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BUSINESS PLAN

2014-15

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CONTENTS

SECTION 1 - INTRODUCTION................................................................................................................4

SECTION 2 - CONTEXT........................................................................................................... ...............5

SECTION 3 - VISION, AIM & STRATEGIC OBJECTIVES.............................................................................6 SECTION 4 - ORGANISATIONAL OBJECTIVES.........................................................................................8 SECTION 5 - FINANCIAL FRAMEWORK................................................................................................14

SECTION 6 - RISK MANAGEMENT FRAMEWORK.................................................................................18 SECTION 7 - ASSET MANAGEMENT STRATEGY...................................................................................19 Appendix 1 - List of supporting Strategies, Analyses and Section Operational Plans...........................21 Appendix 2 - Staffing structure..........................................................................................................22

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SECTION 1 - INTRODUCTION 1.1 This Business Plan sets out the current aims and direction of Almond Housing Association. It outlines the key

areas we will focus on and sets objectives which are designed to ensure that our aims are achieved.

The Plan is an important part of our governance arrangements and it seeks to reflect the key principles in our Code of Governance. Our Board of Management have been fully engaged in setting our overall strategy and business direction. The Plan has been reviewed and approved by the full Board. In producing this Plan we have taken account of the Business Planning Guidance issued by the Scottish Housing Regulator in August 2012.

1.2 More detail is set out in the operational plans for each Section, and also within our various strategies and policies. A list of relevant documents is set out in Appendix 1.

1.3 In preparing this Plan we have sought to take account of the views of key stakeholders and have referred to relevant documents, including:

West Lothian Council Local Housing Strategy 2012 – 2017

West Lothian Council Strategic Housing Investment Plan (SHIP) 2012 – 2015

Scottish Social Housing Charter

Guidance from the Scottish Housing Regulator on implementing the Charter and measuring outcomes.

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SECTION 2 - CONTEXT

2.1 BRIEF HISTORY Almond Housing Association was set up in March 1994 to provide Livingston tenants with the opportunity of

continuity in the provision of housing services following the wind up of Livingston Development Corporation (LDC). In the 1996 ballot for LDC housing stock we were successful in 2 of the 3 areas and became the second largest landlord in West Lothian, after West Lothian Council (WLC), with 2,326 properties and 654 garages.

At 31 March 2014 the Association:

Owned 2442 properties and 655 garages

factored 195 properties (including 50 for landscaping only)

2.2 CONSTITUTION

The Association is a locally-based non-profit making voluntary organisation registered with the Registrar of Friendly Societies under the Industrial and Provident Societies Act 1965, Reg. No. 2471 R (S), with the Scottish Housing Regulator under the Housing (Scotland) Act 1988, Reg. No. HAL 285, and recognised as a Scottish Charity No. SC031696. The Association is also registered with the Scottish Government as a provider of factoring services, Reg. No. PF000181. The Association is accountable to its Members. There were 95 active Members at 31 March 2014. The Association’s financial year is 1 April to 31 March. An Annual General Meeting is held within six months of the end of the financial year. All Members are invited to attend to receive reports on the previous year’s activities, adopt the audited Annual Accounts, elect Members to serve on the Association’s Board of Management and to appoint the Association’s external auditors.

2.3 BOARD & STAFFING STRUCTURE

The Association’s affairs are run by the Board of Management, which has up to 15 Members and normally meets monthly. There is currently one Sub-Committee, the Audit and Finance Sub-Committee, and a standing Allocations Panel. From time to time, ‘short life’ working groups with a specific remit may also be set up. Further details about our Board, including the current Members, are available on our website www.almondha.org.uk The staffing structure as at 31 March 2014 is shown in Appendix 2.

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SECTION 3 - VISION, AIM & STRATEGIC OBJECTIVES 3.1 VISION

Our current vision is: ‘Providing the right to rent quality housing in West Lothian’.

3.2 AIMS

We aim to contribute to meeting housing and other needs in West Lothian through:

working in partnership with others to provide quality homes for rent and other forms of tenure

promoting the interests of tenants

investing in local communities through non-housing activities, and

providing other opportunities for local people to work together for the benefit of their communities.

