CORPORATE FINANCE STRATEGY

Transcription

1 CORPORATE FINANCE STRATEGY APRIL Prepared by: Click here to enter name. EIA Required? Date effective from: Click to enter a date. EIA Completed? Policy approved by: Click here to enter name. Revision number: Click here to enter number. Review Date: Click to enter a date. Lead officer: Click here to enter name.

2 CORPORATE FINANCE STRATEGY INTRODUCTION 1.1 The aim of this strategy is to set a framework for corporate financial management for the business over the next three years during a period which is set to present constant growth, change and challenge for the organisation. Most if not all key business decisions have a financial impact in some way. It is important that financial management and financial governance remain robust, up-to-date, flexible, fit-for-purpose and alive throughout the organisation during this time of significant change. 1.2 Corporate financial management is not just the responsibility of the Corporate Finance Team, but all staff, and Budget Managers, the Leadership Team and the Board in particular. Everyone will have a part to play in ensuring successful financial management during this time of growth. 1.3 There are changes presented that do not just relate to the maturity and growth of the organisation, but also regulatory advancements that the organisation will have to respond to and comply with during this strategy period. It is vital that the Corporate Finance Team keep abreast of these changes and implement them accordingly. 1.4 This strategy and its associated action plan will ensure that Stockport Homes will continue to have the most effective financial management arrangements, systems, skills and focus to support the business to grow successfully, at the same time as maximising opportunities presented by evolving business areas, maximising structure efficiencies and remaining compliant with the changing accounting standards. 1.5 A robust financial management service, providing accurate and timely information for staff and customers alike, enables internal and external stakeholders to make informed decisions which will ensure the continued success of Stockport Homes. 1.6 The priorities in this strategy have been developed following consultation with staff, managers, and technical partners, and are integral to the delivery of Stockport Homes Vision, Mission and Aims. 2 CONTEXT 2.1 Stockport Homes has had a successful eight and a half years in operation with the Finance Management function growing and evolving with the organisation, with clear year-end audit reports and very few internal audit recommendations for improvements, being testament to the strength of the core function. The finance function is business critical, not just because of the legal requirements that the company has to comply with and demonstrate, but because timely and accurate financial performance information is an enabler it enables managers and staff at all levels to make business decisions about how to use Page 2 of 11

3 resources. It is also an area that it is judged externally and has huge reputational issues when it goes wrong. 2.2 The Corporate Finance function supports the whole organisation, not just one business area, and therefore its remit is broad (see Appendix One). Given the various facets of the business areas of the organisation, the accounting is also complex with different politics, policies, systems and accounting requirements in each individual area of the business. Regardless of the individual nuances, statutory accounts for the organisation are pulled together as one set of accounts. The finance function need a good overview and understanding of the whole organisation. 2.3 Stockport Homes are also responsible for the financial management of the Council s Housing Revenue Account and the Capital Programme. These bring additional complexities and responsibilities. Stockport Homes wrote the 30 year HRA Business Plan and its associated Asset Management Strategy and the skills in-house keep this up-to-date taking into account policy, political and fiscal changes, as well as impacts on customers. 2.4 In addition to the above, growth in the last eight years has seen financial appraisal models grow and evolve, to include the implementation of a financial appraisal process for appraising new build schemes, technical component accounting regimes put in place, accounting for shared ownership fixed assets, and the accounting for the organisation s asset base generally, which has grown from zero to 8million in that time alone. 2.5 The business and its aims are changing. Audit Commission inspection regimes and only delivering core business activities are things of the past. New business activities bring greater levels of understanding required, controls, and additional volumes of works and systems usages. It requires more than ever real time information regarding levels of available reserves and the assessment of the best use of those reserves when faced with competing priorities. In light of this the Corporate Finance Team will need to continue to review its focus and skills base with regard to the balance of delivering core accounting requirements whilst advancing business enabling information and advice. Cyclical and monthly pressures for producing works are core in any finance team, i.e. monthly management accounts, the year-end months, the budget setting months. However the time spent on planning, advising and forecasting is also key. 2.6 The relationship with the Council is also changing. The new Management Agreement is likely to see a closer working relationship and that will undoubtedly translate to closer working on how to maximise resources. This also brings added complexities and politics around managing the finances and it is crucial that the business understands its own position at all times in order to offer opportunities going forward. Page 3 of 11

