**North Devon Homes**
# **North Devon Homes Financial Statements for the year ended 31 March 2021**
**Registered Company No. 03674687**
**Registered Charity No. 1164142**
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **North Devon Homes**
## **Financial Statements**
## **for the year ended 31 March 2021**
## **Contents**
Board Members, Executive Officers, Advisors and Bankers ....................................................................... 3 Board of Management report for the year ended 31 March 2021 ........................................................... 4 Strategic Report ............................................................................................................................................... 8 Statement of the Board of Management’s Responsibilities ..................................................................... 28 Report of the Board on Internal Control ..................................................................................................... 29 Independent Auditors’ report to the members of North Devon Homes................................................. 32 Consolidated and Association Statements of Comprehensive Income for the year ended 31 March 2021 ................................................................................................................................................................. 36 Consolidated and Association Statements of Financial Position as at 31 March 2021 ........................ 37 Consolidated Statement of Cash Flows for the year ended 31 March 2021 ......................................... 38 Consolidated Statement of Changes in Reserves for the year ended 31 March 2021 ........................ 39 Association Statement of Changes in Reserves for the year ended 31 March 2021 ............................ 40 Notes to the Financial Statements for the year ended 31 March 2021 .................................................. 41
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Board Members, Executive Officers, Advisors and Bankers**
## **The Board of Management**
Mr Robert Stronge (Chair) Mr Asad Butt (Vice Chair) Mr James Barrah Dr Debbie Hay Ms Suzanne Ingman Ms Delyth Lloyd-Evans Mr Scott Murray Mr Paul Oldroyd Ms Suzanne Lowther Mr Simon Sanger-Anderson
## **Company Secretary**
Mrs Diane Dimond
## **Executive Directors**
Mr Martyn Gimber (Chief Executive) Mr Marc Rostock (Director of Neighbourhoods) Mrs Philippa Butler (Finance Director)
## **Solicitors**
Trowers & Hamlins LLP The Senate Southernhay Gardens Exeter Devon EX1 1UG
Tozers LLP Broadwalk House Southernhay West Exeter Devon EX1 1UA
## **Principal Funders**
Lloyds TSB Bank PLC Level 6 Bishopsgate Exchange 155 Bishopsgate London EC2M 3YB
## **Funding Advisors**
## **Statutory Independent Auditors**
Mazars LLP 90 Victoria Street Bristol BS1 6DP
Aquila Treasury and Finance Solutions Ltd Tempus Wharf 29a Bermondsey Wall West London SE16 4SA
## **Bankers**
NatWest plc Royal Bank of Scotland Group 1[st] Floor, Trinity Quay 1 Avon Street Bristol BS2 0PT
North Devon Homes is a company limited by guarantee (Registered in England, Company Number 03674687), registered charity (charity number 1164142) and is registered with the Regulator of Social Housing (Registration Number LH4249).
The registered office is at: Westacott Road Barnstaple Devon EX32 8TA www.ndh-ltd.co.uk
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Board of Management report for the year ended 31 March 2021**
## **Strategic Report**
The Board of Management presents its strategic report and audited financial statements for the year ended 31 March 2021.
## **Legal Structure**
North Devon Homes (‘NDH’ or ‘the Association’) was incorporated in November 1998. NDH is an independent social business and registered charity. It has one wholly owned subsidiary Anchorwood Limited which is a development company.
NDH is registered with the Charity Commission as a charitable company and as a provider of social housing with the Regulator of Social Housing. It is also a company limited by guarantee, registered at Companies House. Anchorwood Limited is also registered at Companies House.
The Directors of the Association who have served during the year are listed below and the current directors up to the date of the signing of these financial statements are listed on page 3.
## **Principal activities**
The principal activity of the Association is to provide social housing. Any financial surpluses are reinvested into improving existing homes, communities and services and developing new homes.
The Group also consists of Anchorwood Limited a development company.
## **Review of the business**
A review of the business is discussed in the Strategic Report on pages 8 to 27. This includes the Value for Money Statement 2021 and the Board’s arrangements for managing risk.