3.3 STRATEGIC OBJECTIVES 2013-2016 Our Strategic Objectives set the overall direction for the Association over 3 years. They are reviewed

annually and may be amended within the 3-year period to reflect relevant changes within or outwith the Association.

OBJECTIVE 1: Provide high quality homes for renting at levels which are reasonable and comparable to those of other local landlords within our areas of operation. OBJECTIVE 2: Contribute to sustaining tenancies through the support and advice we provide to tenants, in particular with regard to the impact of welfare benefit reforms. OBJECTIVE 3: Contribute to the sustainable development of the area through the design and standards of our properties, and the choices we make in maintaining and improving them. OBJECTIVE 4: Manage our housing stock and associated estates efficiently, effectively and to high standards for the comfort, safety and benefit of our tenants and for the well-being of the community as a whole. OBJECTIVE 5: Ensure that, through our activities and relationships with our tenants, local groups and organisations, we maximise the opportunities for members of the community to be involved in our decision-making processes, where relevant. OBJECTIVE 6: Contribute to the development of our communities with the support of our subsidiary, Almond Enterprises, and where possible provide opportunities for local people to meet their non-housing needs OBJECTIVE 7: Continue to demonstrate high standards of governance and business effectiveness through scrutiny and due diligence by the Board of Management, ensure continued financial viability, and continue to invest in developing high standards of staff performance.

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3.4 ORGANISATIONAL OBJECTIVES 2014-15 To maintain progress towards achieving the Strategic Objectives, the Board approves an annual set of

Organisational Objectives. These are described in Section 4. The Organisational Objectives derive both from existing projects being continued and carried forward from a

previous year, and from the PEST (Political, Economic, Social and Technical) and SWOT (Strengths, Weaknesses, Opportunities and Threats) analyses carried out as part of the business planning process each year. These analyses are included in the set of supporting documents (listed in Appendix 1).

Flowing from the Organisational Objectives each Section sets their team objectives, and from these

individual staff objectives are set as part of the annual staff appraisal process.

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SECTION 4 - ORGANISATIONAL OBJECTIVES 2014-15

2014-15 Objectives Key risks associated with achieving the objective Mitigating Actions

Supporting Strategic Objective 1: Provide high quality homes for renting at levels which are reasonable and comparable to those of other local landlords within our areas of operation.

1 Achieve the Scottish Housing Quality Standard in all properties by 31 March 2015.

1.1 We do not complete the annual cyclical or planned maintenance annual programmes.

1.2 Additional work to achieve the SHQS standard by 2015 is required.

1.1 Funding provided in budget. Focus by Capital Projects staff & monitoring reports to Board.

1.2 Regular monitoring of Scottish Government guidance. Review & adapt current SHQS programme if required.

2 Successfully progress and complete the current new-build development programme.

2.1 The current development programme is not delivered on time or within cost.

2.2 A Consultant or Contractor goes into liquidation and/or unforeseen difficulties are experienced on site.

2.3 The quality of individual elements in the new-build properties is lower than desirable.

2.1 Comprehensive development procedures. Close monitoring of progress and costs.

2.2 Detailed financial appraisal pre-contract. Close monitoring during contract. Detailed liquidation procedures for prompt response if required. 2.3 High quality Design Brief & Specification. Close monitoring of quality during contract.

3 Continue to identify financially viable potential acquisitions and development sites within our area of operation.

3.1 UK & Scottish Gov’t financial decisions result in insufficient funding for new projects in medium term.

3.2 Current levels of grant allowances affect the viability of schemes still to receive approval.

3.3 New loan funding is not available, or is offered on disadvantageous conditions

3.4 The long term strategy of acquisition, modernisation, disposal or demolition of stock is not fully assessed and incorporated in financial projections.

3.1 No specific action available to reduce risk.

3.2 Rigorous option appraisals & risk assessments. Ensure level of ‘unsecured assets’ to back additional loans.

3.3 Not an immediate risk. Continue to forecast requirements well in advance.

3.4 Regular review of strategy includes comprehensive financial & risk assessments.

4 Complete the comprehensive review of the rent setting policy, including option appraisals, by 31 March 2015, for implementation by April 2015.

