Presentation on theme: "VFM self-assessment workshop Steve Smedley. Objective To provide delegates with the tools and information to meet the regulatory requirement to publish."— Presentation transcript:
Objective To provide delegates with the tools and information to meet the regulatory requirement to publish a VFM self-assessment.
Content introductions regulatory requirement & implications what might the self-assessment look like? – stepping through the process - issues, solutions – measuring VFM - issues, solutions round-up Approach – informal & interactive – to learn from each other
Specific requirements of smaller HAs all the standards apply expect little regulatory engagement – direct engagement by exception in response to problem where developing/procuring new stock, HCA may require additional information to assess delivery risk regulator will review: – annual accounts – auditor’s management letter (not required if accounts are independently reviewed) – shortened regulatory return (NROSH+) will not publish public judgement of compliance–v- standards (RJ) – other HAs get RJ on governance & viability every 2-3 years including comments on assurance obtained on VFM
VFM regulation context Review of Social Housing Regulation 2010 – we expect in future the regulator to be more proactive…on ensuring VFM…to achieve better returns for the taxpayer & support new affordable housing supply Purpose of economic regulation (from Regulatory Framework): – to protect historic government subsidy, promote access to private finance, and help address the lack of competitive pressures on providers which might otherwise put pressure on service quality and efficiency Ability to drive VFM a key indicator of quality of governance
VFM regulation context Currently have assurance-based approach to regulation aim to obtain sufficient assurance/evidence that standards are being met starting point is HAs’ own assurance on: – compliance with standards – delivery of plans – effectiveness of control and risk management frameworks ie HCA wants assurance that the board is assured! HCA gets assurance via its 8 question engagement framework – Q5 does the organisation demonstrate how it achieves VFM in meeting its strategic objectives? includes a review of assurance provided to board on the strategy for & achievement of VFM so VFM self-assessment is important as evidence/assurance – key focus for HCA assessment of VFM – principal means of understanding VFM
The VFM standard: delivering VFM a comprehensive approach to VFM [across operations (people) & physical assets (property)] – in the context of objectives – mindful of stakeholder interests 3 Es still relevant as means to achieve VFM specific expectation of: – robust approach to use of resources – understanding of the return on assets and a strategy for optimising returns (ie a considered asset management strategy) – effective performance management and scrutiny arrangements – an understanding of service costs, outcomes & what drives those costs ….. in other words define value for yourself based on your social purpose (recognising stakeholder interests) & max out
The VFM standard: reporting VFM “Boards shall demonstrate to stakeholders how they are meeting this standard. … they will publish a robust self-assessment which sets out in a way that is transparent and accessible to stakeholders how they are achieving VFM in delivering their purpose and objectives.” assessment shall – enable understanding of return on assets – set out absolute & comparative costs of specific services – provide a backward & forward look on VFM gains included in operational & financial review (OFR) or ‘board report’
Round-up of implications VFM was about services - this the whole business – all resources including assets ………..VFM less of an ‘add on’ ? value is tagged to your objectives not the regulator’s – to date this principle is holding but has to reflect the value perspective of stakeholders –publicly listed businesses maximise shareholder value –social businesses maximise stakeholder value? - tenants key but not sole raises tension between stakeholder value perspective eg existing v future tenants government (build) –v- sector (beyond bricks ‘n’ mortar) board/exec reconcile this reality check – VFM & (social) business effectiveness are the same thing can you measure the value you exist to produce?
Round-up of implications greater emphasis on boards genuine engagement in strategic business planning ….. …..a more mature and holistic debate to improve business effectiveness opportunity for the sector: demonstrate its significance, maturity, avoid regulatory creep define value positively, in social business terms – not just about costs regulator is not dictating terms: business model, allocation of resources: supply-v-services-v- support-v-community investment organisational form – group, merge, etc operating structure, suggested costs, service levels but there is dissonance between regulation and politics
Round up of self-assessment principles board demonstrates ownership of VFM approach to VFM is comprehensive and strategic across all resources achieved through 3 Es HA determines the form and content of the self-assessment based on its social purpose and stakeholder interest self-assessment should: – be robust and transparent comprehensive account of how the association is faring with regards to VFM delivery self-assessment not a PR exercise but an accountability and improvement tool – be accessible to stakeholders – infers that report is intelligible and its availability communicated to stakeholders – address: a) return on assets, b) absolute and comparative costs and c) evidence of past and prospective VFM gains.
