Select Committee on Public Accounts Thirteenth Report


THIRTEENTH REPORT


The Committee of Public Accounts has agreed to the following Report:—

REGULATING HOUSING ASSOCIATIONS' MANAGEMENT OF

FINANCIAL RISK

INTRODUCTION AND SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

The Housing Corporation (the Corporation) are a non-departmental public body sponsored by the Department of Transport, Local Government and the Regions (the Department). The Corporation have two main functions - paying grants to housing associations and other registered social landlords (RSLs)[1] to provide social housing; and regulating RSLs' governance, financial performance and the development and provision of social housing in order to protect the interests of tenants and taxpayers.

RSLs are registered charities, industrial and provident societies or not-for-profit companies registered with the Corporation to provide housing at affordable rents for the homeless and people on low income or with special needs. There are now some 2,100 RSLs. They own or manage some 1.45 million homes, a third of the social housing stock in England, housing some 3.2 million people. Some £24 billion of public money has been invested in RSLs' housing assets, and grants to RSLs are planned to rise from £811 million in 1999-00 to £1.2 billion in 2003-04. Since 1992-93, the sector has in addition, raised some £20 billion in private finance, and continues to borrow between £1.5 billion and £2 billion a year from private lenders such as banks and building societies.

Responsibility for the day-to-day management of their financial risks rests with the RSLs themselves, while the Corporation are responsible for regulating how well RSLs do this. On the basis of a report by the Comptroller and Auditor General,[2] our predecessor Committee took evidence from the Corporation about their regulation of RSLs. Three main conclusions and recommendations emerge.

  • The Corporation have a good re+ord in preventing serious failures amongst RSLs and the sector as a whole remains financially healthy. The Corporation should not, however, be complacent about the recent deterioration in RSLs' finances. There are growing problems with rent arrears, late payment of Housing Benefit receipts and low or falling demand for RSLs' housing. The Corporation set benchmarks for assessing the financial performance of RSLs partly by reference to the resources available to follow up weaker cases. The benchmarks do not therefore necessarily reflect a considered judgement of what represents sound financial performance by an RSL. As financial performance in the sector comes under further pressure, the Corporation must maintain a rigorous approach to identifying and following up weaker performing RSLs. They should not lower their benchmarks because of pressure on their own resources.

  • The Corporation should ensure that RSLs' commercial ventures do not jeopardise the provision of social housing or the taxpayers' funds invested in that housing. There is a growing trend for RSLs to diversify into new types of business. The Corporation may be right in assessing the resulting risks to the sector as a whole to be limited; failure of a diversified activity within an individual RSL could however impact adversely on its social housing activities. The Corporation should review whether their regulatory staff have sufficient skills to identify and understand the risks involved in diversified activities, including often complex financing arrangements; and their ability to assess adequately any threats to the security of an RSL's social housing business.

  • The Corporation should ensure that regulatory assessments are based on robust data. The current regulatory regime is weakened by the lack of independent validation of information provided to the Corporation by RSLs. Where the Corporation undertake their own validation checks, these often lead to a re-assessment of the RSL's performance from a satisfactory category to one of a higher risk. In developing a new regulatory regime the Corporation should seek independent validation of key information by RSLs' internal or external auditors to provide greater assurance of the information's reliability as a basis for regulatory judgements, and greater efficiency in the use of regulators' time.

Other important conclusions and recommendations are as follows:

On recognising and reporting on the key financial risks in the sector

There has been a decline in the percentage of large RSLs passing the financial ratios that the Corporation use to assess landlords' solvency and financial viability, suggesting an increase in financial risk. The Corporation should focus on the underlying causes of RSLs' deteriorating performance, and on the actions needed to address these causes to reduce, for example, delays in Housing Benefit awards. (paragraph 13)

The Corporation should compile a comprehensive appraisal of the financial risk in the sector, and develop a risk model to assist them in their regulation of the sector. As well as existing risks, the Corporation should assess risks likely to emerge in coming years so these can be addressed in good time. They should produce annually a report on the financial performance of the sector to better inform Parliament, the Department, RSLs and others interested in the sector. (paragraph 14)

