GREENSQUARE GROUP
VALUE FOR MONEY STATEMENT
Extract from REPORT AND FINANCIAL STATEMENTS
For year ended 31 March 2014
Value for Money Statement
1.
Introduction and principles
This statement is for our residents, stakeholders, Board members and staff. It sets out where we are
on providing an efficient service for all our customers, and creating value for money within
GreenSquare. This is the second year we have provided such a statement.
The staff and Board members at GreenSquare define value for money as the relationship between
effectiveness, efficiency and economy, often described as the value chain. Value for money is high
where there is a good balance between all 3 – low costs, high productivity and successful outcomes.
We aim to be accountable to our residents, partners and regulator by setting out here our past
performance and future aspirations.
Overview
Creating value for money is seen as essential within GreenSquare as it creates “choices” of what we
can do to further our social and charitable objectives. Created value can be applied to:
• improving our existing homes and raising resident satisfaction; and/or
• building new homes to help address the lack of housing supply in the areas where we
operate; and/or
• helping to improve the life chances of our residents and/or the communities where they live.
Therefore there is a compelling drive to deliver value for money at GreenSquare. There are some
areas where we have continued to improve and also some areas where we have identified we need to
do better and which we have plans to tackle. Consequently this value for money statement seeks to
achieve two overriding objectives:
• To outline our value for money performance; and
• To outline the Board’s way forward for value for money, and what decisions it has already
taken to raise performance in this area.
2.
The contents of this statement into 5 areas:
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3.
Our long term aspirations
Managing and monitoring value for money
Our performance to date including benchmarking and the social and financial return we
achieve from our assets, and value for money achievements
The Board’s way forward – driving more value for money
How the Board gains assurance that we are doing what we say we are
Our longer term aspirations
Overall we want to be as efficient as we can whilst providing excellent services to our residents. We
define this aim as achieving top quartile performance (i.e. within the top 25% when compared to
similar housing organisations) on services in a number of areas, particularly in customer satisfaction,
and being in the best quartile on cost. There is a way to go on this, as set out in the rest of this
statement.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
4.
How we manage and monitor value for money
Within the value for money statement last year, GreenSquare detailed the ways it manages and
monitors value for money. In summary the key aspects of this remain:
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the business planning cycle which includes comprehensive cost reviews and
challenge,
including seeking 5% efficiency savings year on year;
performance reporting focused on value for money;
a value for money team meeting regularly to drive changes through the business;
co-regulation of value for money with the resident scrutiny panel;
use of professional advisers;
good contract management;
rigorous project management; and
periodic service reviews looking at cost and service quality.
We also highlighted our Greenstates, a one-page statement of costs, performance, and areas for
improvement for each of our service areas.
5.
Our Performance to Date
a)
Understanding our performance: performance over time
We have reviewed the key indicators which we think are relevant to stakeholders on our value for
money and determined these to be as follows:
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Social Housing Operating Margin
Management and Maintenance Costs per Unit
Void Losses
Efficiency/Procurement Savings
Cost of funds.
With the exception of efficiency/procurement savings which are covered later on, we have set out
below our performance in each of these over the recent period.
Social Housing Operating Margin (Earnings before interest, tax and depreciation EBITDA)
Generating a good operating margin is fundamental to ensuring the organisation is generating
sufficient funds to enable it to invest in its operations going forward. The charts below show our core
turnover and operating margin (these exclude financial impairments due to acquisition of properties):
Social Housing Turnover and EBITDA £m 100 Turnover 50 EBITDA 0 2010 2011 2012 2013 2014 OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
Social Housing EBITDA % 60.00% 40.00% EBITDA % 20.00% 0.00% 2010 2011 2012 2013 2014 Management and Maintenance Costs per Unit
We monitor our overall management and maintenance costs per unit as part of our value for money.
