Home Group s Value for Money Self-Assessment 2014/15

Transcription

1 Home Group s Value for Money Self-Assessment 2014/15 Income breakdown Social Housing - Rents Social Housing - Other Supporting People Income Property Sales Income Other Income Capital Grant Receivable Housing Properties Repairs Interest payable Managing Our Homes Service Chargeable Costs Cost of Properties Sold Delivering Care and Support Other Expenditure breakdown

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3 HOME GROUP LTD. HOME GROUP S VALUE FOR MONEY SELF-ASSESSMENT 2014/15 Home Group s Value for Money Self-Assessment 2014/15 Contents Contents Page 1. Introduction and context Efficiency savings Procurement Cost to Serve/profitability Assets and liabilities Progress against Home Group s Value for 6 Money Improvement Plan 2013/14 3. Improvement Plan to be delivered in 2015/ Home Group s Strategy and Communications 8 9. Organisational performance and benchmarking Performance against Home Group VfM 22 Key Performance Indicators 9.2 Voids Arrears Repairs and maintenance performance Internal monitoring of build costs Corporate Governance Formal Governance structure Checks and balances Managing risk A greater focus on benchmarking HouseMark 2013/14 benchmarking report 28 including operating margin 9.8 Back Office Benchmarking Project governance An efficient, economic and effective workforce Optimising the value of our assets An integrated and outward looking organisation Involving our customers and clients to ensure 12 accountability and transparency in decision making 7.1 Involvement and engagement Involvement Client assessments of the Client Promise Strategy and brand Systems integration Campaigning and developing a stronger voice for the sector Customer and client profiling Customer assessments of the Customer Promise Measuring satisfaction Growing our income to ensure a sustainable organisation Development Strategic financial management Care and Support Approach to financial management Criteria underpinning corporate investment 17 decisions: the discretionary spend model 8.3 Income and expenditure breakdown Conclusions Progress to date and areas for improvement How Home Group meets the VfM Standard 35 03

4 HOME GROUP LTD. INTRODUCTION AND CONTEXT 1. Introduction and Context This is Home Group s third annual Value for Money (VfM) Self-Assessment. Our self-assessment for 2013/14, Optimising_Value@Home, was very detailed and set out a significant amount of context around how we got to where we are now. This year s self-assessment, for 2014/15, picks up from where the story left off, and reports on progress and areas for improvement over the most recent financial year. An Improvement Plan for the current year is included at Section 3. Announcements made in the Emergency Budget on the 8th July will significantly impact on our forecasting and business planning processes going forward. Targets and forward looking plans set out in this self-assessment will be reviewed in the light of the implications of the Budget. Home Group is fully committed to delivering VfM and this is delivered through our commercially caring culture and approach. We view the key components of VfM as: Delivering increased efficiency (reducing waste, promoting innovation and driving savings); Maximising effectiveness (delivering our social mission in the most cost effective way possible); and Adopting an economic approach to service delivery (employing careful use of resources to save expense, time or effort, and thereby utilising remaining resources in the way that best meets the needs of our customers and clients). Efficiency Commercially caring culture with a strong focus on the 3 E s Economy Effectiveness 04

5 HOME GROUP LTD. INTRODUCTION AND CONTEXT Our commercially caring approach to delivering the 3 E s informs our decision making processes, including our appetite for risk and our decisions around discretionary spend. For example, our ambition is to earn significantly more income through outright sales and this is modelled in our business plan. This is already being carefully risk managed through committing phase by phase, and is reflected in our increasing gearing ratio. In addition to developing a broader tenure offer, we are constantly innovating around how we deliver our services, and the types of services we deliver, ultimately to improve outcomes for customers and clients. For example, we are becoming more involved in the field of health and aim to add real value to services provided by traditional health providers, as well as to a number of individuals undergoing - or who have recently experienced - physical or mental health interventions. VfM is a guiding principle for all parts of the business, and we are working to ensure that we are communicating this effectively to our customers, clients, colleagues and wider stakeholders. In order to put this VfM selfassessment into context, Home Group is one of the largest social housing providers in the country. We house more than 120,000 people a year in 55,000 properties, and work with almost 30,000 vulnerable people in supported housing, justice and health services through our Care and Support arm across a total of 248 local authority areas. Our turnover was 333m last year, and the market value of our asset base is 2.8bn. We are working to sweat our asset base i.e. maximise the potential of our assets. For example, we are developing a series of year regeneration plans, which look at the longer term viability of our housing estates. This means considering long term return on investments, and improving the places in which our customers live. We aspire to be the best in sector and beyond, and understand that we need to ensure accountability, transparency and strong management of resources in achieving positive outcomes for our customers and clients. Between April 2011 and April 2015, our average headcount through the year decreased from 3,502 to 3,089. During the same period, our turnover increased from 305 million to 333 million and our underlying surplus (the surplus before recognising the surplus on disposal of properties) increased from 1.6 million to 36.7 million. In 2011/12, we developed 739 homes and in 2014/15 developed 1,301 homes. Grant contribution has declined significantly in 2011 we received 38,600 per unit and by 2015, this had fallen to 20,900 per unit. In terms of a more technical measure, in 2014/15, we generated efficiency savings of 9.7 million, representing 4.5% of operating costs. Going forward, there will be many further areas of efficiency savings these will enable us to fund the 1% annual rent decrease set out in the Emergency Budget. We plan to save 76.8m over the next five years in procurement and operating efficiencies, e.g. through the implementation of our new Enterprise Resource Planning (ERP) system. In addition, there will be some significant growth opportunities, particularly with respect to growing our outright sale activity and identifying more commercial opportunities in Care and Support, notably in the area of Health. Significant future efficiency savings will result from the review of our current strategy, and internal modelling is currently underway to determine the level of savings that can be achieved. These savings and an increasingly economic way of operating allow us to invest to save in the long term and enable us to deliver added value activities for our customers and clients. While driving forward efficiency savings, we have maintained high customer and client satisfaction levels in 2014/15 (92% and 94.5% respectively). External recognition of our achievements Home Group has been the recipient of a number of awards over the last year. This external recognition by our peers and external assessors is testament to the work of our colleagues and the valuable time and engagement given by our customers and clients. Some of the awards we have achieved are listed below: TPAS Landlord accreditation (excellence in resident involvement) TPAS North Excellence in Equality and Diversity (Role Models programme) Social Housing Leadership Award from the Association of Gas Safety Managers Most Innovative Housing Provider (Large) at the Housing Innovation Awards International Safety Award from the British Safety Council Gold award from the Royal Society for the Prevention of Accidents (during Spring 2015) Contact Centre Team of the Year at the National Contact Centre Awards The recognition of our strengths and achievements set out in the box above is a real honour. We constantly strive for success and improvement, and innovate to ensure we are maximising efficiency, effectiveness and economy. However, we know we have more to learn and put in place, and this selfassessment sets out a number of the areas for improvement that we have identified. The VfM self-assessment conclusions in Section 13 includes a table which cross-references to parts of this document to evidence how we believe we meet the VfM Standard. In addition, our 2014/15 Financial Statements (available at www. homegroup.org.uk) include a VfM Statement which is structured around how we meet the VfM Standard. 05

