Annual Accounts. For the year ending 31st March 2014

Transcription

1 Annual Accounts For the year ending 31st March 2014

2

3 Mission, Vision and Values The Board has outlined how we are going to achieve our mission (purpose) and vision and the core values that we will adopt in all of our work. Mission (Purpose) - "To provide high quality, low cost housing, services and support for more people in need. We concentrate on people not places and cover housing, care and the community in our work. In addition, we have a Commercial Purpose, which we deliver via our subsidiary Lets Select Limited, which is to carry out business as a general commercial company to make profits to gift aid to NCHA. Group Vision - More homes, great services, better lives Underpinning everything the Group does is our commitment to equal opportunities, value for money, to our corporate and social responsibility adding social value and delivering on our core values of: Understanding the business environment and our stakeholders Turning good services into great services Meeting customer and stakeholder needs Achieving quality solutions Staff working well together Innovation and adaptable to change

4 CONTENTS PAGE Board Members, Executive Team, Advisors & Bankers 1-2 Report of the Board 3-15 Operating and Financial Review Report of the Independent Auditors to the Members of NCHA Limited Income & Expenditure Accounts 25 Statement of Total Recognised Surpluses and Deficits 25 Balance Sheet 26 Consolidated Cash Flow Statement 27 Notes to the Financial Statements 28 62

5 Board Members, Executive Team, Advisors and Bankers Board: Chairman Vice Chair Members Dr Nigel G Nice BA, DPhil, IHSM Chairman Mrs Ann McCarthy MA, MCIEH, MCIH (Audit Committee) Mrs Lucy Dadge BA, DAM, MBA, FRICS (Audit Committee) Mr Tony Kay DMS Mr Chaudhari Shajait Mr Michael Anthony Khouri Bent MCIH, IPSM, Dip IRM, IAM Mr Graham Carvell Ms Carolyn Isaaks FCCA, BSc (Audit Committee) Mr Pradeep Khuti BA (Audit Committee) Mr Stephen Worthington ACMA Miss Denise Maguire Ms Claire Winfield BA (Hons) Appointed 24 th July 2013 Executive Team: Chief Executive Finance, Corporate Services & ICT Director Housing Services Director Director of Development & Housing With Care And Support Technical Services Director Mike Andrews Paul Higginbotham FCCA David Richardson DMS, MBA, FCMI, FCIH Steve Walker BA (Hons), MA, MSc, MA Paul Moat MBA, MRICS, BSc (Hons) Registered Office: 12/14 Pelham Road Sherwood Rise Nottingham NG5 1AP Telephone Facsimile info@ncha.org.uk 1

6 Board Members, Executive Team, Advisors and Bankers (continued) Auditors: Beever and Struthers Chartered Accountants St. George s House Chester Road Manchester M15 4JE Principal Solicitors: Freeth Cartwright Solicitors Cumberland Court 80 Mount Street Nottingham NG1 6HH Principal Bankers: Treasury Advisors: Lloyds TSB Bank plc PO Box 72 Bailey Drive Gillingham Kent ME8 0LS Savills Financial Consultants Lansdowne House 57 Berkeley Square London W1J 6ER Registered as a charitable social landlord under the Co-operative and Community Benefit Societies Act 2014, Number 20614R. Registered with the Homes And Communities Agency, Number LH

7 REPORT OF THE BOARD The Board presents its report and audited financial statements for the year ended 31 st March Principal Activities Nottingham Community Housing Association Limited (NCHA) is a Registered Provider and Industrial and Provident Society with Charitable Rules, registered on the 22 nd March 1973 for the benefit of the community. NCHA operates mainly within the East Midlands and has three regional offices and a number of satellite offices across the East Midlands. Its head office is in Nottingham. NCHA's principal activities are the management, maintenance, improvement and development of social housing together with the provision of Care and Support services for those people within communities across the East Midlands with additional needs. The companies and Almshouse Organisations that make up the NCHA Group are detailed in note 27 of the accounts. Performance for the Year The NCHA Group's turnover has increased mainly as a result of increases in the Group s stock of Housing Properties in Management, More Homes and efficiencies resulting in costs growing at a slower rate. The results for the year show a surplus on ordinary activities of 6.1m ( m). This is a good result for the Group as the economy struggles to move beyond the credit crunch and is very much in line with financial plans. Transfers to and from designated reserves of 2m and 1.2m ( m and 1.4m respectively) have been made in the year specifically to fund future planned maintenance to our existing housing stock and to reflect the use of funds set aside in previous years to fund the investment in the current year. The Designated Reserves stand at 8m (2013 7m) whilst retained Revenue Reserves stand at 38m ( m). During the year we spent over 11m (2013 over 11m) on maintaining and improving our existing housing stock in line with the Group's objective of exceeding the Decent Homes standard, providing "Great Services" and contributing to "Better Lives" for our customers. Of this expenditure, 2.2m ( m) was invested in capitalised improvements to our customers homes. Investment in the provision of new homes amounted to 21m ( m). This was funded by 3m of Social Housing Grant (SHG) (2013 3m), first tranche Shared Ownership sales 3m (2013 4m), proceeds from other property sales 5m (2013 4m), and the balance from operating activities. Review of the year The Group has had a very successful year taking a further step forward under the 5 Year Corporate Plan. We did, however, receive a governance down-grade from G1 to G2 from the Homes & Communities Agency (HCA) due to a need to strengthen our internal controls framework to ensure that we continue to meet the requirements on governance set out in the Governance and Financial Viability Standard. We have an action plan in place to deliver these improvements and have met all targets to date in delivering the plan. We have retained the highest viability rating that the HCA can give of V1. The 2013 STAR survey showed high levels of customer satisfaction with the Great Services NCHA provides. 89% of customers were satisfied with the services offered by NCHA. 87% were satisfied with the quality of their homes and 85% were satisfied with their neighbourhood as a place to live. 83% were satisfied with the repairs service. 76% were satisfied that NCHA listens to their views and acts upon them. 83% thought that their rent represents value for money. Customer satisfaction among our shared owners (77%) is higher than satisfaction levels reported by the National Housing Federation and HouseMark. Our market/ intermediate rent tenants satisfaction, measured from exit surveys, was 98%. 3

8 REPORT OF THE BOARD (continued) Lets Select Ltd has performed well achieving a profit of 0.3m in line with its financial plans, building on the 0.2m profit achieved in These funds are now available to Lets Select to re-invest in commercial activities generating further profits to help the Group improve services and contribute to the provision of more homes. The performance of Lets Select Ltd enabled it to acquire a one-third share in a private training company (Access Training (East Midlands) Ltd through a joint venture company limited by guarantee with the Acclaim Housing Group and the Futures Housing Group. This acquisition will assist the NCHA Group deliver its Better Lives vision through the provision of a range of training projects to the tenants, residents and communities in which NCHA works. This year has been another very successful year for our Development and Design Teams in the new funding environment with a grant receipt from the HCA of 1m plus further grants of 0.9m from Local Authority (LA) partners highlighting the proportional shift in provision of subsidy from central government to local councils. With 219 properties started on site and 191 properties completed the Development and Design Teams have made another significant contribution to the delivery of "More Homes". NCHA is a member of the Blue Skies Development Consortium which has achieved 145 property completions (HCA funded only) with SHG of 1.1m, exceeding the start of year targets agreed with the Homes and Communities Agency but showing the continued shift in programme in the consortium from grant funded to nil grant programme including more commercial product development. NCHA achieved very successful results in 2013/14 with new allocations through the Affordable Homes Guarantees programme for 344 units and 4.1m in Grant, and in the Care & Support Programme for 23 units and 0.6m in grant. NCHA continues as a Homes and Communities Agency partner in its own right as well as part of the Blue Skies Consortium, to provide 28 "More Homes" for our customers in 2013/2014 as part of the empty homes programme, continuing the delivery of a key element of the Group's vision. This has allowed us to continue our local employment apprenticeships taken on to work in Direct Maintenance Services (DMS) on the empty homes initiative. We carry out post occupancy surveys on all of our new build developments and a key result from the surveys for 2013/14 is that Tenant Satisfaction with their New Home is at 74% which has fallen from 2012/13 but areas of improvement have been identified and actions put in place. This has been affected by our reliance on nil grant section 106 units handing over in this period over which we have less direct design influence. The change in the capital grant funding regime means that NCHA has to put in a greater proportion of its own funds to continue the provision of More Homes. The proceeds from property sales and the revenue surpluses made by the Group are a crucial source of the funds necessary to enable us to continue a substantial development programme. The development team through POD, a joint venture between Longhurst Homes and Lets Select, brought in over 0.1m in external fees delivering more homes for others in line with the corporate strategy, with clients including members of the consortium and Local Authority partners delivering new council housing. The Design team, trading under its registered trademark, Pelham Architects, generated almost 0.2m in external fees delivering more homes for others in line with the corporate strategy, with clients including members of the Blue Skies Consortium, Local Authority Partners, Developers and other housing providers. It had been expected that under occupation charges would have a dramatic effect on NCHA s rent arrears as has been the case for some organisations. This has not been the case as overall arrears have decreased following the investment of increased resources to manage this process and work more closely with our customers. Many affected by under occupation have been unable to pay the rent due and arrears for under occupiers have increased and many have terminated their tenancies. 4

9 REPORT OF THE BOARD (continued) There has been a 21% increase in tenancies ended which has had a significant impact on the increased number of voids and letting activity. The allocations team have had to adapt its letting processes so that properties that have been more difficult to let are let within the Void target time. Despite the pressures caused by the Welfare Reform Act current tenant arrears in General Needs at year end were at their lowest level ever 3.9% and the average relet time was down to 20.6 days. The Estates and Anti Social behaviour Team dealt with 621 cases of Anti Social Behaviour, 81 of which were the more serious cases classified as category A. Satisfaction levels for the ASB service have been increasing in the quarter for the target of 75% satisfaction was achieved. The estate improvement budget of 70,000 has been spent on a range of initiatives such as upgrading door entry systems, electronic notice boards, soft and hard landscaping and signage. The Intermediate Housing Team (IHT) put in place a strategy to promote the purchase of Rent To HomeBuy (RTHB) homes by longer standing tenants. This includes selling 25% shares to make entry into home ownership more affordable. Two Rent To HomeBuy (RTHB) units were converted into sales in 2013/14. Four more RTHB homes are currently being marketed for sale, and three of these have already been reserved. The IHT sales and lettings team undertook a programme of change management in 2013 facilitated by LEAN housing Solutions. This involved the diagnosis of waste and the re-design of processes. The implementation phase involved setting clear standards, roles and responsibilities, visual management and structured problem solving. IHT void losses on the intermediate and market rent stock were halved in 2013/14 and average relet times reduced by 36%. Fifty two new shared ownership properties were sold during the year, five more than the budgeted figure. Shared ownership sales receipts in 2013/14 were 0.8m above the budget figure, and the surplus on the sales programme was 0.4m better than budget. Right To Acquire and voluntary sales were absorbed into the work of IHT. This brings a consistency of approach and gives tenants the benefit of IHT sales expertise. Plain English Guides have been produced in the form of Frequently Asked Questions for Right To Acquire and Voluntary Sales. NCHA supported the National Housing Federation s Shared Ownership Week in 2013 by inviting Gedling MP Vernon Coaker to visit our shared ownership homes in Arnold. He was pleased to see more homes being built in Arnold and commented A great scheme which helps make buying a home more affordable. The number of repossessions of shared ownership homes reduced from five in 2012/13 to two in 2013/14, due in part to the improvements in income management. In 2013/14 Nottingham Annuity Charity increased the percentage of its income spent on the payment of annuities to beneficiaries to 67% from 58% the previous year. Total payments to annuitants increased from 8,636 in 2012/13 to 10,128 in 2013/14. Nottingham Community Almshouse Charity delivered an improvement programme of over 0.1m to its almshouses in 2013/14 and provided adaptations for residents with disabilities. Our Housing With Care And Support Business continues to respond to a financially challenging market where Commissioning Authorities have continued the pattern of the last four years of seeking to pay less for more services. Whilst at the same time they are decommissioning services that they do not have a statutory duty to provide. At the same time we are seeing increased demand for our Specialist Registered Care Homes due to a reduction of providers especially those who are known for delivering quality assured services. The market in our area of operations has seen the exit of providers who fail to meet Value for Money or have been forced out of the market through failure to meet regulatory requirements of the new vigorous Care Quality Commission. We have continued to grow the volume of work delivered by our Personalised Support Teams both in hours delivered and number of service users we provide services to. The reduction in the prices per hour we are paid is creating new challenges but we believe that the growth model is sustainable and provides a model for further development across the region. Support has maintained high quality standards and increased the number of service users receiving services and at the 5

