct Debits Mitigate the risk of error in relation to processing claims, for internal departments within YHN and Revenues and Benefits More accurately market vacant properties at a competitive rent rate
2.4 Use of your data The existing clause has been amended on data protection to include reference to allowing the processing of data for legitimate interests, sharing information with utility companies and credit reference companies. Reference has been made to any subsequent data protection legislation to prepare for the new General Data Protection Regulations which will come into force in May 2018 and therefore future-proof the agreement. 2.5 Domestic Abuse The Domestic Abuse clause has been expanded to include the different types of abuse including coercive control, emotional, physical and financial. The amended clause also stipulates that the perpetrator does not have to reside in the same property in order for YHN to take necessary enforcement action against them.
2.6 Housing Management There have been a number of changes to strengthen the agreement in relation to housing management which include; • Clause 10.1 ’Tenants right to occupy’- An additional clause has been added to enable YHN to gain access to a property where we feel that there may be a risk of imminent harm to person or property. • Clause 24 ‘Access to shared areas’- An additional clause to enable YHN to gain access to shared areas following reasonable notice to the tenant. • Clause 25.1 ’Communal Areas’ - Additional clause added to emphasise tenant’s responsibilities in relation to shared communal areas to ensure that they are kept clean and safe. • Clause 26 ‘Solar Panels’- Additional clause added to reflect that NCC have installed solar panels on a number of properties. This clause sets out the rights and responsibilities of tenants. • Clause 30 ‘Gardens and Fences’- Amended clause. The existing clause has been extended to clarify the responsibilities of tenants in relation to maintaining their gardens. The planting of invasive plants has been prohibited as they can cause extensive and costly damage and also added the right to charge for remedial works whereby a tenant fails to adhere to the agreement. • Clause 33 ‘Lodgers’. This existing clause has been strengthened to request that tenants inform of changes in writing to household composition if people are living in the property for longer than four weeks. • Clause 35 ‘Absence from your home’. Additional clause added so that tenants inform if they are going to be away from the property for more than four weeks and provide details of key-holders.
3.
Consultation
3.1 As specified in Section 103 of the Housing Act 1985, NCC have a legal requirement to consult with all current tenants prior to making any variations to an existing Tenancy Agreement. To fulfil this requirement, a Preliminary Notice setting out the proposed changes was issued to all tenants on the 26 June 2017. This marked the start of the four week statutory consultation period which ended on Monday 24 July 2017. 3.2 Consultation has gone above and beyond statutory requirements by ensuring customers are informed about changes via various channels and have the opportunity to feedback in a way that best meets their needs and preferences. This includes •
Provision of an online feedback form
•
Drop-in roadshow events at different locations across the city
•
Two dedicated focus groups
•
Provision of a ‘Frequently Asked Questions’ document hosted on YHN
website and promoted on social media
4.
•
Presentation of proposed changes to NITV Tenant Panel to enable them to cascade information
•
Social media engagement via NCC,YHN and NITV Facebook and Twitter pages
•
Dedicated ‘tenancy agreement’ email address and SMS provision
•
Short video presentation, highlighting the proposed changes, hosted on YHN website and promoted via social media.
•
Telephone support via both YHN contact centre and dedicated team to answer queries and assist customers with providing feedback where required.
Findings from Consultation Feedback
4.1 The response to consultation was positive with 90% of the 802 completed feedback forms agreeing with the proposed changes. In addition over three hundred tenants have been contacted in response to enquiries received via various channels and one hundred and fifty tenants attended roadshows and focus groups. 4.2 The current themes emerging to date are as follows: •
• •
•
52 week payment: Several queries from tenants over the perceived loss of the ‘rent free weeks’. However, once it has been explained that tenants can choose to retain a payment break, providing there is sufficient credit on the account, all tenants that have been spoken to have been satisfied and agree with the change. Data Protection: Some comments and concerns have been received from tenants in relation to the sharing of information with credit reference agencies. Enforcement of new clauses: Positive comments have been received which welcome the new/strengthened clauses particularly around garden/fences and communal area responsibilities. Tenants are keen to see enforcement action taken against those who fail to comply. Garden maintenance: This clause has been well received. Tenants feel that this is positive and are pleased that this clause has been strengthened.
A number of tenants have raised queries relating to garden maintenance and concern about the physical ability of some tenants to do this. Information has been provided to individuals to explain support options that both YHN and external agencies can offer. The FAQs to have also been updated to highlight support agencies. Comments have also been made about the council’s responsibility to ensure public owned green areas are equally maintained.
4.3 At the time of writing it is not anticipated that there are any major changes to make to the key proposals as a result of customer feedback. However, the final decision on this will be made by Newcastle City Council.
5.
Next Steps
5.1 If approved by Newcastle City Council in September 2017, the new Tenancy Agreement will be implemented on the 1st April 2018. 5.2 Once the consultation period has closed all of the feedback will be evaluated and this will inform the final Tenancy Agreement. •
Tenants will be kept informed throughout the process in the following ways: – A ‘You Said, We Did’ article will be include in October’s Homes and People magazine – Social media and website updates – A video highlighting how tenant’s views have been listened to
5.3 In advance, of implementation the following steps will be taken: •
• • • •
6.
A review of business processes including evaluating and developing the sign up process and tenancy documentation. The current tenancy management procedures will also be updated in line with the new Agreement. Development of a ‘Ways of Working’ document to complement the staff training programme and ensure consistent practice Re-configuration of housing management system Development of a communications plan to help prepare tenants for the changes and re-iterate the expectations within the new agreement A copy of the new tenancy agreement will be sent to every tenant at least four weeks prior to implementation
Recommendations
6.1 Board are asked to note the contents and provide comments and feedback on the proposed changes to the tenancy agreement prior to NCC Cabinet considering the proposed changes in September 2017. Background Papers - Preliminary Notice of Variation Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Matthew Foreman by telephone on 0191 278 3419 or email matthew.foreman@yhn.org.uk
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Appointment of Company Secretary
AUTHOR
Company Secretary
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For approval
SUMMARY
The Board is asked to approve a change of Company Secretary.
DELIVERY PLAN OBJECTIVE
NUMBER & TITLE OBJECTIVE
N/A
NUMBER & TITLE LIKELIHOOD
GR12: Failure to deliver effective governance of the Group 3 (moderate)
IMPACT
3 (moderate)
STRATEGIC RISK REGISTER
N/A
FINANCIAL / VALUE FOR MONEY IMPLICATIONS CUSTOMER IMPACT / VIEWS
N/A
EQUALITY & DIVERSITY CONSIDERATIONS
N/A
N/A
Appointment of Company Secretary 1.
Company Secretary
1.1 In December 2016 it was proposed and agreed that in the interim period whilst Jill Davison was on maternity leave, Jon Ritchie, Finance and Commercial Director, would be appointed as the Company Secretary for YHN. This option was chosen to ensure a permanent member of staff at a senior level was responsible for the role. Companies House was notified of the change on 1 January 2017. 1.2 Jill Davison has confirmed that she will return from maternity leave on 1 August 2017. 2.
Conclusion and recommendations
2.1 In accordance with Item 35 of the Articles of Association, it is within the Board’s remit to appoint the Company Secretary. The Board is recommended to agree to resign Jon Ritchie and re-appoint Jill Davison as Company Secretary.
Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact Jill Davison by telephone on 0191 278 8624 or email jill.davison@yhn.org.uk
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Approval of Financial Statements 2016/17
AUTHOR
Finance and Commercial Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For approval
SUMMARY
Approval of the YHN Group financial statements
DELIVERY PLAN OBJECTIVE
NUMBER & TITLE OBJECTIVE
N/A – statutory requirement
NUMBER & TITLE LIKELIHOOD
GR6: failure to comply with regulatory requirements
IMPACT
3 (medium significant)
STRATEGIC RISK REGISTER
N/A
1 (rare)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
This report summarises the group financial position for the period to 31 March 2017
CUSTOMER IMPACT / VIEWS
There are no specific customer impacts arising from this report
EQUALITY & DIVERSITY CONSIDERATIONS
No specific equality and diversity considerations arising from this report
Approval of Financial Statements 2016/17 1.
Background information
1.1 This report introduces the Annual Accounts for the financial year 2016-17 for YHN Company and Group (Appendix 1). We have provided a summary of any adjustments since the draft outturn presented in the Q4 financial update in May 2017. The report also includes an update on the year end reserves level compared to the minimum level approved by Board. 1.2 The annual accounts approval process The Annual Accounts are approved by the following process:
1
YHN finance staff produce the draft Reports and Statements
2
The Reports and Statements are tested by the Independent External Auditors (EY) for errors and weaknesses in internal processes.
3
EY produce a report of their findings.
4
Group Audit Committee scrutinises the Annual Accounts and provides a recommendation to Board.
5
Subsidiary boards approve the accounts with Audit Committee’s recommendation.
6
Board, with reference to Audit Committee’s recommendation, approves the Reports and Statements.
7
The Reports and Statements are presented to (or “laid before”) the shareholder at the AGM as a formality only.
8
The Reports and Statements are filed with Companies House, FCA, and HMRC (as appropriate).
1.3 Elements of the Annual Accounts All companies are required to produce Annual Accounts. A company’s Annual Accounts will usually contain the following items: Directors’ Report
Statements of Board’s responsibilities with regard to employees, equalities, controls, and disclosure of information to audit. The statement also includes the Board’s ‘going concern’ judgement.
Strategic Report
A review of the business for the past year and the year to come including performance against targets and the main risks considered by the company.
Independent Auditors’ Report
A statement from EY setting out the terms of reference of their audit, and their main finding.
Comprehensive Income Statement
The profit and losses of the company, throughout the year.
Statement of Financial Position
The balance sheet. This statement shows all the assets and liabilities on the 31st March.
Cash Flow Statement
This statement shows how the company has earned and spent cash during the year.
Notes to the financial statements
Notes to the three items above explaining the numbers in more detail, and setting out the policies and judgements used when presenting financial figures.
1.4 Accompanying documents The following documents are produced alongside the Annual Accounts. Going concern assessment There is also the requirement for a letter to the auditors evidencing to them YHN’s status as a going concern, which will be approved at the AGM. This is an assessment of going concern and liquidity risk by the Board. EY requires evidence that cash flows for 12 months following the date of signing the accounts demonstrate a going concern, as this is a fundamental basis for the preparation of the accounts. If it did not apply assets and liabilities would have to be valued on a ‘winding up’ or even “fire sale” basis. See Appendix 2.
Pension support letter A key piece of evidence in the going concern assessment, NCC provides a letter of support confirming that increases to pension contribution rates in future will be covered by increases to the YHN management fee, and that in the unlikely event that YHN becomes insolvent, NCC will step in and subsume the pension deficit. The letter gives the same assurances as last year. See Appendix 3. Letter of representation Each set of Annual Accounts is accompanied by the relevant Board’s letter of representation to the external auditors. This letter gives an undertaking to the auditors that all relevant information has been disclosed to them by Board. EY has provided a template letter. See Appendix 4 2.
Issues and concerns
2.1 Update since Q4 outturn report The following table sets out the changes to the closing reserves position since we reported our outturn to Board in May 2017. £'000 Draft Outturn Board May 2017
YHN 1,738
Abri Asfaleia Trading 859 71
Group 2,668
Improvement in bad debt provision
-
40
-
40
Tax calculation
-
73
-
73
(1,970)
-
-
(1,970)
(18)
-
-
(18)
(250)
972
71
793
FRS102 Pension cost per actuary Sundry adjustments Revised Profit in final accounts
2.2 Pension Deficit update The YHN pension deficit has increased since last year from £14.36m to £23.19m. The actuaries Aon Hewitt have independently reviewed the YHN pension fund position and provided the following numbers.
2016-17
2015-16
(£’m)
(£’m)
14.36
19.49
Past and current service shortfall
1.97
2.32
Actuarial estimate changes
6.86
-7.45
23.19
14.36
Opening deficit
Closing deficit
They have reported that the current and past service costs of the YHN pension fund and the interest charges associated with it during 2016-17 were greater than the contributions made by YHN. This shortfall has increased the pension liability by £1.97m. There was also an increase of £6.86m due to the underlying economic factors that the actuary uses to value the pension funds. These factors can be volatile and last year they reduced the deficit by £7.45m. These numbers seem large, but the actuaries are not recommending any major corrective actions. Every three years they review the situation of all employers in the pension fund, and require changes to contribution rates and often back-dated lump sums. YHN’s contribution rate has increased from 14.2% to 14.6%,(a relatively small rate compared to other employers), and no lump sums are to be paid. 2.3 Palatine debtors update Group Audit Committee has received detailed updates throughout the year on the Palatine debt issue that was uncovered during last year’s closedown process. During 2016-17, YHN staff have reviewed sales ledger transactions and bank statements going back several years relating to £295,000 of debtors. We have been able to secure £168,600 of debt by confirming that it is due from NCC. NCC has agreed this amount. Therefore we have reversed any bad debt provisions related to this debt, improving the profit for the year. £35,000 of the debt has now been paid to the Palatine bank account. We have confirmed that £29,000 of the money will not be recovered.
3.
Minimum levels of reserves.
3.1 YHN’s reserves are formed from the cumulative profits and losses it has made throughout its existence. YHN uses reserves when expenditure exceeds income in the financial year. It is prudent to hold a level of reserves that can act as a buffer against unforeseen financial shocks, or allow the Group to carry out additional expenditure to create future efficiencies. At the Board Away Day on 20 June, a minimum level of reserves of £3.1m was discussed. This amount would provide financial contingency against possible financial risks including the following risks: • •
Further decline of NFS rental income including the additional 1718 pressure of £0.5m Further decline of Ostara income Further NCC efficiency requirements
The reserves for YHN Group (prior to pension deficit) stand at £7.33m. This is well ahead of target, and means that our Transformation fund of £2.8m remains affordable. Closing Reserves Less: Transformation plans
£7.33m (£2.80m)
Total
£4.53m
Target reserves
£3.10m
Even after the Transformation fund is omitted, reserves are at 146% of target. Board is asked to approve the new target for minimum level of reserves (excluding pension liabilities) at £3.1m.
4.
