CONTENTS. Board Members, Executive Team, Advisors & Bankers 1-2. Strategic Report of the Board 3-40

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3 CONTENTS PAGE Board Members, Executive Team, Advisors & Bankers 1-2 Strategic Report of the Board 3-40 Report of the Independent Auditors to the Members of NCHA Limited Consolidated Statement of Comprehensive Income 43 Consolidated Statement of Financial Position 44 Consolidated Statement of Changes in Reserves 45 Consolidated Statement of Cash Flows 46 Notes to the Financial Statements 47 87

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5 Board Members, Executive Team, Advisors and Bankers Board: Chair Ms Claire Winfield BA (Hons) Vice Chair Mrs Ann McCarthy MA, MCIEH, MCIH (Audit Committee) (Resigned 30 th March 2017) Members Secretary Mr Stephen Worthington ACMA (Audit Committee Chair) Ms Carrie Swann BA (Audit Committee) Mr Paul Casey BA MCIH Ms Audra Wynter MBA FCMI MIC ATT Fellow FMATT (Audit Committee) Mr David Harrison BA MCIH Mr Christopher Blackburn Ms Donna Edwards BA CPFA Mr Callum Gillespie Mr Peter Ellis Miss Denise Maguire (Resigned 30 th June 2016) Mr Gerard O Reilly (Resigned 31 st December 2016) Dr Nigel Nice (Resigned 30 th September 2016) Paul Moat MBA, MRICS, BSc (Hons) Executive Team: Chief Executive Mike Andrews Finance and Resources Director Paul Higginbotham FCCA (Retired 30 th June 2017) Finance and Resources Director Craig Jones FCPFA (Appointed 2 nd May 2017) Housing Services Director Technical Services Director Director of Development Director of Housing with Care and Support David Richardson DMS, MBA, FCMI, FCIH Paul Moat MBA, MRICS, BSc (Hons) Allan Fisher BSc (Hons), PG (DIP), MSc Holly Dagnall BA (Hons), MSc 1

6 Board Members, Executive Team, Advisors and Bankers (continued) Registered Office: 12/14 Pelham Road Sherwood Rise Nottingham NG5 1AP Telephone Facsimile Auditors: Beever and Struthers Chartered Accountants and Registered Auditors St. George s House Chester Road Manchester M15 4JE Principal Solicitors: Freeths LLP Cumberland Court 80 Mount Street Nottingham NG1 6HH Principal Bankers: Treasury Advisors: Lloyds Bank plc PO Box 72 Bailey Drive Gillingham Kent ME8 0LS Savills Financial Consultants Lansdowne House 57 Berkeley Square London W1J 6ER Registered as a charitable social landlord under the Co-operative and Community Benefit Societies Act 2014, Number Registered with the Homes And Communities Agency, Number To the 8 th April 2015 the registration number with the Homes and Communities Agency was LH

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8 STRATEGIC REPORT OF THE BOARD The Board presents its report and consolidated audited financial statements for the year ended 31 st March Principal Activities Nottingham Community Housing Association Limited (NCHA) is registered as a charitable social landlord under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency. It was first registered on the 22 nd March 1973 for the benefit of the community. NCHA operates mainly within the East Midlands and has three regional offices and a number of satellite offices across the East Midlands. Its head office is in Nottingham. NCHA's principal activities are the management, maintenance, improvement and development of social housing together with the provision of Care and Support services for those people within communities across the East Midlands with additional needs. The Group consists of Nottingham Community Housing Association (parent company), Nottingham Community (Second) Housing Association, Lets Select Limited, Nottingham Annuity Charity, Nottingham Community Almshouse Charity, Blyth Cottages Charity, Henry Brown s Homes Charity and Warner s Almshouse Charity. Details of each are included in note 27 of the accounts. Performance for the Year The NCHA Group's turnover has increased mainly as a result of increases in the Group s stock of Housing Properties in Management ie More Homes. The results for the year show a surplus on ordinary activities of 19.4m (2016 restated 15.82m). This is a good result for the Group as the economy struggles to move beyond the credit crunch and the sector responds to the challenges of welfare reform. These results are very much in line with financial plans. Transfers to and from designated reserves of 1.4m and under 0.1m respectively ( m and 0.1m) have been made in the year specifically to fund future planned maintenance to our existing housing stock and to reflect the use of funds set aside in previous years to fund the investment in the current year. The Restricted Reserves stand at 12.2m (2016 restated 10.9m) whilst retained Revenue Reserves stand at 69.8m (2016 restated m). During the year we spent over 13m (2016 over 14m) on maintaining and improving our existing housing stock in line with the Group's objective of exceeding the Decent Homes standard, providing "Great Services" and contributing to "Better Lives" for our customers. Of this expenditure, 3m (2016 4m) was invested in capitalised improvements to our customers homes. Investment in the provision of new homes amounted to 26.5m ( m). This was funded by 5.7m of Social Housing Grant (SHG) ( m), proceeds from other property sales 12.8m ( m), and the balance from operating activities. Review of the year NCHA Group The Group has had a very successful year taking a further step forward under the 5 Year Corporate Plan. We have retained the highest viability and governance ratings that the Homes and Communities Agency (HCA) can give of V1 and G1 following an In Depth Assessment. The 2016 STAR survey showed high levels of customer satisfaction with the Great Services NCHA provides. 91% of customers were satisfied with the services offered by NCHA. 85% were satisfied with the quality of their homes and 85% were satisfied with their neighbourhood as a place to live. 84% were satisfied with the repairs service. 73% were satisfied that NCHA listens to their views and acts upon them. 87% thought that their rent represents value for money. Customer satisfaction among our shared owners (81%) is in the top quartile of satisfaction levels reported by the National Housing Federation and HouseMark. Our market/ intermediate rent tenants satisfaction, measured from exit surveys, was 99%. 3

9 STRATEGIC REPORT OF THE BOARD (continued) Group Companies Lets Select Ltd achieved a one-off loss of 0.1m. This one off loss was driven by the company repositioning itself on SMaRT Messenger and the adoption of resident sinking funds in line with its financial plans. The company has accumulated profits to date overall. These funds are now available to Lets Select to re-invest in commercial activities generating further profits to help the Group improve services and contribute to the provision of more homes. Three Together Limited is a company limited by guarantee jointly owned, 50% Lets Select and 50% Futures Housing Group. During the year Lets Select increased its stake in the company from 33.3%, acquiring the share formerly held by Acclaim Housing Group, at a cost of 30k. Three Together Limited purchased Access Training (East Midlands) Ltd on 28 th February Lets Select issued a loan of 367k to Three Together Limited to fund the purchase which remains outstanding as at 31 st March No distribution has been made to Lets Select Limited for the year ended 31 st March Lets Select Limited earned 11,487 from letting and managing homes for other landlords. Nottingham Community Almshouse Charity delivered an improvement programme of 56k to its almshouses in 2016/17, including adaptations for residents with disabilities. Nottingham Community (Second) Housing Association (NC2HA) had another successful year. The Association made a 37k gift aid contribution to NCHA. The Blyth Cottages Charity recorded a surplus of 7k compared to a budgeted deficit of 7k, but this was due to underspends on cyclical and planned maintenance deferred to future years. In 2016/17 Nottingham Annuity Charity paid annuities totalling 12,320 to twenty-seven people in financial hardship. Nottingham Community Housing Association (Parent Company) Development and Design This year has been another successful year for our Development Team whilst continuing to deal with the ever shifting political priorities that affect the business plan for More Homes. Grant receipts from the Homes and Communities Agency and local authority partners, and including RCGF, totalled 6m, reflecting the mixed subsidy sources in the development programme. With 322 properties started on site and 273 properties completed the Development and Design Teams have made another significant contribution to the delivery of "More Homes". NCHA is a member of the Blue Skies Development Consortium which has achieved 583 starts and 419 property completions under the grant funded programmes (note this does not include partners non-grant funded programmes) overall meeting the amended targets agreed with the Homes And Communities Agency. NCHA achieved very successful results in 2016/17 with allocations through the new Shared Ownership & Affordable Homes programme totalling 430 units, adding to the recent successful bids through AHP & AHP2. In addition we have continued to secure schemes allocated through continuous market engagement (CME). NCHA also continues as a Homes and Communities Agency partner in its own right as well as part of the Blue Skies Consortium in order to take advantage of other programmes as and when they become available. We carry out post occupancy surveys on all of our new build developments and a key result from the surveys for 2016/17 is that Tenant Satisfaction with their New Home is at 85.4% which has increased from 2015/16. This continues to be a positive reflection of both our controlled design of new build projects and selection policy of the development team when assessing opportunities. We have also contributed to 2 Lean reviews in the planning process and in sales aiming to improve performance and customer satisfaction. We have had another busy year managing fire risk associated with our properties with the objective of providing our tenants, service users and leaseholders with a safe place to live. During 2016/17 we spent over 0.8m on Fire Risk Assessments and in completing resultant maintenance and management actions. The result of all of this activity was that on the 31 st March 2017 NCHA had 391 buildings that required a Fire Risk 4

10 STRATEGIC REPORT OF THE BOARD (continued) Assessment and all 391 were in place. There were 134 Annual Reviews of Fire Risk Assessments due at that time and all 134 had also taken place. The Board considered a report on 19 th July 2017 covering our actions taken to date following the Grenfell Tower tragedy, our in progress actions and potential future options. It was agreed that our response to the tragedy was proportionate. The change in the capital grant funding regime means that NCHA has to put in a greater proportion of its own funds to continue the provision of More Homes. The proceeds from property sales and the revenue surpluses made by the Group are a crucial source of the funds necessary to enable us to continue a substantial development programme, with property sales from all sources bringing in over 15m of income. The development team through POD, a joint venture between Longhurst Homes and Lets Select, brought in 0.22m in external fees delivering more homes for others in line with the corporate strategy, with clients including members of the consortium and Local Authority partners delivering new council housing. General Needs Income / Tenancy Services Welfare reform has not impacted as much on rent arrears as expected. Under occupation charges started in 2013 as did the benefit cap, which was reduced in Universal Credit has been rolled out to all local authorities for single applicants; the roll out to couples and families has started. Further reductions in housing benefit entitlement are to be made for tenants in April 2019 who are under thirty-five years old who have tenancy agreements which started after April All new tenancies from April 2016 will see a reduction in their Housing Benefit from April 2019 if their rent is more than the Local Housing Allowance. From April 2017 non-exempt new tenants aged less than twenty-one years old will not be able to claim the Housing Cost Element of Universal Credit. Despite the changes which have already been implemented rent arrears have fallen to 3.05% the lowest level ever. Former tenant arrears have reduced again in 2016/17. Our tenancy support team has offered support to over four hundred tenants. In 2016/17 they have helped tenants to claim over 100k worth of extra benefits and have accessed over 15k worth of grant funding for them. To date 60 tenants are claiming Universal Credit. Their rent arrears have increased threefold. The six week delay for the first payment of Universal Credit is the primary reason for this increase in rent arrears. When the first payment is made usually the tenants have outstanding bills to pay and other spending priorities, consequently the rent is not paid for the first or second month. Subsequently we can apply for rent direct and have arrears direct if there are more than two months rent owing. NCHA continues to work closely with Nottingham Credit Union in order to promote their services. Too many of NCHA s tenants still use High Street high cost lenders. Allocations The number of tenancy terminations which resulted in a property being relet reduced from 518 in 2015/16 to 503. This year the Allocations team has reviewed our pre-tenancy work and focussed on developing more robust financial assessments for housing applicants. When reletting older properties we continue to decorate and carpet one room prior to letting and this has led to positive feedback from customers. These factors, taken together, have helped us to achieve an average relet period of 19.4 days in 2016/17. During the year we have taken handover of 198 new properties. All of our larger new build schemes are allocated local lettings plans which set targets for the profile of new tenants on our estates. This has led to improved levels of tenancy sustainability and has consequently helped to reduce the turnover of stock. Customer satisfaction with the Allocations Team remains high with 96% of customers saying that our staff were helpful and efficient and 95% satisfied with the service provided. 5

11 STRATEGIC REPORT OF THE BOARD (continued) Customer Contact In 2016/17 the Customer Contact team experienced another increase in the number of calls received. The team received 17,294 calls in the final quarter of the year which is an increase of 2,600 on the same quarter in 2015/16 (equivalent to a 17% rise in incoming calls). This is largely due to evolving work practises in the Income team in relation to arrears recovery. Our staffing levels have remained the same and 96% of calls are answered within an average of 15 seconds. Customer satisfaction levels with the service provided are high with 97% of customers saying that staff were helpful and polite, 94% stating that their issue was dealt with efficiently and 96% satisfied with the service provided. Estates and Anti-Social behaviour (ASB) Services During 2016/17 the number of properties in management increased while the number of reported ASB cases decreased. We dealt with 663 cases compared to the previous year of 704 cases. The more serious category A cases also reduced from to 122 (2015/16) to 115. The total % Customer Satisfaction rating for ASB for the period 2016/17 was 75% compared to the previous year of 92%. This reduction is attributed to the fact that we modified the calculation for ASB Customer Satisfaction and excluded those who were neither satisfied nor dissatisfied. The amount of time it takes to resolve an ASB case has continued to decrease from 28 to 25 days. This can be attributed to the Estate and ASB Officers focused effort in resolving cases coupled with NCHA s investment in a number of CCTV networks systems. This has improved our ability when detecting and deterring ABS incidences. The CCTV evidence has played a big part in successfully resolving cases. During the past year we have invested in CCTV systems, introduced Fob Locking Systems and Security Door installations. The total cost amounts to 133,426. In line with the company strategy of promoting tenancy sustainability we have been addressing vulnerability issues and concerns relating to Domestic Violence, Abuse Cases and victims of burglary. In response we have invested 15,000 in improving individual security by installing Intruder alarms, PAS Rated doors, Passive Infrared lighting, Window Locks and repairs to Fencing. We have utilised the Estate and Individual Improvement Fund, delivering various projects, which have made a significant and positive impact on improving customers lives and their environment. During 2016/17, the Estate Improvement budget of 121,000 was spent on up-grading communal door entry systems, fencing to secure open land, reconfiguration of the bin store in order to prevent or reduce incidents of fly tipping and general misuse of the area. Expenditure also helps to improve the look of our Estates whilst providing residents with secure and definable defensible spaces. A further 12,631 was spent on 18 Individual Improvements, of which NCHA spent 5,300 installing fencing for elderly customers and 4,980 on creating patio/ even path surfaces for customers with disabilities (supplementing our age friendly services). Estates Services have been at the forefront of developing the Total Mobile systems for Scheme Managers, ASB and the Estates Team. The benefits are numerous, for example it is delivering operational efficiencies and enhancing financial data collection in order to assist the company in making accurate and informed financial decisions for Service Charges. Total Mobile working allows the business to accurately record health and safety repairs and associated issues. The team of Scheme Managers maintain the communal areas and monitor health and safety on a regular basis. They offer support and sign posting services to residents living in properties across the East Midlands. In addition the Estates Officer undertakes Estate Inspections and targets those areas where NCHA have fewer than ten properties which in previous years did not receive inspections. The Scheme Managers and Estate Officers carried out a total of 15,135 Estate Inspections. The Estate Officers are also delivering efficiently via a new and improved fire safety compliance mechanism. The Estates Officers carried out 136 Annual Fire Safety Reviews and raised 200 Fire Safety Actions. 6

12 STRATEGIC REPORT OF THE BOARD (continued) Whilst servicing Increases in stock with an unchanged team we have received a customer satisfaction rating for Estates of 95%. The Estate Services Team signed up a total of 249 new tenancies and under took 255 New Tenancy Follow up contacts and conducted 217 Nine Month Tenancy Review Visits. During the year the Estates Team completed a total of 894 Assured tenancy visits. As a result sixteen Section 21 Notices and seventeen notices of tenancy extensions were served due to tenant s noncompliance with the terms of their tenancy contract. Intermediate Housing Team The Intermediate Housing Team (IHT) manages market rent, submarket rent, shared ownership and leasehold properties for the Group. IHT has in place a strategy to promote the purchase of Rent To HomeBuy (RTHB) homes by longer standing tenants. This includes selling 25% shares to make entry into home ownership more affordable. 16 of the Rent To HomeBuy (RTHB) units were converted into sales in 2016/17. All IHT s income targets for 2016/17 were met or exceeded. 52 new shared ownership properties were sold during 2016/17. Three shared ownership homes were re-possessed in 2016/17. Two repossessed properties were bought back by the Association. This was unfortunately too late to rescue the residents, but it did mitigate the financial loss to NCHA by 81k. 23 shared owners bought additional shares in their properties, and 45 sold their shares enabling them to move up the housing ladder. NCHA earned 16,478 from letting and managing housing for other RPs. Care and Support Our Care and Support Business continues to respond to a financially challenging market with Commissioning Authorities operating with decreasing budgets and increasing demand for services. We remain committed to our mission of providing services to those most in need and deliver over 80% of our business to people who Local Authorities have a statutory duty to provide services for. In order to ensure ongoing financial sustainability Care and Support have reviewed all contracts over the last 18 months and restructured our business accordingly in line with our Board of Management approved strategy. Regrettably this has meant handing back some contracts to Local Authorities where we could not deliver the quality services we are committed to within the cost envelope for the contract. We have focused on growing our income in areas where we can add value and specialism to the local market in the provision of services to individuals with complex and multiple needs. This has ensured that despite handing back contracts our income levels have been sustained. We have invested in mobile technology for care and support work and staff communications which has led to real savings and improved efficiency in relation to reducing travel time and enabling time saved to be used in providing more face to face support for individuals. Our specialist housing management team has once again delivered excellent performance in the management of rent arrears and service charges. The combined impact of these efforts has given a much improved budget outturn for Care and Support for 2017/8 with move back to a fully sustainable financial position by 2018/19. 7

13 STRATEGIC REPORT OF THE BOARD (continued) We have sustained high quality standards over the period and a new satisfaction rating from our customers has shown an increase from 97% to 98.7% demonstrating the delivery of the "Great Services" aspect of the NCHA vision. Technical Services Our Technical Services Team has played a key role in delivering NCHA s Environmental and Sustainability Strategy, including: i) The provision of Home Energy Advice/EPC (Energy Performance Certificate) visits to a further 336 tenants during 2016/17 as well as delivering Energy Roadshows with the objective of reducing fuel poverty amongst our tenants and also the resultant CO2 savings. We provided and installed 813 energy. ii) iii) Savings measures following Home Energy Advice visits helping tenants to reduce fuel bills by 40,000. We secured 386,231 of grant funding from NEA (National Energy Action) to deliver a programme of heating upgrades to improve the energy efficiency of 75 of our homes. We have also further developed our approach to managing Health & Safety (H&S) with a range of initiatives in 2016/17 including: i) Extending the recording of our H&S performance on a RAG (red, amber, green) report to cover all property-related H&S risks. ii) iii) Implementing changes to our approach to Fire Risk Management covering Fire Risk Assessments, Actions Arising and Annual Reviews. Reviewing the roles and responsibilities for H&S across the Group including the appointment of a new Maintenance Health & Safety Manager and a revision to the approach to H&S reporting to our H&S Panel which co-ordinates delivery of H&S at NCHA. Future Developments Lets Select Ltd is our unregistered wholly owned commercial subsidiary. It is now trading effectively after the challenges of the credit crunch. It manages properties let at market rent levels for profit as well as providing other commercial services for the NCHA Group. Lets Select now has a small development for sale programme which will contribute to providing More Homes whilst generating additional surpluses for reinvestment or distribution to NCHA through Gift Aid. Nottingham Community Almshouse Charity, which now owns over one hundred properties with investments of 0.1m and reserves of over 2m, is in a strong financial position with sufficient funds to maintain its stock to decent homes level into the foreseeable future. The incorporation of three local almshouse charities in Nottingham took place in May 2015, with the addition of eighteen more almshouses into the Charity in 2016/17and four further units to be transferred in 2017/18. The Group intends to continue with a substantial development programme, with 308 properties expected to reach completion next year and a continuing programme planned for future years. NCHA will continue to build on the latest STAR survey results and the TPAS evaluation by continuing to improve the services to its current and future customers. This is fundamental to the delivery of our vision "More homes, great services, better lives". Board Members and Executive Team The Board Members and the Executive Team of the Association are set out on page 1. The Board Members are drawn from a wide background and demonstrate a commitment to equality and diversity, particularly in relation to gender, sexuality, race, age, disability and religious belief. They are required to bring together professional, commercial and local experience and will include tenant members. 8

