Leeds Federated Housing Association Limited

Transcription

1 Report and Financial Statements Year Ended 31 March 2017 CO-OPERATIVE AND COMMUNITY BENEFIT SOCIETY NUMBER IP21457R HOMES & COMMUNITIES AGENCY REGISTERED NUMBER LH0989

2 Report and financial statements for the year ended 31 March 2017 Contents Page: 1 Board Members, Executive Directors and Advisors 2 Report of the board of management and operating and financial review including value for money statement (page 7-26) 34 Independent auditor's report 36 Consolidated statement of comprehensive income 37 Association statement of comprehensive income 38 Consolidated statement of financial position 39 Association statement of financial position 40 Consolidated & Association statement of changes in reserves for the year ended 31 March Consolidated & Association statement of changes in reserves for the year ended 31 March Consolidated statement of cash flows 43 Notes forming part of the financial statements

3 Board Members, Executive Directors and advisors for the year ended 31 March 2017 Board Members Helen Jaggar (Chair) Sue Howlett Kingsley Iball Shaid Mahmood Robin Machell Mamta Sharda Until 7 September 2016 Claire Stone Martin Warhurst Stuart Whyte John Williams Executive Directors Matthew Walker Chief Executive Gail Monnickendam Deputy Chief Executive Until 7 July 2016 Jason Ridley Interim Director of Finance and IT From 1 August 2016 Stephen Blundell Operations Director Secretary Jill Hellings Registered office Arthington House, 30 Westfield Road, Leeds LS3 1DE Registered number Leeds Federated Housing Association Limited is registered under the Co-Operative and Community Benefit Act 2014 No. IP21457R and registered by the Homes and Communities Agency No. LH0989 Auditors BDO LLP, 29 Wellington Street, Leeds, LS1 4DL Bankers Yorkshire Bank Plc, 6 Otley Road, Leeds, LS6 2AA 1

4 Report of the board of management and operating and financial review for the year ended 31 March 2017 The Board of Leeds Federated Housing Association Limited is pleased to present its report together with the audited financial statements of the Group and the Association for the year ended 31 March The Group comprises the Association and its subsidiary undertaking Leeds Federated Property Services Limited. Principal activities The Association's principal activity is the management of social housing. It operates through three key business streams including 'general needs' housing for rent, supported housing and care for people and lowcost home ownership. The Group's head office is based in Leeds and its properties, just under 4,000, are predominantly located in Leeds, Harrogate and Wakefield. As well as managing social housing, the Group also provides non-social housing, in particular accommodation for students in higher education. Leeds Federated Housing Association has charitable status by virtue of its registration as a charitable social landlord under the Co-Operative and Community Benefit Act 2014, No: IP21457R. Leeds Federated Property Services is a non-charitable company which manages design and build projects. Board Members and Executive Directors A list of Board members and the Executive Directors of the Group including dates of appointment and resignation, where applicable, are set out on page 1. The Board consists of 9 members. Executive Directors are the Chief Executive, the Operations Director and Director of Finance and IT. None of the Executive Directors hold any interest in the Association's shares and they act as executives within the authority delegated by the Board. Group insurance policies indemnify Board Members and Executive Directors against liability when acting for the Group. Pensions The Executive Directors are members of the Social Housing Pension Scheme (SHPS). They participate in the scheme on the same terms as all other eligible staff and the Association contributes to the scheme on behalf of its employees. Other benefits The Executive Directors are entitled to other benefits: the provision of a car allowance and health care insurance. 2

5 Report of the board of management and operating and financial review Objectives, strategies and achievement The Group's vision is "building futures together". The achievement of this vision is underpinned by three key goals which are set out in a corporate plan that is reviewed and approved by the Board each year. The Board and Senior Management Team have developed a series of key performance indicators using a Balanced Score Card (BSC) to measure performance against a range of targets in order to monitor achievement of the Group's corporate objectives. The corporate goals fall into the following areas; Goal 1 - Sustain Provide good quality homes that people want to live in our properties will be well maintained to a standard which makes us an attractive landlord for existing and prospective customers. Deliver value for money services, providing quality at an affordable cost we will balance the quality of the service with the cost of providing that service to ensure customers can sustain their tenancies and recognise both their rights and responsibilities as tenants. Where appropriate such services will extend to the wider neighbourhood. Maintain a healthy business in terms of its finances, expertise and governance we will remain viable by managing our cash flow and budgets, will ensure that staff are competent to do their jobs, and ensure that the necessary skills exist around the Board table to govern the association well. Continue to involve customers in the business where appropriate to ensure our services remain relevant and continue to offer value for money. Goal 2 - Innovate Make best use of technology to improve the efficiency and effectiveness of services we will use existing and develop new technology where necessary to support service delivery. Find ways to work smarter we will review how services are delivered and find ways to achieve the same or better ends for reduced or the same cost. Adapt to change in our business and operating environment to remain competitive as the operating context changes we will adapt our plans to ensure our products and services remain attractive to customers. Part of this area will involve our pro-active approach to asset management and the potential disposal/rationalisation of some properties. Goal 3 - Grow Expand our delivery of good quality homes we will use our borrowing capacity to increase the amount of development undertaken, delivering 150 new homes per year over the life of this Corporate Plan. Identify new business opportunities to enhance Leeds Fed s viability we will actively look for new opportunities to strengthen the Associations financial position. This may include specific services provided to other Associations or other forms of strategic alliance. Grow our capacity, skills and influence to support the business staff will be given opportunity to develop to enable them to better fulfill their responsibilities. We will engage in partnership working at a local, regional and where appropriate national level to further the organisation s interests with others sharing a common objective. Key Performance Indicators The key performance indicators are a series of targets measured by traffic light system - Green - achieved target; Amber - partially achieved target, Red - Not achieved target, which are tracked and reported via the BSC system. The key performance indicators and targets are reviewed annually by the Senior Management team and the Board. The following table on page 4 analyses some of the performance indicators in the year. The Value for Money self-assessment (pages 7-26) analyses some other performance indicators, as well as giving a summary on overall BSC performance for 2016/17. 3