4.1 Review is not completed on time.

4.1 Focus by Management Team. Progress reports to Board.

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2014-15 Objectives Key risks associated with achieving the objective Mitigating Actions

Supporting Strategic Objective 2: Contribute to sustaining tenancies through the support and advice we provide to tenants, in particular with regard to the impact of welfare benefit reforms.

1 Continue to develop measures to minimise the impact of the welfare benefit reforms on tenants, and on the Association’s finances and systems.

1.1 We fail to identify the potential or actual impact of the reforms on tenants and/or Almond HA.

1.2 We fail to commit the staff time or other resources required to deal with the impact of the reforms.

1.3 We fail to maximise and evaluate the benefit of the SLAB funded financial advice project being delivered in association with CAB.

1.4 We fail to identify ongoing funding for financial inclusion projects following completion of the SLAB project.

1.5 We fail to improve the efficiency and effectiveness of internal systems.

1.1 Review of Government regulations, guidance and close networking with other RSLs and housing organisations to ensure that all impacts are identified.

1.2 Regular review of staff time/resources required and commitment to provide these, including ongoing review of necessary funding.

1.3 Ensure the advice project is publicised well, managed effectively, and evaluated on a quarterly basis.

1.4 With appropriate partners, identify suitable funding sources for benefit and budgeting advice and submit viable funding applications (see also Objective 6.3)

1.5 Implementation of the Core System replacement specification project (see also Objective 4.4).

2 Continue to develop the range of communication methods for tenants and other stakeholders to access information and advice.

2.1 We fail to improve existing or develop new ways of providing advice and information.

2.1 Ongoing development of new website. Exploration of text messaging. Updating of leaflets etc. Implementation of Tenant Participation Strategy.

Supporting Strategic Objective 3 Contribute to the sustainable development of the area through the design and standards of our properties, and the choices we make in maintaining and improving them.

1 Ensure the Asset Management Strategy is based on clear survey evidence of local needs and is designed to meet these needs.

1.1 We fail to complete comprehensive condition surveys and/or include tenants’ views on priorities for improvements etc.

1.1 Sample ‘check’ survey of 15% of stock to be carried out in 2014/15. Tenant views regularly sought via surveys, Open Days, Roadshows, Tenant Conference etc.

2 Implement identified energy efficiency improvements to reduce the extent of fuel poverty and carbon emissions in existing and new-build properties, and continue to research and develop additional measures.

2.1 We fail to explore all possibilities or take advantage of funding from Government or other energy schemes.

2.2 We fail to include energy efficiency measures in future maintenance programmes or new-build designs.

2.1 Regular monitoring of Government announcements etc., networking with others to ensure we keep up to date.

2.2 Regular review of future plans to include energy efficiency measures. Reports to Board on progress.

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2014-15 Objectives Key risks associated with achieving the objective Mitigating Actions

Supporting Strategic Objective 4 Manage our housing stock and associated estates efficiently, effectively and to high standards for the comfort, safety and benefit of our tenants and for the well-being of the community as a whole.

1 Implement agreed actions from the Tenants’ Satisfaction Survey, in particular relating to areas where

the need for improvement has been identified.

1.1 We fail to implement agreed actions, and in particular fail to monitor and measure progress towards achieving the improvements/standards in agreed areas.

1.1 Ongoing focus by Management Team & Tenant Focus Group, and regular reports to the Board.

2. Continue to develop the targets and methodology for assessing performance to deliver the Annual Report on the Charter (ARC), and identify the resources required for ongoing implementation.

2.1 We miss the 31 May deadline for submitting the ARC.

2.2 We fail to identify any areas for improvement in

information gathering and/or greater accuracy in measuring performance according to SHR guidance.

2.3 We fail to agree with the Tenant Focus Group the style and format for the annual report to be issued to all tenants.

2.4 The annual report is not issued to all tenants by the end of October.

2.1 Draft report to be submitted to May Board meeting and thereafter to Tenant Focus Group mid-May.

2.2 Continued focus in second year on ensuring that information recorded meets all SHR requirements – regular reports to Management Team and Board.

