1. Good Governance Matters
Birmingham
28 November 2018

2. Your Team Today Gemma Bell Partner T: 0121 214 3596E:
@gemmabellACS
Rose Klemperer
Associate T: E:
@rklempererACS
Sam McGrady
Director T: E:
@DTP_Sam

3. Agenda 10.00 – 10.45 - Legal & sector update;
10.45 – Lessons to be learnt from downgrades;
11.30 – – tea & coffee break;
11.45 – – Operational vs strategic governance;
12.30 – close

4. LEGAL AND SECTOR UPDATE

5. Regulatory focus Re-cap:
Office of National Statistics reclassification as public – 2015
EU Referendum & new PM – June 2016
Housing and Planning Act 2016 – de- regulation (6 April 2017)
Grenfell – June 2017
Office of National Statistics reclassification as private – November 2017
New Value for Money Standard 2018
Social Housing Green Paper – August – ‘strengthening the Regulator’
2019…

6. The Regulatory Framework Seven Standards
Economic standards
Rent standard
Value for money standard*
Governance and financial viability standard*
Consumer standards
Tenant involvement and empowerment standard
Homes standard
Tenancy standard
Neighbourhood and community standard
* = Code of Practice 6

7. Tenant involvement
‘New’ Tenant Involvement and Empowerment Standard – July 2017
Registered Providers shall:
“have an approach to complaints that is clear, simple and accessible that ensures that complaints are resolved promptly, politely and fairly.”
“ensure that tenants are given a wide range of opportunity to influence and be involved in…the scrutiny of their landlord’s performance…”
“Where RPs are proposing a change in landlord for one or more of tenants or a significant change in their management arrangements, they shall consult with affected tenants in a fair, timely, appropriate and effective manner…”

8. Tenant involvement - Social Housing Green Paper
Chapter 3 ‘Empowering residents and strengthening the Regulator’
Arming residents with information on landlord performance:
“For residents to be empowered they need good information on how their landlord is performing compared to others”
“We consider that the most effective way of doing this is for the performance of all landlords to be assessed against a number of…key performance indicators…”

9. Tenant involvement - Social Housing Green Paper
Ensuring residents’ voices are heard
“We want to understand more about whether the regulatory framework is setting the right expectations on how landlords should engage with residents, and how effective current resident scrutiny measures are.”
Strengthening choice over services
“Our preferred approach is to increase transparency for residents over the performance of landlords, including through KPIs and league tables. Following that increase in transparency we want to offer residents greater opportunity to exercise more choice over their day-to day services...”

10. Deregulation – then
Government view of social housing and housing associations
Rent decreases
ONS reclassification and deregulatory measures - Housing and Planning Act 2016
Asset freedoms
Constitutional consents
Golden share
Notification regime
Increased professionalism of the sector – skills based boards
Diversity of views about the ‘role’ of housing associations

11. Deregulation – now Grenfell The Hackitt review
Rent settlement announcement
Welfare reform u-turns
Role of tenants
Government view of social housing and housing associations
“This Government values housing associations…You asked for our support, and you have our support. Not mere lip service, but real policies, real change, real action.”
Theresa May – 19 September 2018, NHF Summit
£2 billion initiative – long-term certainty?
Social Housing Green Paper consultation

12. The Social Housing Green Paper
2017 Housing White Paper includes emphasis on new homes for rent, including those provided by councils and housing associations
June 2017 Grenfell triggers debate about role and provision of social housing
PM commits the (then) Housing Minister to meet with social housing tenants
September 2017 Sajid Javid announces ‘a wide-ranging, top-to-bottom review of the issues facing the sector’
Consultation events and SHGP published August 2018

13. The Social Housing Green Paper
5 themes:
Safe and decent homes
Resolution of disputes
Empowering residents/strengthening the Regulator
Tackling stigma
Boosting supply

14. The Social Housing Green Paper
Changes to Social Housing regulation?
8 years since the last review
Review of Consumer Regulation
Serious Detriment

15. Sector Risk Profile
Intended to help boards understand the risks in an ‘increasingly complex and diverse sector’
11 October 2018
Health and Safety
Reputational risk
Sales exposure