6 Report of the board of management and operating and financial review Objective KPI Target Outcome Good Quality Homes Successful delivery of the 2016/17 planned investment programme. Delivery of a minimum of 97% of the scheduled works programme 97% of the programmed works for the year were successfully completed, ensuring that the value of the Association s portfolio is maintained. Customer Satisfaction Overall customer satisfaction with Leeds Federated s services Minimum of 87.5% of customers satisfied or very satisfied 85.1% of customers were satisfied or very satisfied at the end of the financial year. Customer satisfaction with the value for money of rent A minimum of 75% of customers satisfied or very satisfied that their rent offers value for money 82% of Leeds Federated customers are either satisfied or very satisfied that their rent offers value for money. Repairs First Time Fix Minimum of 90% of responsive repairs job resolved at first visit 91.7% of repair jobs resolved at first visit, contributing to high levels of customer satisfaction and the efficient use of resources. Void repairs completed within timescale Minimum of 95% of void repair jobs completed on time 96.8% of void repair jobs completed on time, minimising void period and ensuring the housing stock is used efficiently. Gas Servicing Up to date gas safety certificates maintained for all relevant stock 100% of required gas safety certificates to be in place at all times 99.8% of gas safety certificates were in place at the end of the financial year. A total of 7 were overdue, but fully compliant with our escalation procedures. Housing Management Minimise the level of rent arrears Current tenant rent arrears at 3.5% or less Social housing rent arrears at 3.8% at the end of the financial year Minimise lost rent due to empty properties Keep rent losses at or below 1.5% of rent roll Rent losses due to empty properties at 1.5% of rent roll New Homes Successful delivery of our new homes programme Achieve at least 80% of the forecast starts on site during the year 101% of construction starts on site achieved. Achievement of sales targets for shared ownership homes Achieve average sale proportion of 40% at first tranche Average first tranche sales proportion of 44.5% 4

7 Report of the board of management and operating and financial review Risks and uncertainties The Group Risk Management Framework was approved by the Board in July 2016 and set the Group s risk appetite as receptive, defined as take risk if expected reward warrants, within limits. The Risk Register is structured to reflect the Group s goals, strategies and key challenges. Appropriate controls are identified for each risk to ensure that the impact and likelihood of a risk event occurring are at an acceptable level. Each paper presented to Board considers any related risks, and links back to the Risk Register and the Chief Executive provides a Risk Review report at each Board meeting. The top risks identified by the Association in March 2017 are considered below: Key risk Challenge: In light of a continually changing economic and competitive environment ensure that the quality of Leeds Feds homes meets the requirements of the target market. Risk: Statutory duty not fulfilled resulting in injury to the customer Action being taken/ controls in place Procedures for keeping abreast of legislative/best practice changes, with any changes being incorporated into our procedures. Mechanism to ensure our procedures are implemented across all stock. Delivered through: Health and Safety Policy, Health and Safety Committee Meetings and reports, external Health and Safety Advisor. Use of accredited contractors and consultants to deliver services. Challenge: Maintaining Financial Viability Risk: Risk of technical accounting changes affecting viability. Challenge: Maintain a rigorous and effective approach to the governance of Leeds Fed. Risks: Risk of new large expenditure arising that was not planned e.g. pension costs. The Association does not have appropriate controls in place, leading to an instance of fraud, breach of data protection or breach through hacking. Day to Day business is interrupted by a major incident (e.g. office fire) Existing loan agreements well known, any new loan agreements would be carefully negotiated. Technical understanding of accounting standards kept on top of, whole HA sector lobby when necessary, loan agreements usually have clauses in to cover such eventualities. Keep control of expenditure Close liaison in HA sector of trends and issues Careful analysis of pension risk every three years Close liaison with the Development team to ensure developments outside of the budget and business plan can be accommodated if arise. The Association has a full system of internal controls, including financial controls and IT software controls. Staff are aware of their responsibilities in relation to information and the security passwords. Business continuity plan outlining actions to take in such situations to minimise disruption to day to day services to customers. 5