10 REPORT OF THE BOARD (continued) same time increasing financial turnover across the business. The satisfaction rating from our customers is 99% demonstrating the delivery of the "Great Services" aspect of the NCHA vision. In our Housing With Care And Support Department (HWCS) was successful in being awarded 1m of Big Lottery Fund Grant money for our Sound As A Pound project with the initial tranche of 5% being issued late that financial year saw the first full operational year of this project with tranches being awarded as per contract and expenditure thereon being recorded separately. The remaining funding tranches (81%) will be paid out in accordance with contract rules over the remaining four financial years that the contract has to run. In HWCS attracted more external funding for new projects. The Cabinet Office Social Investment Business awarded HWCS 80,790 to carry out a Peer Mentoring Project. The project period covers 1 st February 2014 to 31 st March The grant award is split over two financial years and expenditure thereon must be recorded separately. In the grant award was 16,158 and next year will be 64,632. The proportion of emergency, urgent and routine repairs completed on time remains close to 100%. Our investment in planned maintenance and improvements means that the Group's housing property remains above the Decent Homes Standard and continues to substantially meet our own Decent Homes Plus standard. We have an active approach to Asset Management which is positively impacting on the overall quality of our properties. We appraise properties when they become void and sell those in poorer condition that are in low demand areas and replace them with newly built properties. This approach, when delivered alongside a number of maintenance procurement and efficiency gains, has resulted in significant savings in delivering our repairs service. Our Technical Services Team has played a key role in delivering NCHAs Environmental and Sustainability Strategy, including: i) The provision of Home Energy Advice to over 250 tenants during 2013/14 as well as delivering four Energy Roadshows with the objective of reducing fuel poverty amongst our tenants and also the resultant CO2 savings. We provided our 500 th Home Energy Advice visit during this year. ii) The installation of photovoltaics (PVs) or solar hot water to a further 67 of our homes. The result is that our PV and solar hot water installations that we have carried out since 2011/12 have made well over 3,000 tonnes of carbon savings during 2013/14 as well as savings to our tenants electricity bills. iii) We have secured significant energy-related grants during 2013/14 in order to deliver loft, cavity or solid wall insulation to over 100 more of our homes, which helps with the condition of the properties and the tenants fuel bills. Future Developments Lets Select Ltd is our unregistered wholly owned commercial subsidiary. It is now trading effectively after the initial challenges of the credit crunch. It manages properties let at market rent levels for profit as well as providing other commercial services for the NCHA Group. Lets Select now has a small development for sale programme which will contribute to providing More Homes whilst generating additional surpluses for reinvestment or distribution to NCHA through Gift Aid. Nottingham Community Almshouse Charity, which now owns 100 properties with investments of 0.8m and reserves of 1.9m, is in a strong financial position with sufficient funds to maintain its stock to decent homes level and better into the foreseeable future. It is now exploring the possibilities for expansion with the incorporation of local almshouse charities and a small development programme. The Group intends to continue with a substantial development programme, with 245 properties expected to reach completion next year and a continuing programme planned for future years. NCHA will continue to build on the latest star survey results and the TPAS evaluation by continuing to improve the services to its current and future customers. This is fundamental to the delivery of our vision "More homes, great services, better lives". 6

11 REPORT OF THE BOARD (continued) Board Members and Executive Team The Board Members and the Executive Team of the Association are set out on page 1. The Board Members are drawn from a wide background and demonstrate a commitment to equality and diversity, particularly in relation to gender, sexuality, race, age, disability and religious belief. They are required to bring together professional, commercial and local experience and will include tenant members. NCHA has a policy on the appointment of Board Members against which all written applications for Board Membership will be considered. In addition to possessing the qualities necessary to discharge the responsibilities of Board Membership, the Association has established a Board comprising a range of skills and experience relevant to our work, including: Voluntary Agencies Housing Needs Strategic Management of a Business Treasury Management General Business Property Management Property Development Public Relations Equality and Diversity Adult Social Care Education/Training Health, Probation, Social Services Residents Needs Finance Risk Management Staff Management (Human Resources) Contract Management Marketing/Communication Legal Matters Information Technology Service Quality Governance and Regulation The current Board comprises members with skills, qualities and experience in one or more of the requirement list. The Executive Team comprises the Chief Executive, the Finance, Corporate Services & ICT Director, the Housing Services Director, the Director of Development and Housing with Care and Support and the Technical Services Director. The Executive Team act as executives within the authority delegated by the Board. The Executive Team completed a Skills Matrix during the year to confirm that they have the skills and/or knowledge and/or experience to carry out their role as lead officers of the Group. The Group has insurance policies which indemnify its Board Members and Executive Team against liability when acting for the Group. The insurance cover does not extend to negligent or wrongful acts. As well as established Board Members NCHA has recently created two new Associate Board Member positions. This is a new initiative designed to add further challenge to the Board and forms part of our succession planning for the Board. Remuneration Policy The Remuneration and Governance Sub-Committee reviews the level of payment to Board Members every year. To inform this process, the Sub Committee commissions a biennial market review of Member remuneration from an independent consultant and takes into account, NHF guidance, published surveys and salary settlements negotiated with staff before making a recommendation to Board on any changes to the package. The review undertaken in 2013 identified Member remuneration at NCHA is in line with the average for associations of equivalent size and complexity. The Remuneration and Governance Sub-Committee reviews the remuneration packages for the Chief Executive and Executive Directors annually. Basic salaries are set having regard to each Executive Director s responsibilities and annual incremental progression is linked to achievement of objectives. A market review of pay is conducted on a biennial basis to ensure salary packages remain commensurate with comparable positions in the wider housing and care market. The review undertaken in 2013 identified that Executive remuneration at NCHA was in in line with the average for associations of equivalent size and complexity. The Executive Team has delegated authority to set pay, benefits and terms and conditions for NCHA employees. Pay is determined using a job evaluation scheme and which references market data to ensure 7

12 REPORT OF THE BOARD (continued) salaries support recruitment and retention objectives. Changes to terms and conditions are dealt with via the Association s joint union negotiating group which meets regularly. Pensions The Executive Team are eligible to be members of the Social Housing Pension Scheme (SHPS), which is a defined contribution pension scheme (historically Executive Team members were eligible for the SHPS defined benefit final salary scheme which has now closed to new members). They participate in the scheme on the same terms as all other eligible staff. The Association contributes to this scheme, to the National Health Service Pension Scheme and to the Local Government Pension Scheme on behalf of its employees. Service Contracts Members of the Executive Team have permanent contracts of employment. The Board considers this necessary in order to recruit and retain persons of high calibre and to ensure continuity. Employees The strength of the Group and the Association lies in the quality and commitment of its employees. The Group s ability to meet its objectives and commitments to tenants and other customers in an efficient and effective manner depends on the contribution of employees throughout the organisation. We take this opportunity to thank them for their efforts in making this another successful year. The success of NCHA in the HCA s evaluation, the results of the star survey and the TPAS accreditation are clear evidence of the commitment of our staff to the delivery of quality services to our customers and evidence of their success in delivering that quality service. The 2013 survey identified that 89% of respondents were satisfied with the overall service provided by NCHA, only 7% were dissatisfied. The NCHA Group is committed to its workforce and continues to invest heavily in developing the skills and knowledge of its entire staff. The Association invests higher than sector norms for average days of off job training per employee each year, providing good quality training rated as excellent by 70% of employees who attended. Our employees completed over 80 work related qualifications in 2014, and many more were supported in learning and development activities. The organisation provides information on its objectives, progress and activities through regular office and departmental meetings. A performance management framework is in place and the latest development on our HR system allows more robust monitoring of this framework in practice. A Joint Union Negotiating Group comprised of the Executive Team and staff representatives and officers of the two recognised trade unions Unite and UNISON meets formally to consult with staff and discuss issues relevant to staff approximately six times a year. The organisation is committed to equal opportunities for all its employees. It has an equal opportunities policy and equality and diversity objectives are integrated into annual departmental operational plans which are designed to encourage progress against a number of targets including employment workforce statistics and allocations etc. In addition the Equality and Diversity Forum has been resurrected and is represented by each department. People with Disabilities The Group s policy is to give full and fair consideration to applications for employment made by people with disabilities, having regard to their particular aptitudes and abilities, this practice has been enshrined in the accreditation of the two ticks symbol gained in Reasonable adjustments are made for people who are or become disabled during their employment to allow them to continue working, including any necessary retraining. In addition to our stated commitment to the employment of people with disabilities, where Local Authority support can be secured, the organisation endeavours to include a number of properties that meet mobility space standards on all new build schemes, and carries out a range of adaptations to its existing homes to enable tenants with disabilities to continue living in their homes. As part of NCHA's commitment to supporting 8

13 REPORT OF THE BOARD (continued) tenants with disabilities NCHA has a Customer Advisory Panel which focuses its attention on this area of the Group's activities. The organisation is fully aware of its responsibilities under the Equalities Act Tenant Participation The NCHA Group is committed to involving its customers in decision and policy making. The influence of tenants, residents and service users in the work of NCHA has continued to grow. The Resident Scrutiny Panel completed its first review of the ASB service. A number of recommendations were made and are being acted upon. The restructure of tenant involvement groups took place following the creation of the Resident Scrutiny Panel. This has resulted in a more diverse mix of tenants being involved in the Customer Advisory Panels (CAP s) and the Collective Panel which has replaced the Tenants & Residents Consortium. Many suggestions for service improvement and for changes to draft policies have been put forward by CAPs and accepted by NCHA. The Disability CAP has worked with NCHA to identify the need for scooter storage facilities. Fifteen of these have been provided. With the advice of our tenants, NCHA continues to develop Personalised Services. All of our tenants who are identified as being partially sighted or blind get an annual visit from Maintenance to check for any outstanding repairs. NCHA s Technical Services CAP has set up a sub-group to help with the procurement of the maintenance and repairs service. During 2013/14 they met with a supplier to consider a dual flush mechanism in order to inform the specification of this item. In addition, the group have also reviewed the qualitative parameters for tender scoring including our requirements for social value. NCHA also involves its tenants and shared owners through postal and face to face surveys, focus groups and local tenant and resident groups throughout its operating area as well as an annual tenants conference. NCHA is committed to involving its customers in decision and policy making. The influence of the customers in the work of NCHA has continued to grow. Our Customer Contact Team handled just under 72,000 calls in a year and answered over 90% of those within the service standard. The Residents Scrutiny Panel has now completed two reviews the last one was concerning the allocations service. A number of recommendations were made and are being acted on. Over 247 tenants are now actively involved in assisting NCHA to manage and improve our services. Those involved in tenants are engaged in Customer Advisory Panels, as Tenant Estate Contacts and are part of social network groups. In 2013/14 four large scale tenancy events as well as thirteen smaller events were held. The theme for these events was based around Welfare Reform and the locations we targeted where we knew that that was a high proportion of tenants affected by under occupation and will be affected by Universal Credit when it is implemented. The Tenant Involvement team support regional and specialist CAP s which are overseen by the Collective Panel which is made up from representatives the seven Customer Advisory Panels. One of the most important role of the CAP s and the Collective Panels is to review NCHA s policies and strategies 36 policies were reviewed and 45 policy amendments were recommended by tenants and agreed by NCHA. The Disability CAP continues to be very well supported. They have suggested and monitored the provision of scooter stores, fifteen were installed in 2013/14. Tenant feedback is collected by using the praise and grumble and complaints procedures as well as a number of surveys which are carried out periodically or an adhoc basis. Feedback is analysed and discussed by staff before being taken to tenants. Service improvements are then recommended. An annual list of service improvements resulting from feedback is published in Link. 9

14 REPORT OF THE BOARD (continued) NCHA also involves its tenants and shared owners through postal and face to face surveys, focus groups and local tenant and resident groups throughout its operating area as well as regular tenants events during the year. In addition, NCHA s Housing With Care and Support service users are fully involved and consulted on any revisions to existing, or introduction of new policies or procedures that directly affect their services and in the planning and delivery of their care and support packages. This work is carried out through the Person Centred Services group which gives effect to our person centred approach to giving people Better Lives. The Board has had two tenant members throughout the year. This together with the Tenants Groups detailed above form the main elements delivering NCHA's commitment to tenant participation, which ensures that tenants are involved at all levels in the Group. Information and Communications Technology Technology and its effective application across the business continues to be a key factor in the successful delivery of corporate and business stream objectives. We continue to invest in core ICT infrastructure across the business to ensure that we have effective and robust systems which represent both sector best practice and value for money. IT system security and data protection is a growing area of risk across the sector and we have implemented several programmes in order to mitigate this risk. We have begun a schedule of independent system penetration testing involving a leading national IT security specialist, with many recommendations already implemented. There have been a number of strands to our work in improving data protection including specialist training for a member of staff, who now acts as our lead officer, and wider awareness training and briefings across the business. As part of our ongoing focus on improving efficiency and flexibility there has been a growing demand for mobile working ICT solutions. We have implemented a number of different mobile working solutions which are focused upon specific business stream and customer needs. Health and Safety The Board is aware of its responsibilities on all matters relating to Health and Safety and receives number of H&S related papers during the course of the year including; Annual Health and Safety Performance, Health and Safety Risk Map update and Staff Health and Safety Competencies and Skills. We have a comprehensible H&S Policy along with a number of operational polices and the requirements for procedures which define our approach and processes. Our H&S Committee, which is made up of appropriate representatives from across the business, form the central hub for H&S governance across the business. The H&S Committee is supported by two other sub committees which focus upon Fire Safety and HWCS projects respectively both reporting back to committee every two months. Risk management forms the underlying tool for many elements of our H&S management processes and we operate a business wide system called Managers Managing Safely which defines each line manager and then delivers an auditing process which is in turn reported back to the H&S committee. Social Responsibility Throughout its 41 year history NCHA has brought national resources into local housing provision. During the year, we brought 10m (2013 9m) of grants including revenue grants, Social Housing Grant and other capital grants into the local economy. We are very pleased to be able to combine these monies with the support of local authorities and statutory agencies to achieve a significant impact on local housing, social and community issues. 10

