2 0 2 1 / 2 0 2 2 ANNUAL REPORT & FINANCIAL STATEMENTS
2 ARHAG
CONTENTS Key Management Personnel, Company Secretary, Registered Office, and Principal Advisers. .............................. 4 Chair’s Statement...................................... 6 Chief Executive Officer’s Statement. ............ 8 Strategic Report of The Board. .................. 10 1. About Arhag.........................................................................................11 Principal Activities. .................................................................................. 11 ARHAG’s Vision, Mission & Values............................................................ 12 ARHAG’s Business Model........................................................................ 14 The Migrant & Refugee (M&R) Hub........................................................... 15 Changes in Board Membership................................................................ 16 Website and Intranet. ............................................................................. 17 Risk. ..................................................................................................... 18 Our Assets. ...........................................................................................22 Our People............................................................................................ 24 Our Growth...........................................................................................26 Operational Performance........................................................................ 27 2. Financial Performance and Viability Statement....................................28 Financial Performance.............................................................................28 Viability Statement. ................................................................................30 3. Value For Money Statement.................................................................32 Performance Against Regulatory Metrics. ..................................................32 Long-Term Financial Plan. ........................................................................35 VFMObjectives. ....................................................................................35 4. Corporate Governance........................................................................36 5. Statement on Internal Controls...................................................... 40 6. Statement of The Board’s Responsibilities In Respect of The Strategic Report and The Financial Statements. ......................... 42 Independent Auditor’s Report. ................. 44 Financial Statements. .............................. 48 Annual Report 2021-2022 3
KEY MANAGEMENT PERSONNEL, COMPANY SECRETARY, REGISTERED OFFICE AND PRINCIPAL ADVISERS 4 ARHAG
Board of Management: Qadeer Kiani OBE Chair Bulbul Ali* Board / Operations Committee DavidMaitland* Board / Audit & Risk Committee Abdul Basith Board / Operations Committee Pat Davies Board / Audit & Risk Committee BoeWilliams Board / Operations Committee Amarjit Bains Board / Operations Committee Appointed: September 2021 Keith Best Board / Audit & Risk Committee Appointed: September 2021 Helen Gribble Board / Operations Committee Appointed: September 2021 Diana Hamilton Board / Audit & Risk Committee Appointed: September 2021 Mark Gomar Vice-Chair / Audit & Risk Committee Resigned: September 2021 Wayne Farah Board / Operations Committee Resigned: April 2021 *Denotes Committee Chair Senior Management Team Chris Harris Chief Executive Officer Appointed: June 2021 Andrew Shaw Director of Finance & Resources Tina Bull Head of Housing Shabana Yousaf Director of Property, Building Safety & Compliance Appointed: May 2022 Jai Dosanjh InterimChief Executive Officer Resigned: June 2021 Eileen Russell Asset Management Consultant Resigned: April 2022 Company Secretary and Registered Address Chris Harris Appointed: July 2021 Jai Dosanjh Resigned: June 2021 RegisteredOffice: The People’s Place, 80-92 High Street, London E15 2NE Principal Advisors Statutory Auditor CLA Evelyn Partners Limited 45 Gresham Street London EC2V 7BG Internal Auditor Beever and Struthers 15 Bunhill Row London EC1Y 8LP Banker National Westminster Bank PLC Highbury & Islington Branch 218 Upper Street London N1 1SA Annual Report 2021-2022 5
CHAIR’S STATEMENT Much of 2021/22 seemed more like a normal year with the spectre of the pandemic starting to fade to a distant memory. However, the pandemic has created a new normwith hybrid working becoming more common and widespread not only in the housing sector but across most white-collar business in the country. The year also ended with the Russia and Ukraine conflict resulting in a Refugee crisis in Europe. “Internally Arhag enjoyed one of its most stable years because of key senior management and Board appointments.” 6 ARHAG
The external environment during the year remained extremely unstable not only because of the war in Ukraine but because of the cost-of-living crisis, high energy prices and the ever-increasing rise in inflation which threatens to bring the UK economy into recession during 2022. However, internally Arhag enjoyed one of its most stable years because of key senior management and Board appointments. Financial stability, the addition of 21 new units through an innovative partnering agreement with a local developer, strong safety compliance and improved performance on re-letting empty homes along with the re-establishment of relationships with our hub and external partners were some of the key highlights during the year. However, as always there is scope for improvement, especially on the delivery of our repairs service which remains one of the key priorities for the association. Appointment of new repairs and gas contractors, completion of the stock condition survey, formulation of the communication and asset management strategies, supporting our residents to cope with the cost-of-living crisis and beating the drum for Migrants and Refugees will be the challenges facing Arhag in the next year. However, with the organisation now in a more stable state than it has been for many years, not to mention in rude financial health, Arhag is more than able to meet and exceed these challenges next year and beyond. After nine years, I shall be stepping down as the Chair of Arhag at the AGM in September. During