Annual Report And Financial Statements 2008/09

Thriving communities, affordable homes

Annual Report and Financial Statements 2008/09

INVESTING NATIONALLY DELIVERING LOCALLY

Homes and Communities Agency

Homes and Communities Agency Annual Report and Financial Statements 2008/09 Annual Report and Financial Statements presented to Parliament by the Secretary of State for Communities and Local Government pursuant to paragraphs 11 and 12 of Schedule 1 to the Housing and Regeneration Act 2008 Ordered by the House of Commons to be printed on 9 November 2009 The Homes and Communities Agency was established by Parliament under the Housing and Regeneration Act 2008.

HC 976

London: The Stationery Office

£19.15

Homes and Communities Agency

© Crown Copyright 2009 The text in this document (excluding the Royal Arms and other departmental or agency logos) may be reproduced free of charge in any format or medium providing it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the document specified. Where we have identified any third party copyright material you will need to obtain permission from the copyright holders concerned. For any other use of this material please write to Office of Public Sector Information, Information Policy Team, Kew, Richmond, Surrey TW9 4DU or e-mail: [email protected] ISBN: 9780102962598 Printed in the UK for The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office ID 6277543 10/09 Printed on paper containing 75% recycled fibre content minimum. 2

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 2

28/10/09 18:12:18

Homes and Communities Agency

CONTENTS

Who we are and what we do

4

Regional highlights

6

Chairman’s report

8

Board Members

10

Chief Executive’s report

12

Growth

14

Renewal

16

Affordability

18

Sustainability

20

Investing in our business

22

Business performance

24

Report on the Financial Statements

28

Getting in touch

108

Front cover image The award-winning footbridge at Castleford in West Yorkshire, subject of a recent Channel 4 television series, is kickstarting the regeneration of this former mining town.

Annual Report and Financial Statements 2008/09

3

Homes and Communities Agency

WHO WE ARE AND WHAT WE DO

Creating opportunity The Homes and Communities Agency (HCA) is the single, national housing and regeneration agency for England. Our role is to create opportunity for people to live in high quality, sustainable places that embrace diversity and support inclusion. We provide funding for affordable housing, bring land back into productive use and improve quality of life by raising standards for the physical and social environment. We work nationally while supporting the ambitions of our local partners to provide better places that offer great homes and good jobs with a strong sense of community cohesion. Developing strong relationships at national, regional and local levels are key to our success as a national agency that delivers locally. A new era for housing and regeneration The HCA was created on 1 December 2008 by bringing together regeneration body English Partnerships, the investment arm of the Housing Corporation, the Academy for Sustainable Communities and a number of housing and regeneration programmes from Communities and Local Government (CLG). The result is a wholly new agency providing a single point of contact for all those involved in helping communities to thrive. Each programme is crucial to the success of our communities and, by bringing them together in powerful, locally-accountable programmes built up by our regional teams in response to the needs of individual local ambition, we can ensure they are more than the sum of their parts. 4

Annual Report and Financial Statements 2008/09

for peopLe anD pLaCeS

Homes and Communities Agency

We manage the following funding and delivery strands: • Community Infrastructure Fund • Decent Homes (including Private Finance Initiative) • Growth Funding • Gypsy and Traveller Site Grants • HCA Academy • Housing Market Renewal (HMR) • National Affordable Housing Programme (NAHP) • Places of Change • Property and Regeneration (including National Coalfields Programme and Urban Regeneration Companies) • Thames Gateway

Skills and expertise The Agency is an unrivalled source of expertise and specialist knowledge in the housing and regeneration industry. Our Advisory Team for Large Applications (ATLAS) is expanding to cover the whole of England, offering planning expertise for local authorities on processing large schemes, while the HCA Academy is responsible for developing the skills and knowledge of all those people who create and maintain communities. What we do We work closely with regional delivery partners, including local authorities, housing associations, housebuilders and communities, to develop a shared vision for each area, tailored to the individual and very diverse needs of the people and places involved.

Making a difference Crocodile Works, Newtown, Birmingham The HCA has invested £11.9m of joint NAHP and HMR funding to unblock this stalled regeneration project in Birmingham and get construction moving. The development is now underway, creating 168, mainly affordable, new homes – including family houses and apartments – and is designed by award-winning Midlands architect Glenn Howells.

We do this by addressing four themes of activity: Growth Facilitating the delivery of large-scale developments in strategic locations, helping local areas achieve their growth targets. Renewal Working with local authorities and regional agencies to identify renewal requirements, from rejuvenating failing estates to cleaning up swathes of brownfield land, removing the blight of dereliction and stimulating renewed economic activity.

We are working closely with Registered Social Landlord partner Midland Heart and HMR Pathfinder Urban Living, who are engaging with the local community to address issues such as crime and worklessness.

Affordability Providing the funding for housing associations and private developers to build affordable homes for rent and sale.

This important scheme is helping to kickstart the rejuvenation of this declined north-city suburb.

Computer generated image © Glenn Howells Architects

Sustainability Improving quality of life through innovation, enhanced surroundings and a higher standard of the physical and social environment. Ultimately, our aim is to help local authorities bring together their priorities for homes and communities into a single, comprehensive plan. This forms the basis of our Single Conversation business model, which acts as the link between local authorities, central government, housing providers and other delivery agencies. Together, we can create opportunity for people to live, work and enjoy life in places they desire, can afford, and which meet their needs.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 5

5

28/10/09 18:12:23

Homes and Communities Agency

708

REGIONAL HIGHLIGHTS

new affordable homes completed through the NAHP

• £10m of investment to deliver 250 new Extra Care homes for older people • Approval for England’s first Community Land Trust to be supported through the NAHP at Holy Island, Northumberland (see page 19) • 3 people with long-term disabilities supported into first-time home ownership homesandcommunities.co.uk/northeast

Since 1 December, the HCA has started making a real difference to local communities up and down the country – from helping set up a brand new Community Land Trust for rural families on Holy Island in the North East, to unlocking stalled sites in the South West that will provide homes for over 2,000 people in Dorset and Wiltshire. Our national achievements include: • 27,666 new affordable homes completed for rent and sale • Nearly 240,000 sq m of employment floorspace created • Generated over £500m of private sector investment You can find out more about our national achievements in our Business performance chapter on page 24 and on our website. A breakdown of our spending by local authority area is available at homesandcommunities.co.uk/la-summary

2,100

vitally-needed new affordable homes completed

• Start on site of Lime Street Gateway, Liverpool, delivering a new, accessible entrance to the city centre • Maintaining momentum at New Islington – Chips building completed. 142 homes in total, half with NAHP support (see page 25) • Held the first Key Event in Manchester, bringing together housing and finance professionals to help get people onto the property ladder homesandcommunities.co.uk/ northwest

3,273 affordable homes for rent and sale completed

All figures on this page relate to the period of 1 December 2008 to 31 March 2009. 6

Annual Report and Financial Statements 2008/09

• £168m spent on building new affordable homes • £190.7m allocated towards future NAHP projects to build 3,916 homes • Plans submitted for 195 homes at zero carbon development Hanham Hall, near Bristol (see page 20) homesandcommunities.co.uk/southwest

Homes and Communities Agency

1,698 new homes completed in the region

• 1,888 starts on site (1,389 through the NAHP and 499 through private sector) • Over 36,208 sq m of employment floorspace completed • 112 ha of brownfield land reclaimed (95 ha directly and 17 ha with partners) homesandcommunities.co.uk/yorkshirehumber

£169m invested in the region

• 3,437 affordable homes provided across the region • Delivery of Corby rail station, awarded Regeneration Project of the Year at East Midlands Property Awards • 2,424 homes started on site homesandcommunities.co.uk/ eastmidlands

2,200 Over

new homes completed

• Unblocking Crocodile Works, Birmingham with £11.9m HCA and HMR Pathfinder investment (see page 5) • New affordable homes, infrastructure works and school at North Solihull • Refurbishment of the former Ledbury Cottage Hospital, to create rural affordable homes and commercial units homesandcommunities.co.uk/westmidlands

£309m invested in the region

• 344 zero carbon homes to be provided at Peterborough Carbon Challenge site • A major part of the Harlow Gateway regeneration project brings new private and affordable homes to the area • Elmswell scheme wins the 2009 RIBA Award for Architectural Excellence homesandcommunities.co.uk/eastengland

£700m Over

5,489

affordable homes completed

• 4,902 affordable homes started on site and £410m allocated ahead of target for 7,348 affordable homes • Funding innovation unlocks Epsom Cluster (300 homes), a precursor to the Kickstart programme • Estate renewal partnerships at Rowner, Gosport and Christian Fields, Gravesend (see page 15) homesandcommunities.co.uk/southeast

affordable housing expenditure this year

• 8,497 starts on site and 6,836 completions through the NAHP • £16m cash injection for Woodberry Down enables start on site • Planning permission granted for 4,000 homes at Kidbrooke, south-east London (see page 17) homesandcommunities.co.uk/london

Annual Report and Financial Statements 2008/09

7

Homes and Communities Agency

CHAIRMAN’S REPORT

In our first four months (1 December 2008 – 31 March 2009), industry feedback has been positive about the pragmatic approach we’ve taken to help maintain momentum and generate a supply of new homes. Of course we haven’t done this alone. I have been impressed by the way our partners, including housing associations, developers and local authorities, have been swift to respond to HCA initiatives and embraced our Single Conversation business model.

Some might think that the creation of the HCA was a piece of bad timing. A backdrop of one of the worst economic downturns for decades heralded our launch. But I am proud that the Agency rallied and made a significant impact in securing much-needed affordable homes and supporting the future of the housebuilding industry in this country. So for me, the HCA started its work at just the right time.

At the end of our financial year we were able to report an excellent performance. Overall we funded the completion of over 50,000 new and affordable homes in 2008/09, meaning that more than 100,000 people are now living in better surroundings than 12 months ago. Looking across all of our programmes, I believe we will have improved the lives of at least half a million people by the end of our first year of operation. While the sharp downturn in the housing industry has focused our attention on building as many affordable homes as possible, we have not lost sight of our overarching vision to create opportunities for people to live in high quality places. This vision was crystallised for me in the early days of my chairmanship, when I visited run-down areas around the country to witness the legacy that exists in some of our once vibrant ‘working’ towns. But there is hope for these places. In Erdington, North Birmingham, the 1960s Lyndhurst Estate that features no-go areas and housing in a desperate state of repair, is set to be turned around through £100m of Private Finance Initiative funding through the HCA. This first-hand experience has galvanised my resolve – and that of my Board – to make a positive difference to the lives of as many people as we can. Using our funding, our skills and our work with government ministers and partners, I believe we can turn these areas around, building inspirational places that are well designed and embrace the concept of a low carbon economy. We have a real opportunity and a responsibility to create places that respect our environment and acknowledge the serious consequences of climate change.

8

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 8

28/10/09 18:12:26

Homes and Communities Agency

“I believe we will have improved

the lives of at least half a million people by the end of our first year.” Through our proposed new quality standards (being published next year) we will set the pace for lowering the carbon footprint of all homes that we fund or are built on HCA land. In parallel we will support exemplar projects – such as Hanham Hall, near Bristol, being built to Code Level 6* – to pave the way for hitting the government’s target of zero carbon new homes by 2016. Despite organisational upheaval during its first months of operation, the HCA has delivered. The commitment of our staff, the strong leadership of our Chief Executive and his management team, and the efforts of my fellow Board Members, have created an agency that has the potential to make an enormous difference to the lives of many.

Looking to the future, the extent of the HCA’s delivery of homes and communities will depend on our ability to drive value from every taxpayer’s pound we spend. This requires innovation, partnerships and leverage of new sources of funding. Many initiatives are in hand that will demonstrate new ways of working for what is still a new agency.

Robert Napier Chairman

a DeCent HoMe Making a difference Wolverton Park, Milton Keynes Milton Keynes Partnership has continued to work with partners Milton Keynes Council, Network Rail and RSL Places for People to contribute to the regeneration of this historic railway town and bring two important Grade ll listed buildings back into use. The transformation of this 5.12 ha brownfield site offers 300 new homes, of which 30 per cent are affordable; improved facilities for the local community including open space and leisure facilities; and 2,700 sq m of retail, commercial and heritage floorspace.

in a DeCent

neigHBourHooD

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 9

9

28/10/09 18:12:28

Homes and Communities Agency

BOARD MEMBERS

1 Chairman Robert Napier was formerly Chairman and Non-Executive Director of English Partnerships. Robert is also Chairman of the Board of the Met Office. He was Chief Executive of WWF-UK, the UK arm of the World Wide Fund for Nature, from 1999 to April 2007. Before that he spent 16 years at Redland plc, where he was successively Financial Director, Managing Director and Chief Executive. Robert is currently a Non-Executive Director of Anglian Water Services. He was formerly a NonExecutive Director of Rentokil Initial plc, NonExecutive Director of United Biscuits plc, Chairman of the CBI Transport Policy Committee and President of the National Council of Building Material Producers. Robert’s community activities include being Chairman of the Governors of Sedbergh School and a Trustee of Baynards Zambia Trust. He is also Chairman of the trustees of the Carbon Disclosure Project. 2 Chief Executive Sir Bob Kerslake began in post as Chief Executive Designate from 31 March 2008.

4 Kate Barker CBE is a member of the Monetary Policy Committee, Bank of England, and Chair of Governors at Anglia Ruskin University. Kate was previously Chief Economic Adviser to the CBI and Chief European Economist for Ford Europe. During the past few years she has led two major reviews on behalf of government on housing supply and land-use planning. She was also on the Board of the Housing Corporation. 5 Margaret Fay OBE is Non-Executive Chair of One North East Regional Development Agency, a former Board Member of English Partnerships and a former Non-Executive Director of Darlington Building Society. From 1981 to 2003 she worked at Tyne Tees Television, where for the final eight years she was Managing Director.

1

2

3

4

5

6

From 1997 to 2008 he was Chief Executive of Sheffield City Council, the fourth largest local authority in England. The Council is rated as a four-star authority and was Council of the Year in 2005. Bob was previously with the London Borough of Hounslow, initially in the post of Director of Finance and then for seven years as Chief Executive. Prior to that he was with the Greater London Council, handling Transport Finance, and then with the Inner London Education Authority, where he was responsible for their main accounts with an expenditure in excess of £1bn. Nationally, he has also been a Non-Executive Board Member of CLG and was a member of both the Equalities Review Panel and the National Employment Panel. 3 Candy Atherton is Chair of the Rural Housing Advisory Group. She is also founder of Atherton Associates. Candy is Chair of the Camborne and Redruth Constituency Labour Party and a Member of the Regional Board of the South West Labour Party. She was previously the Member of Parliament for Falmouth and Camborne, Vice Chair of CPR Regeneration, Mayor of the London Borough of Islington and a Non-Executive Board Member of the Housing Corporation.

10

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 10

28/10/09 18:12:31

Homes and Communities Agency

Margaret was awarded an Honorary Doctorate in Business Administration from Sunderland University in July 2004 and an Honorary Degree of Doctor of Law from the University of Teesside in November 2008. 6 Bob Lane OBE is Chairman of the London Thame Gateway Development Corporation, a Board Membe of the National Housing and Planning Advice Unit and a Trustee of the Corby City Academy. Bob was previously Chief Executive of Catalyst Corby, North Northants Development Company and also of Speke Garston Development Company. He was formerly a part-time senior adviser to the international consultancy group EDAW/AECOM. 7 Shaukat Moledina CBE is currently the Chair of a private investment trust supporting small and medium enterprises, as well as a Trustee and main Board Member of Save the Children, Vice President 7

8

of United Response and the Chair of The LHA-ASRA Group. Previously Shaukat was the Chair and a major shareholder in partnership with institutional investors of a successful start-up group of national companies, as well as the Deputy Chair of the Housing Corporation. He has held non-executive directorships in the NHS and housing associations. 8 Professor Peter Roberts OBE is Chair of the HCA Academy, Professor of Sustainable Spatial Development at the University of Leeds and adviser to Addleshaw Goddard solicitors and to Atkins Limited. Peter was previously Professor of Regional Planning, University of Liverpool and Professor of European Strategic Planning, University of Dundee. In 2005 he was awarded an OBE for services to regeneration and planning. 9 Ian Robertson is Chair of the Audit Advisory Board of the Scottish Parliament Corporate Body and is also a Non-Executive Director of Leeds Building Society. Ian was previously Group Chief Executive of Wilson Bowden plc, a FTSE 200 company, Group Financial Controller at Northern Foods plc and Financial Controller at Terry’s of York. He was also President of the Institute of Chartered Accountants of Scotland and Chair (Provost) of Eastwood District Council, Scotland.

9

10

10 Dru Vesty MBE has her own consultancy company Estea Ltd. She is a Non-Executive Board Member of the London Thames Gateway Development Corporation and a member of the Planning Committee of the Olympic Delivery Authority. Dru was previously Director of Healthcare Group Ltd, Director of Property Development at British Gas plc, and Royal Docks Area Director at London Docklands Development Corporation. She also served for eight years as a Non-Executive Board Member of a leading housing association.

11

11 Don Wood CBE is Chairman of the London Housing Foundation and a Trustee of The Orders of St John Care Trust. Formerly he was Group Chief Executive of L&Q Housing Group and prior to that Director of New Islington & Hackney Housing Association. Don holds no other public appointments. The Register of Members’ Interests is open for public inspection and is included on our website.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 11

11

28/10/09 18:12:36

Homes and Communities Agency

CHIEF EXECUTIVE’S REPORT

But clearly in all the important ways, 1 December only marked the beginning. From day one we found ourselves in the midst of what we now know is the longest and deepest economic downturn for generations. It was, and remains, a challenging environment; but also one which presents many opportunities for a newborn organisation like ours to make a mark. Looking at the activity detailed in this report – across the four key themes of Growth, Renewal, Affordability and Sustainability which drive our work – I believe we have done that. However, there are clearly many more challenges in the year ahead.

The HCA began operating on 1 December 2008. In many ways that date marked a culmination of months and months of frenetic activity in getting the Agency up and running; particularly for members of the Set-Up Team, but also for everyone at the predecessor bodies who’d also been asked to carry on with the ‘day job’. The successful launch, four months early, was down to their hard work and I must take this opportunity to give them my thanks.

Despite opening for business against such a tough economic backdrop, the HCA was quick to respond. In particular, writing to our development partners was, I believe, one of the most important actions the HCA undertook. We offered tailored packages of support, including a commitment to flexible grant rates, in order to help them maintain development activity. It was a clear statement of our intent as a national organisation that delivers locally. Since then, we have developed a good working relationship with government and other stakeholders, progressing a number of initiatives with them, most recently our new and very welcomed emphasis on promoting apprenticeships as part of our mainstream delivery. Throughout this, our focus has been on delivery with a premium on maintaining new and affordable build and a firm emphasis on local impact. Through the National Clearing House, HomeBuy Direct, Mortgage Rescue and other initiatives designed to respond to the effects of the credit crunch, I hope this report demonstrates that we have helped to make a difference, on the ground, in every neighbourhood. And through our wider activities and work with communities, I hope that we have helped create opportunity for people to live, work and enjoy life in places they desire and can afford. That will be our mission, too, in the year ahead. Looking internally, over the coming months we must continue to meet the challenge of creating a single, integrated organisation; an agency fit for its local purpose. We have moved quickly to establish a strong senior management team, and as I write, the restructuring of our corporate and regional teams – in particular to streamline the centre and move posts to regional delivery – is well underway. It is vital that we get these structures right if we are to meet the challenge of delivery in the year ahead and beyond.

12

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 12

28/10/09 18:12:37

Homes and Communities Agency

“We will ensure that our programmes

fit places, not the other way around;

and our objective will be to achieve

local ambitions.”

The challenges over the coming 12 months –

our first full year of operation – will be significant.

Along with creating a single organisation, our work

with colleagues at CLG will focus on maintaining

programme momentum in the delivery of

affordable housing and sustainable regeneration,

and on increasing housing supply by responding to

the market and laying the foundations for the future.

Our Corporate Plan for 2009/10–2010/11

clearly sets out our stall around this activity,

to include how we will spend additional monies

given to the HCA through the Budget and the

Housing Pledge, a sign of government’s faith

in our ability to deliver. And underpinning

everything we do will be a commitment to

quality, and the fourth of our priorities, to

embed a place-focused model of working.

Through our new business process, the Single Conversation, priorities will be mutually shared and agreed, and backed by investment and clear roles for delivery. We will ensure that our programmes fit places, not the other way around; and our objective will be to achieve local ambitions. That is our commitment to people and places, and to creating thriving communities.

Sir Bob Kerslake Chief Executive

Making a

DifferenCe

on tHe

grounD

Making a difference Epsom Cluster, Surrey The stalled Epsom Cluster development – including two former Victorian hospital sites and land linking them – brings various strands of our work together. Three sites in all (West Park, St Ebbas and Horton Retail) belong to our Hospital Sites portfolio, and, with partners Crest Nicholson and Galliford Try, will deliver 710 new homes – a third of which will be for affordable rent or sale to first-time buyers. Development has been unlocked thanks to £15m of NAHP grant funding, and a £10m HCA infrastructure loan.

Computer generated image

All homes will be built to Code Level 3*. Cycle paths will minimise reliance on cars, while a new retail hub has been completed. Listed hospital buildings will be retained for redevelopment.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 13

13

28/10/09 18:12:38

Homes and Communities Agency

GROWTH

DeLiVering

Long-terM

BenefitS The pressure to increase the supply of new homes remains high. With demand still outstripping supply we have focused a great deal of effort on accelerating sustainable development in the growth locations that span the length and breadth of the country. But building homes is just part of the picture. Creating new, thriving and sustainable communities needs a whole raft of supporting infrastructure, such as roads, sewerage, community space, parks, shops and improved transport systems. Alongside this, the capacity of local health, education and social services need to be tailored and expanded to meet the demands of new and existing communities. Government has made a multi-million pound growth funding package available to both the Growth Areas and Growth Points, allowing local authorities to take control of delivering their priorities. In addition, a Community Infrastructure Fund (CIF) – specifically for transport schemes vital to unlocking large housing developments – is helping to accelerate growth programmes. The HCA is playing an important role in developing

policy, as well as working with local partnerships

and councils through our Single Conversation,

to deliver growth projects and programmes using

this extensive package of funding, along with

additional HCA investment.

Education and improving the skills of our workforce

is one of the lynchpins of sustaining growth. Milton

Keynes – centre of a major Growth Area and one

of the country’s fastest growing urban areas –

opened a new University Centre in January 2009.

14

Annual Report and Financial Statements 2008/09

to CoMMunitieS

Homes and Communities Agency

Corby rail station Opened in spring 2009, to provide a direct rail link to London.

£170m of Community Infrastucture Funding was allocated this year

The Centre, which also received £7.3m from Milton Keynes Partnership (a sub-committee of the HCA), will increase the city’s capacity to offer top quality learning opportunities, equipping the workforce of the future with the right skills to sustain economic growth. Community facilities are also being improved. In Ashford, growth funding is contributing towards a £2m multi-use arts venue within the 15th century St Mary’s Church in the town centre.

Making a difference Christian Fields, Gravesend, Thames Gateway Delivery of growth and regeneration in the Thames Gateway is central to the future of London, the Greater South-East and, consequently, the UK economy.

New homes, of course, are one of the key components of growth and unlocking sites is a crucial part of delivery. Plans to regenerate a former factory site in Belgrave, Leicester, have been made possible through £2.2m of Growth Point money along with a further £13.2m from the HCA and the private sector to create over 1,000 homes and new community facilities.

The Thames Gateway strategy and programme is transforming communities along 40 miles of the Thames Estuary, from London Docklands to Southend in Essex and Sheerness in Kent. With strong partnerships in local government, business and the communities involved, we are working to improve the housing, transport, economy and education for thousands of people who live in the Gateway.

With our local authority partners, we are working on alternative ways to unlock land in public ownership. Through our Public Land Initiative, we will deliver homes by using a new approach to procurement and deferred land payments, to rebalance risks and returns between the public and private sectors.

For example, a co-ordinated effort to improve the neighbourhood at Christian Fields, a formerly run-down housing community in Gravesend, has involved the residents, housing association Moat, the police and the council’s housing and community safety teams. Christian Fields is now being regenerated with a mixture of new and affordable rented homes and private housing.