14 STRATEGIC REPORT OF THE BOARD (continued) NCHA has a policy on the appointment of Board Members against which all written applications for Board Membership will be considered. In addition to possessing the qualities necessary to discharge the responsibilities of Board Membership, the Association has established a Board comprising a range of skills and experience relevant to our work, including: Housing Needs Strategic Management of a Business Treasury Management General Business Property Management Property Development Public Relations Equality and Diversity Adult Social Care Education/Training Residents Needs Finance Risk Management Staff Management (Human Resources) Contract Management Marketing/Communication Legal Matters Information Technology Service Quality Governance and Regulation The current Board comprises members with skills, qualities and experience in one or more of the requirement list. The Executive Team comprises the Chief Executive, the Director of Finance and Resources, the Housing Services Director, the Director of Development, the Director of Care and Support and the Technical Services Director. The Executive Team act as executives within the authority delegated by the Board. The Executive Team complete a Skills Matrix each year to confirm that they have the skills and/or knowledge and/or experience to carry out their role as lead officers of the Group. The Group has insurance policies which indemnify its Board Members and Executive Team against liability when acting for the Group. The insurance cover does not extend to negligent or wrongful acts. Remuneration Policy The Governance Committee reviews the level of payment to Board Members every year. To inform this process, the Committee commissions a biennial market review of Member remuneration from an independent consultant and takes into account, NHF guidance, published surveys and salary settlements negotiated with staff before making a recommendation to Board on any changes to the package. The review undertaken in 2015 identified Member remuneration at NCHA is in line with the average for associations of equivalent size and complexity. The Governance Committee reviews the remuneration packages for the Chief Executive and Executive Directors annually. Basic salaries are set having regard to each Executive Director s responsibilities and annual incremental progression is linked to achievement of objectives. A market review of pay is conducted on a biennial basis to ensure salary packages remain commensurate with comparable positions in the wider housing and care market. The review undertaken in 2015 identified that Executive remuneration at NCHA was in in line with the average for associations of equivalent size and complexity. The Executive Team has delegated authority to set pay, benefits and terms and conditions for NCHA employees. Pay is determined using a job evaluation scheme and which references market data to ensure salaries support recruitment and retention objectives. Changes to terms and conditions are dealt with via the Association s Joint Union Negotiating Group which meets regularly. The differential between the salaries of the lowest and highest paid employed on a 35 hours full time equivalent basis is 9.1:1. Pensions Some of the Executive Team are members of the Social Housing Pension Scheme (SHPS), which is a defined benefit pension scheme. The defined benefit final salary scheme has now closed to new members. New Executive Team members would be eligible to join the SHPS defined contribution pension scheme. 9

15 STRATEGIC REPORT OF THE BOARD (continued) They participate in the scheme on the same terms as all other eligible staff. The Association contributes to this scheme, to the National Health Service Pension Scheme and other pension schemes where appropriate on behalf of its employees. Employment Contracts Members of the Executive Team have permanent contracts of employment. The Board considers this necessary in order to recruit and retain persons of high calibre and to ensure continuity. Employees The strength of the Group and the Association lies in the quality and commitment of its employees which is reflected in our employment engagement survey taken in early The Group s ability to meet its objectives and commitments to tenants and other customers in an efficient and effective manner depends on the contribution of employees throughout the organisation. We take this opportunity to thank them for their efforts in making this another successful year. The success of NCHA was confirmed through the HCA s In Depth Assessment, the results of the STAR survey and TPAS accreditation are clear evidence of the commitment of our staff to the delivery of quality services to our customers and evidence of their success in delivering that quality service whilst ensuring strong viability and governance. The NCHA Group is committed to its workforce and continues to invest heavily in developing the skills and knowledge of its entire staff. The Association invests higher than sector norms for average days of off job training per employee each year, as well as completing 3,200 e-learning course in 2016/17 we provided good quality training rated as excellent by 76% of employees who attended. 193 staff undertook a qualification programme provided through NCHA and many more were supported in other learning and development activities. The organisation provides information on its objectives, progress and activities through regular office and departmental meetings. A performance management framework is in place and the latest development on our HR system allows more robust monitoring of this framework in practice. A Joint Union Negotiating Group comprised of the Executive Team and staff representatives and officers of the two recognised trade unions Unite and UNISON meets formally to consult with staff and discuss issues relevant to staff approximately six times a year. The organisation is committed to equal opportunities for all its employees. It has an equal opportunities policy and equality and diversity objectives are integrated into annual departmental operational plans which are designed to encourage progress against a number of targets including employment workforce statistics and allocations etc. Progress targets are reported to Board on an annual basis. People with Disabilities The Group s policy is to give full and fair consideration to applications for employment made by people with disabilities, having regard to their particular aptitudes and abilities, we are proud to be signed up to the Government s disability confident employer scheme. Reasonable adjustments are made for people who are or become disabled during their employment to allow them to continue working, including any necessary retraining. In addition to our stated commitment to the employment of people with disabilities, where Local Authority support can be secured, the organisation endeavours to include a number of properties that meet mobility space standards on all new build schemes, and carries out a range of adaptations to its existing homes to enable tenants with disabilities to continue living in their homes. As part of NCHA's commitment to supporting tenants with disabilities NCHA has a Customer Advisory Panel which focuses its attention on this area of the Group's activities. The organisation is fully aware of its responsibilities under the Equalities Act

16 STRATEGIC REPORT OF THE BOARD (continued) Tenant Participation NCHA offers a menu of tenant involvement opportunities which range from giving feedback to being a member of NCHA s board of management. The tenant involvement team aims is to ensure that involved tenants are representative of tenants in general. In order to increase the diversity of involvement NCHA has invested in a community vehicle which will change the emphasis of the tenant involvement team s work. More will be done in the community and on estates rather than in meetings to which a limited number of tenants have the interest or ability to attend. Community vehicle events are based on current issues such as getting ready for welfare reform, helping NCHA to become age friendly, energy advice and initiatives such as healthy eating. The team are also helping to provide IT training for some tenants who need improved IT skills to claim Universal Credit Those tenants who are involved in our more formal mechanisms such as the Customer Advisory Panels and our Collective Panel gave NCHA 108 hours of their time in attending meetings (36 in total). They reviewed 25 policies and service standards and made 117 recommendations for change, 70 of which were agreed. The Resident Scrutiny Panel completed a review of Missed Appointments, which ran alongside an NCHA Lean Review of recharges. The majority of recommendations to improve performance were approved by the Executive Team and Board in May Collecting feedback from surveys by our praise and grumble system is an important way of involving tenants and giving them influence in how our services are delivered. Feedback is also collected via surveys. The service inspection team are now responsible for carrying out almost all of our surveys. 154 tenants attended 39 training courses throughout the year. The courses varied from Restorative Justice, Chairing and Committee Skills, Team Building and Introduction to RSLs to Recruitment skills and Dressmaking. 71 tenants received 1:1 IT digital inclusion training in preparation for Universal Credit. 10 Tenants attended Think Tanks organised by the London School of Economics at Trafford Hall. 8 tenants attended the TPAS 2 day Conference in Warwick which gave them an opportunity to network with tenants from other Registered Providers. Tenants and service users attended 293 learning and development events on a variety of subjects throughout the year. Training providers such as Access, Silver Training and Click (Nottingham Circle) attended events and also offered tenants advice on IT, broadband alternatives and social media. Their involvement was prompted by the need to get tenants online and to get tenants affected by welfare reform to get online. This expenditure has empowered our tenants to have more of an influence at NCHA and to develop their own personal lives. NCHA s Technical Services CAP met regularly during the year to discuss all technical aspects associated with the delivery of our new homes, asset management and maintenance programmes. The Disability CAP continues to work with NCHA to identify the need for scooter storage facilities and eleven of these have been provided this year. The group has helped in the review of the Disabled Adaptations Policy. In addition, NCHA s Care and Support service users are fully involved and consulted on any revisions to existing, or introduction of new policies or procedures that directly affect their services and in the planning and delivery of their care and support packages. This work is carried out through the Person Centred Services group which gives effect to our person centred approach to giving people Better Lives. The Board has had a Member who was a tenant throughout the year. This together with the Tenants Groups detailed above form the main elements delivering NCHA's commitment to tenant participation, which ensures that tenants are involved at all levels in the Group. Technology and its effective application across the business continues to be a key factor in the successful delivery of corporate and business stream objectives. We continue to invest in core ICT infrastructure across the business to ensure that we have effective and robust systems which represent both sector best practice and value for money. 11

17 STRATEGIC REPORT OF THE BOARD (continued) IT system security and data protection is a growing area of risk across the sector and we have implemented several programmes in order to mitigate this risk. We have a schedule of independent system penetration testing involving a leading national IT security specialist, with many improvements already implemented. There have been a number of strands to our work in improving data protection including specialist training for a member of staff, who acts as our lead data protection and cyber security officer along with wider security awareness training and briefings across the business. As part of our ongoing focus on improving corporate efficiency and flexibility there has been a growing demand for mobile working ICT solutions. We have implemented a number of different mobile working solutions which are focused upon specific business stream and customer needs. Health and Safety The Board is aware of its responsibilities on all matters relating to Health and Safety (H&S) and receives a number of H&S related papers during the course of the year including; Annual Health and Safety Performance Review and Staff Health and Safety Competencies. We have a comprehensive H&S Policy along with a number of operational polices and the requirements for procedures which define our approach and processes. Our H&S Panel, which is made up of appropriate representatives from across the business, form the central hub for H&S governance across the business. The H&S Panel is supported by two sub committees which focus upon Fire Safety and Care And Support projects. Both report back to the H&S Panel every two months. Risk management forms the underlying tool for many elements of our H&S management processes and we operate a business wide system called Managers Managing Safely which defines each line manager s responsibilities and then delivers an auditing process which is in turn reported back to the H&S Panel. Social Responsibility Throughout its forty-four year history NCHA has brought national resources into local housing provision. During the year, we brought 9m (2016 9m) of grants including revenue grants, Social Housing Grant and other capital grants into the local economy. We are very pleased to be able to combine these monies with the support of local authorities and statutory agencies to achieve a significant impact on local housing, social and community issues. Payment of Creditors As part of its social responsibility NCHA recognises that the local economy and many of the local businesses would be adversely affected if it were to delay payment. NCHA endeavours to pay all agreed invoices within thirty days of the invoice date. Charitable Donations Board continued to show their commitment to supporting their chosen Charity, Habitat for Humanity, designating part of its reserves for this purpose. Board see the initiative as both an appropriate use of the resources to assist and improve housing conditions on the sub-continent and elsewhere to provide valuable personal development for the staff involved. Board remain committed to this charitable initiative and will look forward to continuing the commitment in future years. Housing Properties Movement on Housing Properties are detailed in notes 13 to 13e and a summary of Housing Properties owned and managed is disclosed in note 29. Over 50% of these properties are in Nottinghamshire but the Group owns properties in a total of thirty-one local authorities across the East Midlands. Nottingham Community Housing Association provides housing properties for Shared Ownership with first tranche sales leading to management until the properties are fully staircased. Additionally, it sells a small number of general needs stock based on an investment re-appraisal model and also sells a small number of 12

18 STRATEGIC REPORT OF THE BOARD (continued) Rent To Homebuy properties, repossessed Shared Ownership properties, sales under Right To Acquire and voluntary sales of submarket rent stock. Lets Select Limited sells a small proportion of its market rent stock each year. Other Fixed Assets Details of additions to other Fixed Assets are set out in Note 14 of the Financial Statements. NHF Code of Governance NCHA is controlled by a Board of Management comprising twelve independent non-executive Members. The Association complies with the key principals of the NHF Governance Code. Compliance with the Code is assessed annually by Board and is subjected to independent health check and audit biennially. The Association is committed to maintaining a satisfactory turnover of Board Members who are required to stepdown by rotation every three years and seek re-election from Shareholders. The Chairman and Vice-Chair are elected each year. The Rules of the Association permit the Board to establish a policy on maximum terms of office from time to time. When individual Members retire by rotation they are required, if seeking re-election, to identify their particular skills, knowledge, experience and competencies which are considered alongside the requirements of the Board as a whole. The average length of service for Board Members at the end of the year was two years. A new Chair was appointed in September An independent review of Board governance was undertaken in February 2017 including an evaluation of Board performance benchmarked against the expectations for high performing Boards and included a review of Board papers and key governance documents. All Members receive an appraisal with the Chair on an 18 month basis. The Board has decided not to formally adopt the NHF Code on Mergers and Partnerships as it does not feel the necessity to adopt a rigid Code preferring to respond to opportunities or proposals on the merits of individual situations as it has successfully done over many years. As with all matters relating to the Governance of the Association this decision is kept open to review on an annual basis. In 2015 the Government passed a new act to fight modern slavery, giving support and protection for the victims, and ensuring big businesses take responsibility for creating transparency in their business and supply chains. NCHA is required to publish a statement that clearly states how we will improve our business activities to combat modern slavery and human trafficking in our corporate activities and supply chains. As well as publishing our statement, we have also ensured that all our managers across the organisation received additional training to raise their awareness on modern slavery and human trafficking. We are also encouraging our staff to report any concerns they might have about a contractor, supplier or member of staff being involved in modern slavery activities. Read our full statement outlining our response to the new modern slavery legislation. NCHA.org.uk/about us/modern slavery act statement The ways in which we seek to achieve good housing association governance are outlined below. Transparency NCHA carries out its work in an open, transparent and accountable manner. In order to be accountable to our customers and stakeholders we have set up an accountability section on our corporate website to help interested parties to see how we manage NCHA and deliver our services. 13

19 STRATEGIC REPORT OF THE BOARD (continued) The Board The Board comprises up to twelve non-executive members and is responsible for managing the affairs of the organisation. The Board meet formally at least nine times a year for regular business and to discuss strategy. The Group Audit Committee comprises a minimum of at least four Board Members and meets at least four times each year. It considers the appointment of Internal and External Auditors, the scope of their work and their reports. It reports to the Board on the effectiveness of the organisation s internal financial control arrangements plus the effectiveness of other controls and adherence to procedures. In 2010 NCHA's Audit Committee membership was expanded to incorporate members from its subsidiary Lets Select Ltd. Membership of the Audit Committee by subsidiary Board members will be restricted to one third of the total membership of the committee. The Governance Committee comprises three Board Members and meets four times a year. It approves, monitors and reviews the organisation s remuneration policies, governance policies and related procedures with respect to the Board and Executive Team. It also reviews the recruitment policy and procedures for the Executive Team. The Care Committee comprises three Board Members and two Independent Members with Care and Support specialism. It meets four times a year to monitor and review the quality of care and support provided by the Association and to ensure the obligations and requirements of the Care Act 2014 are correctly discharged by the Association and the Board. At the top level of the comprehensive internal complaints system there is a Complaints Sub Committee which meets as required and includes at least three Board Members. The Board and its Committees obtain external specialist advice from time to time as necessary. Annual Compliance Statement The Board of NCHA undertook a self assessment of compliance with the Homes and Communities Agency Regulatory Framework and in particular the Governance and Viability Standard and satisfied itself that the Association was fully compliant. Statement on the System of Internal Control The Board has overall responsibility for establishing and maintaining the whole system of internal control and reviewing its effectiveness. The Board recognises that no system of internal control can provide absolute assurance against material misstatement or loss or eliminate risk of failure to achieve business objectives. The system of internal control is designed to manage key risks and to provide reasonable assurance that planned business objectives and outcomes are achieved. It also exists to give reasonable assurance about the preparation and reliability of financial and operational information and the safeguarding of the organisation s assets and interests. Identification and Evaluation of Key Risks The Board confirms that there is a long-term on-going review process for identifying and managing significant risks faced by the Group covering the period up to the annual report. Management responsibility has been clearly defined for the identification, evaluation and control of significant risks. There is a formal and ongoing process of management review in each area of the Association s activities. The Executive Team regularly considers and receives reports on significant risks facing the Association and the Chief Executive is responsible for reporting to the Board any significant changes affecting key risks. All Board and committee reports include a section detailing the risks arising or identified as a result of any information or recommendations included in the report. In meeting its responsibilities, the Board has adopted a risk-based approach to internal controls which are embedded within the normal management and governance process. This approach includes the regular evaluation of the nature and extent of risks to which the organisation is exposed. The Risk Panel and our Board 14

20 STRATEGIC REPORT OF THE BOARD (continued) of Management have continued to work together to assess the quantification of our risk appetite and have produced the following Risk Appetite statement: The Board recognise that the Group s activities involve risk and the taking of appropriately identified, evaluated and controlled risks in pursuit of business objectives is acceptable, particularly in pursuing business opportunities for the benefit of the Group and its customers. The risk based approach is consistent with best practice across the sector. The process adopted by the Board in reviewing the effectiveness of the system of internal control, together with some of the key elements of the control framework, includes: The annual review of the Risk Management Strategy, Risk Management Procedure and Strategic and Operational Risk Maps is an ongoing process for identifying and managing significant risks faced by the organisation. This process has been in place throughout the year under review, up to the date of the annual report and accounts, and is regularly reviewed by the Board. As of March 2017 the risk maps identified the top risks facing NCHA as relating to the Welfare Reform Act whilst the top risk to Lets Select Limited as relating to profit generation. In addition, the Risk Panel annually sets a plan at the beginning of each year to demonstrate to the Executive Team, Audit Committee and Board how it intends to deliver its risk management objectives during the year. Over the past 2 years the NCHA Group has developed and implemented a comprehensive Risk Assurance framework and Assurance Map, which clearly evidences how Board obtain assurance that the key risks have been managed and mitigated. Environment and Control Procedures The Board retains responsibility for a defined range of issues covering strategic, operational, financial and compliance issues including treasury strategy and new investment projects. Policies and procedures cover issues such as delegated authority, segregation of duties, accounting, treasury management, health and safety, data and asset protection and fraud prevention and detection. Information and Financial Reporting Systems Financial reporting procedures include detailed budgets for the year ahead, detailed management accounts produced monthly and forecasts for the remainder of the financial year and for subsequent years. These are reviewed in detail by the Executive Team and are considered and approved by the Board. The Board also regularly reviews key performance indicators to assess progress towards the achievement of key business objectives, targets and outcomes. Monitoring and Corrective Action A process of regular management reporting on control issues provides assurance to senior management and to the Board. This includes a rigorous procedure for ensuring that corrective action is taken in relation to any significant control issues, particularly those that may have a material impact on the financial statements and delivery of our services. A detailed system of performance indicators is monitored by the Executive Team and corrective action identified. The internal control framework and the risk management process are subject to regular review by Internal Audit who advise the Executive Team and report to the Audit Committee. The Audit Committee considers internal control and risk at each of its meetings during the year. The Audit Committee conducts an annual review of the effectiveness of the system of internal control and has taken account of any changes needed to maintain the effectiveness of risk management and control process. The Audit Committee makes an annual report to the Board. The Board has received this report. The Board considers an annual self assessment against the HCA's Regulatory Framework to confirm compliance with regulatory requirements and best practice. 15