15 REPORT OF THE BOARD (continued) Payment of Creditors As part of its social responsibility NCHA recognises that the local economy and many of the local businesses would be adversely affected if it were to delay payment. NCHA endeavours to pay all agreed invoices within 30 days of the invoice date. Charitable Donations At their meeting on 21 st November 2012 the Board approved a proposal to use the Charitable Reserve to send three NCHA staff on one of Habitat for Humanity s (HfH) Global Village volunteer build projects. A budget of up to 10,000 was discussed and it was agreed that the project should be set in a personal development context with the three staff members coming from three different departments. The three volunteers were chosen by lottery from over twenty applicants and they will join a party of some fifteen other volunteers going to help build housing for people living in poverty conditions in Malawi. NCHA s contribution to HfH has been 7,950, paid in February 2012 and some small amounts for items such as safety equipment and inoculations since that point. The build period was between 29 th June and 10 th July The trip was successful, and similar projects will be organised and supported by NCHA regularly. Housing Properties Movement on Housing Properties are detailed in notes 13 to 13e and a summary of Housing Properties owned and managed is disclosed in note 29. Over 50% of these properties are in Nottinghamshire but the Group owns properties in a total of 31 local authorities across the East Midlands. Other Fixed Assets Details of additions to other Fixed Assets are set out in Note 14 of the Financial Statements. NHF Code of Governance NCHA is controlled by a Board of Management which is comprised of twelve wholly independent nonexecutive Members. The Association complies with the principal recommendations of the NHF Code. Compliance is assessed annually by Board and is subjected to an independent health check every 2 years and regular compliance audit by the Associations internal auditors. The only exception to compliance is in relation to the maximum length of service for Board Members. The Association is committed to maintaining a satisfactory turnover of Board Members and Members are required to step-down by rotation every three years and seek re-election from Shareholders. NCHA considers that the skills, knowledge and experience brought to Board, by long serving Members is invaluable in overseeing the control of a very diverse and complex housing and care business, as evidenced in these financial statements. For this reason NCHA does not consider that the adoption of a rigid overall maximum period of Board service of 9 years is in the best interests of the Association, its customers or stakeholders. When individual Members retire by rotation they are required, if seeking re-election, to identify their particular skills, knowledge, experience and competencies which are considered against the requirements of the Board as a whole. In addition any Member, who shareholders would like to see remain on the Board for longer than 3 terms, must be able to satisfy shareholders of their continuing independence in addition to the skills, knowledge and experience they bring to Board. Prior to making the decision to reappoint any Board member for a fourth term, the Board will also take into account the length of service of the remainder of the Board, to ensure that there is a reasonable proportion of members who have been on the Board for 6 years or less to further ensure the continued independence of the Board as a whole. The current average length of service for Board Members is 7 years and 3 members have 5 years or less service. An independent review of Board governance was undertaken in 2013 and will continue on biennial basis this included an evaluation of Board benchmarked against the expectations for a high performing Board and included independent observation of a Board meeting and a review of Board papers. Furthermore the Chairman and Chief Executive were subjected to a 360 degree appraisal facilitated independently which involved feedback and participation from staff and members with particular emphasis being placed an 11

16 REPORT OF THE BOARD (continued) assessment of the continuing independence of the Chairman. The Chairman is elected by the Board on an annual basis. The ways in which we seek to achieve good housing association governance are outlined below. Transparency NCHA carries out its work in an open, transparent and accountable manner. In order to be accountable to our customers and stakeholders we have set up an accountability section on our corporate website to help interested parties to see how we manage NCHA and deliver our services. We have carefully considered and decided not to produce lists of amounts paid as we do not consider that lists of data without context provides meaningful information to potential users of our services but does cost the organisation time and money to produce. This would create inefficiency within the organisation whilst contributing little to transparency and accountability. The Board The Board comprises up to twelve non-executive members and is responsible for managing the affairs of the Organisation. The Board meet formally at least nine times a year for regular business and to discuss strategy. Committees The Group Audit Committee comprises a minimum of at least four Board Members and meets at least four times each year. It considers the appointment of Internal and External Auditors, the scope of their work and their reports. It reports to the Board on the effectiveness of the organisation s internal financial control arrangements plus the effectiveness of other controls and adherence to procedures. In 2010 NCHA's Audit Committee membership was expanded to incorporate members from its subsidiary Lets Select Ltd. Membership of the Audit Committee by subsidiary Board members will be restricted to one third of the total membership of the committee. The Governance & Remuneration Committee comprises three Board Members and meets as required. It approves, monitors and reviews the organisation s remuneration policies, governance policies and related procedures with respect to the Board and Executive Team. It also reviews the recruitment policy and procedures for the Executive Team. At the top level of the comprehensive internal complaints system there is a Complaints Sub Committee which meets as required and includes at least three Board Members. The Board and its Committees obtain external specialist advice from time to time as necessary. Statement on the System of Internal Control The Board has overall responsibility for establishing and maintaining the whole system of internal control and reviewing its effectiveness. The Board recognises that no system of internal control can provide absolute assurance against material misstatement or loss or eliminate risk of failure to achieve business objectives. The system of internal control is designed to manage key risks and to provide reasonable assurance that planned business objectives and outcomes are achieved. It also exists to give reasonable assurance about the preparation and reliability of financial and operational information and the safeguarding of the organisation s assets and interests. Identification and Evaluation of Key Risks The Board confirms that there is a long-term on-going review process for identifying and managing significant risks faced by the Group covering the period up to the annual report. Management responsibility has been clearly defined for the identification, evaluation and control of significant risks. There is a formal and ongoing process of management review in each area of the Association s activities. The Executive Team regularly considers and receives reports on significant risks facing the Association and the Chief Executive is responsible for reporting to the Board any significant changes affecting key risks. All Board and committee reports include a 12

17 REPORT OF THE BOARD (continued) section detailing the risks arising or identified as a result of any information or recommendations included in the report. In meeting its responsibilities, the Board has adopted a risk-based approach to internal controls which are embedded within the normal management and governance process. This approach includes the regular evaluation of the nature and extent of risks to which the organisation is exposed. The Risk Panel and our Board of Management have continued to work together in 2013/14 to assess the quantification of our risk appetite and have produced the following Risk Appetite statement:- The Board recognise that the Group s activities involve risk and the taking of appropriately identified, evaluated and controlled risks in pursuit of business objectives is acceptable, particularly in pursuing business opportunities for the benefit of the Group and its customers. The risk based approach is consistent with best practice across the sector. The process adopted by the Board in reviewing the effectiveness of the system of internal control, together with some of the key elements of the control framework, includes: The annual review of the Risk Management Strategy, Risk Management Procedure and Strategic and Operational Risk Maps is an ongoing process for identifying and managing significant risks faced by the Organisation. This process has been in place throughout the year under review, up to the date of the annual report and accounts, and is regularly reviewed by the Board. In addition, the Risk Panel annually sets a plan at the beginning of each year to demonstrate to the Executive Team, Audit Committee and Board how it intends to deliver its risk management objectives during the year. Environment and Control Procedures The Board retains responsibility for a defined range of issues covering strategic, operational, financial and compliance issues including treasury strategy and new investment projects. Policies and procedures cover issues such as delegated authority, segregation of duties, accounting, treasury management, health and safety, data and asset protection and fraud prevention and detection. Information and Financial Reporting Systems Financial reporting procedures include detailed budgets for the year ahead, detailed management accounts produced monthly and forecasts for the remainder of the financial year and for subsequent years. These are reviewed in detail by the Executive Team and are considered and approved by the Board. The Board also regularly reviews key performance indicators to assess progress towards the achievement of key business objectives, targets and outcomes. Monitoring and Corrective Action A process of regular management reporting on control issues provides assurance to senior management and to the Board. This includes a rigorous procedure for ensuring that corrective action is taken in relation to any significant control issues, particularly those that may have a material impact on the financial statements and delivery of our services. A detailed system of performance indicators is monitored by the Executive Team and corrective action identified. The internal control framework and the risk management process are subject to regular review by Internal Audit who advise the senior management team and report to the Audit Committee. The Audit Committee considers internal control and risk at each of its meetings during the year. The Audit Committee conducts an annual review of the effectiveness of the system of internal control and has taken account of any changes needed to maintain the effectiveness of risk management and control process. The Audit Committee makes an annual report to the Board. The Board has received this report. The Board considers an annual self assessment against the HCA's Regulatory Framework to confirm compliance with regulatory requirements and best practice. 13

18 REPORT OF THE BOARD (continued) Statement of the Responsibility of the Board and the Financial Statements The Co-operative and Community Benefit Societies Act 2014 requires the Board to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Group and Association and of the results of the Group and Association for that period. In preparing those financial statements the Board has: selected suitable accounting policies and applied them consistently; made judgements and estimates that are reasonable and prudent; stated whether applicable United Kingdom accounting standards have been followed; and prepared the financial statements on a going concern basis. The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and Association and enable it to ensure that the financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Regulations) 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing It is also responsible for maintaining an adequate system of internal control and safeguarding the assets of the Group and Association and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Association complies with the Homes and Communities Agency's requirements on fraud. In particular, there is a clear policy on fraud that has been approved by the Board and distributed to all staff. The policy requires a register to be maintained of all actual and attempted fraud. All such cases will be reported to the Board. All cases in excess of 5,000 or any case involving senior management and Board irrespective of the amount must be reported promptly to the Homes and Communities Agency. The Association's policy on antifraud covers the prevention and detection of fraud, the internal and external reporting requirements and the recovery of assets which include legal resolution. Furthermore, the Board also has an established whistleblowing policy. During the year a suspected significant fraud was identified. A full independent investigation was commissioned, the HCA and auditors informed and decisive action has been taken to ensure that controls have been further strengthened to prevent a recurrence. As far as the Board and Executive Officers are aware there is no relevant audit information of which the auditors are unaware. The Board and Executive Officers have taken all steps they ought to have taken as a Board and Executive Officers in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. Post Balance Sheet Events We consider that there have been no events since the financial year end which have had a material effect on the financial position of the Group and Association. Going Concern After making enquiries the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, it continues to adopt the going concern basis in the financial statements. Annual General Meeting The Annual General Meeting will be held on 10 th September

19 REPORT OF THE BOARD (continued) Auditors A resolution to re-elect the Association s auditors Beever & Struthers will be made at the Annual General Meeting on 10 th September The report of the Board was approved on 10 th September 2014 and signed on its behalf by: Nigel Nice Chairman 15

20 OPERATING AND FINANCIAL REVIEW The Nottingham Community Housing Association Group continues to develop its main areas of operation with 6,510 social housing homes (2013 6,422), 1,409 supported housing units (2013 1,432), 702 shared ownership homes ( ) together with 176 ( ) properties let at market rents. Of the properties owned, 173 ( ) properties are managed on its behalf by other organisations. The Groups main source of income is the provision of social housing and this generates 55% of the Group s turnover and whilst our Housing With Care and Support income streams generate 35% of total turnover, they represent only 16% of the Groups property stock as more services are provided to customers in their own homes. At the 31 st March 2014 NCHA also had 592 properties under development ( ). The Group operates throughout the East Midlands with over 50% of the stock in ownership in Nottinghamshire with NCHA s head office in Nottingham. Regional offices are also located in Ollerton, Leicester and Northampton with satellite offices across the East Midlands. The Group s housing stock is split mainly between the properties built before 1945 (22%) and those built after 2000 (39%) with the remainder (39%) constructed between these dates. All of the stock is maintained to Decent Homes standard, with the majority also meeting our own Decent Homes Plus standard. We are developing our Direct Maintenance Service (DMS) to ensure that it demonstrates value for money and we have invested further in the expansion of this area of our operation. Additional growth is planned in the coming year as we intend to demonstrate that the efficiency provided to Nottingham Community Housing Association can enable the Group to achieve better value for money by procuring maintenance services using its in-house team. In addition, the investment in the DMS will result in the creation of more jobs, apprenticeships and training opportunities which will help with the delivery of this corporate objective. The Association plans to spend 58 million on maintenance and improvements over the five years to 31 st March As part of the corporate and business planning process we have developed a programme of maintenance and improvement expenditure based on our in-house stock condition information. We measure our performance against our own budgets and financial projections and against indicators provided by the Homes and Communities Agency and the Housemark Benchmarking club. Our objective is to improve the standard of services we provide whilst improving the efficiency of the Organisation. Demand for Housing Demand for one bedroom or two bedroom properties has increased whilst demand for three or four bedroom houses and two bedroom flats has decreased as a result of the under occupation charges payable by some tenants who are in receipt of housing benefit. New and innovative ways are being tried to let these homes. Turnover The Group s turnover for the year was 59.5 million ( million) and was in line with the financial projections. This represents income from rents, service and support charges, development and design services, and sales of housing properties. Operating Costs Operating costs are incurred on the management and maintenance of the housing stock owned by the Group and the provision of services, including care and support services, to the Group s customers plus the costs of the properties developed for sale. Financing The Group has loans of 215 million ( million), which is 40.2% of the cost of our housing stock and we incurred net financing charges in the year of 10 million ( million). This equates to an average interest rate of 5.1% ( %) for the Group and the total cost of finance was substantially in line with the budget for the year. 16

