Financial Statements SSHA

Financial StatementYear ending 31st March 2012Year ending 31st March 2012

Financial Statements 2012 – South Shropshire Housing Association

South Shropshire Housing Association

Financial Statements for the year ended 31 March 2012

Page Contents 1 Chair’s Statement - review of activities 2 Housing Association Governance 3 Statement of Board of Management ‘s Responsibilities 4 – 5 Statement on Internal Controls Assurance 6 Board Members’ Report 7 Operating and Financial Review 8 Auditors’ Report 9 Income and Expenditure Account 9 Statement of Total Recognised Surplus and Deficits 10 Balance Sheet 11 Cash Flow Statement 12 Notes to the Cash Flow Statement 13 – 30 Notes to the Financial Statements

Registered Office The Gateway, The Auction Yard,

Craven Arms, Shropshire SY7 9BW

Homes & Communities Agency Registration No. LH 3943


1

Chair’s Statement

Trading with difficult economic conditions, we have produced improved results. Our net position is a surplus of £255,239. Accounting practice has had to change with Registered Providers required to adopt ‘component accounting’ for financial years following 1st April 2011. The Association’s accounts reflect this change, creating an additional charge of depreciation from the component accounting method. Depreciation on housing properties has increased as component accounting requires the major components of our houses to be capitalised and depreciated over the estimated useful life of each component. Due to adoption of this accounting practice we have revised the prior year results to reflect this change. This has had a significant effect on the accounts, improving the overall position. We capitalised £1.3 million of work done to our properties that we would previously have been shown in the revenue account. The Association drew down a further £1.75 million in the year from its loan facility and this included £500,000 from the £5 million facility we have arranged with Shropshire Council. Within the year we have developed a further 45 new homes within 2 schemes, these being the Ashbrook sheltered scheme in Church Stretton and a small general family scheme in Claverley. Following the development of Ashbrook, it has been possible to demolish our Windsor Place sheltered building that was no longer fit for purpose. This site is now being redeveloped. This development activity has increased the total number of our properties by 7, as detailed in Note 9, as a further 2 properties have been brought back into management.

The Association has been able to invest significant sums towards routine and planned maintenance. This work includes new bathrooms, doors, windows, kitchens and roofs together with general estate and house improvements. This contributes significantly to improving the environment for our tenants and also helps ensure that we continue to we meet the Decent Homes Standards and to comply with our commitments to our funders, The Royal Bank of Scotland and Newcastle Building Society. In 2011/12, we received more income for aids and adaptations work than anticipated. This enabled us to carry out more alterations for tenants, so as to adapt their homes for their specific needs. I am pleased to report that the Association has been able to meet its objectives of providing good quality homes and services for our customers. I would like to thank our staff and my fellow Board members for their dedication and hard work which has again risen to the challenges being created by the changes in the national housing policy and the economic conditions within which we operate. Further, I must thank our tenants who work with us to enable us to provide the desired services and outcomes. Tim Ralphs Chair 16th July 2012


2

Housing Association Governance

Status of the Association The Association is registered with and regulated by the Financial Services Authority under the Industrial and Provident Societies Act 1965, Registered No. 27191R and is also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH 3943. The Association has charitable objects, and is a charity for tax purposes (reference XT4981).

Purposes of the Association The Association was formed for the benefit of the community in providing housing, accommodation and assistance to help house people. Statement of Compliance with the NHF

Code of Governance Shropshire Housing Group has formally adopted the National Housing Federation Code of Governance. The Shropshire Housing Board reviews compliance with the Code each year on behalf of all members of the Group and confirms that Shropshire Housing Group and its subsidiaries including South Shropshire Housing Association comply with all material principles in the Code.

Members of the Association There are two categories of shareholding membership: Tenant Members of which there are 32 and Voluntary Members of which there are 42, each holding a £1.00 share. Shropshire Housing Limited is also a member and holds a £1.00 share. Members have voting rights at Annual and Special General Meetings. Members of the Association are eligible to be elected to sit on the Board and Sub Committees. The detailed arrangements regarding member-ship are set out in the Rules of the Association.

The Board of Management

The Board comprises up to 10 members and up to 5 co-optees and is responsible for managing the affairs of the Association. The role of the Co-opted persons appointed

by the Board who may not be members of the Association, is to act as specialist advisers. There are 2 elected Tenant Members and Shropshire Council also nominates 1 Council Member to attend the Board of Management. (The Council nominees are not required to be shareholding members of the Association). These rights were transferred from South Shropshire District Council to the unitary authority when it was established in April 2009. The Board members are drawn from a wide background bringing together professional, commercial and local experience. The Group’s Remuneration and Nominations Committee periodically reviews skills available and skills required. Effectiveness is regularly reviewed and monitored. The Board is responsible for the Association’s continuing strategy and policy framework. It delegates the day-to-day management and implementation of that framework to the Executive. The Board now meets six times a year for regular business. Other meetings take place as required and for training and development purposes. Our Board of Management is responsible for the operating activities of the Association which includes setting strategy and policy in relation to development of new homes, improvement, modernisation and repair of existing homes, housing and estate management, tenant involvement, rent collection and arrears management. The Shropshire Housing Board is responsible for providing strategic direction and policy development, overall financial control and support, developing performance systems and monitoring compliance with all regulatory requirements. The Chair is appointed annually by Members of the Board.


3

Remuneration of Board Members

Our Board Members receive a fee from the Association and this is agreed on an annual basis. Reasonable reimbursement is made for travel and subsistence in appropriate circumstances.

