Johnnie Johnson secures viability upgrade as voluntary undertaking continues

JJHT’s viability and governance ratings were downgraded amid liquidity and treasury management concerns in February 2014, when the regulator sought externally validated assurance ‘as a matter of urgency’ to look at the robustness of the group’s financial planning.

A judgment published today says JJHT, which owns and manages 4,960 homes in the north west of England, has used ‘reasonable business planning assumptions and undertaken sensitivity testing to confirm covenant compliance’, with a baseline business plan fully funded for five years.

This has resulted in an upgrade from a non-compliant V3 to a compliant V2, albeit with a need to manage material financial exposures to support continued compliance.  

The regulator says JJHT has shown an accurate and up-to-date stock condition survey, and given assurances there is no dependence on sales to fund the business plan or to achieve covenant compliance.

However, JJHT does not meet all requirements under the governance and viability standard and remains on G3, despite having strengthened its board, stabilised the business, carried out a stock condition survey, completed a stock valuation and updated its business plan.

JJHT has since worked with the regulator to develop an action plan to address identified weaknesses and offered a voluntary undertaking to provide assurance of JJHT’s intention to return to compliance.

The first phase of the voluntary undertaking is now complete ‘save for a strategic review into whether JJHT should remain as a standalone provider or pursue different delivery models with another organisation’.

It says: ‘A competitive process is currently underway. Once the outcome of this process is known, the possible need for any further work under the action plan and voluntary undertaking will be determined.’

The regulator also says that JJHT has not published a robust value for money (VfM) self-assessment.

Paul Dolan, chief executive of JJHT, said: ‘In less than 12 months, we have strengthened the business and radically improved how we operate.

‘The regulatory assessment of VfM is based on our position at March 2014 so with our new business plan, we are entirely confident that VfM outcomes for our stakeholders will be significantly improved.

‘We continue to work positively with the regulator to address the remaining issues highlighted in the February 2014 regulatory judgement to achieve full compliance with the regulator’s standards.’

Swan wins governance upgrade

Swan HA has regained its G1 status after offering ‘positive evidence that it is developing a consistent culture across the group’.

It comes after has been assigned an AA- rating by Standard & Poor’s (S&P) ahead of plans for an imminent bond issue.

Swan had been downgraded to G3 in 2012 when employees at Swan were found to have deliberately falsified documents to claim £50m of development grant funding early to ‘enhance its reputation’.

The regulator says it now has assurance that governance arrangements are now sufficient to adequately control the organisation to enable it to meet its objectives.

The previous regulatory judgement for Swan was published in October 2014.

It upgraded Swan to compliant G2 rating following improvements in internal control, a review of board skills, the appointment of a new chair and significant board refreshment.

The group has implemented a strengthened appraisal and performance management framework for non-executive members and executive directors and carried out an overall assessment of board performance.

The HCA says: ‘We now have increased assurance that processes and systems are in place to protect social housing assets from undue risks arising from other activities which the group undertakes. In addition, the independent assessment of the actions taken by Swan provides positive evidence that it is developing a consistent culture across the group.’

The regulator’s assessment of Swan’s compliance with the financial viability element is unchanged at V1.

BPHA regains G1 after revising board pay

BPHA has regained the highest possible governance rating from the regulator after revising its approach to board pay, including halving the pay to its chair.

The regulatory judgment, published today, says that as part of a wide ranging review of governance, supported by external advisors, BPHA has changed how it determines levels of board member remuneration.

This process included benchmarking of the proposals against other organisations, including HAs of a similar size and complexity to BPHA. The RP has also introduced a new board member performance management and development process.

The HCA says this is more closely linked to defined roles and responsibilities carried out by non-executive directors of the board.

It follows a judgment in May 2014, which asked for assurance in relation to pay and performance.

BPHA has appointed former Circle board member Robert Burgin as its new chair. It has reduced the remuneration for the chair role from £50,000 to £28,000.

The group said this differs to the pay for previous chair Stephen Hallett, who stepped down in July 2014, as a result of a review carried out prior to the new chair role being advertised towards the end of last year

First Wessex downgraded over gas safety

First Wessex has been downgraded to a G2 for having a significant number of overdue gas servicing certificates over a two-year period, which the regulator says reflects shortfalls in its risk management and internal controls.

The regulator concluded that First Wessex - which had been placed on the ‘watch list’ of ratings under review - has breached the Home Standard by failing to comply with the Gas Safety Regulations1998 and that this breach had the potential to cause serious detriment.

While the RP has already taken remedial action, the regulator says it does not consider that effective measures were taken quickly enough. In addition, while the provider had been aware of this issue for some time and had been addressing the issues, it had not informed the regulator.

However, the HCA adds that the assessment recognises that the RP has taken action to improve performance in relation to gas safety, and that its gas servicing certificates are now up to date.

It says: ‘On its own initiative, First Wessex commissioned independent reviews of gas safety and health and safety and more recently of its governance arrangements. Since the initial failure to inform the regulator of poor performance on gas safety, [it] has engaged constructively with the regulator on these issues.’

First Wessex is developing an action plan to address the review recommendations.

Peter Walters, chief executive at First Wessex said the rating is disappointing, but that it means the RP remains compliant with the governance standard.

He added: ‘We’d like to give reassurance that we now have a 100 per cent gas safety check record and have changed our procedures and controls to ensure this situation doesn’t happen again.

‘We continue to work hard at regaining our G1 rating as quickly as possible and the HCA has been impressed with the speed at which we addressed the issues which gave them concern.’