The Options / Appraisal
4.1 Feedback from Group Audit Committee scrutiny Group Audit Committee received a detailed report on the Annual Accounts for all Group companies, and feedback from EY on the course and findings of the audit. EY have given the statements a ‘clean’ audit report, that is, the statements give a “true and fair view of the company’s affairs” and no material errors have been found. Having had the opportunity to review the financial statements and audit results report from EY, Group Audit Committee has recommended that Board approve the Annual Accounts and supporting documents.
5.
Conclusion and recommendations
5.1 Board are asked to approve the following documents to be signed by Board representatives: • • • • •
The Directors’ report; The Strategic report; The financial statements and notes; The letter of representation; and The going concern assessment.
5.2 Board are asked to approve the new target for minimum level of reserves (excluding pension liabilities) at £3.1m.
6.
Implementation
6.1 Once approved and signed by Board representatives, the accounts will be 1. counter signed by EY; 2. laid before the NCC representative at the YHN AGM; and 3. Filed with Companies House and HMRC. 6.2 There is still the possibility of changes to the statutory accounts up to the time of their acceptance at the AGM, should a significant post balance sheet event occur. Background Papers - Group Audit Committee - Annual Accounts July 2017 Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact James Clifford, Financial Controller by telephone on 0191 278 8679 or email james.clifford@yhn.org.uk
Your Homes Newcastle Limited
Annual Report and Financial Statements Year 2016-17
Registered Company No: 5076256
Your Homes Newcastle Limited
Contents
Page
Corporate Information: Board Members, Company Secretary and Advisors
2
Strategic Reports
4
Directors’ Report
12
Independent Auditors’ Report
17
Financial Statements
19
Notes to the Financial Statements
24
1
Your Homes Newcastle Limited
Corporate Information YHN Board Members, Company Secretary and Advisors Chair
Marjorie Olivia Grant OBE, DCL, DL
Tenant Directors
Lisa Doherty
(Vice Chair)
Paul Dutton Tony Moore
Independent Directors
Julie Purvis
Resigned 1 November 2016, vacancy held pending outcome of governance review
John Reid
Resigned 1 November 2016, vacancy held pending outcome of governance review
Loraine Wilson
Resigned 10 May 2016, vacancy held pending outcome of governance review
Phil Dibbs Ammar Mirza CBE Elaine Snaith Lynn Stephenson
(Vice Chair)
Paul Scope Malcolm Page Council Nominated Directors
Veronica Dunn Ian Graham
(appointed 5 April 2017)
Doreen Huddart Joyce McCarty David Slesenger
(resigned 5 April 2017)
Jane Streather Marion Talbot
2
Your Homes Newcastle Limited
YHN Board Members, Company Secretary and Advisors (continued) Chair of the Group Audit Committee
George Clark
Vice Chair of Group Audit Committee
Gordon Burns
Company Secretary
Jill Davison to 4 January 2017; Jon Ritchie from 4 January 2017 to 8 August 2017 Jill Davison from 8 August 2017.
Registered Office Address
Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR
Company registration
The Company is incorporated as a private company limited by guarantee under the Companies Act (company number 5076256).
Internal Auditors
Newcastle City Council Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
External Auditors
Ernst and Young LLP Citygate, St James’ Boulevard, Newcastle upon Tyne, NE1 4JD
Solicitor
Mr John Softly, Assistant Director – Legal Services Chief Executive’s Office, Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8BR
3
Your Homes Newcastle Limited
Strategic Report The members of the Board of Your Homes Newcastle Limited (trading as ‘YHN’) present their strategic report for the year ended 31 March 2017. Principal business The principal activity of YHN is the provision of housing management and improvement services to Newcastle City Council’s housing revenue account (‘HRA’) and other external organisations. In additional YHN is also responsible for the delivery of housing related support services that improve the sustainability of tenancies and neighbourhoods and promote independent living across the City of Newcastle. In 2016-17 YHN managed: 25,863 council homes on behalf of Newcastle City Council; 575 homes on behalf of Leazes Homes: and 1,820 homes on behalf of the Byker Community Trust. We also manage leasehold properties on behalf of Newcastle City Council and the Byker Community Trust. The contract with Byker Community Trust was wound down between October 2016 and 31 March 2017, as the Trust took an increasing volume of services back in-house. The YHN group includes a trading subsidiary – Abri Trading Limited – and a community benefit society – Asfaleia Limited. The latter has been recognised by HMRC as having charitable status. The principal activity of Abri Trading Limited is the rental and sale of home furnishings to social landlords and others. The purpose and objectives are guided by those of the Parent company, Your Homes Newcastle Limited. The objects (purposes) of Asfaleia are to benefit the public by: i) the charitable provision of relief of those in need by reason of poverty, youth, age, unemployment, ill-health or any mental or physical disability; ii) the promotion of education and training; and iii) the advancement of such charitable purposes (according to the law of England Wales) as the Board of Members see fit from time to time. Asfaleia is responsible for the provision of the activities of Advice and Support, Young People’s Service, Community Care Alarm Service (CCAS)/Ostara, Sheltered Housing and Employability. These services are provided in the context of contracts with Your Homes Newcastle Limited and the Ostara service is also made available to the wider public.
4
Your Homes Newcastle Limited
Strategic Report (continued) Organisational structure YHN is a local authority controlled company (“arm’s length management organisation – ALMO”) under the control of Newcastle City Council, established with no share capital and limited by guarantee. Newcastle City Council (NCC) has delegated to YHN responsibility for overseeing the management and maintenance of its residential stock and of HRA services provided to the City’s housing tenants. The YHN Group is structured as follows:
Review of the Business In February 2016 a new four-year Business Strategy was approved by the Board which defined our statement of purpose as “Delivering great services, enabling people to thrive in great communities, supporting a great city”. This purpose is underpinned by three service objectives and six cross-cutting objectives. The three service objectives are:
Keep the housing stock decent, and neighbourhoods clean and safe Collect the rent and let properties efficiently Promote health and wellbeing and support vulnerable people to enjoy independence.
5
Your Homes Newcastle Limited
Strategic Report (continued) Review of the Business (continued) The cross-cutting objectives are to: Use modern technology and innovation to challenge and redefine service delivery; Achieve efficiency at every level and direct resources to where they are needed most; Have high performing people who understand how to contribute to our purpose; Trade profitably to support core services; Work proactively with NCC and our other landlords; and Maximise partnerships to improve services. Abri Trading Limited was incorporated on 10 September 2015, and commenced trading on 1 October 2015 following a transfer of business and assets from Newcastle City Council and Your Homes Newcastle. For the 2016-17 trading year, the Company has performed above expectations, with income levels exceeding the targets set for the year. In headline terms, it was pleasing to see that Asfaleia Limited met or exceeded the performance targets set for it in 2015-16 and again in 2016-17. Further detail is set out in the Directors’ Report below. How we do business The Management Agreement expired on 31 March 2016 and NCC determined to enter into a new long term (10-year) agreement with YHN, commencing on 1 April 2016. This was a significant and positive step for both organisations and for our customers. We worked constructively with the Council in reviewing current arrangements and reached a point where we were clear about their requirements for future service provision and how we could go about delivering these.
6
Your Homes Newcastle Limited
Strategic Report (continued) Key Performance Indicators The following table highlights our performance in managing stock for NCC and other clients. Target theme Efficient spend and delivery of the HRA capital programme Percentage of repairs completed within agreed timescale Percentage of tenants satisfied with the repairs service Total spend on repairs and maintenance Percentage of rent collected from current tenants Percentage of rent not collected because of void properties Percentage of tenants ending their tenancy
2016-17 target
2016-17 actual
Spend £52.86m
Spent £51.60m
New target
99.6%
95%
95%
£20.07m
£20.42m
99.22%
99.63%
1.26%
1.52%
8.5%
8.5%
Principal Risks and Uncertainties YHN has a well-established assurance framework which, along with audit, performance management, accreditation and service reviews, includes risk management. A strategic risk register is maintained which outlines the most significant risks to the achievement of our business objectives. The strategic risk register highlights the perceived threat level of a risk, the controls in place to mitigate the risks and the actions required to improve the controls. The assurance framework and the strategic risk register are applied across the YHN group. The current approach to the management of strategic risks was approved by the YHN Board in May 2016. The framework consists of:
Annual review of the register approved by the Board; and Quarterly monitoring of the strategic risk register by the Group Audit Committee.
7
Your Homes Newcastle Limited
Strategic Report (continued) Principal Risks and Uncertainties (continued) In order to assess risk, the likelihood of a risk is assessed against its potential impact. The assessment generates a score which in turn is assigned a traffic light (red, amber or green) based on controls that YHN has in place. The strategic risk register monitored the following seven risks and uncertainties facing the business as at May 2016 (a new risk register having been approved by the Board that month): 1. 2. 3. 4. 5.
Group income does not meet expectations or plans Group costs fail to meet requirements or expectations Failure to comply with statutory Health & Safety regulations Substantial damage to YHN Group’s reputation. Significant disruption to service provision, affecting YHN, Abri Trading Limited or Asfaleia Limited 6. Ineffective governance of YHN Group 7. Inability of YHN staff to fulfil the business needs of the Group The strategic risk register ensures that the proposed controls and improvement actions reflect our priorities during the financial year. As the strategic risk register reflects our key strategic risks the improvement actions are primarily aligned to our:
Strategic targets; Service Improvement Programme, and Service plans.
Risk Management Strategy and Mitigation Plans YHN and its subsidiaries have a robust risk management strategy in place which flows from the strategic risks identified in the risk register. Set out below are the key mitigation measures which address the fundamental risk to financial stability and continuity (1 and 2 above). With regard to risk 3, the Health & Safety Committee produces six-monthly reports for Board consideration. Risks 4 and 5 are addressed through the Business Continuity Plan, which is reviewed regularly. Risk 6 was addressed in the course of the year through an external governance review, followed up by an internal working group that developed specific measures for improvements in governance arrangements. Risk 7 is managed directly by line managers.
8
Your Homes Newcastle Limited
Strategic Report (continued) Risk Management Strategy and Mitigation Plans (continued) Financial Risk Management Policy YHN currently holds no complex financial instruments. Cash balances are held at Newcastle City Council. Other financial assets and liabilities, such as trade creditors and related party balances, arise directly from the organisation's operating activities. The main risks associated with YHN's financial assets and liabilities are set out below. Interest Rate Risk YHN received interest rates from Newcastle City Council relating to cash held on its behalf. Financial assets, liabilities, interest income and cash flows can be affected by movements in interest rates. The Board Members do not consider there to be any significant exposure. Credit Risk During the financial year YHN received almost its entire turnover from Newcastle City Council and payment terms are 30 days from the date of invoice. Individual exposures and overdue debts are monitored, with customers subject to credit limits to ensure that YHN's exposure to bad debts is not significant. Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The group aims to mitigate liquidity risk by managing cash generation by its operations, applying cash collection targets throughout the group. The group also manages liquidity risk via revolving credit facilities and loan funding from NCC. Foreign Currency Risk YHN does not engage in any foreign currency transactions. All of its activities take place within the United Kingdom and consequently, YHN is not exposed to any foreign currency risk.
9
Your Homes Newcastle Limited
Strategic Report (continued) Future Developments Governance Review A comprehensive governance review process was commenced in 2016, flowing from the establishment of the YHN group structure in Autumn 2015. Specialists in the housing governance field (Campbell Tickell) were appointed to conduct an independent review in Autumn 2016 and their findings were presented to the YHN Board on 7th December 2016. The recommendations were subsequently considered in detail and prioritised by an internal governance review working group. Chaired by an Independent member of the YHN Board, the working group considered the scope for a common purpose board, spanning across YHN, Abri and Asfaleia; adoption of a new, nationally recognised Code of Governance; reducing the size of the YHN board; and introducing Board membership based on the appropriate skills and competencies to oversee the organisation effectively, from a more strategic perspective. Specialist legal and financial advice was taken in relation to the legal impact of a common purpose board and any effect on the tax efficiencies which arise from the current group structure. The key recommendations were far-reaching and, flowing from the NHF Code of Governance which had been recently adopted by the YHN Board, included a significant restructuring of the YHN Board, with an impact on its committee structures and also for the boards of both Abri Trading and Asfaleia. The quasi-charitable status of Asfaleia as a Community Benefit Society meant that it could not readily be brought under the aegis of a common purpose board. Specific recommendations were made in consequence to ensure that its charitable objects remained closely aligned to the strategy and business objectives of YHN. The YHN Board subsequently endorsed all of the working group recommendations on 21st March 2017. Implementation began with NCC and Campbell Tickell in April 2017, commencing with the search for and appointment of a new Chair.
10
Your Homes Newcastle Limited
Strategic Report (continued) Grenfell Tower tragedy Following the tragedy at Grenfell Tower on 14 June 2017, YHN acted immediately to reassure Council tenants that the housing stock was safe and that any remedial action would be taken as a priority. A dedicated team was created, led by the Assistant Director – Operational Property Services. YHN has ensured that the response has been consistent and quality assured. The main priorities of this group are to
Provide reassurance to residents on the safety of their homes Identify immediate and longer term actions relating to fire safety. This will include; implementing property and tenancy related changes if necessary, and developing a future investment proposal Respond to concerns that emerge from the Grenfell Tower investigation Ensure that residents and stakeholders are kept informed of progress, and the views of residents are listened to Work in partnership with Newcastle City Council (NCC) and Tyne and Wear Fire and Rescue Service (TWFRS)
As well as responding quickly to questions from our tenants and other interested parties, YHN is following guidance from the Department of Communities and Local Government, and reviewing our disaster recovery plans and business continuity arrangements in conjunction with partners.
The strategic report was approved by the Board on 8 August 2017 and signed on its behalf on 8 August 2017 by:
Olivia Grant Chair
Jill Davison Company Secretary
11
Your Homes Newcastle Limited
Directors’ Report The members of the Board of Your Homes Newcastle Limited (trading as ‘YHN’) present their directors’ report for the year ended 31 March 2017. The Group has chosen, in accordance with Section 414C(ii) of the Companies Act 2006 to set out in the Strategic report the following, which the directors believe to be of strategic importance:
Review of the business Principal risks and uncertainties Risk management strategy and mitigation plans Future developments.