At a time when the sector is growing and changing, the Corporation are making significant changes to their regulatory regime in order to focus on outcomes achieved by RSLs in managing risks, rather than setting performance standards for risk management. The Corporation should assess whether their new regulatory focus delivers the anticipated increase in ownership of risk management responsibilities by RSL boards and higher standards of self regulation. (paragraph 15)

As the Corporation increases reliance on RSLs' boards to manage risks, they should review whether the current framework for recruiting and retaining RSL board members attracts people with the right business skills and experience to meet the challenges of governing increasingly large and complex organisations. (paragraph 16)

On acting on specific financial risks

The Corporation assured our predecessors that public monies provided for social housing could not be used to subsidise diversified activities. However, there is a risk that weak standards of accounting in RSLs could result in a lack of management information to demonstrate how different streams of monies have been utilised and to apportion costs fairly. Overheads of diversified activities might, for example, be borne by mainstream social housing activities. The Corporation should review their current regulatory procedures and sources of assurance to determine whether they are sufficient to identify risks of this kind. (paragraph 26)

As part of their new regulatory framework, the Corporation are placing reliance on RSLs own risk appraisals. Following weaknesses in RSLs' early risk appraisals, the Corporation issued new guidance in December 2000. The Corporation should undertake an early review of the impact of this guidance to determine whether it leads to improvements in the quality of RSLs' risk assessments, and in their management of risks identified. (paragraph 27)

The Corporation are responding to the need to revise their financial ratios and the pass/fail benchmarks used to assess RSLs' financial viability. They are bringing in new ratios, and a wider range of ratios to deal with the different circumstances of RSLs, for example where Large Scale Voluntary Transfers of properties from local authorities have taken place. They should, however, link their financial ratio assessments more closely to their review of RSLs' risks, and flex the benchmarks to take account of the level of risks faced by an individual RSL. (paragraph 28)

On the consistency and transparency of regulation

The National Audit Office examination, and the Corporation's own quality assurance programme, found significant variations in regulatory assessment between the Corporation's offices. The Corporation should monitor the performance of their offices on a regular basis, and seek substantiated explanations where an office's regulatory assessments appear out of line with others. They should use the results of their monitoring to determine whether their new training system for regulatory staff is helping to provide more consistent judgements about RSLs' performance in similar circumstances. (paragraph 38)

The regulatory regime is also dependent on the Corporation having staff with the right skills and business experience to act as effective regulators. The Corporation have taken action to address the concerns of RSLs and others about the range of their regulators' skills through their current recruitment policies. They will also need to ensure the continual updating and expansion of regulators' skills as the sector changes. Their current consideration of an expanded secondment programme with bodies involved in the social housing sector should aid them in this respect. (paragraph 39)

The Corporation have been slow to provide RSLs and other stakeholders, such as local authorities, with feedback on the results of their regulatory assessments. Feedback should be full and timely, so that prompt action may be taken on any problems identified. The Corporation should consider expanding their current trial of placing regulatory assessments in the public domain for the benefit of all stakeholders in the sector. Appropriate caveats could be added about the purpose for which they had been prepared, where necessary for legal liability or other reasons. (paragraph 40)

RECOGNISING AND REPORTING ON THE KEY FINANCIAL RISKS IN THE SECTOR

The Comptroller and Auditor General's report found that the Corporation and the sector had a good record in avoiding RSL financial failure. Over the past 10 years, there had been no insolvencies of any RSLs resulting in the loss of tenants' homes, despite an increase in the size and complexity of the sector. The sector had, however, come under increased financial pressure in recent years and that trend could be expected to continue. Government policy has been to encourage RSLs to make better use of their financial resources, by taking on and managing more risk. The Corporation fund a smaller proportion of the capital costs of RSLs' new developments than in the past, requiring RSLs to borrow more from private lenders. The Corporation had also taken steps to limit rent levels and rent increases.[3]