6 HOME GROUP LTD. PROGRESS AGAINST HOME GROUP S VALUE FOR MONEY IMPROVEMENT PLAN 2013/14 2. Progress Against Home Group s Value For Money Improvement Plan 2013/14 This table sets out progress against last year s improvement plan (2013/14). Section 3 sets out the new improvement plan for 2014/15, and will be reported against in next year s self-assessment. Area for Improvement 2013/14 Progress Notes and section within the self-assessment RESPONDING TO RELATIVELY LOW LEVELS OF PERFORMANCE Address voids and arrears issues highlighted within performance data Voids and arrears performance still needs to improve, particularly in Care and Support activity (Sections 9.2 and 9.3) Utilise benchmarking data more effectively Address cost to serve issues (operating margins, management, repairs and maintenance spend highlighted within performance data) Capacity developed and some progress, but further work needed (Section 9.6) Clearer in our understanding of cost to serve at granular level but further to do in general needs analysis. Need to improve relative performance on a number of areas. (Sections 8.6, 9.4, 9.7) CUSTOMER AND CLIENT ASSESSMENTS OF VFM Raise awareness of VfM as perceptions relatively lower than other areas of the Client Promise Need to capture customers assessments of VfM performance in a similar way to clients Very positive results of VfM client assessments (Section 7.3) Customer Scrutiny model introduced and assessments underway (Section 7.4) ASSET MANAGEMENT Improve data and systems to model performance of assets on an ongoing basis Develop a full understanding of the asset base Sustainability model developed and operational (Section 6) Detailed stock survey providing strong granular knowledge in progress slight extension to timescales, but complete by Oct (Section 6) INTEGRATION AND INFORMATION A more integrated approach to regulatory reporting Build greater systems integration to address the issue of legacy systems not linking together effectively Improve current and future customer profiling intelligence to enable greater targeting of resources (Detailed Improvement Plan available in 2013/14 self-assessment) New Regulatory Standards Group in operation and scorecard in development. (Section 5.2) ERP implementation is a long term plan and on track to deliver. (Section 11.2) Customer profiling to target high risk customers (in terms of arrears) is underway primarily from an income protection perspective. Need to determine whether we roll out intelligence gathering to the whole customer base (Section 11.4) Successfully implemented On track to deliver, but further time needed More to do and rolling into the next improvement plan 06