Interests of Board Members YHN is a private company limited by guarantee which is wholly controlled by the local authority, Newcastle City Council. Six Board members are Newcastle City Councillors. Six members are tenants of Newcastle City Council, and all financial transactions are carried out under normal commercial terms. In establishing and monitoring the strategy, the Board considers the impact of its decisions on wider stakeholders including Newcastle City Council, tenants, employees, suppliers and the environment. Our Employees Employee Communication and Involvement We use many different channels to ensure our internal communications engage staff with corporate messages, as well as provide opportunities for them to provide feedback and share their own ideas and news. These include our intranet, which features regular internal news articles, staff forums, collaborative working areas and the option to personalise alerts and feeds. We send regular e-newsletters to staff containing a broad range of articles to keep colleagues up to date with organisational news, raise awareness of selected issues, boost morale and inform staff about the wider social and political landscape in which we operate. These digital channels are supported by more traditional methods such as posters, flyers and events to ensure we reach all staff and provide information in an integrated way. We also design campaigns around specific issues taking care to
12
Your Homes Newcastle Limited
Directors’ Report (continued) Employee Communication and Involvement (continued) match communications channels to corporate objectives. For example, we are delivering our organisational transformation programme using a ‘gap year’ theme with a dedicated intranet site, artwork and programme of events to capture attention, encourage participation, dispel rumours and encourage engagement with this significant piece of work. In addition, we have a formal annual appraisal mechanism that includes regular 1-21s for all staff to receive feedback on their performance, identify training needs and gain an understanding of how their targets feed into the achievement of the organisation’s goals. There are also formal and informal communication and consultation mechanisms with trade unions. Equality, Diversity and Human Rights “Equality and Diversity is everybody’s business” We ensure our commitment to equality and diversity goes far wider than our legislative obligations. Our ultimate aim is to ensure that our commitment to equality and diversity is rooted in the core values of everything we do. Our collective efforts to create an exclusive environment for our lesbian, gay, bi and trans colleagues have been recognised by Stonewall in this year’s Workplace Equality Index. We are now the second highest performing housing organisation in the list and ranked 28th overall (previous year ranked 36th). We implement policies, practices and procedures that actively promote equality, diversity and human rights and support the elimination of barriers that prevent fairness for all of our employees and customers. As an organisation with extensive contact with the public, we expect to take account of human rights in our day to day work, whether delivering services or developing policies and procedures. Many of the everyday decisions taken in the workplace have no human rights implications. However, by understanding human rights we are more likely to know when they are relevant and when they are not. It should also help us to make decisions more confidently and ensure those decisions are sound and fair. Employees with disabilities (continued) YHN is committed to ensuring that people with disabilities should have full and fair consideration for vacancies. During the year we continued to demonstrate our commitment to interviewing people with disabilities who fulfil the minimum criteria and endeavour to retain employees in the workforce if they become disabled during employment. If appropriate we would actively retrain and make adjustments to the working environment to allow our employees to remain in the business.
13
Your Homes Newcastle Limited
Directors’ Report (continued) Statement of Directors’ Responsibilities The directors are responsible for preparing the Strategic Report, Directors’ Report and financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:
Select suitable accounting policies and them apply them consistently Make judgements and estimates that are reasonable and prudent State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board takes its responsibilities in relation to bribery seriously and continues to support initiatives to emphasise the organisation’s anti-corruption culture. Future developments affecting the balance sheet The Board considers that there have been no events since the financial year end that have had a significant effect on the financial position. Going Concern Having made enquiries, the Board consider that the Company’s current and future prospects and its availability of financing are adequate to enable it to continue business for the foreseeable future and that they are also satisfied that the Company can continue to pay its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial statements.
14
Your Homes Newcastle Limited
Directors’ Report (continued) Going Concern (continued) The Board consider that a robust going concern assessment process was undertaken and the results discussed and challenged formally at the Group Audit Committee on 13 July 2017. At that meeting the Audit Committee recommended that the Board should endorse these annual accounts. The process for determining whether or not the Company is a going concern involved a number of considerations including an assessment of the financial budgets and forecasts for YHN to August 2018, in the context of a new business strategy for 2016 – 2020 and in the light of a new management agreement between YHN and Newcastle City Council, as endorsed by Cabinet in January 2016. The outlook also considered the continued and possible future effects of Welfare Reform. This period is considered to be the ‘foreseeable future’ as required for this ongoing assessment only and is in accordance with company law and accounting rules. The assessment also considered the solvency and liquidity risks involved in delivering the financial forecasts for the foreseeable future. There were no major changes to YHN’s significant liquidity and solvency risks in the year. The Group has net liabilities of £15,795,000 (2016 £9,728,000), including a pension deficit of £23,190,000 (2016 £14,360,000). The company has a management agreement in place with Newcastle City Council which underpins the Group’s budgets and forecasts, which show that the Company is expected to be able to meet its liabilities as they fall due for the foreseeable future, in particular, for a period of at least twelve months from the date of approval of these financial statements. These budgets and forecasts include contributions payable to the pension scheme on the current agreed contribution schedule, which has been drawn up by the actuary on the basis of a 22-year schedule for the recovery of the deficit. In addition, the Group has received confirmation from Newcastle City Council that the Council would assist Your Homes Newcastle (YHN) in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to YHN to meet such liabilities. For this reason, the Board continues to adopt the going concern basis of preparation for these financial statements.
15
Your Homes Newcastle Limited
Directors’ Report (continued) Disclosure of information to auditors All of the Board members, appointed at the date upon which these report and accounts were approved, were not aware of any relevant audit information which was required by the auditors in connection with the preparation of the report and accounts, of which the auditor was unaware. Having made enquiries of fellow Board members and YHN’s auditors, each Board member has taken all the steps that he/she is obliged to take as a member of the Board in order to make himself/herself aware of any relevant audit information and to establish that the auditor is aware of that information. Auditors Ernst & Young LLP are the external auditors of Your Homes Newcastle Limited for the period 2016-17. The report of the members of the Board was considered and approved by the Board on 8 August 2017 and signed on its behalf on 8 August 2017 by:
Olivia Grant Chair
Jill Davison Company Secretary
16
Your Homes Newcastle Limited INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YOUR HOMES NEWCASTLE LIMITED We have audited the financial statements of Your Homes Newcastle Limited for the year ended 31 March 2017 which comprise Group Statement of Comprehensive Income, the Group and Parent Statement of Changes in Equity, the Group and Parent Company Statement of Financial Position, the Group Statement of Cash Flows and the related notes 1 to 20. 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), including FRS 102 “The financial Reporting Standard applicable in the UK and Republic of Ireland” This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 14, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 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 group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Financial Statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2017 and of the group’s profit for the year then ended;
17
Your Homes Newcastle Limited have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 “The Financial Reporting standard applicable in the UK and Republic of Ireland; and have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements; Matters on which we are required to report by exception In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have identified no material misstatements in the Strategic Report or Directors’ Report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.
Caroline Mulley (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor City Date:
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Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Financial Statements
Group Statement of Comprehensive Income for the 12 months ended 31 March 2017 Note
2017 ÂŁ'000
2016 ÂŁ'000
Income
2
41,645
38,572
Operating costs
3
(39,936)
(37,627)
Operating profit
4
1,709
945
7b 7a
(233) 4 (760)
11 (720)
720
236
73
-
793
236
(6,860)
7,450
(6,067)
7,686
Loss on disposal of fixed asset Interest receivable and other income Interest payable and other charges Profit on ordinary activities before taxation Taxation
8
Profit for the financial year Actuarial (loss)/gain on defined benefit pension
Total comprehensive (loss)/income for the period
20
All amounts relate to continuing activities in the period.
19
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Financial Statements (continued)
Group Statement of Changes in Equity for the 12 months ended 31 March 2017 Profit and loss reserve ÂŁ000 Balance as at 1 April 2015 Total comprehensive income for the year Balance as at 31 March 2016 Total comprehensive loss for the year Balance as at 31 March 2017
(17,414) 7,686 (9,728) (6,067) (15,795)
Company Statement of Changes in Equity for the 12 months ended 31 March 2017 Profit and loss reserve ÂŁ000 Balance as at 1 April 2015 Total comprehensive income for the year Balance as at 31 March 2016 Total comprehensive loss for the year Balance as at 31 March 2017
(17,414) 6,599 (10,815) (7,110) (17,925)
20
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Financial Statements (continued)
Group Statement of Financial Position As at 31 March 2017
Fixed assets Tangible assets Current assets Stocks Debtors: amounts falling due within one year Cash at bank and in hand
Less Creditors: amounts falling due in less than one year Net current assets Total assets less current liabilities Creditors: amounts falling due in more than one year Net assets excluding pension liability Defined benefit pension liability Net liabilities Reserves and capital Profit and loss reserve
Registered Company No: 5076258 2017 2016 Note ÂŁ'000 ÂŁ'000 9
4,346 4,346
5,890 5,890
11 12
713 7,825 4,849 13,387
638 7,400 7,733 15,771
13
(3,591) 9,796 14,142
(10,279) 5,492 11,382
14
(6,747)
(6,750)
20
7,395 (23,190) (15,795)
4,632 (14,360) (9,728)
(15,795) (15,795)
(9,728) (9,728)
These financial statements were approved by the Board and authorised for issue on 08 August 2017.
Signed on behalf of the Board
Olivia Grant Chair
21
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Financial Statements (continued)
Company Statement of Financial Position As at 31 March 2017
Fixed assets Tangible assets Other investments Current assets Stocks Debtors: amounts falling due within one year Cash at bank and in hand
Less Creditors: amounts falling due in less than one year Net current assets Total assets less current liabilities Creditors: amounts falling due in more than one year Net assets excluding pension liability Defined benefit pension liability Net liabilities Reserves and capital Profit and loss reserve
Registered Company No: 5076258 2017 2016 Note £'000 £'000 9 10
2,075 3,900 5,975
2,491 3,900 6,391
11 12
393 6,569 2,404 9,366
390 4,846 5,551 10,787
13
(3,329) 6,037 12,012
(6,883) 3,904 10,295
14
(6,747)
(6,750)
20
5,265 (23,190) (17,925)
3,545 (14,360) (10,815)
(17,925) (17,925)
(10,815) (10,815)
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and not presented an income statement or a statement of comprehensive income for the Company alone. The loss for the year is £7,110,000 (2016: £6,599,000 profit). These financial statements were approved by the Board and authorised for issue on 08 August 2017. Signed on the Board's behalf:
Olivia Grant Chair
22
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Financial Statements (continued)
Group Statement of Cash Flows for the 12 months ended 31 March 2017 2017 ÂŁ'000
2016 ÂŁ'000
(1,404)
8,444
Investing activities Interest received Payments to acquire tangible fixed assets Proceeds on sale of fixed assets
(1,065) -
11 (7,211) 51
Net cash flow from investing activities
(1,065)
(7,149)
Financing activities Interest paid New long-term loans Repayment of finance leases
(310) (105)
(22) 6,500 (42)
Net cash flow from financing activities
(415)
6,436
(2,884)
7,731
7,733 4,849
2 7,733
Note Net cash flow from operating activites
Net change in cash and cash equivalents Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March
18
23
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies 1.1 Statement of Compliance Your Homes Newcastle was incorporated and is registered in Newcastle upon Tyne, England under the Companies Act 2006 (Registered Number 5076256). The Registered Office is Civic Centre, Barras Bridge, Newcastle Upon Tyne, NE1 8PR. The principal place of business is YHN House, Benton Park Road, Newcastle upon Tyne NE7 7LX. Your Homes Newcastle Limited is a company limited by guarantee and does not have any share capital. There is only one “member” of the organisation. That “member” is NCC and the company’s articles of association state that no other person other than the Council Member shall be admitted to membership of the organisation. The financial statements have been prepared on a going concern basis and in compliance with FRS102 as it applies to the financial statements of the Group for the year ended 31 March 2017.
1.2 Basis of preparation and change in accounting policy The financial statements were authorised for issue by the Board of Directors on 08 August 2017. The financial statements have been prepared in accordance with applicable accounting standards. The financial statements are prepared in sterling which is the functional currency of the group and rounded to the nearest £’000.
1.3 Basis of consolidation The group financial statements consolidate the financial statements of Your Homes Newcastle Limited and all its subsidiary undertakings drawn up to 31 March each year. Subsidiaries are consolidated from their date of acquisition, being the date on which the Group obtains control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities. The group profit and loss account include the results and cash flows of: Asfaleia Limited for the 12-month period from 1 April 2016 and Abri Trading Limited for the 12-month period from 1 April 2016. In the parent company financial statements investments in subsidiaries are accounted for at cost less impairment.
24
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.4 Going concern The directors have prepared the financial statements on a going concern basis which assumes that the Company will continue in operational existence for the foreseeable future and meet its liabilities as they fall due. The Group has net liabilities of £15,795,000 (2016 £9,728,000), including a pension deficit of £23,190,000 (2016 £14,360,000). The Company has management agreement in place with Newcastle City Council which underpins the Group’s budgets and forecasts which show that the Company is expected to be able to meet its liabilities as they fall due for the foreseeable future, in particular, for a period of at least twelve months from the date of approval of these financial statements. These budgets and forecasts include contributions payable to the pension scheme on the current agreed contribution schedule which has been drawn up by the actuary on the basis of a 22-year schedule for recovery of the deficit. In addition, the Group has received confirmation from Newcastle City Council that the Council would assist Your Homes Newcastle (“YHN”) in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to YHN to meet such liabilities. Accordingly, the directors of the Group believe that it is appropriate to prepare the financial statements on a going concern, on the grounds that they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. 1.5 Judgements and key source of estimation uncertainty The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date, and the amounts reported for revenues and expenses during the period. However, the nature of estimation means that actual outcomes could differ from those estimates. The following judgements and sources of estimation uncertainty have had the most significant effect on the financial statements: Provisions A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. There can be estimation involved in determining the provision to be made. Operating and Finance Lease Commitments As a lessee, the Group obtains use of plant and equipment. The classification of such leases as operating or finance lease commitments requires the Group to determine, based on evaluation of the terms and conditions of the arrangements whether it acquires the significant risks and rewards of ownership of these assets and accordingly whether the lease requires a liability to be recognised in the statement of financial position.
