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VFM self-assessment workshop Steve Smedley. Objective To provide delegates with the tools and information to meet the regulatory requirement to publish.

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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:

1 VFM self-assessment workshop Steve Smedley

2 Objective To provide delegates with the tools and information to meet the regulatory requirement to publish a VFM self-assessment.

3 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

4 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

5 The VFM standard: doing VFM a comprehensive approach to VFM [across operations (people) & physical assets (property)] – in the context of objectives – mindful of stakeholder interests means being economic, efficient & effective – robust approach to use of resource decisions – understand business case, trade-offs, etc – understand operational costs, what drives costs – understand outcomes from operations and assets in financial, social & environmental terms – maximise outcomes – effective performance management & scrutiny to drive VFM ….. in other words define value for yourself based on your social purpose (recognising stakeholder interests) & max out

6 The VFM standard: reporting VFM boards self-assess VFM and make it available to stakeholders – assessment shall – enable understanding of return on assets – set out absolute & comparative costs of specific services – provide a backward & forward look on VFM gains first VFM self-assessment due in 2013 – included in operational & financial review (OFR) or ‘board report’

7 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 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 – board/exec reconcile this reality check – VFM & (social) business effectiveness are the same thing can you measure the value you exist to produce? 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

8 The VFM standard What do you think? Any observations, issues?

9 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? …… yourself as it’s the business’ perspective that counts (having reconciled stakeholder value perspectives) 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

10 Narrative backed by data? OFRs too

11 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

12 Implications: self-assessment de-minimis regulatory compliance or something more – a business tool? flying under HCA radar - let’s be frank about the risks – their current focus: – the too-big-to-fail – playing %/#s – diversity threat/safeguarding social assets – living wills, for-profits – bumping against covenants/iffy financing models – iffy finance, Cosmo – known risks – vulnerable/complex business models, iffy governance Does this sound like you? What do you think? de minimiswith bells on

13 a definition of VFM in context of the organisation’s purpose & objectives the 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 Telling the story – ‘template’ overview Remember you don’t have to do it like this at all

14 STEPPING THROUGH THE PROCESS

15 Step 1. What VFM means to us: our VFM definition briefly assert the social mission, vision and objectives - unpacking what the key ‘value streams’ are, ie new homes, great services, community well-being, care, support, etc. draw on your USP – assert your unique brand of value with pride – strong sense of place, strong focus on client group, intimate relationship, etc identify key stakeholders – what do they value? Explain that in making use of resource and VFM judgements their interests are considered/reconciled in the round. based on above assert a short VFM definition (which in effect will be about maximising the identified value streams) your value (arguably)is the social value that flows from your mission. Ultimately this is about well- being delivered via key value streams (or outcomes)….

16 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

17 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?

18 Step 2. Our strategic approach to VFM and use of resources set out key principles of VFM strategy and a one/two-liner to provide assurance that it is a considered strategy, eg noting any recent changes, how it links to other key strategies ie risk, asset, people, procurement etc. to show grip on VFM as a strategic issue. no VFM strategy ? - consider how the business strategy drives business effectiveness/VFM.

19 Our VFM strategy may be summarised as:  being clear about what we do - our purpose, objectives and the value we produce  recognising how our operating context influences what we do o the needs & aspirations of our stakeholders, particularly the profile of our customers and stock 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 by making informed choices to achieve our corporate priorities o ensure we have the right physical and human assets for the right cost o do things right – efficient and effective delivery o the right tools to evaluate success and apply learning – to check we have delivered the right outcomes, including making a surplus/efficiency gains for reinvestment in our social objectives Example

20 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?

21 Step 3. Our arrangements to ensure delivery of VFM as part of the day job summarise governance & performance management arrangements associated with planning, delivery and evaluating VFM : – roles of board, exec, other staff, tenants, eg board’s role in leading on VFM and actively holding the executive to account for VFM performance promotion of VFM by the board tenant involvement in VFM, eg agreeing priorities (and efficiencies), shaping services and scrutinising service performance and VFM – assurance (and reporting) framework for VFM eg coherent VFM governance structures, clear roles and responsibilities the system of VFM measurement – extent to which VFM is embedded in performance management, eg appraisals, 121s, team meetings (business culture) eg any other key evidence of VFM being embedded? Issues? Solutions?