my tenure, and with the support of some great people, we have faced the many challenges posed and have together totally transformed Arhag into an organisation which is the envy of others. Our successes include: • Growing our stockholding by just over 60% • Creating a Hub partnership for migrants and refugees at The People’s Place • Exponentially increasing Arhag’s public relations and external profile • Being awarded six national awards for services including best Black & Minority Ethnic (BME) organisation two years in succession • Receiving the award of a successful consortium bid (six organisations) for £1m of Government funding from the Tampon Tax Fund • Becoming one of the founder members of the very successful London BME Chairs/CEO Forum - which is a key partner on both the 2025 Leadership Programme and the Development Consortium with London and Quadrant Housing Association I genuinely feel proud, privileged and honoured to have served the association for such a long time. I am confident that with the very talented Senior Management Team along with the extremely experienced and passionate Board at the helm, my successor will be able to take the organisation to even greater heights. I would formally like to place on record my thanks to the wider Arhag family and all those who have supported me over the past nine years and wish the association all the best in the next stage of its journey. Qadeer Kiani OBE Arhag Board Chair Annual Report 2021-2022 7
CHIEF EXECUTIVE OFFICER’S STATEMENT I joined Arhag in June 2021 and was privileged to be given the opportunity to lead a local BME Housing Association that has a clear and firm focus on working with migrants and refugees. The importance of this focus has never been so prevalent given the events we have all witnessed over the last year around the world. My first week included the handover of 21 homes that we now manage on a 10-year lease, the recruitment process for four new Board members and an office where staff were still working remotely. There is much to be proud of at Arhag. The heritage of the organisation alongside our work with our hub partners, based out of our office in Stratford and beyond, is key to our mission and vision. As we finally come out of the pandemic, the challenges for us at Arhag and the Housing Sector are clear. Service standards and increased resident expectations around value for money and service excellence sit alongside rightfully increased scrutiny and responsibility for our homes to be properly maintained, enhanced to set standards, and plans made to meet net carbon zero and Energy Performance Certificate rating C and above. We have been working hard to improve our service offer through an improvement programme (Building our Foundation) whilst we have replaced our website, sought a long-term repairs partner and carried out a full stock condition survey to mention a few key activities. We have a journey of improvement and continued focus on the resident experience to maintain and progress into 2022/23. Our staff and our residents are central to our being, and we have worked with both groups to improve standards, our service offer and support to those entering and living in our communities. Our Resident Scrutiny Panel has been active throughout the year and involved in the recruitment of our new Chair for Arhag. I would like to thank Qadeer, our outgoing Chair, for his nine-year tenure. He has overseen many positive changes within Arhag. He has been key to ensuring Arhag has developed its offer and homes, whilst remaining financially stable. Qadeer has been really supportive in my first year at Arhag and I am grateful for his support and guidance over that time. The Arhag team are looking forward to delivering more improvements for our Residents, strengthening our migrant and refugee offer and creating new opportunities for us and our partners to work together. We value our partnerships with sector groups such as BME London/National Landlords, National Housing Federation and local community groups and leaders. Closer, collaborative initiatives between us, can benefit all that we do. An exciting year ahead! Chris Harris Chief Executive Officer 8 ARHAG
Annual Report 2021-2022 9
STRATEGIC REPORT OF THE BOARD 10 ARHAG
1. ABOUT ARHAG PRINCIPAL ACTIVITIES “ Our principal activity is still tomanage, maintain, build and growour social housing accommodation stock for both renting and home ownership.” Arhag – African RefugeeHousingActionGroup – was founded in 1979 as a campaigning organisation for the better treatment of Migrants and Refugees. The aimwas to provide a stable, decent, and affordable home which would act as the platform for residents to improve their lives, support their families and make a positive contribution to their communities. In 1989 Arhag was formally registered with the Housing Corporation and spent the next just over 30 years working to become a good Housing Association. We nowmanage and own 911 homes across 14 London Boroughs and one borough outside Greater London. Most of our tenants are nominated by the Councils in the local authorities where we work. Our principal activity is still to manage, maintain, build, and grow our social housing accommodation stock for both renting and home ownership, but in November 2016 we decided that, whilst a stable and decent home was a good platform, the other needs of Migrants and Refugees were not being met. One such unmet need was health where we noticed that for various reasons many Migrants and Refugees (“M&R”) – particularly those who are undocumented – became Isolated from the health service and often do not receive the service they need. Therefore, we decided to set ourselves up as a “go to” organisation and work in collaboration with partner agencies which provide a range of non-housing services as well as training and support for women suffering gender-based violence. As part of our commitment and passion for the “go to” agenda, in early July 2019 we moved into the People’s Place in Stratford, which is now our head office and where we are joined by our M&R partner agencies. Annual Report 2021-2022 11
