NEW CHARTER HOMES LIMITED REPORT AND FINANCIAL STATEMENTS

Transcription

1 NEW CHARTER HOMES LIMITED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH 2013 Company Number: Charity Number:

2 CONTENTS Page Members, Senior Staff, Advisors, Bankers and Lead Funders 2 Report of the Board of Directors 4 Independent Auditor s Report 18 Income and Expenditure 20 Balance Sheet 22 Cash Flow Statement 23 Notes to the Financial Statements 24 Page 1

3 MEMBERS, SENIOR STAFF, ADVISORS, BANKERS AND LEAD FUNDERS Board of Directors Chair Vice-Chair Other Directors Group Chief Executive Geoff Loughlin Jim Middleton Jacqui Fendall Joan Ryan Alan Alcock Retired 17/09/12 Tom Daly Lez Barstow Helen Garnett-Wren Appointed 17/09/12 Geoff Loughlin Tracey Jones David Boyle Gordon Tow (co-opted) Retired 17/09/12 Jacqui Mcann (co-opted) Resigned 05/06/13 Tony Powell (co-opted) Andrew Leah (co-opted) Appointed 05/06/13 Ian Munro Executive Officers Executive Director of Corporate And Deputy Chief Executive Group Company Secretary Lead Executive Martin Frost Martin Frost Tony Powell Registered Office Cavendish 249 Cavendish Street Ashton-under-Lyne OL6 7AT Regulated by External Auditor Internal Auditor Principal Bankers Homes and Communities Agency (LH4266) Baker Tilly UK Audit LLP 3 Hardman Street Manchester M3 3HF KPMG St James Square Manchester M2 6DS Cooperative Bank Plc PO Box 101 Balloon Street Manchester M60 4EP Page 2

4 MEMBERS, SENIOR STAFF, ADVISORS, BANKERS AND LEAD FUNDERS (continued) Funding Facilities Nationwide Building Society Kings Park Road Moulton Park Northampton NN3 6NW Page 3

5 REPORT OF THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31 ST MARCH 2013 The Directors present the financial statements of the Company for the year ended 31 st March PRINCIPAL ACTIVITY The principal activity of the Company is providing rented housing and associated services within the district of Tameside. New Charter Homes Limited is a charitable company limited by guarantee. In 2008 New Charter Housing (North) Ltd changed its name to New Charter Homes Ltd, when the assets of New Charter Housing (South) Ltd were transferred to it. The company obtained charitable status with the Charity Commission on 14 th March GOVERNANCE The association has adopted the main principles and provisions of both the National Housing Federation s Excellence in Governance: Code for Members and the Code of Conduct A statement of compliance is contained within the Group s Governance Plan. THE BOARD The Board of New Charter Homes is responsible for exercising all the powers of the organisation, controlling strategic direction and setting its policy framework. Details of members can be found on page 2. The Board s governance arrangements fully comply with the National Housing Federation s revised Code of Governance and compliance is reviewed on an annual basis. Accordingly, the Board reserves a number of matters for its own consideration where those matters impact on strategic direction and effective oversight, including corporate governance, property development and finance and approval of the budget and business plan. The members of the Board have a range of skills and experience enabling them to make effective decisions and monitor organisational performance with the prevailing regulatory environment. To facilitate this the Board has met 6 times during the period, all meetings have attained the necessary quorum and decision making has remained in line with New Charter Homes Rules. To ensure the board maintain and enhance their individual and collective skills to best meet the evolving needs of the organisation, Board Members have taken part in an annual appraisal exercise, accompanied by a skills assessment and an overall Board effectiveness review during the period. This process has built on that undertaken during 2011/12 and has resulted in a targeted training and development programme for individuals and for the Board as a whole. FUTURE DEVELOPMENTS The Company and its predecessors (New Charter Housing (North) Ltd & New Charter Housing (South) Ltd) were established to receive the homes previously owned by Tameside MBC and transferred in March The Board is looking forward to ensure investment in existing homes is sustained and the wider responsibilities we feel we have for the wellbeing of our tenants and the wider community is enhanced. We also seek to maximise opportunities across Greater Manchester to provide high quality new accommodation. RISKS AND UNCERTAINITIES Risks that may prevent the Company achieving its objectives are considered and reviewed annually by the senior management team and board as part of the corporate planning process. The risks are recorded and assessed in terms of their impact and probability. The major risks are outlined below: Page 4