21 OPERATING AND FINANCIAL REVIEW (continued) NCHA has sufficient secured undrawn loan facilities in place to meet the development loan requirements for the next two years and is currently planning the process to meet its longer term requirements. At 31st March 2014 NCHA had 18 million of undrawn loan facilities fully secured in addition to 0.1m of short term investments. Interest costs incurred are in line with the organisation s budget, partly as a result of the implementation of the treasury policy, which allows flexibility in the proportions of floating rate and hedged debt and the use of cancellable or callable SWAPs to the derivatives previously used which were fixed rate funds only. Nottingham Community Housing Association does not act as a counter party in any derivative transactions; all fixings are entered into within the loan agreements. A quarterly report is provided to Board on investment performance and the current funding position. The proportion of interest at fixed rates at 31 st March 2014 was 70% compared to 75% in the previous year, in addition NCHA has a further 9% of its debt on callable SWAPs. As a result of this policy we expect to maintain control and effective risk management of our loan portfolio. The Group borrows only in Sterling and so does not have any currency risk. Loan Covenant Compliance We have four key covenants in NCHA's loan agreements: asset cover ratios based on valuations; one Balance Sheet covenant based on net worth; and, two income covenants, all measured against the Association's performance. We exceed all of the covenants by a comfortable margin for the current year and our financial projections demonstrate that this will continue into the foreseeable future. Cash Flow The Group has repaid 0.2m ( million drawn) of its loan facilities during the year, from accumulated drawings 0.1m was held as a short term investment at the year end. The delivery of its maintenance and property improvements plans of over 11 million (2013 over 11 million) has been funded mainly from the rental and service income received. In addition this income, together with 3 million ( million) Social Housing Grant, disposal proceeds of 5 million ( million) from Housing Properties and 3m (2013 4m) from first Tranche Shared Ownership Sales has funded 21 million ( million) of investment in additional social housing properties. Result for the Year The Group has achieved a surplus of 6.1 million for the current year ( million surplus) which exceeds budgets and projections made during the year due to a number of efficiencies made over the year. We have made a transfer from designated reserves of 1.2 million to fund Major Repairs and improvements in the current year from funds previously put aside for this purpose and transferred 2 million to reserves to fund future expenditure. Value for Money Self Assessment NCHAs Approach to the assessment and delivery of Value for Money (VFM) Board directs NCHA s delivery of effective and efficient working practices, ensuring Value for Money for its customers through its Procurement and Value for Money Strategy. Within this Strategy specific efficiency targets are set and the successful delivery measured each year within reports to Board. These reports detail financial and non financial gains including added Social Value. Tangible gains of over 1million each year for a number of years have been identified and have resulted in increased surpluses for the Group. In addition the non-financial and added Social Value gains have been recognised through the improvements in customer satisfaction. NCHA also undertakes pre and post project assessments on major capital investment decisions, recognising through its business planning and budgeting process the opportunity cost of these investment projects. NCHA manages and monitors the delivery and measurement of Value for Money across the Group through its Procurement and Value For Money Champions Group which is made up of senior officers managers and staff from across NCHA. For NCHA Value for Money is not simply about reducing costs but achieving a balance between costs and quality, with a particular focus on customer needs. The drive is to maximise the use of the Group s assets to 17

22 OPERATING AND FINANCIAL REVIEW (continued) deliver social, environmental and financial returns. The opportunities for efficiency come through economies of scale, financial strength, rationalisation, simplification and regulation. NCHA will for the second year publish a comprehensive report in September 2014 on the NCHA Web site detailing and quantifying how the Group has delivered Value for Money and added social value within its operations and across the communities within which it operates. This report will be included within the web site under about us/corporate accountability with a heading of Value for Money. Good is not good enough, at NCHA we are driven to improve already good services into Great Services to help provide Better Lives for our customers. Delivering Value for Money through More Homes One of the fundamental parts of the NCHA Group vision has remained consistently for many years the delivery of More Homes. We have maintained a development programme of, on average, in excess of 250 units each year and intend to continue this programme as long as we can do so, whilst maintaining the Groups viability. As funding from other sources has reduced over the past 5 years from over 50% to below 15% NCHA has compensated by investing its cash surpluses from operations and active asset management by disposal of unwanted properties, increasing its own investment from around 20% to over 70% of the cost of the development programme. To achieve this NCHA has reduced costs and increased profits delivering improved Value for Money to enable over 16million of its own resources to be invested in new homes in NCHA s investment of its own funds in the provision of More Homes over the past 5 years is almost 64 million and the Association plans to invest a further 71 million of its own funds into the provision of 1260 new affordable homes in the next 5 years. Research by the NHF demonstrates that each new home built in the East Midlands adds 69,000 to the economy delivering 1.6 jobs. Based on these statistics NCHAs development programme provides 400 jobs each year and adds over 17million to the local economy. Over the next 5 years this potentially results in 400 permanent jobs and adding value of almost 87 million to the local economy. Through our commercial subsidiary Lets Select Ltd we have built 116 new homes and currently have a small programme, developing additional homes for sale on the open Market. Our Development and Design teams manage delivery of the NCHA programme of around 250 units each year but achieve greater efficiency by utilising their expertise to assist other organisations to develop more homes. The development and design teams are currently working with six organisations in the development of around 300 more homes over the next two years having helped some of those organisations deliver on average 100 homes per year for each of the past 5 years. A key element prior to NCHAs investment decisions is a detailed financial evaluation calculating Net Present Value for individual investment schemes and the programme as a whole, together with the return on capital employed. In addition each scheme is considered by the operational teams to confirm that the scheme will meet the social need the investment it is proposed for. On an annual basis NCHA considers post project appraisals on the programmes as a whole and individual schemes, looking in detail at how successfully we have delivered both financial value and added social value. Using the HCA s Global Financial Accounts to Track NCHA financial performance NCHA is a charitable not-for-profit organisation generating surpluses to reinvest in its existing housing stock and in the provision of More Homes as detailed above. The impact of this is that NCHA is not the most financially robust Housing Group although we manage and monitor certain key financial indicators carefully to ensure we maintain our viability. We measure our financial performance against the HCA s global Financial Accounts. This report demonstrates that NCHA is financially sound but with higher loans and gearing levels than the majority of other Registered Providers. This is because we use our available funds plus a significant amount of additional loan finance to fund the provision of More Homes. 18

23 OPERATING AND FINANCIAL REVIEW (continued) NCHA has been tracking its financial performance using the Global Financial Accounts since Most of the indicators demonstrate that NCHA is amongst the 50% least profitable most highly geared Registered Providers. Whilst we have maintained our investment in More Homes throughout that period our profitability has increased in real terms and relative to our peers, our interest costs have fallen, and fallen relative to our peers. This clearly demonstrates the successful delivery of our Procurement and Value for Money Strategy over that period. In addition of the 21 indicators we measure using the Global Financial Accounts 15, 71% of these indicators indicate NCHA is improving in relation to its peers. The graph below demonstrates how our Gearing over that period has increased slightly as we maintain our investment in the development of housing properties but has remained fairly constant in relation to our peers as we have utilised the increased surpluses to invest in More Homes and therefore limit the loan finance required in a period that Grant and other capital subsidy has reduced. The surpluses for the sector and NCHA have been steadily and this graph assumes that continues for 2014 for the global accounts whilst NCHAs surpluses have fallen slightly, mainly as a result of increased investment in Planned Maintenance. Lets Select Ltd NCHAs commercial subsidiary was set up to generate surpluses to gift aid back to NCHA to assist it do deliver more homes in the face of falling grants. A key measure for Lets Select is the Return On Capital Employed (ROCE). NCHA has 2 million invested in share capital in Lets Select and in 2014 this generated returns of over 20%. To date only 0.1million has been returned to NCHA as gift aid but Lets Select has generated retained surpluses of 0.6 million. An element of this has been retained as working capital and is funding 3 More Homes to be built for outright sale and almost 0.4m has been invested in a training company Access Training Ltd to deliver added Social Value across the communities within which the NCHA Group works, by providing training to our customers and other residents across those communities. NCHA Delivering Value for Money within the Social Housing Sector Great Services Housemark Benchmarking It is critical in assessing effective delivery of Value for Money that both cost and quality are measured. To enable NCHA to undertake this evaluation we have been members of the Housemark Benchmarking club for 8 years. Throughout that period we have consistently benchmarked ourselves against Registered Providers in the North & Midlands, currently 58 organisations are part of this group. To ensure we can demonstrate quality as part of our evidence for the delivery of Great Services we rely on survey data which demonstrates that we are top quartile or very close to top quartile in our customers opinion in relation to their satisfaction with those services. 19

24 OPERATING AND FINANCIAL REVIEW (continued) The graph below demonstrates that NCHA has maintained its performance with over 80% of 27 separate indicators at top or second quartile, measured consistently over the past 5 years. Board also considers on an annual basis a specific suite of 15 cost and quality indicators, combined to demonstrate how effectively the Association achieves Value for Money. The results for 2014 indicate that Value for Money is achieved across all indicators, which is an improvement on each of the previous years. We ensure that Housemark Benchmarking information is available to our customers through our corporate web site with a live feed to the latest Housemark dashboard indicators under the how we compare section of the web site. Many of the services NCHA provides for its customers result in savings to other organisations that would otherwise have to respond to the needs of members of the public who are NCHA Customers: Anti-Social Behaviour savings for the police Housing with Care and Support - savings to the NHS and Local Authorities In undertaking regular gas servicing of all of our properties we reduce the risk of fires and explosions reducing the costs of the fire service. NCHA Delivering Value for Money Benchmarked or measured outside the sector Our HWCS team compete in the open market and have maintained the current level of business for the past 5 years at close to or above 20million each year. The team are successful only because they deliver consistent high quality services at low cost which enables them to compete for and win new business. Customer satisfaction statistics run steadily at above 90%. Other teams across NCHA evidence the delivery of Value for Money by competing for and winning new business for Design, Development, Management and maintenance services. The quality of these services is evidenced by the successful continuation of these services in the open market. NCHA Delivering Better Lives NCHA has for many years funded work to provide much needed aids and adaptations to our customers homes. As local authority budgets have faced greater pressures finding themselves unable to fund these works at all or in a timely manner, NCHA has stepped in to fill the funding gap to ensure our customers get the facilities they need to maintain a decent quality of life within their own homes. With an annual budget of over 0.2 million per year NCHA has funded over 1 million of adaptations to help our customers live Better Lives with a further 1 million planned for the next 5 years. 20

25 OPERATING AND FINANCIAL REVIEW (continued) The delivery of added Social Value, a key element to enable NCHA to deliver Better Lives to its customers, is achieved not in big corporate initiatives or through massive financial investments but often through individual members of NCHAs staff doing their jobs well and often going that bit further. This report is too short to capture the numerous examples of these activities, regularly recognised and appreciated by our customers through feedback. Some of these stories are however detailed on our web site at and particularly within the full Value for Money and Added Social value published in the accountability section of our web site. Our investment in Access Training Ltd detailed above, working with two other Midlands based Registered Providers, Acclaim Housing Group and Futures Housing Group, will assist us in the delivery of added social value and Better Lives for our customers and others in the communities within which we operate, by improving their chances for employment and progression within employment through improved access to training services. NCHA Group plans to improve Value for Money NCHA continues to strive to do more and do it better. A key mechanism to enable us to achieve this is our Procurement and Value for Money Strategy. This Strategy, detailing our approach to the delivery of Value for Money is reviewed annually, the coming years objective is to challenge our current approach to procurement and determine how we can achieve greater savings through an improved approach to procurement. NCHA has a good knowledge of its assets and liabilities utilising its Reinvestment Appraisal Model to identify the financial and non financial returns on its properties and schemes to inform investment decisions. Over the coming year we will be extending the use of this model to inform the LIFE (Lead, Influence, Follow or Exit) model we use in looking at our asset holdings in particular geographical areas within which our business operates. A key element to ensure we deliver our 5 year Corporate Plan are is our improvement planning process through detailed Departmental Operational Plans each of which recognises the underlying requirement to deliver Value for Money including added Social Value. 5 year Performance Indicators The trends in the 5 year profile below demonstrate the consistent strength of the Group over the past 5 years. The various profit percentages for the 5 years to March 2014 are healthy and demonstrate substantial improvement over the period. This reflects the success of NCHAs staff in delivering efficiencies as part of the Procurement and Value for Money Strategy over this period. The proportion of emergency, urgent and routine repairs completed on time remains close to 100%. The success of our Maintenance Division in delivering the Groups efficiency agenda is evidenced by a reduction in cost per unit over recent times. Our investment in planned maintenance and improvements means that the Group's housing property remains above the Decent Homes Standard and currently meets 94% of our own Decent Homes Plus standard. We have an active approach to Asset Management which is positively impacting on the overall quality of our properties. We appraise properties when they become void and sell those in poorer condition that are in low demand areas and replace them with newly built properties. This approach, when delivered alongside a number of maintenance procurement and efficiency gains, has resulted in significant savings in delivering our repairs service. Our market rented properties, all managed through our commercial subsidiary Lets Select Ltd, continue to deliver a contribution to our profits. Whilst the surpluses have reduced as the properties age, the contribution to operating surpluses remains over 73% comfortably exceeding the finance costs on the loans secured against these properties. The Balance Sheet ratios for loans and Social Housing Grant in relation to our Housing Property costs show the Group maintaining a healthy position in the increasingly challenging environment as the level of capital grants to support the development of new homes continues to fall. 21

