Value for Money Statement April 2015 – March 2016

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Contents Executive Summary

3

Introduction

5

Section 1: Quality Homes 1.1 Understanding our costs and performance 1.2 Return on assets 1.3 Customer relationship and welfare reform

10 17 21

Section 2: Wellbeing and Independence 2.1 Adding social value

23

Section 3: Sustainable and Progressive Business 3.1 Financial strength and performance 3.2 Business improvement 3.3 Digital improvement 3.4 Collaboration and partnerships 3.5 Investing in people

28 31 31 34 34

Section 4: Looking Ahead 4.1 Top four Group priorities 4.2 Embedding VfM

36 36

APPENDICES 1. Performance and Assurance Framework 2. Performance and Risk Assurance Framework

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37 38

Executive Summary This document is Staffordshire Housing Group’s (SHG) self-assessment on its planning and delivery of Value for Money (VfM). We have carried out the self-assessment using the Homes and Communities Agency’s (HCA’s) value for money standard. We have set VfM targets around efficiencies as well as responding to rent and funding cuts. We have looked for innovative ways to optimise value for money, making the most of resources to invest in our homes and services. After reviewing our progress on VfM, the Board is satisfied that the organisation complies with the VfM standard. Our assessment highlighted that:  We understand the rate of return on our assets  We understand our costs  We have effective performance management  We have worked well with customers who have scrutinised services, tested quality and influenced service improvements. Our Strategic approach to VfM Our VfM strategy underpins our strategic plan. The plan reflects current challenges, the external environment and where we are on our VfM improvement journey. The plan is supported by a delivery plan with clear targets which are scrutinised quarterly by the Audit and Risk Committee and reviewed by the Board. A key factor in delivering VfM is effective control and discipline around financial planning, budgetary control and our investment and contracting decision making process. SHG has a set of key controls, appraisal and reporting mechanisms. This enables effective planning, management and reporting on SHG’s financial position so that we can robustly appraise new business development projects and initiatives ensuring that they meet the organisation’s objectives and required rate of return. Our strategic plan defines our approach to VfM which is to deliver our objectives in a cost-effective and quality-focused way. We do this by: 

Having clear strategic objectives which are understood by staff.

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Having robust business planning processes with organisational priorities cascaded to teams and individuals.

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Performance management and scrutiny processes which drive VfM and continuous improvement.

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Understanding the relationships between costs and the quality of our products and services. We benchmark by using HouseMark, the PlaceShapers group and other networks, setting targets for continuous improvement.

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Having VfM embedded in all areas of the business via staff training, induction, appraisal and performance management, budgeting, procurement, governance, business planning and customer engagement and scrutiny. -3-

Some examples of VfM successes include: 

Re-tendering responsive repairs on a price-per-property and price-per-void basis will produce around: o A 4% saving on current responsive costs in 2016/17 - these costs have been fixed for three years o Added social value of three full-time apprenticeships, 100 volunteer days, 750 work experience days, and twenty energy efficiency seminars for customers

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We provided 86 new rented homes and 22 new shared ownership homes, in line with our commitment to provide a range of affordable housing and low-cost home ownership options.

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We responded with a package of initiatives designed to successfully mitigate the £3.3m impact of four years rent reduction (introduced by the Government in the budget of 8th July 2015).

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To help address the impact of ongoing welfare reform changes we developed the ‘Fair Deal’ a collaborative way of working with customers. This will encourage customers to self-serve so that we can focus our support and resources on those who need greater support to become self-reliant and manage independently.

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The money advice team delivered £501,000 of additional income (or debt resolution) for 296 customers.

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Our VfM databases captured 256 entries where staff recognised their VfM benefits. Group savings of £231k were made, 1,800 staff hours recovered through efficiency savings and £41k was saved on behalf of customers.

Plans for the next four years A review of priorities has resulted in developing four ‘Big Ticket’ areas of work. Phased delivery plans are in place and good progress is being made in each of these areas: 

Creating effective business practices To maximise the potential of our people, to remove process inefficiencies, achieve digital transformation and ensure governance excellence.

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Growing the business and increasing surpluses To increase organisational surpluses through business growth and diversification which supports our core activities.

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Transform our housing and customer services and our relationship with tenants Transform our services and our relationship with tenants to ensure they are equipped to manage their tenancies well and prepared for the impact of welfare reform including the roll out of Universal Credit.

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Transformation of support and wellbeing services Service changes and people reviews to improve our support and wellbeing services enabling us to better meet the needs of vulnerable and disadvantaged people across the group.

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Introduction 1. Our approach to VfM Staffordshire Housing Group (SHG) Strategic Overview Our strategy sets our direction and ambitions to make a real and demonstrable difference to people’s lives and maximise the use of our resources. We aim to deliver our purpose and vision by applying a financially robust, commercially aware approach with value for money at the heart of our strategy. We prioritise some objectives above financial return in order to achieve our purpose of ‘creating opportunities, changing lives’ within a framework of rigorous business planning and performance management.

To achieve our purpose we have a vision: ‘Social Heart: Business Mind’. Our strategic objectives are: 1. Quality homes: people enjoy the homes they rent and buy; we sustain demand for our homes and continue to improve the quality and energy performance of our homes. 2. Wellbeing and independence: our vulnerable customers are supported to build resilience and make positive choices. Older people are supported to age well by maintaining choice and control in their homes. 3. Sustainable and progressive business: we have a robust and sustainable business plan and business models which support the changing needs of the organisation. We have a high performing staff team and efficient and effective business practices.

