Why we are engaging with Sanctuary Scotland Housing Association Ltd (Sanctuary Scotland)
We are engaging with Sanctuary Scotland about its financial management, stock quality, development plans, a small transfer of homes and because it is a systemically important landlord.
We refer to a small number of RSLs as systemically important because of their stock size, turnover or level of debt or because of their significance within their area of operation. We need to maintain a comprehensive understanding of how their business models operate, and how they manage the risks they face and the impact these may have. So we seek some additional assurance each year through our engagement plans. Given Sanctuary Scotland’s size, turnover and level of debt we consider it to be systemically important.
Sanctuary Scotland is one of the largest developers of new affordable housing in Scotland. It has plans to grow through a considerable programme of new homes for social rent, mid-market rent and low-cost home ownership. The number of affordable homes provided by Sanctuary Scotland will increase by around one fifth over the next five years. Sanctuary Scotland will receive significant public subsidy and has told us it will also need to obtain new private finance to support its development programme. We will engage with Sanctuary Scotland to get assurance about how it is managing the risks to the organisation including its levels of debt and development plans.
Sanctuary Scotland has identified reinforced autoclaved aerated concrete (RAAC) in some of its homes. It has told us it has a plan in place to manage any associated risks. Sanctuary Scotland continues to investigate the extent of RAAC in its homes and other buildings.
Sanctuary Scotland will also progress a small transfer of homes from Inverclyde Council.
What Sanctuary Scotland must do
Sanctuary Scotland must:
- send us copies of its Board and audit committee minutes as they become available;
- send us by 30 June 2024:
- its approved business plan and updated risk register;
- 30 year financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- a comparison of projected financial loan covenants against current covenant requirements;
- financial sensitivity analysis which considers the key risks, the mitigation strategies for these risks and a comparison of the resulting covenant calculations with the actual current covenant requirements;
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance; and
- evidence of how it demonstrates affordability for its tenants.
- conclude its investigation into the extent of RAAC in its homes and other buildings as quickly as possible, and confirm the outcome to us;
- tell us if there are any material adverse issues which might affect its capacity to manage the risks associated with RAAC;
- send us an update on its development programme by 31 October 2024. This will include its latest report to the governing body/appropriate committee about development and details of the scale and tenure mix, timescales for delivery and any material delays or changes to the programme;
- tell us if there are any material adverse changes to its development plans which might affect its financial position or reputation, in line with our notifiable events guidance; and
- provide updates on progress with the transfer of homes from Inverclyde Council.
What we will do
We will:
- review the minutes of the Board and audit committee meetings and liaise as necessary;
- observe Sanctuary Scotland’s Board;
- review the business plan and financial information;
- meet with Sanctuary Scotland’s senior staff to discuss the business plan, the financial information and any risks to the organisation;
- review any information Sanctuary Scotland provides about RAAC in its homes or other buildings and engage as necessary;
- review the development update and engage as necessary;
- review the updates on progress with the transfer of homes from Inverclyde Council and engage as necessary; and
- update our published engagement plan in the light of any material change to our planned engagement with Sanctuary Scotland.
Regulatory returns
Sanctuary Scotland must provide us with the following annual regulatory returns and alert us to notifiable events as appropriate:
- Annual Assurance Statement;
- audited financial statements and external auditor’s management letter;
- loan portfolio return;
- five year financial projections; and
- Annual Return on the Charter.
It should also notify us of any material changes to its Annual Assurance Statement, and any tenant and resident safety matter which has been reported to or is being investigated by the Health and Safety Executive or reports from regulatory or statutory authorities or insurance providers, relating to safety concerns.