25
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.5 Judgements and key source of estimation uncertainty (continued) Pension costs The cost of a defined benefit pension plan is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty. In determining the appropriate discount rate, management considers the interest rates of high quality bonds with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The mortality rate is based on the recent actual mortality experience within the Fund and allow for expected future mortality rates. Future salary increase and pension increases are based on expected future inflation rates for the UK. Further details are given in note 20. Impairment of non-financial assets Where there are indicators of impairment of individual assets, the Group performs impairment tests based on fair value less costs to sell or a value in use calculation. The fair value less costs to sell is based on observable market prices less incremental costs for disposing of an asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the next three years and does not include significant future investments that will enhance the assets performance of the cash generating asset that is being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and growth rate used for extrapolation purposes. Taxation Judgement is required when determining the provision for taxes. Tax benefits are not recognised unless it is probable that the benefit will be obtained. Tax provisions are made if it is possible that a liability will arise. The Group reviews each significant tax liability or benefit to assess the appropriate accounting treatment. Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future profits. Determination of financial instruments as basic There is judgement in determining whether financial instruments meet the definition of basic or complex in accordance with Section 11 of FRS 102. Management has determined that the Group and Company’s financial instruments are deemed as basic on the basis of the following: • Interest paid on the loans is on a fixed rate basis. • The loans agreements are with Newcastle City Council and these loan agreements do not contain two way break clauses. These loans have therefore been recognized at amortised historical cost.
26
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.5 Judgements and key source of estimation uncertainty (continued) Fixed assets accounting and stock accounting The Parent undertaking’s fixed assets are comprised of items of furniture rented to Newcastle City Council under the NFS brand, ICT equipment, and the YHN fleet held under lease. The Group’s fixed assets are comprised of the items above and furniture rented to other landlords in Abri Trading, and Ostara alarm equipment in Asfaleia Ltd. Palatine Beds Inventory is held within Abri Trading for raw materials and finished goods held in relation to sales under the Palatine Beds and 1907 brands. See note 1.6 for stock information on stock valuations. Overview of NFS (Newcastle Furniture Service) Brandoperations are split between Your Homes Newcastle and Abri Trading. Resources and NFS fixed assets employed to deliver furniture services to Newcastle City Council are recorded in the Parent’s accounts. Commercial contracts with other landlords are delivered by Abri Trading. Asset purchases and transfers All furniture is initially purchased by the parent undertaking, where it is held at cost price as inventory. Subsequently, when an item of furniture is rented out to an Abri Trading customer, a purchase from the parent is recorded. The furniture is then held with Abri Trading as a fixed asset and held at historic cost less depreciation. The sale is not expensed in the Parent’s income statement. If the item is rented out under the Newcastle City Council contract, the furniture is recorded as a fixed asset within the parent and held at historic cost less depreciation If a customer returns an item of furniture (from either a YHN or Abri Trading contract), an assessment is made of the condition of the asset and it is either 1. disposed and recorded as a disposal with no proceeds, or 2. returned to the Parent’s stock where it is held at the net book value of the asset at the time of its return. A fixed asset disposal is recorded . All repair costs for items within inventory are minor and are expensed as they arise. Presentation of fixed assets The YHN Group uses a global fixed asset register across NFS to control the assets of Abri Trading and the Parent undertaking. To clarify the transactions to the reader and to aid the reconciliation of the Financial Statements to the asset register, additional lines have been added to the fixed asset register to show the additions and disposals within the group. Ostara Asfaleia holds stock and fixed assets in relation to its Ostara care alarm services. These assets take the form of remote alarms, key safes and other support equipment.
27
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.5 Judgements and key source of estimation uncertainty (continued) Fixed assets accounting and stock accounting (continued) Ostara (continued) Supplies of equipment that have not been allocated to a customer are held as stock at cost price. Once an item is allocated to a customer it is transferred from stock to fixed assets and is held at depreciated cost value. If an item is returned by a customer, an assessment is made of the condition of the asset and it is either disposed, or returned to stock where it is held at the net book value of the asset at the time of its return. All repair costs to items are minor, and are expensed as they arise. Sales from stock are recorded as a cost of sale and expensed to the income statement. 1.6 Significant accounting policies Revenue Recognition Revenue is recognised to the extent that the group obtains the right to consideration in exchange for its performance. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and VAT. The following criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of services Revenue from the provision of management services is recognised, according to the individual contract, by: ¡ Fixed fee per period; or ¡ Reference to labour hours incurred to date; or ¡ Fee per unit managed. Where contract income cannot be measured reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
28
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.6 Significant accounting policies (continued) Interest Income Revenue is recognised as interest accrues using the effective interest method. Government Grants Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants are of a revenue nature and as such are credited to income so as to match them with the expenditure to which they relate. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Such cost includes costs directly attributable to making the asset capable of operating as intended. Depreciation is provided on all property, plant and equipment, at rates calculated to write off the asset on a systematic basis over its expected useful life as follows:  Equipment - over 1 ½ to 7 years The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Impairment of non-financial assets The Group assesses at each reporting date whether an asset may be impaired. If any such indication exists, the Group estimates recoverable amount of the asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs. The recoverable amount of an asset or cash generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount through an impairment in profit and loss unless the asset is carried at a revalued amount where the impairment loss of a revalued asset is a revaluation decrease. An impairment loss recognised for all assets is reversed in a subsequent period if and only if the reasons for the impairment loss have ceased to apply. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short term deposits with an original maturity date of three months or less. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above net of outstanding bank overdrafts.
29
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.6 Significant accounting policies (continued) Short-term debtors and creditors Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from any associated impairment are recognised in the income statement in other operating expenses. Stocks Stocks comprise NFS furniture holdings at the parent company, "Ostara" alarm equipment within Asfaleia and raw materials and finished goods for Palatine Beds within Abri Trading Ltd. Stocks are stated at the lower of cost and net realisable value. Costs include all costs incurred in bringing each product to its present location and condition, as follows: · Raw materials, consumables and goods for resale - purchase cost on a first-in, first-out · Work in progress and finished goods – cost of direct materials and labour plus attributable overheads based on a normal level of activity · Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal. Taxation The Group establishes provisions based on reasonable estimates, for possible consequences of audits by the UK tax authorities. The amount of such provision is based on various factors, such as differing interpretations of tax regulations by the taxable entity and the tax authority. Deferred Tax Deferred tax is recognised in respect of all timing differences which are differences between taxable profits and total comprehensive income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements except that: · Where there are differences between amounts that can be deducted for tax for assets and liabilities compared with the amounts that are recognised for those assets and liabilities in a business combination a deferred tax asset shall be recognised; and · Unrelieved tax losses and other deferred tax assets are recognised to the extent that the directors consider that it probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
30
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
1. Accounting Policies (continued) 1.6 Significant accounting policies (continued) Leasing and hire purchase commitments Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to the group, and hire purchase contracts are capitalised in the balance sheet and are depreciated over the shorter of the lease term and the asset’s useful life. A corresponding liability is recognised for the lower of the fair value of the leased asset and the present value of the minimum lease payments in the balance sheet. Lease payments are apportioned between the reduction of the lease liability and finance charges in the income statement so as to achieve a constant rate of interest on the remaining balance of the liability. Rentals payable under operating lease are charged in the profit and loss account on a Interest bearing loans and borrowings All interest bearing loans and borrowings which are basic financial instruments are initially recognised at the present value of cash payable to the lender (including interest). After initial recognition they are measured at amortised cost using the effective interest rate method less impairment. The effective interest rate amortisation is included in finance revenue in the income statement. Pensions benefits The company participates in the Local Government Pension Scheme, through membership of the Tyne and Wear Pension Fund. The scheme is a final salary pension scheme (‘defined benefit’) and retirement benefits to employees of the company are funded by contributions from all participating employers and employees in the scheme. The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method, which attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine the present value of defined benefit obligations) and is based on actuarial advice. The net interest element is determined by multiplying the net defined benefit liability by the discount rate, at the start of the period taking into account any changes in the net defined benefit liability during the period as a result of contribution and benefit payments.
31
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
2. Analysis of Group Turnover
Housing management fees Sales of goods Other income
Landlord Services 2016 2017 £'000 £'000 35,575 35,122 2,840 1,232 3,230 2,218 41,645 38,572
3. Analysis of Group Operating Costs
Employee costs Premises costs Transport costs Supplies & services Depreciation Impairment Bad debt expense Materials and purchases
2017 £'000 27,184 1,305 849 5,523 3,149 91 1,835 39,936
2016 £'000 28,215 954 887 5,292 1,517 139 145 478 37,627
2017 £'000 3,149 619 1,835
2016 £'000 1,517 139 621 889
20 25
16 15
4. Group Operating Profit This is stated after charging:
Depreciation of tangible assets Impairment loss on fixed assets Operating Leases Stock expensed Auditors’ fees For audit services For non-audit services
32
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
5. Employee information a) Staff costs The average number of persons employed during the year, expressed as equivalent of whole time employees was:
Housing management Administration and clerical
Costs for the above employees were: Wages and salaries Social security costs Employers pension contributions Past and current pension service costs above cash contributions
b) Directors’ emoluments Aggregate emoluments payable to directors (including pension contribution and benefits in kind) The full time equivalent number of staff who received emoluments in the following bandings are:
2017 No's 629 151 780
2016 No's 649 170 819
2017 £'000 20,812 1,916 2,936
2016 £'000 21,779 1,449 3,257
1,520
1,730
27,184
28,215
2017 £'000
2016 £'000
38
39
2017 No's £60,001 to £70,000 2 £70,001 to £80,000 3 £80,001 to £90,000 1 £90,001 to £100,000 2 £100,001 to £110,000 2 £110,001 to £120,000 £120,001 to £130,000 £140,001 to £150,000 £150,001 to £160,000 1 £160,000 and above 2 13 The 2017 figures include 9 employees whose emoluments include severance payments (2016: 12)
2016 No's 4 9 1 2 1 2 1 2 22
33
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
6. Key Management Personnel All directors and certain senior employees who have authority and responsibility for planning, directing and controlling the activities of the Group are considered to be key management personnel. Total remuneration in respect of these individuals is £610,000 (2016: £249,000). Six YHN Board Members are NCC housing tenants. All Board member tenancies are granted on normal commercial terms. Tenant Board Members do not use their position to gain any commercial advantage. Six YHN Board Members are Newcastle City Councillors. The Councillors do not use their position as YHN Board Members to gain any commercial advantage. Where conflicts do arise they are fully disclosed either in advance of a Board/Committee meeting or at such a meeting. If appropriate the Councillor would leave the meeting to enable the matter to be discussed in their absence thereby avoiding a conflict of interest.
7a. Interest payable and similar charges
Loans from NCC Finance charges payable under leases Interest on net pension liability
2017 £'000 293 17 450 760
2016 £'000 122 8 590 720
2017 £'000 4 4
2016 £'000 11 11
7b. Interest receivable
Interest on balances held at NCC
34
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
8. Tax Group (a) Tax on profit on ordinary activities The tax charge is made up as follows:
Current tax: UK Corporation tax on profits for the period Adjustment in respect of previous periods Total current tax Deferred tax: Origination and reversal of timing differences Effect of changes in tax rates Total deferred tax Total tax per income statement (b) Tax charge reconciled to the total comprehensive income The tax charge is made up as follows:
Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax of 20% Adjusts from previous periods Effects of income not taxable Expenses not deductible Tax rate changes Movement on unrecognised tax losses Unprovided tax losses Tax charge for the period
2017 £'000
2016 £'000
74 62 136
-
(246) 37 (209)
-
(73)
-
2017 £'000
2016 £’000
720
236
144
47
62 (277) 36 37 (75) (73)
(524) 477 -
-
-
c) Factors affecting future tax charges The standard rate of UK corporation tax for the period was 20.00% (2016: 20.00%). A reduction in the rate to 19% from 1 April 2017 and 17% from 1 April 2020 were substantively enacted prior to the balance sheet date.
35
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
9.Tangible Assets
Group 2017 Cost: At 1 April 2016 Additions Net transfer from inventory Disposals At 31 March 2017 Depreciation and impairment: At 1 April 2016 Provided during the year Net transfer from inventory Disposals At 31 March 2017 Net book Value As at 31 March 2017 As at 1 April 2016
Company 2017 Cost: At 1 April 2016 Additions Net transfers from associate undertaking Net transfer from inventory Disposals At 31 March 2017 Depreciation and impairment: At 1 April 2016 Provided during the year Net transfers from associate undertaking Net transfer from inventory Disposals At 31 March 2017 Net book Value As at 31 March 2017 As at 1 April 2016
Total Equipment ÂŁ'000 7,546 1,204 557 (701) 8,606 (1,656) (3,149) 87 458 (4,260) 4,346 5,890 Total Equipment ÂŁ'000 3,202 748 18 367 (258) 4,077 (711) (1,438) (4) 151 (2,002) 2,075 2,491
36
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017 Included within the group net book value of £4,346,000 is £363,000 (2016 - £339,000) relating to assets held under hire purchase agreements. The depreciation charged to the financial statements in the year in respect of such assets amounted to £112,000 (2016 £47,000).
See note 1.5 for further information on fixed asset transactions and presentation.
10. Investments 2017 £'000
2016 £'000
Company Loans to other Group companies
3,900 3,900 3,900 3,900 Loans to group companies were made at prevailing rates on a fixed interest basis. The fair value of the investment is deemed to be the underlying loan principle.