4 2.7 The regulatory framework is changing, which will see Stockport Homes having to prepare accounts compliant with International Accounting Standards from This has implications such as how property assets are valued and will need technical knowledge and training within the team. 2.8 Finally nationally politics is changing. This strategy cannot ignore policy impacts to customers. Whilst cash collection management and financial services to customers is in the main dealt with outside of this strategy, ie in the Customer Finance Team and its own Income Management Strategy, its effects have a direct correlation in terms of resources available in the HRA, and therefore Management Fee and the relationship with the Council over allocating resources in the HRA. This also makes business diversification more pertinent in terms of maximising monies into the business and reducing shared costs. As the HRA comes under pressure, how to use monies in the best possible way in the HRA will also remain critical, for example the HRA headroom cap will need reviewing and dynamic ways to fund New Build/competing asset priorities will need to be investigated. 2.9 All of the factors highlighted above provide the context for this strategy and highlights the need for a co-ordinated and coherent plan of direction for corporate financial management in the organisation during LINK TO VISION, MISSION AND AIMS 2.10 In April 2012 Stockport Homes launched a new vision, mission and aims, which are highlighted below; Vision: to deliver the best services to customers by being a great place to work Mission: Transforming Lives Aims: Exceed customer expectations and always do the right thing. Support customers in all aspects of their lives through effective partnership working. Create greener places to live and work and continually minimise our impact on the environment. Develop our thriving, safe and sustainable neighbourhoods, maximising our contribution to meeting housing need. Involve customers, staff and the Board in decision making and create opportunities for them to fulfil their potential. Grow by making the best use of our resources and diversifying into businesses that complement what we already do. This Strategy is cross-cutting, contributing to the delivery of all aims with specific emphasis upon the aims of growing by making the best use of Page 4 of 11

5 resources and diversifying into businesses that complement what we already do. 3 STRATEGIC OBJECTIVES & OUTCOMES 3.1 This strategy identifies nine key priorities for the business over the next three years, with 35 actions identified in the associated action plan encompassing governance, support, and business transformation. Taken collectively, these priorities seek to deliver the maximum potential and value from Stockport Homes management of its money. Priority One Maximising resources and reserves management Implement a clear framework plan for maximising monies into the organisation to aid achievement of its goals Investigate other sources of borrowing for the ALMO and HRA Respond to CLG headroom cap changes Work with the Council to agree the best available Management Fee levels Develop a reserves management strategy Develop return on investment indicators for reserves usages and investments Develop clear forecasting for core cost pressures, i.e. pension increases Develop clear reporting for new business areas and surpluses Review banking and treasury management arrangements Maximise investment opportunities such as to increase housing stock in Stockport through new build. Maximise opportunities to increase housing stock in Stockport through new build. Ensure that high quality service delivery can be sustained into the future. Clear understating conveyed at all times to senior management of the organisation s available monies to enable decision making Demonstration that reserves are being utilised in an effective way that maximises returns for the Company. Informed and proactive discussions with the Council to ensure management fee levels and reflective of core pressures. Clear information to support robust decision making regarding use of surpluses. Ensure that cash is being managed in the most effective way so as to maximise returns to the Company. Priority Two Asset Management Manage and maximise resources and efficiencies from the growing asset base of the organisation and the HRA Page 5 of 11

6 Implement budgetary framework for Head Office build and fit-out costs Oversee loan drawdown and agreement for Head Office Head Office vat review Ensure 30 year HRA Business Plan is kept up-to-date Implement component accounting in HRA Develop financial appraisal NPVs for Asset Management Strategy decisions Review debt management portfolio for new build and property/other assets Effective financial management of the Head Office project leading to clear and informed decision making throughout the time period of the project. Ensures that cashflow is effectively managed throughout the project and the loan is drawn down on most preferential terms. The construction process/services delivered from the site will be carried out in the most tax efficient/compliant way. There will be a clear picture of ongoing asset investment requirements against available resources, which significantly affects investment decisions The depreciation charge will more accurately reflect lifecycles of the housing stock and the process will be legally compliant. There will be robust information to estimate future income streams against investment costs, informing decision making about long term viability across the housing stock portfolio. Clear information on levels of debt leading to robust decision making on overall debt levels and future new build appraisal options. Maximum efficiencies gained in terms of interest levels. Priority Three Business Diversification Set a clear process for bidding for new works/costing methods and financial decision making for new business areas, as well as embed a framework for evaluating the success of those new business opportunities. Implement process for valuing/approving new business options. Informed decision making leads to successful outcomes, along with robust monitoring over time to assess the critical success of new Page 6 of 11