Observations on year 1 unhappy with sector response – VFM not taken seriously downgrade G rating by one notch presentational problem – how does it communicate disappointment to sector without government using it as further evidence to beat unloved sector and regulator? HCA unlikely to be more prescriptive in its regulation – counter co-regulation – smacks of box ticking & avoiding responsibility for managing the biz themselves
Observations on year 1 Determining what was required uncertainty about requirements – level of detail? – where and how to publish? – accessible –v- comprehensive/technical? many opted for summary in accounts and detail on website Roles extensive board sign-off but scope for more involvement in process – shaping the SA – understanding & challenging output – special role for audit committee third used tenant scrutiny – obvious role here little reference to input from other stakeholders How was it for you?
Observations on year 1 Return on assets wide interpretation – what was expected? Clarity required? methodological & contextual issues militate against useful KPI I can bore you with this if you like not sure a killer metric was wanted? improving understanding of stock biz critical going forward Absolute & comparative costs HouseMark data sometimes limited in OFR but more elsewhere some not stated costs – difficult to understand Evidence of gains HouseMark data, VFM registers, procurement, commercial return tenant scrutiny, awards, accreditations not mentioned key issue - better understand social value How was it for you?
Observations on year 1 Dissemination need to rationalise the docs that tell us about biz effectiveness? OFR+? improve accessibility & transparency tone down PR reporting non-financial outcomes – learn from social accounts Benefits majority saw value in process as biz tool Regulatory improvements clarify expectations – fine line prescription –v- clarity of expectations
Worth a look…..in my opinion Riverside** (honest, SA as improvement & accountability tool inc action plan, outcomes from stakeholder perspective, involved others in process) Notting Hill* (ROCE by business stream, active asset management, good use of G15 benchmarking and commentary) Helena** (infographic, varied approach to measuring asset and social return) GreenSquare* (honest, comprehensive, had a bash at ROI, embedded VFM, bottom- up VFM - GreenState) Adactus* (thoughtful & accessible use of data, see other Adactus docs for more) Bromford* (good use of metrics, OFR as showcase stakeholder doc) Plymouth CH tenant report (embedding VFM in tenant report, at a glance VFM heat maps) Southern HG (easy to read canter through how runs an effective social housing biz) Midland Heart** (framed around corporate priorities, comprehensive account of active asset management, case studies demonstrate other biz decisions, social value cost/benefit, carbon footprint) Hyde, First Ark * in OFR, ** separate VFM statement
The VFM standard What do you think? Any observations, issues?
Implications: self-assessment it’s your assessment there is no prescribed approach build on what you’ve got like OFR it’s a narrative but focuses on the value you produce and how it’s been maximised for stakeholders but not a fairy story so data/evidence is important as is honesty – strengths & weaknesses VFM is ultimately a qualitative judgement based on intelligent assessment of evidence ….. where whose value is critical. Different answers. who are you trying to convince? …… assure yourself places importance on the process by which the judgement is made – the system of assurance and competence and honesty of those making judgement Suggested approach: a narrative backed by data
not convinced killer financial ratios and PIs alone will do it justice – won’t: capture the full story - the subtleties – eg your mission, strategies & context serve as a transparency tool or business tool diverse info together in one place to check success?... facilitate corporate understanding of business & decision-making for board, exec, staff, involved tenants so staff can link what they do to social mission the process will expose gaps in VFM assurance & measurement over-promise, under-deliver – self-assessment is a key regulatory doc if you are unclear about purpose, you are unclear about value Implications: self-assessment Some already do this: AESs, APSs, etc
Different ways to crack a nut HouseMark/S&P approach VFM standard compliance approach Corporate priority approach
Approaches The HouseMark/S&P definition of VFM in context of purpose & objectives strategic approach to VFM and use of resources arrangements to deliver VFM – performance management and governance what has been achieved plans for next year board assurance on the VFM self-assessment The Compliant background – ie HCA requirement what VFM means to us & how seriously we take it in terms of strategy & delivery (ref standard) return on assets absolute & comparative costs past & future VFM gains Some take a KLOE approach distil standards’ principles assess –v- criteria The Corporate definition of VFM in context of purpose & objectives corporate objective #1 aim arrangements to ensure delivery achievements plans corporate objective #2 ditto etc overall judgement
a definition of VFM in context of the organisation’s purpose & objectives the strategic approach to VFM and use of resources ensuring VFM delivery – performance management and governance what has been achieved plans for next year board assurance Telling the story – ‘template’ overview Remember you don’t have to do it like this at all
Step 1. What VFM means to us: our VFM definition your value is the social value that flows from your mission. Ultimately this is about well-being delivered via key value streams (or outcomes)…. assert social mission, vision and objectives - it’s why you exist! – unpack key ‘value streams’ (outcomes), ie new homes, great services, community well-being, care & support identify key stakeholders – your audience & beneficiaries of your value! – what do they value? – could briefly note that resource decisions and VFM judgements reflect competing objectives based on above, assert a short VFM definition - essentially ‘for us VFM is maximising ‘our value’: more homes, better services, more lives improved…….’