ARHAG’S VISION, MISSION & VALUES Vision: To ensure every migrant and refugee in London has a good home, is empowered to safeguard their individual rights, have their voice heard and make a full contribution to their community. Mission: To provide the best housing services to our customers while developing the potential of migrants and refugees in London. Values To further our vision and mission we have adopted five corporate values that underpin our aims and objectives: • Trust • Respect • Accountability • Customer care • Innovation Our social purpose is enshrined in our vision, defines our mission, and informs our values. 12 ARHAG
Partnerships Migrant & Refugee services As a social landlord, we are not capable of providing all of the services required by migrants and refugees arriving or recently settled in the UK. We, therefore, see the creation of partnerships and the mutually beneficial signposting of customers between partners as the key to tackling social exclusion, growth, innovation, modernisation, cost effectiveness and delivery of customer orientated services. Development Our partnership approach was extended to growth in our core social landlord service when, in June 2021, we entered into a ten-year lease with a private property developer to manage and maintain 21 section 106 units in Stratford – with potentially another 100 in the pipeline. The lease-based approach to development enables Arhag to reduce our exposure to development risk yet enables Arhag to achieve a good return over the life of the leasing agreement. This is yet another example of our commitment and ability to grasp partnership opportunities to tackle housing shortages and enhance our income streams. Employment Through partnering with the Government’s Kickstart programme, targeted at 16–24-year-olds, Arhag has been active in helping to introduce 2 young people to employment opportunities during the year and we are delighted that we were able to offer further opportunities to one of them after the scheme had concluded for them. Social Landlord Groups Since joining as CEO in June 2021, Chris Harris has been positively involved in re-building Arhag’s active participation with other social housing landlord groups including: • g320 – the group of smaller housing associations for London • BME National – a collective of over 45 Black and Minority Ethnic (BME) housing associations working in some of the most disadvantaged parts of the country • BME London Landlords (BMELL) – a collaboration of BME landlords in London to optimise the members’ collective impact and to improve and advocate for better services provided to residents and the wider BME communities. • National Housing Federation (NHF) Following Arhag’s more active participation with BMELL, we were delighted to host the organisation’s Planning Day at The People’s Place in June 2022. Annual Report 2019-2020 13
Arhag is a London-based social landlord, with our business centre located in Stratford, East London. Our core housing business is providing low-cost homes and related services to people in housing need. We are predominantly a general needs and intermediate rent landlord but we also provide a number of supported housing units and properties occupied by shared owners and leaseholders. We provide supported accommodation and related services to migrants and refugees. We strive to be a good landlord to all our tenants, helping those most in need for housing. We provide and enable opportunities for migrants and refugees in London. Within our operating area our properties are quite widely spread but geographically we have a much stronger presence in boroughs north of the River Thames than we do south with over half of our stock in just three boroughs, Newham, Tower Hamlets and Haringey. ARHAG’S BUSINESSMODEL General Needs & Intermediate Rented Supported Housing SharedOwners & Leaseholders Total % London Boroughs (North of the Thames) Newham 220 13 10 243 27% Tower Hamlets 118 10 3 131 14% Haringey 92 92 10% Hammersmith & Fulham 63 63 7% Enfield 56 6 62 7% Camden 59 59 7% Westminster 49 49 5% Barnet 46 46 5% Islington 40 40 4% Kensington & Chelsea 30 1 31 4% Brent 21 21 2% London Boroughs (South of the Thames) Southwark 36 1 37 4% Lambeth 12 12 1% Lewisham 8 8 1% Outside London Hertsmere 17 17 2% Totals 867 23 21 911 100% 14 ARHAG
Arhag’s business centre is The People’s Place, close to the Olympic Stadium in Stratford, East London. The offices serve as amigrant & refugee (M&R) hub for bringing together the partner organisations in one location. The M&R Hub was intended as a high priority in our business development plan going forward, providing as it does, not only Arhag’s administrative business centre but also our agile space on the ground floor is a potential amenity for other groups serving and supporting the local community in and around Newham. The M&R Hub was fitted out to a high specification, allowing Arhag and our fellow partners to move in and start work immediately. Having opened in the summer of 2019 the Hub had operated for less than a year before the Covid-19 pandemic resulted in governmental advice that all bar essential travel should cease, and staff should work from home where possible. Daily occupation levels have varied significantly since then but a noticeable shift upwards in usage has been evident in the last fewmonths. As this return to work materialises both we and our partners are reconsidering the way we work and the extent to which working from a corporate office is or is not a requirement going forward. As part of our recognition of the shared M&R purpose and charitable objectives of our partner organisations, the income generated from the occupation of the space is discounted against market rates and ploughed back into reducing our administrative overheads, enabling us to fulfil better our core social purpose. We are pleased that discussions with three of our partners are indicating that their requirements going forward are changing but that the net occupation of the available desk spaces in the building will be increasing and to date two other potential partners have emerged with a desire also to occupy desks at the Hub. THEMIGRANT & REFUGEE (M&R) HUB Annual Report 2021-2022 15