£ Management Cost per Unit 1450 1400 1350 1300 1250 1200 1150 1100 Management Cost per Unit 2010 2011 2012 2013 2014 Our management costs
have risen, partly to cope
with managing the impact
of welfare reform, and
reflecting other pressures
in the business. We
recognise from
benchmarking (see below)
that we need to improve.
Our management costs in
2013/14 grew by 0.3%,
significantly below inflation.
Maintenance per Unit £'000 1,400 1,300 Maintenance per Unit 1,200 1,100 2010 2011 2012 2013 2014 We currently have a low
level
of
spend
on
maintenance
but
are
reviewing investment in our
assets.
Void Losses
Voids are loss of rent where there is no tenant. Voids losses are an area of focus for the Group and a
pilot for the lean process reviews (see below, section 7 value for money systems) will be focussed in
this area in 2014/15.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
Void Losses 1.70% 1.50% 1.30% 1.10% 0.90% 0.70% 0.50% Void losses are showing an
improving performance over
time.
Void Losses 2010 2011 2012 2013 2014 Cost of Funds
Cost of Funds 4.50% 4.40% 4.30% Cost of Funds 4.20% Our cost of funds (e.g.
interest costs) are relatively
low but may go up as interest
rates rise. At the year ended
st
31 March the element of
variable
debt
was
approximately 18% of total
drawn facilities.
4.10% 2010 2011 2012 2013 2014 b)
Understanding our current performance: benchmarking costs and income
To better understand our existing performance on costs we have looked at our absolute and relative
(i.e. how our costs compare with others) costs, through benchmarking.
Background on benchmarking: We gain a full assessment and richer picture of GreenSquare's
value for money performance by comparison to other similar registered providers. Consequently, a
key focus for this year’s value for money statement is how GreenSquare benchmarks against others.
We use 2 key sources of benchmarking to assess performance. They are the “Shape-Up” analysis
(by FSMB) and Housemark. Clearly benchmarking reports are only available after the financial
reporting is complete, therefore this analysis takes the Shape Up results for year ended 31st March
st
2013 results and then adds the data from these financial accounts for the year ended 31 March
2014. The benchmarking in Shape-Up compares GreenSquare to a peer group of 100 similar
housing association/groups. Where there is similar analysis from Housemark the benchmarking has
shown a consistent story with the Shape-Up results.
Results: For performance to date the following areas are described:
• growth;
• revenue and cost structure;
• surplus and interest;
• bad debts and arrears; and
• balance sheet.
Growth: In 2012/13, our total assets grew by 12.7% compared to the peer group of 4.2% and this
puts us in the top quarter of the peer group. In 2013/14 that growth was 5.2%. This shows that
GreenSquare is maximising its financial capacity to build more new homes for those in housing need.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
Revenue and cost structures: The total revenue per unit for 2012/13 was £5,064, compared to the
sector average of £5,884. For 2013/14 it has improved to £5,439. This remains relatively low
compared with peers. However, it does highlight the significant housing benefit savings that
GreenSquare creates for government when comparing rents paid by residents in receipt of housing
benefit to the level of benefits that would be required to pay market rents in the private rented sector.
In 2012, the Board recognised that staff cost per the number of staff employed was £34,596
compared to the peer group of £30,060 and consequently implemented a new reward strategy. The
new strategy undertook to remove that salary differential over a period of time. As a result these
financial statements show a cost of £34,356, an improvement of 0.7% from the previous year.
The spend on maintenance was £1,103 per home in 2012/13. That placed GreenSquare in the top
quarter within the peer group of the lowest spenders in this area. In 2013/14 this was £1,177, an
increase of 6.7%. Whilst financially this demonstrates good value for money, it needs to be set in the
context of less favourable benchmarks of resident satisfaction. This “cost versus satisfaction”
relationship is addressed in more detail below in the section on “The Board’s way forward - driving
more value for money”.