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VfM Strategy Our aim is to be a high performing business that delivers good quality homes and services. Our VfM strategy underpins the key strategic priorities reflecting current challenges, the external environment and where we are on our VfM improvement journey. It is supported by a detailed action plan with clear targets which are reviewed and refreshed each year by Board as part of our VfM assessment and monitored quarterly by the Audit and Risk Committee. Our approach follows the model shown below:

2. Setting our priorities Our priorities for 2015/16 were to support the delivery of the Strategic Plan which included the transformational projects called our ‘Big Ticket’ plans.

BIG TICKET 1

A transformed care and support service which includes the development of a care and support strategy and a review of services and structure in Arch (our subsidiary charity) to support the delivery of the strategy and improvements in the quality of services and outcomes for customers.

BIG TICKET 2

A transformation of the customer relationship in housing services so that customers are better equipped to manage independently and maintain their rent payments, and so that we focus resources on customers who need additional help to sustain their tenancies.

BIG TICKET 3

Income generation and business efficiency to increase surpluses through growth, commercial activity and by reducing process inefficiency.

Ongoing financial viability is key to the success of the organisation and the delivery of our objectives. Our business plan details resource requirements and is stress-tested to ensure that our objectives are achievable and that we understand the factors which may have an impact on the delivery of the plan.

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Planning and monitoring A key factor in delivering VfM is effective control and discipline around financial planning, budgetary control and the investment and contracting decision making processes. SHG has a set of key controls, reporting and appraisal mechanisms. This enables effective planning, management and reporting on SHG’s financial position so that we can robustly appraise all new business development projects and initiatives ensuring that they meet the organisation’s objectives and required rate of return. Key documents which provide our framework for delivering VfM are:       

Strategic Plan Circle of Success Big Ticket Plans Group Procurement Strategy Treasury Strategy, Business Plan and five-year rolling budget Asset Management Strategy Business Improvement Methodology.

We evaluate service performance using a balanced scorecard which incorporates key performance indicators for financial results, operational processes, people (our staff) and customer satisfaction. We gather feedback from customers in a range of ways including satisfaction surveys which are published in performance reports. The Customer Services Committee ensures that customers’ views and experience of the range of services provided are understood and driving service improvements effectively (see Appendix 1). Performance is also scrutinised by the Executive Team, Audit and Risk Committee, Board of Management and Customer Assurance Panel (comprised of SHA residents and Board members).

Risk management During 2015 we reviewed and improved the risk management process to ensure we focus on key risks. Strategic risks are discussed by the Audit and Risk Committee quarterly. At every Board meeting there is a review of the strategic risk map. We have an integrated operational risk management process across the group which ensures a consistent approach is taken and there is a mechanism for operational risks to be escalated to the Executive Team and Board.

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3. Governance SHA (Staffordshire Housing Association) is the parent company and controls four subsidiary companies. Arch is a charitable organisation used for the delivery of a range of wellbeing services, and Stillness 924 is used for SHA’s development and green energy investment programme. Blue Mountain HA and Search are currently dormant companies retained in the structure for future growth opportunities.

Company structure

Staffordshire Housing Association Board of Management

Arch Charity

Stillness 924

Blue Mountain HA

Search

Subsidiary Company

Subsidiary Company

Subsidiary Company

Subsidiary Company

(3 Trustees appointed from the SHA Board)

(3 Members appointed from the SHA Board)

(3 Members appointed from the SHA Board)

(3 Members appointed from the SHA Board)

The Board has continued to implement governance strategies that ensure the overall governance arrangements are fit for purpose and effectively support the needs of the business. During the year, the Board has:    

Adopted a new code of governance (NHF Code of Governance 2015 version). Reviewed its compliance against the code, made some improvements and assessed it was compliant with the code. Continued its succession and renewal process with recruitment of two new board members and the appointment of a new Chair (effective September 2015). Reviewed SHA’s compliance with the HCA regulatory framework and identified improvement actions which have been implemented.

The Board sets and monitors delivery of the strategic plan and ensures VfM is considered in all aspects of delivery. The Board’s assurance comes from:     

Regularly reviewing progress against strategic objectives. Quarterly reviews of the balanced scorecard which has performance measures across all areas of the business. Monthly reviews of the strategic risk map. Engaging customers through service scrutiny reviews, mystery shopping, satisfaction survey feedback and complaints process feedback. Business improvement processes used for structured reviews of services to improve efficiency and quality.

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       

Internal audits covering all areas of the business which are prioritised on a risk-based approach. The annual external audit covering financial control and reporting. External assurance through independent accreditations such as Investors in People, Investors in Excellence and the National Home Improvement Agency Quality Mark. A validated business plan and robust scheme of delegation. Monthly review of management accounts. An active asset management approach based on understanding the financial performance and social value of properties. Rigorous decision-making processes for investment, procurement and contracting. An investment appraisal model used to support decision-making on where to invest, project returns and set targets for financial and social returns

The Audit and Risk Committee supports the Board by focusing and gaining assurance on risk, business improvement and performance (see Appendix 2).