© Moat

In March this year, £170m of CIF funding was allocated to 29 small to medium-scale transport projects in areas of growth. This funding should not only protect and create more than 2,000 jobs but will directly support 40,000 new homes being built in the next 10 years. Projects range from a new road and junction improvements in the Southgate area of King’s Lynn, Norfolk – allowing the development of 900 homes – to a pedestrian and cycle bridge in Wichelstowe creating ‘green access’ to the centre of Swindon. While growth is crucial to satisfying demand for new homes, we and our partners recognise that it must be carried out in a way that meets the needs of existing communities and delivers tangible, long-term benefits. Annual Report and Financial Statements 2008/09

15

Homes and Communities Agency

RENEWAL

tranSforMing

pLaCeS Our place-maker role is as much about creating sustainable communities as it is about housing. In deprived areas especially, their renewal is critical to giving more people access to decent housing and a better community environment. This is being shaped by our Single Conversation business model, transforming how we identify regeneration opportunities and housing need.

anD reVitaLiSing CoMMunitieS

The HCA inherited a substantial portfolio of regeneration schemes from English Partnerships, ranging from rejuvenating failing sink estates to cleaning up large-scale brownfield sites. Despite the impact of the credit crunch on land values and availability of new funding, we have responded by exploring innovative sources of funding and offering flexibility in bringing schemes forward. At Walker River’s Gate in Newcastle, HCA investment through the NAHP and Property and Regeneration funding for this development of 107 affordable homes is contributing to the wider £450m regeneration of this run-down area. Plans include a new community hub offering retail, leisure and educational facilities. This, in turn, will attract families and transform the area into one of housing choice. Our flexible approach has helped guarantee continuation of key transformational schemes such as the Grade II* listed Park Hill site in Sheffield. A £16m HCA investment secured momentum for Phase 1, working with developers Urban Splash and Sheffield City Council to create a sustainable mixed-use community.

16

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 16

28/10/09 18:12:45

1,431

Homes and Communities Agency

new homes have been delivered under the Housing Market Renewal programme

Elsewhere, despite the downturn, we’ve progressed estate renewal schemes including Kidbrooke’s Ferrier Estate, which reached its start-on-site milestone in March; Rowner former naval accommodation in Hampshire, where we’ve developed a regeneration plan with partners Wimpey, local authorities and Portsmouth Housing Association; and Woodberry Down in Hackney, where construction has now started. The latter is one of five stalled regeneration schemes in London to benefit from HCA funding to unlock sites.

Making a difference Kidbrooke, south-east London Kidbrooke residents are set to benefit

from the transformation of their

community, with one of the largest

housing-focused regeneration schemes

in Europe now underway.

Planning permission was granted in March for the redevelopment of the Ferrier Estate, which is being led by a partnership between the HCA, Greenwich Council, Berkeley Homes (Urban Renaissance), and Southern Housing Group. HCA funding has enabled demolition and Phase 1 to start. The scheme will include 4,000 new mixedtenure homes, almost 27,870 sq m of commercial and retail space, a new school, sports pitches, new community and health facilities, a new transport interchange and 8 ha of public open space.

Additionally, we are progressing housing PFI Round 6 focusing on estate regeneration, to ensure even more schemes are brought forward. The Housing Market Renewal programme is making a significant contribution to community renewal, delivering 1,431 new build homes, 11,020 refurbishments, 3,987 demolitions and 3,809 acquisitions since the HCA opened for business. Since inheriting Decent Homes, two Arms Length Management Organisations (ALMOs) – Stevenage and Enfield – passed their February inspections, facilitating Decent Homes funding for much-needed refurbishment of thousands of social tenants’ homes. Additionally, we spent £26.3m in gap funding to help RSLs reach their Decent Homes target. We delivered two large housing stock transfers totalling over 13,000 homes, in Manchester East (partial) and Sedgefield (whole). The former benefited from £62m of gap funding to bring its social homes up to the Decent Homes standard and facilitate the transfer. Crucially, our enabler role includes vulnerable people and those on the margins of society. Several delivery strands we inherited from CLG address this, such as the £80m Places of Change programme, which aims to improve service provision for homeless people through facilities for training and education. We helped fund a major show garden at the 2009 Chelsea Flower Show, developed by homeless people in partnership with the Eden Project and Homeless Link, equipping participants with confidence, new skills and hope for the future. The Gypsy and Traveller Site Grants programme aims to fund new social rented sites alongside the refurbishment of existing ones. In February, we published bidding guidance for local authorities, RSLs and ALMOs wishing to take advantage of this. The National Coalfields Programme (NCP) is embracing social renewal in our most deprived communities. Our Coalfields Action Plan outlines how we will work with partners to identify social and economic regeneration needs. This includes investment in the three-year Family Employment Initiative – a partnership with Wigan Council and the Coalfields Regeneration Trust – to tackle worklessness among families affected by long-term unemployment. We know that during these challenging times, it is vital we work with our partners to maintain regeneration activity alongside momentum in the affordable housing market, so that communities can continue to thrive. Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 17

17

28/10/09 18:12:46

27,666

Homes and Communities Agency

AFFORDABILITY

DeLiVering

afforDaBLe

HoMeS The HCA has a clear focus on housing affordability. In the first four months of operation we allocated £2.8bn to our development partners. During the same period 27,666 new affordable homes were completed, part of a whole year figure of 47,800.

affordable homes completed

for rent and sale in our first

four months of operation

in a CHaLLenging Market

Despite challenging market conditions we met

our target for the year. Thousands of families

and individuals on local council waiting lists now

have a new, decent home for a rent they can

afford; and thousands more have been helped

into home ownership.

In Cotherstone, County Durham, for example, our

£1m investment saw the first affordable homes

built in the village since the 1960s. Eight local

families will now be able to remain living in the

village, making a big difference to this rural

community. At the other end of the country,

a repayable loan of £3m to the developers of

Hale Village in Tottenham, north London, will

unlock 360 new affordable homes, as well as

acting as the catalyst for the wider regeneration

of the Upper Lee Valley, making it the ideal scheme

for the first ever use of the HCA’s loan powers.

While the recent drop in house prices has helped

with affordability, a lack of mortgage availability

and an increasing requirement for large deposits

means that, for many, home ownership remains

unattainable. For others, the credit crunch has

heralded the risk of repossession as they struggle

with mortgage repayments.

18

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 18

28/10/09 18:12:53

Homes and Communities Agency

Five Links Estate, Basildon Estate regeneration here has guaranteed a continued supply of affordable, desirable homes. HomeBuy Direct, a new shared equity product, allows first-time buyers to own 100 per cent of a new home with a mortgage for only 70 per cent of its value. The 30 per cent equity loan from the developer and the HCA effectively helps remove the barrier presented by the requirement for a large deposit. Successful bids for funding were announced in December and the first buyers registered for the scheme in March this year. On the SWaN project in Sheffield, for example, the HCA provided funding to replace cross-subsidy lost as a result of the market downturn. The amount of affordable homes was increased and 20 will be available to local people through HomeBuy Direct. Making a difference Holy Island Community Land Trust Local people living in an isolated rural community on Holy Island, off the Northumberland coast, will benefit from four new family-sized homes thanks to the HCA’s first ever investment in a Community Land Trust (CLT). Because the homes are being provided by a CLT, they will be available for affordable rent to the island’s 160-strong community in perpetuity. As a result, four families who may have had to leave the island will now be able to stay. Investing in rural areas, among the least affordable places to live, is a key responsibility for the HCA as we seek to tackle the problems of housing affordability and community sustainability.

In January, we signalled our commitment to Mortgage Rescue with £285m of funding to help those facing repossession to remain in their homes. And for those who have decided the time isn’t quite right to buy we are piloting Rent to HomeBuy, allowing them to save for a deposit and to effectively ‘try before they buy’. The concept is exemplified by L&Q’s UpToYou scheme, in which the HCA invested £42m in March. Our Private Rental Sector Initiative will bring new institutional investors into the private rental market for the first time, providing new investment for housebuilders and greater choice for consumers. For those who can’t buy, but aren’t eligible for social housing, high quality, well-managed homes for private rent should be an option of choice. Also in March, we re-appointed a streamlined national network of HomeBuy Agents, to make a simpler first port of call for local people interested in home ownership. The success in meeting our affordable housing targets has been due in no small part to the action we took in the HCA’s first week of operation. We continued to focus on the National Clearing House scheme to buy unsold stock from developers – which saw over 9,000 empty homes brought into use for affordable rent – and we were clear with our partners that we would offer tailored packages of support. In particular, we signalled our commitment to flexible grant rates and allowed conversion of unsold homes to social rent, thereby reducing partner commitments, increasing their income, and helping to meet demand for homes. We will continue to respond flexibly so that we can deliver affordable homes as the market changes, creating opportunity for all.

Annual Report and Financial Statements 2008/09

19

Homes and Communities Agency

SUSTAINABILITY

turning our ViSion Tackling the impact of climate change is one of the biggest challenges we face today. We must simultaneously seek to significantly increase the number of new homes we build and lower their carbon footprint. This will not be easy, but turning this vision into a reality is a priority if we are to deliver our objective of extending high standards of design in buildings, public spaces and places; and embed sustainability in our own and our partners’ developments.

into reaLity

The way we approach this is by looking at sustainability in the round, and through our Single Conversation. We work with partners to discuss how we can achieve the best possible outcomes for an area, helping to ensure environmental, economic and social sustainability and a high level of quality. Knowledge development and sharing is a key part of our work, and through exemplar programmes such as the Carbon Challenge, we share lessons with the industry about designing, developing and delivering greener homes for the future.

20

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 20

28/10/09 18:13:04

Computer generated image © Barratt Developments plc

Hanham Hall, near Bristol England’s first zero carbon development.

195

Making a difference Upton, Northampton We’re working with Metropolitan Housing Partnership to deliver some of England’s most eco-friendly homes at Upton, Northampton. Their scheme, totalling 345 homes, incorporates innovative technologies including community scale wood pellet boilers, green roofs, rainwater harvesting, photovoltaics and solar thermal panels. Whilst all the homes are built to high sustainability standards, six of them will be zero carbon Code Level 6*, completed way ahead of government’s 2016 target for new housing. HCA funding has contributed towards additional build costs of these six units. Upton is an excellent example of how we’re working with developers to incorporate sustainability throughout the entire building process.

Homes and Communities Agency

zero carbon homes are being built on our first Carbon Challenge site

Our first Carbon Challenge site, the Grade II* listed Hanham Hall, near Bristol, had plans submitted in December 2008 for 195 new homes that will be built by Barratt Developments plc to the highest level of the Code for Sustainable Homes. Work will start on site later this year and progress on this, and three other sites across the country, will help us all learn more about what is needed to achieve Code Level 6* on a commercial scale. By creating communities with local authorities and development partners, which are energy efficient, well connected and make it easy for people to live sustainable lifestyles, we hope to increase consumer choice and increase the range of renewable technologies and materials available. To do this we will help to increase supply chain demand and deliver homes that people enjoy living in. An example of this type of development is at Graylingwell, a former hospital site in West Sussex, where plans for around 750 new homes were approved in March. The homes, of which 40 per cent will be affordable, are being built to Code Level 4*. A range of community and commercial uses also form part of the proposals including shops, office space, a multi-purpose community facility, studios and galleries for local artists, a single-storey pavilion with changing facilities, allotments and land reserved for a potential new primary school. The HCA inherited a strong legacy from English Partnerships and the Housing Corporation and we are focused on helping to deliver government sustainability targets. By 2016, all new homes will need to be zero carbon, and the work we have undertaken so far, including the Future Communities website, progressing our Carbon Challenge programme and delivering other low carbon projects across the country plus, through our ATLAS team, feeding into the consultation on eco-towns, ensures this important element of our work remains high on the agenda.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 21

21

28/10/09 18:13:08

Homes and Communities Agency

900

INVESTING IN OUR BUSINESS

Around

members of staff

make up the HCA

SHaping our BuSineSS Our first priority in creating a new single, integrated organisation of around 900 staff has been to get key plans, teams and structures in place from our component parts, at both regional and corporate level, and steer the course of a major cultural change.

to Meet LoCaL neeDS

When the HCA opened for business, we were well on the way to achieving this – having recruited nine new regional directors and a team of corporate directors. Four months later, the development of strategic plans to 2011 for each region was underway, as was implementation of our Change Plan, and we are progressing the harmonisation of office locations. The Change Plan has been instrumental in linking all strands of our business as we move beyond the set-up phase, focusing on four key areas: sharpening delivery, embedding the HCA, creating a new organisation and delivering the Single Conversation. Our Corporate Plan for the next two years outlines the distinctive agenda and priorities for the Agency, enabling us to build on the innovation and new opportunities created by the HCA. Our Learning and Development Team has provided vital support to the organisation during this intense period of change, whilst continuing to develop the skills, capability and capacity of our staff, and our Graduate Development Programme, which at the end of the financial year had grown to 23 participants.

22

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 22

28/10/09 18:13:10

Homes and Communities Agency

HCA Academy Sharing knowledge within the sector. Relationship-building throughout this time has helped lay a solid foundation for the organisation and shape the way we work regionally. Our National Consultancy Unit, for example, has worked with both our internal teams and external partners, providing a wide range of technical support and services including management of our consultancy panels. These have been a huge success with local authorities; by the end of March 2009 over 110 had signed up to use them – something which is having a positive impact on our Single Conversation business model.

Making a difference In a Nutshell – understanding place-making The HCA Academy is dedicated to developing skills, sharing knowledge and increasing talent. The focus is on providing busy practitioners with accessible and cost-effective skills and knowledge. This online course that improves the understanding of place-making was launched on the Academy’s website in December 2008. The course brings together people from local government, regeneration and housing to develop their knowledge about sustainable communities. It consists of tutored workshops that explore: • the concept of place-making • national and regional policy • roles, responsibilities and skills of individuals and organisations • core professions involved in delivery A team of specialist tutors with experience in regeneration and online tutoring run the course.

As the HCA becomes established, the outward facing role of our consultancy teams becomes ever more important. For instance, the ATLAS team, which provides an independent advisory service to local planning authorities and their partners, helped the Planning Advisory Service deliver a series of 10 regional seminars in March, looking at development management and its role in delivering large-scale quality places. ATLAS’s contribution was recognised in February, when their online guide was shortlisted for the RTPI Planning Awards. We are also committed to improving external skills in the regions. Our success will hinge on effective local partnerships, and to achieve this we need to invest in skills. The HCA Academy, our external skills arm, supports our partners to deliver housing and regeneration programmes, and therefore better places for the future, by providing access to practical training and resources. The Academy is focusing on identifying skills gaps in the regions and improving the ability of people to lead partnerships and developments; dealing with the downturn and preparing for the upturn; and supporting the Single Conversation by working with regional teams to improve local delivery. The Academy has already rolled out several training opportunities for our partners. One of its key successes is the national roll-out of Planning for Non-Planners. Between January and March 2009, this bespoke, regionally-focused course helped people from a non-planning background understand the English planning system to improve outcomes delivered by local authorities. The HCA is a wealth of expertise, talent and knowledge. The investment we’ve made so far in our business, and that of our partners, is critical in realising our ambitions to create thriving, diverse places and affordable homes – now, and in the future. Key facts and figures underlying this chapter are set out in the following Financial Statements, but are also brought together in a single place at homesandcommunities.co.uk/staffing Annual Report and Financial Statements 2008/09

23

Homes and Communities Agency

BUSINESS PERFORMANCE

DiffiCuLt tiMeS CaLL for Despite being faced with a particularly challenging economic environment from the outset, the HCA maintained programme momentum in the delivery of affordable homes, and responded actively and innovatively to market conditions.

innoVatiVe

SoLutionS

When we started work in December, the HCA was tasked with achieving the balance of the output targets set for 2008/09 for the NAHP inherited from the Housing Corporation and for the Property and Regeneration programme inherited from English Partnerships. Target ranges were set at the beginning of the financial year before the full impact of the downturn could be assessed. In the first four months of the Agency’s operation, we achieved 58 per cent of the affordable housing completions and 71 per cent of the affordable housing starts delivered in the full financial year for 2008/09.

24

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 24

28/10/09 18:13:16

Homes and Communities Agency

£168m

worth of private sector investment attracted into the National Coalfields Programme

Making a difference New Islington, Manchester In Manchester, the New Islington Millennium Community is an example of successful public and private sector collaboration. Working with Urban Splash, New East Manchester URC and Manchester City Council, we are regenerating one of the region’s most deprived communities. The redevelopment will incorporate 1,400 homes, 12,700 sq m of retail and commercial space and a primary school, all of which will create employment opportunities. Infrastructure works are now complete following a £22m HCA investment. A further £2m created 50 shared-ownership apartments, while an additional £1.3m enabled the switch of units to Rent to HomeBuy, guaranteeing progress despite the economic climate. An additional 142 homes were completed in March 2009.

The results are reported in the table on page 26 together with the outturn for all other outputs for which we inherited targets. Over the full year, the outputs exceeded the target ranges for brownfield land reclaimed and employment floorspace created. They fell within the ranges for all housing completion types and the social rent housing starts delivered under the NAHP. Other types of housing starts were severely impacted by deteriorating market conditions and fell below the range. The total outputs recorded for the Property and Regeneration programme include those relating to the NCP delivered on sites owned and/or managed by the Regional Development Agencies. In 2008/09 the outputs delivered on these NCP sites amounted to: • 166 ha of brownfield land reclaimed; • 151 housing starts on site commissioned; • 231 housing completions; • 232,004 sq m of employment floorspace created; and • £168m of private sector investment attracted. We recognised from day one that achieving diversity and community cohesion outcomes is integral to our success. Equally, our overt commitment to people, as well as places, is driven by a business culture where diversity is valued and requires us to demonstrate excellence in everything that we do. To this end, we’ve developed an interim Single Equality Scheme, outlining the ways we will meet our statutory duties for race, gender and disability equality, as well as underline our commitment to diversity regardless of age, religion or belief. This document can be downloaded from our website, homesandcommunites.co.uk. Our ongoing delivery of equality and cohesion outcomes will be evident in all of our functions and will be overseen by the HCA’s Board Advisory Group for Equality and Diversity.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 25

25

28/10/09 18:13:17

Homes and Communities Agency

BUSINESS PERFORMANCE

HCA outputs against targets National Affordable Housing Programme

Output Measure

Affordable homes for rent – completions (no.)

Target Range 2008/09

Outturn 2008/09

Outturn 1 December 2008 – 31 March 2009

20,920 –31,380

27,798

17,384

6,522 –9,782

8,099

5,231

17,280 –25,920

19,781

10,282

2,240 –3,360

2,415

1,482

Affordable homes for rent – starts on site (no.) 1

24,000 –36,000

30,563

21,841

Low Cost Home Ownership – starts on site (no.) 1

11,200 –16,800

10,789

7,489

Target Range 2008/09

Outturn 2008/09

Outturn 1 December 2008 – 31 March 2009

of which: larger homes (no.) Low Cost Home Ownership – completions (no.) Rural homes – included within total completions (no.)

Property and Regeneration programme

Output Measure

Brownfield land reclaimed (ha.)

200 –225

327

204

Housing starts commissioned (no.) 1

9,175 –10,450

3,120

1,507

Housing completions (no.) 2

6,080–6,600

6,264

3,154

Employment floorspace (sq m)

375,000 –410,000

450,487

239,660

Private sector investment (£m)

1,090 –1,190

1,035

546

HCA spend against programme Programme3

Community Infrastructure Fund

124

Growth Funding

265

Housing Market Renewal National Affordable Housing Programme Places of Change Property and Regeneration Thames Gateway

Delivery Responsibility

2

3

24

Decent Homes HCA Academy

1

Spend (£m)

6 381 2,630 33 383 44

Spend (£m)

ALMOs

896

Housing PFI Credits

138

The former English Partnerships used housing starts commissioned as its prime indicator, whereas the Housing Corporation used physical starts on site. The HCA has now adopted the latter approach. The outturn number for English Partnerships in 2008/09 on this basis was 4,394. Output may include some affordable housing units that have been supported by social housing grant since this was the basis on which the target range was determined. The HCA took budgetary control of the Gypsy and Traveller Site Grants programme as of 1 April 2009.

26

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 26

28/10/09 18:13:17

Homes and Communities Agency

Walker River’s Gate, Newcastle Affordable homes and new community facilities in this £450m regeneration project.

In particular, we have incorporated performance measures that reflect our strategic objectives for the next two years, which centre on the need to maintain the momentum of programme delivery whilst addressing the opportunities and challenges presented by the market downturn; and transform our ways of working and enhance our organisational effectiveness and efficiency.

Sycamore Hall, Wensleydale An Extra Care development providing new accommodation and support to older people. Performance measures As a new organisation with a defined vision, goals and strategic objectives, we have developed a high-level Integrated Performance Framework. This provides a new approach to how we will target, measure, manage and report performance. This, in turn, will help us to demonstrate that we are making a difference in ways that are greater than the sum of our inherited parts.

The high-level framework architecture and principles were approved by our Board in March 2009. Work is now progressing with the detailed specification and testing of the measures through an intensive programme of engagement and consultation both with our own staff and with delivery partners, as well as with officials at CLG. Performance targets To complement the development of the framework, we have identified specific performance measures that will be the subject of performance targets for the HCA in 2009/10. These measures are detailed in our published Corporate Plan 2009/10–2010/11. The Annual Report narrative demonstrates our achievements during the first four months of operation as the HCA. The following Financial Statements relate to the full financial year of 1 April 2008 to 31 March 2009 and include the achievements of our predecessor bodies up to 30 November 2008.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_FRONT END digi_AW.indd 27

27

28/10/09 18:13:22

Homes and Communities Agency

Homes and Communities agenCy RepoRt on tHe FinanCial statements

28

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 28

28/10/09 18:24:54

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 Board Members’ Report The Board Members are pleased to present their report on the affairs of the Homes and Communities Agency along with the audited Financial Statements and the auditor’s report for the year ended 31 March 2009.

Statutory background

The Homes and Communities Agency (HCA) was established by Parliament under the Housing and Regeneration Act 2008 and is the national housing and regeneration agency for England, with an annual investment budget of more than £4bn. The HCA was formed on 1 December 2008 through the transfer of the functions and assets of English Partnerships; the investment functions of the Housing Corporation; a number of delivery programmes from the Department for Communities and Local Government (CLG) and the transfer of the Academy for Sustainable Communities.

Principal activities

The statutory objects of the HCA, as listed in the Housing and Regeneration Act 2008 are to: • • • •

improve the supply and quality of housing in England; secure the regeneration or development of land or infrastructure in England; support in other ways the creation, regeneration or development of communities in England or their continued well-being; and c ontribute to the achievement of sustainable development and good design in England, with a view to meeting the needs of people living in England.

Format of the Financial Statements

The HCA’s Financial Statements for the year to 31 March 2009 have been prepared in accordance with the Direction on the Annual Accounts issued on 24 November 2008 by the Secretary of State with the consent of HM Treasury and in accordance with Paragraph 12(3) of Schedule 1 to the Housing and Regeneration Act 2008.

Going concern basis

The Balance Sheet at 31 March 2009 shows net assets of £0.95bn (2008: £2.31bn). This reflects the inclusion of liabilities falling due in future years which, to the extent that they are not to be met from the HCA’s other sources of income, may only be met by future grants or grant in aid from the HCA’s sponsoring department, CLG. Such grants may not be issued in advance of need and grant in aid for the year ending 31 March 2010, taking into account the amounts required by the HCA’s liabilities falling due in that year, has already been approved by Parliament. There is no reason to believe that CLG’s future sponsorship and future parliamentary approval will not be forthcoming. The Directors therefore consider it appropriate to adopt a going concern basis for the preparation of these Financial Statements.

Pension arrangements

The accounting policy for pensions is disclosed in Note 1 to the Financial Statements. Information on Board Members’ and key managers’ pension entitlements is disclosed in the Remuneration Report which starts on page 41.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 29

29

28/10/09 18:24:54

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) Business review

A review of the HCA’s business, a description of the principal risks and uncertainties facing it and the position of the HCA at the end of the financial year has been prepared under the Management Commentary which starts on page 36. This includes reference to an impairment charge of £542m incurred on the Agency’s development asset portfolio and incorporates the impairment charges presented in the Financial Statements of the Agency’s predecessor bodies for the year ended 31 March 2009. Predecessor bodies’ Financial Statements presented the trading results for eight months to 30 November 2008.