7 HOME GROUP LTD. IMPROVEMENT PLAN TO BE DELIVERED IN 2015/16 3. Improvement Plan to be Delivered In 2015/16 In response to constructive feedback received following the production of last year s self-assessment, we have produced a much more succinct and accessible Improvement Plan for the current year. Some areas for improvement (red and amber traffic lights) have rolled forward from last year, and others are newly identified issues. The full detail behind this will be captured within our Operational Plans. Area for Improvement Outcomes and timescales RESPONDING TO RELATIVELY LOW LEVELS OF PERFORMANCE Improve relative performance on voids and arrears through implementing income protection and void initiatives. Improve relative performance on operating margin through growth activity and minimising waste. Improve relative performance on repairs by speeding up planned maintenance, assuming this is feasible following Emergency Budget measures modelling. Develop a clear approach to benchmarking, including submission of further Group-wide data to HouseMark to enable full use of the service, and also around how data is communicated and shared. Further develop cost to serve data and use this to inform potential reduction in management costs. Meet or exceed targets set out in VfM KPI table (5.5% Customer Service Arrears, 8.9% Care and Support Arrears, 1.27% Customer Service voids, 6.85% Care and Support voids), and improve performance against peer average (see VfM Standard Expectation 4 below and VfM SA Section 9). Review annually. Ensure targets sufficiently stretching and improve performance against peers (see VfM Standard Expectation 4 below and VfM SA Section 9). Review annually. Investment in planned repairs in line with VfM KPI targets (37.8% maintenance spend on social housing property as a percentage of social housing letting income), ultimately leading to a longer term reduction in responsive maintenance (see VfM Standard Expectation 4 below and VfM SA Section 9). Benchmarking approaches mainstreamed by April 2016 (see VfM Standard Expectation 4 below and VfM SA Section 9). Reporting by September 2015 as part of the strategy review process (see VfM Standard Expectation 4 below and VfM SA Section 8.6). CUSTOMER AND CLIENT ASSESSMENTS OF VFM Ensure customer and client satisfaction measures drive improvement and enable benchmarking with HouseMark and others. Clarity on methodology around benchmarking satisfaction measures by end of March 2016 (see VfM Standard Expectation 3 below and VfM SA Section 7.5). ASSET MANAGEMENT Assess the value of a sustainability model for Care and Support activity, and if it has merit, progress development. Complete, integrate and analyse data from full stock condition surveys for all general needs property. Implement a more efficient system of property management for Care and Support Assess by March 2016 and, if appropriate, deliver model by March 2016 (see VfM Standard Expectation 2 below and VfM SA Section 6). Surveys complete by October 2015, update business plan for 2016/17 and programme improvement works underway by April 2016 (see VfM Standard Expectation 2 below and VfM SA Section 6). New in-house property company approach underway by April 2016 (see VfM Standard Expectation 2 below and VfM SA Section 6). INTEGRATION AND INFORMATION Develop a new strategy underpinned by VfM, which improves outcomes for customers and clients, and enables a greater impact on neighbourhoods. Improve integration of systems through ERP. Complete the strategy review by March 2016, and ensure the resulting strategy provides a robust response to external challenges (see below under VfM Standard Expectation 1 and VfM SA Section 4). ERP implemented and facilitating mobilisation/delivery of the new strategy by 2017 (see Value for Money Gains above and VfM SA Section 11.2). 07

8 HOME GROUP LTD. HOME GROUP S STRATEGY AND COMMUNICATIONS 4. Home Group s Strategy and Communications Home Group s activity is guided by the corporate and financial strategy we produced in 2012, Housing with Care. Our mission is to help our customers and clients to open doors to new opportunities and healthy lives. Housing with Care guides all operational plans within the organisation, although is now being reviewed (see below). Home Group s Board steered the development of the priorities within the strategy, and has taken ownership of their delivery. The priorities were refined through discussions with key stakeholders including, importantly, our customers and clients. Operational plans derived from Housing with Care include: our five year rolling business plan; Asset Management Plan; Future Workplace Plan; Development Strategy; Risk Strategy, and our annual team operational plans. Our Housing with Care Strategy was developed for the time period 2012/13 to 2016/17. However, we are in the process of reviewing this strategy due to changes in external circumstances and a need to reposition the organisation to be increasingly self-sustainable, including in terms of managing the implications of the 2015 Emergency Budget measures, e.g. an annual 1% reduction in rent over four years. The new strategy will have an even greater focus on customers and clients outcomes, and will play a bigger role in the places within which we operate. Underpinning this will be a strong focus on VfM, risk management and cash flow management. We are already in consultation with our customers and clients on the development of this new strategy. Our strategy, plans and response to regulatory requirements are communicated through a wide range of channels, including: Internal communications with colleagues, e.g. webinars, intranet resources, targeted, business specific s, face to face events and training modules. External communications with customers and clients, including panels and workshops, accessible literature and web forums. External communications with wider stakeholders, including the HCA, commissioners and other partners through face to face dialogue, targeted literature and the media. We are currently implementing a new SharePoint system to manage internal communications and data sharing, and our website is being totally refreshed to ensure it meets the needs of the business and our key stakeholders, customers and clients. We regularly use the communications mechanisms set out above to seek feedback from colleagues, customers and clients and wider stakeholders on our strategic approaches. This, in turn, is used in our strategic planning. 08

9 HOME GROUP LTD. CORPORATE GOVERNANCE 5. Corporate Governance 5.1 Formal Governance structure HOME GROUP STRUCTURE Charitable Registered Society and Registered Charity Non-charitable Company Audit Committee Governance Committee Health and Safety Governance Committee Rayners Lane Estate Committee Action Committee. Live Home Home Group Developments Limited Action Committee Expert Advisory Groups and Panels (outside of formal legal structure) Care and Support Expert Advisory Group National Client Panel Customer Forum Treasury Panel. Live Smart@Home (company registration number: ) is a private non-charitable company providing market and mid-market rented products. Home Group Developments Ltd (company registration number: ) is a private non-charitable company which undertakes market housing for sale and the new build construction of affordable housing for rent. We have established a formal joint venture company, Evolution Gateshead with Galliford Try, working with Gateshead Council. We have also established a partnership consortium in Hull: KSHP (Keepmoat Ltd, Strata Ltd, Home Group Ltd and Priority Space), working with Hull City Council. As a business, we intend to take forward more joint ventures - a model that shares both risk and reward with the JV partner. Strategic priorities developed by the Board are driven forward by the Executive Team who are tasked with innovating and achieving more efficient and effective ways of delivery, in an era of significantly reduced grant funding. Our approach ensures that commercial development liabilities are ring fenced within our subsidiaries to protect group assets. Mark Henderson Chief Executive Brian Ham Executive Director of Enterprise and Development Dr John Hudson Chief Financial Officer (from June 2015) Rachael Byrne Executive Director of Care and Support Rosie Du Rose Executive Director of Customer Service 09