2.3 Item on Focus Group agenda. Recommendations to be submitted to and agreed with Management Team.

2.4 Continued focus by Management Team and Tenant Focus Group to ensure deadline is met.

3. Continue to survey, assess and prioritise landscaping work across the estate and prepare future investment plans for the replacement of both hard and soft landscaping.

3.1 We fail to identify, prioritise and deliver agreed improvements to landscaping.

3.1 Regular monitoring of progress by Management Team and reports to Board.

4. Establish and progress a project plan for the specification, selection and implementation of a new ‘Core’ IT system that meets business requirements.

4.1 Insufficient resources allocated to each phase of the project.

4.2 Insufficient knowledge of the OJEU (Official Journal of European Union) tendering process resulting in delays, errors etc.

4.3 Loss of key project personnel through absence or resignation.

4.4 Insufficient budget allocation to achieve all ‘wants’ and needs.

4.1 Senior Staff given lead roles within the project to ensure that the plan is progressed.

4.2 Appointment of external consultant to ensure compliance.

4.3 Appointment of external consultant. Senior staff have

long notice periods which will enable handover period.

4.4 Significant budget allocation within 30 year Plan.

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2014-15 Objectives Key risks associated with achieving the objective Mitigating Actions

Supporting Strategic Objective 5 Ensure that, through our activities and relationships with our tenants, local groups and organisations, we maximise the opportunities for members of the community to be involved in our decision-making processes, where relevant.

1. Continue to develop ‘tenant scrutiny’ activities to comply with Charter requirements, in particular building the Focus Group’s capacity to undertake the role through resourcing training and support, and continue to develop self-assessment measures.

1.1 We fail to encourage sufficient tenants to participate in the Focus Group and other scrutiny activities, or to join

the consultation list.

1.2 We fail to ‘build capacity’ by not providing relevant and/or adequate training or support.

1.3 Internal self-assessment measures are not developed.

1.1 While we cannot ‘make’ tenants etc. participate, continue to offer a wide range of ways of ‘getting

involved’ to maximise involvement and input.

1.2 At least one training event to be provided. Ongoing support provided by designated staff.

1.3 Self-assessment programme to be recommenced with regular reports to Management Team and Focus Group.

2. Use complaints, surveys and repairs feedback to inform future decision-making where appropriate.

2.1 We fail to take account of views received when making decisions on future priorities, action, policies etc.

2.1 Regular review of complaints, survey feedback etc. and reporting to Focus Group on resulting decisions, actions.

3. Develop the range of systems and opportunities for tenants and others to provide their feedback and opinions, and to contribute to decision-making and setting priorities.

3.1 We fail to provide a range of events, in particular the next Tenants Conference.

3.1 Tenants Conference to be held by mid 2014, including review of Tenant Satisfaction Survey results. Other events such as road shows to be held as required.

Supporting Strategic Objective 6 Contribute to the development of our communities with the support of our subsidiary, Almond Enterprises, where possible providing opportunities for local people to meet their non-housing needs

1. Support Almond Enterprises to develop their role and activities specifically in relation to business growth, local employment opportunities and their continued financial viability.

1.1 Activities identified by AEL do not meet the needs of AHA, and synergy within the Group is not achieved.

1.2 New activities are not sufficiently financially viable to sustain in the long term.

1.1 Maintain close liaison through AHA membership of AEL Board and regular management meetings to identify and where appropriate provide any assistance required.

1.2 AEL Board to progress option appraisal exercise included within their business plan, in 2014/15.

2. With AEL Board Members, identify what additional services can be provided in the community, by the community and for the community.

2.1 We fail to maintain close liaison and as a result do not identify suitable services for the benefit of the community.

2.1 AEL Board and AEL/AHA management meetings are scheduled regularly.

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2014-15 Objectives Key risks associated with achieving the objective Mitigating Actions

3. Through the appointment of a Community Initiatives Co-ordinator, identify the need and the appetite for support, e.g. in areas such as digital inclusion, and assess the financial viability of projects, taking account of ongoing funding available to meet demand.

3.1 Insufficient community engagement results in incorrect or inadequate needs assessment.

3.2 Insufficient time available to identify funding sources results in a reduced service and/or increased costs to AHA.

3.1 Work closely in partnership with local community, voluntary and tenant groups to identify gaps in provision and the appetite for specific projects to fill these gaps.

