RSH upgrades two small housing associations from G3 to G2

SAHA

 

The RSH downgraded SAHA to G3 in May 2021. It said it lacked assurance that SAHA’s governance, risk management and internal control frameworks were effective, and the board was not “sufficiently sighted” on the extent of SAHA’s financial exposures.

 

SAHA agreed a recovery plan to return to compliance with the regulator. The RSH said based on evidence gained from reactive engagement, it now has assurance that the required improvements have been implemented.

 

The regulator said the housing association has reviewed and enhanced its processes and controls in relation to risk management and business planning.

 

These include protocols to understand and manage the risks arising from the potential surrender of third-party lease agreements, and an external validation of its stock condition data.

 

SAHA has improved compliance reporting on its financial covenants, and this is now sufficient to enable the board to exercise effective oversight, the RSH added. Furthermore, SAHA has improved its stress-testing and strengthened its mitigation strategies.

 

The regulator said: “The board now has appropriate oversight of key risks facing the business.”

 

There is greater clarity on the respective roles and responsibilities of SAHA and its unregistered parent as set out in an updated intra-group agreement, the regulator said.

 

Co-operation and information sharing between the two bodies has improved through the establishment of joint working groups.

 

The RSH said SAHA is also engaging more proactively with its local authority and commissioning body partners about future strategies for its supported housing schemes.

 

Board skills and capacity have been strengthened through training and by refreshing the board membership. An operations committee has been formed to maintain oversight of the delivery of operational performance and allow the board to focus on strategic matters.

 

The regulator revealed SAHA has developed a governance improvement plan with the aim of enabling it to achieve an upgrade to G1.

 

This includes delivery of a board learning and development plan and the implementation of a new assets and liabilities platform.

 

The RSH said it has assurance that SAHA continues to comply with the financial viability elements.

 

The regulator said: “SAHA needs to manage the material risks that arise from its operating model, including relatively short-term revenue funding arrangements for supported housing, combined with the long-term funding arrangements, including reliance on grant, for the buildings through which this service is delivered.”

 

SAHA said its focus is to deliver its roadmap to become a G1 housing association.

 

Lynne Shea, chief executive of SAHA, said: “This is an important step in the right direction.

 

“It is great to have the recognition from the regulator that we have addressed all the concerns that were identified and are moving in the right direction. It is my intention to continue our journey to provide the best service to customers that we can.”

EPIC

 

In August 2021, the RSH downgraded EPIC to G3 after finding issues of “serious regulatory concern”. The regulator concluded that EPIC had “failed to manage its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight”.

 

EPIC’s board had made significant business decisions around growth and deferred fire safety expenditure without fully understanding or considering the impact on its approved business plan and its covenant compliance.

 

The RSH also gave the provider a regulatory notice to notify it breached the Home Standard. EPIC was found to have failed to maintain adequate oversight of its activities, particularly in relation to its health and safety obligations. It had almost 500 overdue fire safety remedial actions.

 

The RSH said since August 2021, EPIC has strengthened its governance arrangements through a refresh of its board based on an independent skills assessment, a full review of its rules and articles, and enhancing its executive capacity.

 

The regulator said: “It has considered its strategic objectives and agreed a new corporate plan for the period until 2025.

 

“It has improved its reporting to the board with enhanced financial reporting, including covenant compliance monitoring and operational reporting including performance measures, which has enabled improved scrutiny and oversight of its activities and key risks.”

 

Following the publication of the regulatory notice, EPIC delivered on a plan to complete its outstanding fire safety remedial actions, the RSH added.

 

It also developed a second, medium-term fire safety improvement plan that it has started and will complete by the end of 2024.

 

The RSH said: “It has refreshed its stock condition survey and the cost of maintaining its homes to the required standard is now fully accounted for within the revised financial forecasts.”

 

The EPIC board commissioned an independent assessment from external consultants and internal auditors to provide it with assurance that the changes it has made so far are effective.

 

The regulator said that EPIC plans to undertake a further assessment as it continues to deliver its stock condition, fire safety and financial plans, to seek additional assurance that it continues to manage its risks to maintaining compliance.

 

The RSH said that EPIC meets the viability standard requirements but its planned increased investment in its existing homes, including the additional asset management costs relating to fire safety, puts pressure on its financial position.

 

The regulator said this, in combination with economic uncertainty in relation to inflation and interest rates, reduces EPIC’s capacity to respond to adverse events.

 

Tracey Johnson, chief executive of EPIC, said: “The past 21 months have given EPIC the drive to really look at itself from the ground up, look at our business, the impact we make on the communities and people we serve and how we bring about positive change and trust in an organisation that has tenants and their homes at the core of service delivery.

 

“Getting to G2 defines a moment in EPIC’s history, having ‘peeled back the onion’ and identified and implemented significant steps forward, that don’t end with the upgrade, but motivate and galvanise us to do more.

 

“A big thank you to all colleagues at EPIC for their continuing hard work, commitment and loyalty, and my predecessor Rebecca Rance for putting all the groundwork in place prior to my joining in July 2022.”

 

Elsewhere, the RSH changed the basis for Clarion Housing Group’s V2 grade to be clear that it is now based on the regulator’s in-depth assessment, rather than November’s stability check.

 

Similar to November, the RSH said the housing association continues to invest in existing homes, while delivering a “significant development programme”.

 

Delivering this investment, coupled with the current economic uncertainty in relation to inflation and interest rates, reduces Clarion’s capacity to respond to adverse events, it said. The provider maintained its G1 grade.

 

A spokesperson from Clarion said: “The regulator has confirmed our regulatory grading, following its in-depth assessment. Our focus remains on supporting and listening to our residents, whilst improving the services we deliver.”

 

Meanwhile, Cottsway Housing Association maintained its G1/V1 grade.