21 STRATEGIC REPORT OF THE BOARD (continued) Statement of the Responsibility of the Board and the Financial Statements The Co-operative and Community Benefit Societies Act 2014 and registered social housing legislation require the Board to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Group and Association and of the results of the Group and Association for that period of account. In preparing those financial statements the Board is required to: select suitable accounting policies and apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable United Kingdom accounting standards have been followed; subject to any material departures disclosed and explained in the financial statements, and prepare the financial statements on a going concern basis unless it is appropriate to presume that the Association will not continue in business. The Board is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and Association and enable it to ensure that the financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing It has general responsibility for taking reasonable steps to safeguard the assets of the Group and Association and to prevent and detect fraud and other irregularities. The Association complies with the Homes and Communities Agency's requirements on fraud. In particular, there is a clear policy on fraud that has been approved by the Board and distributed to all staff. The policy requires a register to be maintained of all actual and attempted fraud. All such cases will be reported to the Board. All cases in excess of 5k or any case involving senior management and Board irrespective of the amount must be reported promptly to the Homes and Communities Agency. The Association's policy on antifraud covers the prevention and detection of fraud, the internal and external reporting requirements and the recovery of assets which include legal resolution. Furthermore, the Board also has an established whistleblowing policy. There was one minor reported case of fraud during the year ended 31 st March The Board and Executive Officers who held office at the date of approval of this Board report confirm that, so far as they are aware there is no relevant audit information of which the auditors are unaware. The Board and Executive Officers have taken all steps they ought to have taken as a Board and Executive Officers in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. Post Statement of Financial Position Events We consider that there have been no events since the financial year end which have had a material effect on the financial position of the Group and Association. Going Concern The Group s financial statements have been prepared on a going concern basis which assumes an ability to continue operating for the foreseeable future. The Government s announcements on the rent setting formula in July 2015 impacted on the future income of the Group and led to a reassessment of the Group s business plans, where affected, including assessing the likelihood of imminent or future breaches of loan covenants. No significant concerns were noted and we consider it appropriate to continue to prepare the financial statements on a going concern basis. Operating and Financial Review The Nottingham Community Housing Association Group continues to develop its main areas of operation with 6,866 social housing homes (2016 6,744), 1,436 supported housing units (2016 1,470),

22 STRATEGIC REPORT OF THE BOARD (continued) shared ownership homes ( ) together with 130 ( ) properties let at market rents. Of the properties owned, 132 ( ) properties are managed on its behalf by other organisations. The Group s main source of income is the provision of social housing and this generates 54% of the Group s turnover. Care and Support income streams generate 34% of total turnover. Care and Support properties however represent only 16% of the Group s property stock as more services are provided to customers in their own homes. At the 31 st March 2017 NCHA also had 703 properties under development ( ). The Group s housing stock is split mainly between the properties built before 1945 (20%) and those built after 2000 (45%) with the remainder (35%) constructed between these dates. All of the stock is maintained to Decent Homes standard. We are further developing our Direct Maintenance Service (DMS) to ensure that it demonstrates value for money and we have invested further in the expansion of this area of our operation. Additional growth is planned in the coming year as we intend to demonstrate that the efficiency provided to Nottingham Community Housing Association can enable the Group to achieve better value for money by procuring maintenance services using its in-house team. In addition, the investment in the DMS will result in the creation of more jobs, apprenticeships and training opportunities which will help with the delivery of this corporate objective. The Association plans to spend 77m on maintenance and improvements over the five years to 31 st March As part of the corporate and business planning process we have developed a programme of maintenance and improvement expenditure based on our in-house stock condition information. We measure our performance against our own budgets and financial projections and against indicators provided by the Homes and Communities Agency and the Housemark Benchmarking club. Our objective is to improve the standard of services we provide whilst improving the efficiency of the organisation. Demand for Housing Demand for one bedroom flats and two bedroom houses has increased whilst demand for three or four bedroom houses and two bedroom flats has decreased as a result of the under occupation charges payable by some tenants who are in receipt of housing benefit. New and innovative ways are being used to let these homes. This has resulted in our void times continuing to reduce. Turnover The Group s turnover for the year was 82.1m (2016 restated 77.2m) and was in line with the financial projections. This represents income from rents, service and support charges, development and design services, and sales of housing properties. Operating Costs Operating costs are incurred on the management and maintenance of the housing stock owned by the Group and the provision of services, including care and support services, to the Group s customers plus the costs of the properties developed for sale. Financing The Group has loans of 247m ( m), which is 41.5% of the cost of our housing stock and we incurred net financing charges in the year of 11m ( m). This equates to an average interest rate of 4.6% ( %) for the Group and the total cost of finance was substantially in line with the budget for the year. NCHA has sufficient secured undrawn loan facilities in place to meet the development loan requirements for the next eighteen months and is currently planning the process to meet its longer term requirements. At 31st March 2017 NCHA had 13m of undrawn loan facilities, which are now fully secured, in addition to 24.3m liquid funds. 17

23 STRATEGIC REPORT OF THE BOARD (continued) Interest costs incurred are in line with the organisation s budget, partly as a result of the implementation of the treasury policy, which allows flexibility in the proportions of floating rate and hedged debt. Nottingham Community Housing Association does not act as a counter party in any derivative transactions; all fixings are entered into within the loan agreements. A quarterly report is provided to Board on investment performance and the current funding position. The proportion of interest at fixed rates at 31 st March 2017 was 83% which is 1% lower than it was in the previous year. As a result of this policy we expect to maintain control and effective risk management of our loan portfolio. The Group borrows only in Sterling and so does not have any currency risk. As part of NCHA s ongoing treasury management arrangements, in May 2017, Board approved a new loan facility with Svenska Handelsbanken AB (publ) of approximately 15m. Loan Covenant Compliance We have four key covenants in NCHA's loan agreements: asset cover ratios based on valuations; one Statement of Financial Position covenant based on net worth; and, two income covenants, all measured against the Association's performance. We exceed all of the covenants by a comfortable margin for the current year and our financial projections demonstrate that this will continue into the foreseeable future. Cash Flow The Group has made nominal drawings ( m) from its loan facilities during the year. From the accumulated drawings 16.3m was held in short term cash accounts and 18.5m was held as a short term investment at the year end. The delivery of its maintenance and property improvements plans of over 13m (2016 nearly 15m) has been funded mainly from the rental and service income received. In addition this income, together with over 3m (2016 over 3m) Social Housing Grant, and disposal proceeds of nearly 13m (2016 8m) has funded over 26m (2016 over 30m) of investment in additional social housing properties. Result for the Year The Group has achieved a surplus of 8.8m for the current year (2016 restated 5.1m surplus) which exceeds budgets and projections made during the year due to a number of efficiencies made over the year. Value for Money Self Assessment ONE TWO THREE FOUR FIVE SIX SEVEN Introduction Our approach to assessing and delivering VFM Delivering value for money through more homes Delivering value for money through great services Delivering value for money through better lives Added social value and return on investment Looking forward: lessons learned and our plans to improve ONE Introduction The Nottingham Community Housing Association group of companies is an independent housing and care organisation working across the 6 counties of the East Midlands in 31 local authority areas. 18

24 STRATEGIC REPORT OF THE BOARD (continued) We have been providing housing and care for over 40 years and currently manage over 9,000 homes as well as providing care and support services to the most vulnerable in our communities. We currently employ in excess of 1,100 staff, have a turnover of over 82m, reserves of over 82m and an asset base of over 500m. Over the next 5 years turnover is expected to grow to almost 100m, reserves to over 100m and our asset base to almost 700m. In achieving this we will increase local employment and be able to provide great services to families in just short of 10,000 homes. Subject to the challenges in the care and support market we also aim to increase the numbers of vulnerable people who receive our services across the communities within which we operate. NCHA is proud of its legacy and reputation as a quality provider of Care and Support services and are committed to continuing to develop these services where it is possible to guarantee quality at the price offered from Local Authorities. We are committed to providing great services to all of our stakeholders and partners and aim to consistently achieve satisfaction ratings amongst our tenants, leaseholders and service users of more than 90%, 87.5% and more than 95% respectively. We recognise that external factors may affect results but we will strive to achieve these high levels of satisfaction. In delivering our corporate objectives we will have improved the lives of our customers. Our group of companies is wholly owned or controlled by Nottingham Community Housing Association Ltd, a traditional, independent, charitable social landlord registered under the Co-operative and Community Benefit Societies Act Subsidiary companies enable the Group to deliver all forms of housing and care and through our commercial subsidiary Lets Select Ltd, to undertake profitable activity, which assists the work of the group. We are committed to using this financial strength to add social value by, amongst other things, creating training and long term employment opportunities in the communities within which we work. Our key priority is to protect our viability (V1) and maintain our governance (G1) Homes and Communities Agency (HCA) regulatory ratings. Our mission is to provide high quality, low cost housing, services and support for more people in need. We concentrate on people not places and cover housing, care and community in our work. In addition, we have a commercial purpose, which we deliver via our subsidiary Lets Select Limited, which is to carry out business as a general commercial company to make profits to gift aid to NCHA. TWO Our approach to assessing and delivering value for money The Board directs NCHA s delivery of effective and efficient working practices, ensuring value for money for its customers in accordance with NCHA s Procurement and Value for Money Strategy. Within this strategy specific efficiency targets are set and the successful delivery measured each year within reports to Board. These reports detail financial and non-financial gains including added social value. The non-financial and added social value gains have been recognised through the improvements in customer satisfaction. These are detailed in later sections of this self assessment. In financial terms, tangible gains of over 1m have been made each year for a number of years. These have contributed towards increased surpluses for the Group. A summary of the targeted and realised financial gains are detailed below: 19

25 STRATEGIC REPORT OF THE BOARD (continued) Planned and Realised Gains Planned Realised /14 1,464 1, /15 1,247 1, / /17 1,123 1,006 1,431 1,772 Planned & Realised Gains 2013 to ,840 6, /18 Planned Gains 671 The table above shows that over the 4 years the gains realised exceed the planned gains in most years and exceed the planned gains across the overall period. The following two tables provide breakdowns of the gains realised in 2016/2017. The first shows nearly 1m of gains identified and incorporated into the budget. The second shows the additional gains identified in the period. Gains Incorporated Into 2016/2017 Budget Review of PST Business Streams Actual Savings 306,980 DMS surplus, works delivered at less than Schedule of rates price under Tendered Framework agreement 412,000 Grounds Maintenance Procurement Care And Support Consultancy Net increased income from external sources by IHT Team Disabled Facilities Grants Managing Recruitment Process & Timing Care And Support White Goods Procurement Efficiencies Fleet Cars Sure Developments Sales Service Fee Income IHT REVO Kaizen Care And Support Driving Tests 25,000 70, ,000 10,000 7,332 5,000 9,350 5,800 1, ,890 Additional income for Dialectical Behaviour Therapy (DBT) training for Care And Support 9,500 Total Gains Incorporated Into The Budget = 975,752 20

26 STRATEGIC REPORT OF THE BOARD (continued) Additional 2016/2017 in year gains identified Saving on employee benefits Reduced bad debts ILOP (sheltered) void loss Savings Identified 4, ,000 20,000 Lean Recharges review 1,000 less letters 1,500 Tenant Involvement structure review (less meetings) / Lean admin review 1,000 Implementation of Total Mobile for Scheme Managers has led to greater work efficiencies and removed the need to increase staff despite an increase in Health and Safety activities and properties with communal areas. 30,000 Controlled expenditure and improved, efficient practices in projects 415,978 Reduced bad debts - General Needs 86,999 Reduced void costs - General Needs 70,078 External work and fees to external clients using existing resources 54,000 Total Additional Gains Identified In ,855 Total Gains = 1,771,607 As in previous years further gains have been identified and incorporated into the budget for the new financial year. It is anticipated that over the course of the year, further efficiencies will be identified. This expectation is in line with the experience of previous years. 21

27 STRATEGIC REPORT OF THE BOARD (continued) Gains Incorporated Into 2017/2018 Budget Planned Savings Rationalisation of Care and Support phone lines 12,800 PSTs: Extra income without extra expenditure because increased use of tablets has reduced travel time and made more staff time available to take on extra work 7,000 Procurement of all flooring 5,000 Shared ownership re-sales service fee income 16,320 Net increased income from external sources by IHT Team 120,000 Reduced void loss due to Lean efficiencies and void property sales 46,000 Saving in treasury costs arising from the Lean review of sales processes 30,000 Reduced bad debts due to Lean efficiencies 1,000 Heating team reduction in 3* gas costs from 120 to 100 per property using Lean reviews of planning and appointment processes 130,000 Use of framework procurement of vans for DMS - savings on previous supplier 75,000 Reduction in responsive repairs as per Board 100,000 Reduction in relet plus as per Board 100,000 Utilities brokerage 8,000 Mechanical and electrical anticipated savings 7,000 Lean Recharges review 1,000 less letters 5,000 Tenant Involvement structure review (less meetings) / Lean admin review 3,000 Re-tendering of window cleaning and cleaning contracts 5,000 Total Gains Incorporated Into The Budget = 671,120 NCHA also undertakes pre-project and post-project assessments on major capital investment decisions, recognising through its business planning and budgeting process the opportunity cost of these investment projects to ensure returns both social and financial have been optimised. NCHA manages and monitors the delivery and measurement of value for money across the Group through its Procurement and Value For Money Champions Group, which is made up of senior officers, managers and staff from across NCHA. For the Group value for money is not simply about reducing costs but achieving a balance between costs and quality, with a particular focus on customer needs. The drive is to maximise the use of the Group s assets to deliver social, environmental and financial returns. The opportunities for efficiency come through economies of scale, financial strength, rationalisation, simplification and regulation. Good is not good enough: at NCHA we are driven to improve already good services into great services to help provide better lives for our customers. THREE Delivering value for money through more homes One of the fundamental parts of the NCHA Group vision has remained consistent for many years: the delivery of more homes. 22

28 STRATEGIC REPORT OF THE BOARD (continued) We have maintained a development programme of, on average, in excess of 250 units each year in recent years. From 2016 onwards we have set ourselves a more challenging target programme of 300 homes each year, i.e1,500 more homes planned for the next 5 years. This reflects a development programme of in excess of 3.0% of our existing housing stock each year. We have identified that we can achieve development growth whilst maintaining the Group s viability. As funding from other sources has reduced over the past 5 years from over 50% to below 20% the Association has compensated for this with its own resources. We are investing our cash surpluses from operations. We are also investing proceeds from the disposal of unwanted properties, which is part of our asset management strategy (see below). Overall our own investment is supporting over 50% of the cost of the development programme. This is a substantial increase from the less than 20% share that was contributed five years ago. To achieve this the Association has reduced costs and increased profits, delivering improved value for money, to enable over 14m of its own resources to be invested in new homes in The Association s investment of its own funds in the provision of more homes over the past five years was over 90m. This provides a return on investment in cash terms, based on the investment from the public purse of nearly 220m of SHG, of over 8% per annum. The Association plans to invest 130m of its own funds, including proceeds from property sales, into the provision of 1,500 new affordable homes in the next 5 years. This provides a return on investment in cash terms, on the investment from the public purse of on average over 220m of SHG, of nearly 8% per annum. Asset management A key part of the Group s Asset Management Strategy is to recognise deterioration in the return from individual properties and informed by our Reinvestment Appraisal Model (RAM). This looks at both financial and added social value. Using the RAM we identify properties for sale. For every property we sell we currently deliver 1.8 new homes. This ratio is expected to rise to 3.6 new homes for each property we sell, depending on the implementation of the Voluntary Right to Buy initiative and the level of SHG and other subsidy (the latter two continues to fall). The Group s plans for More Homes over the next 5 years are very reliant on sales of existing housing properties, as well as properties for outright sale from year 2 of the plan through Lets Select Limited. We monitor on a month by month basis the Property Sales market and any downturn in volumes or prices will result in a review of our development plans. The purpose of the following two tables is to demonstrate to what extent NCHA has and then can finance its on-going development programme though its own resources. Development is funded through a mix of loan, grant and our own resources. Loan facilities are in place to be available to draw and a refinancing exercise is currently underway for part of the loan portfolio for the medium term. These tables show grant is a decreasing part of funding development. They also show that we are able to fund an increasing proportion of our programme from our resources meaning the drawing of existing facilities and the arrangement of new facilities can be used later than would have otherwise been the case. This means increasing the use of our own resources means loans can be used to fund more homes at a later date than would have otherwise been the case. 23

29 STRATEGIC REPORT OF THE BOARD (continued) Research by the National Housing Federation (NHF) demonstrates that each new home built in the East Midlands adds 83,000 (as at February 2016) to the local economy, delivering 1.9 jobs. Based on these statistics the Group s development programme provides around 570 jobs each year and adds nearly 25m to the local economy each year, based on an average programme of 300 units. Over the next 5 years this has the potential to result in 570 permanent jobs, adding nearly 125m to the local economy, based on an average of 300 units a year. 24

30 STRATEGIC REPORT OF THE BOARD (continued) Through our commercial subsidiary Lets Select Ltd we have built 116 new homes and currently have an ongoing programme, developing additional homes for sale on the open market. Our development and design teams manage delivery of the Group s programme and those of other organisations. The Group s programme has been for more than 250 units a year on average for the past five years. We achieve greater efficiency by utilising their expertise to assist other organisations to develop more homes. The development and design teams are currently working with six organisations, effectively sharing services, with a programme to deliver an average of 150 more new homes for each of the next three years for them having helped some of those organisations deliver on average 100 homes per year for each of the past five years. A key element prior to the Group s investment decisions is a detailed financial evaluation calculating Net Present Value for individual investment schemes and the programme as a whole. In addition each scheme is considered by the operational teams to confirm that the scheme will meet the social need the investment is proposed for. On an annual basis we consider post-project appraisals on the programme as a whole and for individual schemes. We look in detail at how successfully we have delivered both financial value and added social value. As a result of the post-project reviews we are able to evidence that the programmes deliver substantial positive financial value and the individual schemes demonstrate the specific added social value planned and are consistently delivered within the original appraisal budgets. At a global level the Group considers the return on assets by reference to public funds invested in the form of SHG, not just to fund more homes as detailed above, but also in relation to annual surpluses. The Group includes targets in relation to surpluses for quarterly Board monitoring. The current year s surplus demonstrates for NCHA a return of 3.2%. Our current plans for the next five years include the aim to achieve a return of 2.9% each year. Using the HCA s Global Financial Accounts to track NCHA financial performance The Association is a charitable not-for-profit organisation generating surpluses to reinvest in its existing housing stock and in the provision of more homes as detailed above. We manage and monitor certain key financial indicators carefully to ensure we continue to improve our viability. We measure our financial performance against the HCA s Global Financial Accounts. This report demonstrates that the Association is financially sound but with higher loans and gearing levels than the majority of other registered providers. 25

