Transcript Value for Money

Value for Money
Self assessment - the lessons learnt
Lynn Dexter
Head of Consultancy
9 April 2014
Session aims
To provide update delegates on the lessons from
the first year of VFM VFM self-assessment.
1. Refresh understanding of the updated
regulatory context
2. Discuss the emerging lessons from Year 1
Regulatory context … updated
VFM regulation context
“we expect in future the regulator to be more
proactive…on ensuring VFM…to achieve
better returns for the taxpayer & support new
affordable housing supply “
-
Review of Social Housing Regulation 2010
“to protect historic government subsidy, promote
access to private finance, and help address the
lack of competitive pressures on providers
which might otherwise put pressure on service
quality and efficiency”
 The purpose of economic regulation (Regulatory
Framework 2014)
VFM regulation 2014 update
Remains an assuranceled approach to regulation
•
To obtain sufficient
assurance/evidence that
standards are being met
•
starting point is HAs Board
assurance on:
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compliance with standards
delivery of plans
effectiveness of control and risk
management frameworks
Critically the HCA wants be
assured that the board is
assured!
The ability to drive
VFM is a key
indicator of the
quality of governance
therefore business
critical to get it right!
VFM regulation 2014 update
Co-regulation thrust remains
consistent
Underpinned by three principles:
1.
2.
3.
Assurance led compliance
Risk based and proportionate
Joined up
WARNING! WARNING!
Model relies on data
accuracy and timeliness
of submission – don’t
be late!
Main updates:
• A refined its risk
assessment methodology to
focus attention on areas
and providers that are more
complex or exposed to
greater risks that impact
viability
• Non-compliant viability
straplines updated to reflect
‘gradings under review’
In reaching assurance the
Regulator will ask …
1.
2.
3.
4.
5.
6.
7.
8.
Do you have appropriate strategic business plan?
Understand operating environment and markets?
Financial plan/position support strategic objectives?
Understands risks around delivery of objectives, and
assured by controls?
Demonstrate VFM in delivering objectives?
Clear measureable objectives and track record of
delivery?
Transparent and accountable?
Effectively led and controlled?
Financial Reporting Council guidance
-Audit and Assurance
• Increasingly complex and
risky financing arrangements
• Decreased receipts from HB
… bad debts … voids …
impact on business plan,
ability to raise finance
• Diversification into nonsocial housing activities
• Partnerships and joint
ventures
• Sustained focus on home
improvement programmes
• Pension liabilities
• Need for commerciality of
Boards skills
So… what does the VFM Standard say?
The VFM standard:delivering VFM
• a comprehensive approach to VFM across all assets

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in the context of your objectives
mindful of competing stakeholder interests
• 3 Es still relevant as ever
• specific expectation of:
 robust approach to use of resources
 understanding of the return on assets (and
a proactive approach to managing them and
understanding future gains)
 effective performance management and
scrutiny arrangements
 an understanding of service costs (in
comparison to peers), outcomes & what drives those costs
The VFM standard: reporting VFM
“Boards shall demonstrate to stakeholders how they are meeting this
standard. … they will publish a robust self-assessment which sets out in
a way that is transparent and accessible to stakeholders how they are
achieving VFM in delivering their purpose and objectives.”
The acid test! The Self-Assessment shall:
 enable understanding of return on
assets
 set out absolute & comparative costs
of specific services
 provide a backward & forward look on
VFM gains
Accounts Direction specifies that providers
must include a self-assessment in the
Operating and Financial Review or Board
Report.
Round-up of implications
- the importance of a strategic approach to value
• 2004 VFM was about services
• 2012 VFM is the whole
business all resources
including assets
• …VFM less of an ‘add on’
• value is tagged to your
objectives not the regulator’s –
clear strategic direction is vital
• but has to reflect the value
perspective of stakeholders
We exist to maximise
Stakeholder
shareholder value
Round-up of implications
- the importance of a strategic approach to value
• Reconcile the tension
between stakeholder value
perspective
• existing v future tenants
• government (build) –vsector (beyond bricks ‘n’
mortar)
• VFM & (social) business
effectiveness are the same
thing
• can you measure the value
you exist to produce?