The effects of these pressures could be seen in the falling percentage of large RSLs passing the eight financial ratios that the Corporation use to assess landlords' solvency and financial viability. These ratios included rent arrears, rent losses and interest cover. The Corporation set a target that each ratio should be passed annually by 85 per cent of RSLs. Over the seven years 1993-94 to 1999-2000 there had been a steady decline in the percentage of large RSLs passing seven of the ratios, and in 1999-2000, the Corporation's target was not met for six out of the eight ratios.[4]

The Corporation did not necessarily agree that the data represented a deteriorating performance. The 85 per cent target did not reflect a judgement about the sector's expected performance. Instead it was a tripwire to review RSL performance, conditioned by the Corporation's workload. The Corporation had resisted lowering the benchmarks that determine whether an RSL passes or fails each ratio, even though RSLs were finding it more difficult to meet them. The Corporation were, however, reviewing the benchmarks to ensure that they matched industry norms, and also the appropriateness of the 85 per cent target.[5]

The Corporation had helped RSLs in serious financial difficulty by facilitating the transfer of RSLs' properties and tenancies to other, financially stronger RSLs. In the four years to March 2001, 13 RSLs faced severe financial difficulties and had to be rescued by being merged with other RSLs.[6] The Corporation considered it unlikely that this policy might lead some RSLs to take on greater risks than they should, in the belief that the Corporation would provide a safety net if they got into serious financial difficulty. RSLs' senior managers and board members' jobs would be at risk. The Corporation did not normally provide any extra funding themselves but always looked to other RSLs and lenders to finance any rescues. Banks and building societies lending to RSLs did not regard the Corporation as underwriting RSLs' financial risks.[7]

The Corporation gathered information on RSLs' finances, governance and financial management. They also produced sector-wide annual accounts with the National Housing Federation, and financial performance indicators for the sector as a whole. They had not, however, compiled a systematic or comprehensive appraisal of financial risk in the sector, or produced an annual report on the financial health of the sector to better inform Parliament, the Department and RSLs about the sector's financial performance.[8] The sector had grown very rapidly in the last few years, principally through the transfer of housing stock from local authorities to RSLs. The Corporation agreed that it would be helpful to produce a report on the financial health of the sector and lay it before Parliament. They also agreed that a risk model for the RSL sector as a whole should be developed as part of their current work.[9]

The Corporation had embarked on a "regulation revolution" to improve their regulation. In particular, their 69 performance standards, which set out detailed requirements on how RSLs should be governed and how their finances should be managed, were being replaced with a new, less detailed regulatory code focussing on the outcomes that RSLs were expected to achieve. RSLs would be expected to identify their own key risks and make arrangements for addressing them.[10] The Corporation acknowledged that they were carrying through significant changes both within the Corporation and within the RSL sector.[11] The Corporation believed, nonetheless, that the transition from performance standards to the new regulatory code did not bring major risks.[12]

The new regulatory code required RSLs to operate a financially viable business, adequate systems of internal control, arrangements to prevent and detect fraud and an adequate risk management framework.[13] The Corporation's regulation had been criticised in the past for being a box-ticking exercise against the performance standards and for creating a culture in which RSLs depended on the regulator for an assessment of how well they were governed and managed. The Corporation were keen that regulation should be an internal matter for RSLs' boards. RSLs' boards should therefore receive regular reports as if self regulation were in place and the Corporation should focus on the outcomes of these internal processes.[14] The Corporation would be issuing a formal consultation paper on their proposals, and the National Audit Office would be one of the bodies invited to comment.[15]

The Corporation said that RSLs' performance often depended on the quality of their managing boards, who were ultimately responsible for financial and operational performance and who had an important role to play under the new regulatory arrangements. The Corporation could not say with absolute certainty that they had complete confidence in every board. There were 29,000 people on RSLs' boards, working entirely without payment. The Corporation had issued proposals on modernising governance, covering issues such as the appraisal of board members' performance, proper recruitment systems for board members, and peer appraisal and mentoring, with a view to promoting best practice in the sector. The new regulatory code would include expectations about the competence of boards, and the Corporation would emphasise the boards' responsibility for making sure that they meet the Corporation's requirements on the governance, management and viability of RSLs.[16]

Conclusions

There has been a decline in the percentage of large RSLs passing the financial ratios that the Corporation use to assess landlords' solvency and financial viability, suggesting an increase in financial risk. The Corporation should focus on the underlying causes of RSLs' deteriorating performance, and on the actions needed to address these causes to reduce, for example, delays in Housing Benefit awards.