Statement of Board of Management’s Responsibilities

The Industrial and Provident Societies Acts 1965 to 2003 require the Board of Management to arrange for the preparation of financial statements for each financial year which give a true and fair view of the state of affairs of the Association as at the end of the financial year and of the surplus or deficit for that period. In preparing those financial statements, the Board of Management is required to: • adopt suitable accounting policies and

apply them consistently; • make judgements and estimates that are

reasonable and prudent; • state whether applicable accounting

policies have been followed subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on a going concern basis.

The Board of Management is responsible for making the appropriate arrangements for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Association and to enable it to ensure that the financial statements comply with the Industrial and Provident Societies Acts 1965 to 2003, and the Housing and Regeneration Act 2008. It has responsibility for taking such steps as are reasonably open to it to safeguard the assets of the Association and to prevent and detect fraud and other irregularities.

Board Members’ Indemnity

The Board has confirmed that the Association does have Board member and Officers Insurance in place.

Financial Instruments

The Association does not have any abnormal exposure to price, credit, liquidity and cash flow risks arising from its trading activities. The Association does not enter into any hedging transactions and no trading in financial instruments is undertaken.

Disclosure of Information to Auditors

In the case of each of the persons who are Board members of the Association at the date when this report was approved:

• So far as each of the Board members is aware, there is no relevant audit information of which the Association’s auditors are unaware; and

• Each of the Board members has taken all the steps that they ought to have taken as a Board member to make them aware of any relevant audit information (as defined) and to establish that the Association’s auditors are aware of that information.

Going Concern After reviewing the Association’s Budget for 2012/2013 and based on normal business planning and control procedures, the members of the Board have a reasonable expectation that the Association has adequate resources to continue in operational existence for the foreseeable future. The financial statements have therefore been prepared on a going concern basis.


4

Statement on Internal Controls

Assurance Responsibility

The Shropshire Housing Group’s Board of Management, as the ultimate governing body, is responsible for the system of internal control, which is designed to provide reasonable but not absolute assurance regarding:- • the safeguarding of assets against

unauthorised use or disposal; and • the maintenance of proper accounting

records and the reliability of financial information used within the business or for publication.

Key procedures have been established and are designed to provide effective internal control. These key areas cover control, reporting information systems, monitoring and risk management. The Board has a clear and well communicated strategy and policy covering the prevention and detection of fraud, and procedures are followed where fraud is suspected or detected. A clearly established whistle blowing policy is in place. The Performance Committee on behalf of the Group and all its subsidiaries have reviewed the effectiveness of the system of internal control, including the sources of assurance agreed by the Board as being appropriate for that purpose. On the basis of the evidence provided by the Assistant Director of Performance and Governance in her report presented to the Shropshire Housing Board on 1st June 2012. We are satisfied that there is sufficient evidence to confirm that adequate systems of internal control existed and operated throughout the year. We are also satisfied that those systems were aligned to an ongoing process for the management of the significant risks facing the Group. No weaknesses were identified which would have resulted in material misstatement or loss and which would have required disclosure in the financial statements.

Control Environment The Group Board has put in place an organisational structure with clearly defined lines of responsibility and delegations of authority. These are found in detail in the Group’s Standing Orders, Financial Regulations, Treasury Management Controls and Risk Management Strategy and Procedures. These delegations and authority levels are reviewed annually.

• Control Procedures

Procedures are in place for all the main functions and service areas, and in particular there are clearly defined policies for development projects and capital expenditure, including the appropriate authorisation levels. Information Technology procedures are periodically updated. All capital projects require Board approval before commencement and commitment of any funds. Completed development projects are also subjected to a post investment appraisal, comparing actual results to original forecasts.

• Information Systems

The Group has a comprehensive system of financial reporting. The Annual Budget and Business Plan are approved by the Board. Actual results are reported against budget headings to each subsidiary Board meeting with any significant variances being reported together with explanations. The current borrowing and investment position is reported at each Board meeting, as well as to the Group’s Performance Committee.

In accordance with regulations, annual financial returns are submitted to the former Tenant Services Authority, now Homes & Communities Agency, and


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quarterly financial returns to the Association’s principal lenders. There are regular meetings of the Operational Management Team to review and monitor revenue and capital spending against budget assumptions. Cash balances are checked daily, coupled with revised forecast of borrowing requirements at regular intervals as necessary. There are a number of annual reports on other functions to the Performance Committee, and these include insurance arrangements and treasury management.

• Monitoring System The control system is monitored by internal audit and within the annual plan the work is focused on the areas of greatest risk to the Association. Monitoring is also done by senior officers and managers.

• Risk Management The Group’s officers have a clear responsibility for identifying risk facing each of the areas in which they operate and for putting in place procedures to mitigate and monitor risk. It is the Performance Committee’s responsibility to review and assess these risks. Performance Committee includes 2 members of South Shropshire Housing Association Board.


6

Board Members’ Report

Members of the Board

The members of the Board who served during the year were as follows: Tim Ralphs Chair as of 30.11.11 Neville Stephens Chair until 30.11.11 Nicholas Holcombe retired 28.09.11 Colin Harrison John Stringer Irene Grant (nee Overton) David Mullins Ian Graves James Williamson Clare Ratcliffe Michelle Walker appointed on 25.05.11 The Board reports that we produced a surplus of £255,239 compared to the previous year’s deficit of £698,985. Turnover has increased to £11.6 million compared to £11.3 million the previous year. Interest charges amounted to approximately £2,664k.

Future developments The Board are continuing to look at new ways to develop new dwellings and to repair and improve existing properties. It is continuing to look to partnerships with other agencies in order to best secure these aims.