Surplus and Interest: the balance sheet records GreenSquare's assets at valuation whereas many
housing associations have continued to use the lower cost figure. The impact of that is the
GreenSquare Operating Surplus is reduced because of a higher depreciation charge. In order to
benchmark consistently, if that variance is removed then the Operating Margin (before interests and
tax) is 28%, which is above the peer group average of 25.9%. For the 2013/14 business plan, the
Board agreed to generate surpluses for development projects and in June 2014 the Board agreed to
take an additional step to support the National Housing Federation “Ambition to Deliver” and thereby
advocates creating a “profit for purpose”. Consequently, the relatively higher Operating Surplus will
help support our vision. However, we have also identified that there are two costs drivers noted
above that need to be addressed:
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the higher than average staff cost (currently being addressed through the reward strategy);
and
the lower than average maintenance costs (this will be continued to be addressed through
improved efficiency measures, i.e. continue with the downward pressure on costs), and the
re-assessment of the long-term asset management needs of our homes, particularly in North
Wiltshire.
Voids, bad debts and arrears: for 2012/13, we demonstrated positive performance in this area, with
the exception of losses from bad debts as a percentage of gross rents and service charges at 0.8%,
which was above the peer group average of 0.7%. In 2013/14 our results show this has been tackled
with an improvement to 0.7%.
Balance sheet: As noted above in Growth, GreenSquare has a recent history of maximising the use
of its balance sheet capacity to help deliver its charitable objectives Consequently the debt per unit
for 2012/13 was £25,400, compared to the average of £22,100 and lower quartile of £27,400. That
desire to maximise the balance sheet capacity has continued and the debt per unit has increased to
£27,400, putting balance sheet capacity to use in furthering our overall aims.
Summary: Our rents are lower when compared to its peer group, whilst our growth is greater. Both of
those results are a positive outcome from a focus on value for money. In financial terms, the lower
maintenance spend is positive in that it creates value to invest in new homes or communities.
However, we are reviewing the impact of this on our residents through a comprehensive re-evaluation
of options for the housing assets, based on their return on investment together with their social and
environmental return. The Board has also identified continued scope to improve our operating
performance on voids and arrears is average. In addition, we have identified that overall our
operating costs are high and are under increased scrutiny to ensure GreenSquare is efficient, and
that its operating cost separates out the cost of being a landlord, and the extra work that we
undertake to improve the resident’s life chances and their communities.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
c)
Understanding our performance: satisfaction
Resident satisfaction is fundamental to us proving value for money and more focus has been given to
the 3 resident led Communities Boards to help improve this. We have recently moved to the Star
system to collate this resident feedback data and the results for the last two years on our landlord
service are shown below:
Landlord Service 100% 95% 90% 85% 80% 75% 70% Landlord Service 2013 d)
2014 There
has
been
an
improvement in our overall
performance, but the Board
will
remain
focused
on
improvement from
bottom
quartile in the Housemark
benchmarking
to achieve
median performance of 88%
and ultimately our aim of over
90% to be in the top quartile.
Understanding our performance: financial return on assets
Are we holding and investing in the right assets?
A full strategic asset review has been carried out in 2013/14 which has identified 16 areas of focus to
ensure we are maximising the return on our assets. During early 2014/15 we will conduct detailed
analysis of each of the areas involving looking at long term net present values and customer
satisfaction levels. Following this review due to be completed by July 2015 recommendations and
action plans will be presented to the Board for consideration. The areas for potential improvement
are listed below:
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Sheltered housing schemes
Precast reinforced concrete (PRC) properties
Small land sites with development potential
Land holdings with no development potential
Regeneration areas
Estates with sustainability issues
High value properties
Three storey flats
Two bedroom flats
Properties with scope to extend
Open spaces with potential to enhance the neighbourhood
Energy efficiency
Under occupation supply and demand.
Garage sites
Supported housing
Potential acquisitions to support regeneration.
