WIGAN AND LEIGH HOMES LTD PREVIOUSLY KNOWN AS WIGAN & LEIGH HOUSING CO LIMITED STRATEGIC REPORT, REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTS

Transcription

1 REGISTERED NUMBER: WIGAN AND LEIGH HOMES LTD PREVIOUSLY KNOWN AS WIGAN & LEIGH HOUSING CO LIMITED STRATEGIC REPORT, REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

2 CONTENTS OF THE FINANCIAL STATEMENTS Page Company Information 1 Strategic Report 2 Report of the Directors 5 Report of the Independent Auditors 12 Statement of Comprehensive Income 14 Balance Sheet 16 Statement of Changes in Equity 17 Cash Flow Statement 18 Notes to the Cash Flow Statement 19 Notes to the Financial Statements 20 Detailed Income and Expenditure Account 34

3 COMPANY INFORMATION THE BOARD: Chair Vice Chair Other Members Penny McGinty Vicky Bannister Karl Battersby EXECUTIVE OFFICERS: Chief Executive Janice Barton (until 16/9/16) Interim Chief Executive Vicky Bannister (from 1/9/16 to 31/3/17) Director of Tenancy Services Vicky Bannister (until 31/8/16) Interim Director of Tenancy Services Peter Hughes (from 1/9/16 to 31/3/17) Director of Asset Management & Development Matt Roberts (until 31/3/17) SECRETARY: Louise Boardman (until 28/3/17) Edward Flanagan (from 29/3/17) REGISTERED OFFICE: Progress House Westwood Park Drive Wigan WN3 4HH REGISTERED NUMBER: Registered Company No: Registered by the Homes and Communities Agency No: 4625 AUDITORS: Fairhurst Registered Auditors Chartered Accountants Douglas Bank House Wigan Lane Wigan WN1 2TB BANKERS: Co-operative Bank PLC PO Box Balloon Street Manchester M60 4EP Page 1

4 STRATEGIC REPORT The Directors present their strategic report for the year ended 31 March REVIEW OF BUSINESS Wigan and Leigh Homes Ltd is a company limited by guarantee and a Registered Provider of social housing. The company operates in Wigan Borough, one of ten metropolitan districts in Greater Manchester, and is around 77 square miles in area with a population of over 300,000 people. Set up as the Council s Arm s Length Management Organisation (ALMO) in 2002 in response to the Government s decent homes programme, the company secured access to significant investment in the Council s housing stock which resulted in the Council homes managed by the ALMO achieving the decency standard. The company had a management agreement with Wigan Council until 2023 in respect of the management and maintenance of the Council's housing stock. For undertaking this work the Company was paid a management fee which was reviewed annually. The management fee budget for the 2016/17 financial year was 13,586,723. In addition to managing the 22,064 Council owned homes in the Wigan and Leigh areas, the company also owns 80 properties. The Homes and Communities Agency (HCA), Wigan Council and the company have contributed to the costs of building these homes. Strategic Priorities The Council launched its key strategic document in 2015 The Deal for the Future which sets out how the Council will transition to a sustainable new way of operating by 2020, in the light of the financial challenges it has had and continues to face. The Deal has seen traditional council services radically transformed and has proved that by forming new relationships with residents, services can be maintained and protected for the future. Although the ALMO has performed well and achieved its original objective, during 2016 the Council started a review to assess whether the ALMO remains the correct vehicle to maintain the Council s housing stock and deliver the Council s objectives of: The re-structure within the Council which will see housing taking a greater role in the growth agenda The Council s new asset based approach and the need to ensure that housing plays a key role working closely with a wide range of services Government policy changes and the resultant impact on the Housing Revenue Account The need to make savings and efficiencies, given the financial pressures that the Council is under. Closer alignment with The Deal principles Following consultation with tenants and staff, the Council s Cabinet on 16 th February 2017 agreed to the proposal to return the housing management functions back to the Council. On 1 st April 2017 the WALH staff TUPE transferred to the Council and were integrated into four directorates - Adult Social Care and Health, Customer Transformation, Economy and Environment and Resources and Contracts. 2016/17 Performance Council owned properties Performance during the year on some key business indicators for the Council s stock is set out below: 2016/ / / /14 Tenant satisfaction with landlord service 90% 90% 90% 91% Proportion of empty homes at 31 st March 1.50% 1.14% 1.50% 1.17% Average time (days) to re-let local authority housing Proportion of rent lost due to vacant properties 1.29% 1.28% 1.34% 1.28% Proportion of rent collected including arrears 96.61% 96.96% 96.98% 98.02% Number of households living in temporary accommodation Percentage of homes achieving the Decent Homes Standard 100% 100% 100% 99.97% Proportion of gas servicing certificates issued 99.5% 99.8% 99.5% 99.5% Satisfaction with anti-social behaviour process 99% 85% 84% 96% Number of working days lost due to sickness absence Page 2