Housing Properties and Other Fixed Assets

We now hold properties at a historical cost of £64.7 million net of Housing Grants and depreciation. These were financed through grants, and internal funds. The value for existing use by a housing association of these properties is professionally assessed at in excess of £90 million. As a stock transfer association our debt to asset gearing ratio is considered to be in line with similar associations. During the year, our units in management increased by 7. There were 45 new properties completed and 40 units at Windsor Place were demolished in readiness for redevelopment. 2 units came back into management. At the year end, the number of housing and commercial properties we managed totalled 2,238.

Cashflow and Liquidity The cashflow from operating activities during the year was £4.3 million, compared to £3 million in 2011. Loans increased by £1.75 million during the year resulting in total borrowings of £62.3 million at the year end. By order of the Board Tim Ralphs Chair 16th July 2012


7

Operating and Financial Review

Background South Shropshire Housing Association is an independent not for profit business formed in the early 1990’s to provide high quality affordable social housing in the South Shropshire area, together with properties in Herefordshire and Shrewsbury. We manage approximately 2,200 houses and aim to build 200 new properties across the Group over the next few years. We have developed services and expertise in a wide range of housing and related services. For example, in addition to improving, managing and maintaining our general needs homes, we run a foyer for young people, a refuge for women fleeing domestic violence, sheltered schemes for older people and run supported housing projects for vulnerable and homeless people. Our vision is to provide quality homes and services involving people in building communities where they choose to live.

Operating Review On 30th July 2007 we became part of the Shropshire Housing Group, with the newly formed Meres & Mosses Housing Association and Total Response Limited. At this time we adopted charitable rules. The formation of the Group has created efficiencies in administrative costs which are being used to improve frontline services, following consultation with tenants. We have seen another successful year, developing 45 new properties and bringing 2 more back into management, although we have demolished a further 40 properties for redevelopment. Once again, the combined expenditure on routine and planned maintenance and improvements has increased from the previous year’s level, with specific attention being directed towards bathrooms, doors, windows, kitchens and roofing. The majority of planned works is now capitalised in line with our components accounting policy.

Reporting Structure

The Board comprises up to 10 members and up to 5 co-optees and is responsible for managing the affairs of the Association. The Board Members are drawn from a wide background bringing together professional, commercial and local experience. The Board is responsible for our continuing strategy and policy framework. It delegates the day to day management and implementation of that framework to the Executive. The Board meets six times a year.

Continuous Improvement We are committed to achieving excellent performance across the whole of our business and services. The Group has a comprehensive performance management framework which ensures a clear focus on performance and clear responsibility for scrutiny on performance at various levels. The Performance Management Group monitors the benchmarked data together with performance indicators, reports and best practice visits. The group is made up mainly of senior managers from across the Shropshire Housing Group.

Risks and uncertainties The Group’s managers have a clear responsibility for identifying risk facing each of the areas in which they operate and for putting in place procedures to mitigate and monitor risk. It is the Performance Committee’s responsibility to review and assess these risks.

Financial Review The 2011/2012 financial year has produced good results with a surplus being achieved. The net position was a surplus of £255,239 against last year’s deficit of £698,985. We paid over £4.6 million in acquisition and construction of housing properties and received over £1.4 million in capital grants relating to this.


8

Report of the Auditors to the members of South Shropshire Housing Association

We have audited the financial statements of South Shropshire Housing Association for the year ended 31st March 2012 which comprise the Income and Expenditure Account, the Statement of Total Recognised Surpluses and Deficits, the Balance Sheet, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Respective responsibilities of the Board

and Auditors As explained more fully in the Statement of Board’s Responsibilities set out on page 3, the Board is responsible for the preparation of financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practice Board’s (APB’s) Ethical Standards for Auditors. This report is made solely to the Association’s members, as a body, in accordance with section 9 of the Friendly and Industrial and Provident Societies Act 1968 and the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Association and the Association’s members as a body for our audit work, for this report, or for the opinions we have formed.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB’s

website at www.frc.org.uk/apb/scope/private. cfm.

Opinion on financial statements

In our opinion the financial statements; • give a true and fair view of the state of the

Association’s affairs as at 31st March 2012 and of its income and expenditure for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been properly prepared in accordance with the Industrial and Provident Societies Acts, 1965 to 2003, the Housing and Regeneration Act 2008 and the Accounting Requirements for Registered Social Landlords General Determination 2006.

Matters on which we are required to

report by exception

We have nothing to report in respect of the following matters where the Industrial and Provident Societies Acts, 1965 to 2003 require us to report to you if, in our opinion; • a satisfactory system of control over

transactions has not been maintained; or • the Association has not kept proper

accounting records; or • the financial statements are not in

agreement with the books of account; or • we have not received all the information and

explanations we need for our audit. Date: Mazars LLP Chartered Accountants and Statutory Auditor 45 Church Street Birmingham B3 2RT


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Income and Expenditure Account for the year ended 31st March 2012 2012 Restated 2011 £ £ Note Turnover 2 11,630,928 11,377,367 Operating costs 2 (8,710,645) (9,419,206) Operating surplus 2 2,920,283 1,958,161 Share of deficit in joint ventures 10 (256) (187) (Deficit) / Surplus on sale of fixed assets 9 (2,350) 6,203 Surplus on ordinary activities before interest

2,917,677 1,964,177

Interest receivable and similar income 3 1,716 10,932 Interest payable and similar charges 4 (2,664,154) (2,674,094) Surplus / (Deficit) on ordinary activities before taxation

5

255,239

(698,985)

Taxation on surplus / (deficit) on ordinary activities

8

-

-

Surplus / (Deficit) for the year transferred to reserves

255,239 (698,985)

All of the above relate to continuing activities. Statement of Total Recognised Surpluses and Deficits for the year ended 31st March 2012 2012 2011 £ £ Note Surplus / (Deficit) for the year 255,239 (698,985) Actuarial (loss) / gain 18 (175,000) 154,000 Prior year adjustment 24 3,197,451 - Total recognised surplus / (deficits) relating to the year

