Preparing Annual Assurance Statements: a thematic review - 2024

About this thematic review
What is an Annual Assurance Statement?
The Statements
The Visits
Areas for improvement
What landlords told us worked well for them and supported them in submitting their Statement
Recommendations
Appendix 1: How we did the visits

About this thematic review

All social landlords are required to submit to the Scottish Housing Regulator an Annual Assurance Statement (Statement) about their compliance with regulatory requirements. Landlords submitted their most recent Statement to us by the end of October 2023.

In this thematic review we set out our findings following our recent visits to nine Registered Social Landlords (RSLs) and four local authority landlords to find out more about the self-assurance work they did to enable them to submit their Statement. On the visits we focused particularly on how landlords assured themselves about meeting their tenant and resident safety duties and for Registered Social Landlords (RSLs), how the Governing Body is assured on its approach to financial planning and the assumptions which underpin the RSL’s financial plans.

Further information on what we covered during the visits is set out in Appendix One.

What is an Annual Assurance Statement?

The Statement is a way for governing bodies and committees to assure themselves and their tenants, people who are homeless or threatened with homelessness, Gypsy/Travellers, other service users and us that they comply with regulatory requirements, or to disclose areas where they need to improve. We set out the requirements for the Statements in our guidance on Annual Assurance Statements.

Landlords have a range of ways through which they assure themselves that they meet appropriate regulatory requirements, including their legal obligations on housing and homelessness services, equalities and human rights, and tenant and resident safety. The Statement is the outcome of that self-assurance. We worked with landlord representative bodies to produce a Toolkit to support landlords’ self-assurance. This work was led by the Scottish Federation of Housing Associations (SFHA).

We consider each landlord’s Statement as part of our annual risk assessment. We then publish the outcomes of this in engagement plans at the end of March. For Registered Social Landlords (RSLs) the engagement plan will include a regulatory status.

The Statements

159 landlords (99%) submitted their Annual Assurance Statements by the deadline on 31 October.

The remaining two landlords (1%) submitted within a few days of the deadline.

18 landlords (11%) disclosed what they judged to be material non-compliance with regulatory requirements.
36 landlords (22%) disclosed what they judged to be non-material non-compliance with regulatory requirements.

Landlords continue to engage positively with the Annual Assurance process, and many have told us that it is valuable in providing them with necessary assurance.

We reviewed all Statements as part of our annual risk assessment of all social landlords and reflected the outcome in engagement plans published at the beginning of April 2024.

The Visits

A number of landlords we visited said they have incorporated their process for completing their statement into their annual cycles as with other regulatory returns, and we observed evidence of an extensive, comprehensive, and robust process being in place for some of the landlords we visited.

Some landlords acknowledged that whilst the process can be resource intensive, it provides governing bodies/committees with detailed assurance on their compliance with regulatory requirements.

A number of the landlords we visited said that they utilise the SFHA Toolkit and find this a helpful framework for their self-assurance work.

Many of the landlords we visited had appropriate measures in place to ensure the governing body is sufficiently assured regarding the organisation’s financial planning and the assumptions which underpin this. We observed evidence of regular and detailed reporting to governing bodies, including effective use of benchmarking, sensitivity analysis and independent expert advice.

Tenant and resident safety was considered a key priority by all of the landlords we visited. Many landlords described the processes they had in place to assure themselves about their compliance with their tenant and resident safety duties. These included robust recording and reporting mechanisms, dedicated roles to monitor compliance, and seeking independent expert advice.

Areas for improvement

In some of the landlords we visited, we observed a lack of appropriate or up to date evidence being made available to the governing body/committee for consideration during the self-assurance process.

Some of the landlords we visited lacked sufficient evidence to provide us with assurance on their approach to tenant and resident safety, including out of date policies and procedures and irregular reporting, preventing appropriate oversight by governing bodies.

The level of governing body/committee involvement in the self-assurance process also varied, with some landlords requiring to consider how they can better implement a governing body/committee led approach.

A number of landlords that we visited also reported to us that they do not currently incorporate any tenant and service user feedback about the services that they deliver and the quality of their homes into their self-assurance processes.