The Corporation should compile a comprehensive appraisal of the financial risk in the sector, and develop a risk model to assist them in their regulation of the sector. As well as existing risks, the Corporation should assess risks likely to emerge in coming years so these can be addressed in good time. They should produce annually a report on the financial performance of the sector to better inform Parliament, the Department, RSLs and others interested in the sector.

At a time when the sector is growing and changing, the Corporation are making significant changes to their regulatory regime in order to focus on outcomes achieved by RSLs in managing risks, rather than setting performance standards for risk management. The Corporation should assess whether their new regulatory focus delivers the anticipated increase in ownership of risk management responsibilities by RSL boards and higher standards of self regulation.

As the Corporation increases reliance on RSLs' boards to manage risks, they should review whether the current framework for recruiting and retaining RSL board members attracts people with the right business skills and experience to meet the challenges of governing increasingly large and complex organisations.

ACTING ON SPECIFIC FINANCIAL RISKS

Over the seven years 1993-94 to 1999-00 there was a marked deterioration in the number of RSLs passing four key financial ratios: rent arrears, which measure whether an RSL has problems receiving rents; rent gearing, which measures whether an RSL's debt is sustainable; rent losses, which measure whether an RSL has problems with empty properties and bad debts; and interest cover, which measures how much of an RSL's income is required to pay interest charges on its outstanding loans.[17]

The Corporation attributed the problem of rent arrears largely to local authorities' difficulties in processing tenants' Housing Benefit claims. Problems had arisen in the last 18 months to two years after measures had been brought in to counter Housing Benefit fraud. These measures were complex and often burdensome for tenants, who had to provide original documentation to support their claims. The problem of late rents was affecting a large number of RSLs. Some larger RSLs were able to overcome the problem, but the Corporation were concerned that some smaller RSLs would get into cash flow problems if matters did not improve soon.[18]

The Corporation had been trying to resolve this problem with the Department of Work and Pensions. RSLs could be more involved in the Housing Benefit system than they were at present. In particular, RSLs could be regarded as responsible bodies, carrying out some of the verification checks on Housing Benefit claims to ease the load on local authorities and to help improve the processing and payment of claims. The Corporation were considering a pilot exercise to see whether this would work. Housing Benefit problems affected local authorities as well as RSLs, and the Housing Benefit system was ultimately a matter for the Department of Work and Pensions.[19]

The downward trend in the number of RSLs passing the rent gearing ratio reflected government policy of making RSLs' assets work harder. RSLs were social businesses and their purpose was not to generate large surpluses. RSLs were borrowing more from private sector lenders and the Corporation was funding a lower proportion of RSLs' capital costs on new developments. The downward trend in the numbers passing the ratio was therefore understandable. The Corporation were monitoring very closely individual RSLs whose rent gearing ratios indicated that they would run out of capacity to borrow.[20]

In his report the Comptroller & Auditor General noted that regulatory staff looked for ways of explaining RSLs' failures against the financial ratios, rather than investigating the causes of the failures and considering action to remedy them. In particular, they routinely accepted that RSLs had problems with rent arrears and Housing Benefit receipts, without considering whether RSLs were taking action to address the problems or at least to reduce the financial impact on their business. If current trends continued, few if any RSLs would have an acceptable rent gearing within a few years' time, but the Corporation's current approach would not help address the underlying issues.[21]

In recent years, the Corporation had become concerned that RSLs were looking to diversify into new business activities, such as renting at market rates, and concerned that that trend might lead to increased financial risks. A National Audit Office survey of 210 RSLs showed that almost half of respondents had diversified in the previous three years and almost one-third planned to do so over the next three years.[22] As more RSLs diversify into new types of business over this period, there is a risk that public money intended by Parliament to be used by RSLs to provide social housing might be diverted, through design or force of circumstance, to fund or subsidise commercial activities. The Corporation assured our predecessors that money provided through the development programme could not be used for other purposes. RSLs' external auditors were required to check that grants had been used for the purposes intended.[23]

