Gloucester City Homes Limited Community Benefit Society. Financial Statements. For the year ended 31st March FCA Registration number: 7041

Transcription

1 Community Benefit Society Financial Statements For the year ended 31st March 2016 FCA Registration number: 7041

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3 FINANCIAL STATEMENTS for the period ended 31 March 2016 Co-Operative and Community Benefit Society Registration No. 7041

4 CONTENTS Page Officers and professional advisers 2 Directors report 3 Strategic report 7 Directors responsibilities in the preparation of financial statements 34 Independent Auditor s Report 35 Statement of comprehensive income 36 Statement of changes in equity 37 Statement of financial position 38 Statement of cash flows 39 Significant accounting policies 40 Notes to the financial statements 45 Page 1

5 OFFICERS AND PROFESSIONAL ADVISERS Directors Date of appointment Timothy Dare 03/11/2005 Christopher Marshall 07/03/2007 Janet Lugg (resigned 07/05/2016) 21/05/2007 Peter Baker 30/07/2008 Richard Ingham (resigned 14/09/2015) 07/10/2009 Peter Osborne 07/10/2009 David Porter (resigned 14/09/2015) 02/11/2009 John Howard 06/10/2010 Jim Beeley 23/05/2011 Said Hansdot 23/05/2011 Tarren Randle (resigned 21/05/2015) 23/05/2011 Paul Toleman 23/05/2011 Margaret Day 03/10/2012 Michael McAlinden 02/10/2013 Emma Davis 22/01/2014 Kathy Williams (resigned 07/05/2016) 21/05/2015 Executive Management Team Chief Executive Director of Resources Director of Housing and Organisational Development Director of Property Services Ashley Green Rob Wharton Anita Pope Michael Hill Company Secretary Rob Wharton Registered Office Railway House Bruton Way Gloucester GL1 1DG Auditor RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP) Chartered Accountants St Philips Point Temple Row Birmingham B2 5AF GL1 1DG Solicitors Anthony Collins Solicitors St Philip s Gate 5 Waterloo Street Birmingham B2 5PG Bankers Lloyds Bank plc 19 Eastgate Street Gloucester GL1 1NU The Co-Operative Bank plc 23A St Aldgate Street Gloucester GL1 1RU Actuary Hymans Robertson LLP 20 Waterloo Street Glasgow G2 6DB Page 2

6 DIRECTORS REPORT The directors submit their report and financial statements of Gloucester City Homes ( GCH, the company ) for the period ended 31 March The financial statements for the period ended 31 March 2016 have been prepared under International Financial Reporting Standards. Gloucester City Homes is a charitable registered provider of social housing, regulated by the Homes and Communities Agency (HCA). In January 2016, GCH underwent an In Depth Assessment (IDA) by the Regulator and in February 2016, was awarded a G1, V2 rating following this process. PRINCIPAL ACTIVITY owns and manages over 4,400 housing properties. The core business is the management, maintenance and development of high quality affordable homes for people in housing need, together with appropriate support services. BOARD MEMBERS AND EXECUTIVE OFFICERS Board Members and Executive Officers are set out on page 2. Board Members are non-executive and are Directors for legal purposes. They are drawn from a wide background, bringing together professional, commercial and local experience. The Executive Directors act as executives within the authority delegated by the Board, and the remuneration of the Executive Directors is reviewed by the Remuneration and Governance Committee, which makes recommendations to be considered and determined by the Board. During and at the end of the 2015/16 financial year, none of the company s directors were interested in any material transaction in relation to the company s business and none are materially interested in any presently proposed material transactions. Insurance policies indemnify Board Members and Officers against liability when acting for the company. STAKEHOLDERS The strength of the company lies in the quality and commitment of its employees. The company s ability to meet its objectives and commitments to residents in an efficient and effective manner depends on the contribution of employees throughout the year. Consultation and communication with all employees takes place through regular briefings and team meetings, and the company is committed to equal opportunities for all its employees. The company actively encourages customer involvement in a number of ways. These include having residents on the Board, a Tenants Scrutiny Panel, mystery shoppers and customer satisfaction surveys. Customers views have helped to shape and influence a range of policies and have played an essential part in developing local offers and service standards. The company is registered and regulated by the HCA and works within the regulatory framework for social housing. The regulator sets out their view as to whether the organisation is financially sound and properly governed and managed, and in the first Regulatory Judgement for the company, they confirmed a financial viability and governance rating of V2/G1. GOING CONCERN On 17 March 2015, 10 year debt facilities totalling 70m were agreed with the Royal Bank of Scotland. This facility provides adequate resources to finance committed investment and development programmes, along with the company s day to day operations. This agreement came with an option to take an additional 10m facility within the first eighteen months. The long term Business Plan shows that the company is able to service these debt facilities whilst continuing to comply with the lender s covenants. ACCOUNTING POLICIES The accounting policies of the company are set out on pages 40 to 44 of this report. Page 3

7 DIRECTORS REPORT (continued) CORPORATE GOVERNANCE Excellence in governance The Board subscribes to the National Housing Federation Code of Governance and complies with all of the principal recommendations therein save two. As part of the contractual offer document agreed with Gloucester City Council for the transfer of stock to the company, Board Membership should comprise 15 Board Members for the first five years post transfer. This contradicts the NHF Code of Governance suggested Board size as a maximum of 12. Plans are in place and are at an advanced stage to reduce Board Membership to 12 prior to the 5 years stipulated in the transfer agreement. As part of the transition towards this position, a number of Board Member positions are being held vacant, thus meaning only 11 Board Members currently sit on the Board. One Board Member (Timothy Dare) has currently served 10 years on the Board, which is in excess of the 9 years maximum tenure outlined in the Code of Governance. For reasons of continuity, special dispensation was given by the HCA for this Board Member to serve an additional 3 years, up to a maximum tenure of 12 years. The company has full compliance with the HCA Governance and Financial Viability Standard, recognising its responsibility for being responsible holders and stewards of social housing assets. The financial plans of the Company are stress tested against a range of short term and long term adverse scenarios. Where possible, control actions are put in place to guard against the impact of such scenarios. A full register of the assets and liabilities of the Company is kept in a central location within the Company. The Board The Board is responsible for the overall strategic direction and governance of the company, including the determination of key policies and the monitoring of compliance with both policies and performance targets. The Board met monthly during the period under review in order to: Determine policies, strategies and financial plans in order to gain Registered Provider status with the HCA. Establish and monitor the strategic direction of the company Set targets for the company and monitor performance against those targets. Consider the Executive Directors reports on a range of issues in pursuit of the objectives of the company. The Board also undertook a significant number of training days and sessions during the course of the year on Risk Management, Business Planning, Treasury Management and Governance. The company has recently updated its governance framework in line with the 2015 update of the NHF Code of Governance. A gap analysis against the new code was considered at the February meeting of the Audit and Risk Committee, which is responsible for monitoring and reviewing governance issues, and on which it reports to the Board. Executive Directors are not members of the Board and, except for the purposes of salary disclosure, are not regarded as Directors for legal purposes and do not hold an interest in the company. The day to day matters of the company are delegated to the Chief Executive and Executive Directors, acting within the authority delegated by the Board. Committee structure The Board is supported by a number of Committees appointed by the Board from its membership. All Board members are entitled to attend all Committee meetings. The Board sets the terms of reference for each Committee and approves the membership thereof. Each Committee elects its own Chair and Vice- Chair. The Board receives all minutes of Sub Committees, and the relevant Chair gives a verbal update to every Board meeting on the discussions held at the previous sub-committee meeting. Page 4