4. Customer Engagement We believe that an effective customer engagement strategy helps to drive service improvements. Our new approach to customer engagement has led to more customers having an influence over the services they receive. A new customer scrutiny model was developed and implemented with customers in late 2015. A group of 11 customers has completed scrutiny reports on the SHA and Arch websites and SHA’s customer feedback methods. An action plan of improvements for each of these areas is now in place and will be monitored by the Customer Assurances Group. This has provided valuable information which has been used to improve digital access for customers, making it easier for customers to access information and services. The three completed scrutiny reports took into consideration the views of over 380 customers. Membership of the scrutiny panel has also been increased and is now more representative of the Group’s services. Over the next 12 months we aim to develop a quarterly customer intelligence report that will provide further insight into what customers think of our services, where we need to improve and where we are not meeting our promises. Complaints Formal complaints are used as a valuable form of customer feedback – we do not set targets for the number that we receive but we do aim to resolve them early in the process so we have a target of resolving complaints the majority of complaints at stage 1. In 2014/15 we received 61 complaints and 82% were resolved at the first stage. This year 2015/16 we have 35 complaints and 86% were resolved at the first stage. Formal complaints have prompted improvements to the starter tenancy appeals process and ensuring repairs reports to non-maintenance staff are passed on to the repairs team quickly.

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Section 1 – Quality Homes 1.1. Understanding our costs and performance HCA Unit cost data comparisons Benchmarking our services against similar organisations is a key part of understanding the relative costs, performance and quality of homes and services we provide. We use HouseMark which provides costs and performance for a peer group of 38 traditional housing associations using its standardised measurement approach. All data is taken from a HouseMark report published in November 2015. The HCA has also published data on costs and efficiency taken from the 2014/15 Global Accounts. For the purposes of this section we have used HouseMark data from 2014/15 to enable same year comparisons. The HCA has analysed housing association costs in the sector and taken the costs of different activities and divided this by the number of managed social housing units. This produces comparable cost-per-unit indicators. The results for SHA are commented on below and summarised in Table 1.

Headline social housing cost per unit SHA’s average cost per unit is below the lowest cost quartile threshold – which indicates that SHA’s costs compare well with the sector. This is affected by contextual factors such as regional wages which are lower than the average for England and contribute to lower costs. SHA manages a high proportion of homes for older people (around 20 per cent of stock) and a higher than average number of supported housing units which typically cost more to manage.

Management cost per unit At £900 per unit SHA’s costs are below the median (£950) but above the lowest cost quartile threshold which is £700 per unit. We have increased some housing management costs over recent years as we have increased SHA’s capacity to mitigate the impact of welfare reform; particularly with the wider introduction of Universal Credit. This is an agreed and ongoing strategy. This can be seen to have an impact in 2016 where comparable costs have increased by around £100 per unit. This is as a consequence of more staff working in income management, additional management costs in extra care (and reduced funding from the local authority) and a one-off policy change on the way overhead costs are apportioned within the group.

Service Charges per unit SHA’s service costs are relatively high at £630 per unit. This is explained by SHA’s housing profile. Sixtytwo per cent of the stock comprises flats in 90 housing schemes. Most of these flats have service charges for the maintenance of communal areas. In addition, 16 per cent of the stock is flats within purpose built villages for older people. These have relatively high service charges to match the range of facilities and services provided. Overall, service costs are matched by service charge income. However, we regularly review costs and services provided with customers to test customers’ views on value and quality. Service items are regularly reviewed and this will continue to be a focus to ensure value for money for tenants.

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Maintenance costs per unit At £1,080 per unit this is above the median but below the highest cost quartile threshold. This figure includes responsive maintenance, cyclical maintenance such as gas servicing and planned maintenance revenue costs (such as replacement external doors, individual window replacements and central heating renewals i.e. planned works items which are not capitalised).

Major Repairs costs per unit SHA’s costs are noticeably lower than the lowest cost quartile threshold. This is largely because 82% of SHA’s homes are purpose built and are relatively new. All homes are decent and therefore major repairs programmes are focused on routine improvement works based on stock condition inspections. These are typically: kitchen upgrades, bathroom upgrades, fuel switching projects (for energy efficiency) and major adaptions for residents with disabilities. Component replacements are organised by schemes and are relatively predictable because we have relatively fewer rehabilitated homes with high investment requirements. We have continued to invest in improving the thermal performance of SHA’s homes with a SAP index 2012 average of 75 (top quartile in SHA’s benchmarking group).

Other social housing costs per unit At £60 per unit this cost is below the lowest quartile threshold and comprises mainly of support costs in the sheltered and extra care villages. We have reviewed staff roles in supported housing schemes as income is likely to reduce further as local authority funding for these services continues to reduce. Our strategy has been to increase the focus on intensive housing management activities which can be funded by service charges and to fund some support activities internally as a managed response to reductions in local authority grant income.

Table 1: HCA Cost data from Global Accounts 2014/15 Total social housing units

Headline social housing CPU (£k)

Management CPU (£K)

Service charge CPU (£k)

Maintenance CPU (£k)

Major Repairs CPU (£k)

Other social housing costs CPU (£k)

2,704

2.90

0.90

0.63

1.08

0.23

0.06

HCA sector data 2015 Upper quartile

4.30

1.27

0.61

1.18

1.13

0.41

Median

3.55

0.95

0.36

0.98

0.80

0.20

Lower quartile

3.19

0.70

0.23

0.81

0.53

0.08

3.01

1.02

0.60

1.05

0.31

0.04

SHA 2015

SHA 2016

2,754

CPU = Cost per unit

[SHA 2016 comparison figures taken from SHA’s 2015/16 accounts]

Housing Management Costs In comparison with our HouseMark peer group SHA’s housing management costs are in the lowest quartile; and lower than most. Table 2 shows we spend relatively less, compared with our peer group, on rent collection and arrears, tenancy management, lettings and ASB management and relatively more on customer involvement.

