Why we are engaging with Faifley
We are engaging with Faifley about its governance, its financial health and its plans to transfer to another Registered Social Landlord (RSL).
COVID-19 has significantly impacted the services provided by social landlords in 2020 and will continue to influence how services are provided in 2021. We will continue to monitor, assess and report upon how each landlord is responding and we will keep our regulatory engagement under review so that we can continue to respond to the challenges of COVID-19.
Faifley failed to comply with the regulatory requirement to submit an Annual Assurance Statement (AAS) by 31 October 2019. It subsequently submitted an AAS in mid-November 2019 which acknowledged its non-compliance with the Regulatory Standards of Governance and Financial Management (the Regulatory Standards).
Faifley’s Senior Officer left the organisation in February 2020 and it appointed an Interim Director who took steps to refresh and strengthen its governing body. The governing body had become depleted through multiple resignations which left its number below the minimum seven required by its constitution.
Faifley commissioned a comprehensive independent governance review to establish the extent of its compliance with both the regulatory requirements and the Regulatory Standards.
The review completed in May 2020 and found that Faifley does not fully meet any of the Regulatory Standards. The review identified the lack of a business plan, serious weaknesses in the capacity of the governing body over time and failures to plan for and fulfil legal obligations associated with tenants’ safety. It concluded that the governing body had not understood or fulfilled its role and responsibilities and did not provide effective leadership and strategic direction over a number of years. The lack of a business plan and effective decision-making framework meant the governing body reacted to operational matters as they arose, exposing Faifley to a range of significant financial, regulatory and statutory risks, including breaches of health and safety legislation for tenants and staff and in relation to equalities legislation. The review also identified that Faifley did not have a comprehensive performance measurement framework or consistent approach to performance monitoring. It had incorrectly reported elements of the Annual Return on the Charter (ARC) in relation to rental income and had misreported its levels of compliance with the Scottish Housing Quality Standard and Energy Efficiency Standard for Social Housing.
Since the review was completed, Faifley has undertaken significant work including, an audit of its compliance with tenant health and safety requirements as a matter of urgency and the development and delivery of a programme to address the failings identified. It also commissioned an external validation of key performance areas in last year’s ARC prior to submission and has taken steps to address the weaknesses identified.
The review also identified serious weaknesses in relation to financial management, asset management and procurement. In particular, the review identified a potential failure to make adequate provision for the long term maintenance of the stock. As well as compromising the interests of tenants this represents a substantial potential risk to the long term viability of the RSL. The governing body accepted all of the review findings and has been working proactively and constructively with us to address these serious and widespread weaknesses. It has taken steps to strengthen its governing body, including co-opting additional expertise to support it.
The lack of a business continuity plan meant that Faifley also faced significant challenges when the impact of COVID-19 became apparent. The lack of support for its IT system added further challenge and organisational risk.
In August 2020 the governing body decided to commission a comprehensive strategic options appraisal to address the implications of the governance review findings and to ensure that the significant weaknesses in governance, statutory compliance, financial viability and its capacity and capability to respond were thoroughly considered. Faifley also entered into a service level agreement with Caledonia Housing Association (Caledonia) to strengthen its capacity and provide some corporate and asset management support.
In March 2021 Faifley completed the options appraisal process and the governing body decided that the best way for Faifley to deliver its tenants’ and residents priorities in future was by transferring its homes to another RSL. Faifley sought expressions of interest for a transfer partner and in June 2021, after a detailed and very thorough selection process, it selected Caledonia as its preferred partner.
Faifley and Caledonia will now further develop the transfer proposals in discussion with Faifley’s tenants and residents. To help facilitate these discussions Faifley has appointed TIS (Tenant Information Service) as the independent tenant advisor.
The Housing (Scotland) Act (2010) requires us to monitor and assess the financial well-being, governance and performance of each Registered Social Landlord.
Our current assessment is that Faifley is working towards compliance with the Regulatory Standards. We set out below the information that Faifley must provide in order to assure us that it can achieve compliance.
What Faifley must do
- provide us with regular updates on the development of the transfer discussions with Caledonia and its plans to discuss this with tenants and residents;
- continue to provide us with updates on the implementation of the action plan to address the weaknesses in its approach to tenant and resident safety and landlord health and safety; and
- send us copies of its governing body papers as they become available.
What we will do
- engage with Faifley as required on progress with the development of the proposals to transfer to Caledonia;
- regularly monitor Faifley’s progress with completing the actions we require it to take;
- review the governing body papers and engage as required;
- consider our future regulatory strategy as the transfer proposals develop; and
- update our published engagement plan in light of any material changes to our planned engagement with Faifley.
Faifley 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.