6 Report of the Board of Directors (continued) New Charter Homes Limited KEY RISK Current economic climate and impact on public sector funds and the housing market The continued restraints on government spending, the Welfare Reform, along with the wider economic downturn have been identified as a significant risk. Such changes are likely to impact on the Company s ability to deliver its planned development programme and may also affect core activities. Low demand for housing properties Failure to meet void targets in relation to turnaround times and number of empty homes which would lead to increased rent loss and higher tenancy turnover. The affordable rent policy could be impacted as a failure to deliver the commitment to the affordable rents programmes, would impact on the predicated income generated from re-let conversions which will result in failure to comply with HCA contract and funding. Delivery of development programme The successful delivery of the programme support from HCA, as well as the ability and willingness of development contractors to continue to build our schemes in a challenging economic environment. Availability of finance Availability of loan finance is essential to a thriving housing market. Potential impact on the Company s ability to deliver its development programme. ACTION BEING TAKEN Regular review of the business plan to ensure adequate resources to deliver core activities and development Welfare reform Steering Group Neighbourhood plans developed to ensure all partners are working towards joint interventions across neighbourhoods to reduce costs and improve sustainability Monitoring rental arrears and working closely with tenants to recover these on a timely basis. Regular monthly voids monitoring Regular review of impact of affordable rents policy Pre tenancy risk assessments and support plans HCA quarterly development updates Enhanced element of the Development Appraisal Checklist Comprehensive development procedures HCA quarterly monitoring HCA audit per scheme Appropriate contractual arrangements minimise risks Regular communication with lenders to maintain strong relationships Close monitoring of lenders covenants, reported to the board on a quarterly basis FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company uses various financial instruments, including loans and cash, and other items such as rental arrears and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Company s operations. The existence of these financial instruments exposes the Company to a number of financial risks. The main risks arising from these financial instruments are interest rate risk, liquidity risk and credit risk. Interest rate risk The Group finances its operations through bank borrowings. The Company s exposure to interest fluctuations on its borrowings is managed by the use of both fixed and variable rate facilities. Page 5

7 Report of the Board of Directors (continued) New Charter Homes Limited Liquidity risk The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and invest cash assets safely and profitability. Credit risk The Company s principal credit risk relates to tenant arrears. This risk is managed by providing support for tenants and closely monitoring the arrears and bad debts. The Welfare Reform and resulting changes to the benefits system has been identified as a key risk, and the SWOT team has carried out extensive work throughout the year to minimise the potential impact. VALUE FOR MONEY What VFM means to New Charter Homes VFM is a clear priority for New Charter Homes and underpins everything we do. New Charter Homes appreciates that in order to deliver our Corporate Plan we must maximise social value and financial capacity. By using tenant profiling and intelligence to ensure we are investing in the right things, delivering our services effectively and achieving VFM gains we can create the capacity to deliver our objectives. New Charter Homes appreciates that delivering VFM requires an organic approach whereby it is fully integrated in the delivery of all our activity and the mind set of staff. Embracing and embedding a culture of VFM was a theme of the Management Information session held earlier in the year. The Boards is committed to value for money becoming embedded in the culture and decision making processes of the organisation thereby meeting the expectations of the new regulatory standard. Serving our customers with the right product at the right quality is paramount to all of our operations. Resident involvement in shaping the business is central to New Charter Homes ethos. Current arrangements to ensure delivery of VFM A robust financial strategy is in place, with strong management accounting, budgetary control and effective financial management that ensures the resources match with the Corporate Plan. The Group gets involved in benchmarking Groups, including Housemark, together with regular peer / sector reviews undertaken by both internal auditors and external assessors. Over the 12 months, efficiency savings, both financial and numerous added value to our customers and wider community have been recognised. Transformational projects include: Creation of Green Charter bringing the Grounds Maintenance Service in House Business transformation creation of Connect a customer service hub, that has substantially improved our services to all customers Neighbourhood Plans a total over haul of our neighbourhood services, resulting in both financial and delivery improvements Receipt of HCA Grant towards our new development program Rent collection rate at over 100% - exceeding our target Substantial resources directed towards Welfare Reform, recognising that this is a significant risk to the organisation CESP & CERP Funding towards Cavendish Mill cavity wall instillation and energy efficiency measure including the bio-mass boiler Page 6