Better payment practice code

In accordance with Managing Public Money, the HCA complied with the British Standard for Achieving Good Payment Performance in Commercial Transactions and with the Late Payment of Commercial Debts (Interest) Act 1998, as amended. We aimed to pay all undisputed invoices within 30 days of receipt and at least 90 per cent of invoices, whether disputed or not, within this timescale. It was the policy to: • • • •

settle the terms of payments with suppliers when agreeing the terms of each transaction and pay bills in accordance with the contract; ensure that the suppliers were made aware of the terms of payment; abide by the payment terms of individual suppliers; and deal reasonably with complaints and disputes and advise suppliers without delay when invoices or parts of invoices, are contested.

In the four months of trading to 31 March 2009 the HCA paid 94 per cent of all invoices within 30 days of receipt and was committed to maintaining this high standard of performance. This included the payment of grants for social housing to RSLs and other bodies. If these payments were excluded, the percentage was 91 per cent.

Environmental matters

The HCA is committed to the promotion of environmental sustainability in both its daily working practices, through the promotion of new and higher environmental standards in the homes it funds, and throughout its areas of business and in the advancement of best practice in its delivery programmes. The HCA Advisory Group on Design and Sustainable Development, chaired by Dru Vesty, provides independent strategic policy advice on design and sustainability aspects, including those relating to the environment and those associated with climate change. Like all businesses, we recognise our office and administration activities have an impact on the environment. We aim to continue our work in reducing adverse effects wherever we can, recognising our obligation in setting a good example to other stakeholders.

30

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 30

28/10/09 18:24:54

Homes and Communities Agency

Employees

As a public body we are required to meet a series of statutory duties for race, gender and disability equality. Our arrangements for meeting these duties are set out in our Single Equality Scheme, which covers all of our functions as a housing and regeneration agency and as an employer. We published an interim scheme in December 2008 and now have a draft scheme. This scheme, called Diverse Interventions, sets out our vision for the delivery of equality, diversity and cohesion for the next two years. The scheme includes an action plan of how we will incorporate diversity into everything we do and identifies a series of corporate values that represent our objectives together with the manner in which we achieve them:

Delivery

We make a real difference to communities through our expertise and experience.

Diversity

We recognise the value of diversity among our own staff and the need for diverse outcomes to meet different needs.

Drive

We are ambitious for people and places, and strive for the highest standards in all we do.

Dialogue

We build close, productive relationships with our partners and foster teamwork among our staff.

Development

We continue to grow our expertise by investing in personal development, encouraging creativity, empowering people to lead and sharing best practice. In the period up to the creation of the HCA, monthly updates were received by colleagues from Sir Bob Kerslake, the then Chief Executive Designate of the HCA. An intranet web page on the HCA Set-Up Team had also been made available to colleagues. This enabled the Set-Up Team to communicate directly with all staff affected by the HCA’s creation. Since the creation of the Agency, weekly newsletters are issued to colleagues to allow the sharing of news in one place. English Partnerships, the Housing Corporation and the other contributing entities had integrated Equality and Diversity Policies that responded to the wide social diversity in contemporary society and reinforced each entity’s diversity commitment to staff, partners, stakeholders and the wider community in which we operated.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 31

31

28/10/09 18:24:54

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) Social and community issues

We work nationally but support the ambitions of our local partners to provide better places that offer great homes and good jobs. By engaging people in the development of the places in which they live and work, we can create a sense of community pride and ownership. Effective community engagement is an integral part of our work and that of our partners. Meaningful community engagement can require the commitment of time, effort and financial resources at the early stages of the process, but experience has shown that it can reap rewards in a number of ways. The benefits of effective engagement with communities include: • • • •

creating better places and building in long-term sustainability with the help of residents’ local knowledge; c larifying uncertainties and overcoming developing tensions, which can, in turn, increase the speed of planning approvals through early-stage community engagement; fostering social cohesion by developing a common vision and sense of belonging among people of different ages and from different backgrounds; and building accountability and enabling residents and communities to develop skills, confidence and achieve a higher quality of life.

Auditors

The Comptroller and Auditor General is the statutorily appointed auditor under the provisions of the Housing and Regeneration Act 2008. The cost of work performed by the auditors for the Agency, in respect of the year ended 31 March 2009, is as follows: £’000

Audit Fee Other services













115 12

So far as we are aware, there is no relevant audit information of which the auditors are unaware, and we have taken all the steps to make ourselves aware of any relevant audit information and to establish that the auditors are aware of that information.

32

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 32

28/10/09 18:24:55

Homes and Communities Agency

Board Members’ responsibilities and composition

The HCA is governed by a Board of 11 Members, appointed by the Secretary of State for Communities and Local Government. The Board determines the strategic direction of the Agency. Robert Napier is the HCA’s Chairman and Sir Bob Kerslake is its Chief Executive.

Code of Practice

HCA Board Members are obliged to act in accordance with the HCA Code of Practice for Board Members, which is based on the model ‘Guidance on Codes of Practice for Board Members of Public Bodies’ produced by the Cabinet Office. HCA Committee members, who are not members of the HCA Board but who may have voting rights, are obliged to act in accordance with a shorter version of the Code of Practice, comprising general principles as to interests and standards in public life.

Standing Orders

The Board and its Committees are also governed by Standing Orders, which set out the details of how the HCA Board manages its business, for example how it calls meetings, how many members must attend them to make a quorum and so on.

Annual Report and Accounts

The HCA Code of Practice for Board Members states that, as part of its responsibilities for the stewardship of public funds, the Board must ensure that it includes a full statement of the use of such resources in its Annual Report and Accounts. Such accounts should be prepared in accordance with the Accounts Direction issued by the responsible Minister and such other guidance as may be issued, from time to time, by the sponsor department and the Treasury. The Annual Report and Accounts should provide a full description of the Board’s activities; state the extent to which key strategic objectives and agreed financial and other performance targets have been met; list the names of the current Members and senior staff; and provide details of remuneration of Members and senior staff in accordance with Treasury guidance. The Annual Report should contain information on access to Registers of Interests. The Register of Members’ Interests is open for public inspection and is included on our website.

Membership and attendance at Board Meetings

Sir Bob Kerslake Candy Atherton Kate Barker, CBE Margaret Fay, OBE Bob Lane, OBE Shaukat Moledina, CBE Robert Napier Professor Peter Roberts, OBE Ian Robertson Dru Vesty, MBE Don Wood, CBE

























4/4 3/4 3/4 3/4 4/4 4/4 4/4 4/4 4/4 4/4 4/4

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 33

33

28/10/09 18:24:55

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) Board committees

The HCA Board has also established a number of committees, boards and sub-committees which it considers necessary for the effective conduct of its business. The Board has delegated all but the most significant decisions to these committees.

The Audit and Risk Committee

The Audit and Risk Committee is an advisory committee. It supports the Board in its responsibilities for risk control, governance, financial stewardship and financial and statutory reporting. The agenda and public minutes of the Committee meetings are available on our website for download. This Committee is made up of the following five HCA Board Members: • • • • •

Ian Robertson (Chairman) Kate Barker, CBE Shaukat Moledina, CBE Dru Vesty, MBE Don Wood, CBE

The Remuneration Committee

The Remuneration Committee is responsible for advising on overall pay and rewards and other broader staffing issues; and for determining the remuneration and bonuses for senior staff, including the Chief Executive. This Committee is made up of the following five HCA Board Members: • • • • •

Robert Napier (Chairman) Margaret Fay, OBE Bob Lane, OBE Shaukat Moledina, CBE Ian Robertson

The Investment Committee

The Investment Committee is responsible for overseeing the delivery of the HCA’s programmes and projects for housing and regeneration, except for those which relate to London or Milton Keynes specifically, which are the responsibility of the HCA London Board and Milton Keynes Partnership Committee, respectively. The agenda and public minutes of the Committee meetings are available on our website for download. This Committee is made up of the following seven HCA Board Members: • • • • • • •

Robert Napier (Chairman) Kate Barker, CBE Bob Lane, OBE Shaukat Moledina, CBE Ian Robertson Dru Vesty, MBE Don Wood, CBE

34

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 34

28/10/09 18:24:55

Homes and Communities Agency

The HCA London Board

The HCA London Board oversees and directs the investment programme of the HCA in London, within the scheme of delegation set by the HCA Board and having regard to the London Housing Strategy. It is chaired by the Mayor of London and involves a number of key stakeholders, together with HCA Board Members. This Committee is made up of the following members: • • • • • • • • •

Boris Johnson (Chairman) – Mayor Robert Napier (Vice-Chairman) – HCA Chairman Sir Bob Kerslake – HCA Chief Executive Cllr Stephen Carr – London Councils Member Cllr Jamie Carswell – London Councils Member Cllr Terry Stacy – London Councils Member Richard Blakeway – Greater London Authority Peter Rogers – London Development Agency Bob Lane, OBE – London Thames Gateway Development Corporation (and HCA Board Member)

The Milton Keynes Partnership Committee

The Committee contributes to the successful and sustainable growth of Milton Keynes including planning, co-ordinating and implementing development within the Milton Keynes Urban Development Area. This Committee is made up of the following members: Independent/private sector • Dr Ann Limb (Chair) • Leon Roach Homes and Communities Agency • Don Wood, CBE • David Edwards (nominee of Sir Bob Kerslake, Chief Executive) Milton Keynes Council members • Cllr Isobel McCall • Cllr Roger Bristow • Cllr David Hopkins Local Strategic Partnership members • Wendy Lehmann • Andrew Peck • Malcolm Brighton

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 35

35

28/10/09 18:24:55

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) Milton Keynes Partnership Planning Sub-Committee

The Milton Keynes Partnership Committee has a Planning Sub-Committee, which carries out the functions of a planning authority. This Committee is made up of the following members: Independent members • Dr Ann Limb (Chair) • Leon Roach Homes and Communities Agency • Sir Bob Kerslake or his nominee Milton Keynes Council • Cllr Isobel McCall • Cllr David Hopkins Local Strategic Partnership • Andrew Peck

The Academy Committee

The Academy Committee oversees the operation of the Homes and Communities Academy and provides guidance on the fulfilment of its key roles. The Committee is made up of the following members: Independent Members • Professor Peter Roberts, OBE (Chair) • Rebecca Bennett Casserly • Lynne Ceeney • Peter Hetherington • Mushtaq Khan • Deborah Lamb Homes and Communities Agency • Gill Taylor (Chief Executive, HCA Academy)

Management Commentary

The management commentary discloses the matters required to be disclosed in the business review under Section 417 of the Companies Act 2006 and takes into consideration the recommendations outlined in the Accounting Standards Board’s Reporting Statement Operating and Financial Review. Its objective is to provide a balanced analysis of: • • •

the development and performance of the businesses during the financial year; the position at the end of the financial year; and the main trends and factors underlying development, performance and position during the financial year and which are likely to affect the entities’ futures.

36

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 36

28/10/09 18:24:55

Homes and Communities Agency

Current and future development and performance

The HCA combines the land and property expertise of English Partnerships, the Housing Corporation’s track record of delivering affordable homes and the Academy for Sustainable Communities’ knowledge of creating and renewing high quality places. Our role also incorporates the following major delivery programmes transferred from CLG: • • • • • • •

Decent Homes Gap Funding; Mixed Communities; Growth; Housing Market Renewal; Community Infrastructure Fund; Thames Gateway; and Places of Change.

We also have delivery responsibility for Arms Length Management Organisations (ALMOs), Large Scale Voluntary Transfers (LSVT), Housing Private Finance Initiative (PFI) and PFI for new supply. Budget responsibility remains with CLG and programme spend is recorded in the Resource Accounts for CLG. Another programme, Gypsy and Traveller Site Grants transferred to the HCA on 1 April 2009. The Agency was launched at a time of severely depressed financial and housing markets which have led to a set of particularly challenging circumstances for the full year being reported. Despite this, the Agency has demonstrated its capacity for implementing the Government’s policies, ensuring delivery and making a real difference to local communities through its diverse portfolio of programmes, projects and initiatives. In particular, we delivered more than 50,000 new and affordable homes across England and hit our target of investing £3.9bn on our national housing and regeneration programmes. In addition, the Agency has developed products designed to respond to the effects of the credit crunch, such as Mortgage Rescue and HomeBuy Direct. These products have been developed and brought to the point of delivery under very tight timescales. Other significant transactions within the Agency during the year included: • • • •

an impairment charge of £542m as a result of the current deterioration in the housing market; provision for a £12.6m debt following the liquidation of a developer. The Agency exercised its step-in rights to seize a back the related development land; the acquisitions of Castle College Northside site in Sheffield and St Clements Hospital, East London; and the disposal of land at the Gateway site in Harlow.

As a result of the continuing recession in the property market and the inability to generate land receipts, it was a challenge to manage partners’ expectations and meet both political commitments and the priorities of the delivery teams. Following the Chancellor’s April budget, further funding was made available in future financial years for the Kickstart Housing and Mortgage Rescue initiatives, local authority social housing and environmental measures. This will give the HCA more flexibility and opportunities to unlock sites for new and affordable housing, responding to local needs and those of the housing industry and councils. The HCA is keen to bring local authorities into the development arena and to ensure more homes are delivered as soon as possible.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 37

37

28/10/09 18:24:56

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) Resources Market position and reputation

With an investment budget of over £4bn in 2008/09, the HCA’s scale and resources mean it can increase housing supply, and enhance people’s quality of life by creating and regenerating communities where people want, and can afford, to live. Our role is to create opportunity for people to live in high quality, sustainable places. We provide funding for affordable housing, bring land back into productive use and improve quality of life by raising standards for the physical and social environment. We will match national targets with local ambitions and a strong regional presence, operating as a national organisation that delivers locally. We aim to be a responsive, adaptable agency that will help local authorities and their partners meet shared objectives for housing and regeneration in their area. Key stakeholders include local authorities, housing associations and developers. Those that benefit most from our work will be local people and places. The Single Conversation is the HCA’s most important business process. It is the way in which we agree and secure delivery at the local level in support of our national objectives. By working in an open and transparent way with local authorities and others we aim to become local government’s best delivery partner, with the ability to secure more and reach better outcomes for each place. The term ‘Single Conversation’ refers to its comprehensive coverage including the full range of housing, infrastructure, regeneration and community activities. It draws on the priorities for a local area as set out in key local plans and is an ongoing, evolving and dynamic process. It will always be a negotiation and will have, at its core, shared visions and objectives for places. Together with our partners, we will develop an understanding of local housing growth needs, how to improve areas through regeneration and how HCA investment can be used to meet the ambitions of these areas.

People

We recognise our staff as our greatest asset and have focused closely over the year on the development of leadership and management training programmes as well as technical training for investment and regeneration professionals. With our experienced staff based across the country, the HCA is a source of expertise and specialist knowledge on housing and regeneration. Our very low sickness absence rate amounted to 2.3 per cent of working days being lost. The HCA Academy is responsible for developing the skills and knowledge of people who create and maintain communities. In June 2008, Sir Bob Kerslake announced his intention to develop a strategic partnership with the Chartered Institute of Housing as a way of positioning the HCA as an employer of choice.

Structure

Our strong regional presence, aligned to the nine Government Office regions and supported by corporate teams around the country, puts us in the best possible position to act as a bridge between national targets and local ambitions.

Principal risks and uncertainties

A review of the HCA’s capacity to handle risk, which sets out the HCA’s objectives in respect of risk management and the strategy to be employed in putting the policy into effect, has been prepared as set out in the Statement on Internal Control which starts on page 46. Note 36 sets out the HCA’s financial risk management procedures.

38

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 38

28/10/09 18:24:56

Homes and Communities Agency

Relationships Sponsor bodies, partners and suppliers

The HCA has good working relationships with its sponsor department and other bodies such as: • • • • • • •

Central and local government; Housing associations; Private sector builders and developers; The voluntary and community sectors; Regional Development Agencies; Professional and industry bodies; and Local delivery vehicles.

This allows the sharing of expertise and best practice across the regeneration and development sector.

Employees

The HCA employs staff with a wide range of skills and experience, from varied backgrounds in the private and public sectors. We offer our staff a range of benefits, which forms a total reward package designed to recruit, motivate and retain staff. We have regular appraisals and personal development plans, a comprehensive induction programme, a wide range of training courses and opportunities for sponsorship towards professional qualifications. Because of the wide range of work that we undertake, our staff have excellent opportunities for career development and diversification. Under the Graduate Development Programme, we train graduates in all aspects of housing and regeneration, with opportunities to contribute to some of the most exciting projects in the country. During the programme, graduates complete placements within the HCA and in other public and private sector organisations. Participants develop professional and technical competence through workshops and master classes, one-to-one coaching and self-directed learning, and wide-ranging skills in areas such as strategic thinking, managing relationships and commercial acumen. Full funding for a qualification in housing or regeneration is available to programme participants.

Cash flow and liquidity

The HCA relies upon grant in aid receipts from CLG to maintain general liquidity. Grant in aid is drawn-down weekly from CLG to fund the HCA’s daily grant payments and monthly to fund its administration and capital costs. The amounts drawn-down are based upon estimates of need. Any balance remaining at the end of each business day is transferred to the Government Banking Service, the banking services shared service provider to the public sector which encourages public sector bodies to maximise the value of funds available to the Exchequer.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 39

39

28/10/09 18:24:56

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) Key performance indicators Financial targets and performance

The Secretary of State sets Departmental Expenditure Limits for Resource Consumption and Resource Capital. These limits and performance against these limits were: Limit £m

Actual £m

Resource Consumption – Near-cash Capital











147 3,668

146 3,653

Sub total











3,815

3,799

Resource Consumption – Non-cash Annually Managed Expenditure











99 124

86 542

223

628

4,038

4,427

Sub total Total











Departmental Expenditure Limits exist as a budgetary tool to control the performance of the HCA throughout the financial year. Monthly submissions summarising actual performance against these limits together with estimates of annual forecasts are made to CLG. Annually Managed Expenditure includes any charges for the impairment of development assets for which the Agency recorded an exceptional charge of £542m due to the current deterioration in the UK housing market. This exceeds the original limit of £124m. The last opportunity for the Agency’s limits to be revised was as part of HM Treasury’s Spring Supplementary review which was submitted in December 2008. The development asset valuation process was not finalised until March 2009 and the results of impairment charges not known until then, too late to be included in the Spring Supplementary review. The economic conditions that exist in the period being reported upon are unprecedented, therefore as soon as individual valuations and resulting impairments became apparent, we made CLG and HM Treasury aware.

Non-financial targets and performance

A number of non-financial key performance indicators are used to manage the HCA. These are set out in the foreword to these Financial Statements and include: • • • • • • • •

Brownfield land reclaimed; Housing units – starts on site commissioned; Housing units – completed; Employment floorspace created; Private sector investment attracted; Total investment in new low-cost ownership homes; Total investment in homes for social rent; and Number of homes delivered for low-cost ownership and for rent.

40

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 40

28/10/09 18:24:56

Homes and Communities Agency

Remuneration Report Unaudited information Constitution of the Remuneration Committee

The constitution of the Remuneration Committee is set out on page 34.

Functions and responsibilities

The Remuneration Committee is required to: • • • • • • •

advise the Chairman, the Board, and the Chief Executive in his role as the HCA’s Accounting Officer, on overall pay and rewards, the remuneration, contractual and pension arrangements of staff at Director level and above, and any related matters; s et and agree annual performance objectives, remuneration terms and other terms and conditions of employment of the Chief Executive, subject to CLG approval; consider and approve the bonus payment for the Chief Executive and other senior officers on an annual basis, subject to CLG approval; consider and advise the Board on broader staffing issues, such as recruitment and retention; monitor and approve the Agency’s staffing situation against the organisational structure and revenue budget agreed by the Board, and in relation to any directions laid down by CLG; review terms and conditions of service and to determine any issues in relation to terms and conditions, overall pay levels and performance awards that are referred to the Committee by the Executive; and ensure that there are appropriate legal, financial and administrative arrangements covering the provision of the HCA’s pension schemes in respect of benefits and contributions, the administration of the schemes and the safeguarding and management of the pension funds’ assets.

Service contracts

There are no service contracts in place (2008: nil).

Audited information

Current year total staff costs are disclosed in Note 13 and include expenditure by the predecessor bodies for the eight months to 30 November 2008 comprising: • •

t he full costs of key managers from English Partnerships; and a proportion of key managers’ costs from the Housing Corporation for those individuals who were involved in investment activities that continue under the HCA.

Similarly, in relation to the Housing Corporation, the total staff costs comparatives for 2008 in Note 13 are included for those key managers who were involved in investment activity that continues under the HCA. Details of the remuneration of individual key managers and that of the Chief Executives for English Partnerships and the Housing Corporation for the period to 30 November 2008 are included in each of the entities’ 2008/09 Financial Statements and comprise: English Partnerships £’000

Housing Corporation £’000

Total £’000

Salary Performance related pay Taxable benefits Employers’ contribution to pension fund







929 82 43 180

393 87 7 65

1,322 169 50 245

Total







1,234

552

1,786



Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 41

41

28/10/09 18:24:57

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued) The following information provides details of the remuneration and pension interests of the Chairman, Chief Executive and key managers in their capacity as employees of the HCA from 1 December 2008 to 31 March 2009 inclusive. Remuneration of those individuals who were employees of predecessor bodies, and who were Board Members or key managers in those bodies to 30 November 2008, is also disclosed. Amounts disclosed for individuals who transferred from the Housing Corporation represent their total remuneration whose roles included, but were not dedicated to, investment activities.

Board Members’ emoluments

2009 £’000

Chairman

Robert Napier HCA English Partnerships (to 30 November 2008)

33 78











Candy Atherton HCA Housing Corporation (to 30 November 2008)











7 8

Kate Barker, CBE HCA Housing Corporation (to 30 November 2008)











7 9

Margaret Fay, OBE HCA English Partnerships (to 30 November 2008)











7 8

Bob Lane, OBE

Board Members











7

Shaukat Moledina, CBE HCA Housing Corporation (to 30 November 2008)











7 18

Professor Peter Roberts, OBE













7

Ian Robertson













7

Dru Vesty, MBE













7

Don Wood, CBE













7

42



Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 42

28/10/09 18:24:57

Homes and Communities Agency

Chief Executive’s emoluments Salary £’000

Sir Bob Kerslake HCA Chief Executive Designate (to 30 November 2008)



73 147

Bonus £’000

– –

Employer’s Taxable Contribution to Benefits Pension Fund £’000 £’000

– –

12 26

85 173

Taxable Benefits £’000

Employer’s Contribution to Pension Fund £’000

Total 2009 £’000

Key Managers’ emoluments Salary £’000

Margaret Allen Regional Director, East Midlands HCA Housing Corporation (to 30 November 2008)

Bonus £’000

Total 2009 £’000



42 75

– 15

1 4

7 11

50 105



48 99

– 9

2 4

12 20

62 132

Eamonn Boylan Director of New Ventures and Partnerships



52

–

2

6

60

David Curtis Regional Director, Yorkshire and the Humber



40

–

–

10

50

David Edwards Regional Director, South East HCA English Partnerships (to 30 November 2008)



43 85

– 4

2 5

10 17

55 111

Terry Fuller Regional Director, East of England

Trevor Beattie, Director of Strategy, Policy, Performance and Research HCA English Partnerships (to 30 November 2008)



47

–

2

11

60

Richard Hill Director of Investment and Regeneration HCA Housing Corporation (to 30 November 2008)





47 85

– 17

– –

8 13

55 115

Gail James Director of Finance (Acting from 1 December 2008)



40

–

3

8

51



40 90

– 9

2 4

10 23

52 126

John Lewis Chief Executive, Milton Keynes Partnership HCA English Partnerships (to 30 November 2008) David Lunts Regional Director, London





52

–

–

6

58

Deborah McLaughlin Regional Director, North West





40

–

2

5

47

Colin Molton Regional Director, South West





43

–

2

10

55

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 43

43

28/10/09 18:24:57

Homes and Communities Agency

Report on the Financial Statements Year ended 31 March 2009 (continued)

Pat Ritchie Regional Director, North East



Paul Spooner Regional Director, West Midlands HCA English Partnerships (to 30 November 2008)

Salary £’000

Bonus £’000

Taxable Benefits £’000

Employer’s Contribution to Pension Fund £’000



44

–

1

10

55



43 90

– 17

2 4

10 18

55 129

44 79

– 17

– –

10 20

54 116

Gill Taylor Director of Corporate Services (Acting from 1 December 2008) and Chief Executive, HCA Academy HCA Academy for Sustainable Communities (to 30 November 2008)

Total 2009 £’000

On 20 April 2009, Gail James and Gill Taylor ceased to be the acting Directors of Finance and Corporate Services, respectively. From this date Richard Ennis became the Director of Finance and Corporate Services.

