LMH GROUP

FINANCIAL REGULATIONS

Group Board Approval 16th March 2017

For all Group members

CONTENTS

  1. Structure
  1. Introduction and Purpose
  1. Planning
  1. Accounting Policies and Procedures
  1. Budget Setting, Budgetary Reporting and Control
  1. Delegated Authorities
  1. Salaries Wages and Pensions
  1. Expenditure
  1. Income
  1. Banking Arrangements
  1. Risk and Insurance
  1. Acquisition and Disposal of Assets
  1. Treasury
  1. Audit Requirements
  1. Fraud and Misappropriation
  1. Company Secretarial

17. Security

LMH GROUP

1.STRUCTURE

1.1Liverpool Mutual Homes Limited (“LMH”) is a non-profit distributing Co-Operative and Community BenefitSociety registered under the Co-Operative and Community Benefit Societies Act 2014. It has charitable objects and is registered as a social landlord with the Social Housing Regulator, currently the Homes and Communities Agency. Registration as a social landlord will be maintained regardless of the particular organisation carrying out the functions of the Social Housing Regulator. LMH is the Parent company of the LMH Group.

1.2LMH Group is made of Liverpool Mutual Homes with two wholly owned subsidiaries Housing Maintenance Solutions Ltd, LMH Developments Ltd and a charity,ComMutual. The regulations are published by LMH in accordance with the agreed Intra-Group Agreement and apply to all members of the LMH Group.

1.3Housing Maintenance Solutions Ltd (“HMS”) is a company limited by shares that is wholly owned by Liverpool Mutual Homes. HMS has delegated functions relating to audit, governance and remuneration to the Group Audit and Risk Committee and the Group Remuneration and Nominations Committee respectively through the operation of the Intra-Group Agreement.

1.4LMH Developments Ltd (“LMHD”) is a company limited by shares and is a wholly owned subsidiary of Liverpool Mutual Homes. LMHD has delegated functions relating to audit, governance and remuneration to the Group Audit and Risk Committee and the Group Remuneration and Nominations Committee respectivelythrough the operation of the Intra-Group Agreement. LMHD has no employees and so day to day activitiesare performed by members of staff at LMH via the operation of an Employee Services Agreement.

1.5ComMutual is a company limited by guarantee and is registered in England with Companies House and with the Charities Commission.

2.INTRODUCTION AND PURPOSE

2.1LMH Group shall ensure effective governance arrangements that deliver its aims, objectives and intended outcomes for tenants/customers and potential tenants/customers in an effective, transparent and accountable manner.

2.2These governance arrangements shall ensure that the LMH Group:

  • adheres to all relevant law;
  • complies with its governing documents and all regulatory requirements;
  • is accountable to tenants,the regulator and relevant stakeholders;
  • safeguards taxpayers’ interests and the reputation of the sector;
  • has an effective risk management and internal controls assurance framework; and
  • protects social housing assets.

All LMH Group staff have a responsibility to ensure that legal andstatutoryobligations are met and LMH Grouppolicies and procedures are adhered to at all times. If staffare concerned about any aspect of these controls,they should ensure that itis raised through the procedures laid out within the LMH Group.

Governance arrangements should establish and maintain clear roles, responsibilities and accountabilities for the Group Board, Subsidiary Boards Chair and Chief Executive in order to ensure that appropriate probity arrangements are in place.

2.3The LMHBoard (Group) has a responsibility to oversee the financial control and accountability of LMH Groupand ensure that its financial and legal responsibilities are properly fulfilled. The LMH Board (Group) may delegate some of the areas of its work to Committees, Panels,Working Groups or employees. Notwithstanding this, the LMH Board (Group) has a duty to understand the finances of the organisation and to keep abreast of the organisation’s financial situation. The LMH Board (Group) must ensure that the organisation keeps proper,and up to date, financial records.

2.4The Intra-Group Agreement sets out the respective responsibilities and obligations of all Group members. All group members must comply with the terms of the agreement.

