Annual Assurance Statements: advice for landlords on temporary changes to our regulatory approach in response to COVID-19

Summary

1.1

Social landlords are facing unprecedented challenges as a consequence of COVID-19. And they are prioritising the management of operations in a way that is intended to mitigate and minimise the impact of the pandemic upon tenants, people who are homeless and other service users while protecting the health and safety of staff, contractors and governing body members.

1.2

The Regulatory Framework requires social landlords to prepare and publish an Annual Assurance Statement (AAS) to confirm to their tenants and us that they are meeting regulatory requirements. This provides assurance of compliance with the relevant requirements of chapter 3 of the Regulatory Framework. The Annual Assurance Statement is a way for governing bodies and committees to assure firstly themselves and then tenants, people who are homeless or threatened with homelessness, Gypsy/Travellers and other service users that they comply with regulatory requirements, or to disclose areas where they need to improve.

1.3

The Statement should be made and submitted by the Register Social Landlord’s (RSL) governing body or the relevant committee of the local authority. In the current circumstances if it is not possible for the governing body or committee to meet to approve the AAS then the landlord body should arrange for it to be approved using appropriate delegated authority as set out in standing orders or scheme of delegation. In these circumstances it is important that governing body or committee has had sight of the statement prior to submission.

1.4

It is essential for landlords to understand the extent to which their ability to deliver services and to comply with regulatory requirements has been affected by COVID-19. In particular landlords will wish to understand the full range of new risks and issues for tenants and other services users. The work required to deliver the AAS will be an integral part of recovery planning for regulated bodies.

1.5

Landlords should submit their AAS to SHR by 30 November 2020, in accordance with the Regulatory Framework and the relevant statutory guidance. We are asking landlords to submit their Statements before the end of November where they can to help us proceed with the annual risk assessment at the earliest time possible. We recognise the unprecedented and demanding circumstances in which social landlords are operating, and we encourage any landlord that may have difficulty in preparing its AAS to speak with its lead regulator as soon as possible.

How should you assure?

2.1

In March of this year we published Lessons from the first round of Annual Assurance Statements. This identifies good practice adopted by landlords to facilitate the submission of the first annual assurance statements.

2.2

The context in which the second round of assurance statements will be delivered is not one that could have been anticipated and is clearly much more challenging given the impact of COVID-19. The Regulatory Framework requires landlords to notify us during the year of any material changes to the assurance in its AAS. Many landlords have submitted Notifiable Events and been proactively talking to us about the impact COVID-19 has had on the services they have been able to deliver, their governance arrangements and their financial management and well-being.

2.3

It remains for each landlord to determine the most appropriate and effective way to get the necessary assurance on compliance with regulatory requirements. The approach adopted should enable the organisation to reach an objective and evidence-based judgement on compliance, ensuring sufficient evidence and information, and where necessary independent assurance.

2.4

Much of the good practice developed in the first year remains relevant and important for landlords seeking to produce their AAS in the context of the pandemic.

2.5

In considering their approach to this year’s submission each landlord should consider any areas highlighted last year as needing action or improvement. And it should consider the specific areas of the business which are most likely to be affected by COVID-19 and on which the landlord and its governing body or committee are likely to need particular information and assurance. We have published a supplement to our Business Planning Recommended Practice which will assist landlords in identifying likely areas for consideration.

2.6

All of the regulatory requirements that social landlords are obliged to meet are contained within Chapter 3 of the Regulatory Framework. We have summarised these in the Appendix, together with our advisory guidance on the approaches that social landlords should consider in order to manage the challenges of COVID-19 and to reflect the impact in their AAS.

What should you do if you find you don’t comply?

3.1

Where a landlord identifies areas for improvement, the governing body or committee should agree appropriate actions. But they do not all necessarily need to be recorded in the AAS. The key question is whether these issues are of such materiality and significance that they mean the landlord cannot conclude with confidence that it is complying with a particular requirement. Landlords should disclose any areas of non-compliance which it judges to be material in the Statement.

3.2

It is for each governing body and committee to weigh up the evidence and seriousness of the issue and reach a judgement on whether it is material and should be disclosed. Landlords should determine whether any material non-compliance is directly due to COVID-19 and distinguish this in the AAS from any other non-compliance with regulatory requirements.

3.3

When reviewing any identified area of non-compliance each landlord should consider the impact of the restrictions imposed by Government in response to the COVID-19 pandemic. In doing so it should consider:

  • the scale of the impact of the pandemic upon compliance with the relevant regulatory requirement;
  • whether the non-compliance is wholly or partially a result of the pandemic;
  • what action is planned to return to full compliance;
  • when full compliance is likely to be achieved;
  • the impact of non-compliance upon tenants and service users; and
  • mitigating actions that can be taken to reduce the impact.