8 DIRECTORS REPORT (continued) CORPORATE GOVERNANCE (Continued) Audit and Risk Committee The Committee met 5 times during the period under review and will continue to meet at least four times per year in the future. Its role is to monitor the risk management framework, review the effectiveness of internal control systems; and to appoint, and consider reports from, the external and internal auditors. The Committee also reviews the external audit management letter and meets the external auditor before the financial statements are presented to the Board for approval. Resources Committee The Resources Committee meets on a monthly basis to consider the financial position of the company through the monthly Financial Monitoring Report. It also has the remit to consider and approve customer facing and internal policies. Going forward, the Committee will continue to meet monthly to consider the detailed Financial Monitoring Report, except for the quarter month when this report will go to the full Board. Commercial and Development Committee The Commercial and Development Committee replaced the previous Business Development Sub-Group, and meets on a quarterly basis to consider and recommend to the Board any separate business and development opportunities that may arise. The Sub-Group met twice during Partnering Board Partnering Board met regularly during the year to monitor the performance of contractors. This Board has now been removed and its remit has passed to the Tenant Scrutiny Panel under the guise of co-regulation. EQUALITY AND DIVERSITY The company continually seeks to promote equality of opportunity as an employer and in the delivery of its services through its Equality and Diversity Strategy. LEGAL PROCEEDINGS The company is not aware that there are any pending legal proceedings that would have a material adverse effect on the financial position or operations of the company. STATEMENT ON INTERNAL CONTROLS The Board accepts that is has overall responsibility for establishing and maintaining the whole system of internal control and for reviewing its effectiveness. The Board recognises that no system of internal control can provide absolute assurance or eliminate all risk. The system of internal control developed is designed to manage risk and to provide reasonable assurance that key business objectives and expected outcomes will be achieved. This framework is expected to provide reasonable assurance about the preparation and reliability of financial and operational information and the safeguarding of the company s assets and interests. The Board operated the Risk Management Strategy during the year and believes that the internal control environment established is appropriate to the statutory, regulatory and business needs of the organisation. In meeting its responsibilities, the Board has adopted a risk based approach to internal controls. During the year the risk management and internal controls have been further developed and embedded within the normal management and governance processes of the organisation. This approach includes the regular evaluation of the nature and extent of risks to which the company is exposed. Page 5

9 DIRECTORS REPORT (continued) STATEMENT ON INTERNAL CONTROLS (continued) The main elements of the internal controls framework are: Monthly Board meetings (except August) with matters formally reserved for decision by the Board outlined in the Rules of the organisation. Reserved matters include a defined range of issues relating to strategic, operational, financial (including treasury management strategy and policy). An Audit and Risk Committee with defined terms of reference meeting on a quarterly basis, specifically to consider matters of financial control and risk management. Standing Orders and Financial Regulations incorporating a Scheme of Delegation. Clearly defined organisational structures and delegated authorities. Gifts and Hospitality policy. Anti-Fraud and Corruption and Whistle Blowing Policies. Accounting Policies. Robust business strategies with annually approved 30 year Business Plan and Operating Budget. Regular financial and key performance indicator reporting, with remedial action being taken where necessary. Declarations by Board Members and staff as part of the controls framework to ensure there are no conflicts of interest. Publicly available Register of Interests of Board Members. Formal recruitment, retention, training and development policies for all staff and Board Members. Management responsibility is clearly defined for the identification, evaluation and control of significant risks. The risk register for the organisation, developed and maintained jointly by the Board and staff, is updated on an ongoing basis. The Audit and Risk Committee has delegated authority to consider the risk map, which is a standing item on the Committee agenda at each meeting. The minutes of these meetings are considered at Board meetings. The Board also routinely considers risk as part of its deliberations on all matters of policy and strategy and reserved decisions. A fraud register is maintained and there have been no reported or detected instances of fraud during the year. STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR The directors who were in office on the date of approval of these statements have confirmed, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the directors have confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor. AUDITOR The company s auditors changed their name from Baker Tilly UK Audit LLP to RSM UK Audit LLP during the year and have expressed their willingness to continue in office. A resolution to reappoint RSM UK Audit LLP, Chartered Accountants, as auditors will be put to the Board at the Annual General meeting. By order of the Board Rob Wharton Company Secretary Date: Page 6

10 STRATEGIC REPORT OPERATING AND FINANCIAL REVIEW The company s activities fall predominantly within the City of Gloucester s boundaries, being managed from the Head Office in Gloucester City Centre. The company has a strong social purpose with teams that work closely with customers and stakeholders to understand and respond to local needs and to help create successful and resilient local communities. The company provides a varied range of housing including general needs, housing for older people and homeless shelters for families and young people. A rolling programme of planned maintenance continues to ensure our properties comply with the Decent Homes Standard and continue to be lettable. Investment activity also includes a modest new build development programme. EXTERNAL INFLUENCES Legislative and political changes to the Social Housing landscape continue unabated and have a significant impact on the environment in which the company operates. Following the Government s Summer Budget in July 2015, where a reduction of 1% per annum on tenants rents was announced, the Board has reviewed its medium and long term cash flows in conjunction with a new stock condition survey, and is assured that the company will continue to meet its covenants throughout the term of the current funding facility. Welfare Reform and its impact on the GCH business is top of our current Risk Register. So far, the impact of the Under Occupation Charge and Benefit Cap has been managed well and there has been minimal impact on the level of arrears. Universal Credit rollout began in June 2015, and although only a small number of tenants are impacted, the levels of arrears for these tenants have increased. The Board takes a proactive stance on this issue and reviews a Welfare Reform strategy twice yearly with regular interim updates. Local Authority spending cuts have continued, and nearly all older person funding has been withdrawn. We continue to look to reshape our service offer in this area, and where eligible, some housing related activity will be funded by service charges. There is, however, a risk that enhanced housing management services will not be fully funded through housing benefit, placing further care and support for older and younger people at risk. One of the Government s housing policies will be to extend Right to Buy to housing association tenants. The Government has stated they intend to compensate housing associations for the loss of their assets through compensation from the sale of high value Council stock, and guarantee one for one replacement for any stock sold. In the short term, this measure is viewed to have minimal impact on the finances of the company as all tenants in situ at the point of transfer from Gloucester City Council have a Preserved Right to Buy status attached to their tenancies. OBJECTIVES AND STRATEGIES Building on the aspirations of the stock transfer, GCH has launched a 5 year Corporate and Strategic plan which mirrors the 5 year offer document and contractual commitment to the City Council arising from the transfer. The plan defines the core values of the business to be Pride, Integrity, Quality and Innovation. The Corporate Plan includes the objectives set out below. Aim Maintain and reform homes and communities Develop and maintain effective partnerships Be a valued employer Champion equality and diversity Excellence in Governance Objectives Provide high quality, value for money services Offer safe, warm and affordable housing Opportunities to develop new homes Provide employment opportunities for tenants Maintain strong partnerships with a string of agencies To provide valued tenant services To build successful communities To provide a supportive environment where staff feel valued To give staff opportunities to meet their aspirations and develop their skills Allowing staff to be creative and innovative Encouraging staff to take ownership and pride in the delivery of our services Work with our tenants and partners to ensure diversity is valued and respected To build strength and unity in everything we do Provide strong challenging leadership to ensure we are successful An accountable organisation that balances strategic risk with innovation Page 7