10 HOME GROUP LTD. CORPORATE GOVERNANCE 5.2 Checks and balances Key to our governance model are the strong performance and scrutiny systems we have in place to drive forward the business, including achieving VfM and social value through our social mission. These include: The Non-Executive Board of Directors, Board Committees and Subsidiary Boards scrutinise financial and performance data at each Board meeting. The Board views VfM as a key driver for the business, and therefore ensures that efficiency, economy and effectiveness underpins all of Home Group s activity. Monthly Executive Directors discussions with Senior Leaders (who report to the Executive Directors Team) to ensure an integrated and streamlined approach to delivery. Internal Risk and Assurance function which carries out audit reviews from a VfM perspective and reports to the Audit Committee on its findings. Performance on how VfM is embedded across the business will be audited in 2015/16, and will be reported on in the next VfM self-assessment. A new approach to regulatory reporting has been introduced to bring together group wide reporting against the requirements of our main regulators, including Homes and Communities Agency, Care Quality Commission, Scottish Housing Regulator and Ministry of Justice. Our new Regulatory Standards Group is up and running and a regulatory scorecard is in development, as was committed to within the 2013/14 Improvement Plan. The main focus of the group is to analyse new regulatory requirements brought about by changes to regulation or entering new business markets and oversee projects to achieve compliance. Customer and client assessments of progress, for example, customer and client assessors perspectives on the extent to which we are achieving VfM (see Section 7). Performance through people where colleague performance is robustly assessed against Specific, Measurable, Attainable, Realistic and Timely (SMART) objectives derived from the organisational priorities. A key element of our investment in people relates to our culture change programme, Living our Values, which is now fully embedded. One of our four core values is Commercial and another is Accountable, demonstrating the importance of the VfM mind set and approach to the business. 5.3 Managing risk 5.4 Project governance A rigorous approach to managing risk is critical to achieving our strategic and operational objectives. Home Group s Risk Management Framework sets out the strategy and approach to risk management across the business. The Board is ultimately responsible for risk and reviews the strategic risk register on a regular basis, although day to day responsibility is delegated to the Executive and Senior Leadership team. In addition, all reports prepared for Board, project and programme management documents have risk management at the heart of them. Our new Director of Risk and Assurance is currently reviewing our Framework to ensure it is in line with best practice and is fit for purpose. We have an agreed approach to project and programme management which has been in place for a number of years. In the current year we have further invested in this approach and created a Portfolio Management Office (PMO). We see this as a critical next step in developing a view across the business of all the programmes and projects underway. The PMO is responsible for ensuring a consistent methodology is taken to project and programme management so that governance arrangements are strong, resource can be prioritised and allocated effectively, and that benefits can be tracked and achieved. 10

11 HOME GROUP LTD. OPTIMISING THE VALUE OF OUR ASSETS 6. Optimising the Value of our Assets The 2013/14 self-assessment set out our Asset Management processes in detail. The process includes: A robust Asset Management Plan which aims to maximise stock return on investment. This is regularly reviewed and its delivery is overseen by four regional Asset Investment Appraisal Panels, with customers scrutinising plans for their area. This is being refreshed during 2015/16 to reflect the outcome and analysis of our stock survey programme. Our workplace rationalisation programme, which has delivered an 800,000 saving on operating costs to date and is on track to save in excess of the targeted 1.3m by 2017, while improving key measures such as staff satisfaction with office accommodation, currently at 90%. 52% of staff said that working relationships had improved as a result of moves to new office accommodation alone. A full review of our Care and Support property portfolio to ensure that our approach to commercial property management is replicated in our Care and Support units; Strong approach to energy efficiency, with the establishment of an ISO14001 compliant Environmental Management System and energy audits, which last year resulted in estimated 7% savings on printing costs and a 5% saving on office energy costs. Our options appraisal model which applies a rigorous assessment process to maximising return on investment of individual properties. This has already led to decisions to dispose of high value void properties as a means of generating income, and is also looking at alternative options such as homesteading. Our Development Investment Panel which includes senior representatives from across the business with delegated project approval to 4m (Executive team and the Board beyond this level). The Panel oversees a five stage gateway process and achieving a series of KPIs (Hurdles and Key Measures). Developments are assessed stage by stage. Commitment to joint venture working already underway in Gateshead, and discussions held with other local authorities and private sector organisations. Customer-centric approach to alleviating fuel poverty, with an investment of 7,500 per property in external wall insulation leading to an average estimated annual fuel cost saving of 274 across 292 properties, and 41% of customers surveyed agreeing that heating bills have reduced as a result of the measures. We are also working with Northern Gas Networks on the Fuel Poverty Assisted Switch Programme to enable the cost-effective installation of gas into homes that are currently not connected to the gas distribution network. There is strong progress to report across our asset management activity. This includes the development of a complex and ambitious sustainability model to assess the performance of schemes against a series of financial and socioeconomic measures. This model was finalised in November 2014 (the target date in the VfM Improvement Plan was March 2015), and this model will be used to inform current and future investment and disposals in addition to identifying opportunities for growth and regeneration. Work is underway to generate a robust, valid picture of the asset base at a granular level. Home Group has contracted to undertake surveys of each of our homes. This will ensure we are fully aware of component renewal requirements and have an evidence base to inform planned maintenance in the future. The original goal was ambitious and aimed to have all of the surveys uploaded to the system by March 2015; however following the delivery of over 20,000 surveys to date, we have now refined our approach into a two phase project. The steering group for this project includes customer representatives, ensuring key stakeholders can provide input into timescales, approach to visits and project management. We are also looking at non-housing assets in terms of maximising value. This comprehensive asset mapping approach will provide us with data for an assessment of land use options. Our new centralised approach to facilities management has established a robust baseline occupational cost of per square foot which benchmarks favourably against a comparable from external research by DTZ, BNP Paribas and GVA. New centralised contracts for waste management, security provision, cleaning, and mechanical and electrical maintenance have significantly rationalised our supplier base, enabling greater control, a fast and professional incident response, and consolidated invoicing and procurement savings which will be realised in 2015/16. We have also been able to recycle our office furniture across the estate and via community groups Section 12.1 sets out our approach to development and outright sales as part of our growth strategy. 11