Your mission Your value Your objectives Your outcomes Anonymous HA is a real organisation with social purpose – it exists to create social value. Its mission sums up the value it produces: to make a positive difference in the lives of people, creating vibrant thriving communities Unpacking this (with help from the corporate plan) we have value streams: – new homes for those in need – enjoyment of the home & neighbourhood through great services, support & regeneration – improved life chances & a better quality of life through community-based work, eg employment & training All staff & board contribute to the value the HA is in business to produce by achieving corporate objectives, including back office staff & those working on commercial activities. What the HA does is pretty amazing – it makes a difference. VFM is about making a bigger difference: more homes, better services, more lives improved Need metrics that map to this value to measure outcomes Value streams?: working through a real case new homes home & neighbourhood improved lives
Example Our definition of VFM is simple – we want to produce as much value as possible for the money and resources we have available OR VFM means the delivery of our social objectives in the most cost effective way possible. The value we produce is directly related to our social purpose – our mission is to make a difference to people’s lives by: providing quality homes providing a range of outstanding services improving the physical and social sustainability of estates and communities For us, therefore, achieving VFM is about making a bigger difference by providing the most quality homes, the best services and best neighbourhoods we possibly can with the resources available. We will do this mindful of the legitimate and sometimes competing interests of our key stakeholders: tenants, local community, local partner organisations, taxpayer and funders. Issues? Solutions?
Step 2. Strategic approach to VFM & use of resources to show grip on VFM as a strategic issue. set out key principles of VFM strategy state that it is a considered strategy, eg: based on fact/previous assessment corporate fit - strategic fit with risk, asset, people, procurement etc. no VFM strategy ? - consider how the biz strategy drives biz effectiveness/VFM.
Our VFM strategy may be summarised as: being clear about what we do recognising how our operating context influences what we do o the needs & aspirations of our stakeholders o local and national context ensuring the system of value production is optimised: o do the right things – a business strategy that focuses resources on the right activities o ensure we have the right physical and human assets for the right cost o do things right o the right tools to evaluate success and apply learning Example
Step 2. Our strategic approach to VFM and use of resources What can you say about how your HA ensures the right amount of money is spent on the right things?: o rigour of business/corporate planning process o use of robust business cases - based on evidence/data (and not historical costs) o quality of debate and challenge Issues? Solutions?
Step 3. Ensuring VFM delivery governance & performance management arrangements associated with planning, delivery and evaluating VFM eg: VFM roles of board, exec, other staff, tenants, eg respective roles in accountability & challenge tenant involvement in VFM: agreeing priorities, shaping services & scrutinising service performance and VFM assurance and reporting framework for VFM eg how is VFM reported within the HA? how is VFM measured? Which tools? extent VFM is embedded, eg performance management, cost control, procurement practice, etc strengths & weaknesses of your approach? Issues? Solutions?
Step 4. VFM achievements Assets Operations Procurement Treasury Surplus & intended use How we did summary by stakeholder? Total VFM scorecard? Pithy commentary on key activity areas Alternatively take each corporate objective in turn. + +
Step 4. VFM achievements Overall judgement/summary by stakeholder. A VFM scorecard/metrics as evidence base to hang story on a)assets assessment of key asset management decisions –v- asset management strategy/social purpose cost & social, financial and environment gains strengths and weaknesses of current approach to assets highlight key VFM initiatives and (quantified) benefits, eg from VFM register b)operations S&P/HouseMark data as starting point (consider quadrant) plus local offer data, care indicators beneficiaries of social investment other qualitative evidence, eg awards, service assessments brief commentary on headline unit cost and performance indicators assert comparisons, explaining key cost & performance drivers, direction of travel don’t forget overheads strengths and weaknesses highlight key VFM initiatives and (quantified) benefits, eg from VFM register, HouseMark data ROI of commercial activity?