The value of our properties
The existing use value (EUV) is a formal valuation of our stock by external valuers. The valuation is a
measure of the total income we receive from our homes less the running costs of the homes over the
lifetime of the homes, all added up. Increasing values indicates that the return on our assets is
increasing. Over recent years we have had 5 valuations for Westlea’s stock, and 3 for OCHA’s. The
results are set out below.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
ExisFng Use ValuaFons 70000 60000 50000 OCHA 40000 Westlea 30000 20000 2005 2007 2008 2010 2013 2014 e)
Understanding our performance: Social return on investments - improved outcomes
for residents:
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We invest in dedicated teams to help support residents who might be either in arrears, or
likely to get into arrears, and help them maintain their tenancies. Not only does this help
people to keep debt to a minimum, it can also reduce mental health problems and be a
positive outcome for the wider communities in which they live.
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Working collaboratively with other agencies, such as the local Credit Unions and Citizens
Advice also enables us to offer a holistic approach to financial inclusion. In 2013/14 £150,000
was invested in the Wiltshire CAB who helped 491 of our residents resolve problems with
debts and benefits issues of £717,000.
Our in-house Tenancy Sustainment Team
conservatively prevented 29 evictions, saving £168,000.
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Dealing with anti-social behaviour (ASB), which affects the wider community, ensures
successful tenancies and prevents others from moving away. Working with the local Crime
and Safety Partnerships produces better outcomes for customers and avoid costly
duplication. Our investment in this service resolved 23 cases in 2013/14.
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The GreenSquare Energy Advisors is an award winning team that work with those customers
most at risk of fuel poverty. Since establishing the team, they have saved our residents over
£385,000 per annum in utilities costs.
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We continue to develop and support our customers who can further their skills and training
through the GreenSquare Academy. This year over 120 residents took part and recorded
satisfaction levels of over 92%. 44 residents completed courses with a formal accreditation.
Understanding our performance: Social return on investment - improved outcomes for the
communities where GreenSquare works
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We invest in community initiatives. The Board agreed an investment of £1.50 per property
per week back into the community. The decisions about investment in community initiatives
is based on priorities set by our resident led Communities Boards Action Plans. These
projects:
o
o
o
improve the areas around our homes; and/or
foster community; and/or
improve individual wellbeing.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
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The review of these projects through our Impact Assessments show that for the majority there
has been a real benefit for communities. Where an Impact Assessment does not support this
work then the project is reviewed. Some examples of successful projects are detailed below.
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Project Inspire has worked with 65 young people through support and learning. 46 have
gained nationally recognised awards and qualifications, and this has directly helped 39 young
carers, 21 with learning difficulties and 21 in danger of becoming excluded from education,
employment or training. This project was match funded with £25,000 and cost GreenSquare
£469 per participant.
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Without any additional cost, we have been working with Aspire Oxford, a charity providing
grounds maintenance services that train and employ ex offenders, to cover our Oxfordshire
estates grounds maintenance. Aspire save the public purse over £1,000,000 each year and
98% of trainees do not re-offend.
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Our estate ‘clean up days’ continue. These cost just over £5 for each for the 842 residents
who took part. Over 80% of the materials collected were able to be recycled or recovered;
they also attracted £3,000 of investment from partners.
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Our Communities Boards have been working to complete their Communities Plans with 27
local consultation events.
These projects have successfully collaborated with such
organisations as the Wiltshire Wildlife Trust, Anybody Can Cook, and the Open Blue Trust.
Understanding our performance: Social return on investment - new homes, and the ‘rent
dividend’
In 2013/14 we built 283 new homes investing £44m into the local community.
Homes Under Management 12000 11000 Homes Under Management 10000 9000 2010 2011 2012 2013 2014 In total we now own and manage over 11,500 homes. The vast majority of these properties are at
rent levels significantly below market levels which creates a rent dividend we are effectively investing
in our community or the UK economy which a private landlord would have retained.