12 HOME GROUP LTD. INVOLVING OUR CUSTOMERS AND CLIENTS TO ENSURE ACCOUNTABILITY AND TRANSPARENCY IN DECISION MAKING 7. Involving our customers and clients to ensure accountability and transparency in decision making 7.1 Involvement and engagement Home Group undertakes significant customer and client involvement. Our Involvement Team works with colleagues across the business to ensure we work in a joined up, consistent way to maximise involvement, measure its impact, fulfil our regulatory requirements, and provide new and innovative ways to work with our clients and customers. We engage and involve our customers and clients through a variety of mechanisms. For example, our online community encourages instant feedback, and we are currently consulting our customers and clients on elements of our strategy review (as a complement to other consultation mechanisms). Such fora enable customers and clients to challenge Home Group on the efficiency, economy and effectiveness of service provision, and this in turn feeds into future service design. Our mechanisms of involvement are set out below. Home Board & Home Scotland Board Customers and clients influence the Board Customer Forum Customers influence Home Board, Executive Team and senior leaders Client Panel Clients influence Home Board, Executive Team and senior leaders Youth Action Young customers and clients influence customer forum and client panel Independent Complaints Panel Customers and clients review and recommend change for complaints outcomes Human Library Customers and clients Human Library members help shape Equality & Diversity at Home influence e-views influence Procurement influence Public Affairs change Recruitment influence Editorial Panels shape Investment Appraisal Panels influence Viewpoint teams Customers scrutinise our performance & services and recommend change Client Assessor Teams Clients assess services against the Client promise and recommend change KISS- Keep it short and simple Customers and clients change documents using our KISS standards What Happened Here Customers and clients review serious incidents, complaints and health & safety and recommend change Together Team Customers and clients design, shape and deliver involvement training for colleagues Bids & Tenders Policy Working groups Publicity Peer mentors Value for money Local involvement Involvement Network Customer and client involvement Client involvement Customer involvement 7.2 Involvement A group of fifteen customers and clients have actively and independently assessed the value for money derived from nine of these involvement options in 2014/15, reporting on activity against impact effectiveness and cost criteria. Customers and clients assessed seven options as medium or high value for money, including our Viewpoint Teams, Human Library and Youth Action initiatives, and have made recommendations to management for future activity and improvement which will be taken forward in 2015/16. 12

13 HOME GROUP LTD. INVOLVING OUR CUSTOMERS AND CLIENTS TO ENSURE ACCOUNTABILITY AND TRANSPARENCY IN DECISION MAKING 7.3 Client assessments of the Client Promise One of the ways we ensure effective, economic and efficient service delivery is through delivery of our customer and client promises, which are assessed by customers and clients respectively. The Client Promise includes: a decent home; VfM; a safe place to live; a choice of products and services; reliable services; clear information and opportunity to influence; and people who care. A total of 48 client service assessments took place between April 2014 and March 2015, involving 261 clients. The figures for 2014/15 show that client perceptions of VfM performance are improving overall - this is very likely to be a consequence of the roll out of the new VfM toolkit, which has ensured greater awareness and transparency. This toolkit sets out the budget and expenditure on each element of a particular service, and asks clients to assess whether the service represents VfM. A VfM toolkit is also currently being developed for customers, as part of the Scrutiny Model (see Section 7.4 below). Client Assessments of Client Promise (2014/15) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0 GOLD standard SILVER standard BRONZE standard NO standard Overall standard achieved A decent home Value for money A safe place to live A choice of products and services Reliable services Clear information and opportunities to... People who care Client assessments of VfM include service critiques and recommendations. Common themes emerging from the 2014/15 service assessments relate to: the opportunity to influence the budget (many clients were unclear that they had the ability to influence budget setting and so this awareness is being raised); being involved in budget meetings; and a greater understanding of the service charge breaking down the details. Services are responding to issues raised in an effort to ensure greater understanding, awareness and input. For example, in one of our older people s services, assessors fed back that they were unclear about grounds maintenance work and schedules, and so it was difficult to assess whether this represented VfM. In response, clients are being given more information on breakdown of service charges and have been fully informed with respect to maintenance schedules. Increasing awareness and communication of our activity around VfM will inevitably take time to become fully embedded. We recognise that we cannot be complacent and that there is much more to do, and will continue to improve information and client awareness of the types of activity we are undertaking to improve efficiency, economy and effectiveness. 13