What landlords told us worked well for them and supported them in submitting their Statement

Getting Assurance and Preparing the Statement

Cloch Housing Association made extensive and effective use of the resources available to the sector to support the Statement process, particularly those from the SFHA and Scotland’s Housing Network (SHN). Cloch amalgamated the Self-Assurance toolkit from SFHA with the Annual Assurance Statement checklist from SHN to create a comprehensive resource to support their review of compliance with regulatory requirements as part of their self-assurance process.

Rosehill Housing Co-operative undertakes a continuous review of compliance with regulatory requirements throughout the year; this helps it to prepare for submission of the Statement, with regular consideration at both governing body and subcommittee level. This is done by means of a real-time, online evidence bank which covers all regulatory requirements, including specific sections on tenant and resident safety. All reports presented at meetings contain a ‘compliance and assurance’ section which sets out clearly how the report demonstrates compliance with the relevant requirements and indicates where it will be stored within the evidence bank for future consideration.

West Granton Housing Co-operative provides governing body members with access to a comprehensive digital evidence bank that holds detailed information linked to regulatory requirements. The evidence bank is regularly reviewed and updated throughout the year to ensure accuracy and is used to support the governing body by providing sources of assurance during the preparation of the Statement.

Whiteinch and Scotstoun Housing Association conducts its own detailed self-assessment against regulatory requirements which is then verified by its internal auditor to provide a second level of assurance. The auditor is then able to highlight any areas for consideration and action for the committee to address prior to the submission of the Statement.

Tenant and Resident Safety

Ark Housing Association introduced a tenant and property compliance officer role following an external audit and internal review to support its commitment to prioritising tenant and resident safety, bringing expertise and improved monitoring and reporting. Ark also provided training to governing body members on tenant and resident safety, ensuring the governing body understand the relevant requirements and are able to provide effective scrutiny. Ark also carries out annual home visits to each of its tenants to assist it in monitoring the condition of its stock, as well as aiding early identification of any potential safety issues.

Berwickshire Housing Association operate a comprehensive approach to tenant and resident safety reporting and assurance. Its approach includes; bi-annual reporting to the governing body based on the Health and Safety Executive’s seven principles of leadership, quarterly reporting to the Risk and Audit Committee and its dedicated Health and Safety Advisory Group, and project based reporting to the Operations Committee on a quarterly basis.

Renfrewshire Council take a proactive approach to providing training to elected members to ensure it has the knowledge and confidence to fully engage with the assurance process. This has included training sessions relating to both compliance with regulatory requirements and health and safety legislation.

West Dunbartonshire Council took a proactive approach to addressing damp and mould within its properties, installing sensors which allow tenants to monitor moisture levels within their properties. The data from the sensors can also be monitored remotely, allowing West Dunbartonshire Council to quickly identify at risk properties, and take any required action at the earliest opportunity. West Dunbartonshire has prioritised installing the sensors into property types which are more prone to damp and mould, with a tranche of 2,000 being installed in 2023-24, and 10,000 planned in total.

Tenant Participation

East Ayrshire Council involves tenants in its assurance process through engagement with the East Ayrshire Federation of Tenants and Residents. Presentations on the process are provided to the Federation starting in April, and include an overview of the assurance activities undertaken, planning for the next Statement, and discussing any emerging issues. The Federation also participate in question and answer sessions throughout the year with senior members of staff.

North Lanarkshire Council has a positive relationship with the North Lanarkshire Tenant and Resident Federation, which is an umbrella body incorporating more than 60 residents groups across the council area. North Lanarkshire council actively involve members of the group to input into scrutiny on specific aspects of the assurance process, including tenant and resident safety issues.

Finance

Ark Housing Association starts the budgeting process in August running through to March when its financial plan is presented to the governing body for approval. ARK develops its financial plan using modelling software, which provides outcomes and sensitivity analysis for its assumptions/forecasts. This incorporates all the variables that need to be considered across different budget lines including rent affordability, impact of inflation, interest rates, future development plans/subsequent borrowing requirements, the impact of the external environment on care & support provisions (government objectives/labour shortages) and compliance with loan covenants.

Berwickshire Housing Association benefits from benchmarking and networking. It visits two other RSLs to share thoughts, ideas and good practices, particularly around key financial planning assumption setting. It does this alongside regular input from its external advisers. Berwickshire uses benchmarking clubs to provide another layer of assurance around the approach to financial planning assumptions.