8 Report of the board of management and operating and financial review Risks and uncertainties (continued). Key risk Challenge: Expand Leeds Fed s delivery of good quality homes. Risk: The development is not viable and/or the houses do not sell Action being taken/ controls in place All schemes are checked to ensure the assumptions are reasonable and calculations accurate and error free. Additional financial parameters have been introduced to reflect the increased risk of increased development activity. 6

9 Report of the board of management and operating and financial review Value for Money Self-Assessment 2016/17 7

10 Report of the board of management and operating and financial review Leeds Federated - Value for Money Self-Assessment 2016/17 This is Leeds Federated s Value for Money Self-Assessment for 2016/17. A version can also be found on our website: 1 Executive Summary 9 2 About Leeds Federated 10 3 Strategic Context 11 4 Our Approach to Value for Money 12 Managing Performance 13 Staff Engagement 14 Board Engagement 14 Customer Engagement 15 5 How We Compare 15 6 Outcomes and Achievements for 2016/17 17 Customer Perceptions 17 Actions from 2015/16 Self-Assessment 19 Maximising our Financial Capacity 19 Asset Management and Development 20 Cost Apportionment Review 21 7 VfM Across the Business 21 Statutory Services 21 Responsive Repairs 21 Housing for Older Persons 21 Income Management & Financial Inclusion 22 Community Spaces 22 Development 23 Planned & Cyclical Maintenance 23 Information & Communication Technology 24 Corporate Services 24 Procurement 25 Social Enterprise Value (SEV) 25 8 Priorities for 2017/18 26 Concluding Statement 26 8

11 Report of the board of management and operating and financial review 1 Executive Summary 2016/17 was the first year of a new Corporate Plan covering the period , and reflected a revised set of corporate priorities with a sharper focus on the need to deliver growth: The focus of this Corporate Plan will be to sustain our existing services at an appropriate standard, innovate across the business to find more efficient ways to deliver those services, and grow our business through the provision of more affordable housing. (Leeds Federated Corporate Plan Summary, April 2016) Through the new Corporate Plan, Leeds Federated has clarified its approach to increasing its delivery of new homes by: Setting a wider geographical area for development (Leeds City Region) Reviewing and revising development scheme appraisal criteria where evidence had shown these to be more conservative than was necessary to effectively manage risk Detailed work to review and further stress test the business plan against a range of scenarios involving increases in development numbers. This has demonstrated, with external assurance, that Leeds Federated is able to substantially increase its output of new homes over the coming 5 years to 750 from an original assumption of 200, effectively a 375% increase in development output. In addition to signalling new levels of ambition in respect of development, the new Corporate Plan retains a focus on: the need to maximise the sustainability and performance of the existing asset base; the need to maintain, and where appropriate, improve the performance of services; the need to obtain maximum business benefit from the use of technology and continue to foster and support a culture of innovation throughout all areas of activity. The Annual budget and 30 year Business Plan set out in financial terms how the plans within the Corporate Plan Summary and strategies will be delivered. They demonstrate that Leeds Fed is a viable business. Robust stress testing is undertaken as part of the annual review cycle to ensure that our financial viability is maintained if our operating context changes. Actual income and expenditure during the year is compared to the annual budget to ensure our plans are on track, with appropriate information reported to Board at least quarterly. During the year we reviewed whether Leeds Federated s future should be as an independent organisation or as part of a larger business. A thorough and detailed process was followed, the outcome of which in January 2017 was to stay independent. We have reviewed our financial capacity and subsequently planned for a substantial increase in our output of new homes, as described on page 19. The Board will review the position again in due course when appropriate. 9

12 Report of the board of management and operating and financial review 2 About Leeds Federated Leeds Federated operates both in its traditional base of Leeds and beyond, managing 3960 homes across the Leeds City Region. Outside the city of Leeds there are particular concentrations of activity in North Yorkshire and the Wakefield Metropolitan District. Although primarily a provider of general needs affordable housing for rent and for sale, Leeds Federated also provides some specialist accommodation and support, and small amount of market rent accommodation targeted at both mainstream and student rental markets. Key Financials (restated) Total Turnover 21,983 23,020 22,191 Operating Surplus (*adjusted for disposal of fixed assets) 7,660* 6,710* 4,924 Housing and Investment properties, net of depreciation and grants 182, , ,804 Fixed assets, net of capital grants and depreciation 183, , ,527 Total assets less current liabilities 191, , ,949 1 restated to allow direct comparison with 2016 and later figures following SORP changes Housing Properties by Category The following chart shows Leeds Federated s housing stock by category in 2016/17, a total of 3,960 units 2 comprising 3,663 social housing units with 85 units of non-social housing and a further 212 homes managed by others. 2 unit numbers stated to allow comparison with previous years. 10