3.4

Given the circumstances, it may be that the level of external, independent assurance could be less than the previous year. However, in most cases it would be appropriate for governing bodies and committees to place reliance on some or all of the independent, external assurance received for the previous year’s assurance statement. 

3.5

The AAS is a tool for each landlord to assure its tenants and service users that it complies with its obligations as a regulated body. Where a landlord considers that it is unable to comply with one or more regulatory requirements due to an underlying issue or because of the impact of COVID-19 it is for the landlord to decide how best to communicate this to its tenants and service users.

How we will use the Annual Assurance Statement

4.1

We recognise the severe difficulties that landlords are facing as a result of COVID-19 and the continuing uncertainty about how, and how quickly, things might change. We appreciate that the pandemic is likely to have affected each landlord’s ability to comply fully with all regulatory requirements. And we know that landlords are keen to understand the impact of COVID-19 on their operations.

4.2

We want to understand and to be able to acknowledge where a landlord is unable to fully comply with regulatory requirements, in whole or in part, as a consequence of the pandemic. We also want to be able to take account of this when we assess each landlord’s performance and risk. This will allow us to judge our level of engagement with each landlord.

4.3

Provided we are assured that tenant and resident safety is not compromised, generally we will not engage with a landlord where it does not fully comply with regulatory requirements and where:

  • the non-compliance is exclusively or largely a consequence of the pandemic; and
  • the landlord has effective plans to return to full compliance.

4.4

All of our work is driven by our statutory objective to safeguard and promote the interests of tenants and service users. Our statutory functions are to monitor and assess the performance of social landlords and the governance and financial well-being of RSLs. Each year we carry out an annual risk assessment in order to perform these functions. The annual risk assessment takes account of all of the information that we have about each landlord. The AAS is an important source of information for the annual risk assessment. We are currently developing the approach for our 2020 risk assessment. It will take into account the context of COVID-19.

Appendix 1 - COVID-19 considerations for landlords

 

 

Action Required 

Potential Impact of COVID-19

Conclusion 

Annual Assurance Statement. Prepare an Annual Assurance Statement in accordance with our published guidance, submit it to us between April and the end of October each year, and make it available to tenants and other service users. COVID-19 has impacted on the ability of landlords to carry out their normal business. This has meant that Governing Bodies and Committees have not been able to meet as usual and to provide challenge and support to management teams.

COVID-19 has clearly impacted upon the ability of landlords to carry out all of the activity required in the process of developing, agreeing, submitting and publishing the AAS. However given the unprecedented context of the pandemic, the challenges presented and the risks to tenants and service users it is vitally important that management and governing bodies or committees have insight and understanding into how the landlords is operating and are able to recognise the impact of COVID-19 on the organisation and reflect this in the AAS.


Landlords should:

  • Adapt the processes that they used in preparing the 2019 statement to the circumstances of the pandemic;
  • Where appropriate and possible follow the good practice that was set out in the report that we published in March 2020;
    and
  • Communicate with their lead regulator and discuss any risks and issues that might impact upon their compliance with the requirement to provide an AAS by 30 November 2020.

Legal Obligations

Have assurance and evidence that it is meeting all of its legal obligations associated with housing and homelessness services.

 

COVID-19 has had a profound effect upon landlords’ ability to meet its legal obligations across a range of activities

Where a landlord is unable to meet a legal obligation the landlord should note the non-compliance and specify whether the failure to comply is due to COVID-19 or not.

 

Where the landlord judges the non-compliance to be material it should be specifically disclosed in the AAS.

 

Where a landlord is unsure whether non-compliance is material or if the failure is due to COVID-19 it should discuss this with its Lead Regulator.

 

Tenant & Resident Safety

Notify us of any tenant and resident safety matters which have been reported to, or are being investigated by the Health and Safety Executive, or reports from regulatory or statutory authorities, or insurance providers, relating to safety concerns.

COVID-19 has created new risks around tenant and resident health and safety as well as rendering it more difficult for landlords to carry out normal functions such as gas safety checks.

Landlords should be aware that we require any non-compliance that creates a risk to the health and safety of tenants and residents to be addressed as soon as possible.

 

Landlords should continue to give the highest priority to ensuring the safety of its tenants and residents and make best endeavours to comply as soon as possible

 

This includes compliance with all legal requirements that protect the safety of its tenants and residents.

 

Where a landlord is unable to meet a legal obligation the landlord should note the non-compliance and specify whether the failure to comply is due to COVID-19 or not.

 

Where a landlord is unsure whether non-compliance is material or if the failure is due to COVID-19 it should discuss this with its Lead Regulator.

 

Where the landlord judges the non-compliance to be material it should be specifically disclosed in the AAS.

 

Engagement Plan

Make its Engagement Plan easily available and accessible to its tenants and service users, including online.

As part of our response to COVID-19 we are only updating Engagement Plans for the most serious regulatory cases.

We will begin publishing updated  Engagement Plans for landlords at the end of March 2021. Landlords should continue to make their current Engagement plan available to tenants and residents.