31 STRATEGIC REPORT OF THE BOARD (continued) The Association has been tracking its financial performance using the Global Financial Accounts since Most of the indicators demonstrate that the Association is just below the median amongst the 50% least profitable, most highly geared traditional registered providers for both profitability and gearing. The HCA has publishes information extracted from the Global Financial Accounts and quantified a Headline Social Housing Cost Per Unit. The median indicator is projected as 3,627 based on the projected 2017 accounts ( 3,570 based on the projected 2016 accounts). This will be updated when the HCA publishes the 2017 accounts. NCHA s cost is 4,903 per unit for 2017 (2016 5,349) showing a significant improvement. The report also identifies the significant additional costs related to the provision of Care and Support. Excluding support costs HCA cpu is 3,139 per unit which is a significant improvement on 2016 ( 3,484). When the HCA publishes the 2017 results it is expected that this improvement will mean that the Association will still be able to demonstrate that it is below the median cost for the sector but has the potential to implement significantly greater efficiencies to achieve the lower quartile costs. Whilst we have maintained our investment in more homes throughout that period, our profitability has increased both in real terms and relative to our peers. At the same time, our interest costs have fallen, and fallen relative to our peers. This clearly demonstrates the successful delivery of our Procurement and Value for Money Strategy over that period. We use Global Financial Accounts information to ensure we optimise our returns from our investment in housing property. The graph below demonstrates how our gearing over the last five years has increased slightly as we maintain our investment in the development of housing properties but has improved marginally in relation to our peers (based on projected figures for our peers) as we have utilised the increased surpluses to invest in more homes and therefore limit the loan finance required, in a period that grant and other capital subsidy has reduced. The surpluses for the sector have been growing steadily and this graph assumes that continues for 2017 for the global accounts, whilst the Association s surpluses have fallen slightly over the period. The gearing figures referred to in the table below reflect the definitions worked to in the global accounts. In the report of the board we refer to gearing as defined by our own covenants which differ markedly from the definition set out below. The definition used in the below is closer to Loans As A Proportion of Housing Property Cost shown in the Five Year Profile below. NCHA s commercial subsidiary, Lets Select Limited, was set up to generate surpluses to gift aid back to NCHA to assist it to deliver more homes in the face of falling grants. In 2017 it generated returns of 11% ( %). Since its creation the company has additionally provided gift aid to the Association and is 26

32 STRATEGIC REPORT OF THE BOARD (continued) working on delivering the Group s development for sale programme. It has also invested in Access Training Limited with a view to generating further returns which can then be gift aided to the Association. Another group company, Nottingham Community (Second) Housing Association also generates surpluses which are gift aided back the Association. The Group s forward-looking financial targets, as detailed in the Corporate Plan, incorporate growing reserves and viable levels of gearing. FOUR Delivering value for money through great services It is critical for the Group in assessing effective delivery of Value for Money that both cost and quality are measured and that the corporate drivers for specific outcomes detailed in our Corporate Plan are fully understood. Housemark benchmarking To enable the Association to undertake this evaluation we have been members of the Housemark Benchmarking club for eleven years. Throughout that period we have consistently benchmarked ourselves against Registered Providers in the North and Midlands; currently 41 organisations are part of this group. To ensure we can demonstrate quality as part of our evidence for the delivery of great services we rely on survey data which demonstrates that we are top quartile or very close to top quartile in our customers opinion in relation to their satisfaction with those services. The Group publishes its Key Performance Indicators each year in its corporate plan showing past, current and targeted performance. Housemark provides 9 indicators similar to our KPIs and these are replicated below demonstrating our actual performance and how we compare to our peers. Our objective is to be top quartile when measured against all KPIs and the table below evidences those areas that we aim to improve further. 27

33 STRATEGIC REPORT OF THE BOARD (continued) Housemark North and Midlands Club Benchmark Comparison 2012/13 to 2016/17 Projected Indicator Indicator Indicator Indicator Indicator Overall Satisfaction 91% Q1 90% Q2 90% Q2 91% Q1 91% Q1 Anti Social Behaviour - Satisfaction with Case Handling 78% Q4 79% Q4 85% Q3 89% Q3 89% Q3 Satisfaction With Repairs & Maintenance 87% Q1 83% Q2 83% Q2 85% Q3 85% Q3 Total Housing Management Cost per property 518 Q2 542 Q2 574 Median 579 Q3 579 Q3 Overheads as a percentage of Turnover 10.3% Q1 10.2% Q1 10.2% Q1 10.2% Q1 10.2% Q1 Relet Time - Weeks 3.7 Q3 2.9 Q Q Q Q1 Void Rent Loss 0.70% Q2 0.79% Q2 0.86% Q2 0.51% Q1 0.51% Q1 Total Rent Arrears 4.90% Q2 3.44% Q1 3.36% Q1 3.37% Q1 3.07% Q1 Proportion of Gas Services completed Q Q Q4 100% Q1 100% Q1 Progress has been made in all areas in Top quartile performance being achieved in six areas (2015 two areas). In the other three areas performance also improved in 2016 with the two third quartile satisfaction items making progress on the 2015 results and the increase Housing Management cpu in cash terms is actually a gain in real terms and reflects service priorities. Projected figures are shown for 2017 ahead of the checking, submission and validation process in the summer. It is anticipated that the progress made in 2016 will be built upon. The following two tables show the progress made between 2014/2015 and 2015/2016 compared to our peers. They show the positive direction of travel with indicators moving towards the bottom right good performance quadrant. 28

34 STRATEGIC REPORT OF THE BOARD (continued) The following table shows that on the total cost of rent accounting and collection per unit there have been cost increases in 2016 which reflects investment in the Income Management Team. It also shows that the total cost of Anti-Social Behaviour remains below that in 2013 and

35 STRATEGIC REPORT OF THE BOARD (continued) Analysis of Management Costs 30 Projected Indicator Indicator Indicator Indicator Indicator Rent Accounting & Collection Q Q Q Q Q3 Total CPP ASB Q Q Q Q Q2 Added value to the communities in which we operate Many of the services we provide for our customers result in savings to other organisations that would otherwise have to respond to the needs of members of the public who are NCHA customers: Anti-social behaviour savings for the police Care and Support - savings to the NHS and local authorities In undertaking regular gas servicing of all of our properties we reduce the risk of fires and explosions reducing the costs of the fire service. Improving performance through staff training We use the HACT calculations to quantify social value. 1,032 staff undertook general work related training = 1,617,144 HACT social value Cost of providing all training activities including management and administration costs and qualification programmes = 393 per person We provided 3,881 places for staff on our in-house training programme at an average cost of 38 per place. Courses included leadership and management training and a range of specialist health and social care courses to provide leaders, managers and staff with the skills and knowledge to meet the specific and changing needs of our tenants and service users. Staff completed over 3,200 e-learning courses through our partnership with the Housing e Academy/Virtual College at an average cost of 4.65 per course. E-learning provides an accessible alternative for staff with busy workloads and who work outside of office-hours. It reduces travel time and time away from the workplace and widens access to learning for staff who work at locations that are some distance from our training premises. 68 staff started an apprenticeship = 160,004 HACT social value 33 started another qualification = 37,092 HACT social value 193 staff were undertaking a qualification programme provided through the Association, including 101 staff who were signed up during the year. Providing qualifications for staff helps to improve skills levels, contributes to the retention of staff and builds organisational capacity. Staff also benefit from acquiring a work-based qualification which enhances their skills, knowledge and employability and career prospects. Delivering value for money benchmarked or measured outside the sector Our Care and Support team competes in the open market and has maintained the current level of business for the past five years at close to or above 23m each year. The team are successful only because they deliver consistent high quality services at low cost which enables them to compete for and win new business. Customer satisfaction statistics run steadily at above 97%. There are particular financial challenges in this sector at the moment, but the budget is set to break even in the current year. Care and Support continues to streamline costs and to identify income streams that will enable the business to ensure even better value for money and to deliver a top quality service to vulnerable people. Other teams across the Group evidence the delivery of value for money by competing for and winning new business for design, development, management and maintenance services. The quality of these services is evidenced by the successful continuation of these services in the open market.

36 STRATEGIC REPORT OF THE BOARD (continued) The external prices agreed for work in the open market informs our internal pricing, particularly in Maintenance and Design and Development. This demonstrates the competitive pricing of these internal services. Incorporated into our Corporate Plan are key performance indicators looking forward over the next five years which will require continual improvement in both the costs and quality of our services and will ensure we continue to deliver improved value for money as we deliver better lives to our customers. Understanding our costs A critical part of the Group s approach to ensuring we deliver value for money is being clear on the costs of the various functions within the Group. One element of this is the data we provide and the comparisons we make annually through Housemark but we rely mainly on detailed business centre based budgets and monthly management accounting data, which ensure we fully understand our own costs and in particular the costs that relate to the individual income streams and cost areas of our business. This is particularly critical across our Care and Support contracts where we deliver a significant level of added social value whilst ensuring that the income is adequate to meet the costs that we must incur to deliver great services and better lives. FIVE Delivering value for money through better lives NCHA has for many years funded work to provide much needed aids and adaptations to our customers homes thereby delivering value through contributing to better lives. The main areas of these works are outline below: As local authorities have faced greater budget pressures, they have found themselves unable to fund these works at all or in a timely manner, and so we have stepped in to fill the funding gap to ensure our customers get the facilities they need to maintain a decent quality of life within their own homes. We are currently working with local authorities on leveraging funds to share this cost, targeting 0.1m Disabled Facilities Grants each year to match our investment. With an annual budget of over 0.2m per year we have funded almost 1m of adaptations to help our customers live better lives over the last 5 years, with a further 0.5m planned for the next five years. In the year to March 2017 the 0.1m spend funded 125 separate adaptations. The table below details the expenditure and the type of adaptations undertaken on behalf of our customers Spend ( ) 178, , , ,104 69,900 Minor Adaptations Number Major Adaptations Number Number of Tenants helped by Adaptations Note: minor adaptations are works such as grab rails; major adaptations are works such as level access showers. 31

37 STRATEGIC REPORT OF THE BOARD (continued) Our technical services team carries out repair checks for tenants with restricted sight, contributing to better lives. We have identified approximately 59 tenants who have restricted sight and we annually survey their homes in order to help identify areas in need of repair, which we then address. The alternative would be to allow these tenants to live in their homes with the defects that they have been unable to identify. We also undertake smoke detector checks and replacements: we carry out annual checks of smoke detectors as part of the gas service, and replace defective smoke detectors or replace old batteries. Whilst we have no statutory obligation to carry out these checks we feel there is sufficient added value to make this beneficial for our customers, the Association, and ultimately the emergency services - adding broader social value. The alternative would be to leave this obligation with the tenant, potentially placing them at a greater fire risk. Our architects have developed an enhanced property specification to a number of our new build schemes including better lighting in the kitchen, turf rather than seeding in the garden, child/pet-proof fencing rather than chain link, curtain battens above windows and lighting to all car parks. All of this will help towards a better quality of life for our customers. Our maintenance division, part of our technical services team, provides instruction on the use of heating systems. We carry out detailed instructions with our tenants on how to use the heating systems in their homes at allocation and as part of the annual service. This helps our tenants to efficiently use their heating system. This is better service for our customers and adds broader social value by improving health and potentially through more efficient use of the heating, utilising less gas and electricity. The team provides an accessible repairs service, and we widely publicise the range of approaches that tenants can take to access our repairs service. In addition, we tend to carry out repairs as requested and very rarely revert to emergency responses only. By adequately resourcing our repairs service, we avoid incurring additional costs. Better lives through energy initiatives We carry out a large range of energy initiatives: Photovoltaic panels (PVs): we have installed PVs to six of our office buildings. These PVs are attractive business opportunities with payback between 7 and 10 years. They also help us to reduce our fuel bills, so that we can invest the savings into more homes, great services and better lives. They also help reduce our carbon footprint by the equivalent of approximately 1.5m car miles over the next 20 to 25 years, which equates to six of the maintenance division s vehicles average mileage for 25 years. The income and fuel bill savings over 25 years will enable us to build extra homes. We have also installed PVs to 179 of our homes. These PVs are expected to pay for themselves in 7 to 10 years, and they also help to reduce the fuel bills of our tenants, making their money go further. We provide home energy advice: we have recently completed our 800 th home energy advice visit. These visits have resulted in approximately 40,000 per year worth of combined savings on energy bills for our tenants and a planet-kindly 109 tonnes of carbon saved. We have also secured 386,000 of energy funding to upgrade 75 of our all-electric properties. Energy roadshows: we deliver regular energy roadshows to help tenants to understand how to save energy in their homes. Light bulb replacement programme: we have delivered a large scale light bulb replacement programme to install energy saving light bulbs to save our tenants electricity so that they get lower bills. 32

38 STRATEGIC REPORT OF THE BOARD (continued) Better lives through training One unemployed person recruited though the Nottingham Jobs Fund = 14,443 HACT Social Value Thirty people have moved from unemployment to employment through the NCHA/NJF programme over the last five years = 433,290 HACT Social Value Five Nottingham Jobs Fund staff moved into permanent posts with NCHA in 16/17 Three apprentices moved into permanent posts with NCHA in 16/17 For the past five years NCHA has worked with Nottingham City Council s Nottingham Jobs Fund (NJF) which aims to support local people into employment by providing twelve months work in real jobs with training opportunities. For the first time this has been costed in terms of the social value it adds which amounts to nearly half a million pounds. NCHA created 35 opportunities through the NJF programme for people who were unemployed. Twenty two of these staff moved into permanent jobs with NCHA and a further eight obtained jobs with other employers and three still on programme. These staff were struggling to find work prior to their NCHA/NJF placement. However, since obtaining experience in a real job and then a permanent job and training with NCHA, many of them have become high achievers and show great potential for the future. Our investment in Access Training Ltd, in partnership with Futures Housing Group, assists us in the delivery of added social value and better lives by providing access to vocational training, work experience and employment opportunities. For example NCHA tenants have benefitted from digital inclusion training provided through Access Training which has helped them to increase their access to information on issues that directly affect their lives such as employment opportunities and energy costs. In buying a share in Access Training we have changed a private, share dividend distributing company into a social enterprise where surpluses are reinvested in the community. Access is delivering training and learning to 717 learners on a range of programmes including: 63 study programme learners 479 apprentice learners 68 school learners 41 adult learners funded through student loans 43 adult learners funded through AEB 18 employer funded 5 ESF Funded Learners range in age from 14 to 60. They have mixed abilities, and many are achieving their qualifications against the odds. Access also delivers employability programmes for adults, including vocational, job search and life skills to help them move into work. In NCHA and Access developed an accredited programme of employability training for people in NCHA s Young Persons Services to improve their employment prospects and help maintain their access to accommodation and benefits. Volunteering for better lives 2016/17 has seen the expansion of our comprehensive and supported volunteering programme, adding social value and contributing to our vision for better lives. Benefits include; added-value within our services, provision of training opportunities and routes to employment for our tenants, residents and service users and a continued strengthening of our connections to the communities we serve. 33

39 STRATEGIC REPORT OF THE BOARD (continued) Our volunteers: Over 40 regular volunteers and student placements, working across three counties and volunteering within Care and Support, Service Improvement and Tenant Involvement. Volunteer roles include peer mentors, gardeners, catering assistants, activity session leaders, befrienders and digital helpers. Over half of our current volunteers are our service users, ex-service users, tenants or residents. In the last 6 months of the financial year, our volunteers and student placements have contributed a total of 7,515 hours. Based on national minimum wage, this represents an estimated economic value of 54,108 We have 37 regular volunteers contributing their time. Utilising HACT s Social Value Bank, a value i is attributed to regular volunteering and therefore represents an additional social value of 111,394 One off volunteers: To strengthen our community connections, whilst maximising the added social value, we have extended our work with local employers and organisations such as the Prince s Trust and in the last six months of the financial year, one-off volunteers have provided a further contribution of 2,724 hours. Based on national minimum wage, this represents an estimated economic value of 19,613 Volunteer tenant and resident panel members: In the last 6 months, our 33 volunteer tenant/resident panel members have contributed 198 hours and using HACT s wellbeing approach have generated 262,581 (Based on an average figure of 7,957 for being an active member of a tenants group) Whilst we recognise that this is not a full cost benefit analysis and that there are costs associated with providing quality volunteering opportunities, this is a key component of our wider commitment to social value. Other activities delivering better lives The delivery of added social value, a key element to enable the Group to deliver better lives to its customers, is achieved not in big corporate initiatives or through massive financial investments but often through individual members of our staff doing their jobs well and going that bit further. This report incorporates a number of examples of these activities, regularly recognised and appreciated by our customers through feedback. Clearly each time we house someone in housing need, provide care and support to one of our service users or training to help someone improve their chances of employment or better employment we add social value. These elements of our business and the added social and economic value from these activities are reflected in the National Housing Federation model as detailed in this report. SIX Added social value and return on investment The Group targets the delivery of added social value across all of its operating activities, from setting objectives for new investments in more homes and measuring them on completion, through the delivery of great services measured through our satisfaction surveys to ensure we deliver better lives for our customers. 34

40 STRATEGIC REPORT OF THE BOARD (continued) Our 5 main income generating areas are General Needs, Shared Ownership and Care and Support within NCHA, and across the Group, Lets Select Ltd and the Almshouses. We consider the return on investment against these areas measured against the net investment in Housing Properties in the table below: Return on Net Property Assets Invested Total General Needs 2.2% 2.0% 2.5% 2.3% 2.5% 11.5% Shared Ownership 1.6% 0.0% 1.1% 1.1% 0.8% 4.6% Care and Support 4.1% 1.4% 7.0% -11.5% -0.7% 0.3% Almshouses 9.7% 4.5% -1.6% 4.1% 4.6% 21.3% LSL 1.1% 2.2% 0.6% 0.9% -1.0% 3.8% The table above demonstrates how over time each of the main cash generating units contribute to the overall viability of the Group. This also helps inform our decision making processes and future operational plans with regard to these business units. Over the last 12 months and over the next 24 months the intention is to address the losses made by our Care and Support business. We recognise the importance of its Care and Support business - 34% of our turnover - achieving a breakeven position financially, over time, which is a critical mechanism for the Group to deliver added social value across the East Midlands. The care business is currently running at a financial loss supported by surpluses in previous years however Board consider the Added Social Value from this part of our business makes it worth supporting through these difficult economic times until it can return to a break even position. We have considered social return on investment (SROI), including one study which highlights a SROI on investment of more than 5 for every 1 spent on adaptations. These returns are from a range of other services including: reduced need for publicly-funded care home provision saving through increased safety and reduced hospitalisation of tenants saving through reduced need for social care provision saving through reduced need for self-funded care home provision substantial well-being benefits to tenants (such as independence, confidence, autonomy, and maintained relationships). Our recognition of these benefits helps inform our decision to continue our investment in the provision of adaptations to our homes. Our investment in adaptations over the last 5 years of 0.9m potentially adds social value of 4.5m. Where the cost of adaptations is shared with local authorities we are facilitating up to twice this value. Whilst we have not invested in a comprehensive study or a comprehensive mechanism for the quantification of SROI it forms a key part of the decision making in our investment appraisal and review processes and the above list is just a selection of areas in which we recognise the delivery of added social value. A large part of our annual efficiency gains come from our maintenance division, where we saved approximately 0.5m of our general needs maintenance budget in 2017 ( m) as a result of procurement savings and other efficiencies. This saving has enabled us to build an extra 10 homes in the pursuit of the more homes element of our vision. 35