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We have increased our staffing in income management to manage rent income as welfare reform affects more tenants and in response to demand for money advice support. As Universal Credit is rolled out we are seeing claimants build up early arrears and we want to ensure we manage this debt risk. Table 2: Cost per Property of Housing Management (HouseMark report 2014/15)

Performance Our key indicators: rent arrears, void loss and relet times, remained good. There has been an increase in tenancy turnover and we have focused on reducing tenancies that fail by introducing stronger risk assessment and tenancy training for new applicants. We have also improved our ASB processes with the objective of improving satisfaction with the outcomes of this service. This continues to be an area where satisfaction is lower than for other services and we will continue to make improvements to our system for monitoring and supporting customers. Rent arrears have been well managed and results are better following improvements made in monitoring systems, processes and staff resources (Table 3). This trend has continued during 2015/16. We have identified former tenant’s arrears as an area for improvement.

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Table 3: Current rent arrears at year end Chart.

Reducing the time taken to relet empty homes (Table 4) has been a continuing area of attention with improvements to the process and better working between teams and contractors to ensure a common focus. This has resulted in empty property void times – from tenancy termination to new tenancy start – reducing to an average of 18 days per letting (HouseMark average 25). We still have a challenge to achieve this performance in supported housing lettings (sheltered and extra care) and this has been a focus for improvement with process analysis and marketing plans for these schemes. We have set objectives to achieve efficient turnaround times and a balanced profile of customers so that these schemes remain sustainable and attractive to new customers. Table 4: Average time in days to relet properties.

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Rent loss due to vacant homes has continued to be below benchmark and within target. Table 5: Percentage rent loss due to empty homes (voids)

Tenancy turnover has reduced over the past 4 years (Table 6), although higher than in our peer group. We recognise that some turnover is inevitable and desirable as tenants’ needs change but we monitor those tenancies which end due to tenancy failure reasons; such as evictions, abandonments or terminations due to debt issues. This has in part led to the introduction of preventative action such as new tenancy risk assessments and tenancy training so that new tenants are fully assessed and areas of concern are discussed with them and addressed early on. Table 6: Tenancy turnover rate

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Housing Maintenance costs - responsive repairs and voids Responsive maintenance costs have been a focus as they are a major area of expenditure. In 2014/15, following an option appraisal on alternative ways of delivering a responsive repairs service, we introduced a new approach in collaboration with the responsive repairs contractor. We trialled a fixed cost-perproperty and cost-per-void system. This arrangement worked well and so we tendered a contract on this basis during 2015/16. Its purpose is to deliver customer benefits such as a focus on keeping properties in good repair; fewer contractor visits and maintenance officer’s time focused on the quality of service rather than administering the process. The outcome was a good value tender and cost certainty which benefits both SHA and the contractor. SHA’s costs were already below the median costs of the benchmarking group (Table 7) and this approach has enabled us to take closer control of this significant area of revenue expenditure. Table 7: Cost per Property of Responsive Repairs and Void Works

Performance We expect the cost-per-property arrangement to incentivise the contractor to resolve more repairs at one visit. The average time to complete a repair continued to reduce in 2014/15 and was 5.65 days compared 6.10 days in 2013/14. Customer satisfaction with this service remained consistent with a 90% satisfaction rating for responsive repairs (Average overall satisfaction with service rating = 9.0 out of 10).

Major works and cyclical maintenance Major works and cyclical maintenance costs reflects investment in improvements and ensures the quality of SHA’s properties. In HouseMark’s classification this includes capital and revenue expenditure. SHA plans improvement works based on a stock condition survey which is verified by property inspections and is updated following inspections and improvement programmes. Expenditure in this area has increased over the last three years and is planned to continue at a similar level. Compared with the peer group, SHA’s expenditure is in the lowest quartile, which is because of the age profile, typically relatively young, purpose-built stock in good condition with components which have been replaced progressively.

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Major works such as kitchen and bathroom refits and replacement window programmes are regularly tendered and we have achieved very good rates for these installations by close working with suppliers and contractors. Cyclical work includes items such as lift maintenance, external painting and gas safety checks. There has been some re-scheduling of the painting programme to maximise painting cycles while maintaining quality.

Table 8: Cost per Property (CPP) of major works and cyclical maintenance

Quality Customer’s views are used to assess the quality of our services. At our last customer wide survey (2014) the results were: Overall satisfaction with Landlord Quality of home Repairs and maintenance service Rent provides value for money

SHA 89% 89% 88% 86%

Peer Group Median 89% 86% 86% 84%

Customer views are routinely checked through a series of transactional survey’s with check on satisfaction with lettings, repairs, estate services etc.

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Customer Satisfaction We use our in-house Customer Index of Service Satisfaction (CISS) methodology to capture feedback from customers across service areas. This enables us to analyse feedback in more detail and compare the performance of services. The Table below shows consistently good satisfaction levels with a range of services. PERFORMANCE MEASURE (Customer Index of Service Satisfaction showing overall satisfaction with services)

2013/14 Actual

2014/15 Actual

2015/16 Target

2015/16 Actual

2016/17 Target

Satisfaction with the lettings service (out of 10)

9.1

9.7

9.5

9.5

9.5

Satisfaction with estate services (out of 10)

8.5

8.8

9.5

9.0

9.5

Satisfaction with condition of new home (out of 10)

9.1

9.7

9.5

9.5

9.5

Satisfaction with responsive repairs (out of 10)

9.2

9.1

9.5

9.0

9.5

Satisfaction with the lettings service has met our 9.5 target. A lean review completed in 2015 on our pretenancy service has led to improved customer satisfaction. Satisfaction with responsive repairs remain consistent without achieving our target levels, issues raised by customers are discussed with contractors to help to understand the customers view and implement strategies to improve. We remain committed to achieving our target of 9.5.