CHANGES IN BOARD MEMBERSHIP On 23 September 2021 Arhagwelcomed4 newBoardmembers to the organisation. Amarjit Bains Amarjit is the Programme Director for the homelessness support and prevention contracts across London. She is a senior leader with extensive experience of delivering strategy, operations and transformation in both the private and public sectors. She is well versed at collaborating across diverse and multiple stakeholders. Amarjit has held leadership roles for more than a decade, managing central government contracts, leading teams in social housing and the private sector. She is a Board member at grassroots and mainstream organisations and an active member of Women in Social Housing (WISH). Diana Hamilton Diana has over 35 years’ experience in Social Housing and Social Care, having been the Head of Housing in a local authority with responsibility for the housing stock and management of over 5,000 tenancies. Diana was also Group Director of Operations in a large social care organisation with a budget of £30m and a staff group of 650 – leading the delivery of housing and social care services to people throughout England, Scotland and Northern Ireland. Diana was the Chair of the Watford Domestic Violence forum as well as its Health and Safety Committee and holds a postgraduate qualification in Social Care Leadership. Keith Best Keith has been Chief Executive of complex organisations and a non-executive director of various bodies for over 30 years. He is currently adviser to the London Hotel Group, Executive Chair of WFM/IGP (international non-Governmental organisation), Chair of Wyndham Place Charlemagne Trust, Charity 2020 and Universal Peace Federation (UK) and Secretary to St James’s Piccadilly, the Parliamentary Outreach Trust and European Movement. Keith has made frequent media appearances on migration and other matters, is a Freeman of the City of London and a liveryman (Loriner). Keith was formerly CEO of several national charities including Survivors UK, Freedom from Torture, IAS (Immigration Advisory Service), Prisoners Abroad; Vice Chair of the European Council on Refugees and Exiles; served on Foreign Secretary’s Advisory Panel on Torture Prevention; was a practising barrister and Member of Parliament for the Anglesey/Ynys Môn constituency. Helen Gribble Helen is a Board-level Company Director with a track record of developing and implementing projects in support of strategic business goals. Her industry experience has included Travel & Hospitality, Rail Construction & Engineering, Financial Services, Not-for-profit, Retail and Professional Services within both the UK, Europe and Internationally. With deep experience in HR and Organisational Development, in her current role Helen has responsibility for both the people and legal functions as well as opening new operating markets globally. Helen has post-graduate qualifications in HR and general business. Helen also has an active interest in Refugee & Migrant issues including being a Board member of the CARAS (Community Action for Refugees and Asylum Seekers) charity Board for over five years. 16 ARHAG
WEBSITE AND INTRANET Working in partnershipwith external consultants, we havemade significant changes and improvements to our corporatewebsitewww.arhag.co.uk Internally, we have introduced an Arhag intranet, GAPS (Green And Purple Star – in recognition of our logo), which is proving to be a great way of keeping staff informed of the latest news and upcoming events and gives them access to important information and documents. Annual Report 2021-2022 17
RISK Our main strategic business risks are reviewed at every Audit & Risk Committee (ARC) meeting and the Chair of ARC produces an annual report of the Committee’s activities for consideration by the Board. Risk Impact HowWeManage Risk Our customers’ homes and our assets are not safe or compliant with legislative requirements • Risk of injury to people • Disruption to service delivery • Poor customer service • Financial consequences • Criminal and/or civil prosecution • Regulatory consequences • Reputational damage • Landlord compliance regime in place • Servicing and maintenance procedures • Standardised approach to fire regulation • Estate inspections include health and safety • Director of Property, Building Safety & Compliance in place to manage function • Data review and audit on system-held data • Independent compliance audits • Monthly reporting to Senior Management Team • Performance reporting to Operations Committee We are subject to a successful cyber attack • Service disruption • Data lost and/or corrupted • Fraudulent transactions lead to financial loss • Regulatory consequences • Data protection is compromised • Information Commissioner’s Office fines/sanctions • Individual and/or class legal actions • Reputational damage • Monitoring of network capacity and security infrastructure via external provider • Multifactor authentication pilot completed but further tests required • Vulnerability testing including penetration testing • Programme being rolled out for attaining Cyber Essentials certification • Restricted external access to corporate systems • Blocked legacy authentication • Mandatory annual cyber security training for all staff 18 ARHAG
Risk Impact HowWeManage Risk Our financial viability is not fully protected • Unable to deliver services • Unable to deliver the commitments in the corporate plan – “go to” agenda • Regulatory consequences • Reputational damage • Reduced investment capacity • Reduced access to funding • Long term financial plan (LTFP) in place • LTFP includes the approved Arhag annual budget and operational cashflows • Financial health indicators in place that monitor financial viability including financial covenant position • Stress testing regime implemented with Board • Financial health indicators discussed monthly by the Senior Management Team and on a quarterly basis by Audit and Risk Committee Funding challenges • Insufficient liquidity to meet our obligations • Unable to deliver services • Unable to deliver the corporate plan commitments • Regulatory consequences • Reputational damage • Reduced service & investment capacity • Prudent liquidity policy that excludes capital receipts • Financial returns to the Regulator of Social Housing shared with Audit and Risk Committee and Board • Monthly monitoring by Senior Management Team • Lender relationship management led by Chief Executive Officer / Director of Finance & Resources. We are not compliant with data protection legislation • ICO fines / sanction • Individual and / or class legal actions • Regulatory consequences • Reputational damage • Mandatory data protection training for all staff • Reports on staff completion of mandatory training • Robust