## **Results**
The Group’s surplus after tax for the year was £1,952k (2020: £1,287k).
## **Going concern**
The Board has a reasonable expectation that adequate resources will continue in existence for the foreseeable future and for this reason it continues to adopt the going concern basis in preparing the Financial Statements. Further details with regard to going concern are considered in Note 1 to the Financial Statements on page 41.
## **Constitution and Governance**
The Board is skills-based and consists of up to ten independent members.
For the year ending 31 March 2021 the following members served on the Board:
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Board of Management report for the year ended 31 March 2021 (continued)**
- Mr Robert Stronge
- Mr Asad Butt
- Mr Scott Murray
- Mr James Barrah
- Ms Delyth Lloyd-Evans
- Ms Suzanne Ingman
- Ms Debbie Hay
- Mr Paul Oldroyd
- Ms Suzanne Lowther
- Mr Simon Sanger-Anderson
The governance structure for the Group is summarised below:
The Boards of North Devon Homes and its subsidiary company Anchorwood Limited are committed to upholding and maintaining the highest standard of governance, accountability and probity in effectively leading and managing the business. The Boards continue to work and challenge themselves to ensure that they have the necessary skills, experience, and where appropriate, the necessary external advice to support decision making and strategic planning.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Board of Management report for the year ended 31 March 2021 (continued)**
## **Compliance Statement**
North Devon Homes (NDH) Group has adopted the NHF 2015 Code of Governance and strives to uphold the principles of good governance as defined by the Code. The Board regularly assesses compliance with the Code to gain assurance that the organisation remains compliant, identifying and implementing any areas for improvement. The Board confirms that NDH was fully compliant with the Code through the financial year ending 31March 2021.
Each year our Regulator, the Regulator of Social Housing, requires us to assess our compliance with its Governance and Financial Viability Standard and provide assurance to customers and stakeholders that the specific expectations are being complied with.
The Board is pleased to confirm that during the year ended 31 March 2021 it considers that NDH has complied with all applicable outcomes and specific expectations of the Governance and Financial Viability Standard and its accompanying Code of Practice, together with the outcomes and requirements of all the other economic and consumer standards.
A new integrated housing management software system is being introduced and the first phase was successfully implemented in June 2021; future phases which are planned over the next year will enable full compliance with the General Data Protection Regulation (GDPR) legislation. Whilst NDH was not fully compliant with all aspects of the GDPR requirements during the year, any areas of non-compliance are not considered to be material.
## **Charity Commission compliance**
The Board as Trustees can confirm that in respect of the Association as the registered charity, it has complied with Charity Commission’s requirements during the year and any fundraising activities in respect of its youth service (as the only area of fundraising activity) have been in accordance with the Charities (Protection and Social Investment) Act 2016.
## **Executive officers**
The Board of Management has delegated authority for operational matters to a team of executive officers. The executive officers who held office during the year are:
Mr Martyn Gimber (Chief Executive) Mr Marc Rostock (Director of Neighbourhoods) Mrs Philippa Butler (Finance Director)
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Board of Management report for the year ended 31 March 2021 (continued)**
## **Financial Risk Management Objectives and Policies**
The Association’s operations expose it to a variety of financial risks that include the effects of credit risk, liquidity risk and interest rate risk. The Association has a formal risk management and assurance framework to mitigate the potential adverse effects that such risks may pose which are further detailed in the Strategic Report on pages 8 to 27.
## **Employees**
The strength of the Group lies in the quality and commitment of its employees. Our strong Team NDH culture enables us to meet our objectives and deliver good quality services to our customers in an efficient manner. We value highly the continued dedication and professionalism of our employees.
The Group operates a continuous performance management review process which supports the delivery of corporate objectives by identifying any training and development needed to achieve those objectives.
## **Equal opportunities**
The Group is committed to an equal opportunities policy within which it actively encourages applications for employment from all groups in society.
It is our policy that disabled persons should be considered for employment, training, career development and promotion on the basis of their abilities in common with all employees.