Cloch Housing Association provides regular, detailed financial reporting and timely financial returns to its governing body. To assist with this, it commissions specialist advice particularly on treasury and component costs. It also included financial planning as part of its internal audit programme.

West Granton Housing Co-operative's concise and clear style of reporting financial information to the governing body ensures key financial concepts are communicated appropriately and are well understood. It found that setting out the dates of annual returns at the start of each governing body report is a good way to keep the Committee informed and assured that regulatory financial returns have been completed accurately and submitted on time.

Whiteinch and Scotstoun Housing Association find it helpful to use various external sources to inform its financial planning assumptions. These include the Office for Budget Responsibility Economic and Fiscal outlook reports, Bank of England reports and HM Treasury forecasts for the UK economy.

Recommendations

Landlords may wish to consider involving any tenants group(s) or organisation(s) in their assurance process.

Landlords should consider the frequency and level of information being providing to its governing body regarding tenant and resident safety, to provide it with sufficient assurance about compliance with requirements.

The governing body/committee should ensure it leads and has ownership of the self-assurance process. Landlords can get advice on governing body/committee involvement in the self-assurance process in the SFHA Toolkit and in our advisory guidance ‘Conducting Reviews of Compliance with the Regulatory Standards of Governance and Financial Management’.

Whilst the majority of landlords submitted their Statements by the deadline, landlords should continue to ensure their governing body/committee meeting dates allow for the Statement to be considered and submitted on time.

RSLs should consider how they present financial information to governing bodies, and whether it is clear, accessible, and timely. RSLs may also benefit from providing training, where necessary, for governing body members to ensure they are able to effectively consider and scrutinise financial reports.

To ensure financial forecasts are based on appropriate and reasonable assumptions and information RSLs should regularly review assumptions and consider whether specialist advice would be appropriate. RSLs should also ensure that appropriate modelling has been undertaken to test a realistic range of scenarios.

Appendix 1: How we did the visits

The landlords we visited

To help ensure a good mix, the landlords we visited are located across Scotland, and are of different sizes, structures, and level of complexity. We also selected the landlords to reflect the different types of Statement that were submitted.

Who we visited

Ark Housing Association
Berwickshire Housing Association
Cloch Housing Association
East Ayrshire Council
Govanhill Housing Association
Home in Scotland
North Lanarkshire Council
Renfrewshire Council
Rosehill Housing Co-operative
Rutherglen and Cambuslang Housing Association
West Dunbartonshire Council
West Granton Housing Co-operative
Whiteinch and Scotstoun Housing Association

What we discussed with landlords

In advance of the visits, we requested that landlords provide us with the following information.

Tenant and Resident Safety

The evidence and information the Management Committee/Governing Body or Local Authority Committee saw to assure itself about compliance with requirements on tenant and resident safety, this could include:
- Management Committee/Governing Body/Committee reports and minutes
- Evidence from independent sources such as internal audit, consultant work and/or your corporate risk register.

Financial Planning and Assumptions (RSLs Only)

The evidence and information the Governing Body saw to assure itself about its approach to financial planning and the assumptions which underpin this. This could include:
- Governing Body reports and minutes relating to submission of forecasts and financial returns.
- External/specialist advice and reports relating to the assumptions used in constructing forecasts.

General process for completing Statement

Questions for Senior Officer/Staff

Talk us through the association’s AAS Process
What resources are required for the process?
Have the resource demands increased/decreased as you become more familiar with the overall process?
Did you use any consultants? If so, to what extent? i.e. for the AAS as a whole or particular areas?
Do you involve tenants? How/and is this for specific parts of the AAS? Do you have any feedback from tenants about their involvement in the process?
Did you do anything especially innovative?
Did you have any issues with getting your AAS in by the deadline?
Do you use the SFHA toolkit to inform the process? If not, what alternative process is used?

Questions For Chair/Committee Members

To what extent are committee involved in the process?
Do you have any feedback from committee about their views about their level of involvement in the process? What was your involvement in the process?
Did you feel the process was led by the committee? If not, why?
Did the committee ask any questions when presented with the AAS to sign and, if so, what questions/queries were there?