data protection processes and procedures in place Our business continuity plans are inadequate • Disruption to service delivery • Poor customer service • Financial consequences • Criminal and/or civil prosecution • Regulatory consequences • Reputational damage • Business continuity working practices in place to oversee arrangements • Local incident management teams are set up • Stress / scenario testing carried out annually • Core service information is backed up daily and replicated to the Cloud Inability to attract/retain talented staff • Poor customer service – increased customer dissatisfaction • Supporting and professional services are unable to support frontline delivery • Loss of corporate memory • High staff turnover impacts remaining staff negatively • Increased recruitment and reward costs • New Senior Management Team in place providing consistency to staff • Building our Foundation – programme will identify and implement peoplebased improvements (People Strategy) • First People Strategy sessions held with over 50% staff attendance. Annual Report 2021-2022 19
Risk Impact HowWeManage Risk Adversemedia or social media attention compromises reputation and / or brand • Damage to customer trust • Reputational damage • Loss of lender confidence • Credibility with stakeholders impacted • Increased regulatory scrutiny • Proactive reputation management • Proactive stakeholder engagement • Regular proactive engagement with Regulator of Social Housing • Expert external advisors identified • Media and social media monitored by identified person Poor budget management compromises our financial viability • Unable to deliver services • Unable to deliver the commitments in the corporate plan • Regulatory consequences • Reputational damage • Reduced investment capacity • Reduced access to funding • Senior Management Team engaged in budget setting process • Internal Auditors (Beever & Struthers) provide assurance on budget process • Budgets approved by Board • Monthly budget monitoring with Senior Management Team Inflation, cost-of-living and / or political action on rents causes issues of affordability andwill compromise our financial viability • Unable to deliver services • Unable to deliver the commitments in the corporate plan • Regulatory consequences • Reputational damage • Reduced investment capacity • Reduced access to funding • Scenario and stress testing of LTFP • Review Arhag operating model • Contracted services procured with agreed uplifts • Review service provider costs with particular emphasis on service chargeable costs • Support for customers most severely impacted Inadequatemanagement of a serious incident in our homes • Negative customer impact • Service disruption • Financial loss • Reputational damage • Regulatory scrutiny and intervention • Estate crisis management approach in place • Learning from previous incidents actively embedded in crisis management approach • Stakeholder communications and management plans in place • Monitoring by Operations Committee • Out of hours and escalation plans in place and updated regularly • Arrangements applied based on government advice and best practice both within and outside the sector Service charges are inaccurate and/ or not compliant with legislation • Poor customer service • Loss of income • Regulatory consequences • Budget and LTFP service charge data aligned • Internal audit programme commenced October 2021 with rent and service charge setting 20 ARHAG
Risk Impact HowWeManage Risk Data is of poor quality or misinforms business decisions • Inadequate corporate oversight • Regulatory noncompliance and sanction • Reputational damage • Disruption to service delivery • Poor customer service • Financial consequences • Procurement completed for stock condition survey. Survey commenced on site 25 April 2022 • Compliance processes updated with new workbooks to validate data • Improvement programme – Building our Foundation covers Data improvement • Kickstart Data Officers (x2) have worked on Housing and Asset data. Upload due to further identify any issues. Work included – Cross matching data held on tenancy files and against data held in Castleton Housing System • 100% of all tenancies were reviewed • Asset – Inputting information on the Terrier (spreadsheet system for Asset Management) with the Administrator in Repairs working on closing historical works orders • Stock Condition Survey results will further inform us on key component data and building asset data that may be missing FINANCIAL GOLDENRULES ANDRISK TRIGGERS During the year the Board approved the introduction of financial ‘golden rules’ which underpin our approach to financial management. Through our financial planning, we ensure that these rules are harmonisedwith our corporate plan and objectives so that, in effect, they comprise the building blocks of our financial strategy. This approach helps us to preserve financial resilience into the long term. The golden rules have been set in the first instance against our financial loan covenants and a risk trigger has been introduced against each which, if breached or forecast to be breached, would trigger risk mitigations being agreed and deployed. Against Earnings Before Interest, Tax, Depreciation & Amortisation Major Repairs Included (EBITDAMRI) Interest Cover the financial golden rule is that performance shall never put Arhag within 25% of the tightest loan covenant limit and a trigger point 45% worse than the limit. Against Gearing the financial golden rule is that performance shall never put Arhag within 5% of the tightest loan covenant limit and a trigger point 10%worse than the limit. We also look to hold available free cash of over £3.5mwith a lower limit of £3.0m. Annual Report 2021-2022 21
