Watchdog rules out further action against Novas
The Tenant Services Authority has found there was a ‘collective failure of management’ at troubled housing association Novas Scarman, which drove it into a financial crisis.
The TSA board concluded an eight-month statutory inquiry into the group on Tuesday. It ruled that Novas’ executive team and board ‘failed to exercise proper management of the financial affairs’ of the group and that it ended up unable to pay the £14 million cost of refurbishing its flagship Arlington House hostel in Camden.
Arlington House and Novas’ other remaining hostel in Dean Street, London, were transferred at no cost in May to One Housing Group, which will complete the refurbishment.
But the TSA’s report says that the group is now financially viable after a management change, new board members and a restructure within the last year, and that no further action will be taken. ‘The inquiry report disclosed insufficient evidence to support a finding of misconduct in relation to any individual, despite the finding of a collective failure of management,’ it adds.
Chief executive Michael Wake was made redundant from Novas in May with an £80,000 payment, although this was unconnected to the landlords’ problems.
Novas said in a statement that it welcomed the findings and that its problems had been overcome. ‘We do accept the TSA’s ruling in its entirety and we apologise publicly for our shortcomings during parts of 2008,’ it added.
The group’s 2007/08 accounts, released last week, reveal it posted a £5.8 million annual loss owing to plummeting property values and merger costs.
The accounts show the group was hit by £3.5 million of impairment charges against its property portfolio. The results date from before the TSA launched its inquiry. In 2006/07 Novas made nearly £1.6 million in profit after selling assets for more than £2 million.
The 2007/08 accounts, which were originally due to be filed last September, reveal that the group lost £942,665 on restructuring costs in 2007/08 after merging with the Scarman Trust and Path social justice charities in December 2007. It lost a further £960,677 absorbing the negative equity of these struggling groups.
‘The costs associated with the merger were higher than anticipated and took longer to turn around,’ a Novas spokesperson said.
The group posted an operating deficit of £639,092 for the year - more than twice the £277,658 deficit in 2006/07.
A breakdown of the deficit showed Novas’ social housing management as the only profitable area for the company - netting it around £2 million in profit. Non-social housing activities, such as the group’s social enterprise work, lost £1.5 million, which Novas said related largely to the activities of Scarman and Path.
‘As matters stand today, we have sufficient cash, no borrowings or overdraft and assets of £20 million,’ the spokesperson added.