14 HOME GROUP LTD. INVOLVING OUR CUSTOMERS AND CLIENTS TO ENSURE ACCOUNTABILITY AND TRANSPARENCY IN DECISION MAKING 7.4 Customer assessments of the Customer Promise While it was only possible to report on the Client Assessments in the 2013/14 self-assessment, as committed to within the VfM Improvement Plan, a new Customer Scrutiny Model has been established to enable our customers to assess us against the Customer Promise. This includes: a decent home; Value for Money; a safe place to live; a choice of products and services; reliable services; clear information and opportunity to influence; and people who care. The first assessments piloted the new model in three of our neighbourhoods. In total, seven assessments were held, involving 101 customers. Now that tools are being developed and rolled out, 20 neighbourhood assessments will take place from 2015/16. Customer Assessments of Customer Promise (2014/15) 100% 90% 80% GOLD standard SILVER standard 70% 60% 50% BRONZE standard NO standard 40% 30% 20% 10% 0 Overall standard achieved A decent home Value for money A safe place to live A choice of products and services Reliable services Clear information and opportunities to... People who care Specifically on the VfM Standard, customers gave mainly positive feedback on rent and service charge breakdown. They find information clear and concise, and feel they get a good, reliable service for the rent money they pay, although there were a small number of exceptions to this. Similar to the client assessments, there was some confusion about what the service charge is comprised of, and so neighbourhoods are aware of the need to be increasingly transparent in this area. The intention is to continue to increase awareness of VfM (and how we are delivering the other aspects of the customer and client promises) in 2015/16, with the goal of seeing a further improvement in assessment results in future years. 14

15 HOME GROUP LTD. INVOLVING OUR CUSTOMERS AND CLIENTS TO ENSURE ACCOUNTABILITY AND TRANSPARENCY IN DECISION MAKING 7.5 Measuring satisfaction An ongoing challenge we face is how to maintain our customer and client satisfaction levels while driving greater savings ensuring we achieve efficiency, economy and effectiveness. Our customer and client satisfaction levels are currently very high (see below) and we see this as an important indicator of how our investments are achieving positive outcomes (providing evidence of effectiveness), representing the added value we generate as a business. Customer satisfaction is measured using a transactional methodology which means that it is not currently possible to benchmark using HouseMark methodologies this uses the STAR system. HouseMark are now looking into transactional benchmarking, and we are also reviewing our customer satisfaction methodology with a goal of improving our ability to benchmark against others, as well as ensuring that the system we use drives improvement within the business. The facts: customer satisfaction 2014/15 Our overall customer satisfaction was 92% 82% of customers agreed that Home Group cares about them 85% of customers were satisfied with our repairs service 96% of customers were satisfied with their gas servicing 90% of customers were satisfied with their neighbourhood The facts: client satisfaction and impact 2014/15 Our overall client satisfaction was 94.5% 86.0% of clients agreed that Home Group cares about them 83.7% of clients with a mental health support need and 87.2% with a physical health support need improved the management of their health 76.9% of clients complied with their statutory orders 87.6% of clients achieved a positive move-on 15

16 HOME GROUP LTD. STRATEGIC FINANCIAL MANAGEMENT 8. Strategic Financial Management 8.1 Approach to financial management Home Group has a robust approach to financial management, which we will continue to test. We must ensure our systems and processes are fit for purpose in a contracting grant regime and a need to operate in an ever more commercial way. ERP and systems integration will further enhance our efficiency around financial management. We have a Standard and Poor credit rating of A+ with positive outlook, Homes and Communities Agency viability rating of V1, gearing ratio of 51.6% and high level of surplus (10% underlying surplus before tax as a percentage of turnover). In order to ensure financially viable investments and manage risks, we have strong systems and hurdles in place in terms of committing investment in development (our Development Investment Panel) and also in identifying which contracts to pursue (our Care and Support Gateway Panel). These structures, clearly linked into the Board, enable a rigorous assessment of VfM in our investment and contract decision making processes. Home Group monitors income/ expenditure against our cash flow and surplus targets on a monthly basis and we work to continuously improve our cash flow management. In addition, we collect Management Information and monitor performance on a monthly basis, led by our Customer Insight team at the Customer Service Centre. This includes performance data around arrears, voids, customer satisfaction, repairs and other key areas, which is measured against our targets. This is shared with Board members and colleagues across the business. Summaries of our performance are included in our Annual Report and provided at our Annual General Meeting (AGM). Transparency is critical and key to this is enabling constructive challenge in setting budgets. Our annual zero based budget review enables such challenge and transparency in budget setting. All members of the Senior Leadership Team (who report directly to the Executive Team) attend Executive budget meetings to set out the business case for their proposed budgets for the forthcoming year (aligned with corporate strategic priorities). They are challenged by the Executive Team and must justify their spend intentions, including how VfM will be delivered. The Executive Team makes recommendations to the Board following this process, and the Board then decides whether to approve the budget, ensuring full corporate ownership. In terms of management of budgets, managers have a budget tolerance of +/- 5%, and are held to account by the Executive Directors Team if this is exceeded. This is part of our approach to managing cash flow, and reforecasting is reviewed each quarter. Our longer term aspirations and financial projections are set out in our five year business plan and 30 year financial forecasts. The business plan is subject to rigorous stress testing which allows us to gain a thorough understanding of the risks we are exposed to and to demonstrate the mitigations we would pursue should the outlook deteriorate. We will be testing these mitigation plans going forward, in order to ensure that we can put them into practice should we need to. This should give confidence to our stakeholders that we maintain the right balance between investing for the benefit of our customers and clients and demonstrating financial viability in the longer term. Stress testing has considered a variety of scenarios to identify the impact of a perfect storm scenario on our financial viability, and in turn informs our appetite for risk. Our Financial Statements (including our Operating and Financial Review), are agreed in July each year at our AGM. 16