41 STRATEGIC REPORT OF THE BOARD (continued) We recognise the delivery of added social value: 1. Through direct employment within NCHA We have increased the number of people employed from 882 full time equivalent (FTE) posts in to 884 at the end of the year. This is an increase in the year and almost 30% since 2012 when we employed only 685 FTE staff. The Group now provides employment for over 1,100 staff. Throughout we had 13 or more new apprentice or trainee posts within NCHA. 2. Through indirect employment Jobs created through the provision of more homes: in , 286 new homes were built, creating 341 new jobs, based on the NHF model. 3. Through training, learning and experience Tenants and service users attended and participated in even more training and learning events this year (293) provided through NCHA, including 89 people completing Sound as a Pound financial inclusion training and 46 people completing Digital Access training. We also provided seven school work experience placements and 10 placements for students in higher education. 717 learners have received accredited training through Access Training. This included 52 NCHA staff who were enrolled on apprenticeship programmes, tenants, service-users and others in the communities we work with. Accredited programmes improve the potential for employment for those without jobs and the potential for progression, increased earnings and maintaining employment for those already in work. This approach has been demonstrated by the success of people moving into work with NCHA through our Nottingham Jobs Fund programme. 1,032 staff completed work-related training courses, 293 staff were enrolled on qualification programmes and 34 staff completed a qualification. This benefits NCHA in terms of organisational expertise and capacity, as well as staff retention. Staff in turn benefit from having enhanced skills, increasing their career prospects and employability. 4. By addressing anti-social behaviour The team achieved 75% satisfaction against a target of 80%. 5. By meeting the needs of our customers for aids and adaptations We provided 147 adaptations in at a cost to NCHA of 0.1m. 6. By providing over 9,000 homes at a decent standard 7. By providing energy saving and green initiatives These save our customers money and reduce damage to the environment. 8. By providing social care and support to over 1,800 customers 9. By letting over 614 (General Needs) homes each year to people who needed them across the communities in which we operate 36

42 STRATEGIC REPORT OF THE BOARD (continued) SEVEN Looking forward: the lessons we ve learned and our plans to improve. NCHA continues to strive to do more and do it better. A key mechanism to enable us to achieve this is our Procurement and Value for Money Strategy. This strategy, which details our approach to the delivery of value for money, is reviewed annually. The coming year s objective is to deliver a number of improvements recommended by an independent consultant, Xantive, who reviewed the Group s procurement approach in This will enable us to achieve greater savings through an improved approach to procurement, whilst improving controls. NCHA has a good knowledge of its assets and liabilities utilising its Reinvestment Appraisal Model to identify the financial and non financial returns on its properties and schemes to inform investment decisions. Over the coming year we will be extending the use of this model to inform the LIFE (Lead, Influence, Follow or Exit) model we use in looking at our asset holdings in particular geographical areas within which our business operates. Having implemented our Asset and Liability Register in 2016 we have two key projects working together to ensure we know our assets and expand the asset and liability register. Both these projects will assist us in the delivery of our current Asset Management Strategy and its future development. A key element to ensure we deliver our five year Corporate Plan, including the improving cost and service standard KPIs, is our improvement planning process. This will be delivered in the coming year, utilising the lean approach across the Group, through detailed Departmental Operational Plans (DOPs), each of which recognises the underlying requirement to deliver value for money including added social value. A stated target of our lean approach is to achieve efficiency gains of up to 0.5m each year over future years. Our Care and Support business faces tremendous pressures resulting in losses in 2015/2016. We will reduce the losses in the short term and achieve break even within the next 3 years. We are using the Housemark Dashboard, detailed above, as one of the key indicators to evidence our successful delivery of Value for Money. We have one indicator, responsive repairs and void works, demonstrating poor performance. Our objective is to have all indicators demonstrating good performance with the majority also demonstrating low cost. NCHA took part in the Sector Scorecard pilot project and intends to give increasing focus to this area. Whilst the results of the pilot are not available at the time of publishing these annual accounts we have already undertaken analysis of our own input. We recognise a large element of this is our substantial Care and Support business and will look to find similar bodies to benchmark with. We are also considering this metric after removing this element. As part of More Homes we will consider Units Developed (As a percentage of units owned) 2.75%, as part of Great Services we will consider Occupancy 98.58% and as part of Better Lives we will consider Percentage of Respondents Very or Fairly Satisfied That Their Rent Provides Value For Money. 91%. 37

43 STRATEGIC REPORT OF THE BOARD (continued) Five Year Performance Indicators The trends in the five year profile below demonstrate the consistent strength of the Group over the past five years. The figures for reflect the Group structure in place at that time, ie they do not include Leicester Quaker Housing Association (whose activity is now part of Nottingham Housing Association), Henry Brown s Homes Charity and Warner s Almshouses Charity. Similarly, those figures are from before the adoption of FRS102. The profit related figures in 2016 have been recalculated in line with the adoption of the Charities SORP by the housing based almshouses. The change in SORP usage is sufficiently immaterial that it does not change the stated statistics. All profit measures have been updated to reflect the inclusion of assets disposals in operating surplus. The various profit percentages for the five years to March 2017 are healthy and demonstrate substantial improvement over the period. This reflects the success of NCHA s staff in delivering efficiencies as part of the Procurement and Value for Money Strategy over this period. The proportion of emergency, urgent and routine repairs completed on time remains close to 100%. Our investment in planned maintenance and improvements means that the Group's housing property remains 100% Decent Homes compliant. We have an active approach to Asset Management which is positively impacting on the overall quality of our properties. We appraise properties when they become void and sell those in poorer condition that are in low demand areas and replace them with newly built properties. This approach, when delivered alongside a number of maintenance procurement and efficiency gains, has resulted in significant savings in delivering our repairs service. Our market rented properties, all managed through our commercial subsidiary Lets Select Ltd, continue to deliver a contribution to our profits. Whilst the surpluses have reduced as the properties age, the contribution to operating surpluses is 66%, comfortably exceeding the finance costs on the loans secured against these properties. The Statement of Financial Position ratios for loans and Social Housing Grant in relation to our Housing Property costs show the Group maintaining a healthy position in the increasingly challenging environment as the level of capital grants to support the development of new homes continues to fall. The Group is also maintaining a healthy level of both free and designated reserves, which will help ensure the continued maintenance of current properties to a decent standard as well as enabling continued investment in the provision of additional homes for future customers who need them. 38

44 STRATEGIC REPORT OF THE BOARD (continued) Nottingham Community Housing Association Group Five Year Profile Income and Expenditure Ratios Restated Restated Restated Restated Operating Profit Percentage 38% 36% 37% 35% 39% (Operating Profit plus Depreciation as a proportion of turnover) Surplus on ordinary activities after tax as a percentage of turnover 9.6% 9.4% 11.9% 6.64% 10.4% Interest cover 211% 213% 233% 226% 258% (Operating Surplus plus depreciation in relation to net finance cost) Average Interest rate 5.2% 5.1% 4.9% 5.1% 5.0% (Total revenue and capitalised interest as a proportion of the average loan, cash and investment balances) Social Housing: Void loss as a percentage of rents, service and support charges 1.6% 1.6% 1.7% 1.1% 1.2% Bad debts as a percentage of rents, service and support charges 0.8% 1.1% 1.4% 0.5% 0.4% Management cost per week per social housing unit in management Maintenance Costs per week per social housing unit in Management Routine Planned Capitalised improvement works Total Maintenance Costs Non Social Housing Activities: Operating Profit on Market Rent stock 75% 73% 75% 73% 66% Statement Of Financial Position Ratios Gross arrears as a proportion of total rent, service and support charges 3.3% 2.9% 2.8% 2.7% 2.1% Loans as a proportion of Housing Property Cost 41.4% 40.2% 40.9% 43.0% 41.5% SHG as a proportion of Housing Property Cost 48.8% 47.5% 47.0% 41.8% 41.4% Public Benefit Disclosure As a public benefit entity the Group has applied the public benefit entity PBE prefixed paragraphs of FRS

45 STRATEGIC REPORT OF THE BOARD (continued) Statement of Compliance The Board confirms that this Strategic Report has been prepared in accordance with the principles set out in paragraph 4.7 of the 2014 SORP for Registered Social Housing Providers. Annual General Meeting The Annual General Meeting will be held on 22 nd September Auditors A resolution to re-elect the Association s auditors Beever & Struthers will be made at the Annual General Meeting on 22 nd September The report of the Board was approved on 13 th September 2017 and signed on its behalf by: Claire Winfield Chair 40

46

47 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF NOTTINGHAM COMMUNITY HOUSING ASSOCIATION LIMITED We have audited the financial statements of Nottingham Community Housing Association for the year ended 31 st March 2017 which comprise the Statement of Comprehensive Income and Retained Earnings, Statement of Changes in Equity, the Statement of Financial Position and Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This report is made solely to the Society s members, as a body, in accordance with Section 87(2) of the Cooperative and Community Benefit Societies Act Our audit work has been undertaken so that we might state to the Society s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Society and the Society s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the Board and the Auditor As explained more fully in the Statement of Board s Responsibilities set out on page 16, the Board is responsible for the preparation of the financial statements which give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council s (FRC s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC s website at Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the Society s affairs as at 31 st March 2017 and of its income and expenditure for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Co-operative and Community Benefit Societies Act

48 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF NOTTINGHAM COMMUNITY HOUSING ASSOCIATION LIMITED (continued) We have nothing to report in respect of the following matters where the Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion: the information given in the Report of the Board for the financial year for which the financial statements are prepared is not consistent with the financial statements; or the Society has not kept adequate accounting records; a satisfactory system of control over transactions has not been maintained; or the financial statements are not in agreement with the accounting records and returns; or we have not received all the information and explanations we need for our audit. Beever and Struthers, Statutory Auditor St George's House Chester Road Manchester M15 4JE 13 th September

49

50 STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 st March 2017 Group Association Note Restated Turnover 2 82,065 77,248 77,553 74,384 Operating Expenditure 2 (62,675) (61,495) (58,614) (59,596) Operating Surplus 2 19,390 15,753 18,939 14,788 (Loss)/ Gain on Disposal of Investments - (5) - (3) Interest Receivable Interest and Financing Costs 8 (11,083) (10,815) (11,054) (10,803) Movement in Fair Value of Financial Instruments (1) 3 Gift Aid Receivable Surplus before Tax 9 8,536 5,119 8,522 4,606 Taxation 9a Total Comprehensive Income for the year 8,536 5,119 8,522 4,606 The financial statements on pages 43 to 87 were approved and authorised for issue by the Board on 13 th September 2017 and signed on its behalf by: Claire Winfield Paul Moat Chair Board Member Secretary The consolidated and parent results relate wholly to continuing activities and the notes on pages 47 to 87 form an integral part of these accounts. 43

51

52 STATEMENT OF FINANCIAL POSITION As at 31 st March 2017 Group Association Note Fixed Assets Tangible Fixed Assets (Housing Properties) Tangible Fixed Assets (Other Fixed Assets) Restated , , , , ,778 5,497 5,777 5,410 Investment Properties 13f 15,024 18, Investment in Subsidiaries ,000 2,000 Other Fixed Assets Investments Current Assets 533, , , ,684 Stock 16 4,336 2,989 2,759 2,882 Trade and Other Debtors 17 4,006 5,410 14,081 16,072 Current Assets Investments 18 8,503 13,368 8,503 13,368 Cash and Cash Equivalents 18 16,311 12,447 15,850 12,114 Creditors Amounts falling due within one year 33,156 34,214 41,193 44, (15,314) (16,660) (16,991) (17,461) Net Current Assets 17,842 17,554 24,202 26,975 Total Assets less Current Liabilities 551, , , ,659 Creditors Amounts falling due after more than one year , , , ,494 Capital and Reserves Non Equity Share Capital Income and Expenditure Reserves 82,043 73,507 71,687 63, , , , ,659 The financial statements on pages 43 to 87 were approved and authorised for issue by the Board on 13 th September 2017 and signed on its behalf by: Claire Winfield Paul Moat Chair Board Member Secretary The notes on pages 47 to 87 form part of these accounts. 44

53

54 CONSOLIDATED STATEMENT OF CHANGES IN RESERVES For the year ended 31 st March 2017 Group Association Income and Expenditure Income and Expenditure Balance as 31 st March ,641 58,559 Surplus from Statement of Comprehensive Income 5,132 4,606 Balance at 31 st March 2016 as previously stated 72,733 63,165 Charities SORP Restatement Balance at 31 st March 2016 Restated 73,507 63,165 Surplus from Statement of Comprehensive Income 8,536 8,522 Balance at 31 st March ,043 71,687 The notes on pages 47 to 87 form an integral part of these accounts. 45

55

56 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 st March Net Cash generated from Operating Activities (see note 1) 21,042 19,569 Cash Flow from Investing Activities Acquisition and Construction of Housing Properties (26,522) (30,647) Proceed from sale of Housing Properties 12,808 7,957 Purchase of Other Fixed Assets (1,504) (1,037) Capital Grants Received 5,696 3,173 Interest Received (9,364) (20,386) Cash Flow from Financing Activities Interest Paid (11,690) (11,460) New Secured Loans 36 22,700 Repayment of Borrowings (902) (423) Investments/Deposits Made 0 (11,665) Withdrawal from Investments/Deposits 4, (7,814) (694) Net Change in Cash and Cash Equivalent 3,864 (1,511) Cash and Cash Equivalents at Beginning of the Year 12,447 13,958 Cash and Cash Equivalents at End of Year 16,311 12,447 Cash Flow from Operating Activities Surplus for the year 8,536 5,119 Adjustments for Non-Cash Items: Depreciation and Impairment Charges 9,061 9,150 Amortisation (2,955) (2,950) Donated Income - (353) (Increase)/ Decrease in Stock (1,347) (1,504) Decrease/(Increase) in Trade and Other Debtors 854 (270) (Decrease) in Trade and Other Creditors (658) (978) Pension Costs Less Contributions Payable (159) 3,310 Carrying Amount of Housing Properties Not Developed for Outright Sales 6,981 5,070 Adjustments for Investing or Financing Activities: 20,313 16,594 Proceeds from the Sales of Housing Properties Not Developed for Outright Sales (10,299) (7,666) Loss of Sales of Other Fixed Asset Surplus on Sales of Investment (1) (1) Movement in Fair Value of Financial Instruments (80) (33) Interest and Financing Costs 11,083 10,815 Interest Received (149) (149) Net Cash Generated from Operating Activities 21,042 19,569 46

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58 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH 2017 Legal Status The Association is incorporated in England under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency (HCA) as a Private Registered Provider of Social Housing. The registered office is Pelham Road, Nottingham NG5 1AP. The Group comprises the following entities: Name Incorporation Registration Status With Homes and Communities Agency (HCA), National Almshouse Association (NAA) and Charity Commission (CC) Nottingham Community Housing Association Ltd Co-operative and Community Benefit Societies Act 2014 Registered HCA Nottingham Community (Second) Housing Association Ltd Co-operative and Community Benefit Societies Act 2014 Registered HCA Lets Select Limited Companies Act 2006 Non-registered Nottingham Annuity Charity Unincorporated charity Registered CC Nottingham Community Almshouse Charity Unincorporated charity Registered NAA and CC Blyth Cottages Charity Unincorporated charity Registered HCA, NAA and CC Henry Brown s Homes Charity Unincorporated charity Registered HCA, NAA and CC Warner s Almshouses Charity Unincorporated charity Registered NAA and CC 1. Principal Accounting Policies (a) Basis of Accounting The Group s financial statements have been prepared in accordance with applicable United Kingdom Accounting Generally Accepted Accounting Practice (UK GAAP) and Statement of Recommended Practice for Registered Housing Providers: Housing SORP As a non-housing organisation, the financial statements for the Nottingham Annuity Charity have been prepared in accordance with applicable United Kingdom Accounting Generally Accepted Accounting Practice (UK GAAP) and Statement of Recommended Practice for Charities: Charities SORP 2015 (FRS102). The financial statements for Nottingham Community Almshouse Charity, Blyth Cottages Charity, Henry Brown s Homes Charity and Warner s Almshouse Charity have also been prepared in accordance with applicable United Kingdom Accounting Generally Accepted Accounting Practice (UK GAAP) and Statement of Recommended Practice for Charities: Charities SORP 2015 (FRS102). The Group is required under the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969 to prepare consolidated Group accounts. The financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008, and the Accounting Direction for Private Registered Providers of Social 47

59 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) Housing The accounts are prepared on the historical cost basis of accounting except as modified by the revaluation of investments and are presented in pounds sterling. The Group s financial statements have been prepared in compliance with FRS102. In applying FRS102 the Group meets the definition of a public benefit entity. Parent Association Disclosure Exemptions: In preparing the separate financial statements of the parent association, advantage has been taken of the following disclosure exemption available in FRS102: 1. No separate Statement of Cash Flows has been presented for the parent association. No separate disclosure has been given for the aggregate remuneration of the key management personnel of the parent association as all staff are employed by the parent association and their remuneration is included in the totals for the Group as a whole. For each of the almshouses the published financial statements for the year ended 31 st March 2016 were prepared on the basis of applying the Statement of Recommended Practice for registered housing providers: Housing SORP For each of the almshouses the financial statements for the year ended 31 st March 2017 are prepared on the basis of applying Accounting and Reporting by Charities: Statement of Recommended Practice applicable to Charities preparing their accounts in accordance with Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS102) (effective 1 st January 2015) (Charities SORP (FRS102)). In preparing these financial statements, the Board considered whether in applying the accounting policies required by FRS102 and the Charities SORP FRS102 a restatement of comparative items was needed. This change affected Nottingham Community Almshouse Charity and Blyth Cottages Charity. In accordance with the requirements of FRS102, a reconciliation of opening balances and net income for the year ended 31 st March 2016 is provided with the net income under previous GAAP adjusted for the presentation of Social Housing Grant having previously been amortised. Reconciliation of reported net income for the year ended 31 st March 2016: Net expenditure as previously stated 123,029 Adjustment for amortised Social Housing Grant 7,112 Net expenditure as restated 115,917 Reconciliation of Social Housing Grant as at 31 st March 2016: Social Housing Grant as previously stated 378,767 Adjustment for amortised Social Housing Grant 117,625 Social Housing Grant as restated 496,392 Reconciliation of Revenue Reserves as at 31 st March 2016: Revenue Reserves as previously stated 2,046,329 Adjustment for amortised Social Housing Grant 117,625 Revenue Reserves as restated 1,928,704 Blyth Cottages Charity Reconciliation of reported net income for the year ended 31 st March 2016: Net Expenditure As Previously Stated 14,037 Adjustment For Amortised Social Housing Grant 6,090 Net Expenditure As Restated 20,127 48

60 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) Reconciliation of Social Housing as at 31 st March 2016: Social Housing Grant As Previously Stated 354,101 Adjustment For Amortised Social Housing Grant 103,769 Social Housing Grant As Restated 457,870 Reconciliation of Revenue Reserves as at 31 st March 2016: Revenue Reserves As Previously Stated 237,593 Adjustment For Amortised Social Housing Grant 103,769 Revenue Reserves As Restated 133,824 (b) Basis of Consolidation The Group financial statements consolidate the accounts of the Group entities listed above on the appropriate method of accounting. Where Nottingham Community Housing Association has become sole corporate trustee for almshouse charities, it has updated their accounting policies to become consistent with Nottingham Community Housing Association. Where required, properties have been reinstated at cost with the removal of property revaluation reserves. Group accounting and depreciation rules have been applied to all Almshouse properties and designated reserves have been transferred to unrestricted reserves to reflect NCHA policies. The National Almshouse Association appointed Nottingham Community Housing Association as sole corporate trustee of Henry Brown s Homes Charity on 30 th April The Group figures for the year ended 31 st March 2016 include the results of Henry Brown s Homes Charity for the 15 month period ended 31 st March 2016 and its assets and liabilities at 31 st March The National Almshouse Association appointed Nottingham Community Housing Association as sole corporate trustee of Warner s Almshouses Charity on 30 th November The Group figures for the year ended 31 st March 2016 include the results of Henry Brown s Homes Charity for the 15 month period ended 31 st March 2016 and its assets and liabilities at 31 st March The principal accounting policies for the Association are those of the Group except on depreciation where no charge is made against Lets Select Limited as the properties are held on an investment property basis (see policy o below). An entity is treated as a joint venture where the Group holds an interest and shares control under a contractual arrangement with one or more parties external to the Group. The only joint venture the Group is involved with is Three Together where Lets Select Limited holds one half of the control. An entity is treated as an associated undertaking where the Group has a participating interest and exercises significant influence over its operating and financial policies. POD is an associated entity of the Group with Lets Select Limited holding a significant interest along with the Longhurst Group. It provides development services to other organisations. Any profit distribution is determined on the basis of the relative inputs from both parties made in that period. (c) Going Concern The Group s financial statements have been prepared on a going concern basis which assumes an ability to continue operating for the foreseeable future. The Government s announcements on the rent setting formula in July 2015 impacted on the future income of the Group and led to a reassessment of the Group s business plans, where affected, including assessing the likelihood of imminent or future breaches of loan covenants. No significant concerns were noted in the business plan for and subsequent plans and therefore we consider it appropriate to continue to prepare the financial statements on a going concern basis. 49