7 Implement organisational wide overheads methodology to include in new business financial modelling. Ensure all tax aspects of new business ventures are considered and implemented. Develop financial management reporting to ensure clear separation of commercial/ income generating financial information from financial information on core management fee funded activity. Develop the Corporate Finance Team further to provide an enabling, expert advisory service. business areas. Clear, consistent approach to applying overheads to commercial ventures so as to allow consistent financial performance appraisal. Clear understanding from Budget Managers as to why overheads are shown. Compliance with tax legislation and informed decision making regarding efficient tax structures. Clear, more useful financial reporting information on the whole Company that better reflects the growing diversity of the Company. Leadership Team and budget managers are better supported to deliver services with full financial knowledge and information. Priority Four Corporate Structures Review structure options and implement/set-up most efficient option Implement VAT structure to fit the structure of the organisation - partial exemption and special method assessments The company structure will support the growth of the company and its housing stock and minimise associated tax liabilities. VAT liabilities will continually reflect the changing/growing activity of the Company, which is a regulatory requirement and incurs fines if not implemented correctly. Priority Five Strategic clarity and enablement Ensure clear, strategic financial information enables informed, proactive decision making. Develop financial understanding of SHL within the Contributors Committee Political parties understand the financial efficiency and maximisation of resources that SHL deliver which will add to the Page 7 of 11

8 Develop ratios for return on investments Redesign the management accounts report to reflect growing diversity of business. Continuous framework for Board training on technical financial issues positive relations re the ALMO vehicle Senior management can appraise /compare performance of invested funds. Clear, focussed report with emphasis on key business indicators ensures strategic messages are captured and not lost in the detail. Board can make strategic decisions with full regard to financial implications Priority Six Information and systems Streamline financial processes/interfaces and improve clarity over the whole business operations to aid decision making and improve the quality and efficiency of financial information Review use of systems for financial information by new business areas Evolve the management accounts pack to ensure information is kept concise and high level to support business decision making Develop financial information reporting capabilities within the team. Work with teams to critically evaluate use of systems for financial information and decision making. Financial processes relating to new business areas are set up in the most accurate and efficient way. Clear, more useful financial reporting information on the whole Company that better reflects the growing diversity of the Company. More efficient, targeted reporting structures. Efficient processes resulting in clear, reliable financial information. Priority Seven Regulatory compliance/financial governance Ensure the organisation s accounting complies with regulatory changes Partial exemption and special methods for VAT Compliance plan for switch to International Financial Reporting Standards (IFRS) and FRS 102 in 2016 Future VAT liabilities will more accurately reflect the activity of the Company. Financial statements are compliant with changes in accounting legislation with minimum additional cost. Page 8 of 11

9 Priority Eight Financial Management skills base Develop the financial management skills base in the business in line with business growth Review Corporate Finance Team skills base and match to business requirements Implement Leadership Forum financial training package Improve Repairs accounting service provision from Corporate Finance following higher turnover of finance staff in this area Review skills of team against recognised quality accreditations, eg accountancy bodies. Address any areas where improvements could be made. Seek awards for accountancy team Skilled, expert team effectively supporting senior management to make informed and pro active financial decisions. Enable informed and complete financial decision making at strategic level. Clear, concise and relevant financial information to support critical decision making. Clear view at all times of repairs costs to the organisation. Skilled, expert and enabled team. Will supplement the already accredited status of the team via accountancy bodies and produce positive press Priority Nine Capacity building with customers Support the financial development of customer groups through advice, support and mentoring. Develop links with customer and community groups to provide support and mentoring with financial management Use specialist skills of the team to link in with local schools and provide volunteer support with mathematics. More effective financial management by community groups leading to stability, increased skills and improved funding chances. Contribution towards improved outcomes for young people. Young people engaged in opportunities for careers in finance. Page 9 of 11

10 4 EQUALITY IMPACT ASSESSMENT (EIA) 4.1 The Equality Impact Relevance Screening has been completed. This strategy has a low impact on customers and staff and therefore a full Equality Impact Assessment is not required. 5 LINKS TO OTHER POLICIES AND STRATEGIES 5.1 This strategy links to and/or supports the following other strategies and policies within the organisation: SHL 3 year Business Plan Risk Management Strategy Income Management Strategy Fraud Policy Various team specific Business Plans Value for Money Strategy These strategies collectively provide the framework to support the organisation in its management of money. It is essential that these strategies are integrated to ensure the Stockport Homes continues to maximise its financial management arrangements. 6 ACTION PLAN 6.1 The objectives in this strategy are linked to Stockport Homes Corporate Aims. The high level actions in this strategy are supported by a detailed action plan which is set out in Appendix two. 7 OWNERSHIP, MONITORING & REVIEW 7.1 The Head of Finance will monitor the delivery of the action plan. Delivery of the strategy will be managed through the Personal Development Review of the Corporate Finance Team Members. This will be overseen at a strategic level by the Director of Finance. 7.2 Annual updates will be provided to the Business Development Sub- Group of the Board. Page 10 of 11

11 Page 11 of 11