About this report
1.
This report sets out the reasons for our statutory intervention in Wishaw and District Housing Association (‘Wishaw and District’) and the outcome of that intervention.
2.
We ended our intervention on 1 December 2019 when Wishaw and District transferred its homes to Trust Housing Association.
3.
We aim to produce post-intervention reports around three months after the end of each intervention. This report has been delayed as a consequence of our decision in March 2020 to move our focus to monitoring the impact of Coronavirus (COVID-19) on social landlords.
About Wishaw and District
4.
Wishaw and District was registered as a social landlord in 1978. It owned and managed 1021 homes and provided factoring services to 372 owners across Wishaw and surrounding communities in North Lanarkshire. It was a registered charity and employed around 22 people.
5.
Wishaw and District’s turnover for the eight month period to 30 November 2019 was £3,480.4k. Its debt per unit was £9,352. The last full year turnover to 31 March 2019 was £5,063.9k.
Our regulatory requirements
6.
Prior to February 2019 our then Regulatory Framework contained six Regulatory Standards of Governance and Financial Management for RSLs to comply with.
- The Management Committee to lead and direct the RSL to achieve good outcomes for its tenants and other service users.
- The RSL is open about and accountable for what it does. It understands and takes account of the needs and priorities of its tenants, service users and stakeholders. And its primary focus is the sustainable achievement of these priorities.
- Management of resources by the RSL to ensure its financial well-being and economic achievements.
- Decisions based upon good quality information and advice which identifies and reduces the risks to the RSL's purpose.
- The RSL to conduct its affairs with honesty and integrity.
- The Management Committee and senior officers to have the skills and knowledge they need to be effective.
Our intervention in Wishaw and District
7.
In early 2016 Wishaw and District alerted us to concerns about a site (‘the site’) it had purchased for development in Main Street, Wishaw. The site had been purchased in 2010 for a significant amount, funded by public money as well as Wishaw and District’s own resources. However, over the years no progress had been made on developing it. We asked Wishaw and District to carry out an options appraisal of the site.
8.
The options appraisal of the site identified a number of serious implications for the Association, including that since 2010 it had committed around £1.45 million of expenditure to acquire the site and a further £875k of public money in enabling works. Yet it had still not progressed the site beyond ground consolidation work, nor had it agreed with its partners how the site should be developed.
9.
The options appraisal also identified a number of serious risks associated with developing the site and other significant potential financial liabilities. It also reported serious weaknesses in the Association’s governance of the acquisition and management of the development.
10.
We asked Wishaw and District to explain the background to this matter and why it had spent so much money without any apparent benefit for its tenants or its partners and funders.
11.
Wishaw and District commissioned a number of independent investigations to identify the underlying reasons for the failure to make progress in this matter.
12.
These highlighted a number of serious failures in Wishaw and District’s governance, and poor decision making in relation to the development project. The findings included:
- the governing body had not sought assurance about the financial viability of the investment decision before it purchased the site, or about the impact of the investment of public funds;
- Wishaw and District had failed to review the effect of this project on the business as a whole and the resulting financial impact on tenants;
- Wishaw and District had used its own resources without assessing whether it could bear the reduction in cash on the business;
- Wishaw and District had no previous experience of complex projects of this nature;
- £2.3 million of public and Association funds had been invested in a project with viability issues; and
- the investment decision had not been in the best interests of Wishaw and District’s tenants.
As a consequence of these failures Wishaw and District was under financial pressure, and its reputation was at risk.
13.
We met the governing body in July 2016. It told us that it accepted the findings and recommendations from the reviews. It also told us that it accepted that it needed to address the risks to the Association and the serious weaknesses in its governance and financial management. The governing body recognised that it needed additional expertise to support it to deal with the serious risks it was facing and to comply with the Regulatory Standards. It decided to co-opt three people with a wide range of housing and financial experience onto the board.
14.
We asked the governing body to commission a full, independent investigation into its role in decision making about the purchase and development proposals for the site, including compliance with Codes of Conduct and the Regulatory Standards. We increased our level of engagement to high and published a new Regulation Plan.
15.
Between August and December 2016 three governing body members resigned, including two office bearers. The third office bearer resigned from the role but remained a member of the governing body. The three co-optees became full members, one assumed the role of Chair and another Vice Chair in order to support the Association. Two new governing body members joined Wishaw and District in November 2016.
16.
