Why we are engaging with BT Loch Aillse agus an Eilein Sgitheanaich Ltd (Lochalsh and Skye)
We are engaging with Lochalsh and Skye about its governance, stock quality and tenant and resident safety.
In September 2022 we engaged with Lochalsh and Skye to clarify the status of its new Board members. Lochalsh and Skye identified failings in its compliance with the Regulatory Standards of Governance and Financial Management. The failures related to Regulatory Standard 1, appointing Board members in compliance with its constitution, and Regulatory Standard 6, ensuring that any non-executive member seeking re-election after nine years’ continuous service demonstrates continued effectiveness.
Lochalsh and Skye’s Annual Assurance Statement submitted in October 2022 identified that it was not compliant with Regulatory Standards between May and August 2022. It stated Lochalsh and Skye considered it was now compliant having addressed the issues regarding its Board membership. It confirmed it had developed a Governance Action Plan for improvement and commissioned an independent audit of governance relating to the areas of failure.
In March 2023 Lochalsh and Skye shared the independent audit report with us which identified further non-compliance with Regulatory Standards 1 and 6 and areas for improvement including weaknesses in Lochalsh and Skye’s governance and assurance processes. Lochalsh and Skye confirmed it had accepted the audit findings and recommendations. This information led us to put Lochalsh and Skye’s regulatory status under review.
To allow us to complete our review of its regulatory status, we asked Lochalsh and Skye to provide us with further information and assurance on the findings of its governance audit report and its plans to address the findings of the report.
In June 2023 Lochalsh and Skye also notified us of a serious tenant and resident safety matter. In May 2023 it identified that it had been inaccurately reporting full compliance with electrical safety requirements. This highlighted failures relating to Regulatory Standard 4, quality of reporting information to the Board and risk management, as well as with regulatory requirements to have assurance and evidence it complies with its obligations in relation to tenant and resident safety. Lochalsh and Skye is currently progressing inspections to provide Electrical Installation Condition Reports (EICRs) in all its tenants’ homes.
We are also engaging with Lochalsh and Skye to seek assurance about its approach to independently validating its stock survey information to support its business plan. The information was last independently reviewed in 2005. Lochalsh and Skye has completed an internal audit of the information and agreed that it will commission an asset management expert to shadow its stock survey process.
Our assessment is therefore that Lochalsh and Skye does not comply with Regulatory Standards 1, 4 and 6 and with regulatory requirements. We are engaging with Lochalsh and Skye to seek assurance about its compliance with regulatory requirements, including the Regulatory Standards, and about its capacity to deliver the improvements required.
Lochalsh and Skye is working openly and constructively with us as it takes forward improvements.
Lochalsh and Skye provided a revised improvement plan to us in July 2023 setting out how it intends to address the issues identified and achieve compliance with the Regulatory Standards and requirements. Lochalsh and Skye has made progress against this plan.
Lochalsh and Skye has commissioned an independent review of its compliance with all of the Regulatory Standards of Governance and Financial Management, with the intention of completing this review prior to the submission of its Annual Assurance Statement in October 2023.
We will therefore continue to seek further information and assurance from Lochalsh and Skye about its governance, capacity and Governance Action Plan.
The Housing (Scotland) Act (2010) requires us to monitor and assess the financial well-being, governance and performance of each Registered Social Landlord (RSL).
Our current assessment is that Lochalsh and Skye is working towards compliance with the Regulatory Standards of Governance and Financial Management. We set out below the information that Lochalsh and Skye must provide in order to assure us that it can achieve compliance.
What Lochalsh and Skye must do
Lochalsh and Skye must:
- provide us with the revised Governance Action Plan;
- provide us with monthly updates on the progress against this Action Plan;
- provide us with the outcome of the independent review of its governance and compliance by October 2023;
- set out how it plans to ensure compliance with electric safety requirements by March 2024;
- provide us with monthly updates on progress on achieving compliance with electrical safety requirements; and
- provide us with the timescale and outcome for the proposed checks on its stock survey processes.
What we will do
We will:
- assess the evidence Lochalsh and Skye provides to demonstrate the steps it is taking to address the areas of non-compliance with Regulatory Standards and requirements;
- engage with Lochalsh and Skye to monitor its progress on achieving compliance with electrical safety requirements;
- review our engagement with Lochalsh and Skye on an ongoing basis; and
- update our published engagement plan in light of any material change to our planned engagement with Lochalsh and Skye.
Regulatory returns
Lochalsh and Skye 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.