3.2 Provide resources necessary to identify suitable service delivery agents, prepare funding proposals for additional services and manage the funding awarded.

Supporting Strategic Objective 7 Continue to demonstrate high standards of governance and business effectiveness through scrutiny and due diligence by the Board of Management, ensure continued financial viability, and continue to invest in developing high standards of staff performance.

1. Continue to implement Governance changes, including annual Board appraisals, ongoing training, and provision of timely & relevant information so Board Members can discharge their scrutiny role.

1.1 We fail to maintain progress towards ensuring that our governance arrangements meet current requirements.

1.2 We fail to maintain a good balance and range of Board skills and experience.

1.3 Board Members fail to take up training opportunities and as a result lack the necessary skills etc.

1.1 Programme of changes agreed and progressing. The Consultant involved in 2013 will again carry out

annual Board Member appraisals.

1.2 Continue to assess the skills/experience we require, and

carry out further recruitment if a need is identified.

1.3 Regulatory requirement to demonstrate necessary skills. Every opportunity to attend training as required will be provided and encouraged.

2. Continue to improve procurement efficiency re. contracting and managing relationships with suppliers, to secure reductions in operating costs.

2.1 We fail to implement improvements and secure maximum ‘best value’.

2.1 Ongoing review of current procurement arrangements. Existing maintenance contracts being renewed by mid

2014 following comprehensive review of specifications and with improved ‘quality’ requirements.

3. Ensure all staff have realistic but stretching targets linked to the Business Plan, and that any additional learning and development needs are identified and addressed.

3.1 We fail to set appropriate targets to improve effectiveness, efficiency and deliver the Business Plan. 3.2 We fail to identify and/or deliver training requirements.

3.1 As part of staff annual appraisal meetings, Managers to ensure individual objectives link to the Business Plan.

3.2 Comprehensive training & development procedures already in place, with budget provision.

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2014-15 Objectives Key risks associated with achieving the objective Mitigating Actions

4. Achieve all key financial ratios.

4.1 We fail to achieve all key ratios and breach loan covenant conditions.

4.1 Regular financial monitoring of all key financial factors, and performance against budget. Reports to Audit & Finance Sub-Committee and to Board.

5. Continue to review all key working practices aiming to ‘work smarter’ across the organisation, making greater use of technology to streamline processes and reducing operating costs.

5.1 We fail to ‘change’ – to improve our effectiveness and efficiency – and fail to take advantage of appropriate new technology.

5.1 Ongoing review of work practices across the organisation. Rigorous questioning of procedures and willingness to change where there are clear benefits to staff, tenants and other clients.

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SECTION 5 - FINANCIAL FRAMEWORK 5.0 OVERVIEW

This section provides some background detail to the 2014/2015 budget and the financial forecast for the following two years – 2015/2016 to 2016/2017.

5.1 KEY ASSUMPTIONS 5.1.1 Developments

During the 3 years of the forecast there are four developments projected to be on site, with two completing during the period. This represents 60 new properties to let. The capital spend for these projects is £2.6m with £1.2m of public subsidy and £1.4m of cash subsidy.

5.1.2 Staffing

During 2014/15, the Association will recruit a Repairs Manager to assist in improving performance in our responsive repairs service, and recruit a Governance Officer to assist the organisation to improve overall performance in services and the associated monitoring of these services. During the second year of our plan, the full introduction of Universal Credit will impact on the Association with 50% of our income now being paid directly to our tenants, rather than via a direct payment to the Association. The Association has provided for the potential of recruiting Communities Initiatives post and to support digital inclusion via either funding a post or providing match funding to support tenants in ensuring on-line benefit applications can be made for the introduction of Universal Credit.

5.1.3 SHQS – revenue costs

We are assuming that we will spend £1.291m on achieving the SHQS standard in all stock by 2015, and will continue to improve our stock in preparation of the Energy Efficiency Target of 2020. The Association will continue to report healthy surpluses during the period of an average 156% interest cover. This level allows an element of headroom over our loan covenant over the period, and provides sufficient funds for future investment in our stock.