The average rent we charge p.a. is £96 per week which is £59 below the average market rent. Given
that about half of our rents are covered by housing benefit we are saving those residents that pay the
rent themselves collectively £15.45m a year and we also are saving the government the same sum in
reduced housing benefit compared with housing our residents in the private sector.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
Summary: GreenSquare created social value for money from the targeting of resources and projects
to areas of multiple deprivation and areas where we know there are problems with ASB and
unemployment. That investment is based on research and analysis, ensuring that there is no
duplication with others agencies, ensuring that investment we get from others is maximised. Overall,
and in line with the budget agreed by the Board, GreenSquare invested £388,000 in 2013/14 in
community investment and customer engagement project costs, and helped lever in a further
£346,000 into our communities in partnership funding. Volunteer support was valued at £540,000.
This gives a total of £1,270,000. The majority of our projects have high outcomes relative to their
cost, which reflects the thought we put in to projects we undertake.
f)
Environmental return
We invest in our assets and services to improve the energy efficiency of homes and reduce our
environmental impact. Our residents have highlighted the high costs of energy as a key concern.
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6.
Each year we invest £500,000 in improving the energy efficiency of our homes with a SAP
rating (Standard Assessment Procedure – a measure of the energy efficiency of a home) of
under 65.
Energy performance certificate calculations indicate our investment saves residents £385,000
per year in energy costs alone.
The average SAP rating of our homes is 72 compared with an average private rented sector
home SAP rating of 56.
Value for money achievements: actual cost and efficiency savings
Within GreenSquare, a value for money team (supported by the vice-chair of the Board) monitors the
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delivery of the value for money. The target for the year ended 31 March 2014 was £1,473,000. This
was exceeded, with actual value for money savings of £2,267,000. Those savings were made up of:
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£86,000 of service charge gains: There were a number of tenancies that were inherited from
North Wiltshire District Council that did not include the ability to levy a service charge. This is
unfair when compared to those residents that do have to pay such charges. The £86,000
represents the progress made with this during the year.
£35,000 ICT savings: These accrued from re-tendering existing contracts, and through the
changing of the way printers are used. The new printer services provided an improved
‘service’ to staff plus saved money.
£147,000 neighbourhood services: Community involvement savings were made through only
investing where there was a strong business case to do so.
£67,000 supported housing: Following resident consultation, a change to the service of
redecorating of tenant’s rooms was made.
£451,000 Asset management: Energy Company Obligation (ECO) Grant was obtained for
insulation to a number of GreenSquare homes. Not only was there a cash saving to the
organisation, but it will also feed through to lower energy costs for a number of residents.
£1,219,000 in-house construction: This was GreenSquare Construction Ltd’s cost savings
generated compared with using external contractors.
£262,000: savings from a variety of other sources.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
Total savings though specific initiatives generated £2,267,000 of value for money savings in 2013/14
the split between areas is shown below:
Efficiency Savings £'000 35 262 86 147 67 Service Charges IT Neighbourhood Services 451 Supported Housing Asset Management 1,219 Inhouse ConstrucSon Other 7.
The Board’s way forward - driving more value for money
st
During the year ended 31 March 2014, the Board reappraised its approach to value for money. The
catalyst for that was the All Boards Away Days in November 2013 where it considered future demand
for housing in Gloucestershire, Oxfordshire and Wiltshire, and the organisational structure to meet
that challenge. There was also a need to address the lower benchmarked resident satisfaction and
high operating costs explained above, and these two challenges will feed through to the 2015
business plan, due to be launched in March 2015. However, because of our charitable objectives and
the desire to do more, there was also a need to act sooner. Consequently, in February 2014, the
Board instructed the following to be undertaken.
Rationalise the GreenSquare group and funding arrangements: GreenSquare is a complex group
with five registered providers and four commercial subsidiaries. The Group funding is also complex
with nine lenders, including a four bank syndicate. This means 12 different financial covenants. The
Board wanted to remove this complexity 3 years ago, but was unable to do so because of the price of
the loan re-negotiation. The Board’s view is that this is again worthy of investigation because the
lending market is now more amenable to such change. The business case is being worked on at the
time that these financial accounts are being finalised but the decision will be driven by:
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Savings in administration costs of the Group that would follow if the number of entities are
reduced;
Releasing balance sheet capacity from the loan re-negotiations i.e. allowing the Group to
borrow more;
Reducing the treasury risk created from the current complexity; offset by
Some increased loan margins when compared to the levels available when the original loans
were agreed in 1995.