1.2. Return on Assets Asset Management The Asset Management Group uses an appraisal model which uses a financial assessment of relative scheme performance using net present values together with a social assessment to assess both the viability and sustainability of our property assets. An appraisal was carried out to evaluate the feasibility of investing in the public areas of Bradeley Village (a sheltered scheme comprising 239 flats) - improving the main reception entrance and providing mobility scooter storage facilities – aiming to ensure that the complex remains an attractive accommodation option when measured against competitors’ offers. Before evaluating costs we completed a 30 year business plan for the scheme to show that the proposed investment is viable and affordable over the life of the plan. We have continued to invest in upgrading bathrooms at Bradeley Village (to ensure that facilities meet the long-term needs of our customers. Since 2014 we have installed 176 level-access bathrooms, with the programme scheduled for completion in 2017 when a total of 220 bathrooms will have been converted to accessible wet rooms.

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We have a target in our affordable warmth strategy to tackle fuel poverty. The measure we use to report this is SAP index 2012 (measure of thermal efficiency) scores. We have an overall target that 80% of our stock achieves a SAP rating of 75 by 2020. We have annual milestone targets towards this and we are currently ahead of target with 56.7% of the stock now achieving SAP 75 (an increase of 5.7% since 2015). Measures taken to improve property SAP ratings include: 

Investing £180,000 on replacing flat roofs to Ruxley Court, taking the opportunity to upgrade insulation to improve the SAP rating of 15 properties.

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Installing high-efficiency electric heating systems at Ruxley Court, helping to reduce customers’ fuel bills, which has resulted in 45 more homes achieving our SAP target level.

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24 properties at Bromley Court, Cobridge, were converted from electric heating to gas central heating. Value for money was enhanced by obtaining part-funding from National Grid, who paid £35,000 towards the costs of installing gas mains.

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Installing 75 high-efficiency replacement gas boilers to properties.

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We have continued our programme to update existing lighting to LED lighting at Rowan Village (24% complete) and West End Village (7% complete), which results in an annual saving of £1,200 on electrical costs and will result in maintenance cost savings of around £7,000 per year on fluorescent light fitting replacements.

Financial impact of re-tendering the price per property contract 

Assuming a similar level of void properties in 2016/17, we estimate a 4% overall saving against our 2015/16 responsive repair budget.

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1.8% increase in costs for responsive repairs. This price is fixed for three years with no inflationary increase, with an option to extend for a further two years.

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30% saving per void against our previous cost. This cost is also fixed for three years.

Social value of re-tendering the price per property contract Over the course of the 5 year of the contract Novus Property Services have committed to deliver the following social value measures:     

Three full-time apprenticeships Supporting six existing apprenticeships 100 volunteer days 750 work experience days 20 energy efficiency seminars for customers

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In 2015/16 we re-tendered the following:     

Responsive repairs and voids re-servicing Replacement bathrooms Boiler replacements Level access shower installations Gas servicing

80% of maintenance costs are on a fixed price basis.

Stock condition During 2015/16 we reviewed the replacement timescale for some building elements within our stock condition survey. This has resulted in an overall reduction in spend per year on our annual planned programme of £82,000. We have altered the method for selecting boilers for replacement. Using the stock condition database as a guide we have analysed data to assess the number of breakdowns, which then influences which boilers are a priority for replacement. By extending the lifespan of our painting cycle we have reduced our painting costs by £20,000 per year. All leased or managed properties were surveyed, and property data is now included in our stock condition data. All private landlords were contacted and requests were made for investment programmes for their properties, which resulted in £38,000 of investment by landlords into properties managed by Arch.

Green Initiatives 

We installed PV panels at West End Village with an estimated energy generation of 489,826 kWh and Feed-in Tariff Income of £85,480 over a 20 year period.

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We installed PV panels at Rowan Village with an estimated energy generation of 489,826 kWh and Feed-in Tariff Income of £85,480 over a 20 year period.

Development of new homes All new developments are assessed on the basis of whether the proposals fit with our overarching strategic and corporate objectives. When assessing the financial viability of new developments we use industry-standard development appraisal and viability software. The assumptions used in the investment appraisals are reviewed and approved regularly, and NPV (Net Present Value) and payback rates are set for all new developments. All new developments are approved by the Board and included in the Group’s business plan. The Group is committed to providing a range of affordable housing and low-cost home ownership options and is currently on site with mixed-tenure schemes at Uplands Mill, Biddulph, providing 44 rented units and 21 shared ownership units overall, and at Tixall Road, Stafford, where 17 shared ownership and nine rented units have been completed. In all, 86 new rented homes and 22 shared ownership homes have been provided. We are currently investigating Rent to Buy and market rent products and a range of funding opportunities to increase our development programme capacity in the longer term. -19-

Stock valuation We regularly review the value of our stock portfolio to ensure that we meet the requirements of our loan facilities and understand our borrowing capacity. Our current stock valuation is £108m, with some £29m available for further borrowing.