8 Report of the Board of Directors (continued) New Charter Homes Limited Charitable donation made to GAET from New Charter Building Company continuing our long term commitment to schools and young people. Efficient and effective procurement techniques, including being a member of the Yorkshire Purchasing Organisation, Procurement for Housing and Procure Plus as well as having in-house expertise. A detailed Asset Management Strategy that sets out how we will approach investment in order to maximise value and ensure that our assets remain sustainable. Resident involvement in the Business Planning process. Tenant Management Team that have undertaken a number of scrutiny reviews, including Grounds Maintenance, Responsive Repairs and window cleaning Increase customer satisfaction with our homes and neighbourhoods Performance is top quartile when measured against our peers Successful year in winning external business, especially fot Threshold 7 NC Building Company New Charter GREAT Opportunities project has helped 150 people to gain employment skills SWAT Team & Money Care Team Value for money and social impact The size and complexity of New Charter Homes has grown during the course of the year. Key achievements have included: Lowest number of empty homes since transfer translating into 400K savings on rent loss Other income generated during the course of the year amounting to 3m. Capital receipts from the sale of properties totalling 599K. The external Grounds Maintenance contract has been brought in-house. This will result in a higher quality service and over five years will result in over 1m of savings. The new affordable homes contract has been implemented and the conversion of properties to affordable rents has been implemented The company as a whole readily embraces its Corporate / Social responsibility, and during 2012/13 launched its Great Opportunities Programme. This initiative is designed to work with and help our residents back into work. It provides a platform toward work through volunteering, work placements and work clubs. During the last 12 months over 80 residents have been helped into employment. Our new build programme has seen a significant social impact: over 450 people have been housed and 25 modern apprentices created within the supply chain. Plans for the next year New Charter Home s strategic approach to VFM continues to be one of maximising value, delivering business effectiveness and VFM gains and of investing in homes, communities and customers to improve their well-being. However, we acknowledge how the current climate and because of key risks such as Welfare Reform have put the Business Plan under pressure and necessitate a further drive for VFM across the Group. To achieve this, we will: Update our VFM strategy Increase and improve customer involvement Page 7

9 Report of the Board of Directors (continued) New Charter Homes Limited More pro-actively use our Benchmarking data, to inform decisions Have a better understanding of the costs for our core and non-core activities. Better understand and evidence of our return on assets Demonstrate outcomes and social value. We have started a programme of training for staff and Board members, which we will also roll-out to our customers. The programme is VIP: Value - Value for Money Impact- Impact of what we do, including Social Return on Investment Performance Measuring what we do, KPI s This will further develop a value for money culture within the organisation. REVIEW OF THE YEAR During the last year the Board of New Charter Homes has continued to provide robust governance and clear strategic direction. The Chair of the Board has provided leadership and new members have refreshed the Board and increased the skills capacity. A programme of workshops and training courses has added further value to the Board Governance role. As a strong partner within the New Charter Housing Trust Group, New Charter Homes is committed to playing its part to achieve the Group s corporate objectives. Key Strategic Objectives Achievements 2012/13 Be delivering a new investment programme Developed extra care scheme at Beatrix emphasising sustainability and quality House Acquired new homes in Stockport Installed new eco-heating systems reducing fuel bills Continue to add to stock portfolio Formulate strategies for poorest quality neighbourhoods Retain high score for tenant satisfaction Ensure our partnership working with other agencies Significant funding secured from HCA 192 units built or acquired Created 32 neighbourhood plans Created Great Opportunities work programme Annual results from STAR (Survey of Tenants and Residents) one of highest for landlord of our size Best ever ratings in 2011 and % Threshold and Tameside Home Services with our vision joined to provide support for customers Working in new area, Knowsley, to help tackle homelessness Specialist Welfare Reform Advice Team (SWAT) set up Page 8

10 Report of the Board of Directors (continued) Investment in homes New Charter Homes Limited 2012/13 saw the continuation of a programme of significant investment in our homes. The investment programme saw 97.5% of the overall programme delivered including 600 bathrooms and 400 kitchens. Customer satisfaction with the investment programme stands at 94%. We opened our first extra-care sheltered housing scheme at Beatrix House in Dukinfield incorporating a community café, hairdressers and other state of the art facilities, providing support to over 30 older people. We also acquired a Sheltered Housing Scheme, Pembroke Court in Stockport, adding to our portfolio of high quality homes. We have installed a Bio-Mass district heating system at Cavendish Mill leading to lower fuel bills for customers. New Homes During the year a total of 105 new properties were added to our stock portfolio, while in terms of acquisitions we completed the purchase of 87 units total 192 units. Development grant received in this year totalled 975K. In total we have invested 19million over the period, equating to 75,396 every working day. We have provided 14m of work to the New Charter Building Company. Great Neighbourhoods This year has seen some great achievements: New Charter Homes has been successful in obtaining the HQN (Housing Quality Network) Accreditation for its Housing Neighbourhood and Estate Service. Neighbourhood Plans for all our estates have been developed and launched. These will help to prioritise actions and see further improvements on our Neighbourhoods. New Charter is a lead organisation for implementing Restorative Justice and Neighbourhood Resolution Panels. This new and innovative approach to resolving conflict has been nationally recognised. A Neighbourhood restructure has been implemented to complement the production of Neighbourhood Plans. The plans provide a focus for action over the next year. All the external contracts we operate (annual value of 2.1m) in Tameside and Knowsley have met their contract performance measures, and several existing contracts have been extended through negotiation and demonstration of high performance. A new Payment by Results contract delivering services to Complex Families has been obtained (value of 1.3m). Page 9