13 Report of the board of management and operating and financial review Housing Properties by Local Authority area The following chart shows the distribution of properties across Local Authority areas. Housing Properties by Local Authority area Lancaster 1 Selby 1 Wakefield 91 Harrogate 348 Leeds 3,519-1,000 2,000 3,000 4,000 3 Strategic Context The Association's strategic approach to delivering Value is set within the context of the Corporate Plan and embedded within each of the organisation s three core strategies: Goal 1 Sustain Good quality homes that people want to live in Value for money services, delivering quality at an affordable cost Maintain a healthy business - finances, expertise and governance Goal 2 Innovate Make best use of technology for greater efficiency & effectiveness Find ways to work smarter Adapt to change to remain competitive Goal 3 Grow Expand our delivery of good quality homes Identify new business opportunities which enhance viability Grow our capacity, 11 skills and influence to support the business

14 Report of the board of management and operating and financial review 4 Our Approach to Value for Money Value is delivered via a variety of routes and methods including, for example, through staff, by hard factual/numerical analysis being undertaken and reported, by publication of key facts and figures to interested parties and the through involvement of the Board. All of these routes and methods emanate from the Value for Money Policy which in turn links into the three goals of the Association. The three goals form the basis of the Association's Corporate Plan which is the driver for the Association's vision of Building Futures Together. Delivering Value Business Planning Effective budget setting, financial reporting and 30 year business planning ICT User Group Develops and monitors ICT Roadmap Procurement Effective procurement, project management and post-evaluation Building Futures Together VfM Steering Group Delivers value by promoting and rewarding business Sustainable Growth VfM is a core element of the business case appraisal for new development and all other business proposals Commercial Skills Business Sense a core behavioural requirement. All staff undertake mandatory VfM e-learning programme 12

15 Report of the board of management and operating and financial review Managing Performance Leeds Federated manages performance throughout the business using an integrated balanced scorecard system that links individual and team performance targets to the delivery of strategic objectives. Wherever possible, measures in the scorecard are designed to reinforce three aspects of business performance (process, quality and cost), again linked to the three strategic goals. In 2016/17 measures were compiled for 13 core business functions: 01 Good Quality Homes 08 Delivering New Homes 02 Customer Satisfaction 09 Preferred Employer 03 Sustainable Tenancies 10 Business Impact of Innovation 04 Quality Repairs Service 11 Financial Performance 05 Statutory Services 12 Value for Money 06 Housing & Tenancy Management 13 Being a Voice 07 ICT Services Sustain Innovate Grow Performance has generally been strong throughout the year across the full range of indicator, and when viewed in overall terms, has largely remained within the green zone. Overall financial performance remains strong, and the Association is working hard to meet the growing challenges in the area of rent collection and income management. Even in this area, performance remains well within budget and business plan parameters. 13

16 Report of the board of management and operating and financial review Staff Engagement Staff within the Association have developed an increasingly sophisticated understanding of value for money and efficiency over time. They know that VfM is about more than cutting costs, or making savings in what may at first sight seem the most obvious way to do so. For staff at Leeds Federated VfM means giving a better quality service for the same money or getting comparable outputs for fewer inputs. VfM is about thinking in advance of spending money, it is about thinking how can I deliver this service in a more efficient way, it is about thinking at the start of a new project what is the budget for this project, how am I going to establish the project, control it, monitor it, report on it and evaluate it post-completion?. To assist in embedding this understanding of VfM in all staff, and recognising that staff work in many different areas of the organisation delivering a varied array of services and products, the VfM Steering Group and the VfM awards for staff were first set up in At the same time, our VfM Register was set up on the organisation s intranet system. This is used to record all ideas, projects and initiatives aimed at improving efficiency. There is no minimum threshold, and items can be added to the register by any member of staff. This supports a culture of active awareness of cost, efficiency and effectiveness throughout the organisation. The VfM Steering Group meets at least three times each year, and has representatives from all key functions within the organisation as well as representation from the board. The meetings are timed to take place prior to meetings of the Audit and Risk Committee, ensuring that the Board is given prompt feedback and assurance that the overall approach to value is effective and in line with regulatory requirements. At every meeting of the group, items logged on the VfM Register are considered and the most popular are nominated for our Business Sense award. These awards are given out at our quarterly staff events, further reinforcing our positive culture of efficiency and value. A total of 46 entries were made on the VfM Register over the course of 2016/17, detailing validated savings or increased revenue generation totalling 221,182. Some Headline Items from VfM Register 2016/17 Change to specification for the renewal of slate roofs to a fibre cement product with comparable performance characteristics 36,219 Additional rental income generated through financial inclusion work 91,350 Improved collection of former tenant and sundry debts 58,830 Board Engagement Board members get involved in VfM directly through their analysis of the content of written Board papers and through their evaluating and questioning attitude whilst participating in Board meetings and Sub Committee meetings. Each item presented to the Board includes a specific section evaluating the value for money implications of the report or any proposals being made. 14