5 STRATEGIC REPORT The overall performance picture is good with 24 out of 32 indicators on target or better. The high risk areas are rental income and gas servicing. Welfare Reform continues to be a major challenge for maximising rent income. Whilst many tenants originally affected by the under-occupation charge have either downsized to a smaller property through assistance from the Company or ended their tenancy, over 10% of tenants still have a reduction in their housing benefit. In addition, the Universal Credit (UC) a single payment for a number of benefits paid monthly saw us having to collect an additional 1.9 million in rent from tenants during 2016/17, income which was previously paid directly to us. At the end of March 2017 there over 1,300 tenants in receipt of UC with their average arrears being considerably higher than the overall average. The proportion of gas servicing certificates outstanding is a critical measure of the safety of the council properties. Whilst robust processes are in place and performance has been consistent over the last 4 years, processes and IT systems are being reviewed to ensure 100% compliance. 2016/17 Performance WALH owned properties Performance during the period on some key business indicators for Wigan & Leigh Home s own stock is set out below: 2016/ / / /14 Tenant satisfaction with landlord service 81% 81% 81% 88% Proportion of empty homes at 31 st March 3.8% 0% 0% 0% Average time (days) to re-let properties 0 (no relets) Proportion of rent collected including arrears % % 97.93% 99.08% Proportion of gas servicing certificates issued 100% 100% 100% 100% Void rent loss 2.3% 0.36% 0.10% 0.25% Tenant satisfaction with the overall service reduced when the last satisfaction survey was carried out in 2014, although the latest results were based on a low number of responses to the survey. Voids performance has been skewed by 3 properties being held empty whilst investigations are taking place with regards to water ingress in one of the blocks. All 80 properties have a valid landlord s gas safety certificate and, whilst rent collection rates have dropped slightly, performance is still good. Key Developments in 2016/17 Restructured the Tenancy Services directorate to align with the Council s model of Start well, live well, age well and using The Deal principles. This included 5 additional New Tenancy Officer posts to support tenancy sustainability. Completed the housing review and transferred housing management services from WALH back to Wigan Council. New governance arrangements in place to run the company in 2017/18. New build and regeneration 95 units completed, 72 units on site, 62 units in planning, 117 units undergoing on-site feasibility. 135k DCLG grant awarded for master planning and enabling works in Worsley Mesnes. Phase 1 master planning completed May Generated cashable savings to the public purse in excess of 1.6 million through better use of housing stock by avoiding unnecessary adaptation work ( 727k), facilitating prompt hospital discharge and avoidance of re-admission ( 447k), close working with colleagues in adult and children social care including the rehousing of young people leaving care, offenders and complex cases ( 460k). Maximised rental income collection given the particular challenge of the Universal Credit rollout. Specialist Benefit Liaison Officers are now in post to ensure that Universal Credit claimants receive appropriate support and advice... Page 3