26 OPERATING AND FINANCIAL REVIEW (continued) The Group is also maintaining a healthy level of both free and designated reserves, which will help ensure the continued maintenance of current properties to a decent standard as well as enabling continued investment in the provision of additional homes for future customers who need them. Nottingham Community Housing Association Group 5 Year Profile Income and Expenditure Ratios Operating Profit Percentage 22% 26% 31% 35% 33% (Operating Profit plus Depreciation as a proportion of turnover) Surplus on ordinary activities after tax as a percentage of turnover 1.4% 1.0% 4.6% 10.3% 10.2% Interest cover 125% 119% 166% 200% 194% (Operating Surplus plus depreciation in relation to net finance cost) Average Interest rate 5.7% 5.7% 5.3% 5.2% 5.1% (Total revenue and capitalised interest as a proportion of the average loan, cash and investment balances) Social Housing: Void loss as a percentage of rents, service and support charges 2.3% 1.6% 1.6% 1.6% 1.6% Bad debts as a percentage of rents, service and support charges 0.6% 0.8% 0.5% 0.8% 1.1% Management cost per week per social housing unit in management Maintenance Costs per week per social housing unit in Management Routine Planned Capitalised improvement works Total Maintenance Costs Non Social Housing Activities: Operating Profit on Market Rent stock 56% 69% 78% 75% 73% Balance Sheet Ratios Gross arrears as a proportion of total rent, service and support charges 3.8% 3.0% 3.8% 3.3% 2.9% Loans as a proportion of Housing Property Cost 40.7% 39.3% 42.2% 41.4% 40.2% SHG as a proportion of Housing Property Cost 53% 51% 49% 49% 47% STATEMENT OF COMPLIANCE The board confirms that this Operating and Financial Review has been prepared in accordance with the principles set out in paragraphs 33 and 24 of the 2010 SORP update for Registered Providers. 22

27 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF NOTTINGHAM COMMUNITY HOUSING ASSOCIATION LIMITED We have audited the financial statements of Nottingham Community Housing Association Limited for the year ended 31st March 2014 on pages 25 to 62. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Association s members, as a body, in accordance with Section 87 of the Cooperative and Community Benefit Societies Act Our audit work has been undertaken so that we might state to the Association s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the Association s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the Board and the Auditor As explained more fully in the Statement of Board s Responsibilities set out on page 14, the Board is responsible for the preparation of the financial statements which give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council 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 Association s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Board Report and the Operating and Financial Review to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the Group and the Association s affairs as at 31st March 2014 and of their income and expenditure for the year then ended; and have been properly prepared in accordance with the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Regulations) 1969, the Housing and Regeneration Act 2008 and the Accounting Requirements for Private Registered Providers of Social Housing

28 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF NOTTINGHAM COMMUNITY HOUSING ASSOCIATION LIMITED (continued) Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion: a satisfactory system of control over transactions has not been maintained; or the Association has not kept proper accounting records; the financial statements are not in agreement with the books of account; or we have not received all the information and explanations we need for our audit. Beever and Struthers Chartered Accountants and Statutory Auditor St George's House Chester Road Manchester M15 4JE 10 th September

29 INCOME AND EXPENDITURE ACCOUNTS For the year ended 31 st March 2014 Group Association Note Turnover 2 59,498 57,230 58,281 55,791 Cost Of Properties Developed For Sale 2 (2,743) (3,937) (2,743) (3,937) Operating Costs 2 (42,443) (38,359) (42,018) (37,870) Operating Surplus 2 14,312 14,934 13,520 13,984 Surplus on Sale of Properties not Developed for Outright Sale 6 1,913 1,165 1,783 1,125 Interest Receivable and Similar Income Interest Payable and Similar Charges 8 (10,247) (10,254) (10,233) (10,239) Gift Aid Receivable Surplus on Ordinary Activities for the Year before Taxation 9 6,058 5,919 5,670 5,606 Taxation 9a Surplus on Ordinary Activities for the Year after Taxation 6,058 5,919 5,670 5,606 All amounts relate to continuing activities. The above surpluses are the historical cost surpluses. STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS For the year ended 31 st March Surplus for the year as above 6,058 5,919 5,670 5,606 Unrealised Surplus/(Deficit) on revaluation (4) (1) Total Recognised Surplus relating to the year 6,112 6,012 5,666 5,605 The notes on pages 28 to 62 form part of these financial statements. 25

30 BALANCE SHEET As at 31 st March 2014 Group Association Note Tangible Fixed Assets Housing Properties Depreciated Cost , , , ,217 Less Social Housing Grant 13 (234,761) (233,914) (233,562) (232,716) 259, , , ,501 Other Fixed Assets 14 4,569 3,766 4,567 3,764 Investments 15 1,307 1,231 2,092 2,096 Current Assets 265, , , ,361 Stock 16 1,804 2,648 1,804 2,648 Investments , ,010 Debtors 17 3,622 3,809 15,717 16,383 Cash at Bank and in Hand 18 6,515 5,329 6,245 5,029 Creditors 12,051 16,796 23,876 29,070 Amounts falling due within one year 19 (10,981) (9,111) (11,489) (9,535) Net Current Assets 1,070 7,685 12,387 19,535 Total Assets less Current Liabilities 266, , , ,896 Creditors Amounts falling due after more than one year , , , ,671 Capital and Reserves Called up Share Capital Revaluation Reserve Designated Reserves 23 8,233 7,472 8,146 7,382 Revenue Reserves 23 37,662 32,365 43,745 38,839 The notes on pages 28 to 62 form part of these financial statements. 266, , , ,896 The financial statements were approved by the Board on 10 th September 2014 and signed on its behalf by: 26

31 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 st March 2014 Note Net Cash Inflow from Operating Activities 22,823 22,050 Returns on Investments and Servicing of Finance 26 (11,227) (11,046) Taxation Capital Transactions Acquisition and Construction of Housing Properties (20,790) (15,944) Disposal of Housing Properties 4,338 4,782 Purchase of Other Fixed Assets (1,520) (1,527) Capital Grants Received 2,832 2,887 Net Cash Inflow/(Outflow) before Management of Liquid Resources and Financing (3,544) 1,202 Management of Liquid Resources 26 4,900 (129) Financing 26 (170) 1,239 Increase in Cash 26 1,186 2,312 Reconciliation of Operating Surplus to Net Cash Inflow from Operating Activities Operating Surplus 14,312 14,934 Depreciation and Impairment Charges 6,293 5,502 Gain on revaluation of investments (15) (41) Loss on Sale of Other Fixed Assets 6 77 Decrease/(Increase) in Debtors 363 (298) Decrease in Stock Increase in Creditors 1, Net Cash Inflow from Operating Activities 22,823 22,050 Reconciliation of Net Cashflow to Movement in Net Debt Increase in Cash in the Period 1,186 2,312 Loans Received 26 (2,000) (1,300) Loans Repaid 26 2, Change in Net Debt 1,356 1,073 Net Debt at Start 26 (209,536) (210,609) Net Debt at End of Year 26 (208,180) (209,536) 27

32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies The Association is incorporated under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency as a Registered Provider of social housing as defined by the Housing and Regeneration Act (a) Basis of Accounting The financial statements have been prepared in accordance with applicable United Kingdom Accounting Standards and Statements of Recommended Practice of the United Kingdom. The accounts comply with the Co-operative and Community Benefit Societies Act 2014, the Housing and Regeneration Act 2008, the Accounting Direction for Private Registered Providers of Social Housing 2012 and the Statement of Recommended Practice for Registered Social Housing Providers Update 2010 published by the National Housing Federation. The Accounts are prepared on the historical cost basis of accounting except as modified by the revaluation of investments. (b) Basis of Consolidation The group financial statements consolidate the accounts of Nottingham Community Housing Association, Nottingham Community (Second) Housing Association and Lets Select Limited. Also included are Nottingham Community Almshouse Charity, The Nottingham Annuity Charity and Blyth Cottages Charity. Turnover and Surplus arising on trading between the group members are excluded. The principal accounting policies for the Association are those of the group except on depreciation where no charge is made against Nottingham Community Almshouse Charity and the Blyth Cottages Charity on properties where the net book values are below the estimated residual value, and where no charge is made against Lets Select Limited as the directors believe that the residual value of assets held is equal to the cost. (c) Turnover Turnover represents rental income and other charges receivable, grants from local authorities and the Homes and Communities Agency, first tranche sales of Shared Ownership stock, outright sales of properties for Lets Select Limited and other income. (d) Fixed Assets, Depreciation And Impairment Tangible fixed assets, except freehold land, are stated at cost less accumulated depreciation and capital grants. Depreciation is provided on all tangible fixed assets except freehold land to write off the cost, less estimated residual value over their useful economic lives on the following methods: Offices: Freehold Offices Leasehold Offices Property, Plant, Machinery & Fixtures: Office Equipment and Plant Scheme Equipment Care and Support Project Set up costs Equal Annual instalments over 50 Years Equal Annual instalments over the life of lease Equal Annual instalments 4 and 5 years Equal Annual instalments 7 to 25 Years 25% pa on a Reducing balance basis 28

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) Vehicles: Vans and Cars Minibuses ICT Equipment: ICT Equipment 50% pa on a Reducing balance basis Equal Annual instalments over 7 years Equal Annual instalments 4 and 5 years The useful economic lives of tangible fixed assets are reviewed annually. Reviews for impairment of housing properties are carried out on an annual basis and any impairment in an income generating unit is recognised by a charge to the income and expenditure account. Impairment is recognised where the carrying value of an income generating unit exceeds the higher of its net realisable value or its value in use. An income generating unit could be a single property but is more normally a group of properties whose income and expenditure can be separately identified. (e) Housing Properties As required by Financial Reporting Standard No.15 the Association has reviewed the economic useful lives of its housing properties and depreciates the property cost, less grants, freehold land and residual value. Future estimated lives have been determined as follows: New Build Houses New Build Flats And Rehabilitated Houses Rehabilitated Flats and Care Homes Leasehold Properties 100 years 75 years 60 years The remaining lease period Where a housing property consists of two or more major components with substantially different useful economic lives, each component is accounted for separately and depreciated over its useful economic life. Expenditure relating to the subsequent replacement or renewal of components is capitalised as incurred. Depreciation is charged in equal annual instalments over the assets expected useful economic lives. For structure only, depreciation is charged after taking into account any Social Housing Grant. The Useful economic lives for the identified components are as follows: Land Structure: New Build Houses Structure: New Build Flats And Rehabilitated Houses Structure: Rehabilitated Flats And Care Homes Roof Lifts Windows & Doors Alternative Energy Systems Bathroom Kitchen Heating System Disabled Adaptions Not Depreciated 100 years 75 years 60 years 50 years 50 years 40 years 25 years 25 years 20 years 20 years 20 years 29

34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) All properties are reviewed for impairment annually and where housing properties have suffered a diminution in value, the fall in value is recognised after taking account of any related capital grants. Donated land is included in cost at its valuation on donation, with the donation treated as a capital grant. In the case of Section 106 land, the valuation takes account of all the conditions of sale imposed by the Local Authority and its value in use to the Registered Provider. Housing properties in the course of construction are stated at cost and are not depreciated, and transferred to completed properties when they are ready for letting. Where housing properties are to be transferred to another association, the net costs, after SHG are shown in current assets. All invoices and architects certificates relating to capital expenditure incurred in the year are included in the financial statements for the year, provided that the dates of issue or valuation are prior to the year end. Expenditure on schemes which are subsequently aborted is written off in the year in which it is recognised that the schemes will not be developed to completion. Schemes constructed for Shared Ownership are included in Housing Property Costs only to the extent that the proportion of the scheme is expected to be retained. The proportion of the scheme expected to be disposed of is accounted for within Current Assets as Stock of Housing Property for Sale and the disposal proceeds recognised as turnover within the income and expenditure account and the cost of disposal recognised within operating costs. (f) Capitalisation of Interest and Administration Costs Interest on loans financing development is capitalised up to the date of completion of the scheme and only when development activity is in progress. Administration costs relating to development activities are capitalised only to the extent that they are incremental to the development process and directly attributable to bringing the properties into their intended use. (g) Social Housing Grant Where developments have been financed wholly or partially by Social Housing and other grants, the gross cost has been reduced by the amount of grant received. When Social Housing Grant in respect of housing properties in the course of construction exceeds the total cost to date of those housing properties, any excess is shown as a current liability. Social Housing Grant received for items written off in the Income and Expenditure Account, including that which relates to a proportion of the development and design administration costs, is matched against those costs as part of turnover. Social Housing Grant can be recycled by the Association under certain conditions, if a property is sold, or if another relevant event takes place. In these cases, the Social Housing Grant can be used for projects approved by the Homes and Communities Agency. However, Social Housing Grant may have to be repaid if certain conditions are not met. In certain circumstances Social Housing Grant may be repayable and, in that event, is a subordinated unsecured repayable debt. 30

