Bolton at Homes has received mixed news from the Homes and Communities Agency as the latest judgement upgraded their governance but downgraded their viability.
According to Housing News:
The regulator downgraded the association from V1 to V2 as they are still satisfied that its financial plans are consistent with and support its financial plans, however its financial profile is weak. The V2 rating states that they comply with viability standards yet action needs to be taken.
The weak financial profile is illustrated by negative operating margins, low interest cover ratios and high gearing.
The regulator identified a number of material financial exposures:
- The level of major repair costs: currently these are approximately 25 per cent of total expenditure and sensitivity analysis has shown that any increase in costs, without identifying mitigations, will have a serious impact on overall organisational viability.
- Implementation of welfare reform: BH has identified a potential negative impact on rental income and cashflow. The business plan assumptions around bad debt levels have been increased marginally and arrears levels have been forecast to double from 2013/14 onwards.
- Increase in pension costs: BH has quantified a number of issues, including autoenrolment and increased contributions. BH has reviewed all costs as part of its business planning and has employed external advisors to review its pension arrangements with a view to reducing long-term costs.
- In-house repairs team costs: the in-house team operated at a deficit in 2013/14. BH has implemented an action plan to ensure the team covers its costs from 2015/16.
- Property viability: BH has identified that 1,500 properties are now in need of either structural repair (which may add approximately 10-15 years onto their useful lives) or demolition. The costs of the assessment exercise have been built into the business plan.
The assessment of Botlon at Homes governance has been upgraded following action it has taken since February 2014 to improve its internal control framework and ensure it complies with all regulatory requirements.
The provider’s governance was downgraded to G2 in February 2014 after a review of its 2013 value for money self-assessment concluded that it did not comply with the Value for Money Standard.
Over the last year they have developed a comprehensive and planned approach to value for money. The board now has a clear strategic view on value for money which aligns with organisational objectives and informs resource allocation. It has developed a good understanding of its asset base and carried out work to understand its costs in comparison with peers. Performance management and scrutiny arrangements drive value for money.
Jon Lord, chief executive of Bolton at Home, said: “We’re happy that the Homes and Communities Agency has awarded our standards of governance a G1 rating.
“In particular it reflects the work we’ve done to meet our value for money (VFM) objectives and share our VFM strategy with customers and other stakeholders.
“Our V2 viability status reflects the continued challenges to recently transferred organisations and the pressures of government policies. We will continue to work to achieve the V1 status in the medium-term.”