2.5Group Standing Orders set down the procedures to enable the LMH Board (Group), and other members of the Group,to carry out their duties and where appropriate to delegate matters toCommittees, Working Groups and the Chief Executive. The operationof the Group Financial Regulations will normally be the primary function of the Executive Director (Resources) who, subject to approval bythe Chief Executive, will decide upon those functions to be delegated to other staff.

2.6TheLMH Board (Group) has made these Group Financial Regulations which must be used in conjunction with the Scheme of Delegation Framework governing the actions of members and employees to ensure that:

  • A financial framework exists within which Board Members and officers may properly act and are fully accountable for their actions;
  • Expenditure complies with the rules and objectives of LMH together with any other statutory requirements, is lawful, reasonable and represents value for money;
  • The assets and other financial interests of LMH are managed effectively to ensure its viability is maintained while ensuring that social housing assets are not put at undue risk;
  • The affairs of LMH are managed with an appropriate degree of skill , independence , diligence, effectiveness, prudence and foresight;
  • LMH has an appropriate, robust and prudent business planning, risk and control framework;
  • LMH assesses the effectiveness of its governance arrangements at least once a year

2.7The Group Financial Regulations shall ensure that:

  • There is access to sufficient liquidity at all times;
  • Financial forecasts are based on appropriate and reasonable assumptions;
  • Effective systems are in place to monitor and accurately report delivery of LMH’s plans;
  • The financial and other implications of risks to the delivery of plans are considered; and
  • LMH monitors, reports and complies with its funders covenants.

2.8TheLMH Board (Group) shall assess, manage and where appropriate address risks to ensure the long term viability of LMH, including ensuring that social housing, and other charitable assets, are protected. LMH shall do so by:

  • Maintaining a thorough, accurate and up to date record of its assets and liabilities and particularly those assets and liabilities that may have recourse to social housing assets;
  • Carrying out detailed and robust stress testing against identified risks and combinations of risks across a range of scenarios and putting appropriate mitigation strategies in place as a result;
  • Before taking on new liabilities, ensuring that they understand and manage the likely impact on current and future business and regulatory compliance; and
  • Maintain a comprehensive and up to date register of its assets and liabilities.

2.9The Group Financial Regulations shall be approved by the LMH Board (Group) and published to the LMH Group. The effectiveness of the regulations in achieving the required outcomes shall be reviewed at least once a year.

2.10TheLMH Board (Group) shall ensure that LMH communicates in an accurate and timely manner with the Social Housing Regulator on material issues that relate to non-compliance or potential noncompliance with the Governance and Financial Viability Standard. This includes returns to the Social Housing Regulator, including an annual report on any losses from fraudulent activity, in a form determined by the Social Housing Regulator.

2.11The LMH Board (Group) shall ensure that any arrangements LMH enters into do not inappropriately advance the interests of third parties, or are arrangements which the Social Housing Regulator could reasonably assume were for such purposes.

2.12The LMH Board (Group) shall ensure that LMH assesses compliance with the Governance and Financial Viability Standard at least once a year. LMH shall certify in its annual accounts its compliance with the Governance and Financial Viability Standard.

2.13LMH shall, as appropriate, support or assist those of its subsidiaries that are registered providers with a view to ensuring compliance with regulatory requirements. It shall also ensure that ComMutual complies with the requirements of the Charity Commission.

2.14TheLMH Board (Group) shall ensure that LMH does not enter into agreements to support the activity of other group companies that may have a material negative impact on the social housing assets of LMH.

2.15TheLMH Board (Group) is responsible for approving, amending and publishing the Group Financial Regulations and the Scheme of Delegation Framework. TheLMH Board (Group) acts for, and in the name of, LMH and the LMH Group but will make general delegations to appropriate staff including:

General delegations to the Chief Executive

The Chief Executive has the day to day responsibility for the management of LMH Groupbusiness. Whilst the Chief Executivemay delegate some of these activities to other members of staff the responsibility remains with him/her.