3,277,690

(544,985)


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Balance Sheet at 31st March 2012

2012 Restated 2011

Note £ £ £ £ Tangible fixed assets Tangible assets cost 9 115,021,423 110,990,572 Less Depreciation 9 (14,735,582) (13,861,175) Less Social Housing grant 9 (34,985,386) (33,662,848) Other capital grants 9 (623,690) (623,690) 64,676,765 62,842,859 Investments/Joint Ventures 10 (21,605) (21,349) 64,655,160 62,821,510 Current assets Assets held for resale 11 308,463 469,558 Debtors 12 1,107,845 1,012,110 Investments 13 402,208 303,088 Cash at bank and in hand 411,104 226,132 2,229,620 2,010,888 Creditors: amounts falling due within one year

14 (2,021,424) (1,877,328)

Net current assets 208,196 133,560

Total assets less current liabilities 64,863,356 62,955,070 Creditors: amounts falling due after more than one year

15

61,984,121

60,217,069

Provision for pension liability 18 902,000 841,000 Capital and reserves Called up share capital 16 74 79 Revenue reserve 17 1,977,161 1,896,922 64,863,356 62,955,070

These financial statements were approved by the Board of Management on July 2012 and were signed on its behalf by Tim Ralphs

Chair Board Member Jen Hayball Secretary


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Cash Flow Statement for the year ended 31st March 2012

2012 Restated 2011 Notes £ £ £ £ Net cash inflow from operating activities

(a) 4,301,755 3,173,271

Returns on investments and servicing of finance

Interest received 1,526 53,372 Interest paid (2,618,330) (2,591,578) (2,616,804) (2,538,206) Capital expenditure Acquisition and construction of housing properties

(4,651,168) (5,537,432)

Proceeds from sale of Right To Buy properties & miscellaneous land

1,150 (8,517) Capital grants received 1,499,158 1,825,258 Purchase of other tangible fixed assets

- (598)

(3,150,860) (3,721,289) Taxation Financing Net housing loans received (c) 1,750,000 - Net shares issued 1 7 1,750,001 7 Increase / (Decrease) in cash

(c) 284,092 (3,086,217)


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Notes to the Cash Flow Statement for the year ended 31st March 2012 (a) Reconciliation of operating surplus to net cash inflow from operating

activities

2012 Restated 2011 £ £ Operating surplus 2,920,283 1,958,161 Depreciation 1,457,710 1,439,683 Increase in debtors (95,541) (33,577) Shared ownership cost of sales / Decrease in stock 161,095 489,809 Increase / (Decrease) in creditors 9,213 (440,810) Movement in provisions (151,000) (240,000) Increase in share capital (5) 5 Net cash inflow from operating activities 4,301,755 3,173,271

(b) Reconciliation of net cashflow to movement in net debt

2012 2011 £ £ Increase / (Decrease) in cash in the year 284,092 (3,086,217) Housing loans received (1,750,000) - Change in net debt (1,465,908) (3,086,217) Net debt brought forward (60,020,780) (56,934,563) Net debt carried forward (61,486,688) (60,020,780)

(c) Analysis of changes in net debt

At 31st March At 31st March 2011 Cash Flow 2012 £ £ £ Investments 303,088 99,120 402,208 Cash at bank and in hand 226,132 184,972 411,104 284,092 Debt due after 5 years (60,550,000) (1,750,000) (62,300,000) Total (60,020,780) (1,465,908) (61,486,688)


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Notes (forming part of the financial statements) 1 Accounting policies The financial statements have been prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), and in line with the Statement of Recommended Practice “Accounting by Registered Social Housing Providers” Update 2010 and the Accounting Requirements for Registered Social Landlords General Determination 2006. A summary of the more important accounting policies, which have been consistently applied, is set out below. The accounting policies were reviewed by the Performance Committee on 9th May 2012 in accordance with FRS18. Accounting convention The financial statements are prepared under the historical cost convention. Turnover Turnover represents rents and service charges receivable in respect of tenanted properties, residential care charges and amounts invoiced in respect of the provision of management services. Fixed assets and depreciation Other tangible fixed assets are stated at cost and are written down to their residual value over their expected useful life on a straight line basis at the following annual rates: Office equipment, fixtures & fittings - 15% to 25% Plant & machinery - 15% to 25% Vehicles - 25% Housing Properties As required by Financial Reporting Standard 15 and the Statement of Recommended Practice for Registered Social Housing Providers, the Group has reviewed the useful economic lives of its housing properties and with effect from 1st April 1999 depreciates the property costs, less grants, freehold land and residual value. Housing properties in the course of construction are stated at cost and are transferred into housing properties when complete. The cost of properties is their purchase price or construction cost together with enhancement expenditure and other acquisition and development costs, including capitalised interest and directly attributable overheads. Freehold land is not depreciated. Depreciation is charged so as to write down the cost (net of social housing grant) of freehold housing properties other than freehold land to their estimated residual value on a straight line basis over their expected useful economic lives at the following annual rates: Housing Properties – 99 years Major components are treated as separable assets and depreciated over their expected useful economic lives or the lives of the properties to which they relate, if shorter, as the following average annual rates, these are approximate as there are sub-elements under each component: Roofs 60 years Kitchens 15 years Bathrooms 30 years Windows/Doors 20 years Central heating 25 years