61 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (d) Judgements and key sources of estimation uncertainty The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the date of the Statement of Financial Position and the amounts reported for revenue and expenses during the financial year. However, the nature of estimation means that the actual outcomes could differ from those estimates. The following judgements (apart from those involving estimates) have had the most significant effect on the amounts recognised in the financial statements: i. The Group capitalises development expenditure on the basis outlined below (see policies o and q below). Initial capitalisation of costs is based on management s judgement that development scheme is confirmed, usually when Board approval has taken place including access to the appropriate funding. In determining whether a project is likely to cease, management monitors the development and considers if changes have occurred that result in impairment. ii. iii. iv. Categorisation of housing properties. The Group has undertaken a detailed review of the intended use of all housing properties. In determining the intended use, the Group has considered if the asset is held for social benefit or to earn commercial rentals. Lets Select Limited is the only group company that holds investment properties. These are carried at fair value with changes in fair value being recognised in the Statement of Comprehensive Income. (see policy o below). The Group has reviewed the economic useful lives of its housing properties and depreciates the property cost, less freehold land and residual value, for all housing properties other than those held on an investment basis. All Non-Housing Property fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all Non-Housing Property fixed assets, to write off the cost less estimated residual value over their useful economic lives. Reviews for impairment of housing properties are carried out when a trigger has occurred and any impairment loss in a cash generating unit is recognised by a charge to the Statement of Comprehensive Income. Impairment is recognised where the carrying value of a cash generating unit exceeds the higher of its net realisable value or its value in use. The Group has identified a cash generating unit for impairment assessment purposes at a property programme level. Following a trigger for impairment, the Group perform impairment tests based on fair value less costs to sell or a value in use calculation. The fair value less costs to sell calculation is based on available data from sales transactions in an arm s length transaction on similar cash generating units (properties) or observable market prices less incremental costs for disposing of the properties. The value in use calculation is based on either a depreciated replacement cost or a discounted cash flow model. The depreciated replacement cost is based on available data of the cost of constructing or acquiring replacement properties to provide the same level of service potential to the Association as the existing property. The cash flows are derived from the business plan for the next 30 years and do not include restructuring activities that the Group is not yet permitted to do or significant future investments that will enhance the asset s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and the growth rate used for extrapolation purposes. There was no impairment trigger in and no impairment losses were identified in the reporting period. v. The cost of defined benefit pension plans and other postemployment benefits are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and the long term nature of these plans, such estimates are subject to significant uncertainty. In determining the appropriate discount rate management considers the interest rates of corporate bonds in the respective currency with at least AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. 50

62 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) The underlying bonds are further reviewed for quality, and those having excessive credit spreads are removed from the population bonds on which the discount rate is based, on the basis that they do not represent high quality bonds. The mortality rate is based on publicly available mortality tables for the specific sector. Future salary increases and pension increases are based on expected future inflation rates for the respective sector. Further details are given in note 10. vi. vii. Categorisation of debt: The Group s debt has been treated as basic in accordance with paragraphs 11.8 and 11.9 of FRS102. The Group has some fixed rate loans which have a two-way break clause (i.e. in addition to compensation being payable by a borrower to a lender if a loan is prepaid where the prevailing fixed rate is lower than the existing loan s fixed rate, compensation could be payable by the lender to the borrower in the event that a loan is prepaid and the prevailing fixed rate is higher than the existing loan s fixed rate). The Financial Reporting Council (FRC) issued a statement on 2 nd June 2016 in respect of such loans with no prescriptive direction as to whether they should be classified as basic or non basic. On the grounds that the Group believes the recognition of each debt liability at cost provides a more transparent and understandable position of the Group s financial position and that each loan still satisfies the requirements of paragraphs 11.8 and 11.9 of FRS102, the Group has retained its basic treatment of its debt following the FRC announcement. Loan Issue Finance Costs are amortised evenly over the life of the related loan. Loans are stated in the Statement of Financial Position at the amount of net proceeds after issue, plus any increases to account for any subsequent amounts amortised. Debt instruments that meet the conditions in paragraph 11.8(b) of FRS102 are measured at amortised cost using the effective interest method, except where the arrangement constitutes a financing transaction. In this case the debt instrument is measured at the present value of the future payments discounted at a market rate of interest for a similar debt. (e) Turnover and revenue recognition Turnover represents rental income (less loss of rent due to voids) and other charges receivable, amortised capital grant, revenue grants from local authorities and the Homes And Communities Agency, first tranche sales of Shared Ownership stock, sale of Rent To Homebuy properties, outright sales of properties for Lets Select Limited and other income and are recognised in relation to the period when the goods and services have been supplied. Rental income is recognised when the property is available for let net of voids. Both 2015/16 and 2016/17 are 52 rent week years. Sales of properties developed for outright sale are included in Turnover and Cost of Sales. Income from property sales is recognised on legal completion. (f) Support income and costs including Supporting People income and costs Supporting People contract income received from Administering Authorities is accounted for as Supporting People income in Turnover in note 2. Supporting People Income is recognised under contractual arrangements. The related support costs are matched against this income in the same note. Support charges included in the rent are included in the Statement of Comprehensive Income from social housing lettings (notes 3 and 4) and matched against the relevant costs. 51

63 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (g) Service charges Service charge income and costs are recognised on an accruals basis. The Group operates both fixed and variable service charges annually on a scheme by scheme basis in full consultation with the residents. Where variable service charges are used the charges will include an allowance for the surplus or deficit from prior years, with the surplus being returned to the residents by a reduced charge and a deficit being recovered by future higher charges. Until these are returned or recovered they are held as service charge sinking funds debtors or creditors (as applicable) due within one year in the Statement of Financial Position. (h) Leaseholders Funds Amounts are collected from leaseholders, where agreed, for future repairs and the replacement of furniture and equipment. Where periodic expenditure is required a provision may be built up over the years, in consultation with residents; until these costs are incurred this liability is held in the Statement of Financial Position within long-term creditors. (i) Loan interest costs Loan interest costs are calculated using the effective interest method of the difference between the loan amount at initial recognition and amount of maturity of the related loan. (j) Loan finance issue costs These are amortised evenly over the life of the related loan. Loans are stated in the Statement of Financial Position at the amount of net proceeds after issue, plus any increases to account for any subsequent amounts amortised. Where loans are redeemed in the year, any redemption penalty and any connected loan finance issue costs are recognised in the Statement of Comprehensive Income in the year in which the redemption took place. (k) Provision for Bad Debts A provision for General Needs and Supported Housing debts becoming irrecoverable is made against 100% of former tenant arrears and 50% of current tenant arrears for all customers more than 6 weeks in arrears. No provision is made against Shared Ownership arrears as it is assumed that action will be taken to recover arrears against the owner s equity in the property in the event of significant levels of arrears. Provisions are made against all other debts, 50% of arrears over 3 months old and 100% of arrears over 6 months old. (l) Retirement benefits The Association participates in the Social Housing Pension Scheme operated by the Pensions Trust, the NHS pension scheme and the Local Government Pension Scheme. These are final salary pension schemes and retirement benefits to the Association s employees are funded by contributions from all participating employers and employees in the scheme. Payments are made in accordance with periodic calculations by consultant actuaries and are based on pension costs applicable across the various participating associations taken as a whole. The cost of providing retirement pensions and related benefits is charged to management expenses over the periods benefiting from the employees services, as more fully explained in Note 10. The disclosures in these financial statements follow the requirements of Section 28 of FRS102 in relation to multi-employer funded schemes in which the Group has a participating interest. 52

64 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) Contributions payable under an agreement with the Social Housing Pension Scheme to fund past deficits are recognised as a liability in the Group s financial statements calculated by the repayments known, discounted to the net present value at the end of the financial year using the required market rate discount factor. The unwinding of this discount is recognised as a finance cost in the Statement of Comprehensive Income in the period incurred. (m) Corporation Taxation The Association has charitable status and is exempt from UK Corporation Tax. However, UK Corporation Tax is payable on profits retained in Lets Select Limited. Any profits made by Nottingham Community (Second) Housing Association would be gift aided to the parent association and therefore no UK Corporation Tax would be payable thereon. (n) Value Added Tax Although the Association is registered for VAT, most of its activities are exempt. It charges VAT on some of its income and is able to recover part of the VAT it incurs on expenditure. All amounts disclosed in these accounts are inclusive of VAT to the extent that it is suffered by the Group and is irrecoverable. (o) Housing Properties, Depreciation and Impairment Social Housing: The Group has reviewed the economic useful lives of its housing properties and depreciates the property cost, less freehold land and residual value, for all housing properties other than those held on an investment basis. Future estimated lives have been determined as follows: New Build Houses New Build Flats And Rehabilitated Houses Rehabilitated Flats And Care Homes Leasehold Properties 100 years 75 years 60 years The remaining lease period Where a housing property consists of two or more major components with substantially different useful economic lives, each component is accounted for separately and depreciated over its useful economic life. Expenditure relating to the subsequent replacement or renewal of components is capitalised as incurred. Depreciation is charged in equal annual instalments over the assets expected useful economic lives. The useful economic lives for the identified components are as follows: Freehold Land Structure: New Build Houses Structure: New Build Flats And Rehabilitated Houses Structure: Rehabilitated Flats And Care Homes Roof Lifts Windows And Doors Alternative Energy Systems Bathroom Kitchen Heating System Disabled Adaptions Not Depreciated 100 years 75 years 60 years 50 years 50 years 40 years 25 years 25 years 20 years 20 years 20 years 53

65 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) Donated land is included in cost at its valuation on donation, with the donation treated as a capital grant. In the case of Section 106 land, the valuation takes account of all the conditions of sale imposed by the Local Authority and its value in use to the Registered Provider. Housing properties in the course of construction are stated at cost and are not depreciated, and transferred to completed properties on practical completion. All invoices and architects certificates relating to capital expenditure incurred in the year are included in the financial statements for the year. All invoices and architects certificates relating to capital expenditure dated after the year end are also accrued on a pro-rata basis for the portion of work completed up to the year end. Expenditure on schemes which are subsequently aborted is written off in the year in which it is recognised that the schemes will not be developed to completion. Schemes constructed for Shared Ownership are included in Housing Property Costs only to the extent that the proportion of the scheme is expected to be retained. Reviews for impairment of housing properties are carried out on an annual basis and any impairment in an income generating unit is recognised by a charge to the Statement of Comprehensive Income. Impairment is recognised where the carrying value of an income generating unit exceeds the higher of its net realisable value or its value in use. An income generating unit could be a single property but is more normally a group of properties whose income and expenditure can be separately identified. Investment Properties: Investment property is the housing property stock of Lets Select Limited. It is not held for the social benefit of the Group. Investment property is measured at cost on initial recognition, which includes purchase cost and any directly attributable expenditure, and subsequently at fair value at the reporting date. Lets Select Limited carries its investment properties at fair value which is determined annually by external valuers and derived from the current market rents and investment property yields for comparable real estate, adjusted if necessary for any difference in the nature, location or condition of the specific asset. The Group engaged independent valuation specialists to determine fair value at the transition date, 31 st March 2014 and 31 st March No depreciation is provided. The changes in fair value are recognised in the Statement of Comprehensive Income. (p) Shared ownership and Rent To Homebuy properties The costs of shared ownership properties are split between current and fixed assets on the basis of the first tranche portion. The first tranche portion is accounted for as a current asset and the sale proceeds shown in turnover. The remaining element of the shared ownership property is accounted for as a fixed asset and subsequent sales treated as sales of fixed assets. Rent To Homebuy properties are held as Tangible Fixed Assets (Housing Properties) on the Statement Of Financial Position until sold. (q) Capitalisation of Interest and Administration Costs Interest on loans financing development is capitalised up to the date of completion of the scheme and only when development activity is in progress. Administration costs relating to development activities are capitalised only to the extent that they are incremental to the development process and directly attributable to bringing the properties into their intended use. 54

66 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (r) Property Managed by Agents The Association considers it carries the financial risk on property managed by agents and accordingly all the income and expenditure arising from the property is included in the Statement of Comprehensive Income. The assets and liabilities are included in the Group s Statement of Financial Position. (s) Non-Housing Property Fixed Assets, Depreciation And Impairment All Non-Housing Property fixed assets are stated at cost less accumulated depreciation. Depreciation is provided on all Non-Housing Property fixed assets, to write off the cost less estimated residual value over their useful economic lives on the following methods: Offices: Freehold Offices Leasehold Offices Property, Plant, Machinery & Fixtures: Office Equipment and Plant Scheme Equipment Care and Support Project Set up costs Vehicles: Vans and Cars Minibuses ICT Equipment Equal Annual instalments over 50 Years Equal Annual instalments over the life of lease Equal Annual instalments 4 and 5 years Equal Annual instalments 7 to 25 Years 25% pa on a Reducing balance basis 50% pa on a Reducing balance basis Equal Annual instalments over 7 years Equal Annual instalments 4 and 5 years The useful economic lives of tangible fixed assets are reviewed annually. Consideration is given each year as to whether or not there is a trigger for an impairment review. Where any impairment is identified it would be recognised by a charge to the Statement Of Comprehensive Income. No trigger was identified this year. (t) Fixed Asset Investments Valuation of Investments in subsidiaries: Investments in subsidiaries are measured at cost less accumulated impairment. The fixed asset investment held by the parent association in Lets Select Limited as shares is measured at cost. There is no accumulated impairment. The parent association intends to hold these shares on a continuing basis. The parent association also holds a fixed asset investment in the Nottingham Credit Union. These are shown at cost. The parent association also holds a fixed asset investment in Royal Bank of Canada Global Markets. Royal Bank of Canada Global Markets manage investments which represent a debt service reserve charged by Housing Securities Limited. The investments are to protect investors in the public debenture stock for the first twelve months interest in the event of a default by the parent association under the terms of the Trust Deed and loan agreement. These investments are included at their full market valuation as at the Statement of Financial Position date. The almshouse charities hold fixed asset investments. These are shown at full market valuation at each Statement of Financial Position date. Any gains and losses on re-measurement are disclosed in the Statement of Comprehensive Income for the period. 55

67 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (u) Current Asset Investments Current asset investments include cash and cash equivalents invested for periods of more than thirty days. They are initially recognised at cost and subsequently at fair value at the reporting date. Any change in valuation between the reporting dates is recognised in the statement of comprehensive income. (v) Stock of materials and properties held for sale Stocks of materials are included in the Statement of Financial Position in current assets at the lower of cost and realisable value, that being the estimated selling price less any costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis. Properties developed for outright sale are included in the Statement of Financial Position in current assets as they are intended to be sold, at the lower of cost or estimated selling price after costs to complete and then sell. At each reporting date both stock of materials and properties held for sale are assessed for impairment. If there was evidence of impairment the carrying value would be reduced to the selling price after costs to complete and sell. The impairment would be recognised immediately in the Statement of Comprehensive Income. (w) Short-term debtors and creditors Debtors and creditors without any stated interest terms which are receivable or payable within one year are recorded at the transaction price. Should any losses be incurred as a result of impairment, these would be immediately recognised as other operating expenses in the Statement of Comprehensive Income. (x) Social Housing and other government grants Where developments have been financed wholly or partially by Social Housing and other government grants, the amount of the grant received has been included as deferred income and recognised in Turnover over the estimated useful life of the associated asset structure, under the accruals model. Social Housing Grant received for non-land items of cost written off in the Statement of Comprehensive Income, including that which relates to a proportion of the development and design administration costs, is matched against those costs as part of Turnover. When Social Housing Grant in respect of housing properties in the course of construction exceeds the total cost to date of those housing properties, any excess is shown as a current liability. Social Housing Grant must be recycled by the Group under certain conditions, if a property is sold, or if another relevant event takes place. In these cases, the Social Housing Grant can be used for projects approved by the Homes and Communities Agency. However, Social Housing Grant may have to be repaid if certain conditions are not met. In certain circumstances Social Housing Grant may be repayable and, in that event, is a subordinated unsecured repayable debt. (y) Recycling of Capital Grant Where Social Housing Grant is recycled, as described above, the Social Housing Grant is credited to a fund which appears as a creditor until spent. Where recycled grant is known to be repayable, it is shown as a creditor within one year. 56

68 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) (z) Disposal Proceeds Fund Receipts from the sale of Social Housing Grant funded properties less the net book value of the property and disposals cost are credited to the Disposals Proceeds Fund. This creditor is carried forward until it is used to fund the acquisition of new social housing. (aa) Holiday pay accrual A liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the date of the Statement of Financial Position and is carried forward to the next financial year. This is measured at the undiscounted salary costs of this future holiday entitlement and so is accrued at the date of the Statement of Financial Position. (ab) Provisions The Association only provides for contractual liabilities. (ac) Financial Instruments Financial assets and financial liabilities are measured at transaction price initially, plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. At the end of each reporting period, financial instruments are measured as follows, without any deduction for transaction costs the entity may incur on sale or other disposal: Debt instruments that meet the conditions in paragraph 11.8(b) of FRS102 are measured at amortised cost using the effective interest method, except where the arrangement constitutes a financing transaction. In this case the debt instrument is measured at the present value of the future payments discounted at a market rate of interest for a similar debt. Commitments to receive or make a loan to another entity which meet the conditions in paragraph 11.8(c) of FRS102 are measured at cost less impairment. On the advice of our Treasury Advisors, Savills Financial Consultants, we have treated all Group bonds and loans as basic financial instruments, including those that have two-way break clauses in line with paragraph 11.9(b) of FRS102. There are no contractual provisions that could, by their terms, result in the holders (the lenders) losing the principal amount or any interest attributable to the current period or prior periods. The fact that a debt instrument is subordinated to other debt instruments is not an example of such a contractual provision. Financial instruments held by the Group are classified as follows: i. Financial assets such as cash, current asset investments and receivables are classified as loans and receivables and held at amortised cost using the effective interest method, ii. Financial liabilities such as bonds and loans are held at amortised cost using the effective interest method, iii. Loans to or from subsidiaries including those that are due on demand are held at amortised cost using the effective interest method, iv. Commitments to receive or make a loan to another entity which meet the conditions above are held at cost less impairment, v. An investment in another entity s equity instruments other than non-convertible preference shares and non-puttable ordinary and preference shares are held at fair value, vi. Derivatives such as interest rate swaps are classified as financial assets or financial liabilities at fair value. 57