11 STRATEGIC REPORT (continued) ACHIEVEMENTS IN As well as embedding the new organisation immediately after stock transfer, dealing with the financial impacts of the July 2015 budget, and undergoing an In Depth Assessment (IDA) by the HCA, the quality of services was maintained, and the task of delivering against the objectives set in the corporate plan was commenced. In addition to maintaining a high level of service provision, the company achieved a place in the Times Top 100 Companies (Not for profit) list during the year, maintained its IIP Gold accreditation, maintained its ISO9001 accreditation and achieved a further 2 Compliance Pluses under the Customer Services Excellence regime, bringing a total of 39 Compliance Pluses in total. The company was also awarded a G1/V2 assessment from the HCA as a result of their In Depth Assessment in January During the year, work commenced on reshaping the Board, both in terms of numbers and the skill sets amongst Board Members, which included a robust self-assessment of skill sets, facilitated by an external resource. It is anticipated that this work will draw to a conclusion during the 2016/17 financial year. As part of the transfer agreement with Gloucester City Council, the company is committed to build 100 new affordable homes over the first 4 years following transfer. Work on this building commenced in the Autumn of 2015, with the first new properties being delivered in the first weeks of April At the same time, plans to enhance this original 100 homes have been agreed by the Board. A decision was made in January 2016 to in-source the company s day-to-day repairs service from its current external provision. Work commenced on this immediately and will form the main objective of the company during , along with significant investment in IT to drive through future efficiencies in the organisation. FINANCIAL REVIEW The company s Statement of Comprehensive Income and Statement of Financial Position are included on pages 36 and 38 of these financial statements. The financial year was the first year of operation as a Registered Provider and so there are significant differences in the financial position at the end of March 2016 compared to previous years positions when reporting as an Arm s Length Management Organisation (ALMO). The financial results over the last five years are set out below Operating surplus 9, Surplus on sale of fixed assets 954 Interest + actuarial (losses)/gains (484) (1,085) (356) (693) (593) Surplus/(deficit) for the year 9,605 (967) (277) (124) (133) Fixed assets 29,441 1, Net current assets 1,624 1,697 2,304 2,193 1,566 Debtors due in more than one year 120,851 Total assets less current liabilities 151,916 3,198 2,993 2,606 1,945 Creditors due after more than 1 year 141,773 Pension liability 1,070 3,731 2,559 1,995 1,210 Revenue reserve 9,072 (533) Total member s funds 151,915 3,198 2,993 2,606 1,945 Page 8

12 STRATEGIC REPORT (continued) The increase in surplus in 2015/16 compared to previous years is due to GCH now owning the housing stock, having previously only managed them on behalf of Gloucester City Council. The accounting treatment of capital works is different from 2014/15, and therefore this surplus is used to undertake works of a capital nature on the stock, and also for the development of new stock. The underlying core performance is strong, but it was supplemented last year with additional right to buy property sales and also a one-off pension credit arising from the stock transfer and Gloucester City Council s obligation to ensure the fund was fully funded at the point of transfer. During , the first tranche of Shared Ownership sales are expected to materialise, enhancing the strong performance on property sales. On 16 March 2016, the Local Government Pension Scheme ( LGPS ) was closed to new members of staff joining the company. For new staff, a Defined Contribution Social Housing Pension Scheme ( SHPS ) is offered. This is expected to make significant savings going forward, and also reduce the pension fund liability for the company. TREASURY POLICY The treasury management policy and strategy are reviewed annually and approved by the Board and are supported by independent professional advice. The Company maintains a risk based approach to its treasury management activities, and seeks to ensure that sufficient liquidity is available to meet foreseeable needs, whilst minimising cash balances, borrowing and interest on borrowing. GCH has one funding facility with Royal Bank of Scotland ( RBS ) expiring in March The total facility is 70m comprising of a 65m term facility and 5m revolving facility. The company also has the option of a further 10m term facility, should it wish to take up this option by 30 September Covenants on these loans are measured in terms of net cash drawn, debt per unit and asset cover, and all covenants continue to have sufficient headroom within them. At 31 March 2016, 21m of these facilities had been drawn leaving a remaining 49m available (or 59m if the option to take the additional 10m is taken). The whole 21m is fixed at a rate of 3.45% (including rate and margin). This falls outside of our Treasury Management strategy to fix between 60% and 80% of our outstanding debt, and is a direct result of the significant changes required to our Business Plan after the July 2015 budget. The Board has also agreed a longer-term Hedging Strategy outside of the current 10 year term we have with RBS to mitigate against future interest rate rises. At 31 March 2016, this had not been put in place. EXTERNAL INFLUENCES On the 24 th June 2016, the result of the referendum on Britain s continued membership of the European Union was announced as a vote to leave. This result will undoubtedly have economic and political consequences, although in the short timescale since the vote it is impossible to predict what these consequences may be. Possible beneficial impacts of the decision to leave are lower interest rates for the foreseeable future, but there are potential downsides if inflationary pressures feed through into the wider economy. There is also a potential impact on house prices. The company will continue to work with its professional advisors to ensure that risks are identified and managed accordingly. Page 9