16. Sector Risk Profile Health and Safety
Boards are ultimately responsible
Be clear about your landlord responsibilities (stock owned and/or managed)
Not just fire safety
Core requirement
‘Three lines of defence’ – have comprehensive control systems in place that staff know how to implement

17. Sector Risk Profile Reputational Risk
Social Housing sector under greater scrutiny than ever before
Will be scrutinised by a wider range of stakeholders
Vital that boards have regard to stakeholders’ expectations in their decision making

18. Sector Risk Profile Sales Risk
More and more RPs reliant on sales income to fund development programmes
Boards should understand markets operating
Skills gap? – need appropriate skills on the board

19. Mergers and consolidations Joint ventures Partnership working
Trends in the sector
Mergers and consolidations
Joint ventures
Partnership working
Diversification
Simplification of structures
Moves away from the regulated sector
Strategic disposals programmes

20. Key questions How do we hear the tenant voice in the Board room?
Do we have the ‘three lines of defence’?
Are we seeing the worst cases as well as the best cases?
Do we have a culture of transparency and openness where people aren’t afraid to open up?
Is there real challenge of the status quo?

21. Lessons from the downgrades
Sam McGrady, Director
28 November 2018

22. Introduction to DTP
What’s going on?
Lessons from recent regulatory downgrades and IDAs
Top tips
Discussion

23. Introduction to DTP Established by David Tolson 12 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 120 housing clients last year
More than 40 RPs over last 2 years supported through IDA
Me – 3 years with DTP, previously HouseMark Deputy CEO, interim and change management, housing management…

24. What’s going on?
Governance, always governance
Aside from ‘regrades’ to V2, vast majority of downgrades have been for governance
Almost all the G2 (or worse) downgrades have resulted from an IDA
And don’t forget VFM

25. Governance focus Clear culture, behaviours and standards
Defined and understood expectations for contribution & conduct
Clarity about strategy, mission and values
Risk management
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
A strong, objective and capable audit committee – clarity of role and remit

26. Governance focus
Strong but inclusive chairing – leadership & ambassador
Taking personal responsibility
Good governance support – role of the Co Sec
Collaboration and co-production
Seeking and gaining assurance
Balance of challenge and support
And also:
Assets and liabilities register
Stress testing and golden rules
The Green Paper, tenant voice and consumer regulation
Partnerships and joint ventures

27. Value for money Shorter, sharper standard
Clearly articulate strategic objectives / approach agreed by Board
Articulate strategy for delivering homes to meet range of needs
Ensure optimal benefit derived from resources and assets
Must demonstrate:
Robust approach to achieving VFM (decision-making, appraisal of potential options for improving performance)
Regular consideration by Board of potential VFM gains (including costs/benefits of alternative commercial, organisational and delivery structures)
Consideration of VFM across whole business (including non-social housing activity)
Appropriate targets in place for measuring VFM; regular monitoring and reporting against targets

28. Some lessons
Equity: G2 – Lack of strategic oversight and holistic control, over-delegation to committees, too much operational focus
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)

29. Some lessons
Knowsley Housing Trust: G3 – compliance (H&S), group structure, risk management
Advance: G2 – financial reporting, risk management and assurance
Suffolk: G3 – leadership, internal controls, risk and financial management
Leeds and Yorkshire: G2 – compliance (H&S), performance reporting, risk management and internal controls
DAMHA: G2 – board skills, term of office, risk management/mitigations and H&S reporting

30. Some lessons
Severn Vale: G2 – risk management of financial position and covenant compliance
Joseph Rowntree: 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

31. Top Tips Be prepared Document review, preparation and collation
Facts and figures
What’s your story?
Practice makes perfect
Good governance
Assets and liabilities register
Stress testing and risk – extra focus
Value for money and know your costs
Keep calm and carry on!
And have a look at our videos

32. Discussion

33. OPERATIONAL GOVERNANCEVs
STRATEGIC GOVERNANCE

34. Scenario
See hand-out
Split into three groups 34