The independent investigation into the role of the governing body was completed in January 2017. In addition to confirming the findings from the earlier review, this review found that:
- the governing body had unanimously decided to purchase the site without having seen a site valuation, and in the absence of any financial viability assessment, and it did not obtain this information before it completed the purchase; at the time land valuations for the site were between £500k to £1m;
- the development was a significant project due to its size, value, complexity, planning and site conditions;
- the governing body did not have the skills or experience to deliver a complex development in a very difficult financial climate;
- there was no feasibility/options appraisal for the site before its purchase;
- Wishaw and District had tried to find partners to develop the site, however potential partners withdrew for reasons connected to the price and/or land conditions;
- the decision to purchase was not in the best interests of Wishaw and District’s tenants;
- there had been weaknesses in the quality of the information generally presented to the governing body and a failure by the governing body to request important information it needed to make decisions; and
- Wishaw and District did not comply with the Regulatory Standards in force at the time in relation to the purchase of the site.
17.
Wishaw and District’s governing body accepted the investigation’s findings and recommendations. However, by this time, further serious issues (including complaints and alleged breaches of the Association’s own code of conduct) had emerged which created further instability and serious risks to Wishaw and District’s capacity to govern and manage the situation.
Why we intervened
18.
As a result of serious weaknesses in its governance, since 2010 Wishaw and District had invested £2.3 million on a site which had failed to deliver any benefit for the RSL, its tenants and residents or the general public. It faced further potential financial losses.
19.
The investigation into the site purchase also revealed multiple breaches of Regulatory Standards that had hitherto gone undetected.
20.
The scale of the issues meant that Wishaw and District now needed to carry out a strategic programme of change of its governance, risk management and financial planning. The scale of the improvement work required was significant.
21.
It also needed to urgently decide the future of the site in order to protect the organisation’s financial position and the interests of its tenants. These issues required expertise, strong governance and effective leadership. Wishaw and District had not demonstrated to us that it had the necessary capabilities in these areas or the capacity to deal with all the issues without expert support.
22.
The extent of the weaknesses in Wishaw and District represented a serious threat to the interests of its tenants and in February 2017 we decided that it was proportionate and necessary to appoint a statutory manager under section 58 of the Housing (Scotland) Act 2010 (‘the Act’), and to appoint five members (including the existing co-optees) to its governing body under section 65 of the Act.
23.
The statutory manager’s remit was to:
- develop and implement an action plan which addressed the serious risks to Wishaw and District’s governance and financial health;
- ensure that Wishaw and District’s stakeholders, including its tenants and funders, were kept up to date with progress on addressing the issues;
- develop an appropriate investment strategy for the site to provide assurance that Wishaw and District was a suitable recipient of public funds; and
- carry out a strategic review with particular emphasis on governance and financial health and implement any necessary improvements to ensure that Wishaw and District met our Regulatory Standards of Governance and Financial Management.
24.
The governing body appointees were:
- Brenda Higgins (formerly of Link Group, board member Weslo Housing Association) – appointed 10 February 2017 to 1 December 2019
- Alastair Firth (board member Partick Housing Association) – appointed 10 February 2017 to 30 August 2018
- Andrea Paterson (Director, Indigo House) – appointed 10 February 2017 to 1 December 2019
- Shirley Robison (at the time CEO Barrhead Housing Association) – appointed 23 February 2017 to 30 August 2018
- Beth Reilly (at the time Head of Development and Technnical Manager Thenue Housing Association) – appointed 2 March 2017 to 22 August 2019.
25.
The governing body appointees’ remit was to:
- support the delivery of the statutory manager’s remit;
- ensure that Wishaw and District met Regulatory Standards and addressed the issues arising from the findings of the two independent investigations; and
- deal with any other issues that might arise in the course of their appointment and in the normal course of governing body business.
26.
Wishaw and District worked co-operatively with us and the statutory appointees. By the time we reviewed our intervention in August 2017 it had dealt with the immediate implications from the independent investigations; was developing a revised business plan and provided us with assurance about its long term financial position; a strategic review of governance and financial management was underway; an improvement plan was being implemented; and, following a review of the governing body, a decision had been made to recruit additional members to enhance its overall capacity and experience base. The governing body had agreed a strategy and risk management plan for the site based on the findings of an environmental due diligence report. A feasibility study for the site was being commissioned.
27.
While we were assured by the progress that Wishaw and District had made, there were still areas of significant weakness. The main issue was the reliance on the statutory appointees and the failure to identify and appoint suitably qualified members of the governing body. Further work was required to improve its governance capacity and for it to become compliant with the Regulatory Standards in a way that could be sustained in future. It still required support to progress the governance improvement work already underway and to maintain progress on the site.
28.
We therefore extended the appointments of the statutory manager and appointees until March 2018 to support Wishaw and District to address these issues and asked it to demonstrate within this time that it had the governance and leadership capacity to lead the organisation in future.
29.
By March 2018 the governing body had identified options for developing the site. It had improved cost control and demonstrated a sound financial base. It had completed governing body member appraisals. Four new members had been recruited to the governing body but two of these and one longer-standing member had subsequently resigned leaving key gaps in skills, particularly in financial management. The resignations posed a serious risk to the sustainability of the governing body, succession planning and the ability of the governing body to function without the statutory appointees.