37
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
11. Stock Group Raw materials and consumables Finished goods
2017 £'000
2016 £'000
146 567 713
121 517 638
Company Raw materials and consumables
393 390 393 390 The difference between purchase price or production cost of stocks and their replacement value is not material. Stocks recognised as an expense in the period were £1,835,000 for the Group (2016: £889,000) and £3,000 for the parent (2016: £40,000) Stock values are shown net of a stock provision value of £73,000 (2016: £23,000)
12. Debtors Group Amounts owed from NCC Trade debtors VAT debtor Prepayments and accrued income Tax asset
Company Amounts owed from NCC Amounts owed from YHN Group companies Trade debtors Prepayments and accrued income
2017 £'000 5,463 1,296 97 760 209 7,825 2017 £'000 3,656 2,132 223 558 6,569
2016 £'000 4,520 1,593 578 709 7,400 2016 £'000 181 241 3,503 921 4,846
38
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
13. Creditors: amounts falling due within one year Group Creditors and other accruals VAT creditor Amounts due to NCC Income in advance Interest accruals due to NCC Redundancy and other pay provisions Tax liability Amounts due in respect of finance leases held with NCC (Note 16)
Company Creditors and other accruals VAT creditor Amounts due to NCC Income in advance Amounts due to other YHN Group companies Interest accruals due to NCC Redundancy and other pay provisions Amounts due in respect of finance leases held with NCC (Note 16)
2017 £'000 1,001 1,346 568 63 122 290 74
2016 £'000 1,040 2,187 6,660 15 122 161 -
127 3,591 2017 £'000 791 1,346 169 9 475 122 290
94 10,279 2016 £'000 910 2,187 1,010 14 2,385 122 161
127 3,329
94 6,883
39
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
14. Creditors: amounts falling due after one year Group and Company Amounts due in respect of finance leases held with NCC (Note 16) Loans from NCC (Note 15)
2017 £000
2016 £000
247 6,500 6,747
250 6,500 6,750
15. Loans 2017 2016 £000 £000 Group and Company 6,500 6,500 Loans from NCC 6,500 6,500 Interest is payable on amounts owed to parent undertakings at rates of 4.5% per annum. The loan is repayable in 2020 and is shown in Creditors falling due in more than one year.
16. Other financial commitments The Group and Company use finance leases to acquire vehicles. Future minimum lease payments due under finance leases: Group and Company Within one year In two to five years In over five years Less: future interest charges Analysed: Creditors: amounts falling due within one year Creditors: amounts falling due in more than one year
2017 £'000 130 272 1 403 (29) 374
2016 £'000 94 256 24 374 (30) 344
127 247
94 250
40
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
17. Financial instruments 2017 £000
2016 £000
374 6,500 213
344 6,500 156
1,296 4,849
1,593 7,733
2017 £'000 793
2016 £'000 234
Adjustments for non-cash items: Depreciation and amortisation of tangible fixed assets Net increase in fixed assets from stock transfers Loss on disposal of tangible fixed assets Impairment of fixed assets Decrease/(increase) in debtors (Increase) in stocks (Decrease)/increase in creditors
3,149 (643) 243 (425) (75) (6,660)
1,517 139 (2,182) (638) 6,935
Adjustments for investing or financing activities: Interest payable Interest on defined benefit pension net liability Interest receivable Difference between pension charge and cash contributions Corporation tax paid Net cash (outflow)/inflow from operating activities
310 450 (4) 1,520 (62) (1,404)
130 590 (11) 1,730 8,444
Group financial instruments measured at amortised cost: Obligations under finance lease (note 16) Loans from parent undertaking (note 15) Trade creditors Group financial assets measured at cost: Trade debtors (note 12) Cash
18. Notes to the statement of cash flows a) Reconciliation of profit for the year to net cash flow from operating activities
Group profit for the year
b) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand only.
41
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
19. Related party transactions Group During the year the group entered into transactions, in the ordinary course of business with other related parties. Entities with significant influence over the group Newcastle City Council (NCC) The company is a local authority controlled company within the meaning of Part V of the Local Government and Housing Act 1989, being a company under the control of NCC. Copies of the financial statements for Your Homes Newcastle Limited can be obtained from the Company Secretary, YHN House, Benton Park Road, Newcastle NE7 7LX The Directors consider that NCC is the ultimate controlling party. With the exception of petty cash transactions, all cash book payments and receipts are made via NCC's banking intermediaries, with the net balance owing to or from the City Council being disclosed as a current asset or liability as appropriate. Entities over which the group has joint control or significant influence YHN Parent and Group no longer exerts significant influence over any entity. Company The related parties of the parent company are the same as those considered for the Group with the addition of the other Group undertakings; Asfaleia Ltd and Abri Trading Ltd. The transactions entered into and the trading balances outstanding at 31 March for the Parent and Group are set out as follows:
42
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
19. Related party transactions (continued) Purchases Amounts from owed from related related party party £’000 £’000 £’000
Sales to related party
Amounts owed to related party £’000
Group Entities with significant influence over the group 2017 30,161 2016 29,304
4,114 9,511
5,463 4,520
7,564 13,626
Entities over which the group has joint control or significant influence 2017 2016 -
-
-
-
Company Other group undertakings 2017 2016
10,034 4,907
6,066 3,111
6,032 4,140
475 2,385
43
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
20. Pensions The company participates in the Tyne and Wear Pension Fund, which is a funded defined benefit scheme where contributions payable is held in a trust separately from the company. The main results and assumptions of the most recent valuation of the Tyne and Wear Pension Fund are as follows. Contributions to the scheme have been charged to the statement of comprehensive income on a cash basis. A qualified actuary has determined contribution rates on the basis of triennial valuations using the projected unit method. The actuaries determined that in order to meet the funding target, the contribution rate would be set at 14.6% for 2016-17 (2015-16: 14.2%). Under the requirements of FRS 102, the company is required to account for and disclose further information on its share of assets and liabilities of the Tyne and Wear Pension Fund at the end of the accounting period. The valuation at 31 March 2016 has been updated by an independent qualified actuary on an FRS 102 basis as at 31 March 2017. As required by FRS 102 the defined benefit liabilities have been measured using the projected unit credit method. This information is set out below: 2017 2016 ÂŁ'm ÂŁ'm Fair value of scheme assets 139.21 114.59 Present value of scheme liabilities 162.40 128.95 Funded Status
(23.19)
(14.36)
2017 % 66.9 9.2 3.9 11.5 2.6 5.9 100.0
2016 % 66.1 10.4 3.7 11.6 2.6 5.6 100.0
The scheme assets are made up of the following allocations:
Equities Property Government Bonds Corporate Bonds Cash Other Total
44
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
20. Pensions (continued) The amounts recognised in the Group Statement of Comprehensive Income and in the Group Statement of Other Comprehensive Income for the Year are analysed as follows: 2017 £'m
2016 £'m
Current service cost
3.95
4.21
Past service costs
0.68
0.30
Interest on net defined benefit liability
0.45
0.59
Total recognised in the Statement of Comprehensive Income
5.08
5.10
20.71
(1.84)
(27.57)
9.29
(6.86)
7.45
2017 %
2016 %
2015 %
3.5 2.0 2.6 3.1 2.0 2.0
3.3 1.8 3.5 2.9 1.8 1.8
3.4 1.9 3.3 3.0 1.9 1.9
2017
2016
22.8 26.3 25.0 28.6
23.2 24.8 25.3 27.1
Recognised in the Statement of Comprehensive Income
Recognised in other comprehensive income Remeasurement losses/(gains) on assets taken to other comprehensive income Remeasurement (losses)/gains on liabilities taken to other comprehensive income Total amount recognised in other comprehensive income
Main assumptions: Rate of salary increases Rate of pension increase Discount rate Inflation assumption (RPI) Inflation assumption (CPI) Pension accounts revaluation rate Mortality assumptions Post retirement mortality Retiring today at 65 – male Retiring today at 65 – female Future pensioners at 65 – male Future pensioners at 65 - female
45
Your Homes Newcastle Limited Annual Report and Financial Statements
2016-17
Notes to the Financial Statements at 31 March 2017
20. Pensions (continued) Changes to the present value of the defined benefit obligations are analysed as follows: Opening defined benefit obligation at 1 April 2016 Current service cost Interest cost Contributions by participants Remeasurement losses/(gains) on liabilities Net benefits paid out Past service cost Closing defined benefit obligation at 31 March 2017
2017
2016
£'m 128.95 3.95 4.46 1.13 27.57 (4.34) 0.68 162.40
£'m 130.78 4.21 4.29 1.16 (9.29) (2.50) 0.30 128.95
Changes to the fair value of assets during the accounting period
Opening fair value of assets at 1 April 2016 Interest income on assets Remeasurement gains/(losses) on assets Contributions by the employer Contributions by the participants Net benefits paid out Closing fair value of assets at 31 March 2017
2017 £'m 114.59 4.01 20.71 3.11 1.13 (4.34) 139.21
2016 £'m 111.29 3.70 (1.84) 2.78 1.16 (2.50) 114.59
2017 £'m 4.01 20.71 24.72
2016 £'m 3.70 (1.84) 1.86
Actual return on assets
Interest income on assets Gain/(loss) on assets Net return
46
Your Homes Newcastle Limited Registered Company No: 5076256 Address: Civic Centre, Barras Bridge, Newcastle upon Tyne, NE1 8PR
47
YHN House Benton Park Road Newcastle upon Tyne NE7 7LX
Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
8 August 2017
Dear Sirs,
Your Homes Newcastle Limited The Directors of the company have performed an assessment of the appropriateness of the going concern basis of preparation of the statutory financial statements for the year ended 31 March 2017. The Directors have concluded that the company can continue to pay its liabilities as they fall due, or otherwise agreed with creditors, for a period of at least 12 months from the date of approval of the financial statements. In making that assessment the Directors confirm that they have considered the following factors:
The basis on which the conclusion has been drawn has been discussed and agreed with all Directors; Forecasts and budgets prepared for the year ending March 2017, extended for 12 months from the date of signing of the accounts and various sensitivities and risks associated within the assumptions thereon (including “stress testing” scenarios); Contingency plans in the event that trading forecasts were not met or major changes to anticipated cash flows arose; The availability of continuing finance from Newcastle City Council (NCC) as the ultimate parent entity; The 10-year Management Agreement with NCC which came into force from 1st April 2016; The support from NCC to assist Your Homes Newcastle Limited in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to meet these liabilities.
Based on the above we can confirm that we believe that adequate finance facilities (bank facilities) will continue to be made available to the company for a period until at least 12 months after date of approval of the financial statements and that they will be satisfactorily renewed at their respective review dates. Yours faithfully, on behalf of the Board of Directors: Olivia Grant
Jon Ritchie
Chair
Company Secretary
Your Homes Newcastle YHN House Benton Park Rd Newcastle upon Tyne NE7 7LX 31 July 2017 Dear Sirs We refer to your request to provide you with confirmation of Newcastle City Council’s (“NCC”) support to assist Your Homes Newcastle (“YHN”) in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available to you to meet such liabilities. For the purpose of clarity, this support includes the following:
As part of the triennial actuarial valuation process, NCC will agree with the Tyne & Wear Pension Fund (“TWPF”) that YHN’s pension assets / liabilities should be assessed on the same basis as is used for NCC. In the event YHN is assessed as having a pension deficit as part of the triennial actuarial valuation process, NCC would agree with TWPF that any deficit payments could be spread over a similar period to NCC itself (at present this is 18.5 years although this may change in the future). In the event YHN are required to make annual payments to TWPF (in line with above) then NCC would agree this could be funded via the HRA management fee. In the event YHN was ever deemed not to be a going concern then NCC would subsume YHN’s pension deficit (if one exists) and recover the annual costs arising from doing so directly from the HRA (as we currently do for the element of the pension deficit that relates to the period before YHN was set up).
We confirm we will continue to provide the support outlined above for a period of at least 12 months from the date of approval of YHN’s accounts. Should any matter set out within this letter be unclear then please do not hesitate to contact the signatory for further clarification. We undertake to inform you immediately in the unlikely event that circumstances change and we are no longer able to provide such support to you. Yours faithfully
Mark Nicholson Assistant Director Financial Services for and on behalf of Newcastle City Council
Your Homes Newcastle Limited Audit results report for the year ended 31 March 2017 4 July 2017
Ernst & Young LLP
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Ernst & Young LLP Tel: 0191 247 2500 Citygate Fax: 0191 247 2501 St James’ Boulevard www.ey.com Newcastle upon Tyne NE1 4JD Tel: 023 8038 2000
Private and confidential The Audit Committee Your Homes Newcastle Limited c/o YHN House Benton Park Road Newcastle upon Tyne NE1 4JD
4 July 2017
Dear Sirs
Audit results board report We are pleased to attach our audit results board report for the forthcoming meeting of the Group Audit Committee. This report summarises our preliminary audit conclusion in relation to Your Homes Newcastle Limited’s (Your Homes) consolidated financial position and results of operations for 2017. The audit is designed to express an opinion on the 2017 consolidated financial statements and address current statutory and regulatory requirements. This report contains our findings related to the areas of audit emphasis, our views on Your Homes accounting policies and judgments and material internal control findings. This report is intended solely for the information and use of the Audit Committee, Board of Directors and management. It is not intended to be and should not be used by anyone other than these specified parties. We welcome the opportunity to discuss the contents of this report with you at the Audit Committee meeting on 13 July 2017. Yours faithfully
Caroline Mulley For and on behalf of Ernst & Young LLP United Kingdom Enc.
The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited. A list of members’ names is available for inspection at 1 More London Place, London SE1 2AF, the firm’s principal place of business and registered office. Ernst & Young LLP is a multidisciplinary practice and is authorised and regulated by the Institute of Chartered Accountants in England and Wales, the Solicitors Regulation Authority and other regulators. Further details can be found at http://www.ey.com/UK/en/Home/Legal.SE1 2AF, the firm’s principal place of business and registered office.
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Contents
Contents 1.
Overview of the audit .......................................................................................... 1
2.
Significant findings from the audit........................................................................ 2
3.
Summary of audit differences .............................................................................. 7
4.
Independence confirmation: update...................................................................... 8
Appendix A
Draft letter of representation .............................................................. 9
The contents of this report are subject to the terms and conditions of our appointment as set out in our engagement letter of 7 May 2015. This report is made solely to the Audit Committee, Directors and management of Your Homes in accordance with our engagement letter. Our work has been undertaken so that we might state to the Audit Committee, Directors and management of Your Homes those matters we are required to state to them in this 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 Audit Committee, Directors and management of Your Homes for this report or for the opinions we have formed. It should not be provided to any third-party without our prior written consent.
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Overview of the audit
1.
Overview of the audit Status of the audit Our audit work in respect of the opinion is substantially complete. The following items relating to the completion of our audit procedures were outstanding at the date of this report. ►
Receipt of direct confirmation of balances with Newcastle City Council;
►
Receipt of IAS 19 protocol letter from the pension fund auditors;
►
Updated subsequent events review to date of approval of financial statements; and
►
Receipt of signed letter of representation and going concern letter.
Subject to satisfactory completion of the above procedures, we anticipate issuing an unqualified auditors’ report for the year ended 31 March 2017.
Audit findings and conclusions: significant risks Risk of fraud in revenue recognition ►
Our testing has not revealed any material misstatements with respect to revenue recognition.
