YORK HOUSING ASSOCIATION

VALUE FOR MONEY (VFM)

York Housing Association’s (YHA) definition of value for money is rooted in its mission and vision.

In order to achieve the mission and vision as much value as possible must be produced for the money and resources available to YHA and our objectives must be delivered in the most cost-effective way possible.

The value YHA produces is directly related to its strategic objectives, laid out in the 2014/19 Business Plan. These are:

  • To remain a strong and viable provider of excellent homes and services to our existing and future customers
  • To grow the business and develop the organisation
  • To be an excellent service provider to all our customers
  • To be proactive in exploring strategic partnerships

For YHA, therefore, value for money is about achieving the highest levels of excellence possible, being the best partner possible, providing the most new properties possible and supporting as many customers as possible with the resources we have. YHA will do this mindful of the legitimate and sometimes competing demands of its key stakeholders, customers, local partner organisations, service commissioners, funders and the taxpayer.

Our VfM Strategy cannot be considered in isolation. As well as being a key strategy in delivering the Business Plan, it is also inextricably linked to other strategies:

  • Asset Management Strategy
  • Customer Service Strategy
  • Property Development Strategy
  • Standing Orders, Authorisations and Financial Regulations
  • Sustainability Strategy
  • Treasury Management Strategy
  • Tenant Involvement Strategy

OUR FOCUS ON VFM

YHA has a strong focus on Value for Money and uses this as a key driver to achieve continuous improvements in services to all its customers and stakeholders. We are proud of our progress in achieving VfM in 2014/15 but recognise that we can always improve. A key strategic objective of York HA is:

“To remain a strong and viable provider of excellent homes and services to our existing and future customers”

We seek to embed the concept of VfM into the heart of the organisation by maintaining a balanced service and cost conscious culture – all staff (particularly budget holders) and Board members endeavour to improve the quality and scope of the services we offer but recognise the need for constant stewardship of the limited resources available as a smaller housing association. We actively encourage ideas and innovation in developing new and different ways to deliver more efficient and effective services to our customers.

York Housing Association has a very ambitious (but affordable) development programme and offers a wide and complex range of services to its customers. We recognise the value this can potentially deliver to our existing customers through economies of scale and contributions from commercial activities but also acknowledge the inherent risks involved. As such we maintain a prudent approach in the use of our resources so that we can remain “strong and viable”.

Our latest VfM Strategy was approved by the Board in November 2014 and confirms the Associations’ commitment to delivering VfM. The VfM Strategy contains specific aims and objectives and then sets out actions and targets for the period 2014-17 to achieve these. In summary, the aims and objectives are:

  • VfM Culture – to fully embed within YHA and to underlie the resource allocation process;
  • Financial Capacity- to optimise the use of YHA’s asset value to deliver further housing;
  • Assets- robust ongoing management to achieve financial, social and environmental benefits;
  • Tenant Satisfaction-to improve landlord and neighbourhood services by targeting resources;
  • Performance- to achieve continuous improvement and benchmark against sector peers;
  • Procurement-to drive value from YHA’s purchasing activities;
  • Operating Costs-to control and improve operating costs and to monitor against peers;
  • VfM Self- Assessment- meeting regulatory requirements and publish annual review.

VFM ACHIEVEMENTS IN 2014/15

Progress against the VfM Action Plan targets in 2014/15 includes:

VfM Culture – we undertook a robust budget setting process for 2015/16 which involved constructive challenge from Board members through a Budget Working Group (new in 2014/15) and main Board meetings.

The Association recognises the need to bring VfM alive amongst staff so that we can evidence and quantify our VfM achievements. We therefore ran a very successful VfM Workshop which was attended by all staff and was followed by the re-launch of our evidence capturing VfM log.

