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sample controls

Risk: Failure to manage assets to produce the planned financial and social returns, and to comply with agreed standards

Controls

1. An Asset Management Strategy is in place and is subject to the approval of, and regular review by, the Board. The Strategy establishes the broad approach to asset management, including the balance between investment in new construction and investment in existing properties. It includes an analysis of the quality of the current assets (including compliance with regulatory standards such as Decent Homes) and the demand for them. It sets out the areas in which the association wishes to operate as a key player and those where it will seek to withdraw through disposal to other social landlords. The strategy is based on a prudent view as to the costs of new development and improvements to existing stock, and of the subsidies available to support this expenditure. It also includes the criteria for deciding whether properties should be invested in or disposed of, to achieve the best results for current and future tenants given the resources available. This takes account of the open market value of each property, the expected cost of maintenance and affordability issues, including service charges and the cost of heating each property (and hence the impact on fuel poverty). Proceeds from these disposals are re-invested in procuring replacement stock that can be maintained more efficiently.


2. The organisation’s housing stock is subject to a stock condition survey on a rolling programme over an agreed period (typically 5 years).


3. Stock condition information is updated between surveys when opportunities allow, including following cyclical maintenance, void works or responsive repairs.


4. Stock condition information is recorded on a database, which is either part of or linked to the Housing Management computer system, and used as the basis for long-term financial planning. The data is regularly updated as required and is subject to periodic validation.


5. The results of the stock condition survey, together with the associated financial implications, are reported at appropriate levels and frequencies (typically annually to the Board).


6. Arrangements are in place to update the stock condition survey by adding properties handed over from development and removed units sold as a result of the asset management programme, Right to Buy sales etc.


7. There is a process in place to identify properties that may be considered for disposal against criteria set out in the asset management strategy and all void properties are tested against these criteria, based on detailed, comprehensive stock condition data. Properties currently in occupation may also be selected for disposal for strategic reasons or if they have very high costs to the landlord and / or the tenant. The analysis takes account of the net present value of the costs of improvement and ongoing repairs, as well as the rental income. It will also consider whether there is a strategic requirement to retain some social housing in high value areas. The final decision to dispose is subject to independent review of the analysis and approval in line with delegated authorities. The criteria for deciding on whether to dispose of existing stock is regularly reviewed with the objective of maximising economic and social value.


8. Where internal standards for asset management are in excess of regulatory requirements, the association periodically reviews these standards to determine whether the resources employed might be better employed on building new homes of providing more support to help tenants into the job market.


9. The association regularly reviews demand patterns for all types of accommodation and analyses the causes of low demand, including low demand from commissioners where revenue subsidy is required. This information is reported at a strategic level to inform the development and asset management strategies. As appropriate it refurbishes, remodels, demolishes and replaces, disposes or changes the use of accommodation, or amends the eligibility criteria to increase the number of potential applicants. The association may seek a guarantee of nominations from the local authority and / or the right to widen the eligibility criteria if nominations are not made within an agreed timescale. Where appropriate, the association works with the local authority and other agencies to address the decline of neighbourhoods found to be suffering from low demand.


10. The association has agreed a clear target for the improvement in the energy efficiency of its stock and the reduction of fuel poverty among its residents. This feeds into the asset management strategy, informing decisions on whether homes should be retrofitted with energy efficiency measures or possibly disposed and replaced with new properties built to higher environmental standards.


11. An appropriate level of resources is budgeted for improving properties to meet the agreed standards, taking account of the following factors:
• The results of the stock condition survey
• Assumptions on the replacement cost of components that are independently validated, agreed in line with delegated authorities and reviewed on a regular basis
• The results of benchmarking costs with associations with similar stock types / locations
• Where relevant, the costs of repairing / replacing properties with non-traditional forms of construction
• A reasonable level of contingency to take account of unforeseen events


12. Arrangements are in place to detect plans and proposals to make alterations to relevant standards, including the Decent Homes Standard and standards relating to specific types of accommodation, such as Registered Care Homes.


13. Plans for maintenance of properties subject to leasehold service charges take account of the limits on recharges for repair, maintenance or improvement of £10,000 for properties outside Greater London and £15,000 in the capital, introduced by The Social Landlords Mandatory Reduction of Service Charges (England) Directions 2014.


14. Long-term financial forecasts are based upon prudent assumptions made about increases in the market price for the labour and materials required in relation to asset management / maintenance activities.


15. Contracts for improvement works use the most efficient form, given the circumstances of the organisation, and the form of procurement:
• Makes use of partnering arrangements, where applicable
• Shares risk reasonably between the parties, using the principle that the impact of a risk should fall on the party most able to control it
• Makes effective use of economies of scale, including the use of procurement consortia, where applicable.


16. The approach to letting and managing contracts for asset management activities includes:
• Price increases limited to inflation (using the RICS Building Cost Information Service indices as the basis)
• Varying contract terms as necessary, using Regulation 72 of the Public Contracts Regulations 2015
• Allowing contractors to exercise a break clause (to avoid the disputes that arise when a contractor is tied to an unsustainable contract).


17. For major works, independent confirmation that the work has been completed to a satisfactory standard is required before payment is made to the contractor. For minor repairs, a proportion of jobs will be post-inspected prior to payment.


18. Where properties are purchased off-the-shelf, they are inspected by a surveyor prior to purchase and an assessment made of the predicted costs of enabling the property to meet agreed standards. The results of this assessment are considered in the decision-making process as to whether to proceed with the purchase of the property.


19. The stock improvement programme is drawn up in the light of agreed standards and the latest stock condition and cost information. Progress against the programme is monitored and reported at appropriate levels and frequencies.


20. The contractor / DLO supplies frequent information to the organisation regarding progress with the programme and meets with the client on a regular basis to discuss performance, including any complaints from tenants.


21. There are contractual arrangements in place to ensure that sufficient resources are available to undertake the programme. The procurement process includes appropriate vetting arrangements to ensure that the contractor is competent to complete the programme on time. The terms of the contract enable the association to take appropriate action in the event of non-compliance, including bringing in an alternative supplier.


22. The organisation has considered the staff resources available to manage the process of asset management and has procured suitable external assistance where required.


23. Progress with the implementation of the Asset Management Strategy is monitored at appropriate levels and frequencies, including regular scrutiny by the Board, which may involve adjustments to the Strategy in the light of changes to government policy, the housing market or the availability of finance.


24. The Asset Management and Development Strategies consider whether the association should increase the rate of churn of its stock, with disposals focussed on the worst-performing assets, in order to release cash for future development, increase the overall housing stock in the area, reduce unit costs of maintenance, improve the average energy efficiency of the portfolio, create more balanced communities and ensure that properties sold under the Right to Buy can be replaced within the three-year deadline. [This approach may be particularly useful to LSVTs constrained by their loan agreements from increasing their debt at an affordable rate].


25. The organisation's response to the rent cut is based on real efficiency improvements, rather than a delay in planned / cyclical maintenance programmes, which would lead to a deterioration in the quality and value of the assets.


26. The organisation has considered whether to adopt Shelter's Living Home Standard, which measures factors concerned with Affordability, Decent Conditions, Space, Stability and Neighbourhood. If adopted, the organisation sets targets for improving compliance with the Standard each year.