6 STRATEGIC REPORT KEY RISKS A number of factors and influences may have an effect on the Company s future performance and financial viability now the ALMO has ended and the principal activity going forward is the ownership and management of its 80 properties. The principal risks include: Political - Changes in Government legislation represent a significant risk to the company. Welfare Benefit Reform, particularly paying housing benefit as part of a Universal Credit direct to tenants, will have an impact on tenants and rental income. At the end of March 2017 there were 3 WALH tenants claiming Universal Credit and 31 tenants in receipt of housing benefit including 6 tenancies affected by the under-occupation charge. During 2016 the Government announced that supported housing would be included in the Government s cap on housing benefit and Universal Credit in social housing to Local Housing Allowance (LHA) rates from April The cap will apply to future and existing tenants. This is a national impact across all supported housing schemes with much lobbying from the housing sector. We now await publication of a Green Paper setting out future plans for supported housing. With Tanfield being classed as supported accommodation, there is uncertainty regarding any potential impact on the scheme. The Conservative Government made a commitment to extend the Right to Buy to housing association tenants. To prevent the need for legislation, the National Housing Federation secured a voluntary deal with the Government on this, although it s not yet known when and how it will happen. A small scale pilot involving 5 housing associations took place last year and it is understood the Government has now chosen the West Midlands as the area for its regional pilot. Financial Viability The Government imposed 1% rent reduction over each of the 4 years between reduces the potential rental income for WALH by around 150,000 over the 4 years, although over the 4 years there will be an average saving of 1,600 for tenants paying full rent. The latest stress testing exercise has taken into account such issues as the impact of this rent reduction, the potential rollout of the Right to Buy, increased rent loss and the management charge from the Council for providing management services to the Company. The stress test showed that in the case of most of the scenarios tested the company s owned properties budget forecast still retains a healthy balance. The continuation of the 1% rent reduction beyond 2019/20 and the application of the LHA cap to supported accommodation pose the greatest single risk. As the worst case scenario demonstrates, the company would be less resilient should a number of risks materialise at the same time. Legal and Regulatory As reported to the WALH Board on 7 th February 2017, there is a problem with water ingress in one of the blocks of flats. Board approved the funding of the re-roofing works at a cost in the region of 100,000 through the company reserves and that WALH seeks costs retrospectively via a claim for damages. Discussions have taken place with all parties to recoup any costs incurred in rectifying the problem. The HCA has focused on the strength of governance and the financial viability in its Regulatory Standards. It has the power to issue regulatory notices where it has evidence that a provider is in breach of an economic standard or for serious detriment finding. The company has a process in place which includes self-assessments against the regulatory standards being verified by the Council s Internal Audit section. Given the transfer of the housing management services from WALH back to the Council and the above risks, an options appraisal is being carried out on the future of the company and its 80 properties. GOVERNANCE Following the transfer of the housing management services from WALH back to the Council, the governance structure was reviewed and amended to take account of the revised set up of the company. Revised Articles of Association were agreed which reduced the Board composition to 3 Directors, all of which are currently Council Officers. This structure will be reviewed once the options appraisal on the future of the company has been completed. ON BEHALF OF THE BOARD:. E Flanagan - Secretary Date:... Page 4

7 REPORT OF THE DIRECTORS The Directors present their report with the financial statements of the company for the year ended 31 March PRINCIPAL ACTIVITY The principal activity of the company in the year under review was that of managing the housing stock of Wigan Council. However, following the transfer of housing management services from WALH back to the Council with effect from 1 st April 2017, that has changed in 2017/18 to the ownership and management of the 80 properties owned by the company. DIVIDENDS No dividends will be distributed for the year ended 31 March FUTURE DEVELOPMENTS Following the transfer of management services for the Council s 22,000 housing stock back to the Council and the ending of the ALMO, an options appraisal is being carried out on the future of the company and its 80 properties. The appraisal is currently focusing on 2 options transfer all existing assets to the Housing Revenue Account and close the company or WALH retain ownership of the 80 properties and manage the assets through Wigan Council staff. The options are being considered within the overall objectives to deliver a more integrated housing solution within the borough and to ensure the services delivered to social housing tenants and borough residents are enhanced and improved. DIRECTORS The Directors shown below have held office from 1 April 2016 to 28 March F B Walker M R Marsden J L Bennett N Turner S Warwick P A Driscoll P A Collins L Hunt A Thompson M Jones Other changes in Directors holding office are as follows: M Whiteside resigned 28 June 2016 P Draper resigned 4 October 2016 J Garlick resigned 4 October 2016 J A Harding resigned as Independent 6 May 2016 J A Harding appointed as Council member 28 June 2016 B Naylor appointed 4 October 2016 A Conway appointed 4 October 2016 S Hanbury appointed 4 October 2016 T Adesemowo appointed 4 October 2016 On 28 March 2017 all Directors resigned and were replaced by: V M Bannister P McGinty K Battersby The 3 Directors are all Officers of Wigan Council. The decision was taken on 17 March 2017 to transfer the management of housing services for the properties owned by Wigan and Leigh Homes Ltd to Wigan Council with effect from 1 April Page 5

8 REPORT OF THE DIRECTORS Wigan and Leigh Homes Senior Officer Emoluments in 2016/17 were as follows: Post holder information Chief Executive Interim Chief Executive Directors Tenancy Services Interim Tenancy Services Notes 1 2 2&3 3 Salary (including fees & Allowances) 48,645 71,003 31,731 44,424 Expense Allowances Total Remuneration excluding pension contributions 2016/17 Pension contributions Total Remuneration including pension contributions 2016/17 3, ,967 71,003 31,731 44,424 10,396 13,630 6,219 8,707 62,363 84,633 37,950 53,131 Asset Management and Development 4 76, ,155 14,926 91, ,958 3, ,280 53, ,158 Notes 1. The Chief Executive retired on 16 th September Director of Tenancy Services was appointed as Interim Chief Executive from 1 st September Interim Director of Tenancy Services appointed from 1 st September The Director of Asset Management and Development left the Company on 31 st March 2017, the respective redundancy package was 56,408. Page 6