17 Report of the board of management and operating and financial review Customer Engagement The Challenger Panel is the primary route by which customers are actively engaged in Leeds Federated s approach to value. The Challenger Panel is not designed to act as a representative body, either geographically or demographically, however it is designed to scrutinise Leeds Federated s performance from a customer perspective. This objective is achieved through means articulated in our Customer Engagement Policy including: Recruiting through various channels customers who have the ability, commitment and desire to work collaboratively with staff to ensure the organisation delivers good quality, value for money services; Operating with transparency by providing the Challenger Panel the same performance reports that go to the Board. We will report the Panel s feedback and challenge to the Operations Committee and encourage members to periodically attend Operations Committee meetings; Embedding evidence based decision making and awareness of value for money in all involvement activities. It should be noted that the concept and importance of VFM was emphasised to the Panel during their induction and as part of the ongoing training programme they received dedicated VFM training from an external provider in May They also received training on challenging and understanding performance data from an external consultant. The Challenger Panel receives quarterly performance information and has direct dialogue with the Operations Committee over the results. This both provides co-regulatory assurance in respect of the regulatory standards and also importantly provides valuable insight regarding the organisation s performance from a customer perspective. The Challenger Panel worked collaboratively with staff in late 2016 to conduct a review of the organisation s local offer. During this process, members of the panel demonstrated their understanding of the need to focus on efficiency and deliver services that provided greater value for money for the customer. As a result, offering value for money was identified as one of the key principles of the organisation s local offer to customers. 5 How We Compare Sector Scorecard 2015/16* 2016/17* Budget 2017/18 Operating Margin 29.1% 34.8% 30.80% EBITDA-MRI 255% 306% 243% Units developed Gearing 23% 26% 226% Customers satisfied that rent provides VfM 93.3% 82.2% 82.5% Return on capital employed 4.02% 4.08% 3.48% Ratio of responsive repairs to planned maintenance 68% 72% 67% * Calculations based on the draft sector scorecard measure definitions as published May Leeds Federated is participating in the pilot the first figures for which are to be submitted by 30 June

18 Report of the board of management and operating and financial review Costs /unit 2014/ / /16 Median 2016/17 Headline social housing CPU Management CPU Service Charge CPU Maintenance CPU Major Repairs CPU Other social housing costs CPU (* - based on 2015/16 Global Accounts) LFHA - Costs Per Unit / / /16 Median 2016/17 Management CPU Maintenance CPU Other social housing costs CPU Service Charge CPU Major Repairs CPU 16

19 Report of the board of management and operating and financial review 6 Outcomes and Achievements for 2016/17 Key Processes Several of the most critical process efficiencies are shown in the table below. Process Efficiency Void turnaround (CORE definition - social) Average calendar days taken to complete repairs Cost KPI Average relet days Actual No. days (all categories of repairs & maintenance incl. gas) Cost KPI Quartile Position/other measure 2012/ / / / / Quartile 2 (7) Median (8) Quartile 2 (6) First time fix % of repairs completed at first visit (all categories of repairs and maintenance incl. gas) Quartile 3 (88.8%) Quartile 3 (90.1%) Median (91.3%) 91.0% 91.7% Developing a mobile working module for customer service visits Number of CSVs carried out annually Customer Perceptions Customers are at the heart of everything Leeds Fed does. Customer insight data remains very important to the Association, helping inform and influence both operational and strategic decision making. In particular, this enables Leeds Federated to understand how effective it is in delivering value from a customer perspective. Customer satisfaction results are reviewed internally on a quarterly basis by staff, by the Challenger Panel, and by the Board s Operations Committee. Results during 2016/17 have been mixed, with evidence of declining satisfaction in around 50% of our principal customer satisfaction measures. However, when viewed in the context of long term trends, performance remains strong. Where possible, the NHF STAR methodology is used to allow for benchmarking and historical comparison. 17

20 Report of the board of management and operating and financial review Satisfaction with rent providing value for money (STAR ) Following a significant peak at the end of 2015/16, customer satisfaction with rent providing value for money fell over three successive quarters prior to recovering at the end of 2016/17. A trend of further improvement has begun to establish in 2017/18. A key measure in the proposed sector scorecard, this will continue to be subject to close scrutiny from management and involved customers. Overall satisfaction (STAR ) Satisfaction with Neighbourhood (STAR ) 18