22 Step 4. Our track record – what we have achieved over the past year A narrative that features key available evidence. Essential components: a)assets What’s your assessment of the VFM of key asset management decisions over the past year? What did they cost and what did you get for your money – expressed in terms of social, financial and environment gain. strengths and weaknesses highlight key VFM initiatives and benefits, eg from VFM register b)operations SPBM/HouseMark benchmarking should serve as the focal point for this narrative, complemented by any local offer/customer promise data. A brief walk through headline unit cost and performance indicators (clearly satisfaction is key) should suffice. To ensure regulatory compliance assert costs as compared to others, explaining high costs and associated drivers strengths and weaknesses highlight key VFM initiatives and benefits, eg from VFM register

23 Step 4. Our track record – what we have achieved over the past year 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 raise the finance required to deliver desired outcomes (leverage). This 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 going forward - the point of VFM

24 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

25 Track record: data sources AssetsOperations Procurement Treasury Management Surplus Borrowing capacity benchmarking/HCA regression analysis internal scorecard local offer performance tenant scrutiny work accreditation, service review, internal audit, etc satisfaction key asset management decisions – cost/benefit key procurement items – cost/benefit VFM register Financial returns impact assessments, SROI, etc

26 Step 5. Improvement Plans for next year – where we need to be smarter Issues? Solutions? what weaknesses identified in section 4 will be addressed in the coming year and what is the estimated benefit in financial, social and environmental terms (future VFM gains).

27 Step 6. Board assurance Issues? Solutions?  is the Board assured of the robustness of this self- assessment, eg the evidence and the process (sign off and challenge)? If the self-assessment is to be transparent it should flag the limitations of underpinning evidence and assurance.  does the Board have any concerns around the organisation’s ability to deliver VFM going forward?  invite and set out how you have or intend to seek challenge and critical review by stakeholders

28 Over to you….. Any other ideas for improving the approach?

29 MEASURING VFM

30 Producing & measuring value: theory Social mission Kind of value Kind of objectives Kind of measures Why are we here? What difference are we trying to make? Did we make a difference (value)? Did we succeed? What did we get for our money? Did we make a bigger difference (VFM)? What are the kinds of outcomes we are looking for that flow from our mission? What are the kind of corporate objectives we need to deliver our mission and value? Metrics need to map to value

31 not beyond wit of most HAs to map existing metrics to the value they produce, identify gaps and look to close them – a ‘total VFM’ dashboard? not just about metrics, other qualitative ways of judging value/success Mapping existing metrics to value

32 OFR ratios & PIs ….gets you so far with financial health & efficiency but doesn’t nail the value you exist to produce Wider perspective on value.... additional data on outputs, outcomes & impact (value) + Nicking good practice from the accountants - a ‘total VFM’ dashboard?......OFR+?

33 Financial: operating margin EBITDA interest cover gearing growth in turnover management cost p/u maintenance cost p/u PIs: % vacant dwellings average re-let time % arrears/rent roll rent loss overall satisfaction satisfaction views taken a/c satisfaction with repairs ? Insert your additional value metrics here + SAP?...other environmental? Socio-economic measures? More on service outcomes, local offers? New homes? Homes improved? asset ROI? Your mix, your business What kind of metrics are we talking about……

34 So what kind of PIs might be included? Don’t panic!!!!! I’m not suggesting you use all of the following metrics – simply pick the best that work for you depending on: a) the nature of your business and the value you produce b) how much effort you want to put in

35 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?

36 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?

37 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?

38 Customer Community & LA Regulator & government Net increase in stockV1 Average SAP rating* V2/4 Satisfaction with neighbourhood as a place to live* V2/4 Percentage of tenants who are satisfied that views are listened to and acted upon* (co-reg) V2 Satisfaction outcome of ASB case* handling V2/4 Satisfaction with quality of new home* V1 % homes failing Decent Homes Standard* V2 Average time to complete a repair* (days) V2 Satisfaction with maintenance* V2 Satisfaction with overall services provided* V2 % jobs right first time V2 Net promoter* V2 % tenants who think rent/service charge is good VFM V2 Satisfaction with outcome of complaint V2 % satisfied with complaint handling V2 % satisfied staff were able to deal with their problem V2 Typically the most frequently used measures are # beneficiaries of a given intervention, eg # tenants provided with financial advice # tenants helped into sustainable work # tenants completing vocational training course # tenants completing skills training # apprenticeships created # kids attending diversionary activity Can also include satisfaction with intervention Also: £x invested of own money £y leveraged Include any key local promise PIs in accordance with consumer regulation V2 Your key Care & support PIs (v3) could be included here too eg QAF. Value source: local PIs, SPBM, HouseMark Complement metrics with reference to any key impact studies

39 ROUND-UP & FINAL ISSUES


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