Salary

Basic salaries are determined by taking into account each individual’s responsibilities, performance against agreed objectives and experience together with market trends. The Secretary of State determines the Board Members’ emoluments. Sir Bob Kerslake was the highest paid employee.

Performance related pay

Board Members and key managers, who are direct employees of the HCA, benefit from a Performance Related Pay scheme whereby any bonuses are determined with reference to performance against agreed objectives during a performance year running from July to June. Payments for 2008/09 are still to be determined and will be disclosed in the 2009/10 Financial Statements. The Chairman is not eligible for performance related payments or other taxable benefits as a result of his appointment. Sir Bob Kerslake has an entitlement to an annual performance related bonus based upon the achievement of agreed targets. Although Sir Bob Kerslake has been awarded a full performance related bonus in relation to the year to 31 March 2009, he has waived his entitlement.

Benefits in kind

The monetary value of benefits in kind covers any benefits provided by the employer and treated by the HM Revenue and Customs as a taxable emolument. They are in respect of lease cars.

44

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 44

28/10/09 18:24:57

Homes and Communities Agency

Pension benefits

Sir Bob Kerslake Chief Executive and Accounting Officer

Accrued pension at 31 March 2009 £’000











Key Managers

Margaret Allen Trevor Beattie Eamonn Boylan David Curtis David Edwards Terry Fuller Richard Hill Gail James John Lewis David Lunts Deborah McLaughlin Colin Molton Pat Ritchie Paul Spooner Gill Taylor





















CETV 31 March 2009 £’000

3

53

23 50 – 53 3 1 16 22 22 – – 1 1 54 1

495 1,011 6 1,245 65 12 245 438 337 6 4 10 10 1,198 14

The Chief Executive and key managers are eligible to participate in the Homes and Communities Agency Pension Scheme, which is a multi-employer defined benefit scheme. Robert Napier is not a member of the Homes and Communities Agency Pension Scheme. Sir Bob Kerslake, Margaret Allen and Richard Hill are active members of the City of Westminster Pension Fund.

Accrued pension at 31 March 2009

The accrued pension entitlement is the pension which would be paid annually on retirement, based upon pensionable service to 31 March 2009. The CETV disclosed above for David Curtis incorporates the effect of a transfer of £1,077,000 into the scheme from previous employment.

Cash Equivalent Transfer Value (CETV) 31 March 2009

The transfer values are the actuarially assessed capitalised value of pension scheme benefits. It is an amount payable by a pension scheme or arrangement to secure pension benefits in another pension scheme or arrangement when the member leaves a scheme and chooses to transfer the benefits accrued in their former scheme. The figures shown relate to benefits that the individual has accrued as a consequence of their total membership of the pension scheme and not just the service in a senior capacity to which disclosure applies.

Robert Napier

Chairman 22 October 2009

Sir Bob Kerslake

Chief Executive and Accounting Officer 22 October 2009

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 45

45

28/10/09 18:24:58

Homes and Communities Agency

Statements by the Accounting Officer Year ended 31 March 2009 Responsibilities of the Accounting Officer

Under the Housing and Regeneration Act 2008, the Secretary of State has directed the Homes and Communities Agency to prepare for each financial year a statement of accounts in the form and on the basis set out in the Accounts Direction. The accounts are prepared on an accruals basis and must give a true and fair view of the state of affairs of the Homes and Communities Agency and of its income and expenditure, recognised gains and losses and cash flows for the financial year. In preparing the accounts, the Accounting Officer is required to comply with the requirements of the Government Financial Reporting Manual and in particular to: • • • •

o bserve the Accounts Direction issued by the Secretary of State including the relevant accounting and disclosure requirements, and apply suitable accounting policies on a consistent basis; make judgments and estimates on a reasonable basis; s tate whether applicable accounting standards as set out in the Government Financial Reporting Manual have been followed, and disclose and explain any material departures in the financial statements; and prepare the financial statements on a going concern basis.

The Secretary of State has appointed the Chief Executive as Accounting Officer of the Homes and Communities Agency. The responsibilities of an Accounting Officer, including responsibility for the propriety and regularity of the public finances for which the Accounting Officer is answerable, for keeping proper records and for safeguarding the HCA’s assets, are set out in the Financial Memorandum published by the Secretary of State.

Statement on Internal Control Scope of responsibility

As Accounting Officer, I have responsibility for maintaining a sound system of internal control that supports the achievement of the Homes and Communities Agency’s policies, aims and objectives, whilst safeguarding the public funds and assets for which I am personally responsible, in accordance with the responsibilities assigned to me by the Principal Accounting Officer of Communities and Local Government (CLG) on 28 November 2008 and as defined in Managing Public Money.

Accountability arrangements

The Homes and Communities Agency (HCA) was launched on 1 December 2008 under the powers contained in the Housing and Regeneration Act 2008. The HCA is a new body that has taken on the assets and liabilities, duties and obligations formerly vested in the Urban Regeneration Agency (URA) and Commission for the New Towns (CNT) (known collectively as English Partnerships); the investment activities of the Housing Corporation; the Academy for Sustainable Communities and certain programmes that were delivered by Communities and Local Government. The legal entities of URA and CNT remained in existence up to 31 March 2009 when they were formally wound up by Statutory Instrument. I was the designated Accounting Officer for these bodies from 1 December 2008 until their wind up. Each body had its own Accounting Officer for the period from 1 April 2008 to 30 November 2008. In respect of the programmes transferring from CLG I assumed Accounting Officer responsibilities for these on 1 December 2008 with the exception of the following: •

•

46

Gypsy and Traveller Site Grants: this programme transferred to the HCA on 1 April 2009 when I assumed the Accounting Officer responsibilities. Accounting Officer responsibility remained with the CLG Principal Accounting Officer until 31 March 2009. Decent Homes: Accounting Officer responsibility for the Arms Length Management Organisation (ALMO), overhanging debt payments and Large Scale Voluntary Transfer (LSVT) levy payments elements of this programme remain with the CLG Principal Accounting Officer. The HCA role in this case is in respect of making funding recommendations to CLG, and supporting local authorities’ delivery of their ALMO programme.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 46

28/10/09 18:24:58

Homes and Communities Agency

•

Housing Private Finance Initiative (PFI): Accounting Officer responsibility for this programme remains with the CLG Principal Accounting Officer. The HCA role is to make recommendations to CLG on the allocation of PFI credits, and to support and ensure delivery of PFI housing projects by local authorities.

Relationships between the HCA and CLG

The relationship between the HCA and CLG is formally governed by an overarching tasking framework, a detailed financial framework and a supporting sponsorship infrastructure. Detailed plans and priorities are set out in the Corporate Plan which is subject to approval by CLG Ministers and is available on our website. The Tasking Framework sets out the Government’s vision for how the HCA will deliver on its strategic priorities. The framework provides long-term strategic direction but also reflects Government’s medium-term expectations for both the initial period after set up and the remainder of the CSR07 period. The Tasking Framework also sets out how the HCA will best deliver national and regional targets for housing and regeneration by working with local authorities and regional agencies. The Financial Framework governs the formal relationship between the HCA and CLG and lays down requirements related to the payment and expenditure of public money, including: • • • • •

governance and accountability; management and financial responsibilities; budgeting; financial delegations and matters requiring CLG consent; and matters relating to the employment of staff.

The sponsorship infrastructure includes the existence of a dedicated Sponsorship team within CLG responsible for commissioning the HCA on behalf of Government to deliver its policy objectives in places across England. There is a regular programme of engagements at Ministerial, sponsorship, and strategic and policy related levels through which the relationship is formally managed. This is supplemented by routine operational arrangements throughout the programmes and activities for which the HCA is responsible. Two corporate plans have been submitted to CLG. An interim plan was published in December 2008 based on work that had been undertaken in the lead up to the launch of the HCA. The interim plan served to form the basis for consultation, draw together how the Agency will deliver its functions, set out how we will innovate for better delivery, make use of the powers provided by the Housing and Regeneration Act 2008 and the coalescence of funding streams within a single, new organisation and described our emerging thinking. The 2009/10–2010/11 Plan builds on the interim plan supported by further analysis, a business planning process and the continuation of emerging thinking. This plan was approved by Ministers on 9 September 2009. The purpose of the system of internal control The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives. It can, therefore, only provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the organisation’s policies, aims and objectives, to ensure the safeguarding of assets, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively and economically. The system of internal control has been in place in the HCA and its predecessor bodies for the year ended 31 March 2009 and up to the date of approval of the annual report and accounts and accords with Treasury guidance.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 47

47

28/10/09 18:24:58

Homes and Communities Agency

Statements by the Accounting Officer Year ended 31 March 2009 (continued) Capacity to handle risk Capacity to handle risk within the HCA is embedded within the non-executive and executive governance structures established within the organisation to manage strategic and operational business and within the core risk management policy and supporting resources guidance and training. The key governance structures established with the HCA to give leadership to the management of risk are: Non-Executive i) The Boardthat meets monthly to provide strategic direction to the Agency; to oversee financial and operational performance and programme delivery; and to set corporate policy. The Board has appointed six committees to undertake a number of tasks on its behalf. ii) The Audit and Risk Committee is an advisory committee of Board Members. It supports the Board by ensuring appropriate processes are in place for risk control, governance, financial stewardship and financial and statutory reporting. iii) The Investment Committee, comprising seven Board Members. It oversees the delivery of the Agency’s investment programmes and considers project proposals for approval. iv) The HCA London Board oversees and approves proposals for the delivery of the HCA’s programmes in London and ensures that the Agency has regard to the Mayor’s Housing Strategy. It includes in its membership the HCA Chairman and Chief Executive, representatives of the London Development Agency, Thames Gateway Development Corporation, London Councils and the Greater London Authority, and is chaired by the Mayor of London. v) The Milton Keynes Partnership Committeeis responsible for ensuring the successful and sustainable growth of Milton Keynes including planning, co-ordinating and implementing development within the Milton Keynes Urban Development Area. It has established a Planning Sub-Committee to undertake its statutory development control responsibilities. vi) The Academy Committee is an advisory body overseeing the strategic direction of the HCA Academy. It is chaired by an HCA Board Member and its other members have been appointed through an open recruitment process to provide a range of expertise relevant to the Academy’s work. vii) The Remuneration Committee comprises five Board Members. It sets the annual performance objectives and remuneration arrangements for the Chief Executive and executive directors, subject to CLG approval. The Board has also established four Board Advisory Groups to provide external expertise, challenge and advice on four aspects of its work. Each group includes one Board Member: • • • •

Design and Sustainability Rural Housing Equalities and Diversity Vulnerable and Older People

Executive i) The Corporate Team comprises the Chief Executive and Corporate Directors. It meets weekly to oversee the day to day management of the Agency, delivery of corporate functions and the preparation of advice and reporting to the Board. This group sits as the HCA’s Property Asset Management Board, and is the principal focus for issues relating to information risk. ii) The Directors’ Groupcomprises the Corporate Team and Regional Directors. It meets monthly and is the principal strategy setting group for the Agency below Board-level, as well as the senior structure for agreeing operational policies and procedures and the deployment of resources. iii) The Regional Directors Network also meets monthly to share best practice and coordinate regional delivery, including the development of the Single Conversation business model.

48

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 48

28/10/09 18:24:59

Homes and Communities Agency

iv) The Projects Executive meets monthly to consider Property and Regeneration and Thames Gateway project proposals under the provisions of the HCA’s project gateway process. The group is chaired by the Chief Executive. Where project proposals exceed the delegation level currently set for the executive, proposals are recommended to the Investment Committee, HCA London Board or Milton Keynes Partnership Committee for consideration. If such projects also exceed the HCA’s delegation limit, they are submitted to CLG and, if appropriate, HM Treasury for approval. The executive has established a number of Programme Boards, comprising directors and senior officers from across the Agency to advise the executive and oversee the development and delivery of the Agency’s programmes: i)

The Affordable Housing Programme Board – overseeing the National Affordable Housing Programme, Gypsy and Traveller Site Grants Programme and Places of Change Programme.

ii) The Growth Programme Board – to oversee the delivery of the Agency’s Growth, Community Infrastructure Fund and Thames Gateway programmes. iii) The Renewal Programme Board – overseeing the Decent Homes and Housing Market Renewal programmes. iv) The Design and Sustainability Programme Board – shaping policy, process and programme development in order to ensure that the statutory HCA duties for the delivery of quality, sustainable development and good design are embedded within the HCA’s corporate planning and operations. v) The Innovations Programme Board – overseeing the creation, assessment and future development of innovative ideas and models that can be used by the HCA in the delivery of its objectives and responses to the market. This was incorporated into the Housing Stimulus Programme Board in April 2009. vi) The Operations Board – overseeing all aspects of the HCA’s operations and delivery of the Agency’s Change Plan and Benefits Realisation Plan. This Board was established in September 2009 and took over the role previously performed by the Organisational Development Board. This Board has a number of sub-committees looking at particular areas of operation. vii) The Housing Stimulus Programme Board – established following the Budget announcement on 22 April 2009 to lead the HCA’s Housing Stimulus Programme and to achieve its delivery commitments as outlined in the Budget Package. To oversee the assessment and future development of innovative ideas and models that can be used by the HCA in delivery of its objectives. This includes representation from CLG and HM Treasury. Risk Management in the HCA is directed by an overall Risk Management policy and strategy that was reviewed by the Audit and Risk Committee on 11 November 2008 and approved by the Corporate Team on 15 December 2008. The policy sets out roles and responsibilities for risk management and the overall approach to be adopted including the determination of risk appetite. The policy and strategy have been developed with reference to relevant guidance published by HM Treasury, Office of Government Commerce and the British Standards Institute. Risk Management is a responsibility for all managers within the HCA and they are supported by a dedicated Risk Manager who facilitates the process and provides guidance and training where required. The risk and control framework The risk and control framework is integrated and multi layered within the HCA. It operates from both a top-down perspective, through the identification of risks associated with the objectives identified in the Corporate Plan and a bottom-up process, through the identification of risks associated with individual projects, programmes and activities. A risk reporting regime aims to ensure that responses to risks are effective and that emerging risks are escalated in a timely fashion. The process is coordinated through a Senior Risk Sponsor (the Director of Finance and Corporate Services) assisted by the Risk Manager. The strategic risk register identifies the following key risks: • • • • •

downturn in the property market and its impact on partners’ access to funds and lender activity; sufficiency of funds through land receipts and grant in aid to match delivery expectations; changes in the political environment; partner capacity to respond to increased delivery demands; embedding the new organisation, bringing together legacy organisation staff; Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 49

49

28/10/09 18:24:59

Homes and Communities Agency

Statements by the Accounting Officer Year ended 31 March 2009 (continued) • • • •

the possibility of external relationships not being satisfactorily managed; organisational capacity in terms of ensuring that staff skills and knowledge are aligned to new ways of working; lack of flexibility in delegations to respond to changing market conditions; and liabilities attaching to legacy organisations fall to the HCA to manage/settle.

All of these risks are inherently significant to the success of the Agency, but the first three are considered the most significant since these are driven by the market or other factors that are not within the Agency’s direct control. The means by which risk appetite can be determined is specified in the risk management policy and strategy, and this is supplemented by scrutiny to both challenge the assessments made and to take decisions on whether risks should be accepted at a higher or lower level than the norm. Specific arrangements have been made to ensure that Information Risk is appropriately dealt with. The Senior Information Risk Officer (SIRO) is the Director of Finance and Corporate Services from 20 April 2009 (for the period from 1 December 2008 to 19 April 2009 the SIRO role was undertaken by the Interim Director of Corporate Services). He is supported by an Information Security Officer and a Business Information Security Group, who collectively monitor compliance with the mandatory Data Handling Guidelines and aim to ensure that information security is aligned with mainstream business. Arrangements in place are based on the good progress that had been made in predecessor organisations and are now being adapted and updated to the HCA context. Key methods of embedding risk management in the activity of the business include: • • • • •

risk identification, assessment and mitigation plans included in Business Plans; routine consideration of risk in all investment decision making processes; regular review of risk registers for programmes, regions and projects; research and analysis of the property and housing market to help inform strategy development and investment decisions; and quarterly risk reporting to senior management and Audit and Risk Committee.

Review of effectiveness As Accounting Officer, I have responsibility for reviewing the effectiveness of the system of internal control. My review of the effectiveness of the system of internal control is informed by the work of Corporate Assurance and the executive managers within the department who have responsibility for the development and maintenance of the internal control framework and comments made by the National Audit Office (NAO) acting as external auditors in their management letter and other reports. I have been advised on the implications of the result of my review of the effectiveness of the system of internal control by the Board and the Audit and Risk Committee. A plan to address weaknesses and ensure continuous improvement of the system is in place. The system of internal control is subject to ongoing review, and this process is coordinated and managed through the Audit and Risk Committee (the membership of which is composed of Non-Executive Board Members possessing the relevant skills and experience), who in turn provide both regular feedback to the main Board and an annual report and overall opinion on the system of internal control. The Audit and Risk Committee bases its judgment on the reports and opinions of Corporate Assurance, updates provided by the NAO, risk reports, reports on the preparation of the Financial Statements and reports from the Senior Information Risk Officer. Additional forms of assurance relating to the establishment of the HCA have also been reported to form part of the overall judgment. The Committee has met on six occasions from November 2008 up to the end of October 2009. Corporate Assurance has performed a programme of independent and objective reviews, in accordance with Government Internal Audit Standards and other work to provide assurance on the system of internal control. Their work during 2008/09 has been supplemented by similar work undertaken in predecessor bodies. The outcome of their work has been regularly reported to me and the Audit and Risk Committee and there is a process in place to follow up the implementation of actions agreed as part of their work.

50

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 50

28/10/09 18:24:59

Homes and Communities Agency

The National Audit Office has provided regular updates on their work as external auditors for the HCA, CNT and URA. To assist me in fulfilling my role as Accounting Officer for the CNT and URA legal entities, a formal Residuary Board was put in place to oversee the wind-up process and the production of the final accounts for these entities. The work of the Residuary Board has itself been overseen by the Audit and Risk Committee. The Senior Information Risk Officer has provided an annual assessment of information security risk. As part of the process of setting up the HCA a Due Diligence review was undertaken, and an OGC Gateway review was performed to provide assurance that systems and procedures were in place and sufficient to ensure a successful launch and continuity of operations. Finally, as part of the transition arrangements the Accounting Officers for both English Partnerships and the Housing Corporation were required to submit pre vesting assurance letters to the CLG Principal Accounting Officer regarding the arrangements in place within these organisations in the period from 1 April 2008 to 30 November 2008 and that all necessary arrangements had been made for the transition to the HCA. These letters have been made available to me and have formed part of my review. Although the Department did not follow the same process for those programmes transferring from CLG, I have received sufficient assurance from the due diligence process conducted by CLG prior to vesting.

Significant control issues

The HCA was established on 1 December 2008, four months ahead of schedule. In so doing it took on many of the risk and control mechanisms used by predecessor bodies and has since then begun a process designed to blend these to develop an overall approach that is effective for the HCA. This process will take time as it is important that any new arrangements are at least as good and ideally better than those inherited. During the process we do not wish the control environment to be weakened. One of the outcomes of this is that what worked in four separate organisations needs rebasing within the new organisation, and in so doing there is potential for gaps to appear. The Audit and Risk Committee recognises that systems and procedures are developing in the HCA, building on those inherited from predecessor organisations. However, the Committee considers that particular attention should be paid to ensuring the arrangements for risk management and data security are improved, as well as the need for the early implementation of outstanding audit actions inherited from predecessor organisations. The Agency has also inherited predecessor organisations, which require review and mitigation. In addition, the Committee drew to the attention of the Board and Accounting Officer the inherent dangers attaching to the speed at which the Agency is being asked to act – and to take on new roles. While they had no reason to believe that the quality of internal control is suffering, it is undoubtedly a risk. They have asked that appropriate attention and resource continues to be applied to risk management and internal control in this area. In respect of the data control issues, legacy bodies were each pursuing their own programmes to comply with these requirements and each were at different stages. In reviewing the HCA information security arrangements, whilst we are satisfied that they are proportionate to business risk, it has become clear that there are gaps in terms of strict compliance with the requirements. The gaps to be addressed have been identified and an action plan is in place to address these gaps over the next year.

Sir Bob Kerslake

Chief Executive and Accounting Officer

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 51

51

28/10/09 18:24:59

Homes and Communities Agency

The Certificate and Report of the Comptroller and Auditor General to the Houses of Parliament and to the Board of the Homes and Communities Agency I certify that I have audited the financial statements of the Homes and Communities Agency for the year ended 31 March 2009 under the Housing and Regeneration Act 2008. These comprise the Income and Expenditure Account, the Balance Sheet, the Cash Flow Statement and Statement of Recognised Gains and Losses and the related notes. These financial statements have been prepared under the accounting policies set out within them. I have also audited the information in the Remuneration Report that is described in that report as having been audited.

Respective responsibilities of the Homes and Communities Agency, Chief Executive/ Accounting Officer and Auditor

The Homes and Communities Agency and Chief Executive as Accounting Officer are responsible for preparing the Annual Report, the Remuneration Report and the financial statements in accordance with the Housing and Regeneration Act 2008 and Secretary of State directions made thereunder and for ensuring the regularity of financial transactions. These responsibilities are set out in the Statement of Accounting Officer’s Responsibilities. My responsibility is to audit the financial statements and the part of the Remuneration Report to be audited in accordance with relevant legal and regulatory requirements, and with International Standards on Auditing (UK and Ireland). I report to you my opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Remuneration Report to be audited have been properly prepared in accordance with the Housing and Regeneration Act 2008 and Secretary of State directions made thereunder. I report to you whether, in my opinion, the information, which comprises Board Members, the Board Members’ Report and the Management Commentary, included in the Annual Report is consistent with the financial statements. I also report whether in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In addition, I report to you if the Homes and Communities Agency has not kept proper accounting records, if I have not received all the information and explanations I require for my audit, or if information specified by HM Treasury regarding remuneration and other transactions is not disclosed. I review whether the Statement on Internal Control reflects the Homes and Communities Agency’s compliance with HM Treasury’s guidance, and I report if it does not. I am not required to consider whether this statement covers all risks and controls, or form an opinion on the effectiveness of the Homes and Communities Agency’s corporate governance procedures or its risk and control procedures. I read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises ‘Who we are and what we do’, ‘Regional highlights’, ‘Chairman’s Report’, ‘Chief Executive’s report’, ‘Growth’, ‘Renewal’, ‘Affordability’, ‘Sustainability’, ‘Investing in our business’, ‘Business performance’ and the unaudited part of the Remuneration Report. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the financial statements. My responsibilities do not extend to any other information.

Basis of audit opinions

I conducted my audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. My audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements and the part of the Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgments made by the Homes and Communities Agency and Accounting Officer in the preparation of the financial statements, and of whether the accounting policies are most appropriate to the Homes and Communities Agency’s circumstances, consistently applied and adequately disclosed. I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements and the part of the Remuneration Report to be audited are free from material misstatement, whether caused by fraud or error, and that in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Remuneration Report to be audited.

52

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 52

28/10/09 18:25:00

Homes and Communities Agency

Opinions

In my opinion: •

• •

t he financial statements give a true and fair view, in accordance with the Housing and Regeneration Act 2008 and directions made thereunder by the Secretary of State, of the state of the Homes and Communities Agency’s affairs as at 31 March 2009 and of its net expenditure for the year then ended; t he financial statements and the part of the Remuneration Report to be audited have been properly prepared in accordance with the Housing and Regeneration Act 2008 and Secretary of State directions made thereunder; and i nformation, which comprises Board Members, the Board Members’ Report and the Management Commentary included within the Annual Report, is consistent with the financial statements.

Opinion on Regularity

In my opinion, in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them.

Report

I have no observations to make on these financial statements.