69 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 ST MARCH Principal Accounting Policies (continued) Financial assets and financial liabilities at fair value are classified using the following fair value hierarchy: i. The best evidence of fair value is a quoted price in an active market. ii. When quoted prices are unavailable, the price of a recent transaction for an identical asset, adjusted to reflect any circumstances specific to the sale, such as a distress sale, if appropriate. i. Where there is no active market or recent transactions then a valuation technique is used to estimate what the transaction price would have been on the measurement date in an arm s length exchange motivated by normal business considerations. 58

70 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 2. Turnover, Cost of Sales, Operating Expenditure and Operating Surplus GROUP Turnover Operating Expenditure Cost Of Sales Operating Surplus/ (Deficit) Turnover ' Restated Operating Expenditure Cost Of Sales Operating Surplus/ (Deficit) 000 ' Restated Social Housing Lettings (note 3) 57,583 (40,731) - 16,852 56,982 (41,594) - 15,388 Other Social Housing Activities Contract Income 7,620 (8,106) - (486) 7,842 (8,944) - (1,102) Development Services 621 (583) (639) - (195) Low Cost Home Ownership First Tranche Sales 3,502 - (2,916) 586 2,313 - (2,216) 97 Rent to Homebuy First Tranche Sales 1,305 - (1,443) (138) (524) 28 Gain on Disposal of Property (note 6) 10,299 - (6,982) 3,317 7,666 - (5,070) 2,596 Donated Income (note 27) Other: Including 290k Pension Deficit 135 (1,288) - (1,154) 121 (2,078) - (1,957) (2016-1,963k) Activities Other Than Social Housing Market Rentals/Shared Ownership 845 (289) (229) Other 155 (336) - (181) 111 (201) - (90) 82,065 (51,334) (11,341) 19,390 77,248 (53,685) (7,810) 15,753 ASSOCIATION Social Housing Lettings (note 4) 57,147 (40,415) - 16,732 56,608 (41,173) - 15,435 Other Social Housing Activities Contract Income 7,620 (8,106) - (486) 7,842 (8,944) - (1,102) Development Services 621 (583) (639) - (195) Low Cost Home Ownership First Tranche Sales 3,502 - (2,916) 586 2,313 - (2,216) 97 Rent to Homebuy First Tranche Sales 1,305 - (1,443) (138) (524) 28 Gain on Disposal of Property (note 6) 7,223 - (3,862) 3,361 6,504 - (4,022) 2,482 Other: Including 290k Pension Deficit 135 (1,289) - (1,154) 121 (2,078) - (1,957) (2016-1,963k) 77,553 (50,393) (8,221) 18,939 74,384 (52,834) (6,762) 14,788 59

71 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 3. Turnover and Operating Expenditure from Social Housing Lettings (GROUP) General Needs Housing Supported Housing And Housing For Older People Residential Care Homes Shared Ownership Housing SubMarket Lettings Income Restated Rents Receivable Net Of Identifiable Service 32,724 3, ,655 1,621 39,989 39,046 Charges And Net Of Voids Service Charge Income 873 3, ,952 4,751 Support Charges - 2,357 3, ,235 4,299 Amortised Government Grants 2, ,961 2,934 Other Grants from Local Authorities and Other Agencies 968 1, ,446 5,952 Total Turnover from Social Housing Lettings 36,901 11,351 5,151 2,244 1,936 57,583 56,982 Operating Expenditure Management 5,065 2, ,019 9,868 Service Charge Costs 2,006 2, ,242 4,633 Support - 3,955 3, ,772 7,596 Routine Maintenance 5, ,861 7,514 Cyclical Maintenance ,204 1,636 Major Repairs 1, ,726 1,783 Rent Losses from Bad Debts (12) Rents Payable to Landlords Depreciation of Housing Properties 7, ,644 8,294 Impairment of Housing Properties Total Operating Expenditure on Social Housing Lettings 22,843 10,388 5, ,027 40,731 41,594 Operating Surplus on Social Housing Lettings 14, (410) 1, ,852 15,388 Voids Losses (being rental income lost as a result of property not being let, although available for letting) Total Total 60

72 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 4. Turnover and Operating Expenditure from Social Housing Lettings (ASSOCIATION) General Needs Housing Supported Housing And Housing For Older People Residential Care Homes Shared Ownership Housing SubMarket Lettings Income Rents Receivable Net Of Identifiable Service 32,317 3, ,637 1,621 39,564 38,675 Charges And Net Of Voids Service Charge Income 872 3, ,951 4,751 Support Services - 2,357 3, ,235 4,299 Amortised Government Grant 2, ,953 2,923 Other Grants from Local Authorities and Other Agencies 966 1, ,444 5,960 Total Turnover from Social Housing Lettings 36,485 11,351 5,151 2,224 1,936 57,147 56,608 Operating Expenditure Management 5,052 2, ,003 9,811 Service Charge Costs 1,947 2, ,183 4,566 Support - 3,955 3, ,772 7,596 Routine Maintenance 5, ,780 7,412 Cyclical Maintenance ,135 1,517 Major Repairs 1, ,726 1,783 Rent Losses from Bad Debts (12) Rents Payable to Landlords Depreciation of Housing Properties 6, ,553 8,224 Impairment of Housing Properties Total Operating Expenditure on Social Housing Lettings 22,532 10,388 5, ,027 40,415 41,173 Operating Surplus on Social Housing Lettings 13, (410) 1, ,732 15,435 Voids Losses (being rental income lost as a result of property not being let, although available for letting) Total Total 61

73 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 5. Turnover from Activities other than Social Housing Group Association Lettings Other , Sale of Properties not Developed for Outright Sale Shared Ownership Staircasing Sales Other Housing Properties Sales Total Sales Total Sales Group Proceeds of Sales 2,038 8,261 10,299 7,666 Less Cost of Sales (1,629) (5,353) (6,982) (5,070) 409 2,908 3,317 2,596 Association Proceeds of Sales 1,969 5,254 7,223 6,504 Less Cost of Sales (1,578) (2,284) (3,862) (4,022) 391 2,970 3,361 2, Interest Receivable and Similar Income Group Association On financial assets measured at amortised cost Interest receivable from current accounts Interest receivable from short term deposits Interest receivable from fixed assets investments Interest receivable from other sources ' ' Transferred to RCGF (13) (16) (13) (16) Transferred to DPF - (1) - (1)

74 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 8. Interest Payable and Similar Charges Group Association Bank Loans and Overdrafts wholly repayable within five years 1,498 1,546 1,498 1,546 Loans repayable after more than five years 10,117 9,979 10,088 9,967 Amortisation of THFC Bond Premium (189) (189) (189) (189) Amortisation of the HSL Bond Premium (108) (108) (108) (108) Amortisation of AHF Bond Premium (34) (34) (34) (34) On financial liabilities measured at amortised cost 11,284 11,194 11,255 11,182 Deferred Benefit Pension Charge ,493 11,344 11,464 11,332 Less Interest Capitalised on housing properties under construction (410) (529) (410) (529) 11,083 10,815 11,054 10,803 The weighted average rate of interest on borrowings over the course of the year of 4.59% ( %) was used for calculating the Association s capitalised interest. 9. Surplus for the year before taxation on ordinary activities The operating surplus is stated after charging/crediting: Group Association Restated Restated Auditors Remuneration (excluding VAT): Audit of the Group Financial Statements Audit of the Subsidiaries Fees Payable The Company s Auditor For Other Services To The Group: Taxation Compliance Services Service Charge Certification Operating Leases: Vehicles Land And Buildings Other Operating Leases Amortised Social Housing Grant 2,961 2,934 2,953 2,923 Depreciation Housing Properties: Impairment (Transfer)/ 0 (7) 0 - (Release) Depreciation Of Housing Properties: 8,013 8,294 7,922 7,591 Component Write Offs ,660 8,919 8,554 8,223 Depreciation Of Other Fixed Assets 1, , , ,

75 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 9a. Taxation The Association is a charitable social landlord under the Co-operative and Community Benefit Societies Act The Board knows of no circumstances that will affect this taxation status in the future. The taxation charge in the accounts nil ( nil) is based on the assessable surplus of the subsidiaries of the Association for the year. 10. Pension Contributions Nottingham Community Housing Association participates in the Social Housing Pension Scheme, and the National Health Service Pension Scheme. Social Housing Pension Scheme Nottingham Community Housing Association participates in the scheme, a multi-employer scheme which provides benefits to some 500 non-associated employers. The scheme is a defined benefit scheme in the UK. It is not possible for Nottingham Community Housing Association to obtain sufficient information to enable it to account for the scheme as a defined benefit scheme. Therefore it accounts for the scheme as a defined contribution scheme. The scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30th December This, together with documents issued by the Pensions Regulator and Technical Actuarial Standards issued by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension schemes in the UK. The Scheme operated a single benefit structure, final salary with a 1/60th accrual rate until 31 st March From April 2007 three defined benefit structures have been available, namely: Final salary with a 1/60th accrual rate. Final salary with a 1/70th accrual rate. From April 2010 a further two defined benefit structures have been available, namely: Final Salary with a 1/80th accrual rate. A defined contribution benefit structure was made available from 1st October An employer can elect to operate different benefit structures for their active members and their new entrants. An employer can only operate one open defined benefit structure plus CARE 1/120 th, plus the defined contribution benefit structure at any one time. An open benefit structure is one which new entrants are able to join. Nottingham Community Housing Association currently operates the final salary with 1/70 th accrual rate and the final salary with 1/80 th accrual rate for existing members. This does not reflect any benefit structure changes made from April Nottingham Community Housing Association currently operates the defined contribution benefit structure for new members. NCHA operates a policy of contractual enrolment for all new staff. The scheme is classified as a 'last-man standing arrangement'. Therefore Nottingham Community Housing Association is potentially liable for other participating employers' obligations if those employers are unable to meet their share of the scheme deficit following withdrawal from the scheme. Participating employers are legally required to meet their share of the scheme deficit on an annuity purchase basis on withdrawal from the scheme. A full actuarial valuation for the scheme was carried out with an effective date of 30th September This actuarial valuation was certified on 23rd November 2015 and showed assets of 3,123m, liabilities of 4,446m and a deficit of 1,323m. To eliminate this funding shortfall, the trustees and the participating 64

76 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 10. Pension Contributions (continued) employers have agreed that additional contributions will be paid, in combination from all employers, to the scheme as follows: Deficit contributions Tier 1 From 1st April 2016 to 30th September 2020: Tier 2 From 1st April 2016 to 30th September 2023: Tier 3 From 1st April 2016 to 30th September 2026: Tier 4 From 1st April 2016 to 30th September 2026: 40.6m per annum (payable monthly and increasing by 4.7% each year on 1 st April) 28.6m per annum (payable monthly and increasing by 4.7% each year on 1 st April) 32.7m per annum (payable monthly and increasing by 3.0% each year on 1 st April) 31.7m per annum (payable monthly and increasing by 3.0% each year on 1 st April) Note that the scheme s previous valuation was carried out with an effective date of 30th September 2011; this valuation was certified on 17th December 2012 and showed assets of 2,062m, liabilities of 3,097m and a deficit of 1,035m. To eliminate this funding shortfall, payments consisted of the Tier 1, 2 & 3 deficit contributions. During the accounting period Nottingham Community Housing Association paid contributions at a rate between 4.0% and 23.9% whilst member contributions varied between 4.0% and 11.2%. As at the Statement of Financial Position date there were 856 active members of the Scheme employed by Nottingham Community Housing Association. The annual pensionable payroll in respect of these members was 17.5m. Nottingham Community Housing Association continues to offer membership of the Scheme to its employees. SHPS Deficit Payment Agreement Where the scheme is in deficit and where Nottingham Community Housing Association has agreed to a deficit funding arrangement, it recognises a liability for this obligation. The amount recognised is the net present value of the deficit reduction contributions payable under the agreement that relates to the deficit. The present value is calculated using the discount rate detailed in these disclosures. The unwinding of the discount rate is recognised as a finance cost. Present Values of Provision Including Growth Plan 31st March 2017 ( 000s) 31st March 2016 ( 000s) 31st March 2015 ( 000s) Present value of provision 10,047 10,831 8,309 65

77 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 10. Pension Contributions (continued) Reconciliation of Opening and Closing Provisions Including Growth Plan Period Ending 31st March 2017 ( 000s) Period Ending 31st March 2016 ( 000s) Provision at start of period 10,831 8,309 Unwinding of the discount factor (interest expense) Deficit contribution paid (1,282) (939) Remeasurements - impact of any change in assumptions Remeasurements - amendments to the contribution schedule 289 (68) - 3,379 Provision at end of period 10,047 10,831 Income and Expenditure Impact Period Ending 31st March 2017 ( 000s) Period Ending 31st March 2016 ( 000s) Interest expense Remeasurements impact of any change in assumptions Remeasurements amendments to the contribution schedule Costs recognised in income and expenditure account 289 (68) - 3, ,461 Assumptions 31st March 2017 % per annum 31st March 2016 % per annum 31st March 2015 % per annum Rate of discount The discount rates shown above are the equivalent single discount rates which, when used to discount the future recovery plan contributions due, would give the same results as using a full AA corporate bond yield curve to discount the same recovery plan contributions. 66

78 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 10. Pension Contributions (continued) The following schedule details the deficit contributions agreed between Nottingham Community Housing Association and the scheme at each year end period: Deficit Contributions Schedule Year ending 31st March 2017 ( 000s) 31st March 2016 ( 000s) 31st March 2015 ( 000s) Year 1 1,332 1, Year 2 1,384 1, Year 3 1,438 1,384 1,017 Year 4 1,263 1,438 1,060 Year 5 1,072 1,263 1,103 Year 6 1,110 1, Year , Year Year Year Year Year Year Year Year Year Year Year Year Year Nottingham Community Housing Association must recognise a liability measured as the present value of the contributions payable that arise from the deficit recovery agreement and the resulting expense in the income and expenditure account i.e. the unwinding of the discount rate as a finance cost in the period in which it arises. It is these contributions that have been used to derive the Nottingham Community Housing Association s Statement of Financial Position liability. 67

79 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 10. Pension Contributions (continued) National Health Service Pension Scheme Nottingham Community Housing Association Limited participates in the National Health Service Pension Scheme, a defined benefit final salary scheme. Past and present employees are covered by the provisions of the two NHS Pension Schemes. Details of the benefits payable and rules of the Schemes can be found on the NHS Pensions website at Both are unfunded defined benefit schemes that cover NHS employers, GP practices and other bodies, allowed under the direction of the Secretary of State in England and Wales. They are not designed to be run in a way that would enable NHS bodies to identify their share of the underlying scheme assets and liabilities. Therefore, each scheme is accounted for as if it were a defined contribution scheme: the cost to the NHS body of participating in each scheme is taken as equal to the contributions payable to that scheme for the accounting period. In order that the defined benefit obligations recognised in the financial statements do not differ materially from those that would be determined at the reporting date by a formal actuarial valuation, the FReM requires that the period between formal valuations shall be four years, with approximate assessments in intervening years. An outline of these follows: a) Accounting valuation A valuation of scheme liability is carried out annually by the scheme actuary (currently the Government Actuary s Department) as at the end of the reporting period. This utilises an actuarial assessment for the previous accounting period in conjunction with updated membership and financial data for the current reporting period, and are accepted as providing suitably robust figures for financial reporting purposes. The valuation of scheme liability as at 31 st March 2017, is based on valuation data as 31 st March 2016, updated to 31 st March 2017 with summary global member and accounting data. In undertaking this actuarial assessment, the methodology prescribed in IAS 19, relevant FReM interpretations, and the discount rate prescribed by HM Treasury have also been used. The latest assessment of the liabilities of the scheme is contained in the scheme actuary report, which forms part of the annual NHS Pension Scheme (England and Wales) Pension Accounts. These accounts can be viewed on the NHS Pensions website and are published annually. Copies can also be obtained from The Stationery Office. b) Full actuarial (funding) valuation The purpose of this valuation is to assess the level of liability in respect of the benefits due under the schemes (taking into account their recent demographic experience), and to recommend contribution rates payable by employees and employers. The last published actuarial valuation undertaken for the NHS Pension Scheme was completed for the year ending 31 st March The Scheme Regulations allow for the level of contribution rates to be changed by the Secretary of State for Health, with the consent of HM Treasury, and consideration of the advice of the Scheme Actuary and appropriate employee and employer representatives as deemed appropriate. The next actuarial valuation is to be carried out as at 31 st March This will set the employer contribution rate payable from April 2019 and will consider the cost of the Scheme relative to the employer cost cap. There are provisions in the Public Service Pension Act 2013 to adjust member benefits or contribution rates if the cost of the Scheme changes by more than 2% of pay. Subject to this employer cost cap assessment, any required revisions to member benefits or contribution rates will be determined by the Secretary of State for Health after consultation with the relevant stakeholders. c) Scheme provisions The NHS Pension Scheme provided defined benefits, which are summarised below. This list is an illustrative guide only, and is not intended to detail all the benefits provided by the Scheme or the specific conditions that must be met before these benefits can be obtained: The Scheme is a final salary scheme. Annual pensions are normally based on 1/80th for the 1995 section and of the best of the last three years pensionable pay for each year of service, and 1/60th for the 2008 section of reckonable pay per year of membership. Members who are practitioners as defined by the Scheme 68

80 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 10. Pension Contributions (continued) Regulations have their annual pensions based upon total pensionable earnings over the relevant pensionable service. With effect from 1st April 2008 members can choose to give up some of their annual pension for an additional tax free lump sum, up to a maximum amount permitted under HMRC rules. This new provision is known as pension commutation. Annual increases are applied to pension payments at rates defined by the Pensions (Increase) Act 1971, and are based on changes in retail prices in the twelve months ending 30th September in the previous calendar year. From 2011/12 the Consumer Price Index (CPI) was used to replace the Retail Prices Index (RPI). Early payment of a pension, with enhancement, is available to members of the scheme who are permanently incapable of fulfilling their duties effectively through illness or infirmity. A death gratuity of twice final year s pensionable pay for death in service, and five times their annual pension for death after retirement is payable. For early retirements other than those due to ill health the additional pension liabilities are not funded by the scheme. The full amount of the liability for the additional costs is charged to the employer. Members can purchase additional service in the NHS Scheme and contribute to money purchase AVCs run by the Scheme s approved providers or by other Free Standing Additional Voluntary Contributions (FSAVC) providers. During the accounting period NCHA paid contributions at the rate of 14.3%. Member contributions are set at 7.1% 69

81 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 11. Board and Executive Team Emoluments Group '000 '000 The aggregate emoluments paid to or received by Board Members The aggregate emoluments paid to or receivable by Executive Team Members (Key Management Personnel) as listed on page one The emoluments paid to the highest paid Executive Team Member of the Association: Chief Executive excluding pension contributions The aggregate amount of Executive Team Members pensions Board Members: Salary Pension Emoluments Emoluments '000 '000 '000 '000 Ms Claire Winfield (NCHA Chair) Mr Steven Worthington (NCHA Audit Committee Chair) Mr Pradeep Khuti (Resigned 31 st March 2016) Ms Caroline Swann Ms Audra Wynter Mr Paul Casey Mr David Harrison Mr Gerard O Reilly (Resigned 31 st December 2016) Mr Christopher Blackburn (Appointed 1 st April 2016) Ms Donna Edwards (Appointed 1 st June 2016) Mr Peter Ellis (Appointed 1 st September 2016) Mr Callum Gillespie (Appointed 1 st September 2016) Mrs Ann McCarthy (Resigned 31 st March 2017) Dr Nigel Nice (Resigned 30 th September 2016) Ms Denise Maguire (Resigned 30 th June 2016) Ms Carolyn Isaaks (Resigned 31 st March 2016) Mr Graham Carvell (Resigned 30 th September 2015) Mr Michael Bent (Resigned 30 th June 2015) The Chief Executive is an ordinary member of the Social Housing Pension Scheme detailed in Note 10. The cost to the Association for the year was 6,743 (2016-7,803). No enhancements or special terms apply, nor does the Association make any other pension contributions on his behalf. The pension payments on behalf of the Executive Team members exclude the SHPS Closed Scheme Surcharge and the SHPS annual deficit contribution. The full cost of both the deficit contribution and surcharge are detailed in Note 12a. The pension payments on behalf of the Executive team members exclude the SHPS Closed Scheme Surcharge and the SHPS accrued deficit contributions. The full cost of both the deficit contribution and the surcharge are detailed in Note 12a. 70