OUR ASSETS Responsive and Void Repairs As in the previous year, the Covid-19 pandemic provided a test to our contractors regarding their ability to respond to customer demand. For a time, the service only supported emergency and urgent repairs with day-to-day repairs not being undertaken. Notifications were given to tenants and updates were posted on the website. As we emerged from lockdowns the service returned to a greater degree of normality. Repairs Re-procurement As part of our drive to improve our repairs service offer, we changed our maintenance contractor during the year and have recently undertaken a full repairs re-procurement exercise, utilising our participation in the South-East Consortium, which will bear fruit in 2022/23. As part of improving the resident experience and response of the organisation, we have renewed our gas heating and hot water contract with K&T Heating Services including arranging for resident calls to be taken directly by K&T from 1 June 2022. This gives our residents direct access to the contractor and technical staff to deal with any service issues and book appointments. Planned and Compliance Work Arhag has continued to invest heavily during the year in its health & safety compliance with a concentration on fire, gas and electrical safety works. Stock Condition Survey It was clear from the start of the year that it would be essential to undertake an extensive survey of the condition of our stock of properties to validate the programmes of component replacement. A major stock condition survey, covering all our units excluding those which had recently been surveyed or which potentially may be the subject of regeneration opportunities, was approved by the Board during the year and has been completed through the spring and summer of 2022. This is a vital piece of work for Arhag and will provide the evidence we require to understand better the condition of our homes, the extent of the immediate requirement to invest in some of them and the programme of future investment we will need to plan for in the next revision of our long-term financial plan. Upgrading our existing homes As the outcomes of these surveys will drive our reinvestment priorities, we paused all but priority reinvestment work awaiting the results. Additionally, we were also cognisant of the continuing impact of Covid-19, for which it was important that we did not put our teams, contractors or residents at risk. Consequently, we adjusted our expectations of the volumes of components to be replaced. The resulting total expenditure during the year was focused on heating installations and amounted to £256k. Component Properties Value £’000 Bathrooms 5 £19 Heating 58 £124 Kitchens 9 £45 Windows 15 £68 £256 In addition to these replacements we have also installed a door entry system (£45k) for the safety and security of our residents at The Goodies, one of our estates in Poplar, and instigated a review of our lift installations, starting with Inverness Street in Camden. 22 ARHAG
£256K £45K The resulting total expenditure focused on heating installations during the year The installation of a door entry system for the security of our residents at one of our estates Annual Report 2021-2022 23
A well-motivated and highly skilled workforce with a “can do” attitude will be the key to our ambition to be one of the best providers of social housing services in London. During 2021/22, we have started the development of a people strategy which assesses our organisational culture, staff terms and conditions (including flexible working), training needs, staff communication strategy, Investors In People and use of IT to deliver 24/7 services to our residents. Our people strategy is key to ensuring that Arhag is not only delivering effective customer-centric services, but that the organisation can embrace agile working, tackle inclusiveness and diversity across the organisation and for its Board and staff to be seen as even more visible and in touch with the communities we serve. At the heart of our people strategy is the establishing of our operating culture and engagement plan by: • Consulting with colleagues about flexible working arrangements; • Reviewing our employment package, including the incremental pay and benefits system; • Considering our pension arrangements; • Delivering a programme to improve customer and colleague relationships to help us drive improvements in our customer service; and • Developing a new Equality, Diversity & Inclusion strategy, and programme “Awell-motivated and highly skilledworkforce with a ‘can do’ attitude” For organisations the size of Arhag, our people are our biggest asset, and we recognise that our reputation with customers depends on howwell we communicate with and manage our relationships with our own employees. OUR PEOPLE 24 ARHAG
Changes at Senior Management Team Over the course of 2020/21 and 2021/22 Arhag has stabilised the Senior Management Team by moving away from Interim Directors and third-party consultants so that now the team is operating at its full complement with all posts filled on a permanent basis. In June 2021 Chris Harris was appointed as Chief Executive Officer, replacing the outgoing InterimCEO and in May 2022 Shabana Yousaf was appointed as Director of Property, Building Safety and Compliance replacing Arhag’s external Asset Management Consultant. These two appointees join Tina Bull, Head of Housing, and Andrew Shaw, Director of Finance & Resources, in constituting the Senior Management Team of Arhag. Development opportunity Arhag is always looking for ways to encourage the development of our staff and in January 2022 we were delighted to announce that one of our team had been accepted onto a programme called ‘Next Generation Leaders’ which is run by the South-East Consortium (SEC) who have partnered with an independent training organisation to provide an Institute of Leadership & Management (ILM) certificated course within the housing sector. Being able to do this is testament to the value that can be derived frommembership of SEC and the principles of using partnerships to develop our organisation. Newways of working Throughout both this year and last, our staff colleagues adapted to working from home and the challenges this brought, from practicalities of space and equipment to home schooling and caring for others. We supported our colleagues by providing the equipment they needed to carry out their work effectively and in an environment that worked for them. We encouraged more flexible working and continued to pay salaries in full during the various lockdowns and did not furlough any of our colleagues. To ensure no one lost out on time away fromwork we have allowed colleagues for the last two years to carry forward more holiday allowance into the new year. In October 2021 we launched our ‘the way we work’ approach with staff, the first steps towards employing our values and behaviours. We now operate a more flexible working pattern which allows staff an improved work / life balance with a minimum of two ‘contact’ points with colleagues, residents or work-related third parties per week. “Arhag is always looking for ways to encourage the development of our staff” Annual Report 2021-2022 25