Amyas C E Morse Comptroller and Auditor General National Audit Office 151 Buckingham Palace Road Victoria London SW1W 9SS 27 October 2009

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 53

53

28/10/09 18:25:00

Homes and Communities Agency

Group Income and Expenditure Account Year ended 31 March 2009

Income Proceeds from disposal of property assets Rent and other property income Contributions from partners Other operating income Clawback of grants and contributions



Expenditure Grant payments Cost of property disposals Administration costs Administration costs allocated to cost of property disposals Estate management costs Programme costs Grant clawback returnable to Treasury Provision for impairment of development assets Provision for other liabilities and charges Depreciation on fixed assets Other operating costs Notional cost of capital

























Note

2009 £’000

2008 £’000

3 4

51,119 6,198 8,354 9,027 40,946

333,035 8,596 39,165 20,921 64,484

115,644

466,201

3,667,130 65,426 82,141 (1,696) 18,967 28,459 378 541,852 7,278 2,129 23,283 70,003

2,780,413 448,454 72,377 (13,298) 18,914 37,149 2,847 31,553 1,891 1,341 10,371 90,946

4,505,350

3,482,958

5 6

7 3 9 9 8 26 31 19,20 10

Group net operating expenditure Share of operating (losses)/profits in associates







12 18

(4,389,706) (15,005)

(3,016,757) 6,665

Net expenditure before interest











(4,404,711)

(3,010,092)

Interest receivable Interest payable Pension fund finance costs









14 15 33(h)

37,792 (3,731) (1,996)

43,706 (2,863) (501)

Net expenditure before taxation Taxation









16

(4,372,646) 402

(2,969,750) (971)

Net expenditure after taxation Notional cost of capital











(4,372,244) 70,003

(2,970,721) 90,946

Net expenditure for the year











(4,302,241)

(2,879,775)

All activities above derive from continuing operations. Net expenditure is financed by Grant in Aid as explained in accounting policy Note 1(h), with the exception of non-cash expenditure, for example, depreciation, provisions, impairments, notional cost of capital, etc.

54

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 54

28/10/09 18:25:00

Homes and Communities Agency

Group Statement of Recognised Gains and Losses Year ended 31 March 2009 Note

Actuarial (loss)/gain from pension fund Revaluation of tangible fixed assets Group share of unrealised (deficit)/surplus on revaluation of investments Revaluation of property/development assets Fair value (loss)/gain on available for sale assets Realised gains on disposal of available for sale assets recognised in Income and Expenditure Account





Total (losses)/gains recognised since last Financial Statements







2009 £’000

33(k) 38 38 38 39

2008 £’000

(28,749) (1,865) (3,281) (587,661) (29)

7,947 1,865 322 114,631 12,111

39

(3)

–



(621,588)

136,876

The accompanying Notes are an integral part of these Financial Statements.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 55

55

28/10/09 18:25:00

Homes and Communities Agency

Group Balance Sheet At 31 March 2009 Note

2009 £’000

2008 £’000

2,299 7,054 70,309 165,953 30,835 – 2,858

3,034 10,792 87,161 89,190 31,030 583 3,032

Fixed assets Intangible fixed assets Tangible fixed assets Investment in associated undertakings Available for sale financial assets Water companies Loans to Registered Social Landlords Other loans and mortgages

















19 20 21 22 23 24 25













279,308

224,822









26

764,026

1,841,027









27 27 28 29

273,749 117,459 40,587 –

384,680 197,097 162,331 279,000

1,195,821

2,864,135

Current assets Property/development assets Debtors: - due after more than one year - due within one year Cash at bank and in hand Investments

Creditors: Amounts falling due within one year

30

Net current assets Total assets less current liabilities











Provisions for liabilities and charges Advances from the National Loans Fund Provisions for pensions







31 32 33

(311,941) 883,880

2,259,853

1,163,188

2,484,675

(151,864) – (59,440) 951,884

56

(604,282)

(140,700) (700) (29,674) 2,313,601

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 56

28/10/09 18:25:00

Homes and Communities Agency

Reserves Income and expenditure reserve Revaluation reserve Fair value reserve









Note

2009 £’000

2008 £’000

37 38 39

693,764 245,747 12,373

1,436,133 865,063 12,405

951,884

2,313,601

The accompanying Notes are an integral part of these Financial Statements. Approved by the Board on 22 October 2009 and signed on their behalf by:

Robert Napier Chairman

Sir Bob Kerslake

Chief Executive and Accounting Officer

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 57

57

28/10/09 18:25:01

Homes and Communities Agency

Balance Sheet At 31 March 2009

Fixed assets Intangible fixed assets Tangible fixed assets Investment in subsidiary undertakings Investment in associated undertakings Available for sale financial assets Water companies Loans to Registered Social Landlords Other loans and mortgages

Current assets Property/development assets Debtors: - due after more than one year - due within one year Cash at bank and in hand Investments

Creditors: Amounts falling due within one year

























Note

2009 £’000

2008 £’000

19 20 21 21 22 23 24 25

2,299 7,054 25,000 47,637 165,953 30,835 – 2,858

3,034 10,792 25,000 43,350 89,190 31,030 583 3,032

281,636

206,011









26

764,026

1,841,027









27 27 28 29

273,749 117,459 40,587 –

384,680 197,097 162,331 279,000

1,195,821

2,864,135









30

Net current assets Total assets less current liabilities











Provisions for liabilities and charges Advances from the National Loans Fund Provisions for pensions







31 32 33











58



(315,283)

(607,624)

880,538

2,256,511

1,162,174

2,462,522

(151,864) – (59,440) 950,870

(140,700) (700) (29,674) 2,291,448

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 58

28/10/09 18:25:01

Homes and Communities Agency

Reserves Income and expenditure reserve Revaluation reserve Fair value reserve





Note

2009 £’000

2008 £’000

696,043 242,454 12,373

1,420,554 858,489 12,405

950,870

2,291,448













37 38 39











The accompanying Notes are an integral part of these Financial Statements. Approved by the Board on 22 October 2009 and signed on their behalf by:

Robert Napier Chairman

Sir Bob Kerslake

Chief Executive and Accounting Officer

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 59

59

28/10/09 18:25:01

Homes and Communities Agency

Group Cash Flow Statement Year ended 31 March 2009 Note

2009 £’000

2008 £’000

Net cash outflow from operating activities







a)

(3,785,543)

(2,721,835)

Returns on investments and servicing of finance Interest received Interest paid









29,298 (40)

41,640 (714)

29,258

40,926

Taxation Corporation tax repaid/(paid)

5,016

(16,654)

Net cash inflow/(outflow) from taxation

5,016

(16,654)

Net cash inflow from returns on investments and servicing of finance

Net cash outflow from capital expenditure and financial investment





b)

(81,382)

(78,837)

Net cash outflow before use of liquid resources and financing







(3,832,651)

(2,776,400)

Management of liquid resources Decrease in cash invested on short-term deposits









279,000

13,000

Net cash inflow from management of liquid resources







279,000

13,000

c)

3,561,412

2,621,619



7,761

(141,781)

Net cash inflow from financing Increase/(decrease) in cash

60









Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 60

28/10/09 18:25:01

Homes and Communities Agency

Note

a) Reconciliation of net operating expenditure to net cash outflow from operating activities

Net operating expenditure Book value of property disposals Provisions for impairment of assets Additions to property/development assets Depreciation on fixed assets Impairment of fixed assets Loss on disposal of fixed assets Loss on disposal of available for sale assets Pension costs Notional cost of capital























Decrease/(increase) in debtors (Decrease)/increase in creditors Increase in provisions



Net cash outflow from operating activities

b) Capital expenditure and financial investment

Loans repaid to Agency Loans advanced by Agency Purchase of tangible fixed assets Sale of fixed assets Purchase of intangible fixed assets Purchase of loan stock in associate Additions to available for sale financial assets Disposal of available for sale financial assets

2009 £’000

2008 £’000



3 26 26 19,20 10 10

(4,389,706) 50,253 541,852 (102,765) 2,129 1,486 40 205 (979) 70,003

(3,016,757) 304,390 31,553 (176,911) 1,341 1,008 2 – (610) 90,946







(3,827,482)

(2,765,038)









193,912 (163,137) 11,164

(190,213) 126,121 107,295









(3,785,543)

(2,721,835)













20 19 21 22

952 – (705) – (342) (4,287) (77,108) 108

357 (78) (1,651) 6 (1,349) (6,665) (69,457) –







(81,382)

(78,837)

Net cash outflow from capital expenditure and financial investment

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 61

61

28/10/09 18:25:01

Homes and Communities Agency

Group Cash Flow Statement Year ended 31 March 2009 (continued) Note

c) Financing

Grant in aid Repayment of funds to HM Treasury Advances from the National Loans Fund Repayments to the National Loans Fund









37

Net cash inflow from financing

d) Analysis of changes in net funds/(debt)

1 April 2008 £’000

2009 £’000

3,908,112 (346,000) – (700)

2,621,619

Cash flow £’000

31 March 2009 £’000









162,331 (198,913)











(36,582)

Short-term deposits Advances from the National Loans Fund







279,000 (700)

(279,000) 700









241,718

(270,539)

62

2,621,619 – 1,400 (1,400)

3,561,412

Cash at bank and in hand Bank overdraft



2008 £’000

(121,744) 129,505 7,761

40,587 (69,408) (28,821) – – (28,821)

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 62

28/10/09 18:25:02

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 1. Statement of accounting policies a) Statutory basis

The Financial Statements of the Homes and Communities Agency (the Agency) are governed under the provisions of the Housing and Regeneration Act 2008 and by the Direction on the Annual Accounts given by the Secretary of State, with approval of HM Treasury under the Act. The Direction issued on 24 November 2008 reflects government policy that the Financial Statements should, insofar as appropriate, conform to the accounting and disclosure requirements contained in Managing Public Money, Financial Reporting Manual (‘FReM’) and in HM Treasury’s Fees and Charges Guide. This guidance aims to ensure that the Financial Statements are prepared in accordance with applicable accounting standards, are produced on a commercial basis and comply with generally accepted accounting practice in the UK.

b) Financial instrument standards

With effect from 1 April 2008, the Government Financial Reporting Manual (FReM) requires non-departmental public bodies to adopt new financial instruments standards. The Agency has adopted the following standards since its formation. FRS 25 Financial Instruments: Presentation and FRS 29 Financial Instruments: Disclosures These standards require disclosure of information that enables users of the Financial Statements to evaluate the significance of the Agency’s financial instruments and the nature and extent of risks arising from those financial instruments. The new disclosures are included throughout the Financial Statements. FRS 26 Financial Instruments: Recognition and Measurement This standard sets out requirements for the measurement, recognition and de-recognition of financial instruments. The related accounting policy for financial instruments is disclosed in Note 1(r).

c) Basis of accounting

The Financial Statements are prepared under the historical cost convention modified by the revaluation of fixed assets, stock of development assets and available for sale financial assets.

d) Basis of preparation and consolidation

The Agency was formed on 1 December 2008. At this date the functions of the Commission for the New Towns, the Urban Regeneration Agency, the investment functions of the Housing Corporation, the Academy for Sustainable Communities and delivery functions of the Department for Communities and Local Government transferred into the Agency. The functions that transferred from the Department for Communities and Local Government on 1 December 2008 were as follows: • • •

Programme management responsibility for Decent Homes Gap Funding, Mixed Communities, Housing Market Renewal, Places of Change and the Community Infrastructure Fund; Housing and delivery functions in support of the main existing growth areas and in the Thames Gateway; and The Agency also has delivery responsibilities for the decent homes programmes for the social housing sector including Arms Length Management Organisations (ALMOs), Large Scale Voluntary Transfers (LSVT), Housing Private Finance Initiative (PFI) and PFI for new supply. Budget responsibility remains with the Department for Communities and Local Government and programme spend is recorded in the Resource Accounts for the Department. The Financial Statements therefore exclude these activities.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 63

63

28/10/09 18:25:02

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) The FReM states that ‘the merger of two or more entities into one entity will be accounted for using merger accounting’. Merger accounting principles have therefore been adopted in the preparation of the Financial Statements to reflect the position as if the Agency had legally existed for the past two financial years. The Financial Statements incorporate the results of the above entities/functions for the two financial years ended 31 March 2008 and 2009 respectively. Where material, accounting policies of the separate entities/functions have been harmonised. The consolidated Financial Statements also incorporate those of the Agency and its active subsidiary undertaking, English Partnerships (Limited Partner) Limited (EP(LP)Limited). No Income and Expenditure Account is presented for the Agency as permitted by section 230 of the Companies Act 1985. The Group’s associated undertakings are all undertakings in which the Group has 20 per cent or more of the equity or voting rights held as a long-term investment and over which it exerts significant influence. In the Group Financial Statements, investments in subsidiaries are accounted for using the equity method. The consolidated Income and Expenditure Account includes the Group’s share of associates’ profits less losses while its share of net assets of associates is shown in the Group Balance Sheet. The share of net asset and profit information is based on unaudited Financial Statements to 31 March 2009 except for Priority Sites Limited where audited Financial Statements to 31 December 2008 have been used.

e) Intangible fixed assets

Intangible fixed assets comprise licenses to use software developed by third parties. Other intangible assets are the costs of developing the critieria and legal framework for grants to RSLs and non-registered bodies and the development costs of core systems of the Housing Corporation that have transferred into the Agency. Development costs are capitalised as the asset under construction is anticipated to have a life in excess of a year and therefore the costs of developing that asset are chargeable over the same life cycle as the asset. Intangible assets are valued at amortised historical cost, which is not materially different from amortised replacement cost. The relevant amortisation rates applicable to each category of asset are as follows: Computer software Set up costs of future grant programmes

3 to 4 years 5 years

f) Tangible fixed assets

Tangible fixed assets, excluding freehold and long leasehold property, are stated at cost less accumulated depreciation and any impairment in value. Land and freehold buildings are recognised initially at cost and thereafter measured at fair value, less depreciation on buildings and any impairment subsequent to the date of valuation. Land is not depreciated. An assessment is carried out each year by a qualified valuer to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. A full valuation is performed every five years. Depreciation is charged to the Income and Expenditure Account based upon cost or fair value (in the case of revalued assets), less estimated residual value of each asset (where material) evenly over its expected useful life as follows: Freehold and long leasehold property Computer equipment Motor vehicles Furniture, fixtures and fittings Office equipment

64

Remaining useful economic life 3 to 4 years 4 years 4 to 15 years 4 to 5 years

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 64

28/10/09 18:25:02

Homes and Communities Agency

Capitalisation levels for fixed assets

From 1 December 2008 fixed assets are capitalised if a single item or group of assets cost £5,000 or more. The previous capitalisation limits were £5,000 per single item for assets transferred from the Commission for the New Towns and the Urban Regeneration Agency and £500 per single item for items transferred from the Housing Corporation.

g) Property/development assets i) Valuation

Property/development assets, consisting of land and buildings, are shown in the Balance Sheet at market value. A valuation of the whole portfolio was carried out as at 31 March 2009 by both internal and external qualified valuers, with independent external valuers appointed to perform the majority of the portfolio’s value and also to value complex properties. In all cases the valuations were in accordance with the Statement of Asset Valuation and Guidance Notes (6th Edition) published by the Royal Institution of Chartered Surveyors. Each asset has an individual calculation in order to calculate the net gain or loss on each site following the revaluation. Any increase above historical cost is taken to the Revaluation Reserve whilst losses are written off against the reserve up to the value of the credit balance in the reserve and are shown in the Income and Expenditure Account thereafter. Upon disposal of a development asset, any revaluation reserve relating to a particular asset being sold is transferred to the Income and Expenditure Reserve.

ii) Change in accounting policy

Prior to the formation of the Agency, property/development assets held by the Commission for the New Towns and the Urban Regeneration Agency were valued as follows: Commission for the New Towns Stocks of land and buildings were included in the Balance Sheet at the lower of cost or estimated market value. Urban Regeneration Agency Development assets were shown at the lower of current replacement cost and net realisable value. Had these previous accounting polices been applied, the net book value of development assets would be reduced by £242m with an equivalent reduction in the Revaluation Reserve. Profit on disposal would be £12.2m. The write down of development assets charged to the Income and Expenditure Account would remain the same.

iii) Disposal of property/development assets

The Agency recognises income from disposal of property/development assets (net of VAT), when there is a legally binding sale agreement, which has become unconditional and irrevocable by the Balance Sheet date, subject to any provisions necessary to cover residual commitments relating to the property. Where proceeds are receivable over a period of more than 12 months after the Balance Sheet date, the proceeds are discounted at the Agency’s cost of capital rate of 3.5 per cent to reflect the net present value of the receipts. The corresponding debtor is also discounted and the difference between actual cash receipts and the net present value of the receipts is credited to interest receivable over the life of the debt.

h) Funding

The Agency’s activities are funded in part by receipts. However the majority of the Agency’s funding is by grant in aid provided by the Department for Communities and Local Government for specified types of expenditure. Grant in aid received to finance activities and expenditure which support the statutory and other objectives of the Agency are treated as financing and credited to the Income and Expenditure Reserve in full, because they are regarded as contributions from a controlling party. Any profit or loss for the period is transferred to this reserve.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 65

65

28/10/09 18:25:02

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) i) Grants payable

Payments of capital and revenue grants to Registered Social Landlords (RSLs) and other bodies are accounted for on an accruals basis. Payments of Capital Investment Grant, under the National Affordable Housing Programme, are paid in two instalments, a start on site tranche and a completion tranche. From 1 April 2008 payments were 50 per cent for each tranche until 1 August 2008 when the tranche payments were varied to 60 per cent for the start on site tranche. The only exception to this is that grants to private developers are paid in one tranche once the scheme is occupied.

j) Grant recoveries from RSLs

Recoveries of grants are accounted for when the amount due for repayment has been agreed with the RSL and invoiced. RSLs are able to retain any grant recoverable from sales within their own accounts for recycling, with the funds becoming due back to the Agency if unused within three years.

k) Cost of capital employed

When calculating the net expenditure for the year, the Agency is required to charge a notional cost of capital against the Income and Expenditure Account, to ensure that it bears an appropriate charge for the use of capital in the business in the year. The charge is set at a rate of 3.5 per cent of the average net assets. Any cash balance held with the Office of the Paymaster General, is excluded from the calculation. After the net expenditure for the year there is an entry reversing this amount. Prior to the formation of the Agency, a notional cost of capital was not applied to the net assets of the Commission for the New Towns. If this policy still applied the notional cost of capital charge would be £29.9m lower as would the reversal of the charge.

l) Investments

Equity investments in the Agency’s own Balance Sheet are shown at cost less provision for impairment.

m) Taxation

Corporation tax is payable on profits at the current rate. Deferred taxation is provided in accordance with FRS19, Deferred Tax to include the estimated future taxation consequences of transactions and events recognised in the Financial Statements. Deferred taxation assets are recognised only to the extent that it is regarded as more likely than not that they will be recovered.

n) Administration costs

Prior to the formation of the Agency, the Commission for the New Towns allocated a proportion of its administration costs against the cost of property disposals. The Urban Regeneration Agency did not allocate such costs against the cost of property disposals. Following harmonisation of accounting policies a proportion of the Agency’s administration costs is charged against the cost of all property disposals. The impact of this change is to increase cost of property disposals by £0.3m and decrease administration costs by the same amount. There is no overall impact on the Income and Expenditure Account.

66

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 66

28/10/09 18:25:03

Homes and Communities Agency

o) Operating leases

Operating lease rentals receivable and payable are accounted for in the Income and Expenditure Account on a straight line basis over the terms of the lease.

p) Pension costs

The Agency accounts for pension costs in accordance with FRS17, Retirement Benefits. During 2008/09 the Agency’s employees were able to participate in the Homes and Communities Agency’s Pension Scheme, and two Local Government Pension Schemes: the City of Westminster Pension Fund and the West Sussex County Council Pension Fund. The two Local Government Pension Schemes are now closed to new employees of the Agency. All three schemes are multi-employer defined benefit schemes as described by paragraph 9 of FRS 17. In the case of the Homes and Communities Agency’s Pension Scheme, contributions are affected by a surplus or deficit in the scheme, but the Agency is unable to identify its share of the underlying assets and liabilities in the scheme on a consistent and reasonable basis. Contributions are charged in the Income and Expenditure Account as they become payable in accordance with the rules of the Scheme. The actuaries of the two Local Government Pension Schemes however, are able to estimate the Agency’s share of underlying assets and liabilities on a consistent and reasonable basis. Full provision is made for any liabilities within Provisions for pensions.

q) Provisions in respect of community related assets

Provisions are made in respect of the estimated future maintenance costs of community related assets. This is done on the basis that these assets have no value and are not income generating and because it is the Agency’s policy to transfer such assets to local authorities and other appropriate organisations. On transfer the Agency is usually required to transfer other assets of value, including cash, which equate to the estimated future maintenance liability attaching to such assets.

r) Financial instruments

Financial assets and financial liabilities are recognised on the Balance Sheet when the Agency becomes a party to the contractual provisions of the instrument. The Agency derecognises a financial asset only when the contractual rights to the cash flows for the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership to another entity. The Agency derecognises a financial liability only when the Agency’s obligations are discharged, cancelled or they expire.

Financial assets

Non-derivative financial assets are classified as either ‘available for sale’ or ‘loans and receivables’. The classification depends upon the nature and purpose of the financial assets and is determined at the time of initial recognition.

Available for sale financial assets

The Agency provides financial assistance to first-time buyers and key workers to buy a share in a new build home. The buyer must take out an affordable mortgage, which along with any deposit, must make up a minimum of 50 per cent of the full purchase price of the property. In return the Agency will assist with up to 50 per cent of the full property price. The assistance is paid to the participating housebuilder, not the buyer. However, as part of the sales agreement, the Agency has an entitlement to a share of the future sales proceeds which will be equal to the initial percentage contribution. This is secured by a second charge on the property. The Agency’s entitlement to the future sale proceeds on these properties is classified as being available for sale and is stated at fair value. Gains and losses arising from changes in fair value are recognised directly in Reserves with the exception of impairment losses which are recognised directly in the Income and Expenditure Account. Where the financial asset is disposed of, the cumulative gain previously recognised in Reserves is included in the Income and Expenditure Account for that period.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 67

67

28/10/09 18:25:03

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) Loans and receivables

Loans and mortgages and trade and other receivables are classified as ‘loans and receivables’.

Loans and mortgages

Loans and mortgages are shown at amortised cost using the effective interest rate and are included within non-current assets.

Trade and other receivables

Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. They are included within current assets, except for those with maturities greater than 12 months after the Balance Sheet date which are classified as non-current assets and are measured at amortised cost less a provision for bad debts. The net of these balances are classified as ‘trade and other receivables’ in the Balance Sheet.

Impairment of financial assets

‘Loans and receivables’ are assessed for indicators of impairment at each Balance Sheet date and are impaired where there is objective evidence that the recovery of the receivable is in doubt. Objective evidence of impairment could include significant financial difficulty to the customer, default on payment terms or the customer going into liquidation. For financial assets classified as available for sale, a significant or prolonged decline in the value of the property underpinning the financial asset is considered to be objective evidence of impairment.

Cash and cash equivalents

Cash and cash equivalents include cash and balances in bank accounts with no notice or less than three months’ notice from inception and are subject to an insignificant risk of changes in value. Cash and cash equivalents are classified as ‘loans and receivables’.

Financial liabilities

All non-derivative financial liabilities are initially measured at fair value and subsequently measured at amortised cost. Financial liabilities consist of trade and other payables. Financial liabilities are classified as current liabilities unless the Agency has an unconditional right to defer settlement for at least 12 months after the Balance Sheet date.

68

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 68

28/10/09 18:25:03

Homes and Communities Agency

2. Fees and charges The Agency is required, in accordance with HM Treasury’s Fees and Charges Guide, to disclose performance results for the areas of its activities where fees and charges are made. The segmental analysis is not intended to meet the requirements of the Statement of Standard Accounting Practice 25: Segmental Reporting. All services are charged at full cost and, therefore, result in no attributable surplus or deficit. During the year, the Agency provided services to other public sector bodies. The amounts, included in Rent and other property income, were as follows: 2009 £’000

2008 £’000

Amounts charged to other public sector bodies









43

67











43

67

Note

2009 £’000

2008 £’000

51,119

333,035

(11,213) (50,253) (3,960)

(30,181) (304,390) (113,883)

(65,426)

(448,454)

(14,307)

(115,419)



3. Disposal of property assets Proceeds from disposals Cost of property disposals: Direct sales expenses and allocated administration costs Book value of property disposals Provision for additional consideration payable for development assets

Deficit on disposal





26 31







Direct sales expenses and allocated administration costs include a recharge of £1.7m (2007/08: £13.3m) from administration costs (Note 9). This recharge is calculated as a percentage of disposal proceeds and has reduced due to the decrease in disposals.