9 REPORT OF THE DIRECTORS CHARITABLE DONATIONS AND EXPENDITURE During the year the company made a donation of 25,000 to Wigan Youth Zone, registered charity number Financial Review Wigan and Leigh Homes Ltd is a company limited by guarantee and a Registered Provider of social housing. Until 2011, it had no Fixed Assets of its own, because its sole purpose was to manage the properties of Wigan Council. The Balance Sheet, like that of all Arm s Length Management Organisations (ALMOs) set up to manage the housing stock of their parent Councils, was dominated by the implication of the FRS17 adjustment relating to the Pension Liability of its staff. From 2015/16 FRS17 has been superseded by FRS102. This liability is covered by a letter from Wigan Council that confirms that the Council has undertaken responsibility for terms and conditions in respect of the former WALH employees who transferred to the Council, including any future pension fund liabilities. As at 1 April 2017 all staff and their respective pension liabilities and commitments were transferred to Wigan Borough Council by way of TUPE. The company has a portfolio of 80 properties, all wholly owned by Wigan and Leigh Homes Ltd. Their construction was partly funded by grants and partly by a fixed interest loan that is being repaid from the rents received for the properties. When the company was set up, it was decided that all surpluses on its housing management activities would be passed back to Wigan Council and returned to the Housing Revenue Account to assist future investment in the housing stock. As such, the company s only annual surplus arises from interest received on bank deposits and a surplus from its own portfolio of assets. The company s Income and Expenditure Account for 2016/17 shows that there was a deficit of 624,797 after the deduction of 70,475 Corporation Tax. An explanation of the deficit is provided in the accounts. Capital Structure and Treasury Policy At the 31st March 2017 the Company had a loan, arranged via Wigan Council, for 1.522m at a fixed rate of 5.35% for 36 years with repayments being on annuity basis. The Company also has two additional loans relating to the Tanfield development. The first loan advance was made in 2014/15for 1,024m at a fixed rate of 3.45% over 40 years. An additional loan of 809,573 was made on the 20 th April 2016 at a fixed rate of 3.20% over 39 years. Employees With effect from 1 st April 2017 all staff employed by the company TUPE transferred to Wigan Council. Council staff are now providing the management services on behalf of the company. The Council has a Staff Deal which is an informal agreement with all staff outlining what they can expect from the Council, and in return what the Council expects from them. The Council has also developed the BeWigan Experience which celebrates how we do things in Wigan, and focuses us on our future. The three behaviours underpinning this are: Be Positive is all about taking pride in what you do, where you work and the service you offer to our customers. It is also about celebrating our achievements and recognising a job well done Be Accountable is all about how we deliver our services, how we can work with partners and colleagues in a smarter way and the ways in which we can commit to making improvements Be Courageous is all about being open to doing things differently and being prepared to have a different conversation. Page 7

10 REPORT OF THE DIRECTORS Financial Risk Management Policy The main risks associated with the company's financial assets and liabilities are set out below. The company does not undertake any hedging activity. Interest Rate Risk The company receives interest from the company's bank account, therefore the financial assets, liabilities, interest income and cash flows can be affected by movements in interest rates. However, the Directors do not consider there to be any significant exposure. Loans to finance its portfolio are fixed rate for the life of the loan from the Council. Price Risk There is no significant exposure to price changes in the carrying value of the financial liabilities. Credit Risk The company receives almost 100% of its turnover from Wigan Council, and payment terms are 30 days from the date of invoice. Individual exposures and overdue debts are monitored, with customers subject to credit limits to ensure that the company's exposure to bad debts is not significant. Liquidity Risk The company is not exposed to liquidity risk as its liabilities are directly met by Wigan Borough Council on its behalf. In respect of the properties that the company owns and manages, the income it receives is 4.0 times the interest due on the loan used to fund them. For its Management Fee activities, the Company was not exposed to liquidity risk as its liabilities were directly met by Wigan Borough Council on its behalf. Foreign Currency Risk The company does not engage in foreign currency transactions, and all its activities take place within the United Kingdom. Consequently there is no foreign currency risk to the company. Corporate Governance The Board confirms that during 2016/17 the company has adopted and complied with the principal recommendations of the Good Governance Standard for Public Services which the former Tenant Services Authority adopted as the standard. Having reviewed the self-assessment prepared by management, Internal Audit is satisfied that there is sufficient evidence to support WALH s statement of compliance against the HCA standards. Some areas for improvement have been identified as part of the self-assessment and implementation of these actions will be followed up as necessary as part of next year s internal audit plan. Page 8