## **Directors’ and officers’ liability insurance**
The Group has maintained directors’ and officers’ liability insurance throughout the year.
## **Executive Officers’ remuneration**
The remuneration of the Chief Executive, Director of Neighbourhoods and Finance Director is determined, when reviewed, by the Board with the aid of external professional advice. The Board members (who are also Trustees) are remunerated for their services, details of which are set out in note 7 to the Financial Statements.
## **Disclosure of information to the auditors**
In the case of each person who was a Board member at the time this report was approved:
- so far as that Board member was aware there was no relevant available information of which the auditors were unaware; and
- that Board member had taken all steps that the Board member ought to have taken as a Board member to make himself or herself aware of any relevant audit information and to establish that the auditors were aware of that information.
This confirmation is given and should be interpreted in accordance with the provision of s418 of the Companies Act 2006.
## **By order of the Board**
**Robert Stronge Chair of the Board 13 September 2021**
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report**
## **Background**
North Devon Homes is a registered provider of social housing which was formed in February 2000 to accept the transfer of 3,281 homes from North Devon Council. At 31 March 2021, the Association owned 3,337 (2020: 3,317) affordable homes.
With the exception of two properties in the Torridge area, all of North Devon Homes’ housing stock is located within the local government district of North Devon. The Association operates in an area where there is an acute shortage of existing affordable homes and limited supply of new sites for new housing provision. In addition to this, the area has very low average wages coupled with high property prices.
An analysis of the Association’s property assets is as follows:
||**2021**|**2020**|
|---|---|---|
||**No.**|**No.**|
|**North Devon Homes’ Affordable Housing Stock**:|||
|**General Needs**|||
|Social rent|2,277|2,266|
|Affordable rent|426|425|
|Intermediate rent|14|14|
|**Older-persons Housing**|||
|Social rent|510|509|
|Affordable rent|31|28|
|Intermediate rent|4|4|
|**Low-cost home ownership**|75|71|
|**Total**|**3,337**|**3,317**|
|**Other units not included above:**|||
|Market Rented|7|7|
|Leasehold Properties|89|89|
|Units managed on behalf of others|16|16|
|Garages|670|670|
|Commercial Properties|19|19|
|**Total**|**801**|**801**|
## **Governance and Management**
During 2020/21 the NDH Board met seven times to provide effective governance to the business. The Board is supported by its Group Audit and Risk Committee and also the Group Remuneration and People Committee. The Anchorwood Limited Board met eight times during the year.
In addition to the formal board meetings, in order to ensure that the NDH Board had sufficient oversight during the global Covid-19 pandemic that affected the Group during the year, a Covid19 task group was set up of up to five Board Members, including the Chair, Vice Chair and Chair of the Group Audit and Risk Committee. This group initially met weekly, and fortnightly from May 2020, with the Executive Team.
The Anchorwood Ltd Board also held more regular short Covid-19 briefing meetings in addition to its formal meetings, to keep appraised of risk, business continuity and other impacts to the business due to the rapidly changing external environment.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report (continued)**
The NDH Board has formally adopted the 2015 National Housing Federation (NHF) Code of Governance “promoting Board excellence for housing associations”. This code not only underpins the way the Board operates but also forms the basis of an ongoing commitment to governance excellence and continuous strengthening of North Devon Homes’ governance arrangements. In 2020 the NHF issued an updated Code of Governance. This was formally adopted by the Board in March 2021 and during 2021/22 the Board will be working through a transition plan to ensure that compliance with the new Code is achieved by 31 March 2022.
Further details are provided within the Board of Management Report on pages 4-7.
## **Regulatory Status**
The Association is a Registered Provider (RP) of Social Housing and is regulated by the Regulator of Social Housing (the “Regulator”) under the Regulatory Framework for Social Housing in England.
In December 2020, following the Regulator’s in-depth assessment, it was confirmed that the Association had maintained the highest Regulatory Rating for governance (which was in place as at March 2020) but had been re-graded from V1 to V2 for Financial Viability due to its current exposure to the housing market. The ratings are defined as follows:
## • **Governance: G1**
The provider meets the governance requirements.