Some every day examples of the kind of issues that flowed from the Workshop included:

  • Negotiation of bulk mail delivery saved £970 pa on postage costs;
  • Returning unused Wi-Fi dongles saved £96 pa;
  • Savings on redistributing/replacing telephone handsets saved £200;
  • Relocation of remote service office saved rental and telephone charges of £700 pa;
  • Reduction in Housing Officer time (equivalent to 6 weeks pa) and travel costs by locating in Scarborough instead of York gave a benefit of c. £8,000;
  • Fitting remote offices with Wi-Fi usage has given c. £4,600 worth of benefits;
  • Reduction negotiated cost of Training courses £1,160;
  • Repayment received for training with unacceptable outcome £240;
  • Smarter repairs invoicing arrangements saved c. £5,000;

Financial Capacity /Development Programme - during 2014/15 York Housing Association completed the following 45 properties (against a target of 38):

Scheme / Affordable
Rent / Shared Ownership / Discount
for Sale / Other (Agency Supported) / Total
Units
Jubilee Court,
Elvington / 12 / 6 / 18
Honeysuckle Court, Norton / 6 / 5 / 2 / 13
Phoenix Park,
Whitby / 4 / 4 / 8
Newburn House, Scarborough / 6 / 6
Total / 22 / 15 / 2 / 6 / 45

The actual average net cost of c. £81k per property compares to a Business Plan assumption of c. £95k per property. This has been achieved by a combination of tenure mix, properties built under s106 arrangements and keen commercial negotiations and pricing control.

To fund our ongoing development programme in 2014/15 York Housing Association started to access the THFC bond finance raised the previous year. Of the £4m raised, we drew down £1.5m in February 2015. Currently c. £0.9m is being held back by THFC pending finalisation of security offered; this is expected to be made available shortly.

During the year we repaid the residual loan balance of £298k held charged against our Alpha Court office.

Assets - a number of properties that do not represent VfM to our core business have been identified and preparations are in progress to dispose of these during 2015/16. The resulting proceeds will be applied to our development programme which offers better value for existing and new customers.

Tenant Satisfaction/ Involvement -Our Tenant Scrutiny Panel continues to thrive and attract new members. During the course of the year the panel undertook 2 scrutiny exercises around mobile working and gardening services. The panel came up with a number of recommendations that will enhance the service to tenants. Scrutiny continues to be a valuable part of the Associations’ governance arrangements and is driving up standards across a range of services.

Performance Improvement – we continue to focus on delivering improved operational performance and set challenging targets; key performance indicator achievement in 2014/15 included:

TargetAchievement

Current Tenant Arrears2.0%1.86%

Former Tenant Arrears1.5%1.39%

Bad Debt Write-Off0.8%0.65%

Voids2.0%1.57%

Achievement beyond the targets noted above equated to another £32k in efficiency savings which have been used to support our ongoing development programme.

Procurement strategy – major areas where we are delivering VfM through effective procurement practices include the property development programme, major repairs programme, routine repairs and maintenance and the planned upgrade to our IT infrastructure; these are quantified further in other parts of this Statement. We also retendered Public Relations services during the year and saved c. £5k pa.

Net Surplus and controlled Operating Costs – a target of 4% of turnover was set for our net surplus before “exceptional” items of property impairment and any surplus from property sales and we delivered a comparable 4.8% (£247k). The net surplus has been bolstered by a property sales surplus which when offset by an impairment cost totals a net addition to Reserves of £484k (8.1% of turnover).

To control operating costs the Board set a target of a 20% operating margin; in 2014/15 this was slightly exceeded at 21.2% and we continue to focus our efforts on improvement of this key indicator as demonstrated in this report.

VfM Self - Assessment / Benchmarking - York Housing Association participates in benchmarking our costs and services with other similar service providers. This ensures we can better target areas of perceived relative lower added value to customers and focus on improving these.

The following table indicates YHA’s performance against peers in 2014/15 based on information currently available from SPBM, the national smaller housing providers’ benchmarking network:

Indicator / York HA / SPBM Upper
Quartile / SPBM lower
Quartile
Av Weekly Operating Cost/Unit / £87.41 / £68.09 / £101.38
Weekly Cost/Dwelling on Management / £17.99 / £16.91 / £25.69
Weekly Investment/Unit / £26.86 / £34.37 / £21.44
Operating Costs as % of Turnover / 78.8% / 64% / 84%
Current Tenant Arrears (GN & HfOP) / 2.22% / 1.84% / 4.5%
Former Tenant Arrears (GN & HfOP) / 0.57% / 0.43% / 1.5%
%age Rent Written Off (GN & HfOP) / 0.09% / 0 / 0.57%
Void Losses (GN & HfOP) / 0.59% / 0.33% / 1.2%
Gearing / 47% / 60.06% / 23.91%
Interest Cover / 1.95 / 4.3 / 1.7
Liquidity / 3.08 / 5.8 / 1.96