The Chief Executiveis responsible for:

  • Budgeting;
  • Income generation;
  • Expenditure;
  • Working within the Group Financial Regulations;
  • To ensure that the processes and policies are reviewed on an annual basis and presented to the Board for ratification;
  • Ensuring adequate financial records are kept;
  • Ensuring that financial records are accurate and distributed to the Board; and
  • Drawing the attention of staff and Board to any problems that arise.

General delegations to ExecutiveDirectors

The Group Executive Directors comprise of those Directors reporting to the Chief Executive. All Group ExecutiveDirectorsshould understand financial reports. These reports should be discussed each month at regular management meetings.

The Group ExecutiveDirectors are responsible for:

  • Ensuring they and their staff comply with theGroup Financial Regulations, procedures and policies of LMH Group;
  • Setting budgets for their areas of the organisation(with the assistance of the financial team);
  • Manage their budget within the constraints set;
  • Raise any concerns regarding financial reporting or controls with the Executive Director (Resources), or the Chief Executive, at the earliest opportunity. If the concern involves the Chief Executive or the Executive Director (Resources), then any concerns should be addressed to the Chair of the Group Audit and Risk Committee.

General delegations to Staff

All LMH staffhave a responsibility to ensure that all the activities they are responsible for meet all legal and statutory obligations and that the procedures and processes set down by LMH are adhered to. All staff must understand the importance of what they are doing and their role within LMH.

2.16The LMH Board (Group) is responsible for all aspects of financial policy and for regulating and controlling the finances of LMH Group companies.

2.17The prudent and effective financial management of LMH will be the responsibility of the Executive Director (Resources) delegated to him/herby the Chief Executive.

2.18The Executive Director (Resources) will be directly responsible to the Chief Executive for the following:

  • Maintaining an efficient administrative and financial system of operations and controls;
  • Safeguarding the assets of LMH Group;
  • Maintaining statutory records;
  • Preparing the annual financial statements, liaising with LMH Group's auditors in respect of the year-end audit and presenting such financial statements to the LMH Board (Group);
  • Arrange funding options for LMH Board (Group) approval;
  • Maintaining LMH Group's relationship with its funders and ensuring 100% compliance with Loan covenants.Presenting financial reports and information to the LMH Board (Group);
  • Ensuring that the requirements of the Homes and Communities Agency, and any subsequent such regulatory bodies, are met concerning the requirement of LMH Group for the timely completion and submission of all relevant financial returns; and
  • Proposing amendments to the Financial Regulations as necessary at least on an annual basis.

2.19The prudent and effective financial management of LMH will be the responsibility of the Executive Director (Resources) delegated to him/her by the Chief Executive.

2.20The Executive Director (Operations) will be directly responsible to the Chief Executive for the following:

  • Conducting the affairs delegated to the Social Landlord Operations Committee in accordance with the authority delegated to that Committee by the LMH Board (Group);
  • Ensuring that LMH meets the expectations of the Homes and Communities Agency, and any subsequent such regulatory bodies, in relation to all Consumer Standards;
  • Conducting the affairs of ComMutual in accordance with the Intra-Group Agreement and the approved ComMutual Business Plan;
  • Proposing amendments to the Financial Regulations as necessary meet operational requirements at least on an annual basis.

2.21The Managing Director (HMS) will be directly responsible to the Chief Executive for the following:

  • Conducting the affairs of HMS in accordance with the Intra-Group Agreement and the approved HMS Business Plan;
  • Proposing amendments to the Financial Regulations as necessary meet operational requirements at least on an annual basis.

2.22Each identified budget holder is accountable for their actions, and any action carried out by an LMH Group employee must comply with LMH Group policies and procedures.All officers, managers and staff are required to conform to the rules set out in these Financial Regulations.

3.FINANCIAL PLANNING

3.1The Executive Director (Resources)is responsible for preparing business plans and long-term financial forecasts for review by the Chief Executive and ExecutiveDirectors, and then presented to the LMH Board (Group) or Subsidiary Boards for approval in accordance with the Intra-Group Agreement.