- **Viability: V2**
The provider meets the viability requirements and has the financial capacity to deal with a reasonable range of adverse scenarios, but needs to manage material risks to ensure continued compliance.
## **Corporate Priorities and Strategies**
The year 2020/21 was the last year of the Association’s Corporate Plan 2018-21. The Plan was set out under four objectives, and a final summary of performance against each heading is outlined below, along with those objectives which were not fully completed by the end of March 2021 and so have been carried forward into the new 2021-24 Corporate Plan.
## **1. Me: Put the customers at the heart of all we do**
## **Achievements and successes**
- **Achievements and successes Objectives carried forward into 2021-24 Plan** • Strong customer satisfaction • Development of ‘real-time’ satisfaction • Effective customer involvement structure measurement, starting with feedback on (C90) with programme of ongoing the repairs service. customer engagement • Go-live with new Housing Management
- • Over 300 changes annually to system - Civica CX - and development documents / policies as a result of direct of customer portal to enable easier input from customers online ways for customers to deal with us.
- • We will continue to put the customer at the heart of everything we do.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Strategic Report (continued)**
## **2. My Home: Maintain and build quality affordable homes**
- **Achievements and successes Objectives carried forward into 2021-24 Plan** • Strong compliance performance • Complete the Taw Wharf development • Overall maintenance performance was and continue to deliver new homes at above that of peers and achieved with other sites. lower front-line costs. • Development of ‘real-time’ satisfaction
- • Identification of lowest performing measurement of the repairs service. properties for disposal, and disposal of • We will continue to provide customers 38 of those units. with a safe and secure home in a good
- • Continued development of Home 2 state of repair
- Continued development of Home 2 Home.
- Completion of trials of home improvement (Energiesprong - Zero carbon whole house retrofit).
- 210 new homes delivered.
- Net increase in NDH’s social housing stock from 3241 to 3337.
## **3. My Neighbourhood: Improve, support and develop our neighbourhoods**
- **Achievements and successes Objectives carried forward into 2021-24 Plan** • Tenancy Handbook completed and • Continue to encourage staff to available online, written in consultation volunteer in activities which support our with customers. communities.
- • Partnership working on projects to • We will continue to be a Community benefit customers, and supporting LA to Landlord, offering services beyond those deliver homelessness duty. of a normal landlord, such as financial
- • At the end of the plan, over 200 advice, independent living support, customers are supported by NDH’s alarm services and young person Independent Living Service, and over support. 1000 use the alarm service. • We will continue to work with local
- • Youth team and customer involvement partners, businesses and stakeholders to activities benefitting individuals and their ensure we all work together on local families throughout the pandemic. issues.
- • Continued low rent arrears - latest benchmarked data shows 2019/20 prior year arrears of 0.66% against a peer group median of 2.94%.
- • Staff volunteering scheme in place, with 88 days delivered prior to the pandemic.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Strategic Report (continued)**
## **4. My Landlord: Deliver Value for Money**
## **Achievements and successes**
- New Housing Management system Civica CX ready to go live, and Customers have been involved in implementation.
- VfM targets mostly achieved (i.e. ROCE >3%; Operating Margin >25%); New homes supply target partially achieved.
- First Phases of Taw Wharf successfully completed. Development pipeline in place going forward for schemes with a mix of social rent, shared ownership and market sale.
- Head Office roof and electrical works completed.
## **Objectives carried forward into 2021-24 Plan**
- Customer portal and self-service options to be rolled out.
- Civica CX, Microsoft 365 and other IT infrastructure to be rolled out in line with IT Strategy.
- Ongoing development and sales at Taw Wharf.
- Gift aid receipts from Anchorwood Ltd to be reinvested to ndh.
- Talent Management Framework implementation – ‘grow our own’ through progression routes & apprenticeships.
- Strong Headline Social Housing Cost per Unit compared to the sector.