As can be seen from the above table, YHA is positioned between the upper and lower quartiles for each indicator selected. The 2014/15 data (for 500-1,200 unit HAs) needs further analysis of the characteristics and drivers underlying the performance and costs (e.g. range of services offered, location, development status), before meaningful conclusions can be drawn. However, for example, it can be seen that we have a relatively low investment per unit; our arrears performance is relatively better; interest cover is good but not exceptional (possibly due to relatively more ongoing development financing). We will be reviewing these further as more data becomes available.

Other examples during 2014/15 where benchmarking has identified areas for further research and potential improvement includes supported housing services , repairs costs and services and voids costs and processes.

OTHER INITIATIVES IN 2014/15:

  • Extra Care Scheme- during 2014/15 we were negotiating with City of York Council and care providers to introduce 24 hour care at Auden House. This has now been successfully concluded. By pooling and maximising our joint resources we have been able to implement a much enhanced service for tenants and this has increased their confidence in the service and therefore satisfaction with the accommodation as a whole.
  • Digital Inclusion Support – wesecured a grant for a 15 month post through City of York’s Financial Inclusion Fund to work with tenants to increase digital inclusion across the city. Getting customers online helps to improve their financial awareness, overcome social isolation and prepares them for the introduction of Universal Credit which will primarily be an online service. Ensuring customers have access to online services will become business critical, as Housing Benefit will be paid directly to customers through Universal Credit in future; we will need to ensure this is paid across to us for rent.
  • Repairs Service – various initiatives have achieved greater value from the service, including a saving of c. £22k per annum from accepting a tender for gas servicing based on an NHC Framework Agreement compared to the existing provider. Other procurement savings made during the year from membership of the NHC amounted to c. £9k.

The Association’s major repairs programme budget of works totalling c. £300k was delivered within budget with competitive tendering producing a c. £17k saving. This covered a range of work including window, bathroom and kitchen replacements, rewiring and smoke and fire alarms.

  • 3rd Party Service Provision – we provided a range of services to other organisations during the year; from managing property for other RPs and housing agencies to providing a full repairs and maintenance service for a sizeable locally based proportion of housing stock of a larger association. Income from these 3rd party services amounted to more than £300k and provided a worthwhile contribution towards York Housing Association’s development programme even after meeting our own costs. We continue to actively pursue these commercial arrangements where there is a net benefit to our own customers from sharing our overhead costs and keep them under review to ensure that this remains the case.

LOOKING AHEAD TO 2015/16

Our VfM Strategy, agreed by the Board in November 2014 covers a 3 year period to 2017. As such, the target areas referenced above continue into 2015/16 being year 2. Particular areas of focus are planned to include:

  • VfM Culture- we will continue to enhance the resource allocation process with a stronger focus on understanding our cost base and its drivers. This will be facilitated by the introduction of a comprehensive Asset and Liability Register. We will run further Workshops on VfM and general Resource/Budget Management.
  • Financial Capacity/Development Programme. To support the funding of building new properties, non-core assets will be disposed of at competitive market rates. Shared ownership tranche sales are also planned to continue to contribute but we are being cautious in our dependence and quantification of benefit from this source. We have an ongoing development programme target of 38 new properties per annum.

In addition to securing access to the remaining THFC bond finance, we will be initiating discussions with various lenders in preparation for funding our ongoing development programme in 2016/17 and beyond.

