There’s no avoiding the issue of value for money this year, as the regulator’s consultation on the standard is coloured by the Government’s drive to make associations more efficient and increase housing supply. While we’re all waiting for the Homes and Communities Agency to release its consultation paper in late spring, it’s worth being aware of a couple of new developments.
- Moves to make the sector’s costs more transparent by including the HCA’s headline social indicator in the global accounts – including trends and projections, plus a spreadsheet showing how each of the 1000+ associations are doing on costs.
- the launch of a sector-led Scorecard, of metrics, providing a broader and high-level snapshot of VFM.
With metrics including operational efficiency, use of borrowing potential and number of new homes delivered, the Sector Scorecard looks to accommodate government priorities whilst reflecting the range of social housing activity.
But there is a difference between what the government might want from the sector, and the basis on which the HCA can regulate VFM, particularly if housing associations are to come off the Exchequer’s balance sheet and stay off . That means the HCA will continue to look for evidence that associations’ objectives are being maximised, which isn’t quite the same as the Secretary of State shouting “build build build!” in your ears.
Responding positively to the question of supply goes way beyond VFM regulation – it’s about overcoming the Government’s lingering and unhelpful perception of the sector which risks marginalisation and a continuing rent policy problem after 2020. To paraphrase the HCA’s Julian Ashby, the sector’s relationship with the government will be defined by the number of homes built.
The HCA realises that supply isn’t the answer everywhere and has a more nuanced understanding of the sector’s diverse products – but, in seeking evidence of working towards objectives, the HCA can respond to ongoing political pressure to drive efficiencies in the sector. Failing to supply when supply is part of your mission is a failure of governance and already results in a downgrade.
But even if supply isn’t central to the mission, the HCA is increasingly challenging providers on their general approach to efficiency as part of the In-Depth Assessments (IDAs). This represents a shift of regulatory focus from self-assessment to reality checking VFM on the ground, or if you like, from assurance that VFM is being demonstrated to be delivered.
What does good VFM look like? The existing standard says:
- a comprehensive & strategic approach to VFM
- resources being used cost-effectively to achieve purpose
- understand assets and have intelligent asset strategy
- understand costs & outcomes of specific services and variation
- effective governance & performance management arrangements for delivering the strategy
If the VFM review yields a Code of Practice, this is the kind of thing that may be developed.
So what will this mean for you?
Arguably, providing the HCA with assurance on VFM delivery on-site is a stiffer test than writing about it in a self-assessment. You have to walk the talk.
It also involves taking VFM to the top of the organisation – challenging boards about fundamental use of resource issues such as whether the current organisational form/structure is the best vehicle for delivering the mission. So, what about cost-sharing groups, mergers, simplifying group structures and constitutional changes? This line of thinking also begs the question: what about the latent capacity of non-developing associations? Probably another good subject for a sector-led initiative.
Picking up the need to get a grip on costs the 2016 Global accounts unit cost data – supporting note states :
‘in conjunction with providers’ own analysis, HCA data is used as a reference point in IDAs and Stability Checks. Providers will be challenged if there is evidence to suggest absolute and relative costs are not properly understood. Where costs are relatively high, the regulator will seek assurance that the provider understands why this is the case, whether this is the result of a conscious business decision and, if not, what the provider’s plans are to reduce costs or improve outcomes.’
In other words, HCA expects you to understand why your costs are whatever they are and that they are commensurate with service scope, quality and other outcomes. And that is where your Acuity (or HouseMark) benchmarking data comes in. Neither the HCA headline metric nor the Sector Scorecard are granular enough to meet HCA expectations in terms of getting a grip on the costs and outcomes of your business. See diagram for how it all fits together.
Meeting HCA requirements for understanding costs
The diagram below shows the fit between HCA, Scorecard and Acuity data
The majority of you won’t be lucky enough to get an IDA but the expectation applies.
Any good news, Steve?
Yes. Publication of the VFM self-assessment is likely to be dropped; it hasn’t been a great success in promoting transparency and accountability and seems to have driven both the HCA and sector around the bend.
But transparently demonstrating VFM will always be an important part of any VFM regime so it’s likely that the HCA will suggest pared down reporting arrangements based on limited metrics, borrowing from the Sector Scorecard where possible. Whilst the metrics will enable consistency of reporting across the sector, the board’s accompanying narrative is likely to set the measures in the context of its own objectives and targets. All will be revealed in the forthcoming consultation paper..
How can Acuity help you through all of this?
Acuity supports smaller associations to stay on top of VFM through a range of subscription and additional services:
- online benchmarking of key cost and performance indicators, including the new Sector Scorecard, to inform best use of resources, facilitate transparency and meet HCA expectations
- bespoke club benchmarking exercises to help you dig deeper into costs, understand variation and facilitate collaboration.
- annual benchmarking report, including salaries survey
- improved data reporting to reflect the Sector Scorecard as well as club member preferences
- benchmarking clubs to enable analysis, knowledge transfer, collaboration on solutions and networking
- in-house VFM briefings/training to ensure the board understands their role
- VFM workshops
- VFM blogs
- VFM consultancy to ensure compliance
- a range of satisfaction products to help you improve service delivery