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Notes (continued) This represents a change in accounting policy to comply with the 2010 SORP update. This has resulted in a prior year adjustment the effects of which are set out in the notes to the financial statements. Shared Ownership Properties All properties are split between fixed and current assets in line with the expectation relating to the first tranche sale percentage. The expected first tranche proportion is classified as a current asset until the point of the first tranche sale. The current asset is then transferred to cost of sales and matched against sales proceeds within the operating surplus in the Income and Expenditure Account. Any operating surplus is restricted to the overall surplus which takes into account the Existing Use Value-Social Housing (EUV-SH) of the remaining fixed asset element. The remaining element of the asset is classified as a fixed asset and included in housing properties at cost less SHG, less any provision for depreciation or impairment. Impairment The properties are reviewed for impairment annually, and where housing properties have suffered a permanent diminution in value, the fall in value will be recognised after taking account of any related capital gains. In view of the current economic conditions, a full review for impairment has been carried out, looking at revised property valuations, particularly for shared ownership properties. Where a risk of impairment has been identified, external property valuations have been obtained. Social Housing and Other Grants When developments have been financed wholly or partly by social housing and other grants, the costs of those developments have been reduced by the amount of the grant received. Social housing grant received in advance of the costs of housing properties in the course of construction is shown as a current liability. Provision is made in the balance sheet for repayments of social housing grants where it is likely that properties will be sold in the foreseeable future. Stock Stock is stated at the lower of cost and net realisable value. Liquid Resources This represents the total of assets which a business can use immediately to make payments. In general they include cash in hand, in bank, assets that can quickly be changed into cash. Operating leases Rentals payable under operating leases are charged on a straight-line basis over the term of the lease. Interest charges Interest charges represent the actual cost of financing purchased and transferred properties, completed property acquisitions, new developments and major repairs schemes where mortgages and loans have been received from external sources.


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Notes (continued) Capitalisation of interest Interest on the loan financing a development is capitalised up to the date of practical completion, after adjustment for interest received on social housing grant in advance of the relevant expenditure. Interest has been charged at 5.17% per annum. Pension costs Contributions payable to the Group’s pension schemes are charged to the income and expenditure account so as to spread the cost of pensions over the service lives of employees in the schemes. FRS 17 is followed. Taxation The charge for taxation is based on the results for the year and takes into account taxation deferred (or accelerated) because of timing differences between the treatment of certain items for taxation and accounting purposes. Provision is made for deferred tax on a full provision basis. We obtained charitable status confirmation from the HMRC for Meres and Mosses Housing Association from its first day of trading and for South Shropshire Housing Association from 6th August 2007. This is due to HMRC accepting our Charitable Objects. Shropshire Housing Limited and its subsidiary Total Response Limited are still subject to taxation. VAT policy The Group is VAT registered, but a large proportion of its income namely rents, is exempt for VAT purposes. This gives rise to a partial exemption calculation. Expenditure is shown inclusive of VAT and the input VAT recovered is shown in the Income and Expenditure Account. Supported People Income and Expenditure Separately identifiable accommodation based rent, service and support charge income along with any related costs for accommodation based supported housing are disclosed under “Supported Housing” within Note 2. Charges for and costs of support services funded under Supporting People are shown under “Supporting People” within Note 2 “Other Social Housing”.


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Notes (continued) 2 Turnover, operating costs and operating surplus

2012 2011 Turnover

£

Operating Costs

£

Operating Surplus

£

Turnover

£

Restated Operating Surplus

£

Lettings 10,064,322 7,641,707 2,422,615 9,665,134 1,501,578 Other Social Housing Supporting People 592,165 505,572 86,593 579,634 110,258 Foyer non letting 10,198 10,198 - 13,279 - VAT 23,730 - 23,730 54,789 54,789

626,093 515,770 110,323 647,702 165,047 Sale of shared ownership first tranche 761,170 676,238 84,932 991,900 19,820 Contribution to pension scheme

-

(151,000)

151,000

-

240,000

Non social housing lettings 179,343 27,930 151,413 72,631 31,716

11,630,928 8,710,645 2,920,283 11,377,367 1,958,161


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Notes (continued)

2 Income and expenditure from lettings (continued) 2012 2011

Housing

Accom-modation

Supported Housing for Older People Foyer Refuge

Shared Ownership

Total

Total

£ £ £ £ £ £ £ Income

Net Rental Income 7,621,288 997,713 43,313 33,100 301,875 8,997,289 8,502,533 Net Service Charges Income

Charges for Support Services 129,750

- 116,141 41,592

67,922 -

39,452 -

15,165 -

368,430 41,592

386,655 39,527

Net rental Income 7,751,038 1,155,446 111,235 72,552 317,040 9,407,311 8,928,715

Revenue grants from Homes and Community Agency and

Local Authority - 214,996 116,120 108,573 - 439,689 450,265 Aids & Adaptations Grant 162,461 - - - - 162,461 250,884

Other Revenue Grants 7,709 - - 18,120 - 25,829 23,650 Other Income 29,011 - - 21 - 29,032 11,620

Total income from lettings 7,950,219 1,370,442 227,355 199,266 317,040 10,064,322 9,665,134

Expenditure on lettings Management 1,774,127 269,548 68,385 27,878 58,034 2,197,972 1,924,612

Services 339,797 122,527 71,087 54,135 9,972 597,518 563,915 Care and support 82,684 236,220 110,595 90,750 - 520,249 557,098

Routine maintenance 1,744,949 274,081 12,720 5,720 - 2,037,470 2,105,974 Planned maintenance 681,751 107,083 - - - 788,834 1,500,983

Rent losses from bad debts 74,749 13,929 1,269 1,593 - 91,540 140,362 Depreciation 1,167,606 189,450 10,492 2,040 38,536 1,408,124 1,370,612

Total expenditure on lettings 5,865,663 1,212,838 274,548 182,116 106,542 7,641,707 8,163,556

Operating surplus/(deficit) 2,084,556 157,604 (47,193) 17,150 210,498 2,422,615 1,501,578 Void Losses (112,072) (30,520) (5,188) (27,017) (2,806) (177,603) (115,239)

The supported housing project is based on support given to individual tenants, and is property based. The rental income quoted refers to the rental due while the tenant is using the facility.