4. Rent and other property income Building rents Ground rents Leaseback rents Service charges Miscellaneous





















2009 £’000

2008 £’000

4,000 1,605 439 56 98

5,257 1,167 892 1,247 33

6,198

8,596

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 69

69

28/10/09 18:25:03

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 5. Other operating income Housing Action Trusts Car park income Release of restrictive covenants and other windfall income Staff on secondment























6. Clawback of grants and contributions Social Housing Grant (Note 7(b)(ii)) Derelict Land Grant Regeneration Grants











2009 £’000

2008 £’000

3,360 1,369 4,263 35

3,723 1,403 15,752 43

9,027

20,921

2009 £’000

2008 £’000

40,690 277 (21)

58,887 2,309 3,288

40,946

64,484

7. Grant payments a) Grant payments were made to RSLs, other bodies, local authorities, Regional Development Agencies and other public and private sector partners under the following programmes:

2009 £’000

2008 £’000

2,063,503 404,668 – 79,870 48,471 20,747 – 160,039 3,115 2,780,413

Social Housing Grant (Note 7(b)(i)) Housing Market Renewal Growth Decent Homes Programme Thames Gateway Delivery Plan Homelessness Community Infrastructure Fund Property and Regeneration Other





















2,651,093 380,399 265,177 124,373 41,455 33,511 23,801 145,792 1,529













3,667,130

Grant payments of £3,667m (2008: £2,780m) comprise capital investment grants for social housing to RSLs and other bodies totalling £2,651m (2008: £2,064m). The composition of these payments and any recoveries is noted below.

b) Social Housing Grant

The Agency’s powers to pay grants for social housing to RSLs and other bodies are conferred by Sections 18, 20, 21 and 27A of the Housing Act 1996. The power to recover grant is conferred by Section 52 of the Housing Act 1988 and Section 27 of the Housing Act 1996.

70

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 70

28/10/09 18:25:04

Homes and Communities Agency

i) Social Housing Grant payments

London South East East of England South West North West West Midlands East Midlands Yorkshire and the Humber North East



Social rent £’000

Low-cost home ownership £’000

Works to RSLs’stock £’000

Other £’000

749,110 305,155 193,238 187,010 160,342 153,164 105,356 84,403 51,837

251,889 123,022 77,566 42,306 28,514 42,030 27,379 22,939 5,579

15,747 3,030 1,839 6,000 6,940 2,120 2,172 902 90

462 117 27 – 645 91 – 9 63

1,017,208 431,324 272,670 235,316 196,441 197,405 134,907 108,253 57,569

895,241 392,518 193,505 176,596 110,035 98,402 87,505 72,930 36,771

1,989,615

621,224

38,840

1,414

2,651,093

2,063,503

2009 Total £’000

2008 Total £’000

ii) Social Housing Grant recoveries In the normal course of its business the Agency recovers grant payments paid in previous years where schemes are terminated, subject to a change of use or have a cost underrun. Social rent £’000

Low-cost home ownership £’000

Works to RSLs’stock £’000

Other £’000

2009 Total £’000

2008 Total £’000

London South East East of England South West North West West Midlands East Midlands Yorkshire and the Humber North East



14,217 2,077 1,032 599 1,269 5 1,242 1,929 –

3,925 1,907 913 – 85 9 445 465 –

67 – 1 – – 9 – – –

– – – – – – – 1,048 –

18,209 3,984 1,946 599 1,354 23 1,687 3,442 –

29,503 5,021 856 116 1,444 150 1,421 – 54





22,370

7,749

77

1,048

31,244

38,565

Grant recoveries from old schemes



9,446

–

–

–

9,446

20,322





31,816

7,749

77

1,048

40,690

58,887

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 71

71

28/10/09 18:25:04

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) iii) Social Housing Grant payments net of receipts Social rent £’000

Low-cost home ownership £’000

Works to RSLs’stock £’000

Other £’000

London South East East of England South West North West West Midlands East Midlands Yorkshire and the Humber North East



734,893 303,078 192,206 186,411 159,073 153,159 104,114 82,474 51,837

247,964 121,115 76,653 42,306 28,429 42,021 26,934 22,474 5,579

15,680 3,030 1,838 6,000 6,940 2,111 2,172 902 90

Grant recoveries from old schemes



1,967,245 (9,446)

613,475 –

38,763 –

366 –





613,475

38,763

366

1,957,799

462 117 27 – 645 91 – (1,039) 63

8. Programme costs

2009 Total £’000

2008 Total £’000

998,999 427,340 270,724 234,717 195,087 197,382 133,220 104,811 57,569

865,738 387,497 192,649 176,480 108,591 98,252 86,084 72,930 36,717

2,619,849 (9,446)

2,024,938 (20,322)

2,610,403

2,004,616

2009 £’000

2008 £’000

HCA Academy Other programme costs











5,494 22,965

5,511 31,638













28,459

37,149

The HCA Academy costs include £1.4m (2007/08: £1.3m) of staff costs (Note 13). Other programme costs include contributions and other non-asset, project specific costs as part of the Property and Regeneration programme. Contributions included payments for the running costs of Urban Regeneration Companies and private sector partners to fund projects and research programmes on wider strategic projects which support the Agency’s remit. During the year the Agency provided support to numerous projects including research into town centre regeneration, agents’ fees in connection with the First Time Buyers’ Initiative and feasibility fees in connection with housing initiatives and Housing Market Renewal. The Agency continues to provide support for the operation of wider strategic programmes such as the National Coalfields and Surplus Public Sector Land programmes.

72

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 72

28/10/09 18:25:04

Homes and Communities Agency

9. Administration costs Staff costs Board Members’ remuneration Indirect staff costs Travel and subsistence Accommodation costs Office running costs Professional fees Marketing and promotion External audit Other

Note

2009 £’000

2008 £’000

49,827 171 1,498 3,943 7,359 5,305 8,806 4,060 247 925

45,671 246 2,211 3,234 7,378 3,814 6,181 3,251 160 231



82,141 (1,696)

72,377 (13,298)



80,445

59,079









13



















12

Administration costs allocated to cost of property disposals













3

Administration costs also include £4.4m of transitional costs in relation to setting up the HCA. The increase in staff costs is the product of increased activity in the Agency’s programme. An allocation of administration costs is made to the cost of property disposals to reflect the in-house resource utilised in disposing of development assets. As this recharge is calculated as a proportion of sales proceeds, the recharge has fallen by £11.6m to reflect the £282m reduction in disposal proceeds.

10. Other operating costs

Note

2009 £’000

2008 £’000

4,127 799 1,515 73 280 1,394 1,008 1,171 2 2 10,371

Housing Action Trusts Property operating costs Rent of lease/sale properties Movement in bad debt provision Redundancy and restructuring Early retirement pension costs Impairment of fixed assets Taxation not recoverable Loss on disposal of fixed assets Miscellaneous





















3,267 678 852 12,432 573 497 1,486 3,458 40 –









11























23,283

Annual Report and Financial Statements 2008/09

73

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 11. Exceptional costs Impairment of development assets

In accordance with the Accounts Direction, the Agency conducted a review of the carrying value of its development assets at 31 March 2009. This has resulted in an impairment charge of £542m (2008: £32m), principally due to the current deterioration in the UK housing market.

Movement in bad debt provision

In the year to 31 March 2009, the Agency exercised its step-in rights to seize possession of development land previously disposed of and resulted in the Agency having to provide for a debt of £12.6m. This is included within the £12.4m movement in bad debt provision charge in Note 10 which would have reported a £0.2m credit if this charge had not been made. If the Agency had not exercised its step-in rights, it would have had to provide for a debt of £15m.

12. Net operating expenditure

2009 £’000

2008 £’000

127 120 3,889 1,148 573 497 12,432

– 160 4,573 1,026 280 1,394 73

Net operating expenditure has been arrived at after charging the following: Auditor’s remuneration - audit fee for HCA Auditor’s remuneration - audit fees for predecessor bodies Operating lease rentals - land and buildings Operating lease rentals - other Redundancy and restructuring Early retirement pension costs Bad debts written off/movement in bad debt provision







The auditor’s remuneration in relation to HCA comprises £115,000 in relation to statutory audit fees in relation to the Agency’s own Financial Statements and £12,000 for the provision of other services. The auditor’s remuneration for predecessor bodies represents statutory audit fees in relation to the Agency’s predecessor bodies’ 2008/09 Financial Statements.

74

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 74

28/10/09 18:25:04

Homes and Communities Agency

13. Staff costs

The costs of salaried staff, excluding Board Members, for the 12 months, which included those of predecessor bodies and included transitional costs in relation to setting up the HCA, were as follows:

a) Total staff costs

2009 £’000

2008 £’000

33,327 3,022 7,366

Salaries and wages Social security costs Other pension costs





















36,490 3,238 7,561













47,289

43,715

Temporary staff Seconded staff











2,591 1,372

2,666 570

51,252 (1,425)

46,951 (1,280)

Less: HCA Academy staff costs recharged to programme costs (Note 8)



Non-Executive Board Member expenses reimbursed









49,827

45,671









61

53

61

53

2009 Total Number

2008 Total Number

854 54

818 49

908

867

2009 £’000

2008 £’000

24,775 3,654 8,728 1,811 197 220 21 2,854 477 969 43,706

There were no staff costs capitalised in 2009 (2008: nil).

b) Average number of staff employed by the Agency (full time equivalents)

Permanent Temporary









14. Interest receivable



Note

Short-term deposits Water companies - annual payments Unwinding of discount on financial assets Loan interest Local authorities Disposal of property assets Housing mortgages Interest on grant recoveries from RSLs Miscellaneous interest Share of interest receivable in associated undertakings















18

16,001 3,613 12,473 1,607 189 165 15 2,175 907 647











37,792



Interest receivable from local authorities relates to interest due on loans in respect of assets transferred from the Commission for the New Towns or from New Town Development Corporations prior to their wind-up (Note 25). Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 75

75

28/10/09 18:25:05

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 15. Interest payable

Note

2009 £’000

2008 £’000

17 301 – 3,390 23

40 596 12 2,148 67

Borrowings from the National Loans Fund Unwinding of discount on financial liabilities Interest on overdue tax Share of interest payable in associated undertakings Other interest













18











3,731

2,863

Note

2009 £’000

2008 £’000



16. Taxation a) Taxation (credit)/charge in the Income and Expenditure Account comprises: Corporation tax on the results for the year at 28/30 per cent Share of taxation charge in associated undertakings









18

(512) 110

659 312



(402)

971

b) Factors that may affect future tax charge

Deferred tax assets have not been recognised in respect of timing differences relating to provisions and funded and unfunded pension liabilities as there is insufficient evidence that the assets will be recovered. The amounts of the assets not recognised are £15m, £14m and £2m respectively. At 31 March 2009 the Agency had estimated tax losses to carry forward of approximately £340m (31 March 2008: £86m). There is, therefore, an unrecognised deferred tax asset of approximately £95m (31 March 2008: £26m). This has not been recognised because of the uncertainty over future trading profits, which would enable such losses to be utilised.

c) Reconciliation of taxation charge Net expenditure before taxation



2009 £’000



Taxation on deficit at 28/30 per cent Effects of: Non-taxable grant income Expenditure not deductible for taxation, including grant payments Notional cost of capital Grant clawback Purchase of plant/equipment Depreciation Capital allowances on plant and machinery Industrial/agricultural buildings allowances Net increase/(decrease) in provisions Revaluation adjustment on disposals Losses used in period Losses carried forward Taxation (credit)/charge for period

76









































2008 £’000

(4,372,646)

(2,969,750)

(1,224,341)

(890,925)

(13,804) 1,040,528 19,593 106 22 596 (186) – 2,017 7,423 (656) 168,300

(31,000) 835,998 27,285 808 37 402 (392) (1) (1,923) 50,747 (5,668) 15,603

(402)

971

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 76

28/10/09 18:25:05

Homes and Communities Agency

17. Surplus funds

Under Section 25 of the Housing and Regeneration Act 2008, the Secretary of State is entitled to direct that the whole or part of any surplus funds shall be paid into the Exchequer. During 2008/09, £346m was repaid (2007/08: £nil).

18. Share of operating (losses)/profits in associates

Note

2009 £’000

2008 £’000

The Group’s share of (losses)/profits in associates included in the Income and Expenditure Account is as follows: Share of operating (losses)/profits in associates Share of interest receivable Share of interest payable Share of taxation Share of (losses)/profits in associates









14 15 16

(15,005) 647 (3,390) (110)

6,665 969 (2,148) (312)







21

(17,858)

5,174

19. Intangible fixed assets Group and Agency Software £’000

Other intangible assets £’000

Total £’000

4,451 120 –

5,088 342 (188)

Cost At 1 April 2008 Additions Disposals

















637 222 (188)

At 31 March 2009









671

4,571

5,242

Depreciation At 1 April 2008 Charge in year Disposals









494 106 (188)

1,560 971 –

2,054 1,077 (188)

At 31 March 2009

412

2,531

2,943

Net book value At 1 April 2008

143

2,891

3,034

At 31 March 2009

259

2,040

2,299

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 77

77

28/10/09 18:25:05

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 20. Tangible fixed assets a) Revalued basis Group and Agency Land £’000

Cost At 1 April 2008 Additions Disposals Revaluations





At 31 March 2009

Freehold buildings £’000

Fixtures, fittings and office equipment £’000

Information technology £’000

Total £’000

2,057 – – (813)

6,248 285 – (2,674)

4,694 134 (267) –

2,178 286 (546) –

15,177 705 (813) (3,487)

1,244

3,859

4,561

1,918

11,582

2,808 (266) 643 –

1,577 (507) 273 –

4,385 (773) 1,052 (136)

Depreciation At 1 April 2008 Disposals Charge in year Revaluations





– – – –

At 31 March 2009





–

–

3,185

1,343

4,528

Net book value At 1 April 2008





2,057

6,248

1,886

601

10,792

At 31 March 2009





1,244

3,859

1,376

575

7,054

– – 136 (136)

Land and freehold buildings comprise the Agency’s offices at St George’s House, Gateshead and Arpley House, Warrington. Independent professional valuations were carried out by GVA Lamb & Edge in relation to St George’s House and CB Richard Ellis in relation to Arpley House which showed the values to be £1.5m and £3.6m, respectively as at 31 March 2009. An accounting adjustment was made to reflect this value.

78

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 78

28/10/09 18:25:05

Homes and Communities Agency

If land and freehold buildings had not been revalued the historical cost and accumulated depreciation would have been:

b) Historical cost

2009 £’000

2008 £’000

Historical cost Land Freehold buildings











1,586 5,852

1,586 5,570













7,438

7,156

Accumulated depreciation Land Freehold buildings











– 819

– 717













819

717

1,586 5,033

1,586 4,853

6,619

6,439

Net book value Land Freehold buildings

Land is not depreciated. Buildings are depreciated on a straight line basis over their remaining useful economic life.

21. Investments Subsidiary undertakings Agency Cost or Valuation At 1 April 2008 Additions in year



At 31 March 2009









2009 £’000

2008 £’000

25,000 –

25,000 –

25,000

25,000

The Agency has a subsidiary, EP(LP) Limited, in which it holds 25,000,000 ordinary shares of £1 each (2007/08: 25,000,000 ordinary shares of £1 each), representing 100 per cent of the issued share capital. The company commenced trading during 2003 and the nature of its business is investment in property related projects. At 31 March 2009 EP(LP) Limited had aggregate capital and reserves of £25.0m, and had no transactions in the year then ended. The Agency also holds a 100 per cent interest in the ordinary shares of Beehive Workshops Limited which was dormant throughout the period. At 31 March 2009 Beehive Workshops Limited had aggregate capital and reserves of £3.3m. All subsidiary undertakings are registered in England.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 79

79

28/10/09 18:25:05

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) Associated undertakings Group

The Group’s share of operating profits in associates included in the Income and Expenditure Account is as follows: Note

Cost or valuation At 1 April 2008 Additions Share of losses in associated undertakings Share of revaluation reserve



18

At 31 March 2009







Share of net assets £’000

Shares £’000

Loans £’000

22,379 – (3,459) (3,281)

40,501 4,287 – –

24,281 – (14,399) –

87,161 4,287 (17,858) (3,281)

15,639

44,788

9,882

70,309

Shares £’000

Loans £’000

Total £’000

Associated undertakings Agency

Total £’000

Cost At 1 April 2008 Additions









10,349 –

40,501 4,287

50,850 4,287

At 31 March 2009









10,349

44,788

55,137

Provision for impairment At 1 April 2008 and 31 March 2009









(7,500)

Net book value At 1 April 2008 At 31 March 2009

80









–

(7,500)

2,849

40,501

43,350

2,849

44,788

47,637

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 80

28/10/09 18:25:05

Homes and Communities Agency

Name of Undertaking

Interest

Nature of Business

Priority Sites Limited

49 per cent ‘B’ Ordinary

Property rental and development

Network Space Limited

49 per cent ‘A’ Ordinary 100 per cent ‘C’ Deferred, non-voting

Development of workspace

English Cities Fund (General Partner) Limited

33⅓ per cent ‘A’ Ordinary

Property development

Land Restoration Trust

½ membership

Land development

English Cities Fund

Limited partnership

Property development

Blueprint East Midlands Regeneration Partnership

25 per cent

Property rental and development

Creative Sheffield

Company limited by guarantee ⅓ membership

Regeneration of Sheffield

Liverpool Vision

Company limited by guarantee ⅓ membership

Regeneration of Liverpool

New East Manchester

Company limited by guarantee ⅓ membership

Regeneration of East Manchester

Tees Valley Regeneration

Company limited by guarantee ⅓ membership

Regeneration of Tees Valley

Leicester Regeneration Company

Company limited by guarantee ⅓ membership

Regeneration of Leicester

Sunderland arc

Company limited by guarantee ⅓ membership

Regeneration of Sunderland

Meden Valley Making Places Ltd

Company limited by guarantee ¼ membership

Regeneration of Meden Valley

Barking Riverside Ltd

49 per cent Ordinary Shares

Development of land

English Environment Fund

Company limited by guarantee ½ membership

Promotion of Environmental projects

Derby Cityscape

Company limited by guarantee ⅓ membership

Regeneration of Derby

Gloucester Heritage

Company limited by guarantee ¼ membership

Regeneration of Gloucester

Regenco (Sandwell)

Company limited by guarantee ⅓ membership

Regeneration of West Bromwich

Walsall Regeneration Company

Company limited by guarantee ⅓ membership

Regeneration of Walsall

Aylesbury Vale Advantage

Company limited by guarantee ⅕ membership

Regeneration of Aylesbury

CL:AIRE

Company limited by guarantee ⅕ membership

Research

Central Salford URC Ltd

Company limited by guarantee ⅓ membership

Regeneration of Central Salford

Opportunity Peterborough

Company limited by guarantee ⅓ membership

Regeneration of Peterborough

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 81

81

28/10/09 18:25:06

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) CPR Regeneration

Company limited by guarantee ¼ membership

Regeneration of Camborne, Pool and Redruth

Renaissance Southend

Company limited by guarantee ⅕ membership

Regeneration of Southend-on-Sea

Hull URC

Company limited by guarantee ⅓ membership

Regeneration of Hull

The New Swindon Company

Company limited by guarantee ⅓ membership

Regeneration of Swindon

North Northants Development Company

Company limited by guarantee 1∕7 membership

Regeneration of North Northants

Plymouth City Development Company

Company limited by guarantee ⅓ membership

Regeneration of Plymouth

1st East

Company limited by guarantee ⅙ membership

Regeneration of Great Yarmouth and Lowestoft

The Agency has invested in English Cities Fund (ECF), a limited partnership. The majority of its investment is by way of loan stock in ECF via the Agency’s wholly owned subsidiary EP(LP) Limited. The return to the Agency varies according to the level of profits achieved and its share of net assets is influenced proportionately. On 1 December 2008 the Agency’s interests in associated undertakings were transferred from the Urban Regeneration Agency to the HCA.

22. Available for sale financial assets

Available for sale financial assets relate to the Agency’s entitlement to future sale proceeds that is equal to the percentage contribution of financial assistance provided to first-time buyers and key workers. They are stated at fair value.

Group and Agency Note

Balance at 1 April Additions Disposals Fair value adjustment









39

Balance at 31 March

2009 £’000

89,190 77,108 (316) (29) 165,953

2008 £’000

7,622 69,457 – 12,111 89,190

23. Water companies

This represents loans to water companies, which are in respect of assets constructed by former development corporations for the provision of water and sewerage facilities to new town developments where ownership has been transferred to the relevant local water company under the 1973 Water Act. The final redemption dates of the remaining water company loans will be between March 2030 and March 2053.

Group and Agency Loans outstanding at 1 April Repayment of loans Loans outstanding at 31 March

82











2009 £’000

2008 £’000

31,030 (195)

31,208 (178)

30,835

31,030

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 82

28/10/09 18:25:06

Homes and Communities Agency

24. Loans to Registered Social Landlords

Loans to RSLs and unregistered societies are advanced under Section 79 of the Housing Associations Act 1985. The average interest rate applied to schemes under development during the year was 6.05 per cent (2008: 6.88 per cent).

Group and Agency

Schemes under development Principal Interest £’000 £’000

At 1 April 2008 Repayments









At 31 March 2009









546 (546) –

25. Other loans and mortgages Group and Agency Local authorities at 1 April Repayment of loans











Mortgages on housing property at 1 April Repayment of mortgages Loans outstanding at 31 March

Total £’000

37 (37)

583 (583)

–

–

2009 £’000

2008 £’000

2,522 (114)

2,629 (107)

2,408

2,522

510 (60)

634 (124)

450

510

2,858

3,032

Loans to local authorities represent the notional loan debt transferred to the appropriate local authority in respect of assets transferred. In the main this represented assets, which had been taken over by the local authority, at a valuation equivalent to the outstanding loan debt at the date of transfer, translated into a new loan agreement between the Agency and the local authority concerned. The final redemption dates of the remaining loans will be between March 2017 and March 2033. The number of outstanding mortgages on housing property reduced from 62 at 1 April 2008 to 55 at 31 March 2009.

26. Property/development assets Group and Agency Market value at 1 April Movement in year: Capital expenditure Disposals Provision for impairment of development assets Revaluation adjustment Market value at 31 March



2009 £’000

2008 £’000









1,841,027

1,885,428

















102,765 (50,253) (541,852) (587,661)

176,911 (304,390) (31,553) 114,631









764,026

1,841,027

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 83

83

28/10/09 18:25:06

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) a) Movement in the year i) Capital expenditure

Capital expenditure to acquire and improve property/development assets, construct and improve civic assets, or to disengage from community related assets amounted to £103m after crediting £7.2m of contributions, including £0.6m of contributions from local authorities.

ii) Costs of property assets disposed

The value of property/development assets, including community related assets, which were disposed of during the year amounted to £50.3m (2007/08: £304.4m) and this amount is offset against disposal proceeds received.

iii) Provision for impairment of development assets

Where the market value of a property/development asset is lower than costs incurred on that asset, a provision is established to write the asset down to market value. This provision is reviewed annually and any adjustment is taken to the Income and Expenditure Account. Any provision against an asset is utilised against the cost of disposal when that asset is sold. The impairment of development assets is classified as an exceptional cost by virtue of its size (Note 11).

iv) Revaluation adjustment

Where the market value of a property/development asset exceeds historical cost, the increase above historical cost is taken to the Revaluation Reserve. Any subsequent decrease in market value is written off against the reserve up to the value of the credit balance. If market value falls below cost a provision is established as in Note (iii), and charged via the Income and Expenditure Account.

b) Valuation i) General

The majority of valuations have been carried out by independent external valuers holding a relevant professional qualification, in accordance with the Statement of Asset Valuation and Guidance Notes (6th Edition) published by the Royal Institution of Chartered Surveyors.

ii) Property interests with negative value

The market valuation excludes property interests with a negative value. The future liabilities associated with these property interests are fully provided for in provisions for liabilities and charges (Note 31). Such provisions are prudently made based on modified valuation data that takes into account any contractual, legal or constructive obligations.