  • Asset Management – weaim to continue our programme of remodelling shared housing into single dwellings and carry on delivering our Options Appraisal for long run property retention. Thedevelopment of a comprehensive Asset and Liability Register will enable us to manage the property estate (858 homes) more effectively and recognise potential risks and gaps in our asset management strategy. For example, we will use the new Register to support identification and selection of appropriate unencumbered property that will act as the necessary security for the next tranche of finance required to fund the ongoing development programme.
  • Tenant Satisfaction- a tenant satisfaction survey is planned for late summer and will be used to ensure that we increase the quality and effective targeting of services offered to customers thereby providing better value from the rents and charges we collect from them; examples include repairs and maintenance to properties and neighbourhood services.
  • Performance, a continued focus. In 2015/16 we have agreed further “stretch” targets on the back of good performance in 2014/15. These include:

-Current Tenant Arrears 1.8% (2% Target in 2014/15);

-Former Tenant Arrears 1.3% (1.5% Target in 2014/15);

-Bad Debt Write Off 0.75% (0.8% Target in 2014/15);

-Voids 1.8%(2% Target in 2014/15).

  • Procurement. During 2015/16we will engage consultants to review our Procurement Strategy and Procedures to enhance our ability to achieve greater VfM.
  • Operating Margin. We have agreed a revised lower Operating Margin (from that in the Business Plan) of 17.2% for 2015/16 which reflects considerable investment in outdated IT infrastructure and our operating structure.
  • VfMSelf-Assessment. We will continue to review our progress and increase our participation and usage of benchmarking information.
  • Transfer of Engagements. We are looking forward to the forthcoming Transfer of Engagements from Family Housing Association (expected to be September/October 2015) involving c.60 additional units. We expect to be able to deliver greater economies of scale from our expanded customer and property base, particularly in housing management, repairs & maintenance and finance services.
  • Repairs Service. In order to reduce the amount of time and travel costs arising from frequent visits to the same estates for a variety of small jobs, we are in the process of reviewing the merits of a allocating a “scheduled” day on site for a maintenance operative.

The aim would be for customers to be aware of this scheduled time and arrange for small non-urgent repairs to be completed then. In addition to optimising the operatives time, it should provide an improved service to customers through more certainty. We constructed the 2015/16 Repairs and Maintenance Budget on a more robust basis linked to, for example, cost/property type, history, location and peer group.

  • YHA Staffing Restructure. All key business areas are being reviewed in order to ensure that they are operating fit for purpose services and delivering as much added value as possible. It has been recognised by the Board and SMT that as York Housing Association has grown at a rapid pace the staffing structure has remained largely unchanged but this now needs to be addressed. It is anticipated that the new structure will be in place by the end of 2015.
  • Collaboration with Smaller HA’s and Shared Services. We continue to work with a group of approximately 10 smaller HA’s across Yorkshire and Humberside to explore how collaboration could produce greater efficiencies of scale. During 2015/16 we anticipate developing a shared Procurement Resource that will work on behalf of the group to develop areas of shared services/joint procurement. We are continuously looking to achieve added value and will be exploring any opportunities that become available including sharing services with other providers if the appropriate synergies exist between us and measurable benefits can be produced.
  • Welfare Reform. We see this as a very high potential risk to YHA and are working to mitigate likely impacts as far as possible. Direct impacts to financial viability include increased bad debt provisions and provision for increased arrears in cash flow forecasting. The financial significance of any impacts is currently uncertain but we are monitoring and liaising with other providers to increase our knowledge and readiness for the Reforms as they are implemented.
  • Stress Testing. Whilst scenario planning and sensitivity analysis are an embedded part of YHA’s business planning process, we are increasing our focus on “stress testing” the business. Using multi-variate worst case scenarios to test our operational and financial resilience we are developing an understanding of the quantum of measures (for example level of accessible cash balances) that are required to address these issues should they arise. Recent developments in the sector arising from providers having inadequate financial liquidity and a lack of awareness of their financial exposure have highlighted the need for an ongoing strong focus on testing financial viability.
  • New Government Policy (such as Right to Buy). The recent proposals to implement the Right to Buy for housing association tenants could have significant implications for YHA if they come to fruition. As a very active developing association we are seeking to achieve economies of scale within our core business and support our growth by offering services to other providers if the economics are right. However, dilution in our stock from forced sales will make these initiatives much harder to achieve, particularly if the property sales proceeds are inadequate to provide replacement stock. As such, our resources would have to be directed to managing an increasingly disparate and reducing asset base. Other potential policy developments are being monitored closely and recognised within YHA’s Risk Management process and mitigations developed as far as possible.

TREASURY MANAGEMENT