5.1.4 Pensions

During 2013/14 the results of the tri-annual pension scheme valuation were announced together with details of future funding requirements. During 2014/2015 the Association will undertake staff consultation on the future of the SHAPS final salary scheme on offer. The Association will consider the introduction of alternative benefits within the SHAPS scheme to ensure that pensions remain affordable to both the organisation and staff. The Board have introduced a defined contribution scheme for new members from 1 April 2014, with contribution rates of 5% from the employee and 10% from the employer.

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5.2 3 YEAR FINANCIAL FORECAST

5.2.1 Income and Expenditure

Income and Expenditure

2014/15 £000

2015/16 £000

2016/17 £000

Turnover 10,046 10,521 10,923

Operating costs 8,386 8,847 9,515

Operating surplus 1,659 1,674 1,408

Sale of properties 48 77 108

Interest 1,000 1,045 1,188

Net Surplus 723 713 334

The fluctuations in surplus are due to movements in both the planned maintenance programmes and also the cyclical works programmed to be undertaken. When these variances are removed the Association’s operations remain relatively static during the period.

5.2.2 Balance Sheet

Balance Sheet Extract 2014/15 £000

2015/16 £000

2016/17 £000

Property 85,360 88,327 90,115

Grant 28,766 28,871 29,637

Net Property [net of depreciation]

42,574 43,675 42,866

Cash 2,713 932 848

Loans 31,689 31,375 29,579

Net Assets 14,971 15,684 16,018

The balance sheet extract highlights increased property values with the developments completing. The continued management of stock and the on-going surpluses generated to ensure adequate cover for loan covenants and on-going stock improvements increase our net asset position.

5.2.3 Cashflow

Cashflow extracts [cash outflows are shown in brackets]

2014/15 £000

2015/16 £000

2016/17 £000

Development Spend (4,461) (3,161) (3,001)

Grant 2,694 820 1,500

Sale of developments - - 1,279

Major works / stock condition (1,291) (991) (1,399)

Loan drawdown - Nil

Loan repayment incl. interest ( 1,308 ) ( 1,359 ) ( 5,985)

Over the next 3 years it is anticipated that the revolver facility will be reduced by £1m.

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5.2.4 Loan Covenants

Loan Covenant 2014/15 2015/16 2016/17

RBS

Gearing 37% 36% 33%

Maximum permitted 60% 60% 60%

Asset cover 2.35:1 2.4:1 2.6:1

Minimum permitted 1.1:1 1.1:1 1.1:1

(operating cash + dep’n)/ borrowing costs

3.4:1 3.4:1 2.8:1

Minimum permitted 1.1:1 1.1:1 1.1:1

Nationwide /Dunfermline BS

Surplus / interest payable 171% 168% 128%

Minimum permitted 110% 110% 110%

During the 3 year period there are no covenant issues experienced. From a review of our 30 year plan, using our long term assumptions again there are no issues experienced with the loan covenants in place.

5.2.5 Key Assumptions

Key Assumptions 2014/15 2015/16 2016/17

Inflation 2.7% 2.7% 2.7%

Libor (interest rate benchmark) 0.6% 0.6% 1.3%

Increases above / below inflation

Rent 0.5% 0.5% 0.5%

Salary costs - - -

Maintenance costs - - -

Voids 0.5% 0.6% 0.6%

Bad debts 1.3% 3.5% 3.5%

5.2.6 Unit Costs

Unit costs 2014/15 2015/16 2016/17

Rent per unit per week £77 £80 £82

Re-active maintenance £867 £905 £972

Cyclical / planned maintenance £81 £125 £117

Major repairs £529 £401 £566

Major repairs incl capitalised £1,007 £1,331 £1,550

Management cost per unit* £1,273 £1,436 £1,417

* Management costs increase due to the computer system replacement in 2015/16 and increased costs of bad debts in relation to the introduction of Universal Credit.

5.3 SENSITIVITY ANALYSIS

In preparing both the annual budget and longer term plans the Association has considered a number of sensitivities in both income received by the organisation and expenditure incurred. Key areas reviewed were: rent increase levels, maintenance costs, general running costs, salary costs, loan interest rates, pension scheme membership movements, levels of bad debts and arrears, property sales.