17 HOME GROUP LTD. STRATEGIC FINANCIAL MANAGEMENT 8.2 Criteria underpinning corporate investment decisions: the discretionary spend model Discretionary Spend Model Would the fulfilment of Home Group s mission be (directly) compromised without the provision of this product/service? IF NO Then we should not deliver this product/service IF YES Do we have a competitive advantage in the providing of this product/service? In other words, are we best placed to offer this service at a highly competitive unit cost which supports the delivery of a clear outcome? IF NO Then we should not deliver this product/service but may wish to signpost customers and clients to such a service provided elsewhere IF YES Do we already have the necessary discretionary capacity available to invest in this product/service and is it expedient to invest in this now (e.g. do we currently have the capacity to deliver this without distracting from delivering other strategic objectives? IF NO Then we should not deliver this product/service now, but may wish to do so once we have delivered competing priorities IF YES Have customers and clients been actively involved in the decisions above and does the outcome reflect their views/priorities? We have clear mechanisms in place to make decisions around investments, based on the principles set out within our core strategy. The discretionary spend model below was included within Housing with Care and continues to provide the basis on which all parts of the organisation make decisions this is being reviewed as part of our strategy revision. This approach helps evaluate return on investment (both financial and social), and enables consideration of potential opportunity costs and tradeoffs, particularly between our commercial objectives and social mission. Two examples of opportunity costs we consider are as follows: The level of void investment impacts on expected void rates; and Deferring planned spend pending stock condition surveys may increase responsive costs in the short term, but provides better VfM in the long term IF NO Then we need to re-run the above questions with the involvement of customers and clients IF YES The costs of developing and delivering this product/service would then need to be prioritised against other products and services before any final inclusion into Home Group s 5-year Business Plan and Operational Plan 17

18 HOME GROUP LTD. STRATEGIC FINANCIAL MANAGEMENT 8.3 Income and expenditure breakdown The granular understanding of our stock that we are developing through stock surveys, and the detailed analysis we are undertaking of our relative cost to serve both geographically and by tenure type (see Section 8.6), will enable us to have a fully informed view of how we can reduce costs, roll out planned maintenance in the most efficient way, and ultimately increase our income in the future. The pie charts below set out a summary of Home Group s capital and revenue income and expenditure for 2014/15. The income pie chart illustrates the importance of self-sustainability given the relatively low proportion of grant received (this is decreasing programme by programme). The expenditure pie chart illustrates that by far the majority of our expenditure is targeted at investing in, managing, maintaining and repairing our stock. Home s Total Capital and Revenue Income and Expenditure Breakdown 2014/15 Income breakdown ( 375.5m) Expenditure breakdown ( 450.1m) 375.5m 450.1m Social Housing - Rents 244.5m Property Sales Income 24.7m Housing Properties 129.2m Service Chargeable Costs 29.5m Social Housing - Other 19m Other Income 14.3m Repairs 105.8m Cost of Properties Sold 16.6m Supporting People Income 41.6m Capital Grant Receivable 31.4m Interest Payable 38.7m Delivering Care and Support 40.2m Managing Our Homes 71.6m Other 18.5m Our higher level of expenditure is a result of significant investment in new properties which will increase our income in future periods. We have funded this through additional borrowings. As a consequence, our gearing ratio is increasing, in line with our planned investments. 18