Risk of management override – expense accruals and provisions ►
We have not identified any material weaknesses in controls or evidence of material management override.
►
We have not identified any instances of inappropriate judgements being applied.
Audit findings and conclusions: other areas of audit emphasis The key areas of audit emphasis and related significant findings are set out in Section 2, and were as follows: ►
Debtors recoverability, arrears and provisioning
►
Your Homes and Abri – Unallocated cash
►
Stock and fixed asset accounting
►
Allocation of expenses and impact on intragroup recharges
►
Pension accounting
►
Provisions including redundancies, equal pay and holiday pay
►
Going concern
►
Related party transactions
►
Compliance with laws and regulations; and
►
Misstatement due to fraud and error.
Control themes and observations ►
We have not identified any significant control observations in relation during the course of our audit.
Summary of audit differences ►
Your Homes - We identified one misstatement relating to reclassification of unallocated cash which has been corrected by the client
►
Abri - We have identified three misstatements. ►
Two reclassification misstatements which have been corrected by the client.
►
There is one uncorrected misstatement in Abri Trading relating to reclassification of payments made in advance to net off against expense accrual.
►
Refer to section 3 of this report for detail.
►
There is no impact of these misstatements on operating profit for the year.
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Significant findings from the audit
2.
Significant findings from the audit The following outlines the basis for our assessment of the level of subjectivity and level of risk involved in accounting matters reported to you. In addition, our assessment of where judgments and estimates fall in a range of possible outcome is highlighted below.
2.1
Significant risks In this section of our report we outline the significant audit risks and related findings. Risk of fraud in revenue recognition (Fraud Risk) Description and conclusion Under ISA (UK and Ireland) 240 there is a presumed risk that revenue may be misstated due to improper recognition. We: ►
Reviewed and tested revenue recognition policies;
►
Reviewed the management agreements in place to ensure revenue recognition is appropriate;
►
Performed analytical review procedures on significant income accounts, understanding trends and movements;
►
Reviewed and discussed with management any accounting estimates on revenue recognition for evidence of bias;
►
Developed a testing strategy to test material revenue streams including agreeing a sample to supporting information;
►
Performed test of details on expenditure to ensure appropriately recognised and associated recharges are in accordance with management agreements;
►
Reviewed and tested revenue cut-off at the year end; and
►
Tested the recoverability of significant debtor balances to cash receipts post year end.
We did not identify any other issues during the course of our work for reporting to the Audit Committee. Risk of management override of controls (Significant Risk) Description and conclusion As identified in ISA (UK and Ireland) 240, management is in a unique position to perpetrate fraud because of their ability to directly or indirectly manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. We: ►
Tested the appropriateness of a sample of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial statements; and
►
Reviewed accounting estimates for evidence of management bias.
We did not identify any significant issues during the course of our work for reporting to the Audit Committee.
EY ÷ 2
Significant findings from the audit
2.2
Other areas of audit emphasis We have summarised below the areas of significant accounting or auditing issues that have arisen during our year end procedures: Background
Conclusion
Debtors recoverability, arrears and provisioning There is a need to review debtors at the year end, in particular where there are amounts due from individuals, to consider if appropriate provision has been made for any known issues. Management should consider whether the bad debt provision is appropriate given the greater potential risk of non-recovery of individual debts, which although likely to be smaller in amount, could impact adversely on cash flow. Included within group debtors at 31 March 2017 were third party debtor balances amounting to £1,503k, net of a bad debt provision of £198k. Included in trade debtors are the following amounts: ►
Byker Community Trust £206k
►
Leazes Homes £45k
►
Abri Trading external debtors £1,136k
►
Asfaleia Trading external debtors £87k
We have performed testing of arrears balances for recovery of amounts due post year end. Our testing indicates that where recovery has been limited, the balance has been appropriately provided for in accordance with management policy. The balances outstanding with Leazes Homes and Byker Community Trust have been confirmed during the course of the audit. Aside from the unallocated cash below, no other issues were identified from the work performed.
Included in the Abri third party debtors balances are historic balances amounting to £70k which relate to the specific issues identified in the prior year in relation to the Palatine bank/debtor reconciliation process within Abri Trading Limited. During the year management has continued the investigation into resolution of the unknown balances, however progress has been limited due to a lack of banking records being available relating to period prior to transfer of Palatine activities to Your Homes Group. A bad debt provision is recognised for the residual amount for £70k (2016: £108k) which has not been recovered through allocated cash and where there is still uncertainty in recovery. In addition we note that there is a further specific provision of £32k relating to outstanding invoices for a customer which has entered liquidation. Your Homes and Abri Trading – Unallocated cash During our testing we identified that cash had been collected within the NCC cash clearing system that had not been allocated against debtors at the year end. This includes £91k of cash received for outstanding trade debtors within Abri Trading Limited and £195k of cash received for outstanding balances with Byker Community Trust within Your Homes.
We have recorded a reclassification difference between amounts owed from NCC (which represents monies due to Your Homes and Abri) and the respective third party balances on the summary of audit differences. This has been corrected in the financial statements. No other issues were identified from the work performed.
We understand that this arises due to a timing difference of transactions posted within the cash clearing system with NCC on the final day of the financial year and being matched against the outstanding debt after the year end.
EY ÷ 3
Significant findings from the audit
Background
Conclusion
Stock and fixed asset accounting Included in the financial statements of Your Homes Group at 31 March 2017 is trading stock relating to Newcastle Furniture stock and Palatine Beds amounting to £713k (£638k in prior year). The group stock includes the following: ►
Your Homes Newcastle - Newcastle Furniture stock £393k
►
Abri Trading - Palatine stock £274k
►
Asfaleia – Ostara telecare equipment £46k
Stock relates to a combination of furniture items that have been purchased and items of furniture returned from tenanted properties, that are in good condition and are available to be reallocated to tenants. During the year, inventory levels have increased as a result of Newcastle Furniture Stock advance purchasing furniture orders into the warehouse prior to a price increase from the main supplier. The group policy is to recognise the purchase of furniture stock within Your Homes Newcastle. When an item is rented out to a tenant the furniture is recorded as a fixed asset and depreciated over the useful economic life. Where the item is rented under the Newcastle City Council contract the item is recorded as a fixed asset within Your Homes Newcastle. Where the item is rented under contracts with other landlords the item is recorded as a fixed asset in Abri Trading Limited. Items that are returned from tenants are assessed in terms of their condition. If the item remains in good condition or requires minor repairs the item is returned to stock in Your Homes at the book value at the point of return. The repair costs are expensed in the Statement of Comprehensive Income. Items that are unable to be repaired are recognised as a disposal with no proceeds. As the condition of these items are regularly assessed on return from tenanted properties with disposals recognised if required, and are booked at net book value of the asset, management considers a stock obsolescence provision is not necessary. Similar policies are in place in relation to Ostara telecare equipment in Asfaleia. The underlying stock and fixed asset records are based on Prysim (Newcastle Furniture Stock). Manual journal entries are posted within the general ledger to record monthly movements which include purchases of items, disposals, transfers between stock and fixed assets. These transactions have been posted at the year end as journals for Period 1-7, Period 8-9, period 10, Period 11 and Period 12.
We have performed the following procedures: ►
Performed stock count procedures based on the year end balances;
►
Tested a sample of items to purchase invoice and subsequent sale to ensure these items are recorded at an appropriate carrying value;
►
Tested year-end cut-off procedures, to ensure completeness of stock;
►
Understood management’s policy for provision for obsolete/ slow moving stock items;
►
Tested the transfer of items between stock and operational assets;
►
Tested disposal and write offs incurred in the period; and
►
Tested depreciation policies.
In respect of the Asfaleia stockcount reconciliation, some small discrepancies were identified between the physical stockcount and the stock listing for the year end, an immaterial adjustment of £2,683 was recorded. In respect of stock valuation, we consider that as stock relates to individual furniture items and there is a risk that these items are potentially obsolete. Management should continue to monitor the items included within stock to assess whether a provision is required for obsolete/ slow moving stock items. During the year we have seen some improvements in the reliability of information available within these systems and improvements in the timing of reconciling these system reports and recording of these transactions within the general ledger. Whilst we have seen improvements in the system reporting, management does rely on the stock management system to reconcile movements in transactions. Management does not maintain a separate fixed asset register and therefore the traceability of movements in and out of fixed assets relies on the quality of information included in Prysim. We identified that during our testing of fixed assets that there are historic items that are in tenanted properties that were installed in the period prior to transfer of activities to Your Homes, for which there is no detailed breakdown. This pool of assets has a net book value at 31 March 2017 of £494k. We understand from management that as items are returned into stock, these are booked at nil value and when reassigned to a new tenant a net book value is assigned on Prysim and an adjustment is made to reduce the amount recognised in the old pool. We understand that during 2017/18 amounts reported in the old pool are expected to be fully utilised. We understand from management that there is a tender process that is expected to commence in 2017/18 to identify IT options for simplifying the maintenance of stock records and a fixed asset register.
EY ÷ 4
Significant findings from the audit
Background
Conclusion
Allocation of expenses and impact on intragroup recharges Certain costs are incurred by Your Homes and recharged to Abri Trading and Asfaleia. These include the following: ►
Staff Costs relating to employee time spent on projects within Asfaleia and Abri.
►
Other costs incurred by Your Homes Newcastle on behalf of Abri and Asfaleia and recharged on the basis of cost centres.
►
Overheads – these costs are not directly attributable to a particular project and therefore are allocated based on a pre-defined percentage allocation agreed for each cost centre.
We have tested the allocation of costs and reviewed for consistency of overhead allocation. No issues have arisen from completion of this work.
Income is recognised within Your Homes parent entity of £9,858k and expenditure is recognised within Abri of £3,632k and Asfaleia of £6,226k. The amounts reported above are eliminated on consolidation within the group accounts. Pension accounting The Tyne & Wear local government pension scheme actuary is able to separately identify the portion of the scheme relating to Your Homes Group staff. Accordingly, FRS 102 Section 28 Employee Benefits is applicable to the Group. The consequence of this is that, in the current and future years, the scheme deficit has to be recognised on the Group’s balance sheet. Funding of Your Homes Group’s participation in the local government pension scheme will continue to have an impact on both Your Homes Group cash flows and balance sheet liabilities.
We utilised EY pension specialists to challenge the appropriateness of the assumptions used in deriving the liabilities at 31 March 2017. We have also assessed the discount rate applied and this is within our expected range. We note that the discount has reduced from 3.5% to 2.6% which is part of the reason for the significant increase in the liability compared to the prior year At the time of our reporting we are awaiting finalisation of the IAS 19 protocol procedures, however we do not anticipate any issues on completion of this work.
The pension liability is the most significant liability (£23.19 million, 2016 £14.36 million) on the Group’s balance sheet and is calculated through use of a number of actuarial assumptions. A small movement in these assumptions could have a material impact on the balance sheet. Provisions including redundancies, equal pay and holiday pay Provisions are typically estimated based on a number of assumptions leading to a range of potential outcomes. Selecting assumptions and measuring the impact of identified exposures requires management to apply judgement.
We have understood the basis of the provisions required at the year end for redundancies and other pay. We have confirmed that there is evidence that the redundancies unpaid were communicated during the year and therefore the provision is appropriate.
Included in provisions at 31 March 2017 are the following amounts:
During our testing of the holiday pay accrual, we identified some employees that had taken holiday in March which was not approved until April. The impact of this is that the holiday pay accrual is overstated by £25k. As this is below our nominal threshold for differences this has not been recorded on the summary of audit differences schedule.
►
Redundancy provision £111k
►
Equal Pay provision £144k
►
Holiday Pay accrual £411k
We encourage management, as part of the year end close process, to review where holiday has been taken before the year end, and where subsequently approved, that this is reflected in the year end provision. There are no other issues arising from this work.
EY ÷ 5
Significant findings from the audit
Background
Conclusion
Going concern On approval of the financial statements, the Board is required to assess whether Your Homes Group is a going concern, which is defined as being able to operate its current business, within available facilities, for a period of at least 12 months from the date of approval of the financial statements. Whilst Your Homes Group trades profitably, as a result of the pension accounting, Your Homes Group has an excess of liabilities over assets in the Balance Sheet. Your Homes Group has obtained confirmation from NCC, confirming their assistance to Your Homes Group in meeting its pension liabilities as and when they fall due, to the extent that money is not otherwise available.
At the time of our reporting we are awaiting receipt of management assessment of going concern providing confirmation from management that YHN will continue to trade profitably and in accordance within available facilities for a period of at least 12 months from the point of approval of the accounts and therefore it is appropriate to prepare the accounts on a going concern basis. We do not anticipate any issues arising from the completion of this work.
Related party transactions There are balances with related parties - Newcastle City Council (NCC); particularly with the company using NCC’s banking facilities. It is important that such balances are agreed between parties and that appropriate disclosure is made in the accounts of transactions with all related parties.
The direct confirmation from NCC in respect of confirmation of balances is outstanding. We do not anticipate any issues arising from the completion of this work.
Compliance with laws and regulations The Group is subject to a variety of laws and regulations in its day to day operations, including not only regulations set by funding bodies but also legislation relating to working with children and vulnerable people and employment law, as well as tax legislation, health and safety regulations, etc. Non-compliance with laws and regulations may give rise to claims and disputes, such as employee and public liability issues. If these are not identified they may not be fully recognised and reflected in the financial statements.
Whilst we have not identified any issues in respect of non-compliance during our audit, we encourage management to include in the Principal Risks and Uncertainties within the Strategic Report, the Directors’ assessment of compliance with laws and regulations with consideration of the procedures Your Homes has in place to mitigate the risk of noncompliance including fire and safety regulation.
The recent incident at Grenfell Tower, has highlighted a number of issues in relation to compliance with laws and regulations and notably fire and safety compliance. It is important to ensure that sufficient procedures are in place to ensure that the risk of non-compliance with fire and safety is sufficiently mitigated. Risk of misstatement due to fraud and error Management has the primary responsibility to prevent and detect fraud. It is important that management, with the oversight of those charged with governance, has put in place a culture of ethical behaviour and a strong control environment that both deters and prevents fraud.
We have not identified any evidence to suggest any material misstatement as a result of fraud or error during the year arising from the completion of our procedures.
