1. Acuity Annual Conference 2018
Workshop: good (and bad) governance – dos, don’ts and lessons learnt
Sam McGrady, Director
19 April 2018
Intro to DTP

2. Content of workshop
Introduction to DTP
Why governance?
Governance – regulatory expectations
What good governance looks like
Dos and don’ts
Lessons from recent regulatory downgrades and IDAs
Discussion/questions

3. Introduction to DTP Established by David Tolson 11 years ago
Strategy, governance and finance experts
Core team of 11 plus associates
Work across UK with housing organisations, charities, commercial organisations and higher education
More than 100 housing clients last year
Strategy, finance, treasury, governance, business planning, growth, mergers and regulatory compliance
Me – 2.5 years with DTP, previously HouseMark DCEO, interim management and housing management; CIH Policy Advisory Committee and RSH Advisers’ Panel

4. Why governance?
More focus on good governance now than ever
Sector risk profile changing (more risky)
Operating environment less benign
Deregulatory measures
Co-regulation
IDA (for larger providers)
……..so HAs need to have strong, effective boards to make right decisions

5. Governance – regulatory expectations
Governance and Viability Standard
Adherence to chosen Code of Governance (usually NHF Code 2015)
Regulatory judgements:
G1 / V1 - Compliant
G2 / V2 - Compliant (but RSH will monitor improvement action plan on G2)
G3 / V3 - Non-compliant and intensive regulatory engagement.
G4 / V4 - Non-compliant, serious failures leading to either intensive regulatory engagement or the use of enforcement powers.

6. Board induction and information Board recruitment, renewal and review
NHF Code of Governance
Composition
Role and function
Board induction and information
Board recruitment, renewal and review
Chair
Conduct of Board business
Chief Executive
Committees – role, TORs etc
Open, transparent and accountable
Diversity and inclusion
Audit and risk
Conduct and probity
Right skills, knowledge, culture; consider conflicts of interest
TORs, standing orders, financial regs etc
Includes succession planning
Chair - responsibilities, skills, leadership
Agenda, papers, decision-making
CEO – clear role, responsibilities, contract etc
Annual report, comms strategy, shareholding policy
Legal compliance, culture
Effective internal controls, external audit, committee
Code of Conduct

7. RSH Governance Standard
Governance … deliver aims, objectives and outcomes
Effective, transparent and accountable
Code of governance - compliance
Clear roles, responsibilities and accountabilities for Board, Chair and Chief Executive
Probity arrangements
Assess effectiveness of governance arrangements each year
Manage affairs with … skill, independence, diligence, effectiveness, prudence and foresight
Communicate in timely manner with regulator re non-compliance
Appropriate, robust and prudent business planning, risk and control framework
‘have effective governance arrangements that deliver their aims, objectives and intended outcomes for tenants and potential tenants in an effective, transparent and accountable manner’
‘adopt and comply with an appropriate code of governance….establish and maintain clear roles, responsibilities and accountabilities for the Board, Chair and Chief Executive and ensure appropriate probity arrangements are in place. Areas of non-compliance with chosen code of governance should be explained….assess the effectiveness of governance arrangements at least once a year’
‘ensure they manage their affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight’
‘communicate in a timely manner with the regulator on material issues that relate to non-compliance or potential non-compliance with the standards’
‘ensure an appropriate, robust and prudent business planning, risk and control framework’

8. Good governance
Clear culture, behaviours and standards
Defined and understood expectations for contribution & conduct
Clarity about mission and values
Strategic (not operational)
Exercising appropriate internal controls
Board composition - balance of continuity and renewal
Right skills and competencies
Annual performance appraisal – individual and collective
Clear and considered succession planning
Strong but inclusive chairing – leadership & ambassador
Taking personal responsibility
Good governance support
Seeking and gaining assurance; being challenging

9. Set out your culture, behaviours and standards
Governance ‘dos’
Set out your culture, behaviours and standards
Be clear about purpose, mission and values
Get your committee/subsidiary structure right
Have an effective Chair
Exercise good internal controls
Understand and manage risk
Do annual appraisals and effectiveness reviews
Have an up to date skills matrix
Understand and prepare for succession planning
Get the right support (including role of Company Secretary)

10. Think this doesn’t apply because you’re smaller
Governance ‘don’ts’
Think this doesn’t apply because you’re smaller
Think it doesn’t matter because you won’t get an IDA
Pay lip service to good governance
Ignore maximum terms of office – they’re there in the Code of Governance for a reason
Dismiss Board member remuneration out of hand
Be afraid of dealing with those who fall short of agreed expected standards
Underestimate the impact of poor governance on your (social) business

11. Arches Housing – G2 – poor risk management and internal controls (H&S)
Lessons from downgrades and IDAs
Aside from ‘regrades’ to V2, vast majority of downgrades in last 18 months have been for governance
Some examples:
Gentoo – G3 – Board failed to exercise adequate internal control and scrutiny; lacked oversight and appreciation of risk; executive contracts and severance payments.
Teign Housing – G2 – control failure in rent setting over number of years = governance weakness
Arches Housing – G2 – poor risk management and internal controls (H&S)

12. Broadacres – G3 – failure to manage commercial activities effectively
Severn Vale – G2 – risk management of financial position and covenant compliance
Joseph Rowntree HT – G2 – preventable control failures around risk management; safeguarding and covenant compliance; ineffective stress testing; failure to address very high cost areas
Broadacres – G3 – failure to manage commercial activities effectively
First Priority – non-compliant – failure to operate strategic planning control framework; poor risk management; insufficient consideration of implications of risk of delivery plans; poor skills and capabilities
No RJ for First Priority as currently registered with less than 1000 units (has since exceeded that).

13. Questions and Comments?