The Association’s vision, objectives and strategies for the next three years are set out in our new 2021-2024 Corporate Plan, and build on the previous plan; taking forward the objectives noted above. It continues to follow the key themes of _Me, My Home, My Neighbourhood, My Landlord_ – with the focus of each area restated for the new plan.
1. Me: Customer focused and accountable business.
2. My Home: ensuring safe and healthy homes, investing in homes to ensure they are sustainable.
3. My Neighbourhood: leading and working with our partners to build communities where people want to live.
4. My Landlord: Delivering Value for Money.
The full Corporate Plan sets out clear targets for each of the objectives above. Key areas of focus for the 2021-24 Plan are tackling inequality, investing in customers’ homes to make them more energy efficient, delivery of new homes and using new technology to improve processes and deliver services more effectively and efficiently. The Plan also sets out the Association’s culture and the way the Association intends to deliver the Plan with objectives on: safety, compliance and responding to the emerging building-safety agenda; good governance; delivery of social value; and customer engagement. There are a number of critical metrics that will be used to track progress:
- Customer satisfaction.
- Customer safety as measured by compliance performance.
- Energy efficiency as measured by properties rated SAP C or better.
- Estimated home running costs based on energy efficiency across the stock.
- Rent affordability compared to average rents.
- New homes delivered.
- Social value delivered.
## **Performance in the Year**
Underpinning the Corporate Objectives, the following specific priorities were delivered in 2020/21:
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report (continued)**
## **Performance in the Year (continued)**
## • **Deliver Welfare Reform Support**
Universal Credit (UC) was rolled out in North Devon from July 2018, and by 31 March 2021 834 of our customers had transitioned to UC. Current tenant rent arrears figures continued to show excellent performance throughout the year with the year end result at 0.80% of the annual rent debit, only showing a small increase on the previous year (0.65%). The difficulties for customers on UC are demonstrated when looking deeper at the results: arrears for non-UC customers are significantly lower than arrears for those in receipt of UC. During the year, we continued to work with customers to help them transition to UC, and to help them build up a rent credit to cover them across the gap in benefit when switching to Universal Credit.
## • **Taw Wharf Development**
During 2020/21, Anchorwood Limited completed the second phase of the Taw Wharf development, and had begun work on the third phase. Properties remained in demand throughout the year, and only four properties remained unsold at the year end, with significant numbers of ‘early bird’ reservations against the third phase. The entire scheme will deliver 37 social rented homes to NDH, and also gift aid to NDH the profits arising from the sale of 135 open market sale units.
## • **IT Systems**
Our three core IT systems – relating to tenancy management, repairs and asset management – are deemed to be at the end of their useful lives. As a consequence, following process reviews, requirements gathering and investigation of potential suppliers, we procured a new integrated housing management system to cover all three areas. During 2020/21, we have continued to build, test and implement the new system. The system was originally due to go live in the financial year 2020/21, but time taken to resolve issues and delays as a result of the pandemic meant that the first phase of the system did not go live until June 2021. The system changes will reduce the risk related to IT, and are also a key part of our Value for Money (VfM) delivery. They will enable more on-line interaction with customers and will also deliver efficiencies as we refine processes and take advantage of new IT capabilities.
## • **Improving our stock for customers**
During 2020/21 we continued to look at pilot projects to identify ways to improve the energy efficiency of our homes. In 2021/22 we will be installing air-source heat pumps in a number of properties, alongside solar panels and batteries, and assessing the benefits for customers. In addition, we will continue to identify and dispose of our worst performing properties when opportunities arise, using receipts to acquire or develop new affordable homes.
## **Performance Management Framework**
The Company has a robust Performance Management Framework in place. The Corporate Objectives set by the Board as part of the Corporate Plan are cascaded into Service Excellence Plans (SEPs) for each service area. The SEPs inform the personal objectives for each member of staff. The achievement of both the SEPS and the staff objectives is regularly monitored.