21 Report of the board of management and operating and financial review Actions from 2015/16 Self-Assessment TABLE OF VFM ACTIONS FOR 2016/17 Activity Target Outcome Repairs initiatives including:- bundling of doors, drain surveys, hedgehog wire installations in gutters; consideration of lettable standard Challenger Panel review of local offer and service standards Further major enhancements to the online service offer (MyAccount) to enable a conscious shift of transactions away from higher cost channels during 2017/18 Marketing of surplus space at head office made available as a result of investment in mobile technology and streamlining of business during 2015/16 Further education and training of budget holders Save 12% per door installed via the batched approach. Save 5% based on audit checks of drains and the potential to vary down quotes received as a result. 10% saving on gutter clearances over a 3 year period on 3 trial schemes. Consider options for varying lettable standard 5% saving A restated offer with a focus on affordable quality 40% of repairs transactions online by March k additional income (annually) with effect from April 2017 Budget holding staff more knowledgeable about accounts generally and about how to monitor budgets We placed orders for 74 composite doors in total via the new batching method last year. This resulted in a saving of 9,250 total (see page 21 for further information) New local offer with emphasis on VfM from a customer perspective. Work has progressed throughout the year on the development of a new website and MyAccount system with specific focus on system usability and accessibility to support the push to digital online self-help services Operations at head office successfully consolidated, with approximately 50% smaller floor area required. Surplus space on market to let. Training delivered as identified in the budget holder survey, on service charge budgets, bad debt provision and trading account resulting in greater engagement in budget setting. Maximising our Financial Capacity During 2016/17 the financial capacity of the organisation was reviewed reflecting the Board s objective to significantly increase development activity over the next 4+ years. With the support of treasury advisors TradeRisks the 2016/17 Business plan was reviewed with the inclusion of an additional 21m investment in 245 units representing an aspiration to effectively double the rate of delivery of new homes. The Business plan performed robustly under multi-variate stress testing and so the board agreed to include additional development in the 2017/18 Budget and Business Plan in support of the Strategic Growth objective. Accordingly the 2017/18 Budget and Business Plan successfully stress tested now includes 72m investment to deliver a total of 750 units over 6 years within the Leeds City Region. This is the headline figure quoted in the Executive Summary at Section 1. The Business Plan and its financial capacity will be reviewed and tested during 2017/18 in conjunction with the development of an updated Corporate Plan. As explored further in Section 8, this will focus on releasing further funding for development as a result of an extensive change programme based on the principle of maximising value across the business. This is known as the Vision 21 programme. 19

22 Report of the board of management and operating and financial review Asset Management and Development To enable Leeds Federated to enhance its understanding of the performance of its asset base, an Asset Return Model was established during 2015/16. Initial results were reported to the Board in March 2016, with further updates to the Operations Committee later in the year. The accuracy and reliability of the model improves as the base data grows, and in February 2017 it was refreshed and updated with a further year s maintenance data, the results of a new stock condition survey, and a new assessment of housing management cost at a scheme level. Average net present values have increased based on the larger, more robust data sample. Average NPV 2015/ /17 Trend Detached, or semi-detached house 33,098 41,513 Terraced house 29,355 35,302 Flat 28,239 30,388 Bedsit 18,802 18,882 All stock average 31,060 35,502 The model continues to be used to sense check the formulation of planned maintenance programmes to ensure that stock is known to be sustainable before substantial sums are committed, and option appraisals are currently being developed to assess the most effective approach to a relatively small number of properties whose performance has been consistently weak. 20

