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1,300-home social landlord downgraded by HCA

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1,300-home social landlord downgraded by HCA

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Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Regulation

1,300-home social landlord downgraded by HCA 1,300-home social landlord downgraded by HCA

The Homes and Communities Agency (HCA) has downgraded a Nottingham-based social landlord on both its governance and viability scales.

Tuntum Housing Association, which was established as a black and minority ethnic housing provider, manages around 1,300 homes across 11 local authority areas in the East Midlands.

The HCA has knocked Tuntum down one notch on its 'Properly Governed' scale to 'G3', explaining that it "does not meet all of the requirements on governance set out in the Governance and Financial Viability Standard. There are issues of regulatory concern and in agreement with the regulator the provider is working to improve its position."

Tuntum was also dropped one notch on the agency's 'Viable' scale, with the HCA explaining that the provider "meets the requirements on viability set out in the Governance and Financial Viability Standard but needs to manage material financial exposures to support continued compliance”.

In its regulatory judgement, the HCA says that Tuntum's governance arrangements "have not ensured that an appropriate strategic planning and control framework that identifies and manages risks is in place. The risks to the delivery of growth objectives have not been adequately identified and managed. Tuntum will need to effectively manage material financial exposures to provide additional assurance and support continued compliance.

Tuntum’s business plan for 2014-19 sets out a strategic objective to grow to 1,800 homes through acquisitions of tenanted stock from other registered providers and via new properties developed on its behalf by partners - an increase in the levels of growth anticipated in its previous plan for 2013-18 which aspired to grow to 1,600 homes.

The HCA’s previous judgement identified a number of challenges. As a result, the regulator required Tuntum to ensure that its growth strategy was robust and that all necessary funding would be in place to deliver it; that there would be appropriate financial planning and effective board oversight of the associated risks; and that growth levels would be subject to an appropriate level of scrutiny and challenge by the board.

The HCA had concerns that previous board reporting on the funding of new schemes had not been comprehensive and that some aspects of both risk management and governance needed to improve in order to support continued compliance.

The regulator says it had insufficient assurance that the board had clear oversight of the key risks to the delivery of its strategic objectives. The provider’s risk map did not adequately identify whether controls had mitigated identified risks to an acceptable level or inform the board on actions to manage exposures.

Tuntum put an action plan in place in response to the issues raised and has made progress on some issues but overall has not provided the additional assurance that the regulator required in relation to governance and risk.

In December 2013, Tuntum notified the HCA that it was actively considering a scheme to acquire and renovate 129 flats in a vacant former local authority tower block.

According to the HCA, the proposed acquisition and the funding arrangements were complex. The plans represented a step-change in Tuntum’s risk appetite and approach to growth.

The scheme had changed fundamentally between October and December 2013 with Tuntum taking on the associated development risk. There were further “significant changes” to the scheme and its risk profile during the early months of 2014.

The regulator set out material concerns about Tuntum’s approach to the scheme, the funding model, the associated risks and their potential to impact on the wider business.

The HCA felt that Tuntum’s responses have not “adequately addressed these concerns”. As a result, the regulator concluded that “significant weaknesses compounded the concerns raised in the previous judgement in relation to the robustness of Tuntum’s growth strategy, its financial planning, identification and oversight of risk and the adequacy of board scrutiny and challenge”.

The HCA has concluded that this represents a failure against the governance elements of the Governance and Financial Viability standard.

We are currently awaiting a response from the Tuntum.

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