Understanding income and expenditure in sheltered housing to support business planning We have developed a business plan for Bradeley Village, our largest sheltered scheme of 239 homes, calculating income and expenditure over the next 30 years which indicates the contribution the scheme makes to the Group. We developed a new marketing plan to ensure that the scheme remains viable, recognising there is new competition from new extra care villages currently being built in Stoke-on-Trent. We recognised that residents were finding it difficult to maintain a volunteer-run café service at this scheme. This was a critical service for the village culture and valued by many residents, so we developed a business case for running the café in-house and supported the service with a small subsidy. The initiative has had a very positive impact and ensures residents and visitors can enjoy a welcoming village centre environment. It will contribute to making the village the preferred housing choice for independent over 55s and a viable alternative to extra care villages.

Return on assets – measures and targets 2013/14 Actual

2014/15 Actual

2015/16 Target

2015/16 Actual

2016/17 Target

Core return on assets (retained surplus as a percentage of reserves)

4.90%

*4.86%

3.20%

*8.32%

6.00%

% properties achieving average thermal efficiency rating of SAP 75 (long-term target 80% by 2020)

42%

51%

55%

57%

62.5%

Customer satisfaction: Overall quality of the home (STAR survey)

87%

89%

Maintain top quartile

89%

Maintain top quartile

9.2

9.1

9.5

9.0

9.5

MEASURE

Customer satisfaction with repairs (monthly customer satisfaction survey)

* Core return on assets, adjusted for the impact of one-off costs associated with the refinancing exercise, exceeded target due to a more focused approach to expenditure and tighter budgetary control.

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IN 2016/17 WE WILL

Quality Homes

Further develop the active asset management scheme plans, reducing risk exposure for SHG. Prepare scheme based sustainability plans for 3 general needs housing schemes.

Wellbeing and Independence

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Sustainable & Progressive Business

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Review our Asset Management Strategy, looking at:  Impact of welfare reform  Growth opportunities  Stock effectiveness  Environmental considerations

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Install 90 high-performance boilers to our property stock

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Replace electric storage heaters with modern high-efficiency storage heaters in 55 properties

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Convert 38 flats from electric heating to gas central heating

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1.3. Customer relationship and welfare reform During 2015/16 we piloted and introduced a new approach to working with our tenants which we called the Fair Deal – the purpose of this initiative was to make explicit our service offer and our expectations of tenants during a period of change with welfare reform reducing and changing tenants’ benefits. The purpose of the Fair Deal is to improve efficiency enabling customers to use on-line services so that we focus our support and resources on those who require more help to become self-reliant and manage independently. We introduced the Fair Deal for all new tenants from November 2015. In August 2016, we will launch it to existing residents following a campaign to explain the purpose and benefits to both SHA and customers. This transformation of the customer relationship in housing services will ensure that customers are better equipped to manage independently and maintain their rent payments to enable us to focus resources on customers who need additional help to sustain their tenancies. As part of improving choice and access we are continuing to work to provide digital access to our services to enable customers to:     

check their rent account make payments report repairs report ASB incidents apply for a home or a transfer -21-

We have introduced tenancy-ready workshops for new customers assessed as being at high risk of accruing rent debts and who may have difficulty maintaining a tenancy. The workshops cover subjects such as:       

How to get a home Preparing for a new home Budgeting, benefits and managing a home Debt issues Right and responsibilities of a being a tenant Repairs and maintenance How to contact SHA and receive additional support to help manage a tenancy

Our aim is to reduce tenancy failure by ensuring customers are fully prepared to maintain a tenancy successfully. We have set a new target for reducing tenancy failures in the first two years of a tenancy to below 5%. Our welfare reform strategy and plan is monitored by the Executive Team and Board. This strategy ensures that we work with customers to mitigate the impact of welfare reform and maintain income collection rates and maximise customers’ income. In preparation for the introduction of Universal Credit we increased capacity in the income services team. We have pro-actively contacted customers who we have assessed as being likely to claim Universal Credit. We have maintained collection rates alongside the gradual introduction of Universal Credit (UC) across North Staffordshire. The impact of UC is being monitored and we are giving customers advice on how they will be affected by UC and assistance to make claims.

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Section 2 – Wellbeing and Independence 2.1. Adding social value Responding positively to changes in Extra Care housing Following changes to local authority support service funding we redesigned our service offer to optimise services which are eligible for housing benefit. Residents were consulted about moving to the new service so we could understand the impact on them personally. They identified it was important to have staff based at their scheme who they could approach for help when they need it. We replaced some roles with Supported Housing Advisor posts which combined elements of support along with new tasks: sustaining tenancies, maintaining health and safety and providing some concierge services. An additional intensive housing management charge has maintained income for the new arrangements. This approach enabled us to manage a reduction in income across two extra care schemes. We have been able to provide the same quality service to customers and residents’ have accepted a small increase in their service charges.

Social Value/ Working with Communities We are aware that as well as cost and performance measures, the work we do has a social impact on the wider community. We are looking at a way of measuring the added social value of projects and activities to better understand the benefits and impact of our work. Examples of this include: 

Securing £15,000 external fee income associated with our ‘Big Local’ social regeneration project funded by the Big Lottery. With the support of the local community, we continue as the Locally Trusted Organisation. This will generate annual fees for a minimum of the next 3 years.



Funding 24 individual community-based initiatives to support our regeneration activity. Examples include: part funding a nursery apprentice, running an older people’s poetry group, and, supporting our residents with anti-social behaviour with Street Games activities for children and young people.



Using intergenerational workshops to recall older people’s memories in Stoke-on-Trent and cataloguing them in a film archive.



