Why we are engaging with Clyde Valley Housing Association Ltd (Clyde Valley)
We are engaging with Clyde Valley about its governance, its 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 Clyde Valley’s level of debt we consider it to be systemically important.
Clyde Valley has recently notified us of a breach of procurement legislation. We have been engaging with Clyde Valley on the actions it is taking to address this issue and to ensure it is complying with the Regulatory Standards of Governance and Financial Management and its legislative duties.
Clyde Valley has plans to grow through a programme of new homes for social rent, and will receive significant public subsidy to help achieve this.
Clyde Valley has recently notified us of serious issues at one of its new build developments which may result in a substantial increase in costs. We are engaging with Clyde Valley to understand the background to the issues and how it will address these.
What Clyde Valley must do
In order to allow us to complete our review of its regulatory status Clyde Valley must:
Provide us with the information we have requested regarding the breach of procurement legislation.
Clyde Valley must also
- provide copies of its Board and audit committee minutes as they become available;
- send us by 30 April 2023:
- 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;
- evidence of how it demonstrates affordability for its tenants; and
- provide us with the information we have requested about the background to the development issues and details of its plans to address these;
- send us an update on its development programme by 31 October 2023. This will include its latest report to the governing body/appropriate committee about development and 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 Clyde Valley’s regulatory status we will:
- review the information Clyde Valley provides regarding the procurement issue and engage as appropriate; and
- update Clyde Valley’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;
- observe Clyde Valley’s Board;
- review the business plan and financial projections;
- meet with Clyde Valley’s senior staff to discuss the business plan, the financial information and any risks to the organisation;
- review the information about the development issues and engage as appropriate; and
- review the development update and engage as appropriate.
Clyde Valley 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.