11 REPORT OF THE DIRECTORS Internal Controls The Board acknowledges its overall responsibility for establishing and maintaining the whole system of internal control and reviewing its effectiveness. Wigan and Leigh Homes Governance Framework comprises the systems and processes, the culture and values, by which Wigan and Leigh Homes is directed and controlled and its activities through which it accounts to, engages with, and leads its tenants and customers. It enables Wigan and Leigh Homes to monitor the achievement of its strategic objectives and to consider whether these objectives have led to the delivery of appropriate, cost effective services. The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of Wigan and Leigh Homes policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. Wigan Council s Internal Audit Annual Assurance Opinion on the adequacy and effectiveness of the system of internal control as reported to the Wigan & Leigh Homes Board on 7 th June 2017 was that from the internal audit work undertaken in 2016/17 the Chief Internal Auditor concluded that Wigan and Leigh Homes operates an effective overall control environment. During 2016/17 key elements of the control framework have included: A Governance, Standards and Audit Committee delegated authority to oversee the work of the Internal and External Audit functions and provide independent assurance of the effectiveness of:- a. Governance arrangements. b. Risk management framework and the associated control environment. c. standards of conduct throughout the organisation. A Business, Investment and Performance Committee delegated authority to oversee the business and performance of the Company and in particular to:- a. Monitor revenue and capital expenditure including the determination of investment priorities and programmes. b. Agree performance targets on local and national performance indicators and monitor performance. c. Approve service improvement and value for money reviews. A Tenants Committee delegated authority to provide support and guidance to the Board from a tenant s perspective and in particular to:- a. Act as tenants voice on issues of importance to tenants, b. Advising on rent setting and stock investment priorities, c. Setting standards and scrutinising performance. Board approved terms of reference and a scheme of delegation that is reviewed regularly. Page 9

12 REPORT OF THE DIRECTORS An Internal Audit function carried out at arms-length by Wigan Council s Internal Audit service that has responsibility for the continual review of major financial controls and the wider internal control environment. A private firm of external auditors who provide an annual opinion on the financial statements, balance sheet and profit and loss for the year, in accordance with United Kingdom Generally Accepted Accounting Practice A risk management framework and a comprehensive Risk Register approved by the Board and monitored by the Governance, Standards and Audit Committee. Business continuity plans complement the risk management framework. A strong performance management culture based on a tiered approach to priorities, responsibilities and targets. The framework is reported regularly to Business, Investment and Performance Committee and annually to Board. It includes the use of at risk indicators where additional reporting and scrutiny occurs. A Board approved Employee Code of Conduct, Fraud Management and Whistleblowing policies that outline expected behaviour and set standards of conduct and mechanisms available to report any incidents of misconduct or behaviour not in keeping with the code. A Value for Money strategy achieved by all reports including financial and value for money implications that are used to determine areas for improvement. The business planning and budget processes are also used to drive value for money. The Board cannot delegate ultimate responsibility for the system of internal control but it can, and has, delegated authority to the Governance, Standards and Audit Committee to regularly review the effectiveness of the system of internal control. The Board receives copies of the reports to Governance, Standards and Audit Committee together with minutes of the meetings. The means by which the Governance, Standards and Audit Committee has reviewed the effectiveness of the system of internal controls includes: Internal Audit reports Internal Audit s Annual Assurance Opinion Audit recommendation tracker Management assurances The External Audit management letter During the year Internal Audit reviewed a range of issues including: Corporate Governance Performance Indicators Risk Management Overview Data matches from the National Fraud Initiative Exceptions to Contract Procedure Rules New Build Management of Voids Overall in the Assurance Opinion of Wigan Council s Internal Audit service Wigan and Leigh Homes operates an effective overall control environment. Page 10

13 REPORT OF THE DIRECTORS STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the surplus or deficit of the company for that period. In preparing these financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the company's auditors are aware of that information. AUDITORS The auditors, Fairhurst, will be proposed for re-appointment at the forthcoming Annual General Meeting. ON BEHALF OF THE BOARD:... E Flanagan - Secretary Date:... Page 11

14 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF WIGAN AND LEIGH HOMES LTD We have audited the financial statements of Wigan and Leigh Homes Ltd for the year ended 31 March 2017 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement 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 Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Statement of Directors' Responsibilities set out on pages fifteen and sixteen, the directors are responsible for the preparation of the financial statements and for being satisfied that they 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 Auditing Practices Board's Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Strategic Report and the Report of the Directors to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: - give a true and fair view of the state of the company's affairs as at 31 March 2017 and of its deficit for the year then ended; - have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'; and - have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion based on the work undertaken in the course of the audit: the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and the directors report has been prepared in accordance with applicable legal requirements. Page 12

