Why we are engaging with Reidvale
We are engaging with Reidvale about its governance and financial management.
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.
We engaged with Reidvale in March 2019 as our annual risk assessment had identified that a majority of board members had been in place for more than nine years. We were also aware that Reidvale had not assessed its compliance with the Regulatory Standards of Governance and Financial Management.
Reidvale commissioned an independent review of its compliance with Regulatory Standards. This review, completed in September 2019, found that there were a number of areas where the association was not compliant with Regulatory Standards. The areas of non-compliance included strategic control and the development and monitoring of its Business Plan, risk management and the lack of appropriate processes to assess the skills and experience needed on the management committee, the appraisal processes for staff and committee members and succession planning.
Reidvale has developed a Governance improvement Plan. It has co-opted three individuals on to its management committee to support it as it takes forward the necessary improvements. It has also appointed an interim Director following the retirement of the previous post holder.
Reidvale commissioned a further review of compliance with Regulatory Requirements in November 2020. The review identified some progress in relation to delivering improvements but found serious weaknesses in compliance with Regulatory Requirements. The review has specifically raised matters relating to Reidvale’s Business Plan, rent affordability, and the lack of an action plan to mitigate the risks of COVID-19. The review also recommended that Reidvale should carry out a full audit of compliance with its tenant and resident health and safety duties to ensure that Reidvale was adhering to all parts of applicable legislation.
We are engaging with Reidvale to seek assurance it addresses the weaknesses found in its review of compliance with Regulatory Standards and its recent review of compliance with Regulatory Requirements. Reidvale is engaging openly and constructively with us as it takes forward its improvements.
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 Reidvale is working towards compliance with the Regulatory Standards of Governance and Financial Management. We set out below the information that Reidvale must provide in order to assure us that it can achieve compliance.
What Reidvale must do
- keep us up to date with progress in implementing its Governance Improvement Plan to address the weaknesses in its governance and financial management ;
- provide us with assurance it fully complies with its obligations in relation to tenant and resident safety;
- ensure it is has robust plans and is taking appropriate actions in relation to COVID-19; and
- send us by 30 September:
- its approved business plan and updated risk register;
- 30 year financial projections incorporating the updated stock condition survey consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- 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;
- report to the Board in respect of the approved 30 year projections and sensitivity analysis; and
- evidence of how it demonstrates affordability for its tenants.
What we will do
- review and monitor the implementation of Reidvale’s Governance Improvement Plan;
- meet with Reidvale’s senior officer on a bi-monthly basis to discuss progress;
- review the report on compliance with tenant and resident health and safety duties and engage with Reidvale on the findings;
- discuss its approach to dealing with actions relating to COVID-19;
- review the business plan and financial projections;
- provide feedback on the business plan and financial projections;
- review our engagement with Reidvale on an ongoing basis; and
- update our published engagement plan in light of any material change to our planned engagement with Reidvale.
Reidvale 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.