35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (h) Leased Assets Where assets are financed by leasing agreements that give rights approximating to ownership, they are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease repayments payable during the lease term. The corresponding leasing commitments are shown as obligations to the lessor. Lease payments are treated as consisting of capital and interest elements and the interest is charged to the Income and Expenditure Account using the annuity method. Rentals paid under operating leases are charged to the Income and Expenditure Account as incurred. (i) Designated Reserves The Association designated those reserves which have been set aside for the uses which prevent them, in the judgement of the Board, from being regarded as part of the free reserves of the Association. (j) Provisions The Association only provides for contractual liabilities. (k) Major Repairs Designations In order to ensure that housing properties meet the Decent Homes standard, a lifecycle costing approach has been taken to establish the required spend on planned maintenance and major repairs over a 30 year period. This 30 year estimated major repairs spend is then designated from free surpluses on an annualised basis. Transfers are made from the Property Reserve to fund major repairs and planned maintenance expenditure in the current year. (l) Recycling of Capital Grant Where Social Housing Grant is recycled, as described above, the Social Housing Grant is credited to a fund which appears as a creditor until spent. (m) Stock Stock is included in the Balance Sheet valued at the lower of cost and net realisable value. (n) Properties for sale Properties developed for outright sale are included in Turnover and Cost of Sales. Properties developed for outright sale are included in current assets as they are intended to be sold. (o) Pensions The Association participates in the Social Housing Pension Scheme operated by the Pensions Trust, the NHS pension scheme and the Local Government Pension Scheme. These are final salary pension schemes and retirement benefits to the Association s employees are funded by contributions from all participating employers and employees in the scheme. Payments are made in accordance with periodic calculations by consultant actuaries and are based on pension costs applicable across the various participating associations taken as a whole. 31

36 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) The cost of providing retirement pensions and related benefits is charged to management expenses over the periods benefiting from the employees service, as more fully explained in Note 10 which fully follows the requirements of FRS17. (p) Leaseholders Funds Amounts are collected from leaseholders for future repairs and the replacement of furniture and equipment. (q) Property Managed by Agents The Association considers it carries the financial risk on property managed by agents and accordingly all the income and expenditure arising from the property is included in the income and expenditure account. (r) Taxation The Association has charitable status and is exempt from UK Corporation Tax. Although the Association is registered for VAT, most of its activities are exempt. All amounts disclosed in these accounts are inclusive of VAT to the extent that it is suffered by the Group and is irrecoverable. (s) Service charge sinking funds Service charge sinking funds are dealt with as creditors due within one year. Services charges are set on annual basis in full consultation with the residents. (t) Support income and costs including Supporting People income and costs Supporting People (SP) contract income received from Administering Authorities is accounted for as SP income in the turnover note 2. The related support costs are matched against this income in the same note. Support charges included in the rent are included in the income and expenditure from social housing lettings note 3 and matched against the relevant costs. (u) Loan finance issue costs These are written off evenly over the life of the related loan. Loans are stated in the Balance Sheet at the amount of net proceeds after issue, plus any increases to account for any subsequent amounts written off. Where loans are redeemed in the year, any redemption penalty and any connected loan finance issue costs are recognised in the Income and Expenditure Account in the year in which the redemption took place. (v) Provision for Bad Debts A provision for General Needs and Supported Housing debts becoming irrecoverable is made against 100% of former tenant arrears and 50% of current tenant arrears for all customers more than 6 weeks in arrears. No provision is made against Shared Ownership arrears as it is assumed that action will be taken to recover arrears against the owner s equity in the property in the event of significant levels of arrears. Provisions are made against all other debts, 50% of arrears over 3 months old and 100% of arrears over 6 months old. 32

37 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (w) Finance Costs Finance costs are capitalised as a cost of development schemes, and are written off as part of the depreciation charge over the life of the scheme. 33

38 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 2. Turnover, Operating Costs and Operating Surplus GROUP Turnover Operating Costs Cost Of Properties Developed for Sale Operating Surplus/ (Deficit) Turnover Operating Costs Cost Of Properties Developed for Sale Operating Surplus/ (Deficit) ' ' Social Housing Lettings 48,255 (33,954) - 14,301 46,051 (31,160) - 14,891 Other Social Housing Activities Contract Income 6,717 (6,753) - (36) 5,560 (5,614) - (54) Development Services 306 (627) - (321) 477 (593) - (116) Shared Ownership First Tranche Sales 3,167 - (2,743) 424 3,905 - (3,937) (32) Other 35 (828) - (793) 45 (649) - (604) Non-Social Housing Activities Market Rentals/Shared Ownership 935 (250) ,100 (272) Other 83 (31) (71) ,498 (42,443) (2,743) 14,312 57,230 (38,359) (3,937) 14,934 ASSOCIATION Social Housing Lettings 48,056 (33,810) - 14,246 45,804 (31,014) - 14,790 Other Social Housing Activities Contract Income 6,717 (6,753) - (36) 5,560 (5,614) - (54) Development Services 306 (627) - (321) 477 (593) - (116) Shared Ownership First Tranche Sales 3,167 - (2,743) 424 3,905 - (3,937) (32) Other 35 (828) - (793) 45 (649) - (604) 58,281 (42,018) (2,743) 13,520 55,791 (37,870) (3,937) 13,984 34

39 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 3. Income and Expenditure from Social Housing Lettings (GROUP) General Needs Housing Supported Housing Residential Care Homes Shared Ownership Housing SubMarket Lettings Income Rents 29,078 2, ,411 1,515 34,990 33,432 Service Charges 807 3, ,089 4,783 Support Charges , ,305 3,797 Rents Receivable Net of Voids 29,886 7,129 3,051 1,803 1,515 43,384 42,012 Grants from Local Authorities and Other Agencies 798 3, ,871 4,039 Total Income from Social Housing Lettings 30,684 10,260 3,726 1,818 1,767 48,255 46,051 Expenditure Management 4,592 2, ,537 7,889 Services 942 1, ,205 3,496 Support - 3,956 2, ,284 5,614 Routine Maintenance 4, ,554 6,022 Planned Maintenance 3, ,386 2,455 Rent Losses from Bad Debts Rents Payable to Landlords Property Depreciation And Impairment 4, ,471 5,274 Total Expenditure on Social Housing Lettings 18,862 9,527 3, ,118 33,954 31,160 Operating Surplus on Social Housing Lettings 11, , ,301 14,891 Rent Loss From Voids Total Total 35

40 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 4. Income and Expenditure from Social Housing Lettings (ASSOCIATION) General Needs Housing Supported Housing Residential Care Homes Shared Ownership Housing SubMarket Lettings Income Rents 28,905 2, ,385 1,515 34,791 33,186 Service Charges 807 3, ,088 4,782 Support Services , ,305 3,797 Rents Receivable Net of Voids 29,713 7,129 3,051 1,776 1,515 43,184 41,765 Grants from Local Authorities and Other Agencies 798 3, ,872 4,039 Total Income from Social Housing Lettings 30,511 10,261 3,726 1,791 1,767 48,056 45,804 Expenditure Management 4,565 2, ,497 7,857 Services 900 1, ,163 3,454 Support - 3,956 2, ,284 5,614 Routine Maintenance 4, ,473 6,004 Planned Maintenance 3, ,407 2,404 Rent Losses from Bad Debts Rents Payable to Landlords Property Depreciation And Impairment 4, ,468 5,273 Total Expenditure on Social Housing Lettings 18,732 9,527 3, ,118 33,810 31,014 Operating Surplus on Social Housing Lettings 11, , ,246 14,790 Rent Losses From Voids Total Total 36

41 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 5. Turnover from Non-Social Housing Activities Group Association Non-Social Housing Activity Lettings 935 1, Other ,018 1, Sale of Properties not Developed for Outright Sale Shared Ownership Staircasing Sales Other Sales Total Sales Total Sales Group Proceeds of Sales 625 4,603 5,228 4,468 Less Cost of Sales (594) (2,721) (3,315) (3,303) 31 1,882 1,913 1,165 Association Proceeds of Sales 601 4,173 4,774 4,201 Less Cost of Sales (558) (2,433) (2,991) (3,076) 43 1,740 1,783 1, Interest Receivable and Similar Income Group Association ' ' Interest Received from Listed Investments Other Interest Receivable Transferred to RCGF (13) (8) (13) (8) Transferred to DPF (1) (2) (1) (2)

42 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 8. Interest Payable and Similar Charges Group Association Bank Loans and Overdrafts wholly repayable within five years 1, , Amortisation of THFC Bond Premium (189) (189) (189) (189) Amortisation of the HSL Bond Premium (108) (108) (108) (108) On Other Loans 9,512 11,034 9,498 11,020 10,746 10,853 10,732 10,838 Less Interest Capitalised (499) (599) (499) (599) 10,247 10,254 10,233 10,239 The weighted average rate of interest on borrowings over the course of the year of 5.01% ( %) was used for calculating the association s capitalised interest. 9. Surplus for the year before taxation Group Association Is stated after charging: Depreciation Housing Properties: Depreciation Charge 4,789 4,789 4,762 4,764 For The Year Housing Properties: Impairment (Release) (9) (156) (9) (156) For The Year Component Write Offs ,582 5,359 5,464 5,276 Other Fixed Assets: Depreciation Charge For The Year Other Fixed Assets: Impairment Charge For The Year Operating Leases: Land And Buildings Other Operating Leases Auditors Remuneration (excluding VAT): In their capacity as Auditors: Statutory Audit Reporting On Service Charges For Other Services: Taxation

43 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 9a. Taxation The Association is an Industrial and Provident Society with charitable rules. The Board knows of no circumstances that will affect this taxation status in the future. The taxation charge in the accounts nil ( nil) is based on the assessable surplus of the subsidiaries of the association for the year. 10. Pension Contributions Nottingham Community Housing Association participates in the Social Housing Pension Scheme, National Health Service Pension Scheme and has two staff members in the Local Government Pension Scheme. Social Housing Pension Scheme Nottingham Community Housing Association participates in the Social Housing Pension Scheme (the Scheme). The Scheme is funded and is contracted-out of the State Pension scheme. SHPS is a multi-employer defined benefit scheme. Employer participation in the Scheme is subject to adherence with the employer responsibilities and obligations as set out in the SHPS House Policies and Rules Employer Guide. The Scheme operated a single benefit structure, final salary with a 1/60th accrual rate until 31 March From April 2007 three defined benefit structures have been available, namely: Final salary with a 1/60th accrual rate. Final salary with a 1/70th accrual rate. Career average revalued earnings (CARE) with a 1/60th accrual rate. From April 2010 a further two defined benefit structures have been available, namely: Final Salary with a 1/80th accrual rate. Career average revalued earnings (CARE) with a 1/80th accrual rate. A defined contribution benefit structure was made available from 1 October An employer can elect to operate different benefit structures for their active members and their new entrants. An employer can only operate one open defined benefit structure at any one time. An open benefit structure is one which new entrants are able to join. Nottingham Community Housing Association currently operates the final salary with 1/70 th accrual rate benefit for existing members. This does not reflect any benefit structure changes made from April Nottingham Community Housing Association currently operated the final salary with 1/80 th accrual rate benefit for newer existing members and new members. The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to determine the level of future contributions required, in respect of each benefit structure, so that the Scheme can meet its pension obligations as they fall due. From April 2007 the split of the total contribution rate between member and employer is set at individual employer level, subject to the employer paying no less than 50% of the total contribution rate. From 1 April 2010 the requirement for employers to pay at least 50% of the total contribution rate no longer applies. The actuarial valuation assesses whether the Scheme s assets at the valuation date are likely to be sufficient to pay the pension benefits accrued by members as at the valuation date. Asset values are calculated by reference to market levels. Accrued pension benefits are valued by discounting expected future benefit payments using a discount rate calculated by reference to the expected future investment returns. During the accounting period Nottingham Community Housing Association paid contributions at the rate of 5.9% whilst member contributions varied between 5.7% and 9.9%. 39

44 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 10. Pension Contributions (continued) As at the balance sheet date there were 273 active members of the Scheme employed by Nottingham Community Housing Association. The annual pensionable payroll in respect of these members was 7.3m. Nottingham Community Housing Association continues to offer membership of the Scheme to its employees. It is not possible in the normal course of events to identify on a reasonable and consistent basis the share of underlying assets and liabilities belonging to individual participating employers. The Scheme is a multiemployer scheme, where the assets are co-mingled for investment purposes, and benefits are paid out of total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS17 represents the employer contribution payable. The last formal valuation of the Scheme was performed as at 30 September 2011 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme s assets at the valuation date was 2,062 million. The valuation revealed a shortfall of assets compared with the value of liabilities of 1,035 million, equivalent to a past service funding level of 67.0%. The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the Scheme as at 30 September Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The market value of the Scheme s assets at the date of the Actuarial Report was 2,718 million. The Actuarial Report revealed a shortfall of assets compared with the value of liabilities of 1,151 million, equivalent to a past service funding level of 70%. The financial assumptions underlying the valuation as at 30 September 2011 were as follows: Valuation Discount Rates: % p.a. Pre-Retirement 7.0 Non Pensioner Post Retirement 4.2 Pensioner Post Retirement 4.2 Pensionable Earnings Growth 2.5 per annum for 3 years, then 4.4 Price Inflation (RPI) 2.9 Pension Increases: Pre 88 GMP 0.0 Post 88 GMP 2.0 Excess Over GMP 2.4 Expenses for death-in-service insurance, administration and Pension Protection Fund (PPF) levy are included in the contribution rate. The valuation was carried out using the following demographic assumptions: Mortality pre-retirement 41% SAPS S1 Male / Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for Males and 1.25% p.a. for Females. Mortality post retirement 97% SAPS S1 Male / Female All Pensioners (amounts), Year of Birth, CMI_2009 projections with long term improvement rates of 1.5% p.a. for Males and 1.25% p.a. for Females. 40