The communities of Fegg Hayes and Boothen in Stoke-on-Trent have benefited from a sports inclusion project for young people. £10,000 was secured through ”Awards for All” for both communities (£20k in total) for a year-long project, helping young people to get fit and healthy and reduce anti-social behaviour.

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Money advice In 2015/16 the money advice team worked with 296 customers across the Group and achieved additional income and debt cancellation for customers to the value of £501,000. This was achieved by ensuring customers were claiming the benefits they were entitled to, obtaining grants and loans to assist those in need of support and by providing advice to resolve debt issues. All customers who we assessed as being affected by the benefit cap were contacted and given advice about how they may be affected by the change. We have continued to mitigate the impact of welfare reforms by giving support, information and advice to all affected customers. In 2016/17 we will support our customers affected by the introduction of UC and offer access to one of our money advisors to provide support, guidance and advice to tenants claiming this new benefit.

Training and employment opportunities In 2015/16 we supported over 300 customers across the Group with training and employment opportunities. COURSE TYPE

NO.

BENEFIT

Computer skills

33

Improves the skills of people with little or no experience of using computers or Tablets. Three customers chose to take their learning to a higher level to help them gain employment working with computers. One customer achieved MOS Expert level and another will do so within the next 12 months.

Hobbies

63

Hobby courses support customers pursuing new and existing hobbies in subjects including art, textiles and photography. Courses are relatively inexpensive and help reduce social isolation and develop confidence in customers.

Personal Development

45

These courses are mainly taken up by more vulnerable customers or people moving on from other support. They include courses on assertiveness, stress management and healthy lifestyle choices.

Skills Development

171

These courses give customers a basic set of skills that employers are looking for, such as food hygiene or health and safety. They also include courses that the customer can use to access specific industries, such as manufacturing or health and beauty.

Business Development and Fundraising Activity SHA’s subsidiary, Arch (North Staffs), is a charity which delivers a range of services for vulnerable people in Stoke-on-Trent and adjacent local authorities. Arch continued to deliver a range of innovative and creative services with funding secured from national charitable trusts and voluntary grant makers. This type of funding enables us to not only increase our support offer for customers but also, by bringing in funding from out-of-area sources, contribute to our local economy. In 2015/16 this totalled more than £500,000 and included the continued employment of 12 people from local communities. We expect current reductions in funding to continue until at least 2019/20 with substantial changes in local government funding. By the end of 2015/16 we had a £500,000 reduction in annual funding due to decommissioning of four contracts; in addition two contracts were reduced in value. We expect preventative and low-level support services to remain at risk, as councils focus on their statutory obligations.

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Arch has been resilient to ongoing changes. Over the last year we have developed strong relationships with commissioners and are working in partnerships that can deliver services at scale. Unlike many charities, our Group structure means that we have access to a business infrastructure that has the flexibility to expand or contract as required. Arch continues to invest in a dedicated business development team, now well established in the organisation. Activity and achievements during the year included: 

Secured £2m funding to continue to deliver existing services and develop or pilot new work.



Achieved a tender success rate of 81%. Feedback from partners suggests that this is more than double the success rate of other organisations.



Diversified income identified and applied for funding from a much wider range of funding streams.



Developed a more proactive approach to securing funding using internal and external data to highlight gaps in need/provision and/or where we can contribute to wider public sector savings.



Undertaken some small scale cost benefit analysis resulting in ongoing funding for a DV intervention project in Stoke Royal Hospital’s Emergency Department.



Invested resources in traditional fundraising activities with a focus on eBay-based charity trading and community and corporate fundraising.

Social value During the year Arch worked in Stoke-on-Trent, Staffordshire and Cheshire East local authorities, engaging nearly 6,000 children, young people, adults, families and professionals in services aimed at reducing social exclusion by ending domestic abuse, tackling homelessness and promoting social inclusion. Arch’s activities provided the following outcomes:

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Revival Home Improvement Agency (HIA) Revival is a brand in SHG used for our home improvement agency and support services provided in the community. We successfully mobilised a Staffordshire county-wide HIA contract in October 2014. During 2015/16 we dedicated resources to work with our business improvement team to process-map the service and develop a comprehensive improvement plan. These actions have started to realise improvements, including an increase in value of work completed per quarter from £582,811 in Q1 to £1,256,941 by Q4. Across the whole service, which also includes a hospital discharge service, we supported 3,998 customers. Revival has continued to work with older and disabled people to support their wellbeing and independence through a range of home-improvement-based and person-based services, including: 

Hospital Discharge Service This service works closely with staff at University Hospitals of North Midlands NHS Trust, supporting people during and after discharge from hospital. Referrals have continued to increase from 774 in 2012/13 to 1,190 in 2015/16.



Intensive Home Support Scheme Following the restructure of how we deliver floating support, a specialised service within the hospital discharge service was developed, providing short-term, intensive, enhanced care after hospital discharge for vulnerable, frail older people with complex needs. This has continued to result in increased numbers and speed of people returning home from hospital, improving their homes and wellbeing.



Advice Hub This is a single point of access for all Revival customers, giving triage assessment and ensuring customers are referred to the right service to meet their needs. During 2015/16, we completed 1,983 low-level assessments compared to 1,005 in 2014/15.