13 STRATEGIC REPORT (continued) RISK MANAGEMENT Risks that prevent the company achieving its objectives are considered and reviewed regularly by the Management Team, Audit Committee and Board as part of the corporate planning process. The risks are assessed in terms of their impact and probability. The 8 strategic risks going forward are considered below: Business area Risk Mitigation strategies Financial strength Less predictable income due to Welfare Reform leading to breach of financial covenants. Review and update of all rent collection processes and ensure a cross company approach to rent collection. Ensure sufficient capacity in the Business Plan to withstand hikes in arrears. Governance New development Investment programmes Quality service provision Long-term viability IT infrastructure and systems Key staff and personnel Board has appropriate skills to meet new Regulatory requirements. Development ambitions not realized due to reduced funding or lack of available opportunities. Sales risk where applicable in future years. Failure to meet Investment Programme requirements to ensure properties remain fit to let Quality of services fails to meet customers aspirations External influences impact on the long term viability of the company IT systems failure impacts on operational delivery of services. Failure to invest in IT systems to drive efficiency through the company Failure to attract and retain key personnel Monitor on a regular basis. Robust succession and skills based recruitment plan. Induction and training of new Board Members. Work closely with developers in relation to potential opportunities. Monitor the impact of HCA policy developments. Ensure Business Plan does not become dependent on sales. A recent, full, external stock condition survey has been carried out identifying all requirements over the next 30 years. These costs are contained within our 30 year Business Plan. A system is in place to regularly capture customer satisfaction information. Monitor changes in Government policy and ensure appropriate mitigation strategies are in place in areas within our control e.g. Treasury Management Strategy. Disaster Recovery Plan in place. Board has recently sanctioned significant investment in IT to drive longer term efficiencies. Bi-annual benchmarking of recruitment packages to ensure the company is abreast of market conditions. A Risk Management and Assurance group consisting members of the top two tiers of management, and chaired by the Chief Executive is responsible for considering risk management, and reporting quarterly to Audit Committee. Through this Risk Management and Assurance group, responsibility for individual risk management is firmly embedded through the roles and responsibilities of the relevant managers who each take responsibility for the control environment within their functions. Page 10

14 STRATEGIC REPORT (continued) VALUE FOR MONEY SELF ASSESSMENT 1. Introduction and Approach Gloucester City Homes (GCH) is a community benefit society which means that any surplus we make from any commercial activities or savings is directly invested back into the organisation to maintain core services and provide more affordable homes in line with our strategic aims and social objectives. This is our first self-assessment required as part of the Homes and Communities Value for Money standard as a new registered provider. We were previously an arm s length management organisation (ALMO), established in December 2005 to achieve the decent homes programme. As an ALMO we invested nearly 65 million, making over 19,000 significant improvements. As a result, every home now meets the Government s standard. In 2010, we were assessed as a 3 star excellent organisation with excellent prospects for improvement. Between 2005 and 2015, we delivered efficiency and cash savings of around 15.5 million through a combination of continuous improvement linked to, challenging our services and through robust procurement. Between 2010 and 2015, following an extensive options appraisal, the City Council and GCH embarked on a stock transfer programme which received 89% tenant support for transfer in Their decision was taken on the basis that GCH would invest 270 million into maintaining the existing stock and delivering new homes. We became a registered provider on the 16 th March 2015 and have committed to deliver the 8 tenant promises agreed in the offer document. The offer forms part of the contractual requirements outlined in the transfer agreement which includes delivering 100 new affordable rented properties in our first 4 years as a new provider. We are however now providing a mixture of different new homes products, following a revision of our Development Strategy in December 2015, to reflect changes in national policy and safeguard our aspirations to become a strong developer to meet housing need. We are funded by the Royal Bank of Scotland and have a loan facility of 70 million over 10 years which facilitated the purchase of the stock for m from the Council last year. As at the 31 st March 2016, we own and manage 4,517 rented homes including 10 sheltered housing schemes, 4 semi-sheltered schemes. These provide a total of 473 homes, representing almost 11% of our total provision. We also manage 321 leasehold properties and 21 homeless units. The management of our assets is critical to our long term success and we make intelligent investment decisions that provide long term sustainability and homes which meet demand. Around 1,600 of our units are non-traditional built between the late 1940 s and the 1970 s. Our revised Asset Management Strategy allows us to make further choices on future investment through an in-depth stock condition survey completed in The challenge of the last 12 months following the Government s rent reduction announcement has meant that we have had to curtail our aspirational investment in these homes to ensure that the Business Plan remains viable. But we are committed to ensuring these homes meet Government standards and that we fulfill our health and safety requirements. In October 2015, the Board made a clear statement in its cost reduction plan that Our aim will be to deliver core housing services which represent value for money; whilst developing business growth so that GCH remains strong, resourceful and creative. In February 2016, we were subject to an indepth assessment by our regulator, the Homes and Communities Agency, which resulted in us being awarded a G1/V2 rating demonstrating that we provide effective scrutiny and challenge and strong performance outcomes with and understanding of our costs. The Board was commended by the HCA for their vigorous and forensic approach to rent reduction last autumn. Page 11

15 STRATEGIC REPORT (continued) Our VFM Approach The Board and executive has a clear value for money vision to challenge and transform our operations. By creating income streams through a commercial agenda and driving efficiency through strong ICT investment to support channel shift and customer self-service, in order to reduce our costs and overheads. Our Corporate Plan and Value for Money Strategy agreed in October 2014 has 5 clear objectives: 1. Scrutinising and challenging our services 2. Buying or providing services which drive down cost and improve quality 3. Collecting rents and service charges effectively and efficiently to pay for housing services 4. Managing our assets effectively 5. Creating efficient and accessible services through new Information and Communications Technology How we will achieve this As a new provider in a different operating environment, and mindful of our changing objectives to deliver more housing, the Board and leadership have identified a roadmap to transform our approach to service delivery. Over the next 5 years, we intend to drive a step change in our operational efficiency through a number of key objectives including; Introducing a transformational culture shift linked to cost reduction and efficiency to support new homes development and maintaining core services. Realigning our strategic aims including a revised mission, vision and values and a review of our key performance indicators and service standards. Significant investment in technology between 2016 and 2017 (c 1M) to support channel shift and self-service to create operational efficiency, which will in the medium term reduce operational costs by c 160K a year from year 5 of our Financial Business Plan. Using our benchmarking data, delivering a number of planned service reviews using the lean model to reduce service delivery costs and creating operational efficiency to generate income to support new house building Introducing new products including shared ownership, market sales and rent to buy and extending our operations within a logical and accessible geographic area comprising the whole of Gloucestershire. Developing a regeneration programme in partnership with key stakeholders including the local authority, Government and funders. Introducing new commercial streams for repairs and maintenance; extending our landlord health and safety services to the private sector; expanding management services and facilities management for others and providing independent living solutions to owner occupiers and others. The objective is to use additional income surpluses to support new development or protect services valued by our tenants. Managing our assets effectively, ensuring they are viable, deliver a positive yield over the business planning period with an improving net present value and with high levels of demand. We systematically review and manage our assets intelligently and procure effectively to ensure we secure the best investment costs and productivity through well managed neighbourhood programmes. We are moving away from our stated mission of excellent services recognising the need to balance quality with cost. Our current mission is To work with our residents to provide excellent services and decent homes in successful communities This is underpinned by 4 core values; Pride, Quality, Innovation and Integrity, the latter states that we will publish clear service standards and ensure that Every Penny Counts which forms part of our efficiency agenda and provides the basis for continuous improvement. Page 12

