Manningham regains trust after non-compliant rating

Compliance

Problems dated back to when the Health and Safety Executive (HSE) discovered in 2015 that MHA had not established a robust system for maintaining gas appliances in its homes, thereby breaching gas safety regulations – MHA was completely compliant on gas safety checks, but it was not servicing when it should have been.

A full review was carried out by MHA, and approved later that year.

However, following an in-depth assessment in 2016, the RSH’s February 2017 judgement said the “systematic nature of the problem” and “lack of transparency” meant the provider had breached the Home Standard and put tenants at risk.

It said this had become a governance issue as the board at the time was aware of the problem but failed to report it to the RSH.

Mr Bloomfield said: “The regulator has taken comfort that we didn’t simply say that the issue was a blip and we accepted it was a problem.”

“What it has said was there were weaknesses in gas safety reporting – the internal data wasn’t as robust as it should have been and things were concluded quicker than they should have been.”

Actions included reviewing internal gas safety processes, hiring contractors to undertake the work, and establishing a health and safety compliance officer role.

Board review

One of the main changes was to reduce board terms from nine to six years. This meant many of the board members incumbent in 2017 had to step down.

Mr Bloomfield said: “Some of the board members who had been around a long time were disappointed they had to step down. But sometimes you can kill an organisation with love – you see the organisation as your baby and don’t get a grip on the wider context.

“However, they stepped down with good grace. We then drew up a skills matrix and assessed the skills on the board. Once we started doing that, we quickly identified where we had skills gaps. The gaps were risk, assurance, and understanding complex finance.”

Mr Bloomfield added that MHA had “a new blank sheet” to work with. “When we went into a voluntary undertaking, we devised an action plan and that was reported on to the regulator every month. We also entered another action plan that demonstrated cultural change. You can’t just give someone a document that says ‘we’ve changed’. It was about demonstrating the changes.”

Campbell Tickell advised on governance, providing feedback on oversight and scrutiny of the provider’s activities, on a daily basis and at an executive level.

Development pause

There were also some operational impacts. MHA had already been winding down development until it could identify more funding and land, but it opted not to enter into any new build or new financings. The pause did not incur any exceptional costs.

Mr Bloomfield said: “We had stretched ourselves quite far in terms of our financial headroom. We had quite a significant debt portfolio, and we had developed at pace and accelerated our growth. Now it was time to focus on getting debt paid off more quickly.

“We said, ‘Let’s pause the development button now and have an arrangement in place to pay off debt more quickly, and look at refinancing this debt with a blend of different providers.’”

MHA said its two funders, The Housing Finance Corporation and RBS, “remained supportive”, although it did undergo a period of increased scrutiny of its activities.

The provider had to pay normal amortising payments. However, there were no requests to repay debt early and no funders withdrew. As there was no requirement to undertake financial restructuring to address the downgrade issues, no additional costs were incurred.

MHA is now looking at a financial restructuring with a view to creating capacity.

Mr Bloomfield added: “We couldn’t work on restructuring debt while we were non-compliant. It was very difficult for our lenders to look at the debt and lending figures.

“Now we are compliant, they are interested as they don’t see us as an organisation of concern.”