30.
At this time the governing body comprised 13 members consisting of five appointees, one local councillor and seven elected members. The governing body still depended on appointees filling key office bearer roles and there had been no progress on the succession to these posts or to the roles of Chair of the sub-committees. The statutory manager assessed that the Association would potentially be compliant with five of the Regulatory Standards by September 2018 however, it was questionable whether it would be compliant with Standard 6 (the governing body and senior officers have the skills and knowledge they need to be effective) by the end of 2018/19.
31.
We considered that the key risks now facing the Association related to its governance, its leadership capacity and sustainability. While Wishaw and District had made progress, it had not made sufficient progress towards a sustainable solution.
32.
Addressing the key risks would require significant time, resources, continued support and intervention with no foreseeable point in the future when it would be able to comply with Regulatory Standards without this level of support. The ongoing provision of support was not a sustainable solution to the identified risks. We continued the statutory appointments for a further six months and asked the statutory manager to carry out a strategic review to identify the best strategic options for the Association and its tenants.
33.
The governing body identified its key strategic objectives for the future and the statutory manager carried out a review of how well each of the strategic options would deliver against them. Wishaw and District consulted a wide range of stakeholders including tenants and service users, staff, lenders, elected members and the local authority. It appointed the Tenants Information Service (TIS) and established a Tenants’ and Residents’ Panel to ensure that tenants and residents were able to provide their views throughout the process.
34.
The review was concluded in June 2018. In August 2018 the governing body considered the review and decided that the best way for Wishaw and District to meet its objectives in future was to transfer its assets and liabilities to another RSL.
35.
To facilitate the work needed to identify a potential transfer partner, run the required tenant consultation and ballots and ensure that they did not interfere with the smooth delivery of services to tenants and other users, we extended the appointments of the statutory manager and statutory appointees.
36.
The statutory manager’s remit now included:
- supporting the governing body to implement a transfer of engagements to another registered social landlord;
- supporting Wishaw and District to comply with the Regulatory Standards of Governance and Financial Management;
- supporting Wishaw and District to communicate with its tenants, service users and stakeholders including its lenders; and
- assisting and supporting the governing body in its role.
Transfer of engagements
37.
In August 2018 Wishaw and District sought expressions of interest for a transfer partner.
38.
On 1 November 2018 Wishaw and District announced that three RSLs had been shortlisted and that tenants, residents and staff would be involved in the final selection process which would include visits to the candidates to see how they handled customer care, tenant engagement and staff relations.
39.
On 21 December 2018 Wishaw and District announced that Trust Housing Association (Trust) had been chosen as the preferred candidate. Trust’s transfer proposals included:
- a three-year rent freeze
- £3 million investment in homes
- building new homes
- continued local presence
40.
We decided to make four further appointments to the governing body to ensure that it continued to have sufficient capacity and expertise after three of the five original appointees stepped down between August 2018 and August 2019 after lengthy periods providing support to the Association:
- Helen Forsyth (at the time CEO Berwickshire Housing Association) – appointed 1 November 2018 to 1 December 2019
- Nile Istephan (CEO Eildon Housing Association) – appointed 1 November 2018 to 1 December 2019
- Julia Mulloy (CEO Scottish Borders Housing Association) – appointed 7 November 2018 to 1 December 2019
- Laura Calder (at the time board member Muirhouse Housing Association) – appointed 5 December 2018 to 1 December 2019
41.
Following a comprehensive consultation programme and an independent ballot of tenants in August 2019, 97% of tenants on a 73% turnout were in favour of the transfer to Trust.
42.
The transfer to Trust was completed on 1 December 2019 and Wishaw and District was removed from the Register of Social Landlords on 27 March 2020.
43.
Trust is continuing to develop new homes in Wishaw. In December 2020 it obtained planning permission to develop 42 new homes on the Wishaw town centre site, the purchase of which had led to the Regulator’s initial engagement. Construction began in July 2021.
44.
In the course of this intervention we identified instances where the investment of public money had not delivered good value for money. We have drawn the attention of public funders to this matter.
Cost of intervention
45.
Wishaw and District met the direct costs of the intervention. The cost of the services and expenses of the statutory managers and the expenses of the statutory appointees covered the period from February 2017 to December 2019 and amounted to £415,603 excluding VAT.
46.
The focus of the statutory manager’s remit changed significantly throughout the period of our intervention as new issues were identified. And as the focus of our intervention changed, we took the opportunity to appoint individuals to reflect the skillsets needed. The statutory managers appointed are set out below:
David Jepson
Sue Philpot
Mags Lightbody
The cost of intervention was offset by wider savings in staffing levels, substantial improvements in performance and improved risk management, including the risk of failing to comply with regulatory standards and requirements.