## **Key Performance Indicators (KPIs)**
The North Devon Homes Board and Executive Team monitor the Group’s KPIs through quarterly performance reporting, regular meetings of the Executive Team and of the Strategic Performance Group. Performance information is widely available in customer newsletters, on our website and in our offices.
A performance management process is in place to capture, monitor and manage performance and delivery across the business including delivery of our Corporate Plan and service excellence plans, with quarterly performance reports.
Performance across the organisation as at 31 March 2021 is summarised on the following page:
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report (continued)**
## **Key Performance Indicators (KPIs) (continued)**
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report (continued)**
## **Key Performance Indicators (KPIs) (continued)**
Some further commentary on performance in the year is provided below:
- **Repairs:** Customer satisfaction data for our repairs service has not been routinely collected by our Customer Service Team during the Pandemic due to other priorities. For 2021/22 we have a new external agency collecting satisfaction data, and the initial results show that satisfaction remains high. Repairs on-time performance was below target - although only marginally for the highest priority emergency repairs. For other repairs, this was mainly a result of the disruption during the year due to the pandemic and the backlog of repairs from the initial lockdown at the end of 2019/20 and beginning of 2020/21, when urgent and routine repairs were restricted.
- **Rent Collection:** The performance of rent collection for current customers continued to be extremely strong in 2020/21. This year has seen the continued roll-out of Universal Credit in North Devon and current arrears performance is significantly better than target, despite the number of UC claimants increasing from 615 to 834 in the year. Former tenant arrears are also on target.
- **Gas Safety:** At the end of the year all properties with gas had a valid gas certificate.
- **Re-lets:** Re-let times and void rent loss increased in the year due to the pandemic but, despite the restrictions impacting our ability to carry out void works and re-let properties for a period, the rent loss performance was well within target.
- **Customer Satisfaction:** The STAR survey (Survey of Tenants and Residents) was undertaken in August 2018 and, although overall satisfaction dropped, it remained upper quartile compared to our peer group. Customer satisfaction remains a key driver. In 2020/21 there were 30 complaints, down from 43 in the previous year, and a relatively small number (Housemark suggest a Housing Association can expect 33 complaints annually per 1000 properties). The reduction may have been related to the pandemic. Of the 30 complaints received, two thirds were upheld.
- **Planned Maintenance (major repairs):** The majority of the planned maintenance programme was completed in year. The programme was subject to delays associated with the pandemic, and consequently not all planned units were delivered in year; some works have been carried over into the programme for 2021/22.
- **Finance:** Financial performance outperformed the budget set for the year. Through the addition of 26 new homes, the net book value of the Group’s total housing property fixed assets increased by £679k from the previous year. Liquidity remained strong at the end of the year although Group liquidity ratio performance was lower than in the previous year due to a higher value of short-term creditors (impacted by S106 monies due to be paid by Anchorwood Limited in 2020/21). At the year end there was £5.5m of stock and work in progress, mainly attributable to the investment in the Taw Wharf development site. Whilst there was lower performance in respect of interest cover for the Group and Association than in the previous year, this outperformed the budget forecast for the year. Further detail on financial performance is provided in the Value for Money Statement 2021 on page 20 and the Operating and Financial Review on page 25.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report (continued)**
## **Risk Management**
The Group has a clear framework for managing risk and during the year an external review of Risk Management was carried out by Hargreaves Risk and Strategy, which concluded that the Risk Management remained ‘very good’.
The risks are recorded in the Risk Register and are assessed in terms of impact and probability, both in terms of inherent risk (i.e. if all controls failed / worst case scenario) and residual risk (i.e. controls in place and working as expected). Each risk has an underlying plan which includes details of controls in place, time-specific assurances against those controls, as well as actions planned to further improve controls. An Assurances report is being completed for each key risk, which sets out the critical assurances in place against the three lines of defence model. The full risk register is reviewed by the Group Audit and Risk Committee on a quarterly basis as well as every four to six weeks by the Strategic Performance Group.