Our responsibility is to plan and perform audits to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatements whether caused by error or fraud. As auditors, we approach each engagement with a questioning mind that accepts the possibility that a material misstatement due to fraud could occur, and design the appropriate procedures to consider such risk.
EY á 6
Summary of audit differences
3.
Summary of audit differences In the normal course of any audit, we identify misstatements between amounts we believe should be recorded in the financial statements and the disclosures and amounts actually recorded. These differences are classified as ‘known’ or ‘judgemental’. Known differences represent items that can be accurately quantified and relate to a definite set of facts or circumstances. Judgemental differences generally involve estimation and relate to facts or circumstances that are uncertain or open to interpretation. We have included all known amounts greater than £42k relating to Your Homes. The following misstatements to the financial statements have been corrected by management: ►
►
►
Your Homes - Reclassification of cash recovered by NCC for settlement of outstanding Byker Community Trust invoices (within debtor codes) £194,575 Abri Trading - Reclassification of cash recovered by NCC for settlement of outstanding third party debtors invoices (within debtor codes) £90,991 Abri Trading – Reclassification of deferred income relating to Palatine £32,208 (between debtors and creditors)
We highlight the following misstatements to the financial statements and/or disclosures which were not corrected by management: ►
Abri Trading – Reclassification of payments made in advance to net off cost accrual (between within codes) £36,025
There are no amounts we identified that are individually or in aggregate material to the financial statements at 31 March 2017.
EY ÷ 7
Independence confirmation: update
4.
Independence confirmation: update We confirm there are no changes in our assessment of independence since our confirmation in our audit planning board dated 8 February 2017. We complied with the APB Ethical Standards and in our professional judgement the firm is independent and the objectivity of the audit engagement partner and audit staff has not been compromised within the meaning of regulatory and professional requirements. The following fees have been incurred and/or approved in respect of non-audit services (excluding VAT) for the year ended 31 March 2017.
Description of relationship or service
Type of independence threat
Group corporation tax compliance services
Self-interest
8,500
A seperate team to the audit team is providing the advice.
Tax assistance provided to Your Homes Group with responses to HMRC’s enquiry into job-related accommodation and related advice
Self-interest
6,000
A seperate team to the audit team is preparing the letter to HMRC.
Preparation of charity returns for Asfaelia
Self-interest
2,950
A seperate team to the audit team is preparing the advice.
Total
Amount ÂŁ
Safeguards adopted and reasons considered to be effective
17,450
As the non-audit services fees are significantly below the 3:1 threshold, we do not consider any additional safeguards to be necessary. We consider that our independence in this context is a matter that should be reviewed by both you and ourselves. It is therefore important that you and your Board/Audit Committee consider the facts of which you are aware and come to a view. If you wish to discuss any matters concerning our independence, we will be pleased to do so at the forthcoming meeting of the Audit Committee on 13 July 2017.
EY á 8
Draft letter of representation
Appendix A
Draft letter of representation
This letter of representations is provided in connection with your audit of the consolidated and parent company financial statements of Your Homes Newcastle Limited (“the Group and Company�) for the year ended 31 March 2017. We recognise that obtaining representations from us concerning the information contained in this letter is a significant procedure in enabling you to form an opinion as to whether the consolidated and parent company financial statements give a true and fair view of the Group and Company financial position of Your Homes Newcastle Limited as of 31 March 2017 and of its financial performance and its cash flows for the year then ended in accordance with, for the Group, UK accounting standards including FRS 102, and for the Company, UK accounting standards including FRS 102. We understand that the purpose of your audit of our financial statements is to express an opinion thereon and that your audit was conducted in accordance with International Standards on Auditing (UK and Ireland); which involves an examination of the accounting system, internal control and related data to the extent you considered necessary in the circumstances, and is not designed to identify - nor necessarily be expected to disclose - all fraud, shortages, errors and other irregularities, should any exist. Accordingly, we make the following representations, which are true to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: A. Financial Statements and Financial Records 1.
We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated 7 May 2015, for the preparation of the financial statements in accordance with, for the Group, UK accounting standards including FRS 102, and for the Company, UK accounting standards including FRS 102.
2.
We acknowledge, as members of management of the Group and Company, our responsibility for the fair presentation of the consolidated and parent company financial statements. We believe the consolidated and parent company financial statements referred to above give a true and fair view of the financial position, financial performance and cash flows of the Group in accordance with UK accounting standards including FRS 102 and for the Company in accordance with UK accounting standards including FRS 102 and are free of material misstatements, including omissions. We have approved the financial statements.
3.
The significant accounting policies adopted in the preparation of the Group and Company financial statements are appropriately described in the Group and Company financial statements.
4.
As members of management of the Group and Company, we believe that the Group and Company have a system of internal controls adequate to enable the preparation of accurate financial statements in accordance with UK accounting standards including FRS 102 for the Group and UK accounting standards including FRS 102 for the Company that are free from material misstatement, whether due to fraud or error.
5.
We believe that the effects of any unadjusted audit differences, summarised in the accompanying schedule, accumulated by you during the current audit and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. We have not corrected these differences identified by and brought to the attention from the auditor because they are immaterial. EY á 9
Draft letter of representation
B. Fraud 1.
We acknowledge that we are responsible for the design, implementation and maintenance of internal controls to prevent and detect fraud.
2.
We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.
3.
We have no knowledge of any fraud or suspected fraud involving management or other employees who have a significant role in the Group or Company’s internal controls over financial reporting. In addition, we have no knowledge of any fraud or suspected fraud involving other employees in which the fraud could have a material effect on the financial statements. We have no knowledge of any allegations of financial improprieties, including fraud or suspected fraud, (regardless of the source or form and including without limitation, any allegations by “whistleblowers”) which could result in a misstatement of the financial statements or otherwise affect the financial reporting of the Group or Company.
C. Compliance with Laws and Regulations 1.
We have disclosed to you all identified or suspected non-compliance with laws and regulations whose effects should be considered when preparing the financial statements.
D. Information Provided and Completeness of Information and Transactions 1.
We have provided you with: · Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; · Additional information that you have requested from us for the purpose of the audit; and · Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
2.
All material transactions have been recorded in the accounting records and are reflected in the financial statements.
3.
We have made available to you all minutes of the meetings of shareholders, directors and committees of directors held through the period to the most recent meeting.
4.
We confirm the completeness of information provided regarding the identification of related parties. We have disclosed to you the identity of the Group an Company’s related parties and all related party relationships and transactions of which we are aware, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements, guarantees, non-monetary transactions and transactions for no consideration for the period ended, as well as related balances due to or from such parties at the year end. These transactions have been appropriately accounted for and disclosed in the financial statements.
5.
We believe that the significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable. EY ÷ 10
Draft letter of representation
6.
We have disclosed to you, and the Group and Company has complied with, all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt.
E. Liabilities and Contingencies 1.
All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the financial statements.
2.
We have informed you of all outstanding and possible litigation and claims, whether or not they have been discussed with legal counsel.
3.
We have recorded and/or disclosed, as appropriate, all liabilities related litigation and claims, both actual and contingent, and have disclosed in the notes to the financial statements all guarantees that we have given to third parties.
4.
No claims in connection with litigation have been or are expected to be received.
F. Subsequent Events 1.
There have been no events subsequent to period end which require adjustment of or disclosure in the financial statements or notes thereto.
G. Group audits 1.
There are no significant restrictions on our ability to distribute the retained profits of the Group because of statutory, contractual, exchange control or other restrictions other than those indicated in the Group financial statements.
2.
Necessary adjustments have been made to eliminate all material intra-group unrealised profits on transactions amongst parent company, subsidiary undertakings and associated undertakings.
H. Other information 3.
We acknowledge our responsibility for the preparation of the other information. The other information comprises the Strategic Report and Directors Report.
4.
We confirm that the content contained within the other information is consistent with the financial statements.
I. Accounting Estimates 1.
We believe that the measurement processes, including related assumptions and models, used to determine accounting estimates have been consistently applied and are appropriate in the context of UK accounting standards including FRS 102.
2.
The assumptions we used in making accounting estimates appropriately reflects our intent and ability to carry out specific courses of action on behalf of the entity, where relevant to the accounting estimates and disclosures.
3.
We confirm that the disclosures made in the financial statements with respect to accounting estimates are complete and made in accordance with UK accounting standards including FRS 102.
EY รท 11
Draft letter of representation
4.
We confirm that no adjustments are required to accounting estimates and disclosures in the financial statements due to subsequent events.
J. Going Concern 1.
Note 2 to the financial statements discloses all of the matters of which we are aware that are relevant to the Group and Company’s ability to continue as a going concern, including significant conditions and events, our plans for future action, and the feasibility of those plans.
K. Retirement benefits 1.
On the basis of the process established by us and having made appropriate enquiries, we are satisfied that the actuarial assumptions underlying the scheme liabilities are consistent with our knowledge of the business. All significant retirement benefits and all settlements and curtailments have been identified and properly accounted for.
EY á 12
EY | Assurance | Tax | Transactions | Advisory Ernst & Young LLP Š Ernst & Young LLP. Published in the UK. All Rights Reserved. The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF.
ey.com
YHN House Benton Park Road Newcastle upon Tyne NE7 7LX
Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD
8 August 2017
Dear Sirs, This letter of representations is provided in connection with your audit of the consolidated and parent company financial statements of Your Homes Newcastle Limited (“the Company”) for the year ended 31 March 2017. We recognise that obtaining representations from us concerning the information contained in this letter is a significant procedure in enabling you to form an opinion as to whether the consolidated and parent company financial statements give a true and fair view of the Group and Company financial position of Your Homes Newcastle Limited as of 31 March 2017 and of its financial performance and its cash flows for the year then ended in accordance with, for the Group, UK accounting standards including FRS 102, and for the Company, UK accounting standards including FRS 102. We understand that the purpose of your audit of our financial statements is to express an opinion thereon and that your audit was conducted in accordance with International Standards on Auditing (UK and Ireland); which involves an examination of the accounting system, internal control and related data to the extent you considered necessary in the circumstances, and is not designed to identify - nor necessarily be expected to disclose – all fraud, shortages, errors and other irregularities, should any exist. Accordingly, we make the following representations, which are true to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves: A. Financial Statements and Financial Records 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated 7 May 2015, for the preparation of the financial statements in accordance with, for the Group, UK accounting standards including FRS 102, and for the Company, UK accounting standards including FRS 102. 2. We acknowledge, as members of management of the Group and Company, our responsibility for the fair presentation of the consolidated and parent company financial statements. We believe the consolidated and parent company financial statements referred to above give a true and fair view of the financial position,
financial performance and cash flows of the Group in accordance with UK accounting standards including FRS 102 and for the Company in accordance with UK accounting standards including FRS 102 and are free of material misstatements, including omissions. We have approved the financial statements. 3. The significant accounting policies adopted in the preparation of the Group and Company financial statements are appropriately described in the Group and Company financial statements. 4. As members of management of the Group and Company, we believe that the Group and Company have a system of internal controls adequate to enable the preparation of accurate financial statements in accordance with UK accounting standards including FRS 102 for the Group and UK accounting standards including FRS 102 for the Company that are free from material misstatement, whether due to fraud or error. 5. We believe that the effects of any unadjusted audit differences, summarised in the accompanying schedule, accumulated by you during the current audit and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. We have not corrected these differences identified by and brought to the attention from the auditor because they are immaterial. B. Fraud 1. We acknowledge that we are responsible for the design, implementation and maintenance of internal controls to prevent and detect fraud. 2. We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. 3. We have no knowledge of any fraud or suspected fraud involving management or other employees who have a significant role in the Group or Company’s internal controls over financial reporting. In addition, we have no knowledge of any fraud or suspected fraud involving other employees in which the fraud could have a material effect on the financial statements. We have no knowledge of any allegations of financial improprieties, including fraud or suspected fraud, (regardless of the source or form and including without limitation, any allegations by “whistleblowers�) which could result in a misstatement of the financial statements or otherwise affect the financial reporting of the Group or Company. C. Compliance with Laws and Regulations 1. We have disclosed to you all identified or suspected non-compliance with laws and regulations whose effects should be considered when preparing the financial statements. D. Information Provided and Completeness of Information and Transactions 1. We have provided you with:
Access to all information of which we are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; Additional information that you have requested from us for the purpose of the audit; and Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.
2. All material transactions have been recorded in the accounting records and are reflected in the financial statements. 3. We have made available to you all minutes of the meetings of shareholders, directors and committees of directors held through the period to the most recent meeting. 4. We confirm the completeness of information provided regarding the identification of related parties. We have disclosed to you the identity of the Group and Company’s related parties and all related party relationships and transactions of which we are aware, including sales, purchases, loans, transfers of assets, liabilities and services, leasing arrangements, guarantees, non-monetary transactions and transactions for no consideration for the period ended, as well as related balances due to or from such parties at the year end. These transactions have been appropriately accounted for and disclosed in the financial statements. 5. We believe that the significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable. 6. We have disclosed to you, and the Group and Company has complied with, all aspects of contractual agreements that could have a material effect on the financial statements in the event of non-compliance, including all covenants, conditions or other requirements of all outstanding debt. E. Liabilities and Contingencies 1. All liabilities and contingencies, including those associated with guarantees, whether written or oral, have been disclosed to you and are appropriately reflected in the financial statements. 2. We have informed you of all outstanding and possible litigation and claims, whether or not they have been discussed with legal counsel. 3. We have recorded and/or disclosed, as appropriate, all liabilities related litigation and claims, both actual and contingent, and have disclosed in the notes to the financial statements all guarantees that we have given to third parties. 4. No claims in connection with litigation have been or are expected to be received.
