Why we are engaging with Albyn
We are engaging with Albyn about its governance, financial management, stock quality, development plans and because it is a systemically important landlord.
We refer to a small number of RSLs as systemically important because of their stock size, turnover or level of debt or because of their significance within their area of operation. We need to maintain a comprehensive understanding of how their business models operate, and how they manage the risks they face and the impact these may have. So we seek some additional assurance each year through our engagement plans. Given a combination of Albyn’s size, turnover and level of debt we consider it to be systemically important.
We have been engaging with Albyn since June 2019 regarding its governance and management of changes at governing body and operational level as well as its related business change programme. From this engagement, we are seeking assurance about Albyn’s compliance with the Regulatory Standards of Governance and Financial Management (the Regulatory Standards).
Albyn has now concluded an investigation into anonymous complaints, in part related to the management and oversight of the change programme. The investigation did not uphold any of the complaints however Albyn then commissioned a separate review to support its governance including a risk review. The governing body has prepared an action plan to address weaknesses identified as part of this governance review including the completion of development and training actions for the governing body and any outstanding tasks from the risk review.
To support this work the governing body has been strengthened by two co-optees, and a new Chair took up position in January 2022. Albyn has also recruited an interim senior member of staff for a period of two years to help progress the action plan and business change agenda.
The former Chair and senior officer resigned in August 2021 and Albyn has therefore carried out a strategic options appraisal. Another member of the leadership team has been appointed as interim senior officer until September 2022 and a further interim appointment has been made to ensure a full leadership team is in place and providing support to the governing body.
We are engaging with Albyn to monitor progress with its action plan and the longer term change programme. We require assurance about the governing body’s understanding of its role and responsibilities including the risks to tenants' interests of Albyn failing to meet its obligations as an employer. The governing body is currently working to give us assurance about its governance arrangements and members' capacity to progress these issues. Both the governing body and the leadership team are working openly and constructively with us as they take forward this work and to provide us with assurance about compliance with the Regulatory Standards.
Albyn has informed us that it is reviewing its stock condition survey and that this will be complete by August 2022. Following this review a revised asset management strategy will be developed.
Albyn is one of the larger developers of new affordable housing in Scotland. It has plans to grow through a considerable programme of new homes for social rent and mid-market rent, and will receive significant public subsidy to help achieve this. Albyn has told us it is in the process of arranging private finance in order to support its development programme.
What Albyn must do
In order to allow us to complete our review of its regulatory status Albyn must:
- provide monthly updates on progress with its action plan and business change programme including assurance that it is progressing within timescales and is effectively addressing the associated risks; and
- provide updates on progress with governing body development and training actions and provide assurance that it is maintaining positive working relationships with the leadership team as well as maintaining sufficient governing body capacity.
Albyn must also
- provide copies of its Board and audit committee minutes as they become available;
- update us on the outcomes of its stock condition survey and confirm its plans for its asset management strategy;
- send us by 30 June 2022:
- its approved business plan and updated risk register;
- 30 year financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- a comparison of projected financial loan covenants against current covenant requirements;
- financial sensitivity analysis which considers the key risks, the mitigation strategies for these risks and a comparison of the resulting covenant calculations with the actual current covenant requirements;
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance; and
- evidence of how it demonstrates affordability for its tenants.
- send us an update on its development programme by 31 October 2022. This will include details of the scale and tenure mix, timescales for delivery and any material delays or changes to the programme; and
- tell us if there are any material adverse changes to its development plans which might affect its financial position or reputation, in line with our notifiable events guidance.
What we will do
To allow us to complete our review of its regulatory status we will:
- continue to engage with Albyn to monitor updates and the progress of its action planbusiness change programme and governing body development and training actions;
- review the strategic options appraisal which Albyn has shared with us and liaise as necessary;
- meet the leadership team monthly to discuss our ongoing engagement and its progress with the action plan, business change programme and governing body development;
- meet the governing body quarterly to discuss progress and our ongoing engagement; and
- update Albyn’s regulatory status when we have completed our inquiries.
We will also:
- review the minutes of the Board and audit committee meetings and liaise as necessary;
- review the outcome of the stock condition survey as well as Albyn’s plans for its asset management strategy and liaise as necessary;
- review the cash flow projections and liaise with Albyn as necessary;
- review the business plan and financial projections;
- meet with Albyn’s senior staff to discuss the business plan, the financial information and any risks to the organisation;
- review the development update and liaise as necessary; and
- update our published engagement plan in light of any material change to our planned engagement with Albyn.
Albyn must provide us with the following annual regulatory returns and alert us to notifiable events as appropriate:
- Annual Assurance Statement;
- audited financial statements and external auditor’s management letter;
- loan portfolio return;
- five year financial projections; and
- Annual Return on the Charter.
It should also notify us of any material changes to its Annual Assurance Statement, and any tenant and resident safety matter which has been reported to or is being investigated by the Health and Safety Executive or reports from regulatory or statutory authorities or insurance providers, relating to safety concerns.