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Notes (continued) 3 Interest receivable and similar income 2012 2011 £ £ Interest receivable from bank deposits 1,716 10,932

4 Interest payable and similar charges 2012 2011 £ £ Net finance charge on pension (note 18) 37,000 56,000 On bank loans, overdrafts and other loans repayable - wholly or partly in more than 5 years 2,739,037

2,777,005

Less: interest capitalised (111,883) (158,911) 2,664,154 2,674,094 5 Surplus / (Deficit) on ordinary activities

2012 Restated 2011 £ £

Surplus / (Deficit) on ordinary activities is stated after charging: Depreciation of tangible fixed assets 1,457,710 1,439,683 Auditors’ remuneration including VAT. (This is shown within the Group costs):

In their capacity as auditors - - In respect of other services - - 6 Staff costs 2012 2011 £ £ Wages and salaries 850,609 980,040 Social security costs 70,208 79,792 Other pension costs 178,854 102,475 1,099,671 1,162,307 Average number of full-time equivalent persons employed during the year 40

47

These were categorised as: Development 4 9 Housing 2 2 Sheltered/Domestic Support 34 36 40 47

7 Directors’ emoluments 2012 2011 Fees payable by way of expenses and Remuneration to Board Members -

£19,649

8 Taxation The Association was accepted as a charity with effect from 6 August 2007.


19

Notes (continued) 9 Tangible fixed assets

Freehold housing

properties

Freehold housing

properties in the course of construction

Foyer Office equipment, fixtures &

fittings

Total

£ £ £ £ £ Cost

At the beginning of the year 89,187,546 7,549,443 1,943,704 467,776 99,148,469 Restated for previous year 11,719,867 - 122,236 - 11,842,103 Restated opening balance 100,907,413 7,549,443 2,065,940 467,776 110,990,572

Additions 4,360,645 1,079,848 17,261 - 5,457,754 Schemes completed 6,578,638 (6,578,638) - - -

Disposals (899,009) (420,082) - (107,812) (1,426,903)

At end of year 110,947,687 1,630,371 2,083,201 359,964 115,021,423

Depreciation and impairment

At the beginning of the year 4,712,645 - 82,207 421,671 5,216,523 Restated for previous year 8,328,666 - 315,986 - 8,644,652 Restated opening balance 13,041,311 - 398,193 421,671 13,861,175

Charge for the year 1,397,631 - 20,986 39,093 1,457,710 Eliminated on disposals (475,491) - - (107,812) (583,303)

At end of year 13,963,451 - 419,179 352,952 14,735,582


20

Notes (continued) 9 Tangible fixed assets (continued) Freehold

housing properties

Freehold housing

properties in the course of construction

Foyer Office equipment, fixtures &

fittings

Total

£ £ £ £ £ Social Housing grants

At beginning of year 31,249,775 2,053,103 359,970 - 33,662,848 Receivable 1,109,470 213,068 - - 1,322,538

Schemes completed 2,053,103 (2,053,103) - - -

At end of year 34,412,348 213,068 359,970 - 34,985,386

Other capital grants - - - - - At beginning of year & end of year - -

623,690 - 623,690

Net book value At 31st March 2012 62,571,888 1,417,503 680,362 7,012 64,676,765 At 31st March 2011 56,647,512 5,496,340 652,902 46,105 62,842,859

Works to existing properties during the year amounted to £2,186,168. This has been accounted for as follows:- Planned maintenance - revenue £ 788,834 Improvements - capital £1,397,334


21

Notes (continued) 9 Tangible fixed assets (continued) Housing properties and housing properties in the course of construction include £2,376,625 (£2,264,742 for 2011) of accumulated capitalised interest. Number of units 2012 2011 Under development at end of year: Housing accommodation 15 45 Under management at end of year: Housing accommodation 2,210 2,209 Managed for private landlords 4 4 Commercial units 24 18 2,238 2,231 Disposal of fixed assets 2012

£

2011

£ Proceeds (2,350) 6,203 Cost - (358,418) Depreciation eliminated on disposal - 358,418 (Deficit) / Surplus on disposal (2,350) 6,203 10 Investments 2012 2011 £ £ Shares in Joint Venture undertaking: At 1st April 2011 40 40 Addition - -

At 31st March 2012 40 40 In 2005, the Association acquired 40 ordinary shares of £1 each in South Shropshire Local Homes Limited, out of a total of 99 issued. The principal activity of the company in the year under review was that of the provision and sale or rent of affordable housing for local people. Dividends on sale or winding up of the company will entitle the 3 shareholders equal amounts on distribution irrespective of share numbers held. The accounting period is the year ended 31st March.


