Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)



  20. Which ones?
  (Dr Perry) The 600 large ones whose performance is really looked at in the NAO Report. 83 per cent of the people who do not put in accounts on time are organisations that have fewer than 250 homes and they are not in receipt of money.

  21. So you do have an analysis by type, size and region of those who are failing to submit their annual accounts and we could have a copy of those sent to the Committee?
  (Dr Perry) I would be happy to put a note in on that[1].

  22. You mentioned about court action. How many have you taken to court?
  (Dr Perry) I did not say. I do not have that information to hand.

  23. Could you let us have that information as well?
  (Dr Perry) Yes[2].

  24. You said that the court was not all that happy about some of them being brought to court because it was bureaucratic, but at the end of the day that is in the regulations and therefore, regardless of what the courts say, you are obliged to do that. When they go to court what are the punishments? What are the fines?
  (Dr Perry) The fines are usually small and very often if they are not paid the courts do not seek to enforce them.

  25. Right. So you are doing your job but the court is not?
  (Dr Perry) I did not say that, Chairman.

  26. Let us say there was a rapid deterioration in the financial stability of an RSL, how would you pick that up and take action immediately?
  (Dr Perry) It depends on the size of it. If it is one of the larger ones they have to produce quarterly financial returns which are based on their own management accounts. Every quarter we need to get them. They also have to do us a five-year projection of their financial performance. For the smaller ones we rely on annual accounts so there would be more of a time-lag. On the other hand, the regulation system does rely on quite a lot of intelligence passing backwards and forwards between RSLs and our offices and I would hope that we would not be unaware of problems that were arising.

  27. What would you consider to be a balance between a proactive action and a reactive action, if you like? Do you know what I mean?
  (Dr Perry) Well, proactive action would be when we received maybe two sets of quarters' accounts and we saw that something seemed to be happening, and if we had not already spoken to the chief executive and the finance director of that RSL, then we would certainly do so at that point. For those associations which are lead regulated, their lead regulator would go in pretty quickly.

  28. What you are basically saying—and I was going to ask you what action the Corporation took and what are the measures the Corporation has for assessing financial viability—is that the five-year forecasts and the quarterly financial forecasts are the two methods that you would have. You seem to be saying they are successful. Are they successful in picking up a situation like I mentioned where suddenly somebody gets into real trouble?
  (Dr Perry) We are rarely completely surprised when someone is in trouble. Hopefully we will have been there beforehand.

  29. Right. So how do you interpret those returns?
  (Dr Perry) We are moving to a more specialised system now where we have just recruited a number of specialist financial regulators, a number of them coming in from the financial services industry other regulators, and they will look at the quarterly returns, and assess the ratios on the basis of those.

  30. Would you say that they are of value?
  (Dr Perry) The quarterly returns are absolutely essential, yes.

  31. Are you not putting too much bureaucracy onto them or do you feel that that is the best way to do it?
  (Dr Perry) I would not have called that bureaucracy. They are making a regular financial report to the regulator.

  32. Fine, fine. I have got to be careful what I say because I always get myself into a little bit of trouble. I know some housing associations and very often the success of the housing association depends upon the standard of the board of the housing association. How confident are you that the boards are, in fact, competent, bearing in mind these people are the ones who are ultimately responsible for the financial and overall performance of a housing association? How confident are you that the boards are competent?
  (Dr Perry) I cannot say with any absolute certainty that we have complete confidence in every board all of the time. There are 29,000 people who sit on RSL boards. They are people who work entirely without payment. It one of the biggest voluntary—

  33. That is not an excuse that they can use, though, is it?
  (Dr Perry) Absolutely not and one housing association board found that out recently. We have been working on governance issues with housing associations for some time. The National Housing Federation does a very large amount of work with the boards of housing associations. We have at the moment the consultation paper out on modernising governance to which we are getting a good response, which raises issues and develops issues like appraisal of board members, proper recruitment systems for board members, peer appraisal and mentoring for board members, and tries to introduce into the RSL sector best practice—the sort of thing that the Institute of Directors and the CBI have been doing.

  34. You reckon that you do take a certain amount of action to ensure that the boards are competent?
  (Dr Perry) We encourage RSLs to develop methods which will give them reassurance that their boards are competent.

  35. Do you assess the boards at all?
  (Dr Perry) We do not assess the boards personally. Our lead regulators would certainly take a view on whether a board is on top of the job, is interacting properly, engaging properly with their own senior staff, and receiving the right kinds of report and doing with the reports what they are supposed to do. To that extent we do have an informal finger on the pulse of the quality of boards.

  36. The Chairman talked about the new Regulatory Code that is coming in, which is at consultation stage. Do you plan for that Regulatory Code to assist you in the assessment of the competence of the boards?
  (Dr Perry) Yes because the contents of the Code will include issues about the competence of the board. Mrs Miller has been responsible for doing a lot of this work.
  (Mrs Miller) There are three key elements to the Regulatory Code and they are to ensure that the organisation is viable, to ensure that it is properly governed, and to ensure that it is properly managed. In holding associations to the Regulatory Code we place great emphasis on the boards' responsibility in making sure that they meet our requirements.

  37. I will move on then. When you assess a housing association's or an RSL's financial viability, what account do you take of the salary levels of the senior staff and the benefits that they get and the golden handshake that they might be given? I can always remember a housing officer of a local authority coming to me with an annual report of a housing association and saying, "Look at the back page there, have a look at it, see the salaries they are paying them and what I am getting compared to them."
  (Dr Perry) I think it is fair to say that since there have been a couple of high profile cases in the last year or so that the word has gone out in the sector that this is something which has to be regarded seriously by them. We do have the power where payments are made which are non-contractual to intervene and we have used that power recently. Where very, very good packages are built into the contracts of employment we have less intervention powers. I think the power of peer pressure within the movement is getting quite strong now and I think such cases as there have been in the past are unlikely to be repeated.

  38. Okay. Let us move on. Paragraph 4.7—this is about the regulatory teams—how do you actually appoint the regional teams?
  (Dr Perry) We have been going through that process now. I was personally involved, and I selected with board members the assistant chief executive for regulation and I was also a member of the interview panels for the four directors of regulation in the country. We have now appointed assistant directors. We have recruited by public advertisement widely in the media and we have been successful in recruiting people from outside the Corporation.

  39. Are you confident that you are getting the right people for the job? It is a fairly junior post, is it not?
  (Dr Perry) No.

1   Note: See Evidence, Appendix 1, page 11 (PAC 00-01/174). Back

2   Note: See Evidence, Appendix 1, page 11 (PAC 00-01/174). Back

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