RSH issues regulatory notice to two small providers

The regulator said the provider’s business-planning and risk management framework failed to ensure that Rapport, once its initial strategy had failed, had alternative options available to secure new funding or manage its costs accordingly to maintain its liquidity.

 

The RSH said in its report: “As a result of this, the regulator has concluded that Rapport has failed to demonstrate that it has an appropriate, robust and prudent risk and control framework in place.

 

“Rapport has failed to assess, manage and address risks to ensure its long-term viability, including ensuring social assets are protected by carrying out detailed and robust stress-testing, and before taking on new liabilities, ensuring it understands and manages the likely impact on current and future business and regulatory compliance.”

 

The RSH said that the provider’s “lack of effective board oversight and management of its key risks” was a “fundamental failure of governance”.

 

It added: “As a result, the regulator has concluded that the Rapport board has not been able to demonstrate that it is managing its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight.”

 

The regulator said it continues to work “intensively” with Rapport as it works to address the issues identified.

 

The RSH said that as a result of the failings it has appointed officers to the board of Rapport on an interim basis.

 

It said the aim of this is to strengthen the skill and capacity of the board and provide the necessary support to manage its financial position, ensure its tenants remain safe and ensure appropriate governance functions are maintained.

 

Harold Brown, senior assistant director for investigations and enforcement at the RSH, said: “This is a fundamental failure of governance by Rapport, including ineffective management of its financial risks which led to significant liquidity issues.

 

“Rapport needs to address these issues urgently and we are working with the provider intensively to ensure that it does so.”

 

Leon Steer, chief executive at Rapport, said the regulatory notice reflects the “recent challenges” it has encountered as a housing and care provider, which have made the past three years “incredibly difficult”. 

 

He said: “The COVID-19 pandemic, subsequent staffing crisis and cost of living pressures have contributed to significant pressures on the care industry as a whole and particularly on us as a non-profit provider, which is largely dependent on local authority funding.

 

“Our residents’ well-being and safety remains our highest priority, and we will continue to work closely with the Regulator of Social Housing to address the issues raised and improve our position.

 

“We would like to express our gratitude to our staff and volunteers, who continue to work tirelessly to support our residents despite difficult circumstances.”

Easy Housing Association

 

The RSH said that although it is based in London, Easy’s business model is to enter short-term leases in Birmingham and use these properties for the purposes of supported exempt accommodation.

 

The regulator said Easy’s governance arrangements are “underdeveloped and inadequate for the size of the organisation”.

 

The RSH said in its report: “The board has failed to exercise adequate oversight of the organisation, as the board of directors do not have sufficient board information or receive adequate reporting on performance and health and safety.

 

“As a consequence, it is unable to demonstrate that it is managing its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight. We lack assurance that Easy has complied with the specific expectation to assess the effectiveness of its governance arrangements at least once a year.”

 

The RSH said it has no assurance that a governance effectiveness review has been carried out.

 

It said: “We have seen limited assurance regarding the board having the right competencies, experience and technical knowledge appropriate to the size, scale and risk profile of the organisation, or that this is regularly assessed.”

 

The regulator said it has seen no evidence that Easy had plans in place to address any skills gaps identified and that such plans are monitored to ensure that they are followed through.

 

The regulator said that a new chair has been appointed recently, which has brought additional skills and experience to the board, but that it is too early to tell if this will have the desired impact on overall board performance.

 

Easy’s business planning, risk and control framework is also “underdeveloped and inadequate for the potential risks to the organisation”, the judgement added.

 

The regulator said: “The regulator has concluded that the board’s risk management framework is ineffective in identifying and managing risks associated with its strategy to enter lease obligations on its stock.

 

“We have seen no reference to any risk appetite or meaningful risk tolerances within Easy’s reporting. Risks are poorly articulated, and mitigations do not appear to help the board control the presenting risks.

 

“The risks identified are limited and do not cover all areas we would expect from an organisation undertaking this business model. The board reporting we have seen has been of limited quality.

 

“We lack assurance that financial forecasts are based on appropriate and reasonable assumptions and that Easy has effective systems in place to monitor and accurately report delivery of the registered provider’s plans. Its business-planning is also limited, and it has not carried out any stress-testing of its business plan.”

 

The regulator said that it found a lack of assurance that Easy has in place a thorough, accurate and up-to-date record of its assets and liabilities.

 

The RSH said that due to “significant weaknesses” in its governance arrangements, it has not seen sufficient evidence that health and safety risks are adequately managed.

 

It added that Easy has not been able to provide the regulator with “sufficient evidence” to demonstrate how it complies with the Rent Standard, or how its stock meets the definition of social housing.

 

The RSH said that Easy acknowledges the extent of its failings, has been “engaging and working positively” with the regulator, and is committed to undertaking the work necessary to come back to compliance.

 

It has developed a programme of work to facilitate this and has obtained external resource to support it in this task, the regulator added.

 

Although work is in its early stages, the RSH said, there has been “some initial progress” against its improvement plans over recent months.

 

Mr Brown said: “Easy Housing Association has failed to meet our standards in multiple areas, including significant weaknesses in managing financial risks and in business-planning.

 

“It also failed to show that it complies with the standards on key issues, including those for health and safety and rents. Its board needs to take immediate steps to address these failures of governance.

 

“Easy Housing Association and its new chair have started to address these issues, and we will monitor it closely as it works to return to compliance with our standards.”

 

Easy has been contacted for comment.