The review of these sensitivities together with the levels of agreed expenditure to achieve the Business Plan objectives during the short term enabled the Board to agree a level of rent increase for 2014/15 of 3.2%, which it is felt will allow our rents to remain affordable for our tenants, whilst ensuring that the Association remains financially viable.

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5.4 KEY FINANCIAL RISKS & SCENARIO PLANNING

5.4.1 SHQS and Energy Efficiency Standards

The value of major repairs expenditure programmed for the period 2013 – 2020 will be insufficient to achieve SHQS by 2015 and the new energy efficiency standards by 2020.

Subject to other factors, the Association could increase its spending on these areas without affecting the loan covenants over the planning period, to achieve the standards. However the Association’s asset management strategy may need further updating should costs per property increase radically.

5.4.2 Interest rates

Interest rates incurred are higher than projected.

The plan assumes a LIBOR rate within the short, medium and long term based upon information obtained from our treasury advisors Murja. The Association’s loans are either at fixed rate or LIBOR plus associated margins applicable to the loans. Subject to other factors the Association could accommodate a small increase in LIBOR rates above the levels predicted without affecting loan covenants. Should larger increases arise, then the Association would need to re-phase the major repairs expenditure programme to ensure compliance with loan covenants. It is not anticipated that this would cause any significant operational issues

5.4.3 Rental Growth

The levels of rental growth may be less than projected.

When reviewing our 30 year plan we considered an assumption of rental growth of RPI-0.5% whilst costs were increasing by RPI. This resulted in loan covenant breaches, therefore we would either require to re-phase expenditure to manage the levels of surpluses each year or control costs to the levels of rental growth, or a combination of the two.

5.4.4 Welfare reform impact on revenue and arrears

Arrears are significantly higher than projected.

In 2013/14 52.7% of our total rental income was housing benefit. With the introduction of Universal Credit, this income will no longer be received directly by the Association and will need to be paid by the tenants. Should a significant proportion of these tenants not remit these funds to the Association this will have a significant impact on the operating cash flow and will increase the levels of rent arrears, and subsequently the levels of bad debts.

Increases in the levels of arrears and bad debts have been incorporated within our budget and long term plans which result in increasing the arrears and bad debts percentages to 7.8% and 3.5% respectively. When reviewing our 30 year plan, should income recovery from those in receipt of Universal Credit drop by 10%, this would result in a reduction in cash flow of around £0.5m. This would increase borrowing during the planning period, however it is not envisaged that this would result in loan covenant breaches. Increased levels of bad debts have been assessed to establish what can be sustained without resulting in loan covenant breaches.

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SECTION 6 - RISK MANAGEMENT FRAMEWORK 6.0 OVERVIEW

Almond has an overarching risk management policy which states: “We recognise the need for, and the value of a comprehensive Risk Management Strategy, which aims to minimise risk and the financial or other consequences should anything go wrong.”

In practice this means that we ensure that we have a robust organisational structure, a range of policies and procedures, and comprehensive insurances, which together make up the Risk Management Strategy.

We recognise that it is not possible to foresee and anticipate every eventuality, and that some events are outwith our control. We regularly review the Risk Management Strategy, both in the light of general experience and following any specific losses, and revise or update the Strategy as required.

6.1 SPECIFIC AREAS COVERED BY RISK MANAGEMENT FRAMEWORK

o Board control o Compliance with legislation o Development o Housing Management o Housing Maintenance o Financial Management o Loan Procurement o Insurances o Human Resource (HR) issues o Equality & Diversity o Health and Safety o Staff Security o Security of Buildings and Assets o Information Technology(IT) Strategy o Unforeseen events o Business Continuity

6.2 RISK ASSESSMENTS & RISK REGISTER

All risks are assessed against a risk matrix measuring Impact and Likelihood and given scores of 1 (low)

to 5 (high) for each. Combined scores of 1 - 4 are deemed ‘low risk’, between 5 -14 are ‘medium risk’

and between 15 - 25 are ‘high risk’.

The Risk Register is reviewed quarterly by the Senior Management Team and Audit and Finance Sub-

Committee, with reports from the Sub-Committee to the Board on ‘high risk’ matters.