27. Debtors Group and Agency a) Amounts falling due after more than one year

2009 £’000

2008 £’000

Due from disposal of property/development assets Trade and other receivables









161,644 112,105

247,644 137,036











273,749

384,680

84



Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 84

28/10/09 18:25:06

Homes and Communities Agency

b) Amounts falling due within one year

Due from disposal of property/development assets Trade debtors Interest on short-term deposits Rents Corporation Tax VAT Other taxation Prepayments Other debtors Loans to employees











































2009 £’000

2008 £’000

80,247 10,523 – 577 1,885 – 529 1,993 21,612 93

145,222 15,801 4,626 317 6,389 2,456 450 1,206 20,609 21

117,459

197,097

Trade debtors are amounts owed to the Agency mainly by RSLs and include an estimated amount of £1.9m (2008: £1m) for the recovery by the Agency of amounts held for more than three years by RSLs in their Recycled Capital Grant Fund account. In addition, an amount of £nil (2008: £10.1m) in respect of grants recoverable from RSLs who no longer provide housing under the Key Worker Living initiative has been accrued.

c) Intra-Government balances

Amounts falling due within one year 2009 2008 £’000 £’000

Amounts falling due after more than one year 2009 2008 £’000 ’000

Balances with other central government bodies Balances with local authorities Balances with public corporations and trading funds





3,019 1,934 –

15,519 3,230 338

– – –

– – –

Intra-Government balances Balances with bodies external to government





4,953 112,506

19,087 178,010

– 273,749

– 384,680







117,459

197,097

273,749

384,680



Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 85

85

28/10/09 18:25:07

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 28. Cash at bank and in hand Group and Agency

2009 £’000

2008 £’000

Cash at bank and in hand (Note 34)











40,587

162,331













40,587

162,331

2009 £’000

2008 £’000

29. Current investments Group and Agency Cash on sterling deposit (Note 34)











–

279,000













–

279,000

Group 2009 £000

Group 2008 £000

Agency 2009 £’000

Agency 2008 £’000

257 315,822 16,750 198,913 2,569 13,394 56,577 –

291 160,299 8,360 69,408 1,566 10,753 61,264 3,342

257 315,822 16,750 198,913 2,569 13,394 56,577 3,342

30. Creditors a) Amounts falling due within one year

Miscellaneous deposits Trade creditors Taxation and social security Bank overdraft Other creditors Housing Action Trusts deferred income Accruals and deferred income Amount due to subsidiary undertaking



















291 160,299 8,360 69,408 1,566 10,753 61,264 –







311,941

604,282

315,283

607,624

Group 2009 £’000

Group 2008 £’000

Agency 2009 £’000

Agency 2008 £’000

b) Intra-Government balances

Balances with other central government bodies Balances with local authorities Balances with public corporations





15,017 98,701 –

34,771 118,234 3

15,017 98,701 –

34,771 118,234 3

Intra-Government balances Balances with bodies external to government





113,718 198,223

153,008 451,274

113,718 201,565

153,008 454,616







311,941

604,282

315,283

607,624

86



Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 86

28/10/09 18:25:07

Homes and Communities Agency

31. Provisions for liabilities and charges Group and Agency CRA transfers £’000

Balance at 1 April 2008 Charge to Income and Expenditure Account Expenditure against provisions



Balance at 31 March 2009



Property Additional interests consideration with on negative development value land £’000 £’000

Other liabilities £’000

Total £’000



22,439 4,814 (50)

3,352 438 –

113,883 3,960* –

1,026 2,026 (24)

140,700 11,238 (74)



27,203

3,790

117,843

3,028

151,864

* Charged against cost of property disposals (Note 3)

a) CRA transfers

The Agency’s policy is to transfer community related assets to local authorities and other appropriate organisations. To the extent that the activities of the Agency have raised a reasonable expectation with third parties that these transactions will proceed, a provision has been made in the Financial Statements. These liabilities will be discharged by forming balancing packages of industrial and commercial assets and by cash endowment. Any asset transferred as part of a balancing package will not as a consequence realise disposal receipts. Where community related assets are transferred, the provision that has been made is utilised in the cost of property disposals to offset the cost of the assets transferred.

b) Property interests with negative value

Provision has been made for estimated liabilities arising in respect of disengagement from property interests with negative value. These relate to lease/leaseback interests, rental guarantees and assets where disengagement is dependent upon significant investment in sites by the Agency, the cost of which exceeds the value to be realised in future asset sales. Although the ultimate cost of disengagement from these interests is uncertain, the extent of the Agency’s liability has been estimated in consultation with retained property agents. The estimates are based on costed investment requirements that take into account legal, contractual and constructive obligations, on rents payable and, where appropriate, both rents receivable and repair and maintenance obligations, in respect of each individual interest.

c) Additional consideration payable for the purchase of development assets

In 2005/06 the Agency entered into an agreement with a third party to acquire a portfolio of surplus public sector land. The development agreement was structured so that initial consideration payable would be supplemented by further consideration when milestones for income and profit were triggered. Based on sales completed to date and forecasts for remaining disposals it is almost certain that additional consideration will be payable. In order to match income recognised in the Agency’s accounts with the true cost of disposal, the Agency has established the above provision. The provision calculates the proportion of additional consideration that will become payable attributable to sales recognised to date. The movement in this provision has been charged against cost of property disposals in the Income and Expenditure Account. This provision comes under the broad definition of a financial instrument. Refer to Note 36 for further information.

d) Other liabilities

Other liabilities primarily comprise specific provisions for property transactions and legal actions. The amount includes a £2m provision in relation to a profit guarantee payable to a developer under the London-Wide Initiative. Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 87

87

28/10/09 18:25:07

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 32. Advances from the National Loans Fund

The Agency’s borrowing powers are conferred by Section 92 of the Housing Associations Act 1985. Section 93, as amended by Statutory Instrument 1990 No. 779, limits the Agency’s borrowing from all sources to £2,300m. At 31 March 2009 the amount owed was nil and hence the rate of interest payable on the advance was nil per cent (2008: 5.54 per cent) and the weighted average rate of interest for the year was 3.01 per cent (2008: 5.66 per cent).

Group and Agency

Total £’000

Balance at 1 April 2008 Advances made during the year Repayments on maturity













700 – (700)

Balance at 31 March 2009













–

33. Pension arrangements and liabilities

During 2009 Agency employees were able to participate in contributory pension arrangements afforded by either the Homes and Communities Agency’s Pension Scheme or statutory Local Government schemes administered by either the City of Westminster or West Sussex County Council. These pension schemes have broadly comparable benefits. The two Local Government Pension Schemes are now closed to new employees of the Agency.

a) Homes and Communities Agency’s Pension Scheme

This is a multi-employer defined benefit scheme as described in paragraph 9 of FRS 17, Retirement Benefits. The Scheme was initially started in English Estates and has evolved through several changes, the main ones of which being the formation of Regional Development Agencies and the London Development Agency and the integration of English Partnerships into the HCA. Because of this complex history it is not possible to allocate the scheme’s assets and liabilities to each individual contributing employer on a reasonable and consistent basis. Therefore, whilst the figure is disclosed, it has not been provided for in these Financial Statements. The rate of employers’ contributions is the same for all contributing entities in the scheme based on the needs of the scheme in total. This rate is reviewed on a periodic basis, normally three yearly, with additional reviews as necessary and is adjusted in order to ensure that the full liabilities of the scheme will be met. Contributions are charged to the Income and Expenditure Account as they become payable in accordance with the rules of the scheme.

88

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 88

28/10/09 18:25:07

Homes and Communities Agency

A valuation of the scheme’s total assets and liabilities at 31 March 2009 in accordance with FRS 17 has been prepared and the results together with the key assumptions used are noted below:

Actuarial value of the liability Market value of assets Net pension (deficit)/surplus Salary increase rate Pension increase rate Discount rate Price inflation





















£m 2009

£m 2008

144.5 107.3 (37.2)

129.2 130.0 0.8

4.9% 3.4% 6.7% 3.4%

5.5% 3.5% 6.9% 3.5%

The Financial Statements of the Agency’s Pension Scheme are available from the Secretary, at St George’s House, Kingsway, Team Valley, Gateshead NE11 0NA. All employees who are members of the Agency’s Pension Scheme are issued with a summary of the Financial Statements.

b) City of Westminster Pension Fund

The Agency is also an admitted body of the City of Westminster Pension Fund which operates under the Local Government Pension Scheme Regulations. It is a defined benefit scheme based on pensionable salary. The most recent triennial valuation of the Fund as at 31 March 2007 has been updated by independent actuaries to the City of Westminster Pension Fund to take account of the FRS 17 disclosure requirements for the year to 31 March 2009. Liabilities are valued on an actuarial basis using the projected unit method which assesses the future liabilities discounted to their present value. The employer’s contribution rate for the year ended 31 March 2009 was based on the recommendation contained in the valuation report of the fund as at 31 March 2004. A valuation of the Agency’s total assets and liabilities at 31 March 2009 in accordance with FRS 17 has been prepared and the results together with the key assumptions are disclosed in Note (d) below.

c) West Sussex County Council Pension Fund

This is also a multi-employer defined benefit scheme as described in paragraph 9 of FRS 17. The Agency’s contributions are affected by a surplus or deficit in the scheme. A valuation of the Agency’s total assets and liabilities at 31 March 2009 in accordance with FRS 17 has been prepared and the results together with the key assumptions are disclosed in Notes (d) and (e) below.

d) Pension liabilities Funded £’000

2009 Unfunded £’000

Total £’000

Funded £’000

2008 Unfunded £’000

Total £,000

City of Westminster Pension Fund West Sussex County Council Pension Fund

35,030 16,921

– 7,489

35,030 24,410

13,031 8,838

– 7,805

13,031 16,643



51,951

7,489

59,440

21,869

7,805

29,674



Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 89

89

28/10/09 18:25:07

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) e) Actuarial assumptions

The main assumptions used by the actuaries of the City of Westminster Pension Fund and West Sussex County Council Pension Fund are as follows:

i) Financial assumptions

Inflation increases rate Salary increases Pension increases Expected return on assets Discount rate













2009 City of Westminster Pension Fund

2009 West Sussex County Council Pension Fund

2008 City of Westminster Pension Fund

2008 West Sussex County Council Pension Fund

3.6% 5.1% 3.6% 6.5% 6.5%

3.1% 4.6% 3.1% 6.4% 6.9%

3.7% 5.2% 3.7% 6.9% 6.8%

3.6% 5.1% 3.6% 7.1% 6.9%

ii) Mortality assumptions Life expectancy is based upon actuarial mortality tables, projected to calendar year 2033 for non pensioners and 2017 for pensioners. Based on these assumptions, the average future life expectancies at age 65 are summarised below:

At 31 March 2009

West Sussex County Council Pension Fund

City of Westminster Pension Fund

Current pensioners Future pensioners

f) Fair value of employer assets

Female Years

Male Years

Female Years

22.2 24.5

24.2 26.4

21.5 22.6

24.4 25.5

2009 2008 2009 West Sussex 2008 West Sussex City of County City of County Westminster Council Westminster Council Pension Fund Pension Fund Pension Fund Pension Fund £’000 £’000 £’000 £’000

Equities Bonds Property Other assets











Total



Long-term expected rate of return on assets

90

Male Years



28,789 9,015 – 76

20,471 5,556 2,339 877

37,860 11,921 – 100

27,660 6,554 3,057

1,432





37,880

29,243

49,881

38,703





6.5%

7.1%

7.1%

6.4%

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 90

28/10/09 18:25:08

Homes and Communities Agency

g) Net pension liability

2009 2008 2009 West Sussex 2008 West Sussex City of County City of County Westminster Council Westminster Council Pension Fund Pension Fund Pension Fund Pension Fund £’000 £’000 £’000 £’000

Fair value of employer assets Present value of funded liabilities







37,880 (72,910)

29,243 (46,164)

49,881 (62,912)

38,703 (47,541)

Net under funding in funded plans Present value of unfunded liabilities







(35,030) –

(16,921) (7,489)

(13,031) –

(8,838) (7,805)

(35,030)

(24,410)

(13,031)

(16,643)

Net liability

h) Analysis of Income and Expenditure Charge 2009 City of Westminster Pension Fund £’000

2009 West Sussex County Council Pension Fund £’000

2009 Total £’000

2008 City of Westminster Pension Fund £’000

2008 West Sussex County Council Pension Fund £’000

2008 Total £’000

Amounts charged to net operating expenditure Current service costs Past service costs Losses on curtailments and settlements

1,111 202 –

228 160 454

1,339 362 454

1,574 406 –

344 – 219

1,918 406 219

Sub-total



1,313

842

2,155

1,980

563

2,543

Amounts charged to finance costs Interest charged Expected return on assets



4,186 (3,248)

3,755 (2,697)

7,941 (5,945)

3,177 (2,989)

Sub-total



938

1,058

1,996

188

313

501

Total expense recognised in Income and Expenditure Account



2,251

1,900

4,151

2,168

876

3,044

3,231 (2,918)

6,408 (5,907)

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 91

91

28/10/09 18:25:08

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) i) Reconciliation of fair value of employer assets 2009 City of Westminster Pension Fund £’000

2009 West Sussex County Council Pension Fund £’000

2009 Total £’000

2008 City of Westminster Pension Fund £’000

2008 West Sussex County Council Pension Fund £’000

2008 Total £’000

Opening fair value of employer assets Expected return on assets Contributions by members Contributions by the employer Contributions in respect of unfunded benefits Actuarial gains/(losses) Unfunded benefits paid Benefits paid

49,881 3,248 695 1,846 – (16,370) – (1,420)

38,703 2,697 102 791 497 (10,709) (497) (2,341)

88,584 5,945 797 2,637 497 (27,079) (497) (3,761)

50,359 2,989 546 1,883 – (4,541) – (1,355)

41,216 2,918 97 868 478 (4,005) (478) (2,391)

91,575 5,907 643 2,751 478 (8,546) (478) (3,746)

Closing fair value of employer assets

37,880

29,243

67,123

49,881

38,703

88,584

2009 Total £’000

2008 City of Westminster Pension Fund £’000

2008 West Sussex County Council Pension Fund £’000

2008 Total £’000



j) Reconciliation of defined benefit obligation 2009 City of Westminster Pension Fund £’000

2009 West Sussex County Council Pension Fund £’000

Opening defined benefit obligation Current service cost Interest cost Contributions by members Past service costs Actuarial (gains)/losses Losses on curtailments Unfunded benefits paid Benefits paid



62,912 1,111 4,186 695 202 5,224 – – (1,420)

55,346 228 3,755 102 160 (3,554) 454 (497) (2,341)

118,258 1,339 7,941 797 362 1,670 454 (497) (3,761)

68,970 1,574 3,177 547 406 (10,407) – – (1,355)

60,410 344 3,231 97 – (6,086) 219 (478) (2,391)

129,380 1,918 6,408 644 406 (16,493) 219 (478) (3,746)

Closing defined benefit obligation



72,910

53,653

126,563

62,912

55,346

118,258

2008 City of Westminster Pension Fund £’000

2008 West Sussex County Council Pension Fund £’000

2008 Total £’000

2,081

7,947

k) Amounts recognised in Statement of Recognised Gains and Losses

Actuarial (losses)/gains

92



2009 City of Westminster Pension Fund £’000

2009 West Sussex County Council Pension Fund £’000

2009 Total £’000

(21,594)

(7,155)

(28,749)

5,866

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 92

28/10/09 18:25:08

Homes and Communities Agency

l) History of experience adjustments

The five-year history of experience adjustments is as follows:

City of Westminster Pension Fund Present value of defined benefit obligations Fair value of scheme assets



Deficit in the scheme Experience gains/(losses) on scheme liabilities Experience gains/(losses) on assets



2009 £’000

2008 £’000

2007 £’000

2006 £’000

2005 £’000

(72,910) 37,880

(62,912) 49,881

(68,970) 50,359

(65,138) 46,290

(56,177) 36,916

(35,030)

(13,031)

(18,611)

(18,848)

(19,261)

(16,828) (360)

(875) (4,509)

(119) (718)

2009 £’000

2008 £’000

2007 £’000

2006 £’000

2005 £’000

(53,653) 29,243

(55,346) 38,703

(60,410) 41,216

(54,831) 40,602

(49,641) 34,072

(24,410)

(16,643)

(19,194)

(14,229)

(15,569)

(15) (10,709)

(854) (4,005)

2 (7,778)

121 5,791

(1,575) 1,471

14* –

398* –

* net gain on assets and liabilities

West Sussex County Council Pension Fund Present value of defined benefit obligations Fair value of scheme assets



Deficit in the scheme Experience gains/(losses) on scheme liabilities Experience gains/(losses) on assets



34. Financial assets

The carrying values and fair values of the Agency’s financial assets, by classification, are as follows:

Loans and receivables Cash at bank and in hand Investments Debtors Loans and mortgages Available for sale Financial assets Total financial assets













2009 Fair value £’000

2009 Carrying value £’000

2008 Fair value £’000

2008 Carrying value £’000

40,587 – 386,801 33,693

40,587 – 386,801 33,693

162,331 279,000 571,276 34,645

162,331 279,000 571,276 34,645

165,953

165,953

89,190

89,190

627,034

627,034

1,136,442

1,136,442

Prepayments, tax and social security are excluded from the table above as these are non-financial assets. The fair values of financial assets above are determined as described in Note 35.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 93

93

28/10/09 18:25:08

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 35. Financial liabilities

The carrying values and fair values of the Agency’s financial liabilities, by classification, are as follows: 2009 Fair value £’000

2009 Carrying value £’000

2008 Fair value £’000

2008 Carrying value £’000

Other financial liabilities Creditors Advances from the National Loans Fund Provisions for liabilities and charges





252,038 – 117,843

252,038 – 117,843

560,039 700 113,883

560,039 700 113,883

Total financial liabilities





369,881

369,881

674,622

674,622



Deferred income, tax, social security and certain provisions are excluded from the table above as these are non-financial liabilities. The fair values of financial assets and liabilities are determined as follows: •

•

The fair values of available for sale financial assets are calculated using movements in the CLG house price index at a regional level, being the most relevant available observable market data. Therefore these fair values are categorised as level 2 in the fair value hierarchy as defined by FRS 29. The fair values of other financial instruments are calculated by discounting their future cash flows using discount rates set by HM Treasury, or the rate intrinsic to the financial instrument if higher.

36. Financial risk management

The Agency’s financial assets and liabilities are detailed in Notes 34 and 35, respectively. The Agency is exposed to operational risk in its activities, particularly as it generally becomes involved in developments at locations where the private sector is unwilling to proceed without intervention. Through transactions with developers, the Agency’s intervention results in financial risks, most significantly credit risk and liquidity risk. The Agency also has exposure to market price risk arising from financial instruments as a result of its equity interests in housing units noted in Note 1(r). The Agency is exposed to interest rate risk as a result of financial instruments that bear interest at variable rates. The Agency manages risk from a strategic and operational perspective, which includes the financial aspects of risk management. The Agency has a corporate risk management function whose role is to provide advice and assistance to managers on handling risk across the Agency including: • • •

providing a risk management framework for the Agency; facilitating risk assessment workshops for strategic, programme, regional and project activities; and providing quarterly reports to senior management.

The Agency has approved a risk management framework including policy, strategy, processes and reporting responsibilities.

A monthly review of risk takes place across the Agency, from which the Corporate Team and the Audit and Risk Committee are

informed on a quarterly basis. The monthly reviews incorporate numerically scored assessments of both the likelihood and impact of specific risks arising, which are combined to direct management’s attention to the areas requiring action. Quantitative data, for example on debtor balances, is provided by Central Finance as necessary.

94

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 94

28/10/09 18:25:09

Homes and Communities Agency

The potential exposure to debtor balances is a key focus for management, particularly in the current economic climate. In order to mitigate this risk, the Agency adopts the following approach to transactions with developers: • • •

exposure to credit risk is monitored by Business Appraisal, including the accumulation of risk where the same potential developers are referred for financial vetting for geographically distant projects; existing credit risks, assessments are performed monthly by delivery teams and reported to Central Finance; and for development agreements resulting in the sale of property are always secured by the Agency’s right to retake possession of the disposed property in the event of a default by the buyer.

a) Credit risk

Credit risk is the risk of financial loss where counterparties are not able to meet their obligations. The Agency’s maximum exposure to credit risk, without taking into account any security held, is the same as the carrying amount of financial assets recorded in the financial statements, as disclosed in Note 34. In addition, the Agency has guaranteed the payments under loan obligations of other entities, as disclosed in Note 41. The total maximum exposure under these guarantees is £27.3m (2008: £27.4m), of which £21.7m (2008: £21.7m) relates to Home Group. This guarantee is backed by the right for the Agency to take a first legal charge over the association’s saleable assets. At 31 March 2009, the Agency’s cash was held entirely with the Office of the Paymaster General. At 31 March 2008, before the Agency was formally created, cash and investments were held with various financial institutions in accordance with the Agency’s predecessor bodies’ processes for treasury management as approved by their Boards. The amount shown as a bank overdraft at 31 March 2008 and 31 March 2009 relates only to payments which were in transit at the year end, and the Agency’s bank accounts remained in credit throughout the period. The counterparties to other financial assets are generally major developers and housebuilders in the private sector, and normally arise from disposals of development assets. However, available for sale financial assets relate mainly to amounts receivable individually from the private owners of housing units when their properties are sold, resulting in a broad spread of credit risk for these assets. Amounts receivable from the disposal of property are always secured by the Agency’s right to retake possession of the disposed property in the event of a default by the buyer, and in appropriate cases are backed by financial guarantees. Amounts receivable from the owners of housing units are secured by a second charge over their property. Loans to water companies relate to only one debtor. There are no significant concentrations of credit risk in the Agency’s other debtors. For all financial assets excluding cash, the maximum exposure to a single counterparty at 31 March 2009 was £137.8m (2008: £177.7m), and the five largest counterparties accounted for 49 per cent of the total balance (2008: 41 per cent). In the year ended 31 March 2009 the Agency suffered a bad debt expense of £12.6m (Note 11) resulting from the liquidation of a developer and the administration of its guarantors. As a consequence the Agency retook possession of the development land previously disposed of, which will be used in the Agency’s ordinary activities in future. The carrying value of the land at the Balance Sheet date was £2.3m.

b) Liquidity risk

Liquidity risk is the risk that the Agency will be unable to meet its liabilities as they fall due. Up until the launch of the Agency, the Treasury Management Policy was reviewed and approved by the English Partnerships’ Board on an annual basis. The criteria of accepted best practice were adhered to, including compliance with all statutory and relevant regulatory codes. Sufficient liquidity was retained at all times to meet expected liabilities through the investment of cash surpluses in financial instruments with maturity profiles necessary to ensure the availability of funds when required while optimising returns on investments. Investment of cash surpluses were made only with approved counterparties and in accordance with established exposure limits.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 95

95

28/10/09 18:25:09

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) Investments were all short-term sterling deposits which did not exceed six months. For the other predecessor bodies and, since the formation of the Agency on 1 December 2008, cash surpluses have been held with the Office of the Paymaster General. The Agency does not engage in speculative activity and its policy does not allow the use of more complex financial instruments, such as derivatives. The expected undiscounted cash flows of financial liabilities, based on the earliest date on which the Agency can be required to make payment, are as follows: Carrying value £’000

Contractual cash flows £’000

Less than 1 year £’000

1-2 years £’000

2-5 years £’000

Over 5 years £’000

2009 Other financial liabilities Creditors Advances from the National Loans Fund Provisions for liabilities and charges

252,038 – 117,843

252,038 – 117,843

252,038 – –

– – –

– – 117,843

– – –



369,881

369,881

252,038

–

117,843

–

2008 Other financial liabilities Creditors Advances from the National Loans Fund Provisions for liabilities and charges

560,039 700 113,883

560,039 700 113,883

560,039 700 –

– – 17,646

– – 96,237

– – –



674,622

674,622

560,739

17,646

96,237

–

Total

Total

Deferred income, certain provisions, tax and social security are excluded from the table above as these are non-financial liabilities. The provisions shown above are contractually payable only when cash has been received from debtors arising from disposals of the relevant property. The contractual cash flows above reflect the estimated timing of cash receipts as used in the calculation of the carrying value of the related amount included in debtors. The Agency’s financial guarantee contracts (as disclosed in Note 41) can be called upon at any time.

c) Interest rate risk

The Agency is exposed to interest rate risk on its financial assets classified as loans and receivables, where these pay interest at a variable rate. However, the Agency’s loans and receivables mainly carry interest at fixed rates. Therefore there is no significant interest rate exposure arising from the Agency’s loans and receivables or other financial instruments.

d) Market price risk

The Agency’s results and equity are dependent upon the prevailing conditions of the UK economy, in particular UK house prices. The UK housing market affects the valuation of the Agency’s non-financial assets and liabilities, especially development assets. The Agency is also exposed to market price risk in its available for sale financial assets. The financial assets are the Agency’s interests in housing units located in geographically diverse areas within the UK. As these assets are classified as available for sale, any market price movements are normally reflected in changes in equity, and have no effect on the reported net expenditure for the period unless an impairment is reported. The Agency has performed a sensitivity analysis that measures the change in fair value of the financial assets held for hypothetical changes in market prices. The sensitivity analysis is based on a proportional change to all prices applied to the financial instrument balances existing at the year end.