11 Report of the Board of Directors (continued) Delivering a fantastic customer experience New Charter Homes Limited The table below illustrates our commitment to providing a fantastic customer experience; Performance Indicator Target Outturn performance Average time taken to complete any 5 days 5.34 days top quartile performance repair Number of repairs right first time 99% 99.58% - top quartile Repairs appointments kept 100% 100% - top quartile Emergency repairs responded to in 99% 100% - top quartile 4 hour target All repairs in target 98% 99.77%- top quartile Gas servicing certificates in target 100% 100% - top quartile Customer satisfaction with repairs 95% 92.8% service Satisfaction with newly let properties 95% 94.74% Satisfaction with investment works 96% 94% Number of empty homes 1.4% of stock 0.87% of stock Overall customer satisfaction - 94% The results from the STAR (Survey of tenants and residents) survey were particularly pleasing: Overall satisfaction with services remained at 94% Satisfaction with how we respond to ASB is 90% Partnership working As a result of partnership working with New Charter Building Company, the turnaround times of our empty homes has been reduced and at year end we had our lowest ever number of empty properties. Partnership working with the Royal Exchange Theatre has been established resulting in a programme of theatre and arts activities over the next two years. Our partnership between the New Charter Academy and the Manchester United Foundation continues to offer tremendous sporting opportunities to our Academy students. We have continued to consolidate our partnership working with Threshold Housing Project Ltd, who joined the Group in April 2012, and Tameside Homes Services whose net assets were acquired by the Group in December 2012, providing a continuum of care and support for homeless, vulnerable and older people in Tameside and Oldham. Developing our people New Charter Homes is proud to have played a significant role in helping to achieve the Group s 10 th position in the Sunday Times Best Companies list. We have been reaccredited with Diversity in Business Award reaching the highest excellence category. A neighbourhood restructure was completed to align our people to the newly developed Neighbourhood Plans and staff have been supported into their new roles. Awards and Achievements HQN accreditation for estate services one of only a handful in the country Customer Service excellence re-accreditation with partnership working and community regeneration being highlighted as areas of strength Page 10

12 Report of the Board of Directors (continued) EMPLOYMENT PRACTICES New Charter Homes Limited As a member of New Charter Housing Trust Group we adhere to Group wide employment practices. The Group Diversity and Inclusion Policy has ensured that every reasonable effort is made to ensure we are compliant with the Equality Act 2010 and that there is no harassment, victimisation or discrimination in respect of the protected characteristics contained within the Act including Age, Disability, Gender Re-assignment, Race, Religion or Belief, Sex, Sexual Orientation, Marriage and Civil Partnership and Pregnancy and Maternity, in the way we treat our employees, contractors, job applicants and visitors. We remain committed to creating a working environment that offers equality of treatment and opportunity for all employees and to provide them with the opportunity to develop their skills and abilities. This applies to all aspects of the Group s working practices and includes the recruitment and selection of employees, terms and conditions of employment, training, salary, work allocation, promotion and disciplinary procedures. All employees are required to adhere to the Diversity and Inclusion policy and it is a mandatory requirement that they undergo training and development activities to ensure that they carry out their duties and responsibilities in terms of promoting, developing, implementing and reviewing the policy in the course of their work. As evidence of commitment to diversity and inclusion, the Group has been awarded the Diversity in Business Accreditation at an excellent level. To encourage all sections of the community to seek employment, facilities necessary to offer a welcoming environment and flexible working patterns have been offered, provided that they do not conflict with service delivery. All vacancies are advertised widely and appropriately. Employment practices are reviewed as appropriate to ensure compliance with current legislation. The Group regularly informs employees of issues relevant to their employment through meetings with Trade Union representatives, the Employee Consultation Forum and through direct means of communication. During the year's trading, the Group has continued to apply its policy on Trade Union recognition and has provided time off for staff to attend Trade Union facilities. FINANCIAL REVIEW The financial position and results for the year are set out on pages 20 to 42 of these statements. Results for the year The surplus for New Charter Homes for the year, before movements to reserves, was 3.228m which was within the approved plan. This compares with a surplus of 2.922m in the previous year. The main variance compared to the previous year was an increase in turnover of 3.9m An increase of operating costs of 3.060m and a decrease in RTB sales yielding a surplus of 0.38m (2012 Surplus: 0.4m) more than compensated for a decrease in interest costs of 0.55m The main variances against the projections for the year were: Income received in relation to Right to Buy sales, resulting in receipts not budgeted for. A reduction in New Development expenditure due to a number of schemes not progressing as expected. Surplus/reserves Total reserves as at 31st March 2013 were m ( m). These reserves represent accounting surpluses/deficits from current and previous years and movements on the valuation of our housing properties. Summary Balance Sheet New Charter Homes Balance Sheet as at 31st March 2013 is summarised on page 22 of these financial statements. Page 11