Charter Compliance

Landlords must comply with the Scottish Social Housing Charter which specifies standards and outcomes that tenants and service users can expect from all social landlords.

It is likely that COVID-19 has impaired and will continue to impair the ability of landlords to comply with the Scottish Social Housing Charter. However the impact of COVID-19 upon compliance during the reporting year 2019/20 is likely to be limited as most of that year was unaffected by COVID-19.

 

Landlords should keep a record of the impact of COVID-19 during 202/21 and use the comments fields in the next Annual Return on Charter to explain the impact

Failure to comply with the Charter during 2019/20 is unlikely to be related to COVID-19.

Landlords must arrive at a view as to whether any breach is material, whether it is due to COVID-19, and whether it should be disclosed in the AAS.

 

In our annual risk assessment  we will take into account the impact of COVID 19 on the ability of landlords to meet the requirements of the Charter.

 

Charter Reporting

Report its performance in achieving or progressing towards the Charter outcomes and standards to its tenants and other service users (no later than October each year). It must agree the format of performance reporting with tenants, ensuring that it is accessible for tenants and other service users, with plain and jargon-free language.

The deadline for 2020 has been extended to December in recognition of the challenges that landlords are facing due to COVID-19.

Any landlord that anticipated difficulty in complying with the extended deadline should discuss this with its Lead Regulator.

Whistleblowing

RSLs only

Have effective arrangements and a policy for whistleblowing by staff and governing body/elected members which it makes easily available and which it promotes.

COVID-19 may impact the arrangements that RSLs have made in respect of whistleblowing.

Governing Bodies should review their Whistleblowing arrangements and consider whether any changes are required as a result of COVID-19

Communication with Tenants & Service Users

Make information on reporting significant performance failures, including our leaflet, available to its tenants.

Provide tenants and other service users with the information they need to exercise their right to complain and seek redress, and respond to tenants within the timescales outlined in its service standards, in accordance with guidance from the Scottish Public Services Ombudsman (SPSO).

 

Ensure it has effective arrangements to learn from complaints and from other tenant and service user feedback, in accordance with SPSO guidance.

COVID-19 has the potential to disrupt the normal channels of communications between landlords and tenants and residents.

Landlords should review how they currently communicate with their tenants and residents and consider whether any changes are required to deal with the current and likely future challenges presented by COVID-19.

Standards of Governance & Financial Management (except Standard 3)

RSLs only

Comply with the Standards of Governance and Financial Management

Section 36 of the 2010 Act requires us to issue a Code of Conduct setting out Standards of Governance and Financial Management for RSLs. The Standards represent that Code.

 

The Standards are supported by detailed guidance which RSLs should observe in order to comply with the Standards.

 

The Standards are high level principles and, with the exception of Standard 3, we would not anticipate that COVID-19 would impair the ability of RSLs to comply with the overall Standard.

 

Exceptionally an RSL may find that it is unable to comply with an element of guidance due to COVID-19. Where it judges such a non-compliance to be material it must disclose this in the AAS and indicate whether it is due to the impact of COVID-19.

 

 

Failure to comply with a Regulatory Standard will always be material and must be disclosed in the AAS.

 

Failure to comply with an element of Guidance may or may not be material. RSLs must arrive at a view as to whether any breach of guidance is material, whether it is due to COVID-19, and whether it should be disclosed in the AAS.

Standard 3

RSLs only

Standard 3 requires each RSL to manage its resources to ensure its financial well-being, while maintaining rents at a level that tenants can afford to pay.

COVID-19, the national lockdown and the consequent economic impact has created the most challenging set of economic circumstances in several generations. It is inevitable that these circumstances will create new challenges for RSLs in complying with Standard 3. RSLs are required to submit their latest financial forecasts to us and these should be based on the best and most up to date information available and a reasonable set of assumptions.

 

RSLs should consider the advisory guidance that we have published on Business Planning and consider their business plans in that context. Assumptions should be kept constantly under review and RSLs should regularly carry out sensitivity analysis and scenario planning to test their ability to comply with Standard 3.

 

Any RSL which judges that it does not comply with Standard 3 or anticipates that it will not be able to comply with Standard 3 in the future should disclose this in its AAS and contact its Lead Regulator to discuss the matter.

Submission of Information

RSLs only

Comply with, and submit information to us in accordance with, our guidance on:

·       notifiable events

·       group structures

·       consulting tenants where tenant consent is required

·       financial viability of RSLs: information requirements

·       determination of accounting requirements

·       preparation of financial statements.

We recognised that social landlords would prioritise work that managed and mitigated the impact of COVID-19 and so we changed submission dates for much of the information that we require to be submitted.

 

 

Any RSL which is unable to comply with any requirement to submit information to us should contact their Lead Regulator and we will work with the RSL to help to facilitate regulatory compliance.