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SECTION 7 - ASSET MANAGEMENT STRATEGY 7.0 OVERVIEW Asset Management may be defined as: “The efficient and effective direction and utilisation of all assets, including for example property,

vehicles, IT systems and financial reserves, to sustain the business.”

[Improving Property Asset Management in the Central Civil Government Estate, Leeds University, April 2006]

Property asset management comprises:

a) a strategic component, the focus of which is the medium term (3 – 5 years) to longer term

(up to 30 years) and involves decisions on appropriate investment in property assets to meet customers’ needs and service delivery requirement, e.g. new-build developments, major planned maintenance programmes, provision of offices;

b) an operational component, the focus of which is the ongoing management of property assets over the short to medium term within an allocated budgetary framework, e.g. annual cyclical maintenance programmes or short-term planned maintenance projects.

7.1 ASSET MANAGEMENT STRATEGY - AIMS The overall aims of our Asset Management Strategy are to:

a) build new or refurbish existing properties complying with all current statutory requirements

and completed to as high a standard as possible, so that we:

provide high quality homes for our tenants;

contribute to developing balanced and sustainable communities;

maximise the useful life of each property;

minimise the short, medium and long term maintenance costs of our properties;

b) ensure that our property asset base and development plans meet local long-term housing needs as identified by West Lothian Council’s current Local Housing Strategy, with regard to location, property types and sizes;

c) continually assess that our property asset base generates a positive return, and where individual properties have been purchased outwith our normal areas of operation, e.g. through the Empty Homes or Mortgage to Rent initiatives , assess at each tenancy termination whether the property should be retained, or sold because it is generating no return or is being subsidised by the remainder of the stock;

d) meet the Scottish Housing Quality Standard in all our properties by 2015 at the latest;

e) have the required finance in place to meet current and future property asset management requirements;

f) continue to examine alternative ways of delivering repairs services, including developing ‘in house’ services through Almond Enterprises, which may also create local employment opportunities;

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g) develop the use of modern ‘low carbon’ technologies for the production of heat and power in our properties, to reduce overall energy usage and reduce our tenants’ energy bills where possible, as part of our contribution towards the Scottish Government’s commitments to reduce energy consumption by 12% and greenhouse gas emissions by 42%, by December 2020;

h) where appropriate apply for grants from Scottish or UK Government ‘green’ funds for works such as loft, cavity or external wall insulation, or the installation of energy efficient technologies;

i) develop the use of sustainable products and materials both in new projects and the maintenance of existing properties;

j) continue the development of our IT systems so that they meet all requirements, in particular housing management and maintenance requirements, as efficiently and effectively as possible;

k) implement effective Housing Management and Maintenance policies including Allocations, Rent Setting, Mutual Exchange, Transfer, Anti-Social Behaviour, Tenant Participation, Estate Management, Reactive Repairs, Cyclical & Planned Maintenance, Factoring and Voids Management etc. so that we:

continue to meet local housing needs;

provide attractive and safe places to live in;

minimise property turn-over rates;

minimise the time properties are vacant during voids;

keep our properties and estates in a good state of repair;

maximise the anticipated life of our properties;

take account of the needs and priorities of our tenants;

engage tenants in the management and upkeep of their properties and local areas, and in the development of sustainable communities.

l) continue to invest in staff training, in particular relating to relevant procedures and IT systems, so that we deliver an efficient, effective and ‘value for money’ service.

7.2 ANNUAL ACTION PLAN The overall Strategy is supported by a detailed Action Plan which is reviewed and revised annually.

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Appendix 1 - Underpinning Strategies, Operational Plans and Policies

DOCUMENT OWNER LAST UPDATE

Operational Plan: Asset Management SH

Operational Plan: Corporate Services A

Operational Plan: Finance CP

Operational Plan: Housing Management TP

Risk Strategy and associated Risk Register GW

SWOT and PEST analyses GW

30 Year Financial Projections (including Stress Testing / Scenario Planning / Sensitivity Analysis)

CP

Asset Management Strategy - Annual Action Plan SH

Strategic Housing Investment Plan (Link into WLC document) SH

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