15 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF WIGAN AND LEIGH HOMES LTD Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or - the financial statements are not in agreement with the accounting records and returns; or - certain disclosures of directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. J J Weston (Senior Statutory Auditor) for and on behalf of Fairhurst Statutory Auditor Chartered Accountants Douglas Bank House Wigan Lane Wigan Lancashire WN1 2TB Date:... Page 13

16 (REGISTERED NUMBER: ) STATEMENT OF COMPREHENSIVE INCOME Continuing Discontinued Total Notes TURNOVER 2 601,980 13,075,888 13,677,868 Cost of sales 2 (217,048) (13,261,184) (13,478,232) GROSS SURPLUS/(DEFICIT) 384,932 (185,296) 199,636 Administrative expenses (803) (803) OPERATING SURPLUS/(DEFICIT) 6 384,129 (185,296) 198,833 Interest receivable and similar income 2,045-2,045 Interest payable and similar expenses 7 (141,200) - (141,200) Other finance costs 15 - (614,000) (614,000) SURPLUS/(DEFICIT) BEFORE TAXATION 244,974 (799,296) (554,322) Tax on surplus/(deficit) 8 (70,475) - (70,475) SURPLUS/(DEFICIT) FOR THE FINANCIAL YEAR 174,499 (799,296) (624,797) OTHER COMPREHENSIVE INCOME Actuarial gain / (loss) relating to pension scheme, due to : Changes in financial assumptions (15,669,000) Other experience losses 6,165,000 Return on net assets excluding amounts included in net interest 10,086,000 Changes in demographic assumptions (302,000) Income tax relating to components of other comprehensive income - OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX 280,000 TOTAL COMPREHENSIVE LOSS FOR THE YEAR (344,797) The notes form part of these financial statements Page 14

17 (REGISTERED NUMBER: ) STATEMENT OF COMPREHENSIVE INCOME Continuing Discontinued Total Notes TURNOVER 2 394,181 12,696,842 12,696,842 Cost of sales 2 (177,353) (13,271,236) (177,353) OPERATING SURPLUS/(DEFICIT) 6 216,828 (574,394) (357,566) 216,828 (574,394) (357,566) Interest receivable and similar income 4,615-4,615 Interest payable and similar expenses 7 (116,516) - (116,516) Other finance costs 15 - (736,000) (736,000) SURPLUS/(DEFICIT) BEFORE TAXATION 104,927 (1,310,394) (1,205,467) Tax on surplus/(deficit) 8 (26,332) - (26,332) SURPLUS/(DEFICIT) FOR THE FINANCIAL YEAR 78,595 (1,310,394) (1,231,799) OTHER COMPREHENSIVE INCOME Actuarial gain / (loss) relating to pension scheme, due to : Changes in financial assumptions 8,193,000 Other experience losses 556,000 Return on net assets excluding amounts included in net interest (2,161,000) Income tax relating to components of other comprehensive income - OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX 5,788,704 TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR 4,556,905 The notes form part of these financial statements Page 15

18 (REGISTERED NUMBER: ) BALANCE SHEET 31 March 2017 Notes FIXED ASSETS Tangible assets 9 7,524,243 7,658,944 CURRENT ASSETS Debtors , ,919 Cash at bank 2,193,713 2,416,919 2,886,478 2,853,838 CREDITORS Amounts falling due within one year 11 2,036,690 3,142,062 NET CURRENT ASSETS/(LIABILITIES) 849,788 (288,224) TOTAL ASSETS LESS CURRENT LIABILITIES 8,374,031 7,370,720 CREDITORS Amounts falling due after more than one year 12 (7,728,569) (7,002,461) PENSION LIABILITY 15 (18,043,000) (17,421,000) NET LIABILITIES (17,397,538) (17,052,741) RESERVES Income and expenditure account 14 (17,397,538) (17,052,741) (17,397,538) (17,052,741) The financial statements were approved by the Board of Directors on its behalf by:... and were signed on... P McGinty - Director The notes form part of these financial statements Page 16

19 (REGISTERED NUMBER: ) STATEMENT OF CHANGES IN EQUITY Retained Total earnings equity Balance at 1 April 2015 (22,408,942) (22,408,942) Changes in equity Total comprehensive income 5,356,201 5,356,201 Balance at 31 March 2016 (17,052,741) (17,052,741) Changes in equity Total comprehensive loss (344,797) (344,797) Balance at 31 March 2017 (17,397,538) (17,397,538) The notes form part of these financial statements Page 17