23 Report of the board of management and operating and financial review The Asset Return Model is of vital importance in enabling Leeds Federated to optimise the performance of its assets over time. A significant review of the Association s strategy in relation to asset management will be a core element in the development of an updated Corporate Plan during the 2017/18 financial year. Cost Apportionment Review For a 4 week period during Q3 all employee time was recorded against key activities. The resulting data has been used to review the accuracy of allocations within the accounts which determine the global account measures and will, as part of the Vision 21 programme inform a deeper understanding of the cost drivers, efficiency and effectiveness of the internal processes, systems and organisational ways of working which underpin the value maximisation objective of Vision 21. The time and cost apportionment analysis has provided valuable data which will be used within the Vision 21 programme to determine efficiency targets for the organisation. It is also anticipated that the exercise will be repeated during 2017/18 to refine the previous data and provide further insight at operational levels to drive additional transparency, efficiency and effective use of systems. 7 VfM Across the Business Statutory Services The approach to the re-inspection of domestic asbestos has been altered to a risk-based system from the previous approach of automatic annual visits. This means that properties will be visited on a frequency that is driven by the level of risk attributed to the type, condition and location of the asbestos recorded on Leeds Fed asbestos register. The anticipated result will be that the majority of domestic premises will not require an annual inspection as they will be classified as low risk and this will allow revisits of every 2 years or more to be put in place. The risk assessment across the asbestos register is due to be completed in and the resulting efficiency / cost saving will be calculated at this time. The changes to asbestos re-inspections have been developed in conjunction with the Association's Health and Safety Committee and external health and safety advisor, and are designed to ensure that resources can be targeted more effectively. The organisation continues to comply with all statutory requirements in relation to this area of work. Responsive Repairs Analysis of major works carried out reactively showed that a relatively small number of component types account for a disproportionate amount of spend. With a view to ensuring we are delivering VFM in this area we have explored the possibility of batching works together to reduce cost. Composite doors replacements currently form part of the trial in this area, which is successfully saving around 8% from when compared to the previous spend when these were delivered without batching. The supply and installation of composite doors account for circa 90k spend per annum. In 2016/17 a cumulative saving of 9,250 was made across a total of 74 doors. Housing for Older Persons Following the 1% rent reduction effective in April 2016, a focus for the Housing for Older Persons business stream was to review the existing structure and service with a view to reducing the overall cost of the service by rationalising the team and improving the service offer to customers. By re-structuring the team from 6 staff to 4 members of staff, savings of approximately 59,965 including on costs have been achieved without any detrimental impact on lettings performance, applicable from the start of 2016/17. 21

24 Report of the board of management and operating and financial review Use of the mobile working application has reduced the time taken to administer welfare checks by 421 hours or 56 days per year. It had also improved the visibility of this information to other staff therefore improving service delivery to customers in our HOPS schemes. Income Management / Financial Inclusion The table below shows the additional income generated for the Customer and Leeds Federated as a result of referral to the Financial Inclusion Officers/Money Matters team. In the year to date there have been 179 active referrals (this figure only includes customers who have actively engaged with us following the initial referral): Additional Income Increased Landlord Income Increased Customer Income April , , May , , June , , July , August , , September October November December , , January , February March , , Cumulative Total 91, , Community Spaces Our facilities team currently delivers a comprehensive cleaning service across our Leeds based stock. From February 2017 we started to deliver this service to our North Yorkshire residents. This is expected to lead to a better value, lower cost service for customers in this area. Additional value delivered in this areas has included: Environmental cleans communal areas and lifts, plus needle collections when needed. Replacement light bulbs replacing failed lamps in communal areas. Graffiti removal correct chemicals and PPE are kept on vehicles so it can be dealt with while team are on site rather than being given to a day to day contractor. As a result of the development and implementation of a tablet-based mobile working system for the delivery of fire alarm and emergency lighting testing, capacity has been released within existing resources to undertake portable appliance testing in-house instead of through an external contractor. 22

25 Report of the board of management and operating and financial review Development In addition to delivering the Association s own schemes, the development team also procures new homes via section 106 agreements from competitively bidding or paying set transfer rates in line with Local Authority policies. This is a competitive process for the Association in which other Registered Providers will be bidding for the same stock. In these situations Leeds Fed commissions Redbook valuations to ensure the Association is buying property at or below market value. These valuation reports also ensure Leeds Fed sells shared ownership at the market value. Section 106 schemes have to meet the Association s minimum investment hurdle, and to date the minimum investment hurdle has allowed us to remain competitive in securing opportunities within this market. In addition, Leeds Fed has made a successful bid for grant funding for the new Shared Ownership Affordable Homes Programme Leeds Fed has secured 35k per unit, again calculated to ensure schemes meet the Association s minimum investment hurdle. Planned & Cyclical Maintenance One of the most significant savings resulted from the re-procurement of a number of planned programme contractors which took place during Original estimates based on the tendered rates against the incumbent indicated potential savings ranging from 11-19%. Now that the first year of delivery on those new rates has been completed an actual position can be reported. Bathrooms are on average 19% cheaper than the incumbent rate and kitchens are on average 13% cheaper. By far the most significant saving has been with the windows and doors programme. Thanks to an innovation in the method of installation (using harnesses), the majority of window installations can be made without scaffold; this has substantially reduced the overall costs of an average installation. In real terms the saving across programmes has resulted in increased delivery of units with the same budget. For example in , 92 units were delivered with a budget of 577,537 whereas in a total of 233 installations were completed with a budget of 550,000. The recent stock condition survey indicated that substantial investment on windows and doors will be required in the next 5 years; these improved rates for this programme will allow us to maximise the numbers delivered. Finally it is to be noted that this reduction in the cost of delivery has not had any impact on quality or customer experience in fact both bathrooms and kitchens are now being installed quicker and more efficiently then before which has resulted in less disruption to tenants and fewer in works complaints. The other area of notable saving has been in a change in specification of roofing materials on the planned reroofing programme. A number of alternative products were considered and our roofing contractor returned comparative pricing based on an initial list of 26 properties. A change from a Redland to a Marley roof tile (and associated products) resulted in a saving of 18,843 on the quoted price. On this basis the alternative spec was agreed and was delivered against a total of 50 properties on the 16/17 roofing programme. If a pro rata saving is applied to the additional properties then a total saving of 36,219 can be assumed. Again in real terms this has translated to the ability to deliver additional units with the available budget. In terms of stock condition, roofing is in a similar position to windows and doors whereby there is a large demand for re-roofing some of our older properties in the next few years. These savings will allow us to deliver more units at better value. Once again we are reassured that there has been no compromise on quality, the new supplier Marley has agreed to match the 15 year warranty provided by Redland. 23