45 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 10. Pension Contributions (continued) The long-term joint contribution rates required from April 2013 from employers and members to meet the cost of future benefit accrual were assessed at: Benefit Structure Long-term Joint Contribution Rate (% of pensionable salaries) Final salary with a 1/60th accrual rate 19.4 Final salary with a 1/70th accrual rate 16.9 Career average revalued earnings (CARE) with a 1/60th accrual rate 18.1 Final salary with a 1/80th accrual rate 14.8 Career average revalued earnings (CARE) with a 1/80th accrual rate Career average revalued earnings (CARE) with a 1/120th accrual rate If an actuarial valuation reveals a shortfall of assets compared to liabilities the Trustee must prepare a Recovery Plan setting out the steps to be taken to make up the shortfall. Following consideration of the results of the actuarial valuation it was agreed that the shortfall of 1,035 million would be dealt with by the payment of deficit contributions as shown in the table below: From 1 April 2013 to 30 September 2020 From 1 October 2020 to 30 September 2023 From 1 April 2013 to 30 September 2026 A cash amount(*) equivalent to 7.5% of Members Earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April) A cash amount(*) equivalent to 3.1% of Members Earnings per annum (payable monthly and increasing by 4.7% per annum each 1 April) 30,640,000 per annum (payable monthly and increasing by 3% per annum each 1 April; first increase on 1 April 2014) (*) The contributions of 7.5% will be expressed in nominal pound terms (for each Employer), increasing each year in line with the Earnings growth assumption used in the 30 September 2008 valuation (i.e. 4.7% per annum). The contributions of 3.1% will be calculated by proportioning the nominal pound payment at the time of the change. Earnings at 30 September 2008 (for each Employer) will be used as the reference point for calculating these contributions. These deficit contributions are in addition to the long-term joint contribution rates as set out in paragraph 14 above. 41

46 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 10. Pension Contributions (continued) The next formal valuation of the Scheme will begin later this year and will give an update on the financial position as at 30 September The results of this valuation will be available in Spring Employers that participate in the Scheme on a non-contributory basis pay a joint contribution rate (i.e. a combined employer and employee rate). Employers that have closed the defined benefit section of the Scheme to new entrants are required to pay an additional employer contribution loading of 2.5% to reflect the higher costs of a closed arrangement. A small number of employers are required to contribute at a different rate to reflect the amortisation of a surplus or deficit on the transfer of assets and past service liabilities from another pension scheme into SHPS. New employers that do not transfer any past service liabilities to the Scheme pay contributions at the ongoing future service contribution rate. This rate is reviewed at each valuation and new employers joining the Scheme between valuations up until 1 April 2010 do not contribute towards the deficit until two valuations have been completed after their date of joining. New employers joining the Scheme after 1 April 2010 will be liable for past service deficit contributions from the valuation following joining. Contribution rates are changed on the 1 April that falls 18 months after the valuation date. A copy of the Recovery Plan, setting out the level of deficit contributions payable and the period for which they will be payable, must be sent to The Pensions Regulator. The Regulator has the power under Part 3 of the Pensions Act 2004 to issue scheme funding directions where it believes that the actuarial valuation assumptions and/or Recovery Plan are inappropriate. For example the Regulator could require that the Trustee strengthens the actuarial assumptions (which would increase the Scheme liabilities and hence impact on the Recovery Plan) or impose a schedule of contributions on the Scheme (which would effectively amend the terms of the Recovery Plan). As a result of pension scheme legislation there is a potential debt on the employer that could be levied by the Trustee of the Scheme. The debt is due in the event of the employer ceasing to participate in the Scheme or the Scheme winding up. The debt for the Scheme as a whole is calculated by comparing the liabilities for the Scheme (calculated on a buy-out basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the Scheme. If the liabilities exceed assets there is a buyout debt. The leaving employer s share of the buy-out debt is the proportion of the Scheme s liability attributable to employment with the leaving employer compared to the total amount of the Scheme s liabilities (relating to employment with all the currently participating employers). The leaving employer s debt therefore includes a share of any orphan liabilities in respect of previously participating employers. The amount of the debt therefore depends on many factors including total Scheme liabilities, Scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time. Nottingham Community Housing Association has been notified by The Pensions Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme, based on the financial position of the Scheme as at 30 September At this date the estimated employer debt for the Association was 40.6m. National Health Service Pension Scheme Nottingham Community Housing Association Limited participates in the National Health Service Pension Scheme, a defined benefit final salary scheme. 42

47 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 10. Pension Contributions (continued) Past and present employees are covered by the provisions of the NHS Pensions Scheme. Details of the benefits payable under these provisions can be found on the NHS Pensions website at The scheme is an unfunded, defined benefit scheme that covers NHS employers, GP practices and other bodies, allowed under the direction of the Secretary of State, in England and Wales. The scheme is not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme assets and liabilities. Therefore, the scheme is accounted for as if it were a defined contribution scheme: the cost to the NHS Body of participating in the scheme is taken as equal to the contributions payable to the scheme for the accounting period. In order that the defined benefit obligations recognised in the financial statements do not differ materially from those that would be determined at the reporting date by a formal actuarial valuation, the FReM requires that the period between formal valuations shall be four years, with approximate assessments in intervening years. An outline of these follows: a) Full actuarial (funding) valuation The last formal actuarial valuation undertaken for the NHS Pension Scheme was completed for the year ending 31 March Consequently, a formal actuarial valuation would have been due for the year ending 31 March However, formal actuarial valuations for unfunded public service schemes have been suspended by HM Treasury on value for money grounds while consideration is given to recent changes to public service pensions, and while future scheme terms are developed as part of the reforms to public service pension provision. Employer and employee contribution rates are currently being determined under the new scheme design. b) Accounting valuation A valuation of the scheme liability is carried out annually by the scheme actuary as at the end of the reporting period. Actuarial assessments are undertaken in intervening years between formal valuations using updated membership data are accepted as providing suitably robust figures for financial reporting purposes. However, as the interval since the last formal valuation now exceeds four years, the valuation of the scheme liability as at 31 March 2012 is based on detailed membership data as at 31 March 2010 updated to 31 March 2012 with summary global member and accounting data. In undertaking this actuarial assessment, the methodology prescribed in IAS 19, relevant FReM interpretations, and the discount rate prescribed by HM Treasury have also been used. The latest assessment of the liabilities of the scheme is contained in the scheme actuary report, which forms part of the annual NHS Pension Scheme (England and Wales) Pension Accounts, published annually. These accounts can be viewed on the NHS Pensions website. Copies can also be obtained from The Stationery Office. c) Scheme provisions The NHS Pension Scheme provided defined benefits, which are summarised below. This list is an illustrative guide only, and is not intended to detail all the benefits provided by the Scheme or the specific conditions that must be met before these benefits can be obtained: The Scheme is a final salary scheme. Annual pensions are normally based on 1/80th for the 1995 section and of the best of the last three years pensionable pay for each year of service, and 1/60th for the 2008 section of reckonable pay per year of membership. Members who are practitioners as defined by the Scheme Regulations have their annual pensions based upon total pensionable earnings over the relevant pensionable service. With effect from 1 April 2008 members can choose to give up some of their annual pension for an additional tax free lump sum, up to a maximum amount permitted under HMRC rules. This new provision is known as pension commutation. 43

48 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 10. Pension Contributions (continued) Annual increases are applied to pension payments at rates defined by the Pensions (Increase) Act 1971, and are based on changes in retail prices in the twelve months ending 30 September in the previous calendar year. From the Consumer Price Index (CPI) will be used to replace the Retail Prices Index (RPI). Early payment of a pension, with enhancement, is available to members of the scheme who are permanently incapable of fulfilling their duties effectively through illness or infirmity. A death gratuity of twice final year s pensionable pay for death in service, and five times their annual pension for death after retirement is payable. For early retirements other than those due to ill health the additional pension liabilities are not funded by the scheme. The full amount of the liability for the additional costs is charged to the employer. Members can purchase additional service in the NHS Scheme and contribute to money purchase AVC s run by the Scheme s approved providers or by other Free Standing Additional Voluntary Contributions (FSAVC) providers. During the accounting period NCHA paid contributions at the rate of 14%. Member contributions are set between 5.3% and 9% depending on their full time equivalent earnings in the previous tax year. This new set of rates commenced from 1st April

49 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 11. Board and Executive Team Emoluments Group '000 '000 The aggregate emoluments paid to or received by Board Members The aggregate emoluments paid to or receivable by Executive Team Members The emoluments paid to the highest paid Executive Team Member of the Association: Chief Executive excluding pension contributions The aggregate amount of Executive Team Members pensions Salary Pension Emoluments Emoluments '000 '000 '000 '000 Board Members: Dr Nigel Nice (NCHA Chair) Mrs Ann McCarthy (NCHA Vice-Chair & Audit Committee Chair) Mr Michael Bent Mrs Lucy Dadge Mr Graham Carvell Mr Tony Kay Mr Chaudhari Shajait Ms Carolyn Isaaks Mr Pradeep Khuti Mr Steven Worthington Miss Denise Maguire 5 5 Ms Claire Winfield (2014 Part Year Only) Executive Team Members: Chief Executive Director of Finance, Corporate Services & ICT Director of Technical Services Director of Development & Housing With Care & Support Director of Housing Services The Chief Executive is an ordinary member of the Social Housing Pension Scheme detailed in Note 10. The cost to the Association for the year was 17,800 ( ,750). No enhancements or special terms apply, nor does the Association make any other pension contributions on his behalf. Senior Staff earning more than 50,000 excluding pension Group Salary Band No. No. 50,000 to 55, ,001 to 60, ,001 to 65, ,001 to 70, ,001 to 75, ,001 to 95, ,001 to 100, ,001 to 125, Total

50 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 12. Employee Information Group Weekly full time hours are 35 hours for office staff and 37, 39 or 40 hours for non office based staff. NCHA also employs staff on a zero hours basis. No. No. The average weekly full time equivalent number of persons (including the Chief Executive) employed during the year was: a. Staff Costs (for the above persons) Group Wages and Salaries 17,754 16,168 Social Security Costs 1,328 1,256 Other Pension Costs 1, ,678 18,387 In addition to the Employers Pension Contributions, NCHA makes an annual deficit payment into the SHPS scheme and a SHPS Closed Scheme Surcharge, the total value of these payment in 2013/14 were 831,466 and 182,022 respectively ( ,196 and nil). NCHA s pension contribution rate across all schemes, including the deficit and surcharge payment, represents 16.07% ( %) of pensionable pay. 46

51 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 13. Housing Properties (GROUP) Social Housing Properties Shared Ownership Housing Properties Non-Social Housing Properties Assets in the Course of Construction Social Housing Assets in the Course of Construction Shared Ownership Cost As At 1 st April ,805 33,772 5,640 6, ,868 Capitalisation of Components 2, ,228 Additions to New Properties ,438 1,755 20,197 Disposal of Components (1,336) - (80) - - (1,416) Disposal of Properties (2,772) (849) (320) - - (3,941) Schemes completed in the year 15,527 1,356 - (15,527) (1,356) - As at 31 st March ,760 34,865 5,350 8,710 1, ,936 Depreciation And Impairment As At 1 st April ,090 1, ,467 Depreciation charge for the year 4, ,789 Impairment release for the year - (9) (9) Disposal of Components (614) (614) Disposal of Properties (295) (32) (327) As at 31 st March ,765 2, ,306 Depreciated and Impaired Cost 31 st March ,995 32,855 5,350 8,179 1, ,630 Total 47

52 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 13. Housing Properties (GROUP) (continued) Social Housing Properties Shared Ownership Housing Properties Non-Social Housing Properties Assets in the Course of Construction Social Housing Assets in the Course of Construction Shared Ownership Social Housing Grant and Other Grants As At 1 st April ,267 11,078-1, ,914 Additions to New Properties , ,819 Disposal of Properties (1,648) (324) (1,972) Schemes completed in the year 2, (2,741) (207) - As at 31st March ,420 10,961-1, ,761 Net Book Value at 31st March ,575 21,894 5,350 6,894 1, ,869 Net Book Value at 31st March ,448 20,848 5,640 4, ,487 Total 48

53 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 13.a Housing Properties (ASSOCIATION) Social Housing Properties Shared Ownership Housing Properties Assets in the Course of Construction Social Housing Assets in the Course of Construction Shared Ownership Cost As At 1 st April ,340 33,497 6, ,488 Capitalisation of Components 1, ,968 Additions to New Properties ,438 1,755 20,197 Disposal of Components (1,314) (1,314) Disposal of Properties (2,772) (849) - - (3,621) Schemes completed in the year 15,527 1,356 (15,527) (1,356) - As at 31 st March ,167 34,590 8,710 1, ,718 Depreciation And Impairment As At 1 st April ,902 1, ,271 Depreciation charge for the year 4, ,762 Impairment release for the year - (9) - - (9) Disposals of Components (603) (603) Disposal of Properties (295) (32) - - (327) As at 31 st March ,561 2, ,094 Depreciated and Impaired Cost 31 st March ,606 32,588 8,179 1, ,624 Total 49

54 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 13.a Housing Properties (ASSOCIATION) (continued) Social Housing Properties Shared Ownership Housing Properties Assets in the Course of Construction Social Housing Assets in the Course of Construction Shared Ownership Total Social Housing Grant As At 1 st April ,268 10,879 1, ,716 Additions to New Properties 59-2, ,818 Disposal of Properties (1,648) (324) - - (1,972) Schemes completed in the year 2, (2,741) (207) - As at 31st March ,420 10,762 1, ,562 Net Book Value at 31st March ,186 21,826 6,894 1, ,062 Net Book Value at 31st March ,170 20,780 4, ,501 50