Navigator Service This service links vulnerable and lonely people with a volunteer providing social, practical and emotional support. This project is working with local partners including Stoke on Trent City Council to develop a bid to the Big Lottery for a Volunteer Academy to promote, support and develop the volunteer offer locally. -26-

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Section 3 – Sustainable and Progressive Business 3.1. Financial strength and performance Group Financial Performance Summary Financial Performance The Group ended the year in a healthy financial position. Group surpluses (restated for the adoption of SORP 2014), excluding the impact of one-off costs arising as a result of a refinancing exercise, were reported at £1,929k compared to £1,322k the previous year. Turnover increased by £2.9m in the year primarily from £1.5m increased sales activity from first tranche low cost home ownership sales alongside an uplift of £0.8m from rent receivable, reflecting new properties and the annual rental uplift for the year. Operating Expenditure increased by £1.5m in the year due primarily to accelerated depreciation charges on various freehold properties held on 25 year operating leases and additional cost of sales in relation to the sale of first tranche low cost home ownership properties. Loan interest payable has remained consistent to the prior year at £3m but the 2016 total also includes £1.7m of costs expensed relating to new finance. Of our £133.4m of Fixed Assets, Housing Properties dominate at £126m with additions of £4.3m in the year. The total also includes other fixed assets of £5.8m and £1.7m being the value of investment properties. The Group saw a significant increase (£5.6m) in Current Assets as a result of new funding drawn as part of the refinancing exercise. These cash-holdings are allocated to the Groups ongoing development programme. Rent Reduction Mitigation We have a robust business plan in place to mitigate the impact of the rent reduction announced in the 2015 budget, welfare reform and with other economic and financial risks. The Board has agreed an action plan to reduce operating costs from 2016/17 onwards to mitigate the impact of an expected £3.3m reduction of rental income across the four year period, including: 

The implementation of a four year rolling budget process in order to gain greater certainty and control of our costs. This enabled the removal of £758k from our cost projections in the rent reduction period.

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  

The retendering of key contracts on a fixed price basis and fixing other major components of cost where practicable. This enabled the removal of £597k from our cost projections in the rent reduction period. The integration our maintenance and customer services teams, bringing in house some health and safety inspections resulting in cost savings of £25k pa whilst maintaining the required service levels. The remodelling of our development team into a re-focused ‘enterprise and growth’ team resulting in cost savings of £125k pa whilst maintaining our development and growth ambition.

Refinancing In May 2015 SHA completed a £21.8m refinancing exercise which resulted in a lower overall weighted average cost of capital and provided greater certainty in the business plan in relation to the cost and availability of our future financing requirements.

Procurement Our procurement strategy ensures that a standardised and disciplined approach to procurement is taken across the Group and purchasing power maximised. Savings over the year include: 

Insurance tender made savings of £16,000 (part year effect) in 2015/16 with forecast saving of £40,000 for 2016/17. The tender resulted in improved cover and added benefits including training and risk management advice.

We have developed and piloted a travel and accommodation system which will ensure spending in these areas is controlled and monitored. This is a more efficient way of booking and managing travel with a more robust audit trail which will be rolled out in 2016/17.

Business Planning We have undertaken an extensive exercise to enhance our budget forecasting process. As a result we have been able to plan with relevant certainty the next four years’ budgets to understand/mitigate the impact of government rent reduction. This will allow us to make more informed asset investment decisions with confidence that our lenders covenants will be met. We are continuing to invest heavily in ICT to ensure we maximise opportunities to improve access to services for customers and have systems that are more efficient resulting in a more mobile and effective workforce.

SHA performance For the 2015/16 financial year SHA adopted the updated Housing SORP and transitioned to the new FRS102 accounting standards. As a consequence, the financial measures and targets have been restated to reflect these new reporting standards. Target surpluses exclude surpluses arising on the sale of property as we have deemed this to be a prudent planning assumption.

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In order to ensure comparability, the financial performance measures exclude charges related to one-off legal and advisory fees and loan breakage costs associated with SHA’s refinancing exercise. These amounted to £281k for 2014/15 and £1,669k for 2015/16. Key observations The percentage operating margin measure has reduced by 1.6% year on year as a result of the increase in reported turnover arising from the new (SORP 2014) requirement to amortise grant. Operating costs as a percentage of turnover have reduced under both accounting conventions. This is due in part to increased turnover arising from increased sales activity from first tranche low cost home ownership and the delivery of cost savings from SHA’s rent reduction measures and operating efficiency agenda. Office and Central Overheads remained flat in the period with inflationary pressure being mitigated by cost efficiencies. The ratio of overheads as a proportion to direct revenue costs is projected to increase due to the projected delivery of savings in direct revenue costs. PERFORMANCE MEASURE

2013/14 2014/15 Actual Actual

2015/16 Target

2015/16 Actual

2016/17 Target

SORP 2010 Basis Operating margin

26.7%

25.6%

23.2%

25.5%

N/A

Overhead costs as % of turnover

17.3%

16.4%

16.2%

14.1%

N/A

Surplus on ordinary activities

£879k

£904k*

£608k** £1,641k**

N/A

Operating margin

N/A

26.0%

N/A

24.3%

25.6%

Overhead costs as % of turnover

N/A

13.5%

N/A

13.4%

16.1%

Surplus on ordinary activities

N/A

£1,206k*

N/A £1,690k**

£1,186k

Balance sheet - net worth

N/A

£21,200k

N/A

£21,200k

£22,400k

N/A

27.5%

33.2%

32.1%

34.3%

£530k

£473k

£466k

£511k

£471k

£1,882k

£1,866k

£2,361k

£2,387k

£2,423k

£620k

£622k

£600k

£598k

£600k

£2,178k

£2,098k

£2,172k

£2,060k

£2,106k

Capital Component Cost

£743k

£626k

£930k

£848k

£936k

Gearing ratio -