The Board considers risk in all of its decision making and the Executive Team and the Board have an open dialogue regarding the key and emerging risks to the business. This ensures that the Board understands the risks and receives assurance regarding the systems of internal control. The Board has established a programme of internal audit work designed to provide additional assurance on the Group’s areas of greatest risk. The internal auditors provide an independent view on the design and operation of the Group’s controls, which informs the Board’s assessment.
Some of the key risks to successful achievement of the Group’s objectives are summarised below. These risks are actively monitored by the Board and the Executive Team.
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**North Devon Homes**
## **Strategic Report (continued)**
## **Risk Management (continued)**
|**Risk **|**Key controls**|
|---|---|
|**Failure to achieve**
**and deliver Value for**
**Money (VfM)**|Budgetary control policy and procedures in place.
Current and new Corporate Plan for 2021-2024 establish VfM priorities.
The VfM Strategy outlines how value will be delivered and includes key
metrics to track progress.
Procurement strategy embedded in VfM Strategy.
VfM link through strategy, departmental service excellence plans,
performance and Board decision making.
Use of benchmarking tools to monitor performance and inform a
programme of continuous improvement activity.|
|**Higher arrears than**
**anticipated as a**
**result of welfare**
**reform**|Significant work continues with customers who have moved to UC, to
support them to manage finances and keep their arrears down.
Close arrears monitoring.
Income management service tailored to support customers.
Close monitoring of changes to the welfare system and communication
with customers. Identification of customers most at risk of higher arrears in
order to target interventions towards them.
Promotion of direct debits and basic bank accounts. Recurring card
payments implemented via Allpay. Wide range of payment facilities
available.
Whilst overall performance continues to be very good, as UC continues
to be rolled out this still remains a key risk due to the result of the
significant impact that UC has on customers. This has been exacerbated
by the impact of the Covid-19 pandemic, which has continued to tip
many onto UC as circumstances change, or negatively impacted their
finances in other ways.|
|**Failure to effectively**
**monitor, anticipate**
**and respond to**
**changes in the**
**economic**
**environment**|Interest rate exposures carefully monitored and Treasury Strategy regularly
reviewed.
Prudent business plan assumptions made around inflation and interest
rates, and sensitivity analysis carried out.
Stress testing carried out based on externally developed scenarios e.g.
Bank of England stress tests, to ensure Business Plan capacity is
understood. The Board is prepared for changes in the environment, and
have identified triggers and recovery actions.
Regular review by senior management of external sources of information
and attendance at events.
Emerging risks discussed at Strategic Performance Group and Group
Audit & Risk Committee.
Risk is regularly reviewed and will continue to be, as there is likely to be
ongoing uncertainty affecting the economic environment due to Covid-
19, and the longer term outcomes of Brexit.|
|**Failure to effectively**
**monitor and respond**
**to changes in the**
**external political**
**environment**|Key information sources monitored.
Key emerging / potential issues and their implications are discussed at
Strategic Performance Group.
Senior staff engaged with local political networks.
Environmental scanning to be aware of potential emerging issues.
Risk is regularly reviewed and will continue to be, as there is likely to be
ongoing uncertainty affecting the economic environment due to Covid-
19, and the longer term outcomes of Brexit.|
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Strategic Report (continued)**
## **Risk Management (continued)**
|**Risk**|**Key controls**|
|---|---|
|**Non-Compliant with**
**General Data**
**Protection**
**Regulation**|Information Security Compliance Group (ISCG) in place to support
compliance and delivery of the action plan.
Finance Director appointed as Data Protection Officer (DPO) to ensure
compliance progress monitored at a senior level.
Group Governance Manager in place to provide high level support to
DPO.
Ongoing specialist contract to enable quick access to support and
advice.
Member of South West GDPR group, sharing resources and materials.
Programme of data protection e-learning and other awareness activities
in place for all staff.
GDPR compliance audit undertaken during 2018 by specialist advisors.
GDPR requirements included in specification for new
housing-management system.|
|**Failure of the Board**
**to exercise good**
**governance**|Skills-based Board in place.
Assurance Framework developed and implemented to ensure the Board
receives information needed to govern effectively.