22

10 Investments (notes continued) South Shropshire Housing Association share of the joint venture, South Shropshire Local Homes Limited £ £ Share of turnover - Share of loss before tax (256) Taxation - Loss after tax (256) Balance brought forward (21,349) (21,605) Share of assets Fixed assets Current assets 389 389 Share of liabilities Due within one year or less (22,001) Due after more than one year-shares (33) Share of net liabilities (21,645) Shares held 40 ordinary £1 shares 40 (21,605) 11 Assets held for resale 2012 2011 £ £ Shared ownership completed units 220,753 100,958 Shared ownership work in progress 87,710 368,600 308,463 469,558 12 Debtors 2012 2011 Due within one year £ £ Gross rental arrears 640,049 583,566 Less: Provision for bad debts (359,086) (319,379) 280,963 264,187 Prepayments and accrued income 826,882 747,923 1,107,845 1,012,110 13 Current asset investments 2012 2011 £ £ Cash on short term deposit 402,208 303,088


23

Notes (continued) 14 Creditors: amounts falling due within one year 2012 2011 £ £ Trade creditors 336,094 383,104 Other taxation and social security 78,096 73,901 Rent in advance 117,303 108,137 Social Housing Grant in advance* 241,902 65,283 Accruals and deferred income 1,248,029 1,246,903 2,021,424 1,877,328 * Includes recycled capital grant £ Opening balance Homebuy 18,750 Grant element of Shared Ownership 176,620 Closing Balance 195,370 It is envisaged that this will be recycled into another capital scheme in 2012. 15 Creditors: amounts falling due after more than one year

Housing loans The Association has a combined borrowing facility with RBS and Newcastle Building Society of £65,000,000 of which £61,800,000 had been utilised at 31st March 2012 (£3,209,000 undrawn). The facility is for a term of 35 years on both fixed and variable rate terms. The Association is able to choose from time to time to select fixed term borrowing from variable rates. The borrowings are secured by fixed and floating charges over the assets of the Association; variable rates are at LIBOR plus the agreed margin. Fixed rate loans were between 4.7% and 5.8% including margin. In addition, the Association has drawn down £500,000 of a £5 million facility with Council, paying 3.83%. 2012 2011 Amounts repayable by instalments and not wholly repayable within five years:

£ £

Repayable after five years 62,300,000 60,550,000 The balance sheet shows the position net of refinancing costs of £315,879 (2011: £332,931).


24

Notes (continued)

16 Called up share capital 2012 2011 £ £ Issued and fully paid shares of £1 each: At beginning of year 79 74 Issued during the year 1 5 Relinquished during the year (6) - At end of year 74 79 The shareholders do not have the right to dividends, redemptions, distributions etc. 17 Reserves £ At 1st April 2011 (1,300,529) Prior year adjustment 3,197,451 At 1st April 2011 restated

1,896,922

Surplus for the year 255,239 Actuarial (loss) on pension scheme (175,000) At 31st March 2012

1,977,161

18 Pension obligations The Association’s employees are members of the Social Housing Pension Scheme (SHPS) or the Shropshire County Pension Scheme. Total pension cost for the Association was £178,854 (2011: £102,475) covering 15 (2011: 16) employees. This includes £151,800 (£66,000 in 2011) lump sum payment for the Shropshire County Pension Scheme funding deficit. (a) Social Housing Pension Scheme South Shropshire Housing Association participates in SHPS (the Scheme). The Scheme is funded and is contracted-out of the State Pension scheme. It is not possible in the normal course of events to identify on a consistent and reasonable basis the share of underlying assets and liabilities belonging to individual participating employers. This is because the Scheme is a multi-employer scheme where the Scheme assets are co-mingled for investment purposes, and benefits are paid from total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS17 represents the employer contribution payable.


25

18 Pension obligations (continued) The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to address the level of future contributions required so that the Scheme can meet its pension obligations as they fall due. The last formal valuation of the Scheme was performed as at 30 September 2008 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme’s assets at the valuation date was £1,527 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £663 million, equivalent to a past service funding level of 69.7%. The Scheme Actuary has prepared an Actuarial Report that provides an approximate update on the funding position of the Scheme as at 30 September 2010. Such a report is required by legislation for years in which a full actuarial valuation is not carried out. The funding update revealed an increase in the assets of the Scheme to £1,985 million and indicated a reduction in the shortfall of assets compared to liabilities to approximately £497 million, equivalent to a past service funding level of 80.0%. The next triennial formal valuation of the Scheme is due as at 30 September 2011. The results of the valuation will be available by December 2012. (b) Shropshire County Superannuation fund The Shropshire County Superannuation fund is a local Government Pension Scheme and is a multi-employer defined benefit scheme. The scheme is funded and is contracted out of the state scheme. The last formal valuation of the Scheme was performed at 31st March 2010 by a professionally qualified actuary using the “projected unit credit actuarial cost” method. The market value of the Scheme’s assets at the last valuation date was £951 million. The valuation revealed a Past Service deficit of some £226 million (equivalent to a past service funding level of 81%). The share of fair value of assets at 31st March 2010 (last full actuarial valuation) was as follows: £’m Equities 495 Bonds 238 Other 218 Market Value 951 Past Service liabilities (1,177) Past Service deficits (226) South Shropshire Housing Association Limited paid contributions at the rate of 20.2% during the accounting period which is also set for the next 2 years. Member contributions vary between 5.9% and 7.5%. We additionally pay the lump sum of £151,800 which is set for the next 2 years.


26

Financial assumptions A qualified independent actuary, Mercer Limited, carried out an actuarial valuation at 31st March 2012 for disclosure purposes. The major assumptions used were: 31 March 2012 31 March 2011

Rate of CPI inflation 2.5% 3.4% Rate of increase in salaries 4.0% 4.4% Rate of increase in pensions 2.5% 2.9% Discount rate 4.9% 5.5%


27

18 Pension obligations (continued) The assets of the scheme and the expected rate of return were: Rate of return

expected at 31st March

2012

Value at 31st March 2012

£’000

Rate of return expected at 31st March

2011

Value at 31st March

2011 £’000

Equities 7.0% 1,269 7.5% 1,470 Bonds 4.1% 249 5.1% 226 Government bonds 3.1% 345 4.4% 257 Property 6.0% 86 6.5% 86 Cash liquidity 0.5% 115 0.5% 115 Other 7.0% 331 7.5% 102 Total market value of assets 2,395 2,256 i) Liability and funding status under Financial Reporting Standard 17 of South

Shropshire Housing Association’s part of the fund.