3.2Theannual Business Plans of all LMH Group members will reflect the priorities set by the LMH Board (Group). The LMH Board (Group) will, prior to 31st December each year, determine the parameters that all Group members shall use in the preparation of annual Business Plans. Each Group member shall prepare its Business Plan in accordance with these parameters and present the plan to the LMH Board (Group) no later than 28 February each year for endorsement.

3.3The LMH Business Plan will be a 30 year plan and other Group members will produce a 5 year plan. All business plans will include details on cash flows and balance sheets.

4.ACCOUNTING POLICIES AND PROCEDURES

4.1All financial and management accounts produced must be prepared in accordance with LMH Group’s accounting policies and present a true and fair presentation of the organisation’s accounts.

4.2Accounting policies are determined and set by the LMH Board (Group) on the recommendation of the Group Audit and RiskCommittee. Any accounting treatment required but not specified in the accounting policies should be discussed with the Executive Director (Resources).

4.3All policies are to comply with International Financial Reporting Standards (IFRS) and the guidelines recommended within the Statement of Recommended Practice (SORP) 14 Accounting by Registered Social Housing and FRS102, the financial reporting standard for the UK and Ireland.

4.4All accounting procedures and records shall be determined by the Executive Director (Resources) to satisfy statutory and regulatory requirements.

4.5The Lead Executive Director of each company, in conjunction with the Finance Director (Group), will ensure that the LMH Group finance team keep proper accounting records on behalf of the company and to maintain sufficient accounting records sufficient at all times.

4.6The GroupCompany Secretary will produce all returns required for regulatory compliance, appropriately approved.

4.7The LMH Board (Group), and all Subsidiary Boards, must ensure that Data Protection rules are observed at all times. This is delegated to the Lead Executive Director of each Company in conjunction with the Corporate Services Director. The Lead Executive Director will ensure the appropriate Board and/or Committee is aware of any issues in a timely manner.

5.BUDGET SETTING, BUDGETARY REPORTING AND CONTROL

5.1Following the approval of the annual Business Plans of all Group members each Group member will agree a Budget for the following year which is within the parameters set by the Business Plan.

5.2The Budget for each Group member will be prepared by the Executive Director Resources, in consultation with the Lead Executive Director for each Group Member. The Executive Director (Resources) shall present the respective Budgets to each Group member for approval.

5.3The process for approval for variations to the Budget are as follows:

  • It is the responsibility of the authorising officer, to whom budget management responsibility has been delegated, to ensure that the authorised expenditure is within approved budget;
  • Owing to the adoption of zero based budgeting, each year a set amount will be agreed with the LMH Board (Group) for inclusion in that year’s (the annual)Budget under the control of the Chief Executive. This is to provide for expenditure that was not foreseen when the Budget was set. Amanager identifying a need to utilise this provision will complete a ‘Deviation from Budget Form’ which, once countersigned by the relevant Director, will be submitted to the Chief Executive for approval or otherwise. The additional expenditure will be subsequently reported, where approved by the Chief Executive, to the LMH Board (Group) at the next available meeting. For any increase in capital spend on the agreed budget, this must be approved by the LMH Board (Group).

The accountability of the budget by Group member and/or Directorate is with the relevant Executive Director. The Executive Director may delegate the responsibility of the budget to employees, although at all times the accountability remains with the Executive Director.

6.DELEGATED AUTHORITIES

6.1The roles and responsibilities of the LMH Board (Group),SubsidiaryBoards and Committees are specified in their constitutions, terms of reference and governance documentation. The LMH Board (Group) and Subsidiary Boardswill delegate authority to senior management in order to facilitate day to day operations; however accountability always remains with the LMH Board (Group) or Subsidiary Board. The obligations of all Group members are clearly set out in the Intra-Group Agreement and should a conflict exist between these regulations and that agreement, the terms of the agreement shall take precedence.