20 (REGISTERED NUMBER: ) CASH FLOW STATEMENT Notes Cash flows from operating activities Cash generated from operations 1 (816,633) 912,316 Interest paid (141,200) (116,516) Tax paid (37,475) (11,348) Net cash from operating activities (995,308) 784,452 Cash flows from investing activities Purchase of tangible fixed assets - (1,346,240) Interest received 2,045 4,615 Net cash from investing activities 2,045 (1,341,625) Cash flows from financing activities New loans in year 809,573 - Loan repayments in year (39,516) (27,571) Grant received in year - 116,667 Net cash from financing activities 770,057 89,096 Decrease in cash and cash equivalents (223,206) (468,077) Cash and cash equivalents at beginning of year 2 2,416,919 2,884,996 Cash and cash equivalents at end of year 2 2,193,713 2,416,919 The notes form part of these financial statements Page 18

21 (REGISTERED NUMBER: ) NOTES TO THE CASH FLOW STATEMENT 1. RECONCILIATION OF DEFICIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS Deficit before taxation (554,322) (1,205,467) Depreciation charges 134, ,700 Adjustment for pension funding 288, ,000 Government grants (31,605) (31,605) Finance costs 755, ,516 Finance income (2,045) (4,615) 589, ,529 (Increase)/decrease in trade and other debtors (253,649) 277,534 (Decrease)/increase in trade and other creditors (1,152,913) 317,253 Cash generated from operations (816,633) 912, CASH AND CASH EQUIVALENTS The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts: Year ended 31 March /3/17 1/4/16 Cash and cash equivalents 2,193,713 2,416,919 Year ended 31 March /3/16 1/4/15 Cash and cash equivalents 2,416,919 2,884,996 The notes form part of these financial statements Page 19

22 1. STATUTORY INFORMATION WIGAN AND LEIGH HOMES LTD NOTES TO THE FINANCIAL STATEMENTS Wigan and Leigh Homes Ltd is a private company, limited by guarantee, registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page. The presentation currency of the financial statements is the Pound Sterling ( ). The company constitutes a public benefit entity as defined by FRS 102. The financial statements have been prepared in accordance with applicable accounting standards including Financial Reporting Standard 102. The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102), the Statement of Recommended Practice for Social Housing Providers 2014, and with the Accounting Direction for private registered providers of social housing in England The financial statements are also prepared under the requirements of the Housing and Regeneration Act 2008 and the Companies Act The financial statements have been prepared on a going concern basis under the historical cost convention, modified to include certain items at fair value. The financial statements are prepared in sterling, which is the functional currency of the company. The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated. Page 20 continued...

23 2. ACCOUNTING POLICIES WIGAN AND LEIGH HOMES LTD (REGISTERED NUMBER: ) NOTES TO THE FINANCIAL STATEMENTS - continued Basis of preparing the financial statements These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act The financial statements have been prepared under the historical cost convention. The balance sheet shows a deficit of 17,397,538 due to a pension fund liability of 18,043,000. Wigan Council recognises that the arrangements between the Council and Wigan & Leigh Homes Ltd, for the management of the Council's housing stock, allow the company to meet all its current liabilities to the pension fund. Wigan Council also recognises that there is no provision in the arrangements which allow the company to make good any shortfall which might arise as described. Wigan Council agrees, therefore, that in the event that the administrator of the pension fund calls upon Wigan & Leigh Homes Ltd to make any payment in respect of such a shortfall, in respect of an employee of the company as a result of matters beyond the company's control, the Council will reimburse to the company the amount of such payment. During the year the council reviewed the contract with WALH and a decision to return the management of the councils housing stock to the direct control of WBC was made with effect from midnight on 31 March All staff have been transferred to direct employment with WBC by means of TUPE. Given the transfer of the housing management services from WALH back to the Council, a stress test on the financial viability of the company as a landlord of 80 properties has been produced by Finance. The stress test showed that in the case of most of the scenarios tested the company's owned properties budget forecast still retains a healthy balance. The continuation of the 1% rent reduction beyond 2019/20 and the application of the LHA cap to supported accommodation pose the greatest single risk. The worst case scenario demonstrates, the company would be less resilient should a number of risks materialise at the same time. In conjunction with this an options appraisal is being carried out on the future of the company and its 80 properties from a commercial and administrative point of view. Throughout the process the company will continue as a Registered Housing Provider with reference to the 80 properties in ownership. The Council will continue to support this by providing management services for the 80 properties owned by WALH until a decision is finalised. The financial statements have been prepared on a going concern basis, taking into account the considerations noted above. Turnover Management Fees - Turnover represents the net invoiced value of services provided for the management of Council housing stock, excluding value added tax. Rental Income - Turnover represents rental and service charges income receivable in the year net of rent and service charge losses from voids, Supporting People income, revenue grants from local authorities and the Homes and Communities Agency. Page 21 continued...