16 STRATEGIC REPORT (continued) Performance Management & Benchmarking Strategy & Policy Asset Management Commercial Development Every Penny Counts Service Reviews Scrutiny and Challenge Project Management Collaborative Partnerships How we monitor and measure progress Our progress is monitored in two ways: Firstly, through our Board where there is robust scrutiny and challenge of all Strategy; Policy, Performance and financial controls to support our VFM objectives. In we have achieved efficiencies and savings in excess of 1M which are detailed in Section 4.3 below. In addition, as a result of rent reduction, the Board took a granular approach, approving reductions in expenditure to facilitate the 3 million annual cut in rental income. This decision also returned the valuation of the stock back to it c 20M valuation from the minus 9M valuation resulting from rent reduction. Secondly, our Tenant Panel has a specific focus on consumer standards challenging service delivery and standards, driving improvements and ensuring tenants receive quality, competitively priced services. The Panel has undertaken a number of service reviews linked to the value for money agenda and was recognised by TPAS last year as regional finalist for tenant scrutiny. 2. Progress against our Corporate Plan objectives Our Corporate Plan incorporates the 5 objectives contained within the Value for Money Strategy The Board monitors progress against our Corporate Plan objectives on a quarterly basis as part of our performance management framework. The following table outlines progress against our value for money objectives over the last year: Page 13

17 STRATEGIC REPORT (continued) What we have achieved and when Outcomes Value for Money : Objective 1 Scrutinising and Challenging our services Identified cost reduction and efficiency measures to Achieved 3M annual rent reduction to mitigate the impact of rent reduction scheme in support viable business plan and October 2015 protecting development. Secured a G1/V2 following an in-depth assessment by the Homes and Communities Agency in February 2016 Maintained top quartile performance in the majority of our KPI s in March 2016 Received high level of landlord satisfaction through an independent STAR survey in July 2015 Secured external accreditations including Customer Service Excellence & Investors in People Gold in March 2016 A rating which demonstrates confidence our funders and key stakeholders Assurance that resources are effectively deployed and well managed Assurance that resources are effectively deployed and well managed Assurance that there is strong leadership, provision of effective and valued services, staff resources are effectively motivated, deployed and well managed as an employer of choice. Secured BSI: ISO 9001:2008 in March 2016 Assurance which demonstrates confidence our funders and key stakeholders that effective systems and controls are in place Conducted benchmarking review through Housemark We are self-aware of our costs / resulting in 5 year programme of service reviews performance in comparison with our peers, approved in March 2016 enabling effective prioritisation of service reviews Monitored all performance and service delivery We are self-aware of our costs / outcomes through the Board and Tenant Scrutiny performance in comparison with our peers, Panel. All performance and service outcomes are enabling effective prioritisation of service publicised in a range of leaflets and via our website. reviews Quarterly review with final year-end report in May 2016 Completed a fundamental review with TPAS of tenant scrutiny structure to support co-regulation completed in January 2016 Stronger consumer led Governance which supports the transition to a more commercially focused Board whilst realigning resources to maximise rental income. Value for Money : Objective 2 Buying or providing services which drive down cost and improve quality All partners and contractors now deliver services at CPI as directed by the Board in October 2015 Secured 66.4k of additional social value funding through procurement between April 2015 and March 2016 The Business Plan remains viable through protected increase in costs Compliance with the Social Value Act 2012 and supporting the community we work in by increasing local job opportunities and supporting the local economy Completed options review of our repairs services in January 2016 to drive down costs by bringing service in house by April Other services including grounds maintenance are being reviewed that have the potential to secure savings Engage 90 local employees either directly or through contractual arrangements Reduce costs in 2017/18 and create a commercial income stream from 2021 Generate c 1.79M direct income into the City s economy Page 14

18 STRATEGIC REPORT (continued) Value for Money : Objective 3 Collecting rents and service charges effectively and efficiently to pay for housing services We remain top quartile on collection of current year The Business Plan remains viable rents and collected 67k of former tenant s arrears in the financial year. Continued to monitor the impacts of welfare reform Mitigate risks to our income streams and with a proactive approach quarterly review support tenants to manage their personal budgets effectively Conducted a review of services charges to ensure that Maximise potential income streams the cost of service delivery is recovered effectively - annually Planned the introduction of new systems that will enable us to support tenants in financial distress and gather customer insight information to support tenancy sustainment and ultimately maximise income collection March 2016 Collaborated with the CAB and Gloucester Law Centre to support financial inclusion including welfare benefits advice throughout the financial year Mitigate risks to our income streams and support tenants to manage their personal budgets effectively Mitigate risks to our income streams and support tenants to manage their personal budgets effectively resulting in 0.7million of increased benefits Value for Money : Objective 4 Managing our Assets effectively 100% of our homes meet the Decent Homes Standard Compliance to legislative requirements and our properties are all home safe throughout the financial year Completed a stock condition survey on 50% of our Use asset intelligence to make informed houses and 100% of all flats in February 2016 future investment decisions Identified an Asset Management Viability Model in 119 dwellings will undergo a detailed March 2016 options review in to determine future investment Planning permission on 5 sites granted and development started in August 2015 Delivery of 33 new homes will be delivered by October 2016 Value for Money : Objective 5 Creating efficient and accessible services through new Information and Communications Technology The entire infrastructure, platform and security is now Provided a resilient platform and additional managed by an external partner from April 2015 security to facilitate mobile working with solid Business Continuity Phase 2 of the ICT Strategy commenced from April 2015 Procured a new website partner in November 2015 to deliver a new platform for web services which is Android and Smart Phone enabled to support self service 3. Making the best use of our Assets Support channel shift, agile working & selfservice options to improve customer access and reduce operational costs Support self-service options to improve customer access and reduce operational costs Our Staff Resources We provide a supportive environment where staff feel valued, are given opportunities to meet their aspirations and develop their skills; allowing them to be creative and innovative, taking ownership and pride in the delivery of our services. Our highly competent employees have been independently accredited including Customer Service Excellence; Investors in People where we retained the Gold standard in early 2016 and we are a current Sunday Times Top 100 non-profit making organisation. Page 15