Step 4. VFM achievements Issues? Solutions? c) key procurement gains not already covered at a) or b) d) treasury management brief ref to the cost of capital, debt management strategy and any evidence of savings from active debt management. How does the cost of capital compare? use made of physical assets to achieve development outcomes. Could include brief reference to: o board’s agreed approach to risk and future business plans o current borrowing capacity in the context of: borrowing constraints – headroom, loan covenants access to affordable finance NB this is about managing HCA expectations as much as reporting VFM e) state surplus & how gains/surpluses will be used to produce more VFM
Track record: what’s the story? AssetsOperations Procurement Treasury Management Surplus financial benefit - savings, income, etc costs –v- service outcomes, social & economic benefits, environmental benefits Borrowing capacity looking ahead – even more social value It’s all social value! financial benefit - savings, income, etc Narrative backed by data
Alternatively, flicking over to ‘The Corporate’ corporate objective #1 – aim – arrangements to ensure delivery – achievements – plans corporate objective #2 – ditto but need to ensure don’t lose sight of: – regulatory requirements – social outcomes/value @ expense of internal/back office ‘enabling’ corporative objective
Step 5. Improvement Plans for next year – where we need to be smarter Issues? Solutions? pick up weaknesses identified in section 4 what is the estimated (quantifiable) benefit in financial, social and environmental terms (future VFM gains).
Step 6. Board assurance Issues? Solutions? is the Board assured: this is a fair and balanced account of VFM? that it meets the requirements of the standard? of the robustness of this self-assessment sufficient evidence/assurance? process - sufficient time to understand & challenge? if transparent, flag limitations of evidence/assurance any concerns around the organisation’s ability to deliver VFM going forward? invite challenge by stakeholders
Dissemination disseminate who? where? summary plus full fat probably the way to go for now accessible? find it? understand it? language graphics
Over to you….. Any other ideas for improving the approach?
Building a picture of value with metrics Social mission Kind of value Kind of objectives Kind of measures Metrics need to map to value identify kind of value new homes (V1) great tenant services (V2) care & support (V3) added value (V4) commercial return? map existing metrics fill gaps metrics other forms of evaluation reviews, awards etc tenant scrutiny impact studies
Customer Community & LA Regulator & government Net increase in stockV1 Average SAP rating* V2/4 Satisfaction neighbourhood * V2/4 Satisfaction with quality of new home* V1 Satisfaction with overall services provided* V2 Satisfaction with maintenance* V2 % jobs right first time V2 Net promoter* V2 Fuel poverty PIs? # found employment V4 # apprenticeships created V4 # completing training course V4 # provided financial advice V4 satisfaction with intervention V4 £x invested of own money £y leveraged NB NHF audit categories as basis for typology Key local promise PIs (in accordance with consumer regulation) V2 Your key Care & support PIs (V3) could be included here too eg QAF. Telling the story: where the value lies Complement metrics with key reviews, awards, scrutiny, impact studies, social accounts? Regulatory rating Arguably, surplus, leverage
VFM scorecard: for self-assessment & general biz tool VFM scorecard limited set of common KPIs – less is more emphasis on performance not context but should be considered –v- context comparable evidence base for: credible VFM story understanding business effectiveness complements corporate scorecard (not always metric-based) Process Value People Biz health Value delivery Value creation
Which PIs might be included? Process Value People Biz health % rent collected % service charge collected average re-let time (all voids) calls handled at first contact or another key customer process PI repairs at first visit/equivalent net promoter with employer? or satisfaction sickness absence staff turnover ratio top earner to bottom earner (Hyde) measures on say board effectiveness or staff development? growth turnover net increase in stock operating margin operating costs as % turnover management, maintenance, overheads non-social housing turnover % spend non-social % margin non-social arrears as % void loss as % bad debt as % effective interest rate leverage satisfaction with new home net promoter/satisfaction with service satisfaction with repairs satisfaction with neighbourhood % tenants who think rent/service charge is good VFM #/% beneficiaries – employment? #/% beneficiaries - training & education? #/%/£ beneficiaries – income inclusion? Vote: good idea….or not?
Business health source: accounts, SPBM, HouseMark business growth – growth in turnover – growth in assets – net increase in stock – new biz income debt servicing & use of assets – net leverage/gearing – debt per unit – EBITDA MRI interest cover – return on assets operating efficiency & profitability – margin eg operating margin EBITDA MRI margin – operating cost per unit management cost maintenance cost – income protection arrears as % rent due FTA as % rent due void loss as % rent due bad debt/write off – effective interest rate Clearly lots more to choose from but what do you think are the key metrics?
Business processes source: local PIs, SPBM, HouseMark % rent collected % service charge collected % repairs completed in target time % units vacant & available % units vacant & unavailable average re-let time tenancy turnover other key processes where effectiveness matters, eg gas safety, ASB case handling, budget achievement? Clearly lots more to choose from but what do you think are the key metrics?
People source: local PIs, SPBM, HouseMark average days lost to sickness staff turnover staff/board satisfaction could consider: – customer service accreditation – local measures associated with training and developing staff Clearly lots more to choose from but what do you think are the key metrics?
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