Many of the major lending institutions had expressed concern that RSLs were diversifying without adequate preparation. They believed that many RSLs had not assessed the additional burdens that new activities would place on their staff.[24] The Corporation now required RSLs to tell them about diversification activities where these represented a significant proportion of the RSL's annual turnover. Diversification brought little risk to the sector as a whole because the sector was financially strong and diversification activities were consistent with RSLs' aims and objectives. The Corporation recognised, however, that failure of a new business venture could damage an RSL's mainstream social housing activities.[25] Each RSL weighed up the risks and discussed them with regulatory staff. It was difficult, nonetheless, to predict in advance whether an individual RSL was capable of taking on the risk.[26]

RSLs' risk appraisals should be a key tool in helping RSLs and the Corporation identify financial risks. The National Audit Office examined the risk appraisals of 42 RSLs and found that they varied widely in their content, some adopting a strategic approach by highlighting around a dozen key business risks, while others set out hundreds of risks in detail. Many had not allocated responsibility for managing the risks or had identified the likelihood of the risks materialising or their potential impact on the RSL. Risks arising from diversification did not feature prominently in any of the appraisals.[27] The Corporation explained that those findings were based on the first round of risk appraisals, shortly after they had introduced the mandatory requirement for RSLs to prepare such appraisals, and that it was therefore not surprising that the appraisals were of variable quality. The Corporation too had noted that some risk appraisals lacked a strategic focus and that risk appraisal had often been a one-off project rather than a tool to manage risk actively. Since then they had worked closely with the sector to improve guidance on risk appraisal, publishing new guidance in December 2000. Lead regulators would focus on the quality of RSLs' risk appraisals because they were crucial to the success of the new regulatory approach.[28]

The financial ratios and benchmarks used by the Corporation to assess RSLs' financial health also play a key role in identifying emerging financial problems in individual RSLs. The National Audit Office commissioned Standard & Poor's, a leading credit rating agency, to review the ratios. They found that the benchmarks needed to be adjusted to reflect the business risks faced by an RSL, being flexed up or down depending on whether the RSL was facing more or less risk. Some ratios needed to be modified and new ratios introduced. The Corporation's ratios were also inappropriate for RSLs set up under the Large Scale Voluntary Transfer programme (for local authority housing stock), where the debt financing of such RSLs meant that they automatically failed most of the ratios.[29] The Corporation had found these recommendations useful and, as a result, had modified some ratios. They had commissioned consultants to undertake a thorough review of all the ratios, with particular attention on ratios for Large Scale Voluntary Transfer RSLs. The Corporation acknowledged that their existing ratios were not designed for the particular circumstances of those RSLs, whose performance should be monitored against their business plans. The consultants had been asked to develop ratios for assessing the longer-term viability of those RSLs, which will become important as RSLs build up a track record of performance over a number of years.[30]

Conclusions

The Corporation assured our predecessors that public monies provided for social housing could not be used to subsidise diversified activities. However, there is a risk that weak standards of accounting in RSLs could result in a lack of management information to demonstrate how different streams of monies have been utilised and to apportion costs fairly. Overheads of diversified activities might, for example, be borne by mainstream social housing activities. The Corporation should review their current regulatory procedures and sources of assurance to determine whether they are sufficient to identify risks of this kind.

As part of their new regulatory framework, the Corporation are placing reliance on RSLs own risk appraisals; following weaknesses in RSLs' early risk appraisals the Corporation issued new guidance in December 2000. The Corporation should undertake an early review of the impact of this guidance to determine whether it leads to improvements in the quality of RSLs' risk assessments, and in their management of risks identified.

The Corporation are responding to the need to revise their financial ratios and the pass/fail benchmarks used to assess RSLs' financial viability. They are bringing in new ratios, and a wider range of ratios to deal with the different circumstances of RSLs, for example where Large Scale Voluntary Transfers of properties from local authorities have taken place. They should, however, link their financial ratio assessments more closely to their review of RSLs' risks, and flex the benchmarks to take account of the level of risks faced by an individual RSL.