19 HOME GROUP LTD. STRATEGIC FINANCIAL MANAGEMENT 8.4 Efficiency savings Home Group s strategic approach to efficiency savings (as set out in our Housing with Care corporate and financial strategy 2012): More flexible and leaner back office services; Delivering the management restructure of our supported housing services; Increasing efficiencies through closer, more integrated working between overlapping areas of our general needs and supported housing activities; Continuing to increase the efficiency and consistency of our front line general needs housing services, through significantly increasing the ratio of number of units per front line Full Time Equivalent (FTE); Increasing maintenance efficiency year on year; and A more efficient approach to asset management (including maintenance). In 2014/15, we generated efficiency savings of 9.7m, representing 4.5% of operating costs. This was marginally lower than we achieved in 2013/14 (4.0% of operating costs), and we recognise the need to increase levels over the next few years. Between April 2011 and April 2015, our headcount decreased from 3,502 to 3,089. During the same period, our turnover increased from 305 million to 333 million and our underlying surplus increased from 1.6 million to 36.7 million. In 2011/12, we developed 739 homes and in 2014/15 developed 1,301 homes. Grant contribution has declined significantly in 2011 we received 38,600 per unit and by 2015, this had fallen to 20,900 per unit. Going forward, there will be many areas of efficiency savings and growth opportunities. This includes, for example: options appraisal processes; repairs and maintenance contracts designed to achieve 3% year on year savings; a move toward more digital self-serve; and the roll out of ERP. Our Customer Service Centre is making a major impact in terms of efficiencies. As efficiencies are identified it is important to ensure we adhere to agreed policies and procedures to ensure we maximise effectiveness. Examples include: We have reduced our call handling time over the last year, resulting in a saving of seven FTE (c 105,000) Invoking annualised hours contracts has led to a cost saving equivalent to four FTE colleagues (c 60,000). Through centralising our complaints systems, we have reduced the cost of handling a complaint from 99 to 92 over the last year making an annual total saving of 38,000. We have altered the way we send letters resulting in a 6,000 saving per month. Our new Knowledge Management Tool has honed the accuracy of our systems and logging, saving between 20-30,000 per month. Our strategy review is reassessing our delivery model and ensuring greater integration (enabled by ERP), to ensure we maximise efficiency, economy and effectiveness. We are building planned efficiency savings and commercial growth opportunities into our rolling five year business plan/operational plan timeframe and also building into objectives within our Performance through People process. Efficiency savings set out within our business plan enable us to invest further in our existing homes, develop new approaches to service delivery, and identify and deliver new development opportunities. Efficiency savings set out in last year s business plan for the years 2015/16 to 2018/19 have been revised upward from 41 million to 51.4 million, with an additional 20.1 million saving identified for 2019/20. This is primarily due to the increasing impact of the new ERP system following an initial significant investment. Overall savings are currently as follows, but we will be reviewing and identifying many further savings to enable us to mitigate against challenges presented by the 2015 Emergency Budget Statement:- 2015/ / / / /20 Total Efficiencies ( m)

20 HOME GROUP LTD. STRATEGIC FINANCIAL MANAGEMENT 8.5 Procurement Home Group s Procurement policy is underpinned by the pursuit of VfM. The selfassessment for 2013/14 set out our procurement processes in detail covering, for example: Transparent tender processes via the e-sourcing portal; Embedding legislative and best practice guidance; Multi-supplier framework agreements and Regional Procurement Forums; E-procurement system, i.e. Marketplace@home; Stakeholder engagement and flexible contract methodology; Feedback mechanisms; Transparency about expenditure over 500; and Our CIPs and ISO accreditations. Procurement savings amounted to 6.5m in 2014/15. Examples of how this has worked in practice over the last year are included below: Our National Repairs and Maintenance contract (value 750m) commenced in 2012 on a year basis. This involved contracting with five contractors across all of our stock, with an anticipated reduction in costs of 70m (excluding set up costs) against the life of the contracts. Prices are fixed for three years and then they decrease year on year by 3%, obliging the contractor to improve efficiency to preserve their profit margin. Quality is incentivised through a bonus/malus approach, and each regional provider is expected to employ two apprentices/training opportunities per 1m turnover, with the potential to deliver 200 apprentice opportunities. The new contracts aim to improve our service offer to customers by reducing the response time to repairs as follows: - Emergency Repairs reduce from 24 hours to six hours - Routine Repairs reduce from 25 working days to 14 working days The partner we contracted with to deliver ERP continues to be on track with delivery, with anticipated savings generated of over 19m by 2019/20 (see Section 11.2). New Insurance premium and claims savings - through increasing our excess on damage to property claims, we have reduced our overall insurance payments, with actual savings of c 2m. We have put in place protection against future exposure a maximum of 1m exposure in a financial year. A new contract for mobile telephony has delivered savings of 330,000 per annum on IT and communications costs. 8.6 Cost to serve/profitability In the last self-assessment, we committed to do more in terms of providing a clear breakdown of cost to serve for different parts of the business. We have been working to understand and communicate more effectively the costs and outcomes of delivering specific services, and which underlying factors influence these costs. Going forward, this will reflect Emergency Budget measures. The map below sets out our geographical areas of operation. Significant work on cost to serve (profitability) of Care and Support activity is already underway and has continued over the last year. As identified in the 2013/14 Improvement Plan, we need to develop a stronger understanding of our cost to serve in terms of general needs housing. The first phase of the analysis into general needs accommodation is underway and due to report in summer The next phase involves further integration with the sustainability model and looking at other types of tenure. This work will enable us to: Understand the most efficient type of property from a build cost and yield perspective across the country. Undertake more benchmarking and learning from best practice between schemes. Ensure that future strategic decisions around footprint acquisition/disposal/ development/stock swaps are based on more detailed, up to date information. Link detailed financial information with our sustainability model (see Section 6) for a full picture of scheme viability across our stock. 20