19 STRATEGIC REPORT (continued) We continue to review our skills and capacity requirements through a controlled approach to anticipate future resources requirements linked to national or local policies; and to meet any future strategic aims. Asset Management and New Homes Development Gloucester City is a regional centre with a high demand for affordable housing. There is limited supply with most stock successfully let through the choice based lettings system, however, there are some pockets of lower demand within our stock and these units are being reviewed and proactively managed as part of the options appraisal process. Our housing stock represents our highest value asset and its on-going repair and maintenance our largest liability. We own and manage around 4,456 rented homes. There are 321 leasehold properties in our 368 blocks. We own 25 commercial units and 21 homeless units. There is one high-rise block and a large proportion of non-traditionally constructed units totalling1,626 homes. 48% of our stock is flats; 38% is houses and 14% bungalows. The majority of our stock was built between 1945 and 1964 and makes up 48% of our homes; 22% of our homes were built between1965 to % was built after 1981 and the last council home was built in1991. There has been no new development between 1991 and 2015 until we became a registered provider and started our new homes programme as outlined below. Active asset management ensures we intelligently invest in stock that is performing well. All of our homes meet the decent homes standard, all of our homes meet Landlord Health and safety requirements and all of our assets remain financially viable in conjunction with the 30 year business plan. However, we are targeting those assets that require higher expenditure over a 30 year term to identify if a more in depth options appraisal is required to inform future investment decisions. We have set a net present value of 25K return on all of our assets over the life of our 30 Business Plan, which has identified that just 23 units are flagged as red on the NPV financial summary and currently subject to an options appraisal. The following table outlines our NPV summary and the performance of our stock: Combined RAG status Net Present Value Summary RAG Count NPV RAG cost per unit 1-3 4, ,697,805 40, ,697,201 22, ,543 23,284 All 4, ,930,548 40,101 We have undertaken a number of stock condition surveys since GCH formed as ALMO in The surveys have supported our investment decisions which initially focussed on meeting the Government decent homes standard, which we achieved in March 2012 and have since maintained. A further survey informed the decision to stock transfer between 2010 and The most recent large scale survey was undertaken in 2015 gathering stock condition data on 50% of our houses and 100% of all blocks of flats and forms the basis of a new Asset Management Strategy and is fully costed within our 30 year Financial Business Plan. Our original investment programme was to deliver 32.4 million to our non-traditional stock as part of an aspirational programme linked to the preservation of the external fabric, which in turn would improve energy efficiency. Following rent reduction, we have revised the programme downwards to deliver essential works only. Our original 30 year spend profile was million and is now million. This results in an average investment at 56k per unit over 30 years, which is well within and at the lower end of an expected benchmark range. An investment of 46 million is required within the first 5 years of the plan. The reduction in investment creates increased fuel related costs for residents and potentially increasing repairs and cyclical maintenance costs in our budget profile. We can however, through our asset viability modelling tool, identify increased Page 16

20 STRATEGIC REPORT (continued) opportunities through disposal, regeneration and new development using additional potential headroom in the financial business plan. As part of our drive to increase value for money in delivering our investment programmes, we intend to take a range of actions including: Reducing our VAT costs by returning our repairs service to a DLO from April 2017, which will also provide the opportunity to provide capacity to deliver future planned works as well as create operational efficiencies. Increasing commerciality of our repairs and maintenance service by delivering for the private sector from 2020 onwards. Procuring services by combining a range of planned improvement works into single contracts to avoid pepper potting and delivering services through smarter contract management. Undertaking a review of key performance indicators and service standards to ensure a greater emphasis on cost reduction. For example, increasing the provision of decorating vouchers to reduce our painting costs with the intention is to reduce the average void costs from 1,380 in 2015/16 to no more than 1,000, excluding planned component renewals. Moving to a preferred materials specification which will be completed by March 2017, to provide greater certainty over costs and quality of materials used by the DLO. It will also provide improvements in recycling facilities to reduce costs and facilitate the move to an inhouse grounds maintenance provision from April Moving to a 5 year decent homes programme to create greater efficiencies by systematically working through neighbourhood areas rather than the previous pepper potting approach. Splitting our investment programmes between external (7 years) and internal (5 years) to ensure greater efficiency through a systematic approach to planned programme of works. Undertaking a full options appraisal of our garage sites with a view to identifying future development opportunities. 65% of our garage sites are void. We regularly assess viability and re-investment priorities through a Stock Viability Model that takes account of a range of factors including demand and projected costs. The intention is to ensure that all of our assets are viable and deliver a positive yield over the business planning period with an improving net present value yield and with high levels of demand. This appraisal process results in individual properties being allocated a red, amber or green re-investment status and an assessment of cost is made with direct reference to the Asset Management Database and associated reports. Demand has been assessed with reference to housing management perception informed by void turnover rates and associated performance indicators. Our Viability Model has already flagged 119 dwellings (2.7% of our stock) as red and which will be assessed in to determine our approach to their future investment; regeneration or disposal. The trade-off is the investment in our existing stock or subsiding new homes development. The following table outlines the performance of our stock against our viability model: Combined RAG status Viability Model Summary Sheet RAG Count RAG Cost RAG cost per unit 1-3 3, ,309,783 51, ,326,206 63, ,463,318 71,120 All 4, ,099,307 54,112 Managing our Land and Estates: Ahead of stock transfer we conducted a review of the land transferring to us which has already secured 5 sites for development with full planning approval. We wish to acquire more land to enable us to secure future delivery of homes and possible regeneration opportunities. Page 17

21 STRATEGIC REPORT (continued) In we conducted an independent review of our land to identify if the current grounds maintenance service provided by an external contractor, represented value for money. This has identified that there is a potential to secure savings and enhance the quality of this service area. This review will be completed in with a view to providing alternative arrangements from April New Homes Development Our aim is to deliver 100 new homes in the first four years as a new Housing Association. Our Development Strategy sets out our agenda in terms of acquisitions, cross - subsidisation and tenure approach. Planning permission was obtained on all of our current development sites and we will deliver 33 new homes across 5 sites by October 2016 which equates to 33% of the 100 new homes. Phase Bazeley Road Painswick Road St Peters Road Birch Avenue Kemble Road 3 Bungalows / 3 Houses all let May Shared Ownership, 2 bed Bungalows all sold June bed flats, 2 and 3 bed houses - all let July bed bungalows and 1 x 4 bed house (all Shared Ownership) Sept/Oct bed bungalows, 2 and 3 bed houses (all Shared Ownership) Aug 2016 Following a strong tender process, we engaged a local development contractor, Aqua Construction. Our first six affordable rented properties at Bazeley Road in Matson were completed and occupied on 5 th May Our first four Shared Ownership properties were completed at Painswick Road in Matson in April 2016 with units reserved at completion. This scheme was delivered in budget and two local young people have been employed on 2 year Apprentices in Carpentry and Bricklaying as a result of this contract. Both attend Gloucester College and are making good progress. New Affordable Homes - Bazeley Road, Matson New Shared Ownership Homes - Painswick Road, Matson Phase St James Close 9 shared ownership consisting of 1 and 2 bed Winsley Road bungalows Amberley Road 6 flats (3x2 bed; 3x1 bed) 2 houses (1x2 bed ; Badminton Road 1x4 bed) Potential affordable rented homes (subject to 3 houses (3x2 bed houses rented) bid) 3 Bungalows (3x1 bed bungalows) 63 units Phase 3 and units Mixture of Shared and Affordable units Future development plans Shared Ownership / Market Sales 140 new homes Page 18