24 2. ACCOUNTING POLICIES - continued WIGAN AND LEIGH HOMES LTD (REGISTERED NUMBER: ) NOTES TO THE FINANCIAL STATEMENTS - continued Housing properties Housing properties are principally properties available for rent and are stated at cost less any provision for impairment (representing a diminution in the recoverable service potential of the asset below its carrying value in the balance sheet) less depreciation. Cost includes the cost of acquiring land and buildings, development costs, interest charges incurred during the development and expenditure incurred in respect of improvements. Improvements are works to existing properties which result in an increase in the net rental income, including a reduction in maintenance costs or result in a significant extension of the useful economic life of the property Housing properties in the course of construction are stated at cost not depreciated. Housing Properties for Rent - Fixed Asset Capitalisation and Depreciation Housing properties for rent are stated at cost less accumulated depreciation. Houses are transferred to completed properties when they have reached practical completion. Where a housing property comprises two or more major components with substantially different useful economic lives, each component is to be accounted for separately and depreciated over its individual useful economic life expenditure relating to the subsequent replacement or renewal of components is capitalised as incurred. Depreciation is charged on a straight-line basis after taking into account Social Housing Grant over the assets expected economic useful life as shown below: New build housing structure 150 Years Roofs 60 Years Windows 30 Years Electrical 30 Years Bathrooms 30 Years External doors 30 Years Boilers 15 Years Heating systems 30 Years Kitchens 20 Years Fences 30 Years Lifts 20 Years Electric gates 15 Years Communal flooring 15 Years Communal door entry 10 Years Communal lighting 30 Years Social Housing Grant (SHG) and Other Grants Government and other grants received relating to assets recognised under the depreciated cost method are recognised as deferred grants and amortised over the life of the housing property structure. The amortisation is recognised in income. Taxation Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. Current or deferred taxation assets and liabilities are not discounted. Current tax is recognised at the amount of tax payable using the tax rates and laws that that have been enacted or substantively enacted by the balance sheet date. Page 22 continued...

25 (REGISTERED NUMBER: ) NOTES TO THE FINANCIAL STATEMENTS - continued 2. ACCOUNTING POLICIES - continued Deferred tax Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. The activities of the company are partially exempt from VAT. Expenditure is fully matched against its respective income stream. Expenditure relating to ALMO activities is net of VAT and expenditure relating to rental activities is shown gross of VAT Service charge sinking funds Unutilised contributions to variable service charge sinking funds and over-recovery of variable service costs which are repayable to tenants are included in liabilities along with interest credited to the fund. During the year after consultation with tenants the service charges were converted to fixed and as a result the service charge sinking fund has been released to the income and expenditure account. Hire purchase and leasing commitments Rentals paid under operating leases are charged to surplus or deficit on a straight line basis over the period of the lease. Assets acquired under finance leases are capitalised and depreciated over the shorter of the lease term and the expected useful life of the asset. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding lease liability using the effective interest method. The related obligations, net of future finance charges, are included in creditors. Rentals payable and receivable under operating leases are charged to the statement of comprehensive income on a straight line basis over the period of the lease. Pension costs and other post-retirement benefits When employees have rendered service to the company, short-term employee benefits to which the employees are entitled are recognised at the undiscounted amount expected to be paid in exchange for that service. The company operates a defined benefit plan for the benefit of its employees. A liability for the company's obligations under the plan is recognised net of plan assets. The net change in the net defined benefit liability is recognised as the cost of the defined benefit plan during the period. Pension plan assets are measured at fair value and the defined benefit obligation is measured on an actuarial basis using the projected unit method. Actuarial valuations are obtained at least triennially and are updated at each balance sheet date. Employees of Wigan and Leigh Homes Ltd participate in the Greater Manchester Pension Fund (GMPF) which is a defined benefit pension. The scheme is a Local Government Pension Scheme managed by Tameside Metropolitan Borough Council. The assets of the scheme are invested and managed independently of the finances of the company. The GMPF is a funded scheme and the assets are held separately from those of the company in separate trustee administration funds. Debtors and creditors receivable / payable within one year Debtors and creditors with no stated interest rate and receivable or payable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the statement of comprehensive income in other administrative expenses. Page 23 continued...