2012 £’000

2011 £’000

Plan assets 2,395 2,256 Benefit obligations (3,297) (3,097) Deficit in scheme (902) (841)

ii) Analysis of the amount which has been charged to operating surplus under Financial Reporting Standard 17

2012

£’000 2011

£’000 Current service cost (46) (49) Employer contribution 197 112 Total operating charge 151 63

iii) Analysis of the amount which has been charged to interest costs under Financial

Reporting Standard 17 2012

£’000 2011

£’000 Expected return on assets 132 128 Interest on liabilities (169) (184) Net return (37) (56)


28

18 Pension obligations (continued) iv) Analysis of amount which has been recognised in the statement of total recognised

surpluses and deficits (STRSD) 2012

£’000 2011

£’000 Asset (loss) / gain (82) (19) Liability (loss) / gain (93) 173 Changes in assumptions underlying the present value of the scheme liabilities -

-

Actuarial (deficit) / surplus for recognition in the STRSD (175) 154

v) Movement in Financial Reporting Standard 17 deficit during the year

2012 £’000

2011 £’000

Deficit at the beginning of the year (841) (1,179) Movement in year: - Past service gain - 177 - Current service cost (46) (49) - Contributions 197 112 - Net return from other financial income (37) (56) - (Deficit) / Surplus in STRSD (175) 154 Deficit at the end of year (902) (841)

vi) History of experience (deficits) / surpluses calculated under Financial Reporting

Standard 17

2012 £’000

2012 As a % of Scheme assets/

liabilities Asset loss (82) 3.4% Experience gain on liabilities (93) 2.8% Total amount recognised in the STRSD (175) 5.3%

19 Capital commitments

2012 2011 £ £ Capital expenditure contracted for but not provided in the financial statements

2,553,930

957,678

Capital expenditure authorised by the Board of Management but not yet under contract

93,750

195,000


29

The Board of Management expects the expenditure it has authorised to be fully financed by a combination of Social Housing Grant, private loan finance, or from the Association’s own funds. There is a formal borrowing facility in place with Newcastle Building Society and Royal Bank of Scotland plc to fund all planned capital expenditure requirements. 20 Other financial commitments

The Association was committed to making the following annual payments under non-cancellable operating leases: Operating leases which expire:

2012 £

2011 £

Property Plant Total Total Within 1 year - 498 498 - 1 - 2 years - 7,547 7,547 - 2 - 5 years - 6,371 6,371 - over 5 years - - - - - 14,416 14,416 - 21 Contingent liabilities

The Association has been notified by the Pensions Trust of the estimated employer debt on withdrawal from the Social Housing Pension Scheme based on the financial position of the Scheme as at 30 September 2011. As of this date the estimated employer debt for South Shropshire Housing Association was £6,919,296. This has not been provided for, since there is currently no intention to withdraw from the scheme. 22 Legislative provisions

The Association is incorporated under the Industrial and Provident Societies Act 1965. Registered No. 27191R and is also registered with the Homes & Communities Agency in accordance with the Housing and Regeneration Act 2008, Registered No. LH 3943. The Association has charitable objects with effect from 6th August 2007, reference XT4981. The ultimate parent undertaking is Shropshire Housing Limited, an Industrial and Provident Society regulated by the Homes & Communities Agency. The entity has elected to take advantage of FRS 8 exemption from disclosing certain intra-group transactions. 23 Related Party Transactions Marches Housing & Charitable Trust (MHCT), which is a registered charity, was registered on 9th December 2003, having an accounting reference date of 30th June. The activities of Marches Housing & Charitable Trust were raising funds for the relief of poverty, sickness and old age and to advance education and provide leisure facilities in Shropshire and


30

other specified areas. Marches Housing & Charitable Trust has more recently reviewed its objectives to include promotion of social and financial inclusion building of community capacity in partnership with the local community and local agencies. Some of the trustees are our Board Members and the Secretary is a member of the Shropshire Housing Limited staff. The decision was taken during the year to return the unused portion of SSHA funded money of £29,095.92 in September. The remaining money is being used on projects at the discretion of SSHA staff. It has since been decided that MHCT will not be wound up as a charity but will be re-launched under a different name with different trustees and objectives. There is no intention for SSHA to provide financial support in the future. In the year to March 2012, South Shropshire Housing Association paid out £3,082 of donations on behalf of grants approved by Marches Charitable Trust. Any tenants who sit on the board of South Shropshire Housing Association are charged for rent and other services on normal business terms. Board members who are appointed by councils do not affect the way we receive any grants; they are all at arm’s length. Members who are involved with any business with whom we trade have to declare their interests and take no part in the letting of any contracts involving the same. 24 Prior year adjustment South Shropshire Housing Association has adopted the Statement of Recommended Practice (SORP): Accounting by registered social housing provider Update 2010 in this current year ended 31st March 2012. This has resulted in the provisions for component accounting being implemented this year. Major components are now treated as separable assets and depreciated over their expected useful economic lives or the lives of the properties to which they relate, if shorter. Significant costs referring to the replacement of major components were previously treated as revenue expenditure. Comparative figures have been restated to reflect this change in of accounting policy.

Cumulative effect to 31st March 2010

Prior year adjustment 2010 / 2011

Cumulative effect to 31st March 2011

Balance sheet Reserves – revenue reserves

3,861,993 (664,542) 3,197,451

Income and expenditure account

Increase in operating costs 664,542 Increase in operating deficit

(664,542)

Documents

Financial Statements SSHA