13 Report of the Board of Directors (continued) New Charter Homes Limited The key factor affecting the Balance Sheet is the inclusion of our housing stock at valuation (rather than at cost less depreciation). In our view, the valuation approach provides a more relevant and meaningful representation of our financial position. The valuation was carried out by Savills, an independent and professionally qualified surveying firm as at 31 st March The financial statements demonstrate a net current asset position of 8.171m as at 31 st March 2013 ( m). Cash flows New Charter Homes cash flows are summarised on page 23. The principal sources of cash inflows in the year were: rental and other income of m( m), the sale of housing properties under RTB and land sales of 599k ( k) and total drawdown on the Group Loan Facility of 13m ( m ( 6.2m less 2.45m - arrangement fee ). The principal cash outflows were: operating costs of m ( m), investment in assets, particularly housing stock, of m ( m) and servicing of debt of m ( m). Capital structure and treasury policy The Company s financial strategy is underpinned by a business plan and has been used to secure long term funding, over a thirty year period, from two lenders, with the Nationwide Building Society being lead lender and facility agent. The funding profile, amounting in total to a facility for the Company of 350m, reflects the fact that in the initial years of the Company, accrued deficits were recorded until the ten year investment strategy was fulfilled in March An updated stock condition survey has been completed and the results fed into future projections. Surpluses are projected which enable the repayment of all outstanding loans. Long-term borrowings at the year-end totalled m ( m). Close monitoring of the business is exercised by Funders, by the application of a series of loan covenant requirements on a quarterly basis. These relate to the basic drivers of the business and include tests on income, expenditure, interest, the security valuation of the Company s assets, and in summary reflect the fact that cashflow is the predominant issue. The Directors are pleased to report that during the period all tests applied by the Funders on a Group wide basis were fully met. New Charter continues to maintain a risk-averse approach towards the management of its loan portfolio and at the yearend had 95.03% of its debt on a fixed rate basis, leaving it relatively well protected against potential adverse movements in interest rates. The Finance Committee agreed a set of treasury policies at the time of stock transfer. These policies have been reviewed by the Committee during the course of the financial year. Going Concern The Company s business activities, its current financial position and factors likely to affect its future development are set out within the Report of the Board. The Company has in plane a long-term debt facility, which provides adequate resources to finance the investment and development programmes, along with the Company s day to day operations. The Company also has a long-term business plan which shows that it is able to service these debt facilities whilst continuing to comply with lenders covenants. Page 12

14 Report of the Board of Directors (continued) New Charter Homes Limited On this basis the board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, being a period of twelve months after the date on which the financial statements are signed off. As a result it continues to adopt the going concern basis in the financial statements. STATEMENT OF COMPLIANCE In preparing this Board report, the board has followed the principles set out in the Statement of Recommended Practice: Accounting by registered social housing providers (SORP) update AUDITOR A resolution to reappoint Baker Tilly UK Audit LLP as the Company s external auditor will be proposed at the AGM. Baker Tilly UK Audit LLP has indicated its willingness to continue in office. Statement of directors responsibilities in respect of the Directors Report and the financial statements The directors are responsible for preparing the Directors Report and the financial statements in accordance with applicable law and regulations. Company law, Charitable law and Social Housing regulation requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the surplus or deficit of the company for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether applicable UK Accounting Standards and the Statement of Recommended Practice Accounting for Registered Social Landlords 2010 have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the association will continue in business. The directors are responsible for keeping proper accounting records that are sufficient to show and explain the company s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that its financial statements comply with the Companies Act 2006, the Housing & Regeneration Act 2008 and the Accounting Direction for Registered Providers of Social Housing They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the association s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Public Benefit The Board confirm that they have referred to the guidance contained in the Charity Commission s general guidance on public benefit when reviewing the charity s aims and in planning future activities. Page 13