Discussions with the investor developer responsible for the redevelopment of Sugar House Island indicated that they are pleased with Arhag’s management of the scheme and they are seeking a longer term relationship. Future phases on the development could yield up to a further 100 affordable units that we may be able to manage. Discussions with Tower Hamlets and Transport for London are also underway jointly with another developer for the redevelopment and regeneration of a large site in the borough. Arhag has the financial and operational capacity to grow, and we will continue to look for opportunities to concentrate our activities in our core areas of north and east London. Key to this are the results of the stock condition survey and its impact on the financial capacity of the organisation to invest in new unit growth. The majority of Arhag’s growth over its recent history has been through the successful acquisition of properties owned by larger registered social landlords and we will continue to assess these opportunities as and when they arise. We are reviewing our current business plan to refine our position on further developments. We have been looking at alternative routes to increasing our unit numbers, such as long-term lease agreements and joint ventures with other developers, to take advantage of Section 106 agreements in our geographical areas. Should good transfer opportunities arise we would certainly consider the proposals in the best interests of the association. Alongside these plans Arhag would also be open to discussions with other providers about combining our operations to achieve growth and to develop our “go to” agenda. Where appropriate to facilitate these plans, Arhag may make strategic disposals of properties to improve efficiencies and release operational resources so we can focus on our portfolio of accommodation for migrants and refugees in London. To this end we completed the sale of the final five units during the year to another Registered Provider. We have also handed back a further temporary social housing property to NewhamCouncil. During the year we acquired the lease on 21 units in Carpet Street on Sugar House Island, Stratford and will actively pursue further similar opportunities as and when they arise. OUR GROWTH 26 ARHAG
Repairs Although our residents’ satisfaction with our repairs performance is below where we would want it to be, it is only a slight reduction on last year and remains an improvement over the previous year. This is despite the continuing impact of Covid-19 with its restrictions on access to our residents’ property. We will continue to monitor what we can do to ensure that improvements we make to the service translate into improved satisfaction with the service. Rent Arrears and Collection Our year end performance on current tenant rent arrears was 4.1% and our rent collection was 101%. In October 2021 Arhag had its first eviction for 3 years following the changes in legislation on evictions during the Covid-19 pandemic. These changes had taken away an important, albeit ‘last resort’, tool in the armoury of managing tenant arrears. Our rent arrears had been impacted by this and the challenge had been to continue to increase collection and reduce arrears, which had been an issue with several cases awaiting court dates due to the change in legislation and the extension of notice periods. With a long-term issue of the courts managing the backlog of cases and bailiffs being available to execute warrants this continued to affect our rent arrears. Voids Our void performance is good, an improvement on the previous two years and we were also able to improve against our previous target of 22 days, bringing actual average turnaround time down to 13 days during a very challenging year in which we had a total of 24 new voids. Our target for 2022/23 is now to maintain this turnaround time for re-letting empty homes. Gas Safety This year a considerable effort was put into achieving full compliance. During the previous year, primarily because of Covid-19, we were not able to gain access to all our properties to complete all the gas servicing and testing and therefore obtain certificates of gas safety compliance. We consequently fell short of the 100% target in 2020/21, a performance we have reversed in 2021/22. OPERATIONAL PERFORMANCE ARHAGMetrics Target 2023 2022 2021 2020 2019 Resident satisfaction with responsive repairs 80% 67% 71% 60% 69% Current tenant rent arrears 3% 4% 4% 6% 2% Rent collection as % of rent due 100% 101% 100% 94% 100% Void turnaround time (days) 13 13 16 18 11 Gas safety certificate 100% 100% 91% 100% 98% “Our year end performance on current tenant rent arrears was 4.1% and our rent collectionwas 101%.” Annual Report 2021-2022 27
FINANCIAL PERFORMANCE £5,251K Social housing operating costs £1,089K Increased surplus in 2021/2022 2. FINANCIAL PERFORMANCE AND VIABILITY STATEMENT Surplus for the year Arhag has delivered a 32% increase in its surplus for the year from £822k in 2021 to £1,089k despite a reduction in the contribution from the sale of fixed assets from £1,122k last year to £657k this year. This improved performance has been achieved through increasing turnover by 3% and reducing operating costs and interest charges by 8%. Despite the continued uncertainty through the past two years over the wider economic climate, as a consequence of Covid-19 and any lasting impact of Brexit, our improved financial performance has been essential in enabling us to look forward with confidence to continuing to deliver our social objectives. The Board of Arhag is therefore delighted to report a good set of results for the year and a strong financial position. Turnover Social housing lettings turnover increased by 3% from £6,478k to £6,672k with the addition of 21 intermediate rent units in Newham at the end of June 2021 combined with the annual increase in social housing rents to offset the loss of income following the disposal of five units in south London this year and the full-year impact of the disposal of 10 units a year earlier. Income from partners reduced slightly during the year as