Executive Team: At 1 April 2013 there were seven members of the senior executive team. By 31st
of March 2014 a plan reduced this to five. The predicted, and achieved, saving is £213,000 per
annum.
Common GreenSquare Branding: To simplify understanding of the GreenSquare group and drive
further efficiencies, all the commercial subsidiaries have adopted the GreenSquare brand.
OPERATING AND FINANCIAL REVIEW continued
Value for Money Statement continued
Procurement: Procurement is currently dispersed across the Group. After taking specialist advice
the Board decided that procurement should have one Executive lead (the Development Director) and
the way it is undertaken is being reviewed to ensure consistent quality in purchasing and to generate
savings. Once the resources and processes for procurement are agreed then targets can be set and
monitored. This is due to be agreed in the third quarter of 2014/15.
Value for Money systems: The Board agreed to investigate a new approach to systems and
processes that adds value to the customer and drives out waste. These approaches (“lean reviews”)
have their origins within the manufacturing sector but have been successfully implemented in other
housing associations. Typically, such reviews should lead to improved outcomes for our customers,
efficiency savings, and increased staff empowerment. This is due to be implemented from the third
quarter of 2014/15.
Asset management: In October 2013, GreenSquare commenced a review of its housing assets.
This is known as the GreenSquare strategic asset management review, which will seek to identify at a
scheme level the following:
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the financial, social and environmental returns that the schemes generate (taking account of
both future income and underlying liabilities with each);
any options to be addressed to meet future demographic challenges.
Key Performance Indicators (KPIs): in June the executive team reviewed the key indicators by
which it proposed to assess value for money in the Group. The Executives considered what indicators
would be important to the Group’s various stakeholders. These stakeholders include residents, staff,
lenders, the tax payer, and the regulator. As a result the group will focus on the following indicators
over the medium term:
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8.
Resident satisfaction
Satisfaction with the quality of our homes
% ASB cases resolved successfully
Operating margin on social housing activities
Costs per housing property
Return on assets
Void losses
Cash savings
Commercial turnover and profit
The treasury cost of funds
Number of new homes developed
The rent dividend i.e. the gap between our rents and market rents, and the HB savings for the
government we achieve
Savings in procurement.
How the Board gains assurance that we are doing what we say we are
The Board receives information on our performance on value for money in the following ways:
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This statement has been reviewed by the Board
Greenstates, a position statement on the costs and quality of all major areas of service level
activity, are available to the Board
Our balanced scorecard reported quarterly to the Board includes KPI’s, such as management
costs per property, covering the efficiency of our services
We report progress on key saving initiatives to the Board in a ‘savings log’ quarterly
The budget is approved by the Board and sets targets for savings and the management
accounts show how these are being achieved
The Board has appointed one of its members as a value for money champion and they attend
the GreenSquare Management Team responsible for value for money and provide regular
reports to the Board on value for money progress. They also coordinate the value for money
portfolio holders within the Communities Boards.
OPERATING AND FINANCIAL REVIEW continued
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Value for Money Statement continued
9.
Conclusion
As outlined at the start of this value for money statement, there is a compelling driver for improving
GreenSquare’s value for money. “Profit for a Purpose” enables value to be created that can be
applied to the three key strategic choices of improving existing homes and raising resident
satisfaction, building new homes and starting to tackle the paucity of housing supply, and/or seeking
to improve the lives and communities for our customers.
This value for money statement shows that GreenSquare has achieved good performance in some
areas but acknowledges that there are other areas where improvements can be made. The Board
acknowledges this and have already embarked on a series of measures to address it.