CONSISTENCY AND TRANSPARENCY OF REGULATION

After an initial computerised assessment of an RSL's finances, using financial ratios and benchmarks, the Corporation's regulatory staff investigate further and use their own knowledge about an RSL to arrive at an assessment of whether the RSL's performance is satisfactory, should be under observation, or under supervision. The National Audit Office found that, in 1999-2000, 45 per cent of RSLs were computer assessed as an observation case (a cause for concern) or a supervision case (a cause for serious concern) but two out of three such cases were subsequently upgraded to satisfactory by regulatory staff.[31]

There were also wide variations in the extent of such re-assessments across the Corporation's offices. The Corporation acknowledged that those variations were not acceptable, unless they could be explained by the character of the RSLs covered by those offices. The Corporation recognised that some regulators' judgements might be better than others. A quality assurance programme had been in place for the previous two to three years, which found that regulators' judgements were questionable in a small number of cases. The Corporation hoped that their new training system would ensure much greater consistency.[32]

On the other hand, when the Corporation visit a selection of RSLs each year to validate their performance returns, some 45 per cent of visits result in RSLs being downgraded, mostly from satisfactory status to observation status, with some being reclassified to supervision status. Around a quarter of reclassifications relate to financial concerns. The percentage of RSLs reclassified in this way has increased over the last few years.

The Corporation's regulation of RSLs had depended in part upon RSLs certifying each year their compliance with the Corporation's performance standards. With the introduction of the new regulatory code self-certification by RSLs would be reduced.[33] The Corporation would be consulting RSLs about this reduction, and they expected instead to require RSLs to have information validated by their internal or external auditors before submitting it to the Corporation.[34] Of the 20 RSLs visited by the National Audit Office, none had sought to validate their returns before submitting them.

The demands on the skills and knowledge of regulatory staff are likely to increase as more RSLs diversify into new business activities and establish complex organisational structures and partnerships, which will make it harder to assess RSLs' financial performance. In a survey of RSLs, the National Audit Office found that 36 per cent of respondents disagreed or strongly disagreed that the Corporation had staff with the right skills regulating their organisations. In particular, 60 per cent disagreed or strongly disagreed that the Corporation had staff with the necessary business experience to regulate their organisations' management of financial risk.[35]

The Corporation had recently recruited a number of specialist financial regulators, several of whom had come in from other regulators in the financial services industry. They now had lead regulators, who were quite senior people, dealing with the largest and most complex RSLs.[36] Most financial regulation staff had a professional qualification in finance. However, only a minority had a recognised professional housing qualification or direct experience in housing management. The Corporation were considering expanding their secondment scheme to encourage secondments to and from RSLs and other bodies involved in the social housing sector.[37]

The sector was expected to continue to expand over the coming years as a result of the Large Scale Voluntary Transfer programme. Registration of new RSLs created under this programme would be likely to place increased demands on regulatory staff. A review commissioned by the Corporation in July 1999 estimated that the regulatory workload would increase by 45 per cent up to 2004-05, as the transfer programme expanded.[38] The Corporation acknowledged the pressure that had been placed on their staff in recent years. In response, the Department had given the Corporation more resources, leading to a 23 per cent increase in the number of regulatory staff.[39] The Corporation's administration budget was expected to rise from £30 million in 1999-00 to £34 million in 2003-04, an increase of some 13 per cent.. The Corporation were confident that they had sufficient resources to cope with their workload. If their resources were likely to prove insufficient, they would ask the Department for more.[40]

The Corporation had not issued any guidance to RSLs explaining their financial ratios and benchmarks and how they were used to assess RSLs' solvency and financial viability. None of the 20 RSLs visited by the National Audit Office had a clear understanding of the ratios or of how the Corporation arrived at their financial assessments.[41] The Corporation acknowledged that it was increasingly important that RSLs understood the financial ratios and the benchmarks so that they knew what they were being assessed against. Until recently, the Corporation had been reluctant to tell RSLs how they calculated the ratios, although they had now done so. They intended to be much more open with RSLs about the ratios in future.[42]