26 Report of the board of management and operating and financial review ICT [Information and Communication Technology] The following projects have been delivered during 2016/17: Further upgrade to the mobile software Origin which now enables staff across several departments to carry out even more tasks when away from the office. The specific areas are that surveyors can pick up and complete both repair order and void inspections and fire safety checking at schemes. These were manual processes with dependency on staff having to return back to the office to input information onto the housing management system. Rent collection has been improved by automating the identification of sundry debts cases. Business information reports from across number of areas have been improved by adding automated calculations and summary tables. This results in shorter time to analyse performance and removes risk of errors from running manual calculations. Corporate Services Training and Development: It is more and more evident that good quality and cost effective training and development can be carried out using social media via webinars, use of linked-in and professional blogs etc. In October 2016 we implemented e-learning modules through Learning Pool. These modules cover a number of mandatory learning as well as refresher courses, from induction sessions, through to housing and management development modules. Using this type of learning means staff can undertake learning when it is needed rather than wait until there are enough staff to make booking a course cost effective. Since October 2016 we achieved the following savings with anticipated further significant savings in : Training Numbers Saving Induction 9 new starters x 3 induction modules each 1,350 Safeguarding e-learning Frontline staff x 40 x 3 day sessions at 800 each session plus ability to extend the learning to other areas of the business 2,400 During 2016 we have also accessed some good quality webinars. Members of the Corporate Services Team undertook free Webinars delivered by the Free School for Health and Social Care on Innovation and Change and used this to deliver Evolve workshops to staff on Innovation and Change. This proved a good way of disseminating learning to other staff. We will continue to promote the use of webinars to the staff teams and encourage similar approaches to disseminating that learning. Other value for money on training and development courses have been: 40% saving on employment law sessions as a result of inputting into the content for the day Free seminars/training sessions delivered by Solicitors linked to Housing Association, through Buy Yorkshire, and professional membership of organisations such as CIPR and CIPD, CIH 24

27 Report of the board of management and operating and financial review Governance During 2016 the Board achieved its aim to reduce Board members from 12 to 9 which provided a value for money saving in relation to Board payments and expenses as well as ensuring good governance in relation to the number of people on the Board. Training and development for Board members has been sourced for free for specific areas such as Treasury and Audit through the use of Auditors and Advisors. Communication and PR Throughout the year a lot of work has been undertaken on making use of social media for communication to staff and tenants which has allowed us to streamline the use of print and marketing campaigns. Using this approach we are able to reduce the marketing and printing budgets for We have achieved VFM on the annual report through the use of videoing and making use of these across various communications such as; staff conference, AGM, updating the Challenger Panel and for use in the Customer focus document. Procurement 16/17 saw the start of the majority of our new planned works contracts, which were tendered for in 15/16. All of these re-procurements (for windows & doors, kitchens & bathrooms, central heating installations and cyclical decorations) indicated a potential saving on unit prices of between 11 19% compared to the incumbent / previous contract. In reality, this translated into doing more work for the budget. The major procurement in 16/17 was for our gas servicing contract. This was tendered via a mini completion against a Procurement for All framework, which was won by the incumbent. Although there was no forecast monetary saving (an increase in line with inflation), the new contract includes a 2-way system interface which will increase efficiency and accuracy (no need for double entering of data) and the introduction of an incentive approach to increase KPI achievement. Savings from previous procurement activities (which have resulted in lower prices than previous contracts for 16/17) are approximately 379k. Savings related to other 16/17 procurements or by combining works / not tendering (saving tender costs) are approximately 47k. Savings as a result of using framework consortia are approximately 38k. These total 464,435 ex VAT. Social Enterprise Value (SEV) As part of reviewing and testing the 2016/17 and 2017/18 Budget and Business Plan performance, Leeds Federated also calculated the Social Dividend or return generated through the provision of social housing, i.e. recognising the difference between market rent and the rent charged by Leeds Federated. The calculation, performed by treasury advisors TradeRisks, estimated our Social Enterprise Value at 283m which compares well with other Housing Associations. Our SEV evidences the sustained delivery of social value in support of our Corporate Sustain goal and specifically the provision of value for money services at an affordable cost. 25