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HCA reveals 'in-depth assessment' process
The English social housing regulator has set out the way it will conduct in-depth assessments (IDAs) of housing associations.
The Homes and Communities Agency (HCA) has today published its latest Regulating the Standards document, which includes detail about the HCA’s new forensic ‘in-depth assessments’. As Inside Housing has previously revealed, under its new approach, the HCA will no longer carry out an annual viability review on all providers with 1,000 homes or more. Instead, it will conduct ‘periodic’ IDAs. The frequency of an IDA will depend on the risk-profile of the association, but most providers will receive an IDA every three or four years.
The document reveals that each IDA will be a ‘bespoke piece of work’ and will include assessments of risk profiles, exposures, financial strengths and weaknesses and governance. The HCA will aim to give associations six weeks to prepare in most circumstances. It will supply associations with a bespoke document setting out the information it needs and the deadline by which the individual association needs to supply it.
The minimum information required will include copies of the organisation’s business plan and risk assessments, accounts, financial statements, audit management letters and details of organisational and group charts. The HCA will then carry out the IDA, which is a mixture of desk work and visits to the association, during which regulatory staff will meet board members and executives. After the IDA, the regulator will give feedback to the organisation.
STEP-BY-STEP: HOW IDAs WILL WORK
1: HCA decides an association needs to have an IDA.
2: HCA will then generally give the association six weeks’ notice.
3: HCA then produces a document setting out the scope of the IDA and shares this with the housing association.
4: HCA then specifies documentation it needs from the association and a deadline for submitting evidence – this will vary according to each organisation.
5: The IDA is then conducted, involving a mixture of desktop research and visits to the housing association. Each IDA will be led by a senior HCA staff member, and regulatory staff will meet board members and executives.
6: After the IDA, the HCA will tell the provider the outcome. Where there is no change to viability and governance ratings, there will be no narrative report, just oral feedback. Where there is a change, this will be discussed with the provider.
Source: Homes and Communities Agency
The HCA is currently piloting the IDAs with 10 housing associations.
Julian Ashby, chair of the HCA regulation committee, said: ‘I believe that the new approach will be more efficient and effective for both the regulator and registered providers.’
In addition to IDAs, the HCA will carry out an ‘annual stability check’. The HCA will do this by using data supplied by associations in their financial forecast returns and annual accounts. If the HCA thinks an existing judgement needs to be changed, this could trigger an IDA.
The document also confirmed that the wording of straplines in regulatory judgements will change to put more of a focus on the need for organisations to manage a ‘wide range of adverse scenarios’.
The document re-iterates that a ‘V2’ rating for financial viability over a prolonged period ‘would not necessary be a cause for regulatory concern’ if it was the result of a conscious decision to take on more well-managed risk to deliver goals. Inside Housing has previously reported that the regulator is downgrading more landlords from the top ‘V1’ rating to ‘V2’ to reflect the riskier operating environment for the sector.
The HCA also yesterday published a document called With the Benefit of Hindsight which describes real-life examples of organisations which have run into financial trouble, using fictional names.