At the 20 RSLs visited by the National Audit Office there was common concern that the Corporation had not provided the RSLs with appropriate and timely feedback on the results of their regulatory investigations. In their survey of RSLs, the National Audit Office also found that a substantial number of them were not satisfied with the feedback provided by the Corporation. Lenders and local authorities also wanted to see more information put into the public domain.[43] The Corporation recognised the importance of providing RSLs with appropriate and timely feedback. A system of feedback to RSLs existed but could be improved. Since the National Audit Office survey, the Corporation had introduced a system of lead regulators to develop a continuous relationship with the largest RSLs. With this system in place, feedback had improved significantly. The Corporation were also putting more information into the public domain. With the agreement of the RSLs concerned, the Corporation had recently put 60 regulatory appraisal reports on to their Internet website, and they expected further expansion in the coming years.[44]

Conclusions

The National Audit Office examination, and the Corporation's own quality assurance programme, found significant variations in regulatory assessment between the Corporation's offices. The Corporation should monitor the performance of their offices on a regular basis, and seek substantiated explanations where an office's regulatory assessments appear out of line with others. They should use the results of their monitoring to determine whether their new training system for regulatory staff is helping to provide more consistent judgements about RSLs' performance in similar circumstances.

The regulatory regime is also dependent on the Corporation having staff with the right skills and business experience to act as effective regulators. The Corporation have taken action to address the concerns of RSLs and others about the range of their regulators' skills through their current recruitment policies. They will also need to ensure the continual updating and expansion of regulators' skills as the sector changes. Their current consideration of an expanded secondment programme with bodies involved in the social housing sector should aid them in this respect.

The Corporation have been slow to provide RSLs and other stakeholders, such as local authorities, with feedback on the results of their regulatory assessments. Feedback should be full and timely, so that prompt action may be taken on any problems identified. The Corporation should consider expanding their current trial of placing regulatory assessments in the public domain for the benefit of all stakeholders in the sector. Appropriate caveats could be added about the purpose for which they had been prepared, where necessary for legal liability or other reasons.




1  Most registered social landlords are housing associations, but RSLs also include trusts, co--operatives and companies. Some housing associations choose not to register with the Housing Corporation and do not receive public funds. Back

2  C&AG's Report, HC 399 of Session 2000-2001 Regulating housing associations' management of financial risk Back

3   C&AG's Report, paras 2.3-2.5 Back

4   ibid, para 2.7 Back

5  Qs 5-6, 51-54, 58, and C&AG's Report, para 2.10 Back

6  C&AG's Report, paras 3, 2.3 Back

7  Qs 50, 88 Back

8  C&AG's Report, paras 3.15-3.16, 3.18 Back

9  Qs 8-11 Back

10  C&AG's Report, paras 3, 7, 2.15 Back

11  Q77 Back

12  Q3  Back

13  C&AG's Report, para 2.15 Back

14  Q75 Back

15  Q4 Back

16  Q32-36 Back

17  C&AG's Report, para 2.8 Back

18  Qs 51, 54, 56, 72 Back

19  Qs 51, 54-57, 72-73 Back

20  Qs 51, 54 Back

21  Qs 52, 54, 74 and C&AG's Report, para 4.18 Back

22  C&AG's Report, paras 1.5 and 2.18 Back

23  Qs 85-86, 88 Back

24  C&AG's Report, para 2.20 Back

25  Q85 Back

26  Q6 Back

27  C&AG's Report, paras 2.19, 3.12 Back

28  Q7 and C&AG's Report, para 3.13 Back

29  C&AG's Report, paras 4.8 and 4.18 Back

30  Qs 11-13 Back

31  C&AG's Report, paras 4.15-4.16 Back

32  Qs 14-15 Back

33  C&AG's Report, paras 3.7, 3.9-3.10 Back

34  Q84 Back

35  C&AG's Report, paras 4.6-4.7 Back

36  Qs 29, 38-41 Back

37  C&AG's Report, para 4.7 Back

38  ibid, para 4.5 Back

39  Q82 Back

40  Q87 Back

41  C&AG's Report, para 5.13 Back

42  Qs 60-63 Back

43  C&AG's Report, paras 5.12, 5.14 Back

44  Qs 64-70 Back


 
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