Round-up of implications
- the importance of a strategic approach to value
• greater emphasis on boards
• opportunity for the sector
• regulator is not dictating terms
Round-up of implications
- VFM SA principles
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Board ownership
VFM is comprehensive and strategic
across all resources
3 Es
Form and content of VFM SA
determined by your social purpose
and stakeholder interests
self-assessment should:
 be robust and transparent
• comprehensive
• not a PR exercise
 accessible to stakeholders
 address: a) return on assets, b)
absolute and comparative costs
and c) evidence of past and
prospective VFM gains.
OFR
Accessible and transparent
September deadline
Lessons from Year 1
HCA reflections on Year 1
• HCA generally
unhappy
• Presentational
problem
• HCA unlikely to be
more prescriptive in
its regulation
• downgrade G rating
by one notch
HCA Reflections on Year 1
“Generate
surplus,
generate
capacity”
- Julian Ashby, HCA
February 2014
HCA reflections on Year 1
“The sector’s ability to
use its resources
efficiently to deliver its
objectives is an
increasingly important
reputational issue”
Matthew Bailes
Executive Director,
Regulation, HCA
February 2014
Importance of on-time quality
reporting
“We will treat lateness
of submission of any
statutory returns and
data as a significant
governance control
weakness and grade
accordingly.”
Matthew Bailes,
Executive Director, Regulation, HCA
February 2014
HCA letter to Chairs (Feb 2014)
“The Regulatory Framework sets an expectation
that providers should develop a strategy to deliver
continuous improvement in:
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•
•
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Running costs
Return on assets
Evidence of gains
Transparency
HouseMark survey 2013 said …
Determining what was required
• uncertainty about requirements
• many opted for summary in accounts and detail on
website
Roles
• extensive board sign-off but scope for more involvement
in process
• only a third used tenant scrutiny
• little reference to input from other stakeholders
HouseMark survey 2013 said …
Return on assets
• wide interpretation
• contextual issues militate against
useful KPI
• improving understanding of stock
biz critical
Absolute & comparative costs
• HouseMark data
• limited in OFR
• some not stated costs
Evidence of gains
• data
• Impact of scrutiny, 3rd party
accreditations
• key issue - better understanding of
social value
HouseMark survey 2013 said …
Dissemination
• need to rationalise the docs that tell us about biz
effectiveness? OFR+?
• improve accessibility & transparency
• tone down PR
• reporting non-financial outcomes – learn from social accounts
Benefits
• majority saw value in process as biz tool
Regulatory improvements
• clarify expectations – fine line prescription –v- clarity of
expectations
Emerging schools of thought
Three emergent approaches …
HouseMark
approach
Corporate
priority approach
VFM standard
compliance
approach
Three emergent approaches …
The ‘HouseMark’ The ‘Compliant’
The ‘Corporate’
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definition of VFM in
context of purpose &
objectives
strategic approach to
VFM and use of
resources
arrangements to deliver
VFM – performance
management and
governance
what has been achieved
plans for next year
board assurance on the
VFM self-assessment
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background – ie HCA
requirement
what VFM means to us &
how seriously we take it
in terms of strategy &
delivery (ref standard)
return on assets
absolute & comparative
costs
past & future VFM gains
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Some take a KLOE approach •
• distil standards’ principles
• assess –v- criteria
•
definition of VFM in
context of purpose &
objectives
corporate objective #1
• aim
• arrangements to
ensure delivery
• achievements
• plans
corporate objective #2
• ditto
Corporate objective #3,
ditto
overall judgement
Measuring VFM
A final word …
Value is determined by you
… there is no template!
We can help …
• Return on Assets
• Early bird
benchmarking and
scenario planning
• VFM Self
Assessment support
• Embedding VFM in
the organisation
culture
• Board Assurance
• Operational
accreditations
• Repairs VFM toolkit
• Bespoke Clubs
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Welfare Reform
Voids
Active Assets
Business Assurance
• … specialist
Consultancy
Thank you for listening
[email protected]
079 6767 6767