22 STRATEGIC REPORT (continued) 4. Our Performance and costs 4.1 Key Performance Indicators We have a strong performance management framework converting strategic priorities into operational delivery. We report service and performance outcomes through our website, our tenant s magazine and annual report to keep our tenants and key stakeholders up to date. These are monitored quarterly through a formal report to Board and Tenant Panel. What have we achieved over the last 3 years? Homes and Safety 2015/16 Target 2015/ / /14 % emergency repairs completed on time 100% 100% 96.03% 100% % urgent repairs completed on time 99.5% 99.5% 94.8% 99.3% % routine repairs completed on time 99% 98.8% 92.5% 99% % of tenants who think repairs service is excellent or good 95% 99.3% 98.8% 96.8% Re-let times for empty homes (days) % of homes with a valid gas safety certificate 100% 100% 100% 100% Days taken to install a major medical adaptation GCH has strong performance on repairs and maintenance. We intend to return the service to an in-house provision from April 2017 to secure savings linked to VAT and also create further operational and commercial savings and opportunities from 2017 onwards. Customer Service % of calls to the customer services team answered in target % of complaints answered within target % of tenants who think that overall the customer service is excellent or good % of customers satisfied with the ASB service % of tenancies ending within 6 months of start date 2015/16 Target 2015/ / /14 95% 96.4% 97.5% 97.3% 100% 100% 97.4% 100% 95% 100% 100% 100% 95% 100% 100% 100% 2% 0.4% 1.2% 1.6% Performance continues to be strong however our future plans will include a drive to greater efficiency through channel shift and self-service. We expect traditional performance areas to dip temporarily as we seek to reduce costs by improving access through different service offers. Page 19

23 STRATEGIC REPORT (continued) Rent Collection 2015/16 Target 2015/ / /14 % of current rent arrears against rent debit 1.76% 1.61% 1.16% 1.31% Former Tenant Arrears collected 60K 67K 66K 56K % of tenants evicted for rent arrears 0.19% 0.16% 0.10% 0.07% Rent collected from current and former tenants as a % of rent due 98.28% 98% 99.6% 99.15% including arrears b/fwd. Evictions due to rent arrears as a % of all tenancies 0.18% 0.10% 0.10% 0.02% Managing the impact of welfare reform and particularly Universal Credit is a key strategic priority to manage and protect rental income. We are managing the impacts and have reviewed our resources both in terms of direct rent collection and also financial inclusion / welfare benefits advice. We have been prudent in increasing our bad debt provision within our financial Business Plan and the Board monitors the impact of welfare reform through a monthly report. Satisfaction Survey 2015/16 Target 2015/ /14 % satisfied with overall quality of their home 77% 78% 77% % satisfied with their neighbourhoods as a place to live 75% 78% 74% % satisfied with value for money of the rent 73% 75% 76% % satisfied with ease of access to GCH services 81% 84% 78% % satisfied with the way GCH deals with repairs and maintenance 73% 76% 70% % satisfied that GCH keeps them informed 85% 86% 83% % satisfied with the overall service provided 83% 84% 85% Our independent bi-annual survey results are relatively strong but we want to do better. For example, some performance weakness relates to the type of homes we provide and can only be improved through longer term regeneration. We intend to move to more responsive surveys aligned to the star survey so that we can review our results more accurately and more timely from mid We have begun to review our full suite of Key Performance Indicators (KPI s) in 2016 to ensure they provide appropriate assurance on our new organisational risks and priorities, along with our different stakeholder interests. Our new Tenant Panel will provide further scrutiny on consumer driven performance whilst also supporting Board to scrutinise our performance on areas that could impact our economic performance, financial risks and regulatory requirements. Page 20

24 STRATEGIC REPORT (continued) 4.2 Our performance against others We benchmark our salaries and benefits on a rolling 2 year cycle, last reviewed in October We also use benchmarking data as a driver to investigate and improve our service cost position when comparison with our peers. The annual results feed our 5 year service review priorities. The benchmarking results have told us that there are six cost areas which feature either in middle lower quartile or lower quartile. All of these form part of our review timetable for services areas over the next 5 years. In identifying the priorities, we have been mindful of key business decisions already taken which will provide desired outcomes regardless of those reviews. For example; we have already taken action from April 2016 to reduce and redirect our resident involvement costs to support financial inclusion as part of our welfare reform strategy, a project to return to an in-house repairs and maintenance service from April 2017 is underway and a fundamental review of grounds maintenance to drive costs down from April 2018 will commence from April Our Anti-Social behaviour service is valued by our tenants and we receive the highest number of reported ASB issues in our peer group. This service is delivered in partnership on a multi-agency basis and provides services for all tenures affected by ASB across the City. The intention is for partners to review the service with a report to Board in October Our first service review will focus on Human Resources and then Tenancy Management. The scope of the service reviews will also encompass tenant satisfaction. It is our intention to move towards more responsive surveys such as STAR T on a quarterly basis. The rationale behind this is that we currently see a marked difference between the results of the bi-annual survey and those who provide feedback at the point of delivery. The following table shows our performance against our Housing Association peers linking both cost and quality for : Benchmarking Key Source HouseMark: All National Housing Associations Stock Size 4,500 to 5,500 UQ Upper Quartile MU Middle Upper Quartile ML Middle Lower Quartile LQ Lower Quartile CPP = Cost Per Property GN = General Needs HfOP = Housing for Older People Void = Empty home Median all of the peer group have reported the same number and the Group is shown below: Acis Group Boston Mayflower Broadacres Housing Four Housing Association Herefordshire Housing Peaks and Plains Housing Trust Phoenix Community Housing Raven Housing Trust Saffron Housing Trust Saxon Weald Severnside Housing Spire Homes (LG) Trent and Dove Housing Wandle Housing Association Watford Community Housing Trust Wellingborough Homes Westward Housing Group Wulvern Housing Wyre Forest Community Housing Yorkshire Coast Homes Page 21

