Why we are engaging with Reidvale Housing Association Ltd (Reidvale)
We are engaging with Reidvale about its governance and financial management.
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 (the Regulatory Standards).
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 Reidvale was not compliant with Regulatory Standards. The areas of non-compliance included demonstrating strategic control, the development and monitoring of its Business Plan, risk management, 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 developed a Governance Improvement Plan. It co-opted three individuals on to its management committee to support it take forward the necessary improvements. It also appointed an interim senior officer 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 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. Reidvale carried out an internal audit on its compliance with tenant and resident safety duties in the last quarter of 2021/22. We will engage with Reidvale on the findings.
Reidvale commissioned an options appraisal to consider its strategic options in March 2021. During this process it became apparent that Reidvale’s expenditure in some areas such as staff salaries was high in comparison to similar registered social landlords (RSLs). Progress on the options appraisal was suspended at this point in order to carry out an organisational review which concluded in February 2022.
Reidvale has also carried out a stock condition survey in order to understand its future maintenance requirements and incorporate that information into its strategic and financial planning. The stock condition survey report was produced in January 2022 and work is ongoing to fully understand the financial implications of this. The outcomes of this will also inform the options appraisal.
The options appraisal process recommenced in March 2022 and when it is completed Reidvale will develop a new Business Plan.
Reidvale is engaging openly and constructively with us and we will continue to engage with it to seek assurance it addresses the weaknesses identified in its compliance with Regulatory Standards.
The Housing (Scotland) Act (2010) requires us to monitor and assess the financial well-being, governance and performance of each RSL.
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;
- keep us up to date with matters arising from its organisational review and options appraisal;
- keep us informed about the outcome of the stock condition survey and the impact on its future maintenance programme and related costs;
- send us by 30 September 2022:
- 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 along with risk mitigation strategies for each of the key risks considered;
- 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.
What we will do
- review and monitor the implementation of Reidvale’s Governance Improvement Plan;
- meet with Reidvale’s senior officer on a monthly basis to discuss progress;
- review the internal audit report on compliance with tenant and resident health and safety duties and engage with Reidvale on the findings;
- engage with Reidvale regarding the outcome of the organisational review, stock condition survey and options appraisal;
- review the business plan and financial projections and provide feedback;
- 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.