55 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 13b. Housing Properties Group Association Freeholds 512, , , ,840 Long Leaseholds 21,047 21,107 15,778 15,803 Short Leaseholds , , , ,488 13c. Social Housing Grant Group Association a) The total accumulated SHG received or receivable at the balance sheet date from both capital and revenue sources. 241, , , ,968 b) The total SHG received and taken to revenue in the year d. Capitalised Interest and Other On-Costs Group Association Additions to Housing Properties during the Year included: Capitalised Interest Capitalised Improvements 2,228 2,272 1,968 2,077 Sales & Marketing Costs Design Costs Development Costs ,922 4,141 3,662 3,946 13e. Total Major Maintenance Works Group Association Total Major Maintenance Works For The Year Included: Income And Expenditure Account Planned Works 4,386 2,455 4,407 2,404 Capitalised Improvements 2,228 2,272 1,968 2,077 6,614 4,727 6,375 4,481 51

56 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 14. Other Fixed Assets (GROUP) Offices Property Plant, Machinery & Fixtures 2014 Vehicles ICT Equipment Cost As at 1 st April ,695 1,850 1,254 2,286 9,085 Transfers - (5) Additions ,520 Disposals (9) (73) (161) (228) (471) As at 31 st March ,219 2,052 1,383 2,480 10,134 Depreciation As at 1 st April ,097 1, ,913 5,319 Transfers - (1) Depreciation Charge for the year Disposals (8) (73) (156) (228) (465) As at 31 st March ,178 1,465 1,008 1,914 5,565 Net Book Value at 31 st March , ,569 Net Book Value at 31 st March , ,766 Total 52

57 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 14a. Other Fixed Assets (ASSOCIATION) Offices Property Plant, Machinery & Fixtures 2014 Vehicles ICT Equipment Cost As at 1 st April ,695 1,843 1,254 2,285 9,077 Transfers - (5) Additions ,520 Disposals (9) (73) (161) (228) (471) As at 31 st March ,219 2,045 1,383 2,479 10,126 Depreciation As at 1 st April ,097 1, ,913 5,313 Transfers - (1) Depreciation Charge for the year Disposals (8) (73) (156) (228) (465) As at 31 st March ,178 1,459 1,008 1,914 5,559 Net Book Value at 31 st March , ,567 Net Book Value at 31 st March , ,764 Total 53

58 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 15. Fixed Asset Investments Group Restated Association Restated Listed Investments at Valuation Royal Bank of Canada Global Markets Other Investments 1,215 1, ,288 1, At Cost Other Fixed Asset Investments Lets Select Limited Shares - - 2,000 2,000 Nottingham Credit Union ,019 2,019 Total Investments 1,307 1,231 2,092 2,096 Royal Bank of Canada Global Markets manages investments which represent a debt service reserve charged by Housing Securities Limited. The investments are to protect investors in the public debenture stock for the first twelve months interest in the event of a default by an association under the terms of the Trust Deed and loan agreement. These investments are included at their full market valuation of 73,155. This is 197 higher than cost and the revaluation adjustment has again been disclosed as a movement on the revaluation reserve on the Balance Sheet. 16. Stock Group Association Stock of Shared Ownership Properties for sale: completed schemes 807 1, ,984 Stock of Shared Ownership Properties for sale: under construction Stock of Materials ,804 2,648 1,804 2,648 54

59 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 17. Debtors Group Association Amounts falling due within one year: Rent Arrears 1,468 1,618 1,457 1,603 Less Provision for Bad Debts (426) (396) (423) (392) 1,042 1,222 1,034 1,211 SHG Receivable Inter-Company Debtors Other Debtors 1,513 2,111 1,409 1,987 Prepayments ,232 3,809 3,308 3,859 Amounts falling due after one year: Lets Select Limited Loan ,409 12,524 Other Debtors ,409 12,524 Total Debtors 3,622 3,809 15,717 16, Cash at Bank and in Hand and Current Assets Investments Group Association Cash at Bank and in Hand Mortgaged: HSL 1, , Unmortgaged: Deposits For Service Users Other Unmortgaged Bank Accounts 5,222 4,253 4,986 3,982 6,515 5,329 6,245 5,029 Current Assets Investments Short Term Money Market Investment 110 5, ,010 55

60 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 19. Creditors amounts falling due within one year Group Association Housing Loans Loan Interest Accruals 1,646 1,920 1,646 1,920 Premium on Debenture Issue Trade Creditors 2,224 2,023 2,224 2,023 Funds Held For Others Prepaid Income 1, , Taxation and Social Security Payable Recycled Capital Grant Fund Maintenance Dilapidations Capital Creditors 1, , Due to subsidiaries Accruals and Deferred Income 2,055 1,486 2,164 1,469 10,981 9,111 11,489 9, Creditors amounts falling due after more than one year Group Association Other Housing Loans 215, , , ,362 Loan Administration Fees (700) (690) (700) (690) Premium on Debenture Issue 2,045 2,341 2,045 2,341 Disposal Proceeds Fund Health Grant Fund Recycled Capital Grant Fund 2,905 2,173 2,905 2,173 Other Creditors falling due after more than one year , , , ,671 Housing Loans Repayable as follows: By Instalments: Between one and two years Between two and five years 4, , In five years or more 179, , , , , , , ,192 Other than by Instalments: Other Housing Loans Between one and two years Between two and five years 18,080 1,000 18,080 1,000 In five years or more 12,400 29,480 12,400 29,480 Housing Loans falling due after more than one year 214, , , ,672 Housing Loans falling due in under one year Total Housing Loans 214, , , ,722 Housing Loans are secured by specific charges on the Group s housing properties and are repayable over periods of up to the next 28 years. They bear interest at rates of between 0.7% and 11.5%. 56

61 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2013 (continued) 21. Recycled Capital Grant Fund Group & Association Group & Association Opening Balance 1 st April 2,755 1,598 Grants Recycled 1,438 1,182 Interest Accrued 13 8 Investment In New Stock (668) (33) Closing Balance 31 st March 3,538 2,755 RCGF Due In Less Than One Year RCGF Due In More Than One Year 2,905 2,173 3,538 2, a Disposal Proceeds Fund Group & Association Group & Association Disposal Proceeds Fund Opening Balance 1 st April Grants Recycled Interest Accrued 1 2 Major Repairs & Works to Existing Stock - (356) Closing Balance 31 st March DPF Due In Less Than One Year - - DPF Due In More Than One Year Called up Share Capital Group & Association Group & Association Ordinary Shares of 1 each allotted, issued and fully paid at the start of the year Issued during the year 1 - At the end of the year The shares do not have any right to dividend or distribution in a winding up and are not redeemable. Each share has full voting rights. 57

62 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 23. Reserves Designated Reserves Revenue Reserves Property Reserve Charitable Reserve Other Reserves Total Designated Reserves Group As at 1 st April ,365 6, ,472 Transfer from Reserve to Revenue 1,232 (1,208) (9) (15) (1,232) Transfer to Reserve (1,993) 1, ,993 Surplus For The Year 6, As at 31 st March ,662 7, ,093 8,233 Association As at 1 st April ,839 6, ,382 Transfers from Reserve to Revenue 1,229 (1,208) (9) (12) (1,229) Transfer to Reserve (1,993) 1, ,993 Surplus For The Year 5, As at 31 st March ,745 7, ,007 8,146 Although under its rules the Registered Provider does not trade for profit, its financial affairs are organised so that over the planning period income exceeds expenditure. The surplus is vital to enable the Registered Provider to meet its commitments to providers of private finance, continue to raise further private finance and to have reserves ready to provide for unexpected situations. The Board regularly reviews the Registered Provider's finances to determine the amount of reserves required for day-to-day management and to provide for the future. Any amounts over and above this minimum are invested in the provision of social housing. Other reserves within NCHA are to fund Supporting People activity and the additional other reserves in the group accounts are available to fund works to properties in the subsidiaries. 58

63 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 24. Revaluation Reserve Group Association Revaluation Reserve Valuation of Investment at 1 st April Revaluation adjustment (4) (1) Valuation of Investments at 31 st March Capital Commitments Group & Association Capital Expenditure that has been Contracted for, but has not been provided for in the Financial Statements 11,326 20,000 Capital Expenditure that has been Authorised by the Board, but has not yet been Contracted for 32,473 12,199 43,799 32,199 The Association expects to finance the expenditure above by: Social Housing Grant Receivable 5,365 1,364 Other Grants Receivable 586 1,076 Sales Proceeds 5,208 7,044 Loans to be Received with Loan Offers 32,640 22,715 43,799 32,199 25a. Other Financial Commitments The annual commitments under non-cancellable operating leases are as follows: Group & Association Land and buildings which expire:- Leases expiring within the next year 70 - Leases expiring in the second to fifth year - 70 Leases expiring in more than five years - - Others, which expire: - Leases expiring within the next year - - Leases expiring in the second to fifth year Leases expiring in more than five years

64 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 26. Notes to the Cash Flow Statement Group Returns on Investments and Servicing of Finance Interest Received Interest Paid (11,316) (11,122) (11,227) (11,046) Taxation Paid Corporation Tax Paid Management of Liquid Resources Investments Made - (129) Investments Redeemed 4,900-4,900 (129) Financing Housing Loan Advances Received 2,000 1,300 Housing Loan Principal Repayments (2,170) (61) (170) 1,239 At Start Of Year Cash flow At End Of Year Changes in Net Debt Cash at Bank and in Hand 5,329 1,186 6,515 Debt due within one year (61) (50) (111) Debt due after one year (214,804) 220 (214,584) (209,536) 1,356 (208,180) 27. Subsidiary Undertakings The Association is the parent organisation in a group that also includes LETS Select Limited, Nottingham Community (Second) Housing Association and three Almshouse organisations. LETS Select Limited The Association owns 100% of the shares in LETS Select Limited, which is a wholly owned commercial subsidiary. Its principal activities are managing and letting residential properties, provision of property related services and the development and sales of residential properties. LETS Select Limited transfers surpluses by Gift Aid to NCHA. The only transactions that have occurred between the two organisations are as follows: Loan Interest Management Fee Maintenance Fee Design Fee The intercompany loan of 12.4m is secured by a security trust deed over all present and future assets of LETS Select Limited and is repayable over the next 11 years. Interest rates vary between 3.1% and 6.6%. 60

65 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) Nottingham Community (Second) Housing Association As Nottingham Community Housing Association owns one ordinary share in Nottingham Community (Second) Housing Association Limited and has the power to appoint and remove members of that Association s Board of Management, that Association is accounted for as a subsidiary undertaking. Nottingham Community (Second) Housing Association Limited is a Registered Provider of social housing, renting shared ownership and other properties within Nottinghamshire and has the same registered office as the Association and is incorporated in England. The issued share capital of Nottingham Community (Second) Housing Association is eight 1 ordinary shares. The only transactions that have occurred between the two organisations are as follows: Management Fee Gift Aid Maintenance Fee 1 - Almshouse Organisations There are three Almshouse organisations consolidated into these group accounts, each of which pays a management fee to NCHA as follows: '000 '000 Blyth Cottages Charity Nottingham Community Almshouse Charity Nottingham Annuity Charity 3 2 The Association also carried out maintenance works which were charged to the Blyth Cottage Charity and the Nottingham Community Almshouse Charity as follows: '000 '000 Blyth Cottages Charity 1 1 Nottingham Community Almshouse Charity Post Balance Sheet Events We consider that there have been no events since the financial year end which have had a material effect on the financial position of the group. 61

66 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2014 (continued) 29. Units/Bedspaces Group Association No. No. No. No. Social Housing Under Development at end of year: Housing Accommodation Shared Ownership Under Management at end of year: Housing Accommodation 5,891 5,906 5,839 5,854 Intermediate Rent Affordable Rent Supported Housing, Care Homes & Housing For Older People 1,409 1,432 1,346 1,369 Shared Ownership Freehold Interest Only ,621 8,524 8,438 8,341 Non Social Housing Under Management at end of year: Market Rented Other Non Social Housing Accommodation Managed by Agents The Association owns units included in note 29 above which are managed by other bodies, as follows: Group & Association Group & Association No. No. Housing Accommodation Supported Housing, Care Homes & Housing For Older People Number of Units of Accommodation Related Parties The Board has two tenant members who hold a tenancy agreement on normal terms and cannot use their position to their advantage. NCHA is the sole Corporate Trustee for Nottingham Community Almshouse Charity, Blyth Cottages Charity and the Nottingham Annuity Charity. As at 31 st March 2014 the following balances were owed: Amounts Owed to Trustee Amounts Due from Trustee '000 '000 Blyth Cottages Charity 1 - Nottingham Community Almshouses Charity

67

68 Nottingham Community Housing Association 12/14 Pelham Road Sherwood Rise Nottingham NG5 1AP T: or /nottinghamcommunityhousingassociation We will make every effort to provide copies of this report in another language or format, please call to make a request. An electronic version of this report can be found on our website, Nottingham Community Housing Association is registered as a charitable social landlord under the Co-operative and Community Benefit Societies Act Registered Number 20614R, A member of the National Housing Federation. Published September 2014.