F. Subsequent Events 1. There have been no events subsequent to period end which require adjustment of or disclosure in the financial statements or notes thereto. G. Group audits 1. There are no significant restrictions on our ability to distribute the retained profits of the Group because of statutory, contractual, exchange control or other restrictions other than those indicated in the Group financial statements. 2. Necessary adjustments have been made to eliminate all material intra-group unrealised profits on transactions amongst parent company, subsidiary undertakings and associated undertakings. H. Other information 1. We acknowledge our responsibility for the preparation of the other information. The other information comprises the Strategic Report and Directors Report. 2. We confirm that the content contained within the other information is consistent with the financial statements. I. Accounting Estimates 1. We believe that the measurement processes, including related assumptions and models, used to determine accounting estimates have been consistently applied and are appropriate in the context of UK accounting standards including FRS 102. 2. The assumptions we used in making accounting estimates appropriately reflects our intent and ability to carry out specific courses of action on behalf of the entity, where relevant to the accounting estimates and disclosures. 3. We confirm that the disclosures made in the financial statements with respect to accounting estimates are complete and made in accordance with UK accounting standards including FRS 102. 4. We confirm that no adjustments are required to accounting estimates and disclosures in the financial statements due to subsequent events. J. Going Concern 1. Note 2 to the financial statements discloses all of the matters of which we are aware that are relevant to the Group and Company’s ability to continue as a going concern, including significant conditions and events, our plans for future action, and the feasibility of those plans. K. Retirement benefits 1. On the basis of the process established by us and having made appropriate enquiries, we are satisfied that the actuarial assumptions underlying the scheme
liabilities are consistent with our knowledge of the business. All significant retirement benefits and all settlements and curtailments have been identified and properly accounted for.
Olivia Grant Chair
Jon Ritchie Company Secretary
Board 8 August 2017 Delegated Decisions – Schedule of non-confidential Delegated Decisions taken between 27th April 2017 and 26th July 2017
No.
Directorate/ Delegated Officer
Scheme
Cost/ Budget provision
Units
Contractor
Wards
1
Matthew Foreman - Customer Services
Jontek Maintenance Agreement
Funding of £44,200 Your Homes Newcastle Revenue Budget
n/a
Jontek Limited
Cross City
2
Matthew Foreman - Customer Services
Call 2 Collect
Funding of £36,000 Your Homes Newcastle Revenue Budget
11
Voicescape Limited
Cross City
3
David Langhorne - Assets & Development
Conewood House sheltered remodelling
Funding of £189,952 from Regeneration – Sheltered Housing
28
n/a
Fawdon
4
David Langhorne - Assets & Development
RF0019 2017/18 Roofing Programme (NEP Tender)
Funding of £4,447,336 from Lifecycle – Maintaining Decency
786
NEP Tender
Cross City
5
David Langhorne - Assets & Development
WD0025 Slatyford Fire doors
Funding of £284,504 Standard Housing Investment – Health & Safety
216
BCE
Denton
6
Jon Ritchie – Finance and Commercial
YHN Group External Audit
Funding of £19,750 from Your Homes Newcastle Revenue Budget
n/a
Ernst & Young
n/a
7
Jon Ritchie – Finance and Commercial
Secure disposal of documentation
Funding of £7,200 Your Homes Newcastle Revenue Budget
n/a
Shred-It
n/a
8
David Langhorne - Assets & Development
Buyback of 210 Grace Street
Funding of £111,300 from New Build and New Housing
184
n/a
Byker
9
David Langhorne - Assets & Development
New Mills Remodelling Phase 4
Funding of £406,284 from Environmentals
54
NCC Highways and local services
Westgate
10
David Langhorne - Assets & Development
Ecology surveys for RF0019 Roofing Programme
Funding of £8,199 from Lifecycle Maintaining Decency
380
BCE
Cross City
11
David Langhorne - Assets & Development
Building Information Modelling, Phase 2
Funding of £36,000 from New Build and New Housing
n/a
BIM Cross City Technologies
12
David Langhorne - Assets & Development
SEC0002 Replacement ICLS and communal doors
Funding of £223,623 from Lifecycle - Other
240
Bamford Doors
Cross City
13
David Langhorne - Assets & Development
St Ann's Community Centre Demolition
Funding of £15,536 from HRA Revenue Fund
1
Owen Pugh
Ouseburn
14
David Langhorne - Assets & Development
Wesgate/Vallum Court (Bin Chute & Hopper Renewal )
Funding of £30,400 from Standard Housing Investment - Health & Safety
240
Hardall International Ltd
Westgate
15
David Langhorne - Assets & Development
Heating Upgrade Cruddas Park House
Funding of £1,961,000 from Standard Housing Investment Energy Efficiency/Fuel Poverty
159
BCE
Elswick
16
David Langhorne - Assets & Development
Environmental ProgrammeProcurement of Architects
Funding of £29,150 from Environmentals
n/a
Colour Urban Cross City Design
17
David Langhorne - Assets & Development
Cavity Wall and Loft Insulation Schemes
Funding of £146,280 from Energy Efficiency/Fuel Poverty measures
300
Miller Pattison
Cross City
Delivering great services, enabling people to live in great communities, supporting a great city
Your Homes Newcastle Board 8 August 2017
TITLE
Slavery and Human Trafficking Statement FY 2016/2017
AUTHOR
David Langhorne - Assets and Development Director
COMPANY
Your Homes Newcastle
ACTION REQUIRED
For approval
SUMMARY
This report includes the 2016/17 Modern Slavery Statement, as required under the Modern Slavery Act 2015, for approval by Board.
DELIVERY PLAN OBJECTIVE STRATEGIC RISK REGISTER
NUMBER & TITLE OBJECTIVE
N/A
NUMBER & TITLE LIKELIHOOD
GR6: Failure to comply with regulatory requirements
IMPACT
3 (moderate)
N/A 1 (negligible)
FINANCIAL / VALUE FOR MONEY IMPLICATIONS
There are no financial/VFM implications associated with this report.
CUSTOMER IMPACT / VIEWS
The incorporation of Modern Slavery into our mandatory safeguarding training will help ensure our staff are equipped to recognise and report any related concerns across our customer base.
EQUALITY & DIVERSITY CONSIDERATIONS
Compliance with the Modern Slavery Act 2015 will help YHN promote equality and diversity across its business, the City and its supply chain.
Slavery and Human Trafficking Statement FY 2016/2017 1.
Background information
1.1 Legislation, in the form of the Modern Slavery Act 2015 (the Act), received Royal Assent on 26 March 2015. 1.2 The Act consolidates various offences relating to human trafficking and slavery. It covers
Slavery – where ownership is exercised over a person;
Servitude – involving the obligation to provide services imposed by coercion;
Forced or compulsory labour involving work or services exacted from any person under the menace of a penalty and for which the person has not offered himself voluntarily and;
Human trafficking involving arranging or facilitating the travel of another with a view to exploiting them.
1.3 The act includes provisions to:
Enable the Secretary of State to make regulations relating to the identification of and support for victims;
Make provision for independent child trafficking advocates;
Introduce a new reparation order to encourage the courts to compensate victims where assets are confiscated from perpetrators;
Close gaps in the law to enable law enforcement to stop boats where slaves are suspected of being held or trafficked; and
Require businesses over a certain size and threshold to disclose each year what action they have taken to ensure there is no modern slavery in their business or supply chain.
1.4 An additional clause was added retrospectively and came into force in October 2015, which requires all commercial organisations carrying on a business in the UK, with a turnover of £36 million or more to disclose, in an annual slavery and human trafficking statement on their website, what steps they have taken during the financial year to ensure their business and supply chains are slavery free. 1.5 Failure to produce the required statement, where applicable, could result in the Secretary of State seeking an injunction but in practice is more likely to risk being “named and shamed”.
1.6 The statement must be approved by the Board and signed by a director before being published on the company’s website with a prominent link on the homepage within six months of the financial year end i.e. 30th September. 1.7 YHN published its first Slavery and Human Trafficking Statement for 2015/16 following Board Approval in June 2016. 2.
The Options
2.1 Whilst a statement template is not provided under the legislation, the Act does recommend that it contains:
An outline of the organisation’s structure, business and supply chains;
Policies in relation to slavery and human trafficking;
Due diligence processes in relation to slavery and human trafficking in the organisation’s business and supply chains;
Identification of parts of the business and supply chains where there is a risk of slavery and human trafficking and the steps taken to assess and manage that risk;
An assessment of its effectiveness in ensuring slavery and trafficking are not taking place in its business or supply chains measured against performance indicators it considers appropriate; and
Information about training concerning slavery and human trafficking that’s available to staff.
2.2 Appendix 1 details YHN’s 2016/17 annual statement, which represents an ongoing commitment to address the issue of Modern Slavery. 2.3 It should be noted that the annual statement only applies to YHN’s supply chain and does not include suppliers that undertake work for the Council that YHN manages but are funded through the Housing Revenue Account. The Council has been consulted about this and agrees with the approach we are taking. 2.4 Whilst there is no requirement and it is perhaps impossible to guarantee that slavery and trafficking does not exist somewhere within an organisation’s supply chain, the annual statement is:
Designed to demonstrate that an organisation is aware of the issue;
Is not driving the use of modern day slavery practices through purchasing and procurement practices; and is
Taking effective steps to stop modern day slavery practices in its supply chains.
3.
Conclusion and recommendations
3.1 Board is recommended to: -
Approve the Slavery and Human Trafficking Statement (Appendix 1) for signature by a director and for publication on the YHN website by 30 September 2017.
Background Papers - Slavery and Human Trafficking Statement (2015/16), YHN Board, 21 June 2016. Contact Officer: If you have any questions about this report that you would like clarifying before the meeting, you can contact David Langhorne by telephone on 0191 278 7701 or email david.langhorne@yhn.org.uk
Appendix 1
Your Homes Newcastle (“YHN”) Slavery and Human Trafficking Statement FY 2016/17
Appendix 1 IntroductionYour Homes Newcastle (“the company”) is a not-for-profit Arms Length Management Organisation (ALMO) and a wholly owned subsidiary of Newcastle City Council. We were set up in 2004 to manage the Council’s properties, to improve housing in order to meet the Government’s Decent Homes standard and to provide a range of support services for Newcastle City Council and other landlords. We currently manage:
27,400 council and leasehold homes on behalf of Newcastle City Council; and Over 600 homes on behalf of Leazes Homes.
Our structure, business and supply chains We have a group structure with Your Homes Newcastle as the parent company along with two subsidiaries. The two subsidiaries are Asfaleia Ltd, a charitable subsidiary, and Abri Ltd, a trading subsidiary.
Your Homes Newcastle provides our core housing management and administrative functions; Asfaleia Ltd delivers our community care alarm service, sheltered housing service, young peoples’ service, advice and support service and employability services; and Abri Ltd includes the Newcastle Furniture Service (NFS) and Palatine Beds.
Further information about our activities is detailed on our web site at http://www.yhn.org.uk/ Our tier one supply chain is made up of UK/European based suppliers. Total buying value in 2016/17 for the group was £7.5m across 443 suppliers with the top 5% (23) of suppliers accounting for 68% (£5.0m) of expenditure. The main categories are summarised below:White goods, small electrical and furniture items for NFS
£2.9m (39%)
Information technology and telephony
£1.0m (13%)
Raw materials to manufacture beds for Palatine
£0.8m (10%)
Healthcare Services
£0.3m (4%)
Utilities
£0.3m (4%)
Printing
£0.1m (1%)
Miscellaneous Other
£2.1m (29%)
TOTAL
£7.5m (100%)
Appendix 1
Policies in relation to slavery and human trafficking YHN has a zero tolerance approach to any form of modern slavery and trafficking. This is supported by our Modern Slavery Policy that was developed and implemented during 2016/17. As well as setting out our approach the Policy details how it will be communicated and how we will ensure compliance, as well as deal with any breaches. In addition we have a comprehensive Corporate Procurement Strategy, supported by a number of policies including Anti Bribery, Fraud and Corruption, Whistle blowing and Corporate Equality, as part of our public sector equality duty which includes the elimination of unlawful discrimination. YHN are also committed to continually assess the recruitment procedures and practices in order to comply with current employment legislation, and recruit staff according to best practice. During 2016/17 we updated our Employee Code of Conduct and Whistleblowing Policies to include reference to Modern Slavery. Equality impact assessments are also carried out on all HR related policies to ensure they promote equality of opportunity. Finally as an organisation we have been assessed as excellent under the Social Housing Equality Framework and are a Stonewall top 100 employer 2017 (ranked 28th), demonstrating our commitment to equality. Due diligence processes in relation to slavery and human trafficking in our business and supply chains As a group we are governed by the Public Contract Regulations 2015, which are underpinned by our Financial Regulations, incorporating a comprehensive supplier accreditation process. This includes, as appropriate, a supplier suitability or prequalification questionnaire containing checks relating to a suppliers economic and financial standing, as well as compliance with labour law. We have also updated our procurement documentation and introduced a Supplier Code of Conduct which sets out the standards, including those relating to Modern Slavery, expected from our suppliers when doing business with us. In addition our standard contract terms require our suppliers to adhere to all of our policies and rules, together with compliance at all times with the Law, including specifically the Modern Slavery Act, in the performance of the contract. Parts of our business where there is a risk of slavery and human trafficking taking place, and the steps we have taken to assess and manage that risk.
Appendix 1 We have analysed our third party spend and categorised the supply areas we think are most at risk of modern slavery. The areas we think that are most at risk are due to their relatively high level of spend and the lack of supply chain visibility below our tier one suppliers:
Supplies of white goods, small electrical and furniture items for NFS. Supplies of raw materials to manufacture beds for Palatine.
During 2016/17 we undertook the mapping of our NFS supply chain, securing the signed commitment to tackle Modern Slavery and action plan from our first tier supplier. They in turn secured the same commitment from the majority of our second tier suppliers. Going forward we will continue to pursue any outstanding commitments and plan to undertake a similar exercise for the raw material suppliers to Palatine Beds. Effectiveness in ensuring that slavery and human trafficking is not taking place in our business or supply chains We are confident that slavery and human trafficking is not taking place amongst our first tier suppliers due to the due diligence processes that we currently have in place. Whilst we cannot be as certain that slavery and human trafficking is not taking place further down our supply chains, since the introduction of our new policy and revised procedures, together with the work we have undertaken in conjunction with our NFS supply chain, we have had no reported instances of Modern Slavery. Training about slavery and human trafficking available to staff During 2016/17 Modern Slavery training has been incorporated into our Safeguarding Adults and Children Level 1 training, which is mandatory for all staff who may have to make a safeguarding alert. In addition supplier guidance in relation to Modern Slavery has also been developed and made available on our website.
This Statement is made pursuant to section 54(1) of the Modern Slavery Act 2015 and has been approved and published by the YHN Board and will be reviewed annually.
Signed:
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Position:
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Date:
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