15 Report of the Board of Directors (continued) Disclosure of information to auditor New Charter Homes Limited The directors who held office at the date of approval of this Directors Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company s auditors are unaware; and each director has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the Company s auditors are aware of that information. Internal Controls The Homes and Communities Agency, has clear expectations with regard to internal controls and seeks to ensure that the New Charter Housing Trust Board s overall responsibilities with regard to matters relating to internal control are properly discharged. To assist in this duty, the Trust Board has appointed a Risk & Assurance Committee to provide a Group wide view of risk and assurance management. The Committee on behalf of all the Companies within the Group carries out amongst other things the following: An understanding of internal control Management of fraud Effectiveness of internal control processes and systems Understanding of risk and minimization of exposure without compromising broader objectives A regular review of risks facing the Group A summary of main policies designed to manage risk A summary of the key sources of evidence Confirmation that fraud register has been reviewed Confirmation action taken in respect of any significant matters identified and any supervisory action required by the regulatory bodies. GROUP CHIEF EXECUTIVE S STATEMENT OF INTERNAL CONTROL Under the Governance & Viability Standard of the HCA Regulatory Framework, associations are required to have in place an effective risk management and internal controls assurance framework. Whilst there is no requirement to include an Internal Controls Assurance Statement in the Directors Report and Financial Statements it is considered good practise to do so and helps to demonstrate the Group s compliance with the Regulatory Framework. Each of the Group s Boards accept their responsibilities for establishing and maintaining effective systems of internal control but acknowledge that no system of internal control can possibly seek to eliminate all risks. The framework adopted by the Group is designed to manage risk as much as possible, taking into consideration evolving internal and external risks. This is accomplished by ensuring a thorough understanding of the business objectives of the Group as set out in the Corporate and Business Plans. The internal control framework ensures compliance with the Regulatory Framework set down by the Homes and Communities Agency (HCA) who are the Group s Regulator and the Group s adopted Code of Governance (the National Housing Federation s Excellence in Governance: Code for Members). Each of the Boards and the Group Management Team has been actively engaged in identifying, assessing and prioritising risk during 2012/13. The Group s Risk and Assurance Committee has overall responsibility for ensuring effective control mechanisms to manage those risks are implemented and evaluated. The most significant change in risk during the course of the year has been the impact of the Government s welfare reforms. The Group has and continues to undertake a large amount of work to mitigate the risks as the reforms come into force during There has been no evidence of substantial fraudulent or corrupt activity during the year. Page 14

16 Report of the Board of Directors (continued) INTERNAL CONTROL FRAMEWORK New Charter Homes Limited Business Planning/Objectives There is a robust business planning process in place which allows for input from Board Members, executives, employees and customers to set clear business aims and objectives against which progress can be demonstrated and risks can be assessed. Risk Management Framework The Group has in place a Risk Management Strategy. Supporting this Strategy are comprehensive Risk Registers which detail the key risks, the controls in place to mitigate the risks, the risk ratings with and without controls and the direction of travel for each risk. This is monitored in detail by the Risk and Assurance Committee and reported to each Board. Risk Management controls are monitored by the Group Management Team (GMT), internal audit where a specific audit is programmed, and the Risk and Assurance Committee. All board reports contain a specific section on Risk Evaluation. Internal Audit The Group contracts out its internal audit service. For the period to 30 th September 2012 the appointed auditors were Beever & Struthers. Following a tender process KPMG were appointed as the Group s Internal Auditors for the period 1 st October 2012 to 30 th September Risk and Assurance Committee The Group has an Audit Committee, membership of which is drawn from across the Group, which meets on a quarterly basis. Towards the end of the year, as part of the Committee s self-evaluation of its role, it was agreed that the Committee would be re-named the Risk & Assurance Committee. The Committee has clear Terms of Reference and meet annually with internal and external auditors without officers being present. The Committee agrees an annual internal audit programme which is determined against known and anticipated risks for the year. All findings from the audits are presented to the Committee for scrutiny, the Committee is then responsible for ensuring recommendations are implemented and followed up as appropriate. Committee Members undertake regular training and development in relation to their risk management responsibilities. Sessions were held in July 2012 and December Finance Committee The Group has a Finance Committee, membership of which is drawn from across the Group, which meets on a quarterly basis. The Committee has clear Terms of Reference and is primarily responsible for monitoring and scrutinising the Group s financial planning and controls. Policies & Procedures The Group has in place a comprehensive suite of policies and procedures covering all areas of the business. The Financial Regulations (including the scheme of delegations) are reviewed annually. The Fraud & Whistleblowing and Gifts & Hospitality policies were also reviewed during 2012/13. Page 15

17 Report of the Board of Directors (continued) New Charter Homes Limited Performance Management Financial Management Information and Key Performance Indicators are in place and are scrutinised in detail by GMT on a monthly basis and the Boards on a bi-monthly/quarterly basis. The Group also has in place an effective employee performance review system which helps to embed risk awareness and a culture of continuous improvement. Board Members also participate in an annual appraisal process consisting of individual appraisals and a full Board Effectiveness Review. SOURCES OF ASSURANCE The Group draws upon various sources of assurance to evaluate the effectiveness of its internal controls. HCA The HCA concluded that The Group meets the requirements on viability set out in the Governance and Financial Viability standard and has the capacity to mitigate its exposures effectively. Funders The Business Plans for 2012/13 received approval from the Group s funders. A robust financial planning and control process ensured that all covenants set by the Group s funders in relation to the loan facilities were achieved during 2012/13. Internal Audit Beever & Struthers undertook 7 audits during 2012/13 (one of which was an advisory report) and raised 28 recommendations. 25 of these recommendations have been implemented, 3 have been partially implemented and/or are ongoing in line with agreed action plans. KPMG undertook 7 audits during 2012/13 and raised a total of 37 recommendations. To date 20 of these recommendations have been implemented. An overall opinion of satisfactory assurance was achieved. External Audit The Group s External Auditors (Baker Tilly) presented their Audit Plan for the financial Year ending 31 st March 2013; this set out the areas of risks on which they would focus their audit. Fraud Register Any entries in the Fraud register are reported to the Risk and Assurance Committee. There were 3 entries during 2012/13; all entries were thefts of low value. Insurance The Group has appropriate insurance in place to mitigate risks within the acceptable tolerance agreed by the Boards. One high level claim was made during 2012/13 this is still under investigation. Awards & Accreditations Detailed below are some of the external accreditations the Group has received during the year: Customer Service Excellence Standard Best Companies 3 Star Organisation Sunday Times Best Not for Profit Companies to Work for (No 10) Investors in People Gold Award Investors in People Health & Wellbeing Award ROSPA Gold Award Housing Quality Network Estate Management Accreditation Diversity in Business Accreditation Investors in Excellence Standard TPAS Quality Accredited Page 16