82 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) Aggregate number of full time equivalent staff whose remuneration exceeded 60,000 in the period excluding pension: Group Restated Salary Band No. No. 60,001 to 65, ,001 to 75, ,001 to 100, ,001 to 105, ,001 to 110, ,001 to 135, ,000 to 140,000-1 Total Employee Information Group No. No. The average weekly full time equivalent number of persons (including the Chief Executive) employed during the year was: Weekly full time hours are 35 hours for office staff and 37, 39 or 40 hours for non office based staff. NCHA also employs staff on a zero hours basis. 12a. Staff Costs (for the above persons) Group Wages and Salaries 22,170 22,091 Social Security Costs 1,888 1,695 Other Pension Costs 997 1,026 Pension Deficit Charge 497 3,461 25,552 28,273 In addition to the Employers Pension Contributions, total Pension Costs include a SHPS Closed Scheme Surcharge, the total value of this payment in 2017 was 200,022 ( ,619). NCHA carries a SHPS Pension Deficit as a creditor and annual movements in this creditor are reflected in the SOCI. In 2017, this charge was 642,000 (2016-3,463,000 due to triennial valuation). NCHA s pension contribution rate across all schemes, including surcharge payment, represents 5.68% ( %) of pensionable pay. 71

83 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 13. Tangible Fixed Assets: Housing Properties (GROUP) Completed Social Housing Properties Completed Shared Ownership Housing Properties Assets in the Course of Construction Social Housing Assets in the Course of Construction Shared Ownership Cost At 1 st April ,039 41,801 12,456 1, ,192 Works to Existing Properties 2, ,826 Additions to New Properties ,701 3,886 23,629 Schemes completed in the year 16,090 8,958 (22,473) (2,575) - Disposal of Components (1,350) (1,350) Disposal of Properties (3,796) (2,608) - - (6,404) As at 31 st March ,182 48,820 8,684 3, ,893 Depreciation And Impairment At 1 st April ,663 3, ,445 Depreciation charge for the year 7, ,013 Depreciation on Disposal of Components (739) (739) Depreciation on Disposal of Properties (517) (143) - - (660) As at 31 st March ,033 3, ,059 Net Book Value at 31 st March ,149 45,190 8,288 3, ,834 Net Book Value at 31 st March ,376 38,415 12,060 1, ,747 There were 6,431 units pledged as security for liabilities as at 31 st March 2017 (2016 6,482). Total 72

84 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 13.a Tangible Fixed Assets: Housing Properties (ASSOCIATION) Completed Social Housing Properties Completed Shared Ownership Housing Properties Assets in the Course of Construction Social Housing Assets in the Course of Construction Shared Ownership Cost At 1 st April ,221 41,527 12,456 1, ,100 Works to Existing Properties 2, ,496 Additions to New Properties ,701 3,886 23,629 Schemes completed in the year 16,090 8,958 (22,473) (2,575) - Disposal of Components (1,341) (1,341) Disposal of Properties (3,796) (2,584) - - (6,380) As at 31 st March ,043 48,570 8,684 3, ,504 Depreciation And Impairment At 1 st April ,120 3, ,869 Depreciation charge for the year 7, ,922 Depreciation on Disposals of Components (731) (731) Depreciation on Disposal of Properties (515) (143) - - (658) As at 31 st March ,411 3, ,402 Net Book Value at 31 st March ,632 44,975 8,288 3, ,102 Net Book Value at 31st March ,101 38,174 12,060 1, ,231 There were 6,392 units pledged as security for liabilities as at 31 st March 2017 (2016 6,454). Total 73

85 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 13b. Housing Properties Group Association Housing Properties cost comprises: Freeholds 576, , , ,856 Long Leaseholds 18,808 19,741 15,040 14,865 Short Leaseholds , , , ,100 13c. Social Housing Grant Group Association Deferred SHG in SFP (note 21) 210, , , ,789 SHG Recognised in SOCI to date 47,240 43,307 45,782 41,846 The Total Accumulated SHG Received Or Receivable at 31 st March 257, , , ,656 13d. Capitalised Interest and Other On-Costs Group Association Additions to Fixed Assets during the Year included (added to Housing Properties unless otherwise stated): Capitalised 4.59% ( %) Capitalised Improvements 2,818 3,613 2,496 3,067 Sales & Marketing Costs ICT Costs: Other Fixed Asset Design Costs Development Costs ,552 5,725 4,230 5,179 13e. Total Major Maintenance Works Group Association Total Major Maintenance Works For The Year Included: Income And Expenditure Account Planned Works 2,930 3,419 2,861 3,300 Capitalised Improvements 2,818 3,613 2,496 3,067 5,748 7,032 5,357 6,367 74

86 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 13f. Investment Properties Group Association Investment Properties Held for Letting At Start of Year 18,082 19, Additions Disposals (3,058) (1,039) - - Revaluation At End of Year 15,024 18, Investment properties are measured at fair value at the reporting date, determined annually by external valuers and derived from the current market rents and investment property yields for comparable real estate, adjusted if necessary for any difference in the nature, location or condition of the specific asset. Investment properties were valued at 31 st March 2016 by Savills (UK Ltd) Chartered Surveyors. For the purpose of the valuation, Savills (UK Ltd) Chartered Surveyors have adopted the definition of Market Value contained in the Royal Institute of Chartered Surveyors' Valuation - Professional Standards Incorporating the International Valuation Standards (the RICS "Red Book") January No depreciation is provided. We have been closely monitoring sales which indicate the valuation bears out. There are therefore no changes in fair value this year to recognise in the Statement of Comprehensive Income. 75

87 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 14. Tangible Fixed Assets: Other Fixed Assets (GROUP) Freehold Offices Property Plant, Machinery & Fixtures 2017 Vehicles ICT Equipment Cost At 1 st April ,299 2,577 1,616 3,359 11,851 Transfers (10) - Additions ,504 Disposals (163) (33) (47) (284) (527) As at 31 st March ,136 2,901 1,863 3,928 12,828 Depreciation At 1 st April ,651 1,331 2,495 6,354 Transfers Depreciation Charge for the year ,048 Disposal Depreciation (49) (30) (47) (226) (352) As at 31 st March ,876 1,480 2,794 7,050 Net Book Value at 31 st March ,236 1, ,134 5,778 Net Book Value at 31 st March , ,497 Total 76

88 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 14a. Tangible Fixed Assets: Other Fixed Assets (ASSOCIATION) Freehold Offices Property Plant, Machinery & Fixtures 2016 Vehicles ICT Equipment Cost At 1 st April ,299 2,570 1,616 3,272 11,757 Transfers (10) - Additions ,504 Disposals (163) (33) (47) (198) (441) As at 31 st March ,136 2,894 1,863 3,927 12,820 Depreciation At 1 st April ,644 1,331 2,495 6,347 Transfers Depreciation Charge for the year ,020 Disposals Depreciation (49) (30) (47) (198) (324) As at 31 st March ,869 1,480 2,794 7,043 Net Book Value at 31 st March ,236 1, ,133 5,777 Net Book Value at 31 st March , ,410 Total 77

89 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 15. Fixed Asset Investments Group Association Investment In Group Companies: Lets Select Limited Shares Net Book Value At 31 st March 2017 And 31 st March ,000 Other Investments: Cost: At start of year Additions 7 7 At end of year Revaluation: At start of year Additions 93 - At end of year Net Book Value: At 31 st March At 31 st March Shared Ownership Properties for Sale and Other Stock Group Association Stock of Properties for outright sale: completed schemes 1, Stock of Shared Ownership Properties for sale: completed schemes 491 1, ,104 Stock of Shared Ownership Properties for sale: under construction 2,226 1,738 2,226 1,737 4,294 2,948 2,717 2,841 Stock of Materials ,336 2,989 2,759 2,882 78

90 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 17. Debtors Group Association Amounts falling due within one year: Rent Arrears 1,233 1,507 1,219 1,486 Less Provision for Bad Debts (369) (469) (363) (463) 864 1, ,023 SHG Receivable Amounts owed by Group undertakings Other Debtors 2,061 2,731 1,947 2,446 Prepayments ,609 5,037 3,641 5,032 Amounts falling due after one year: Lets Select Limited Loan ,440 11,040 Due From Three Together and Select Ventures ,440 11,040 Total Debtors 4,006 5,410 14,081 16, Cash and Cash Equivalents and Current Assets Investments Group Association Cash at Bank and in Hand Mortgaged Against Specific Loans: Housing Securities Limited 1, , Affordable Housing Finance plc Unmortgaged: Deposits For Service Users Other Unmortgaged Bank Accounts 14,205 11,176 13,891 10,892 16,311 12,447 15,850 12,114 Current Assets Investments Short Term Money Market Investment 8,503 13,368 8,503 13,368 79

91 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 19. Creditors amounts falling due within one year Group Association Restated Housing Loans (note 20) 159 1, ,114 Loan Interest Accruals 1,794 1,868 1,794 1,868 Premium on Debenture Issue Trade Creditors 2,112 1,978 2,112 1,978 Funds Held For Others Rents and service charges paid in advance 1,401 1,190 1,376 1,165 SHPS Pension Agreement Plan (note 10) 1,332 1,283 1,332 1,283 Taxation and Social Security Payable Deferred Capital Grants (note 21) 3,072 2,895 3,070 2,982 Disposed Proceeds Fund (note 23) Recycled Capital Grant Fund (note 22) 816 1, ,043 Maintenance Dilapidations Capital Creditors 1,586 1,851 1,586 1,851 Amounts owed to Group undertakings - - 1, Accruals and Deferred Income 1,120 1,138 1,078 1,113 Other creditors ,314 16,660 16,991 17,461 20a. Creditors amounts falling due after more than one year Group Association Housing Loans 248, , , ,970 Loan Administration Fees (887) (924) (860) (911) Premium on Debenture Issue 1,977 2,308 1,977 2, , , , ,367 SHPS Pension Agreement Plan 8,714 9,548 8,714 9,548 Deferred Capital Grant 207, , , ,807 Disposal Proceeds Fund (note 23) Health Grant Fund Recycled Capital Grant Fund (note 22) 3,210 3,473 3,210 3,473 Other Creditors falling due after more than one year , , , ,494 80

92 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 20b. Creditors amounts falling due after more than one year Group Association Debt Analysis Loan Repayable by Instalments: Within one year In one year or more but less than two years 2, , In two years or more and less than five years 11,565 10,452 11,533 10,419 In five years or more 193, , , ,366 Loan Not Repayable by Instalments: Within one year - 1,000-1,000 In one year or more but less than two years 17,080-17,080 - In two years or more and less than five years ,280-17,080 In five years or more 22,900 22,900 22,900 22, , , , ,158 Less loan issue costs (935) (1,002) (911) (986) Total Loans 247, , , ,172 Loans are secured by specific charges on the Group s housing properties. The loans are repayable quarterly/half-yearly at varying rate of interest and are due to be repaid in 2045/46. The Interest Rate Profile of the Group at 31 st March 2017 was: Total Variable Rate Fixed Rate Weighted Average Rate Weighted Average Term % Years Instalment Loans 208,528 43, , % 19.1 Non- Instalment Loans 39, , % ,508 43, , % 20.6 At 31 st March 2017 the Group has the following facilities: Undrawn facilities 13,

93 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 21. Deferred Capital Grant Group Association Restated Opening Balance 1 st April 207, , , ,664 Grants Received in Year 7,145 4,963 7,145 4,963 Grants Disposals in Year (1,645) (1,914) (1,629) (1,914) Released to Income in Year (2,955) (2,926) (2,953) (2,924) Closing Balance 31 st March 210, , , ,789 Due to be released in less than one year 3,072 2,984 3,070 2,982 Due to be released in more than one year 207, , , , , , , , Recycled Capital Grant Group & Association At the start of the year 4,516 3,348 Inputs: Grants Recycled To RCGF 1,554 1,855 Interest Accrued Recycling: Investment In New Build Stock (2,057) (703) At the end of the year 4,026 4,516 RCGF Due In Less Than One Year 816 1,043 RCGF Due In More Than One Year 3,210 3,473 4,026 4,516 RCGF three years or older where repayment may be required. The Homes And Communities Agency have verbally agreed to the 175k being recycled into the Forest Road Clipstone development scheme Disposal Proceeds Fund 82 Group & Association Opening Balance 1 st April Inputs: Grants Recycled Interest Accrued - 1 Recycling: Investment in New Build Stock (29) (175) Closing Balance 31 st March DPF Due In Less Than One Year DPF Due In More Than One Year There is no DPF three years or older where repayment may be required

94 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 24. Called up Share Capital Group & Association Ordinary Shares of 1 each allotted, issued and fully paid at the start of the year Issued during the year 3 6 Written back during the year (1) - At the end of the year The shares do not have any right to dividend or distribution in a winding up and are not redeemable. Each share has full voting rights. 25. Capital Commitments Group Association Restated Capital Expenditure that has been Contracted for, but has not been provided for in the Financial Statements Capital Expenditure that has been Authorised by the Board, but has not yet been Contracted for Investment In Jointly Owned Entity that has been Authorised by the Board, to fund capital expenditure that has not been Contracted for 27,604 23,391 27,501 23,391 18,598 39,002 18,598 39,002 4, ,823 62,393 46,099 62,393 The Association expects to finance the expenditure above by: Social Housing Grant Receivable 6,055 11,530 6,055 11,530 Other Grants Receivable 871 2, ,764 Sales Proceeds 4,221 20,763 4,118 20,763 Distribution from jointly controlled 4, entity, resulting from sales proceeds Loans to be Received with Loan 35,055 27,336 35,055 27,336 Offers 50,823 62,393 46,099 62,393 83

95 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 26. Operating Leases Group & Association At the end of the year the Group and Association had commitments of future minimum lease payments as follows: Land and buildings which expire: Leases expiring within the next year Leases expiring in the second to fifth year Leases expiring in more than five years Others, which expire: Leases expiring within the next year Leases expiring in the second to fifth year Subsidiary Undertakings The Association is the parent organisation in a group that also includes Lets Select Limited, Nottingham Community (Second) Housing Association and five Almshouse organisations. Lets Select Limited The Association owns 100% of the shares in Lets Select Limited, which is a wholly owned commercial subsidiary. Its principal activities are managing and letting residential properties, provision of property related services and the development and sales of residential properties. Lets Select Limited transfers surpluses by Gift Aid to NCHA. The transactions that have occurred between the two organisations are as follows: Loan Interest Management Fee Maintenance Fee Design Fee The intercompany loan of 10.4m is secured by a security trust deed over all present and future assets of Lets Select Limited and is repayable over the next 8 years. Interest rates vary between 3.1% and 6.6%. The management fee is determined by an intercompany Service Level Agreement agreed by both Boards. The maintenance fee and design fees are determined by the works carried out. Nottingham Community (Second) Housing Association As Nottingham Community Housing Association owns one ordinary share in Nottingham Community (Second) Housing Association Limited and has the power to appoint and remove members of that Association s Board of Management, that Association is accounted for as a subsidiary undertaking. Nottingham Community (Second) Housing Association Limited is a Registered Provider of social housing, renting shared ownership and other properties within Nottinghamshire and has the same registered office as the Association and is incorporated in England. The issued share capital of Nottingham Community (Second) Housing Association is eight 1 ordinary shares. 84

96 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) The transactions that have occurred between the two organisations are as follows: Management Fee Gift Aid Maintenance Fee 2 1 Almshouse Organisations There are five Almshouse organisations consolidated into these group accounts, each of which pays a management fee to NCHA as follows: '000 '000 Blyth Cottages Charity Nottingham Community Almshouse Charity Nottingham Annuity Charity 2 2 Henry Brown s Homes Charity 5 6 Warner s Almshouses Charity 5 2 The Association also carried out maintenance works which were charged to the charities as follows: '000 '000 Blyth Cottages Charity 1 3 Nottingham Community Almshouse Charity Henry Brown s Homes Charity 3 6 Donated Income from new Group members was as follows: '000 '000 Henry Brown s Homes Warners Almshouse Charity Ada Mary Best Homes - 41 Lambley Almshouses - (11) Post Statement of Financial Position Events We consider that there have been no events since the financial year end which have had a material effect on the financial position of the group. 85

97 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) 29. Units/Bedspaces Group Association No. No. No. No. Social Housing Under Development at end of year: Housing Accommodation Shared Ownership For Sale Under Management at end of year: Housing Accommodation ,666 5,560 5,637 Intermediate Rent Affordable Rent Supported Housing Care Homes Housing For Older People Shared Ownership Freehold Interest Only ,094 8,955 8,871 8,737 Non Social Housing Under Management at end of year: Market Rented Other Non Social Housing Accommodation Managed by Agents The Association owns units excluded from Note 29 above which are managed by other bodies, as follows: Group & Association Group & Association No. No. Housing Accommodation Supported Housing, Care Homes & Housing For Older People Related Parties As at 31 st March 2017, the Board has one tenant member who holds tenancy agreement on normal terms. Rent charged to the tenant board member was 4k (2016-4k). There are no arrears. Tenant members cannot use their position to their advantage. NCHA is the sole Corporate Trustee for Nottingham Community Almshouse Charity, Blyth Cottages Charity, Nottingham Annuity Charity, Henry Brown s Homes Charity and Warner s Almshouses Charity. 86

98 NOTES TO FINANCIAL STATEMENTS 31 ST MARCH 2017 (continued) As at 31 st March 2017 the following balances were owed: Amounts Owed to Trustee Amounts Due from Trustee '000 '000 Blyth Cottages Charity - - Nottingham Community 5 - Almshouses Charity Nottingham Annuity Charity - - Henry Brown s Homes Charity - - Warner s Almshouses Charity Adoption of Charities SORP for NCAC and Blyth Cottages Charity Group Reserves As At 1 st April Group Reserves As At 31 st March 2016 As Reported Under Housing SORP FRS102 67,641 5,132 72,773 Gross Grant Recognised In Income And Expenditure Account Reserve Reverse Grant Amortisation (207) (13) (220) As Reported In Line With Charities SORP 68,388 5,119 73,507 Nottingham Community Almshouse Charity and Blyth Cottages have adopted the charities SORP. The Charities SORP does not permit the amortisation of social housing grant. Grant should be recognised as income in the year of receipt. 33. Financial Instruments Group Association Assets Measured At Amortised Cost: Investments in subsidiaries - - 2,000 2,000 Fixed assets investments Trade debtors 2,303 2,731 2,189 2,446 Current assets investments 8,503 13,368 8,503 13,368 Cash at bank and in hand 16,311 12,447 15,850 12,114 27,817 29,148 28,591 29,971 Liabilities Measured At Amortised Cost: Loans 247, , , ,172 Leases Trade creditors 2,112 1,978 2,112 1,978 Recycled Capital Grant Fund 4,026 4,516 4,026 4,516 Disposals Proceeds Fund , , , ,213 87

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