96

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 96

28/10/09 18:25:09

Homes and Communities Agency

At 31 March 2009, if UK house prices had been 10 per cent higher/lower and all other variables were held constant, the Agency’s reserves, before the effects of taxation, would have been £13.6m higher/lower than as stated (2008: £7.8m higher/lower).

e) Currency risk

The Agency’s dealings are almost entirely Sterling denominated, and therefore the Agency has no material exposure to currency risk.

37. Income and expenditure reserve

Balance at 1 April Actuarial (loss)/gain from pension fund Transfer from revaluation reserve Repayment of surplus funds to HM Treasury Grant in aid received

Group 2009 £’000









Net expenditure







Balance at 31 March







38. Revaluation reserve

Balance at 1 April Revaluation of property/development assets Revaluation gains released on disposal Group share of revaluation reserve Revaluation of tangible fixed assets









Balance at 31 March







1,436,133 (28,749) 26,509 (346,000) 3,908,112

Group 2008 £’000

Agency 2009 £’000

1,517,180 7,947 169,162 – 2,621,619

4,996,005 4,315,908 (4,302,241) (2,879,775)

1,420,554 (28,749) 26,509 (346,000) 3,908,112

Agency 2008 £’000

1,506,769 7,947 169,162 – 2,621,619

4,980,426 4,305,497 (4,284,383) (2,884,943)

693,764

1,436,133

696,043

1,420,554

Group 2009 £’000

Group 2008 £’000

Agency 2009 £’000

Agency 2008 £’000

865,063 (587,661) (26,509) (3,281) (1,865)

917,407 114,631 (169,162) 322 1,865

858,489 (587,661) (26,509) – (1,865)

911,155 114,631 (169,162) – 1,865

245,747

865,063

242,454

858,489

The revaluation reserve represents the excess of market value over historical cost for the Agency’s fixed assets and development assets.

39. Fair value reserve Group and Agency

Note

2009 £’000

2008 £’000

22

12,405 (29)

294 12,111

(3)

–

Balance at 1 April Fair value (loss)/gain on available for sale assets Realised gains on disposal of available for sale assets recognised in Income and Expenditure Account







Balance at 31 March











12,373

12,405

The fair value reserve represents the excess of fair value over historical cost for ‘available for sale’ assets.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 97

97

28/10/09 18:25:09

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 40. Operating leases

At 31 March 2009 the Agency had annual commitments under operating leases as follows:

Leases expiring - within one year - between one and five years - in over five years







2009 Land and Buildings £’000

2009 Others £’000

2008 Land and Buildings £’000

2008 Others £’000

1,097 2,574 1,744

288 828 –

411 1,795 2,682

391 753 –

5,415

1,116

4,888

1,144

Most of the leases relating to land and buildings are part of lease and leaseback arrangements entered into by the Agency or by former development corporations and are subject to rent review periods ranging from 1 to 21 years.

41. Contingent assets and liabilities Contingent assets

The Agency has in certain instances disposed of land on the basis that if there is a subsequent change in use of the land, which materially increases the return to the purchaser, the Agency has a right to participate in the returns achieved. The normal term during which this arrangement remains in force is 21 years. For social housing and other community related schemes the term is more usually 35 years. By its nature this income is variable and the timing of receipt is uncertain; therefore, it is not possible to quantify the likely income, which may ultimately be received by the Agency.

Contingent liabilities

a) Home Group On 6 May 1987 with the Secretary of State’s consent, the Milton Keynes Development Corporation together with one other development corporation and 12 local authorities jointly and severally guaranteed the punctual payment of interest and any other monies due together with the repayment of principal in the year 2037 in respect of 8.75 per cent guaranteed loan stock amounting up to a maximum of £100m created by North Housing Association which subsequently became Home Group. The initial stock issued in May 1987 totalled £66.3m. On 30 May 1991 the liability of one other development corporation was transferred to a local authority. Since that date further tranches of the stock amounting to £33.7m have been issued and the number of participating authorities increased to 19. The money has been used by Home Group to develop assured tenancy housing on sites made available to it by the 19 authorities. Each participant’s contingent liability is determined by the amount of development expenditure incurred in its area, as a percentage of the total stock issued. On this basis, the Agency’s currently assessed contingent liability in respect of 450 completed dwellings is 21.65 per cent. In the event of Home Group failing to make good any default within two months, the Agency and other authorities are entitled to take a first legal charge on sufficient of the association’s saleable assets as represents adequate security for the debt. b) Sunderland City Council The freeholds of several hundred properties on two estates in Washington were transferred to Sunderland City Council on 1 April 1997. The transfer was subject to an Agency indemnity valid for a period of 30 years against costs which may be incurred in remedying shale related defects. This indemnity was issued with the approval of CLG. The extent of this liability is unquantifiable at this time.

98

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 98

28/10/09 18:25:10

Homes and Communities Agency

c) Open Door scheme Under Section 84 of the Housing Associations Act 1985 the Agency is empowered to indemnity certain secured lenders in England. During the years 1984 and 1985 the Agency indemnified four building societies against losses that might arise from advances they made under a scheme to promote home ownership (the Open Door scheme). The amount shown is the maximum liability that might arise in the event of a call being made under the agreements. No calls have been made against the indemnities during the last five years.

Liability under Section 84

2009 £’000

2008 £’000

88

120

2009 £’000

2008 £’000

21,000 5,583

– 5,583

d) Other contingent liabilities The Agency also has the following contingent liabilities:

London-Wide Initiative Indemnities to building societies with regard to housing mortgages







London-Wide Initiative The Agency has entered into agreements to underwrite pre-development costs on the London-Wide Initiative in the event that the Agency terminates development agreements with partners. The Agency has agreed to reimburse all eligible expenditure up to a capped limit. The maximum exposure for the Agency is £21m for existing agreements. As at 31 March 2009 no agreements had been terminated. Indemnities The indemnities represent the value of the mortgage outstanding when the Agency took over the indemnity. It is not practical to assess the current balance outstanding because of the number of individual loans involved. The Agency is potentially liable for miscellaneous claims by developers, contractors and individuals in respect of costs and claims not allowed for in development agreements, construction contracts, grants and claims such as Compulsory Purchase Orders. Payment, if any, against these claims may depend on lengthy and complex litigation and potential final settlements cannot be determined with any certainty at this time. As claims reach a more advanced stage they are considered in detail and specific provisions are made in respect of those liabilities to the extent payment is considered probable.

42. Capital expenditure commitments Expenditure that has been authorised by the Agency at 31 March







2009 £’000

2008 £’000

–

–

Contractual arrangements under the London-Wide Initiative (LWI) specify that, in the event that any LWI units remain unsold three months after practical completion, the Agency will buy back the remaining share of the LWI units from the developers.

Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 99

99

28/10/09 18:25:10

Homes and Communities Agency

Notes to the Financial Statements Year ended 31 March 2009 (continued) 43. Agency merger a) Analysis of current year results

An analysis of the contribution to the results for the year ended 31 March 2009 made by the combining entities in the period prior to the merger date of 1 December 2008, together with the contribution from the combined Agency in the period since the merger date, is as follows: CNT Pre-merger £’000

URA Group Pre-merger £’000

HC Pre-merger £’000

CLG Pre-merger £’000

HCA Academy Pre-merger £’000

HCA Group Post­ merger £’000

Total £’000

Income Expenditure

33,963 (146,548)

15,130 (428,742)

20,097 (866,844)

– (524,601)

265 (2,117)

46,189 (2,536,498)

115,644 (4,505,350)

Net operating expenditure Share of operating loss in associates Interest receivable Interest payable Pension fund finance costs

(112,585)

(413,612)

(846,747)

(524,601)

(1,852)

(2,490,309)

(4,389,706)

– 19,723 – (690)

(10,003) 9,038 (2,482) –

– 1,888 (17) (528)

(5,002) 7,143 (1,232) (778)

(15,005) 37,792 (3,731) (1,996)

Net expenditure before taxation (93,552) Taxation 656

(417,059) (211)

(845,404) (6)

(524,601) –

(1,852) –

(2,490,178) (37)

(4,372,646) 402

Net expenditure after taxation Notional cost of capital

(92,896) 29,898

(417,270) 25,254

(845,410) (538)

(524,601) (1,856)

(1,852) –

(2,490,215) 17,245

(4,372,244) 70,003

Net expenditure for the year

(62,998)

(392,016)

(845,948)

(526,457)

(1,852)

(2,472,970)

(4,302,241)

Recognised gains and losses Actuarial loss from pension fund Loss on revaluation of fixed assets Group share of loss on revaluation of investments Loss on revaluation of development assets Fair value loss on AFS assets Realised gains on disposal of AFS assets recognised in I & E Account Total recognised gains and losses

(3,031) (1,073) – (353,416) –

– (357,520)

–

(4,599)

– – – –

– – – –

–

–

(21,119)

(28,749)

(452)

–

–

–

(340)

(1,865)

(2,187)

–

–

–

(1,094)

(3,281)

(109,411) (81)

– –

– –

– –

(124,834) 52

(587,661) (29)

–

–

–

(3)

( 3)

–

–

(147,338)

(621,588)

– (112,131)

(4,599)

100 Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 100

28/10/09 18:25:10

Homes and Communities Agency

b) Analysis of prior year results

An equivalent analysis for the year ended 31 March 2008 is as follows: CNT Pre-merger £’000

URA Group Pre-merger £’000

HC Pre-merger £’000

CLG Pre-merger £’000

HCA Academy Pre-merger £’000

Total £’000

Income Expenditure



118,352 (243,954)

288,910 (595,485)

58,934 (2,083,670)

– (554,338)

5 (5,511)

466,201 (3,482,958)

Net operating expenditure Share of operating profit in associates Interest receivable Interest payable Pension fund finance costs



(125,602) – 30,142 (12) (313)

(306,575) 6,665 10,652 (2,811) –

(2,024,736) – 2,912 (40) (188)

(554,338) – – – –

(5,506) – – – –

(3,016,757)

6,665

43,706

(2,863)

(501)

Net expenditure before taxation Taxation



(95,785) (656)

(292,069) (312)

(2,022,052) (3)

(554,338) –

(5,506) –

(2,969,750) (971)

Net expenditure after taxation Notional cost of capital



(96,441) 51,155

(292,381) 44,739

(2,022,055) (583)

(554,338) (4,365)

(5,506) –

(2,970,721) 90,946

Net expenditure for the year



(45,286)

(247,642)

(2,022,638)

(558,703)

(5,506)

(2,879,775)



2,081 1,073

– 792

5,866 –

– –

– –

7,947 1,865

Recognised gains and losses Actuarial gain from pension fund Gain on revaluation of fixed assets Group share of unrealised surplus on revaluation of investments Surplus on revaluation of development assets Fair value gain on AFS assets



–

322

–

–

–

322



108,264 –

6,367 12,111

– –

– –

– –

114,631 12,111

Total recognised gains and losses



111,418

19,592

5,866

–

–

136,876

c) Accounting policy alignments: effect on net assets

The book value of net assets at the time of the merger, together with adjustments arising from alignment of accounting policies, were as follows: CNT Pre-merger £’000

URA Pre-merger £’000

HC Pre-merger £’000

CLG Pre-merger £’000

HCA Academy Pre-merger £’000

Total £’000

Net assets at time of merger Accounting policy alignments



680,066 381,502

876,446 10,578

(16,833) –

(4,409) –

– –

1,535,270 392,080

Restated net assets at time of merger



1,061,568

887,024

(16,833)

(4,409)

–

1,927,350

The Agency is required by the Direction on the Annual Accounts to carry development assets at market value. Before the creation of the Agency, development assets were carried at the lower of cost and estimated market value in CNT, and at the lower of current replacement cost and net realisable value in URA. This has resulted in adjustments for accounting policy alignments of £381.5m for CNT and £12.6m for URA. A number of other accounting policies and practices have been aligned between the merged entities, although the effect of these is not material to the Agency.

Annual Report and Financial Statements 2008/09 101

HCA_2009 AR_ ACCOUNTS digi_AW.indd 101

28/10/09 18:25:10

Homes and Communities Agency

d) Accounting policy alignments: effect on consolidated reserves

Adjustments to consolidated reserves resulting from the merger are as follows: I&E reserve £’000

Revaluation reserve £’000

Fair Value reserve £’000

Total £’000

Consolidated reserves at time of merger Accounting policy alignments





1,516,022 20,668

4,727 373,609

14,521 (2,197)

1,535,270 392,080

Restated consolidated reserves at time of merger





1,536,690

378,336

12,324

1,927,350

The accounting policy alignments are those described in (c) above.

44. Related party transactions

The Agency is a non-departmental public body sponsored by CLG. Hence any other bodies sponsored by CLG are considered to be related parties. During the year, the Agency has had a significant number of material transactions with CLG. The Agency has had a number of material transactions with other government departments and other central government bodies, including various local authorities, Regional Development Agencies and the Department for Business, Enterprise and Regulatory Reform. The Agency has also had a number of material transactions with its associated undertakings including: •

Priority Sites in which the Agency has a 49 per cent interest: - the provision of grant funding totalling £3.1m (2007/08: £10.3m) - loan stock interest to the Agency of £0.7m (2007/08: £0.8m)

•

Urban Regeneration Companies, in most of which the Agency is a 1/3 member: - contributions to the operating costs, research and studies of these companies totalling £6.7m (2007/08: £7m)

•

Land Restoration Trust in which the Agency has a 50 per cent holding: - grant funding totalling £0.6m (2007/08: £0.5m)

•

Meden Valley Making Places in which the Agency has a 25 per cent holding: - payment of grant funding totalling £nil (2007/08: repayment of £3.5m)

•

Blueprint East Midlands in which the Agency has a 25 per cent holding: - investment by way of loan stock and shares in the form of cash and property £nil (2007/08: £2.5m)

•

Barking Riverside in which the Agency has a 49 per cent holding: - investment by way of loan stock £4.3m (2007/08: £4.2m) - loan stock interest to the Agency of £0.9m (2007/08: £0.9m)

The Agency’s internal approval procedures are established so that members of staff nominated to act as directors or officers of associated undertakings do not have delegated authority with regard to the relevant undertaking. There were no other transactions in which Board Members and related parties had a direct or indirect financial interest. During the year none of the senior managers or related parties has undertaken any material transactions with the Agency.

102 Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 102

28/10/09 18:25:11

Homes and Communities Agency

45. Losses and special payments

In accordance with the provisions of the Accounts Direction, the Agency must summarise all losses and special payments made during the year, being transactions of a type, which Parliament cannot be supposed to have contemplated. During the course of the financial year the Agency made no losses or special payments requiring disclosure.

46. Post balance sheet events

The Agency’s Financial Statements are laid before the Houses of Parliament by the Secretary of State of Communities and Local Government. FRS21, Events After the Balance Sheet Date requires the Agency to disclose the date on which the accounts are authorised for issue. This is the date on which the certified accounts are despatched by the Agency’s management to the Secretary of State of Communities and Local Government.

The authorised date for issue is 27 October 2009.

Annual Report and Financial Statements 2008/09 103

HCA_2009 AR_ ACCOUNTS digi_AW.indd 103

28/10/09 18:25:11

Homes and Communities Agency

Accounts direction given by the Secretary of State in accordance with paragraph 12(3) of Schedule 1 to the Housing and Regeneration Act 2008 1. The annual accounts of The Homes and Communities Agency (hereafter in this accounts direction referred to as “the Agency”) shall give a true and fair view of the income and expenditure and cash flows for the year and the state of affairs at the year end. Subject to this requirement, the annual accounts for 2008/09 and for subsequent years shall be prepared in accordance with:–

(a) the accounting and disclosure requirements given in Managing Public Money and in the Government Financial Reporting Manual issued by the Treasury (“the IFReM”), as amended or augmented from time to time; (b) any other relevant guidance that the Treasury may issue from time to time;



(c) any other specific disclosure requirements of the Secretary of State;

insofar as these requirements are appropriate to the Agency and are in force for the year for which the accounts are prepared, and except where agreed otherwise with the Secretary of State and the Treasury, in which case the exception shall be described in the notes to the accounts. 2. Schedule 1 to this direction gives additional disclosure requirements of the Secretary of State.

Signed by authority of the Secretary of State

Liz Barnard An officer in the Department for Communities and Local Government Date 24 November 2008

104 Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 104

28/10/09 18:25:11

Homes and Communities Agency

Schedule 1 Additional disclosure requirements

The following information shall be disclosed in the annual accounts, as a minimum, and in addition to the information required to be disclosed by paragraph 1 of this direction.

The notes to the annual accounts shall disclose: (a) an analysis of grants from:

(i) government departments (ii) European Community funds (iii) other sources identified as to each source; (b) an analysis of the total amount of grant from the Department for Communities and Local Government, showing how the grant was used; (c) an analysis of grants included as expenditure in the income and expenditure account and a statement of the total value of grant commitments not yet included in the income and expenditure account;

(d) details of employees, other than board members, showing:– (i) the average number of persons employed during the year, including part-time employees, agency or temporary staff and those on secondment or loan to the Agency, but excluding those on secondment or loan to other organisations, analysed between appropriate categories (one of which is those whose costs of employment have been capitalised) (ii) the total amount of loans to employees



(iii) employee costs during the year, showing separately:– (1) wages and salaries (2) early retirement costs (3) social security costs (4) contributions to pension schemes (5) payments for unfunded pensions (6) other pension costs



(7) amounts recoverable for employees on secondment or loan to other organisations

(The above analysis shall be given separately for the following categories:

I

employed directly by the Agency

II

on secondment or loan to the Agency

III

agency or temporary staff

IV

employee costs that have been capitalised);

(e) in the note on debtors, prepayments and payments on account shall each be identified separately; (f) a statement of debts written off and movements in provisions for bad and doubtful debts;

Annual Report and Financial Statements 2008/09 105

HCA_2009 AR_ ACCOUNTS digi_AW.indd 105

28/10/09 18:25:11

Homes and Communities Agency

Accounts direction given by the Secretary of State in accordance with paragraph 12(3) of Schedule 1 to the Housing and Regeneration Act 2008 (continued) (g) a statement of losses and special payments during the year, being transactions of a type which Parliament cannot be supposed to have contemplated. Disclosure shall be made of the total of losses and special payments if this exceeds £250,000, with separate disclosure and particulars of any individual amounts in excess of £250,000. Disclosure shall also be made of any loss or special payment of £250,000 and below if it is considered material in the context of the Agency’s operations. *(h) particulars of material transactions during the year and outstanding balances at the year end (other than those arising from a contract of service or of employment with the Agency), between the Agency and a party that, at any time during the year, was a related party. For this purpose, notwithstanding anything in the accounting standard, the following assumptions shall be made: (i) transactions and balances of £5,000 and below are not material (ii) parties related to board members and key managers are as notified to the Agency by each individual board member or key manager (iii) the following are related parties: (1) subsidiary and associate companies of the Agency (2) pensions funds for the benefit of employees of the Agency or any subsidiary companies (although there is no requirement to disclose details of contributions to such funds) (3) board members and key managers of the Agency (4) members of the close family of board members and key managers (5) companies in which a board member or a key manager is a director (6) partnerships and joint ventures in which a board member or a key manager is a partner or venturer

(7) trusts, friendly societies and industrial and provident societies in which a board member or a key manager is a trustee or committee member (8) companies, and subsidiaries of companies, in which a board member or a key manager has a controlling interest (9) settlements in which a board member or a key manager is a settlor or beneficiary (10) companies, and subsidiaries of companies, in which a member of the close family of a board member or of a key manager has a controlling interest (11) partnerships and joint ventures in which a member of the close family of a board member or of a key manager is a partner or venturer (12) settlements in which a member of the close family of a board member or of a key manager is a settlor or beneficiary (13) the Department for Communities and Local Government, as the sponsor department for the Agency.

106 Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 106

28/10/09 18:25:11

Homes and Communities Agency

For the purposes of this sub-paragraph: (i) A key manager means a member of the Agency’s management board. (ii) The close family of an individual is the individual’s spouse, the individual’s relatives and their spouses, and relatives of the individual’s spouse. For the purposes of this definition, “spouse” includes personal partners, and “relatives” means brothers, sisters, ancestors, lineal descendants and adopted children. (iii) A controlling shareholder of a company is an individual (or an individual acting jointly with other persons by agreement) who is entitled to exercise (or control the exercise of) 30% or more of the rights to vote at general meetings of the company, or who is able to control the appointment of directors who are then able to exercise a majority of votes at board meetings of the company. * Note to paragraph 1(h) of Schedule 1: under the Data Protection Act 1998 individuals need to give their consent for some of the information in these sub-paragraphs to be disclosed. If consent is withheld, this should be stated next to the name of the individual.

Annual Report and Financial Statements 2008/09 107

HCA_2009 AR_ ACCOUNTS digi_AW.indd 107

28/10/09 18:25:12

Homes and Communities Agency

GettinG in touch

homesandcommunities.co.uk [email protected] 0300 1234 500 HCA Offices Corporate Centre London 110 Buckingham Palace Road London SW1W 9SA Corporate Centre Warrington Arpley House 110 Birchwood Boulevard Birchwood Warrington WA3 7QH Ashford Kent House 81 Station Road Ashford Kent TN23 1PP Birmingham 5 St Philip’s Place Colmore Row Birmingham B3 2PW Bristol 1st Floor, Aztec Centre Aztec West Almondsbury Bristol BS32 4TD Cambridge Block 2, Suite 3 Westbrook Centre Milton Road Cambridge CB4 1YG

Corby 1st Floor Exchange Court Central Business Park Cottingham Road Corby NN17 1TY Croydon Leon House High Street Croydon Surrey CR9 1UH Exeter Beaufort House 51 New North Road Exeter EX4 4EP Gateshead St George’s House Kingsway Team Valley Gateshead NE11 0NA Leeds 2nd Floor, Lateral 8 City Walk Leeds LS11 9AT

London – West End Maple House 7th Floor 149 Tottenham Court Road London W1T 7BN Manchester 4th Floor One Piccadilly Gardens Manchester M1 1RG Milton Keynes Central Business Exchange II 414–428 Midsummer Boulevard Central Milton Keynes MK9 2EA Nottingham The Belgrave Centre Stanley Place Talbot Street Nottingham NG1 5GG Telford Jordan House West Hall Court Hall Park Way Telford TF3 4NN

London – Southwark Palestra 197 Blackfriars Road London SE1 8AA

108 Annual Report and Financial Statements 2008/09

HCA_2009 AR_ ACCOUNTS digi_AW.indd 108

28/10/09 18:25:12

Printed on Revive 100 silk containing 100 per cent de-inked recycled waste. All imagery in this document is the copyright of the HCA unless otherwise stated. Design by 300million Print by Seacourt Publication Code: HCA0049 Publication Date: November 2009

HCA_2009 AR_Cover_digi_AW.indd 2

28/10/09 18:09:55

The Homes and Communities Agency is able to provide literature in alternative formats including large print, braille and audio. HCA London 110 Buckingham Palace Road London SW1W 9SA

Please contact us on 0300 1234 500 or by email at [email protected] for further information.

HCA Warrington Arpley House 110 Birchwood Boulevard Birchwood Warrington WA3 7QH

Homes and Communities Agency Annual Report and Financial Statements 2008/09

homesandcommunities.co.uk [email protected] 0300 1234 500

Thriving communities, affordable homes

Annual Report and Financial Statements 2008/09

INVESTING NATIONALLY DELIVERING LOCALLY

Published by TSO (The Stationery Office) and available from: Online www.tsoshop.co.uk Mail, Telephone Fax & E-Mail TSO PO Box 29, Norwich, NR3 1GN Telephone orders/General enquiries 0870 600 5522 Order through the Parliamentary Hotline Lo-Call 0845 7 023474 Fax orders: 0870 600 5533 E-mail: [email protected] Textphone: 0870 240 3701 The Parliamentary Bookshop 12 Bridge Street, Parliament Square, London SW1A 2JX Telephone orders/General enquiries: 020 7219 3890 Fax orders: 020 7219 3866 Email: [email protected] Internet: http://www.bookshop.parliament.uk TSO@Blackwell and other Accredited Agents Customers can also order publications from TSO Ireland 16 Arthur Street, Belfast BT1 4GD 028 9023 8451 Fax 028 9023 5401

HCA_2009 AR_Cover_digi_AW.indd 1

28/10/09 18:09:55