18 Report of the Board of Directors (continued) New Charter Homes Limited It is my conclusion that the Group s internal control framework provides adequate assurance that risk is understood, effectively managed and embedded within the culture of the organisation and that during 2012/13 there were no areas of exceptional or undue concern. The report of the Board of Directors was approved on 14 th August 2013 and signed by order of the board by: I H MUNRO 14 th August 2013 GROUP CHIEF EXECUTIVE NEW CHARTER HOUSING TRUST Ltd Mr M Frost Company Secretary New Charter Homes Limited Cavendish 249 Cavendish Street Ashton-under-Lyne. OL6 7AT Page 17

19 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF NEW CHARTER HOMES LIMITED Page 18

20 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF NEW CHARTER HOMES LIMITED (continued) Page 19

21 Income and Expenditure Account For the year ending 31 March Turnover 2 62,384 58,445 Operating costs 2 (43,610) (40,550) Operating Surplus 2 18,774 17,895 Sales of fixed assets Interest receivable and other income Interest payable and similar charges 6 (16,069) (15,519) Surplus on ordinary activities before taxation 3,228 2,922 Taxation on ordinary activities Surplus for the financial year 3,228 2,922 All of the above results derive from continuing operations. The notes on pages 24 to 42 form an integral part of the financial statements. Page 20

22 Statement of Total Recognised Surpluses and Deficits for Year Ended 31 March Surplus for the financial year 3,228 2,922 Unrealised Surplus on the revaluation of housing properties 23,961 34,930 Total Recognised Surpluses and deficits relating to the year 27,189 37,852 Statement of Historical Cost Surpluses and Deficits for the Year Ended 31 March Surplus on ordinary activities before taxation 3, Difference between the historical cost depreciation charges and the actual depreciation charge for the year calculated on the revalued amount 26 (5) Total Recognised Surpluses and deficits relating to the year 3, Reconciliation of Movements in Funds for the Year Ended 31 March Opening total funds as at 1st April 152, ,116 Total recognised surpluses and deficits for the year 27,189 37,852 Closing total funds at 31st March 180, ,968 Page 21

23 Balance Sheet (Co. No ) As at 31 March Fixed Assets Tangible fixed assets housing properties , ,299 Other tangible assets 12 10,449 9, , ,828 Current Assets Debtors 13 13,330 9,933 Cash at Bank ,330 9,933 Creditors Amounts falling due within one year 14 (5,159) (4,389) Net Current Assets 8,171 5,544 Total Assets Less Current Liabilities 479, ,372 Creditors Amounts falling due after more than one year , ,404 Capital and Reserves Housing Properties Revaluation Reserve , ,683 Revenue Reserve 18 (6,088) (12,715) 180, ,968 The notes on pages 24 to 42 form an integral part of the financial statements. 479, ,372 The financial statements were approved and authorised for issue by the board on the 14th August 2013 and signed on its behalf by: Geoff Loughlin (Chair) M Frost (Company Secretary) Page 22

24 Cashflow Statement For the year ending 31 March Net cashflow from operating activities 19a 24,969 24,544 Returns on investments and servicing of finance Interest received Interest paid (16,069) (15,519) (15,928) (15,377) Taxation paid - - Capital expenditure Acquisition and construction of housing properties (23,615) (17,271) Social Housing grant received 975 3,668 Proceeds from sales of fixed assets (22,041) (12,917) Net cash outflow before use of liquid resources and financing (13,000) (3,750) Financing Loans advances received 13,000 6,200 Loan principal repayments - (2,450) 13,000 3,750 Increase/(decrease) cash in the period - - Management of liquid resources Cash balances are held in the parent company who manages the funds on behalf of New Charter Homes Limited. The notes on pages 24 to 42 form an integral part of the financial statements. Page 23