25 STRATEGIC REPORT (continued) HouseMark Benchmarking results : Business Activity Cost KPI GCH Result Quality KPI GCH Result Corporate Health Average number of staff days lost to 9.56 days % of staff turnover 9.3% Sickness ML UQ Corporate Health This row is intentionally blank BLANK % of complaints resolved during first contact 94.7% UQ Corporate Health This row is intentionally blank BLANK % of calls answered by the customer services team within % seconds UQ Housing Management Cost per property to collect rent and manage rent arrears UQ Current tenant arrears as a % of rent due 1.17% UQ Housing Management Cost per property of resident % of tenants satisfied that their views are taken into account 61.80% involvement activities LQ LQ Housing Management Cost per property of managing antisocial behaviour cases LQ % of antisocial behaviour cases resolved successfully 100% UQ Housing Management Cost per property of tenancy % of overall tenant satisfaction 80.40% management LQ LQ Housing Management % of tenancy turnover 7.11% UQ % of tenants satisfied with their home 75.4% LQ Housing Management Cost per property to re-let homes % of tenants satisfied that their rent provides value for money 69.40% UQ LQ Housing Management % of rent loss on empty properties 0.70% MU Average time in days to re-let a home (standard re-let) UQ Responsive Repairs & Voids Cost per property of responsive repairs Average number of calendar days to complete a repair and empty home re-let works MU LQ Page 22

26 STRATEGIC REPORT (continued) Responsive Repairs & Voids Responsive Repairs & Voids Responsive Repairs & Voids Major Works & Cyclical Maintenance Average cost of a repair MU Average cost of a void repair UQ % of repairs that are completed at the first visit 92.43% MU % of tenants satisfied with repairs (own post repair work survey) 98.80% UQ Average number of repairs per 3.47 % of tenants satisfied with repairs service 70.40% property MU LQ Cost per property of major works and cyclical maintenance service LQ % of properties that have a valid gas safety certificate 100% Median Major Works & Cyclical Maintenance Estate Services % of total costs for major works and 73.09% % of homes that are non decent dwellings 0% cyclical maintenance UQ UQ Cost per property of delivering estate services ML % of tenants satisfied with their neighbourhood as a place to live 72.10% LQ Service Review Timetable : The timetable below is based on the HouseMark results for , but will be reviewed as we receive more up to date information through future benchmarking. Service Area 2016 / / / / / 2021 Tenancy Services Human Resources Finance Customer Services Inc. complaints ICT and Business Support Repairs Responsive and Voids Major Works and Cyclical Inc. Estate Services Anti-Social Behaviour Income Management Resident Involvement and Inclusion Communications Page 23

27 STRATEGIC REPORT (continued) 4.3 Our financial performance We have a complete set of financial controls in place which are monitored monthly through the Board s Resources Committee supported by a robust risk and treasury management framework which is reviewed quarterly by the Audit Committee. Board has received eight reports on Treasury Management between October 2014 and January We continue to assess financial risk and stress test the business plan on a regular basis to ensure viability of the organisation based on scenario planning. Our performance for the financial year (as a new registered provider) means that we have a new financial operating base, making a comparison with the previous year s ALMO financial results inappropriate. There are significant differences between an ALMO and Housing Association financing, with previously some costs being absorbed into the Housing Revenue Account of the City Council, client services being removed and contractual service level agreements ended. We have also restructured the organisation following independent benchmarking to re-align resources to meet our new operating environment which has included strengthening the Treasury Management and Development areas of the business. This was approved by the Board in October Our successes in include Secured a G1 /V2 rating from the regulator which placed an emphasis on value for money Revised the existing 30 year financial Business Plan which absorbed the required Government rent reduction for the next 4 years submitting an updated financial return to the regulator in October This resulted in the Board and Leadership team identifying savings of c 3 million per annum with our funders, RBS approving the new 30 year financial Business Plan Conformed to all of our financial covenants and our operating margins with the Board choosing to operate at -5% of our cash flow covenant whereas RBS allow us to operate at +5% building in capacity to absorb any unforeseen risks that may occur. Delivered a new pension offer for future employees to create certainty and achieving savings of 48.8K in year 1 Delivered Benefits and Savings in excess of 1 million Understanding our cost variants alongside the sector In June 2016, the HCA published their Headline Social Housing Costs derived from the 2015 Global Accounts data through a detailed regression analysis. The regulator has written to all housing providers including GCH outlining that the sector must have a comprehensive and strategic approach to value for money. They have provided clarity about how they intend to regulate against the value for money standard, setting out an expectation to all providers that they must be fully transparent in understanding its costs and be able to explain differences in operating efficiency within the self-assessment. As a continually improving organisation which has been at the forefront of excellence, we welcome this opportunity to rise to the challenge, with a greater intensity of focus on efficiency whilst ensuring that we do not undermine our investment in new and existing homes and services to our tenants. Page 24

28 STRATEGIC REPORT (continued) GCH Unit Cost Data Contextual Information Entity Closing Social Housing Units Managed Headline Social Housing Cost CPU ( ) Management CPU ( ) Service Charge CPU ( ) Maintenance CPU ( ) Major Repairs CPU ( ) Other Social Housing Costs CPU ( ) % Supported Housing % Housing for Older People Gloucester City 4,456 3,103 1, % 10.6% Homes Upper Quartile 4,300 1, ,180 1, % 15% Median 3, % 8% Lower Quartile 3, % 4% Page 25

29 It is recognised that the amount of supported housing activity and differences in regional wages account for some of the variables across the sector. We have used the average stock number as the divider in accordance with the HCA regression analysis. The costs for GCH are for the financial year against the HCA regression analysis which is for Our financial year for covered 54 weeks because of stock transfer and have therefore been pro-rated downwards We are below median quartile and just below lower quartile on the headline social housing cost for registered providers We are reviewing our service charge levels in The number of units for older people is above median quartile which means that we will have higher costs in this area because of the more intensive housing management requirements How our tenants was spent in 2015/16 In 2015/16 we charged the second lowest average weekly rent in Gloucestershire at The highest rent charged by a provider was and the lowest was per week. As can be seen, 63 pence in each is spent on tenants repairs, home investment and new homes development. How your GCH was spent in Business Support Home Improvements & Repairs 53p & Offices 13p Bank Interest 3p Depreciation 4p Leadership & Governance 3p Housing Services 11p Building New Homes 10p Sheltered Accomodation 3p We anticipate a greater proportion of our expenditure will be allocated to new homes development with lower costs on business support and office accommodation, with a lowering of cost on housing services as we move to self-service options for tenants Page 26