we worked with them to mitigate the impact of the Covid pandemic by reducing the service charges of the accommodation at The People’s Place to reflect lower usage of the building. Operating costs Social housing operating costs have reduced by 8% from £5,705k to £5,251k. The surplus generated by the sale of the units in April 2021 was used during the remainder of the year to boost our investment in Arhag’s underlying health & safety compliance position concentrating on bringing properties transferred to us in previous years up to an acceptable standard and in continuing the original accelerated rate depreciation of the costs of moving to Stratford. During this financial year our property, building safety and compliance team has continued to improve our health & safety compliance across our properties with continued and substantial investment in fire risk assessments, gas and electric testing and in making changes to the properties as necessary from the resulting reports. 5 UNITS have been sold in south London to a local registered provider in 2022 28 ARHAG
Also this year, Arhag’s Board reviewed the useful economic lives of the components of the Stratford office with a consequent reduction in the overall annual depreciation charge. Arhag has maintained a prudent approach to the risk of resident debt not being fully recoverable. However, having increased the impairment in the carrying value of resident debt in 2021 we have not needed to increase it further this year. OperatingMargins As a consequence of improving our underlying financial performance, Arhag has improved its operating margin on social housing lettings from 12% to 21% and our overall margin (including the surplus on disposal of assets) has improved from 12% to 16%. Disposal of fixed assets Arhag is not financially reliant on disposing of properties to support its business model, although it should be noted that the decision of the Board to focus operations more in north and east London rather than south of the river has resulted in disposals of 10 units in 2021 and a further 5 units in 2022 to a local registered provider. With the social housing grant on the units transferring with the properties, these sales were able to deliver strong surpluses and contribute to greater geographical and operational efficiencies. Net Interest During 2020/21 Arhag removed £2.00m of loan facility with RBS/NatWest and this year we have repaid £1.25mwith no additional refinancing being required. As a consequence of the combination of this and the ending of a fixed interest rate on two of our loan tranches, our net financing costs during the year decreased. The majority of our outstanding debt is held on fixed interest rates and this has mitigated the risk of rising Bank of England lending rates as experienced recently. Where our debt is variable there are minimum lending rates built into the loan agreements which have not yet been breached. Debt and Liquidity Arhag’s loan facilities are held with four banks, against which we carry a cash reserve of £3.09m (2021: £2.55m). At the end of the financial year, our net debt had reduced from £25.15m to £23.36m, of which £1.25m is repayable within one year and £1.14m the following year. Our total liquidity as of 31 March 2022 of £3.09m (2021: £2.55m) comprises immediately available bank deposits and payments that have been made by residents to our 3rd party payment system provider and which is in transit to Arhag. We have reviewed and updated our medium and long-term financial forecasts and shared these with our lenders to understand and identify our funding requirements. Annual Report 2021-2022 29
The Board assessed the viability of the association in May 2021 using a long-term financial forecast of the organisation’s income & expenditure, capital investment, working capital management, the repayment profiles of existing debt and any refinancing required as a consequence. The Board is, to the best of its knowledge, satisfied that covenant compliance is maintained throughout the course of the plan thus confirming the future viability of the association. After making enquiries, the Board has reasonable expectation that the association has adequate resources to remain in operational existence for a period of at least 12 months from the date of approval of the financial statements. The association has considerable financial resources together with long-term cash-generating assets. As a consequence, the Board is satisfied that the association is well placed to manage its business risks successfully. For this reason, it continues to adopt the going concern basis in preparing the association’s financial statements. No material uncertainties related to events or conditions that may cause significant doubt about the ability of the association to continue as a going concern have been identified by key management personnel after considering the relevant facts and circumstances. VIABILITY STATEMENT 30 ARHAG
“The Board has reasonable expectation that the association has adequate resources to remain in operational existence for a period of at least 12months from the date of approval of the financial statements.” Annual Report 2021-2022 31
3. VALUE FORMONEY STATEMENT PERFORMANCE AGAINST REGULATORY METRICS The VfM standard and Code of Practice sets out the requirements for registered providers to publish annual evidence in the financial statements to enable stakeholders to understand the provider’s: a) Performance against its own value for money targets and any metrics set out by the regulator b) Measurable plans to address any areas of underperformance, including clearly stating any areas where improvements would not be appropriate and the rationale for this. The suite of VfMmetrics set out by the regulator in a) above is restricted to data derived from the financial statements and regulatory returns such as the Financial Viability Assessment (“FVA”). All metrics are derived from data that is already in the public domain in providers’ own financial statements and the Global Accounts dataset maintained centrally by the Regulator. The metrics include output measures alongside cost data, and measures of the efficiency with which both resources and our assets are utilised. This includes the degree of investment to existing stock as well as new supply. 32 ARHAG
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