25 Notes to the financial statements For the Year Ended 31 March Accounting Policies The financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom and the Statement of Recommended Practice (SORP) Accounting by Registered Social Landlords updated in A summary of the more important accounting policies which have been applied consistently is set out below. Basis of Accounting The financial statements have been prepared under the historical cost convention as amended for the valuation of housing properties and comply with the Accounting Direction for Registered Providers of Social Housing 2012 and applicable Accounting Standards. Going Concern The Association's activities together with the factors likely to affect it's future development and position are set out in the report of the Board of Directors. On the basis of their assessment of the Association's financial position, the Association's Directors have a reasonable expectation that the Association will be able to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. The company has prepared a 30 year business plan in accordance with these expectations. Finance Costs Where it is prudent to do so, finance costs are expensed through the Income and Expenditure Account in the year incurred. All identified finance costs currently go through the I&E. Turnover The majority of turnover is generated from Rental and Service Charge income which is exempt from VAT and charged evenly to the Income and Expenditure Account over a 50 week period. Income is also generated from a Supporting People Contract with Tameside MBC, where income is received monthly and a home contents insurance scheme, where tenants are charged weekly. Capitalisation The policy is to revalue housing properties on an annual basis. All properties are valued on the basis of an Existing Use Value Social Housing) with the assumption that target rent is the maximum rent. Properties under construction are held at cost. Major repairs to properties of a capital nature, which will result in an increase in the net rental income over the life of the property, are capitalised under the component accounting principles described below. Depreciation of Housing Properties Housing Properties are depreciated over their expected useful economic lives on a straight line basis. The depreciation is calculated by deducting the land value from the revalued sum. As detailed above in the Accounting Policies section, the Trust has adopted the principle of Component Accounting. This accounts separately for each major component of a property asset with substantially different useful economic lives, and depreciates them over their useful economic life. Depreciation rates applied to major components Structure of housing properties 100 Years (1.00% per annum) Roofs 60 Years (1.67% per annum) Bathrooms/Rewires/Lifts 30 Years (3.33% per annum) Windows/Doors/Central Heating Systems 25 Years (4.00% per annum) Kitchens 20 Years (5.00% per annum) Boilers 13 Years (7.69% per annum) Page 24

26 Notes to the financial statements For the Year Ended 31 March 2013 Impairment In accordance with Financial Reporting Standard 11 (FRS11) Impairment of Fixed Assets and Goodwill, for assets with a remaining economic life greater than 50 years, an impairment review is undertaken. For those assets with a lower economic life, an impairment review is undertaken where there is an indication that the assets may be impaired. If assets are found to be impaired, the amount of impairment is disclosed in the note 3 analysis to the Income and Expenditure Account. Social Housing Grant and other capital grants Where developments have been financed wholly or partly by Social Housing Grant (SHG) or any other form of capital grant subsidy, the cost of those developments is reduced by the grants received (before revaluations). For component accounting purposes the grant is deducted from the apportioned cost of 'structure' or where this is smaller than the grant, the next largest identified component. When SHG in respect of housing properties in the course of construction exceeds the total cost to date of those housing properties, the excess is shown as a current liability. Where SHG is retained following the disposal of a property it is shown under the disposal proceeds fund and recycled in Creditors: amounts falling due after more than one year. These funds will be used for the provision of new social housing for rent and sale. Other Fixed Assets Tangible fixed assets are stated at cost less accumulated depreciation. Depreciation is charged on a straight line basis over the expected useful economic lives of the assets at the following rates: Freehold premises See note below Motor vehicles 3 Years (33.3% per annum) Furniture, Fixture & Fittings 5 years (20.0% per annum) Computers and Office Equipment 5 years (20.0% per annum) The principle of Component Accounting has also been applied to freehold premises in this category. The identified major components have been re-lifed and are being depreciated at the rates in the Depreciation of Housing Properties note above. Where an asset has been identified to be disposed of, it will be treated as a current asset until the point of sale. Any profit or loss on disposal will be recognised in the income and expenditure account. Any loss which may arise on the replacement of components as part of the initial stock transfer, or loss on demolition of properties due to redevelopment, will be written off to the Income and Expenditure Account as soon as the commitment is made. Pension Costs The Company participates in a pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held separately from those of the Company. Pension scheme assets are measured using market values. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Details of the scheme are set out in note 21. Contributions from the Group and participating employees are paid into an independently administered fund. These payments are made in accordance with triennial calculations by professionally qualified independent actuaries. In the intervening years, the actuary reviews the continuing appropriateness of the rates of the contributions. The pension scheme managers are unable to identify the underlying assets and liabilities belonging to the employees of individual group companies. Accordingly the full defined benefit or liability of the Group is recognised in the accounts of New Charter Housing Trust Limited. New Charter Homes Limited is recharged its proportion of the employer contribution payable to the scheme for the accounting period. The pension scheme surplus (to the extent that it is recoverable) or deficit is recognised in full. The movement in the scheme surplus / deficit is split between operating charges, finance items and, in the statement of total recognised gains and losses, actuarial gains and losses. Page 25