Board attendance monitored through KPI’s.
Robust recruitment procedure for Board members.
Coaching, training and support available to Board members.
Skills mix of Board reviewed annually and / or when membership
changes.|
|**Failure of Taw Wharf**
**(Anchorwood Bank)**
**development**|Local estate agents and valuers engaged to inform the development of
homes for sale, sales strategy, and pricing. External advice sought for key
decisions about development to add to the local intelligence.
Mitigation in place to address potential failure of contractor /
joint-venture-agreement partner.
Exit stages mapped out to ensure the Board has choices throughout the
development prior to committing to each build phase.
Contracts in place to set out responsibilities of contractors / partners and
to mitigate against cost increases.
Controls in place to ensure VfM and delivery against anticipated profit.
Controls in place to ensure Health and Safety on site; reviewed and
amended in light of Covid-19 to continue works safely whilst social
distancing.
Scenario and stress testing of Anchorwood Limited business plan to
understand the impact of risks crystallising.
Assumptions are continually reviewed to ensure the plan is realistic in the
current environment with the ongoing impacts of Covid-19 and Brexit (i.e.
risk of falling house prices, sales delays, rising costs of borrowing and
materials, lack of availability of materials).|
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**North Devon Homes**
## **Strategic Report (continued)**
## **Risk Management (continued)**
|**Risk**|**Key controls**|
|---|---|
|**Failure to develop**
**and implement an**
**informed Asset**
**Management**
**Strategy**|Asset Management Strategy in place aligned to Corporate Plan 2021-24.
Direct Labour Organisation – Home 2 Home – in place for response repairs
and planned works with external contractors for specialist services (e.g.
gas, electrical).
Planned Maintenance programme in place based on regular stock
condition surveys.
Programme of improvement planned to improve energy efficiency of
homes.
Ongoing review of poorly performing properties (i.e. energy efficiency,
repair costs), with disposal of the worst-performing properties when they
become void.|
|**Failure to comply**
**with Health and**
**Safety obligations**|Permanent Health and Safety (H&S) Officer post in place with an
allocated H&S budget.
External expertise retained to provide support.
To mitigate the H&S risks as an employer: policy and procedures are in
place, reviewed regularly and communicated; monitoring of near misses,
incidents, and actions; training provided for all staff; regular briefings /
updates on H&S. Risk assessments and mitigations reviewed and updated
to take accounf of significant events (e.g. Covid-19).
To mitigate the H&S risks in our stock we have robust policies and
procedures, which are monitored and regularly audited in relation to gas,
fire safety, electrics, legionella, and asbestos; a cyclical maintenance
process / procedure is in place; and an overall compliance register is
maintained.
To mitigate risks as client and developer, there are procedures to ensure
Construction Design and Management regulations are followed. Our aim
is to specify works (i.e. design, materials) that anticipate emerging
building safety legislation to ensure developments are future-proofed and
meet customer and regulatory expectations.
We continue to prepare for legislative changes resulting from the Grenfell
Tower inquiry by investing in health and safety compliance and robust
monitoring arrangements.|
|**IT systems and cyber**
**security. Failure to**
**comply with data**
**protection legislation**|Firewall and anti-virus software are in place and penetration testing is
carried out. Monthly monitoring of system security by an external
specialist, who also carries out regular penetration and phishing tests.
Non-public areas of the building are protected by security systems, and
devices are protected by passwords.
Training is provided for staff, alongside regular cyber risk updates (e.g.
regarding ransomware threat).
An IT Strategy is in place, with appropriate budget in the business plan, to
ensure IT systems that meet business need are in place and maintained.
A programme is ongoing to upgrade end-of-life IT infrastructure including
a move to MS365.
Data protection policies and procedures are in place.
All mobile devices have robust security controls enabled.|
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## **Strategic Report (continued)**
## **Risk Management (continued)**
The key risks above were addressed throughout 2020/21; however, during the year the Covid-19 pandemic and associated restrictions impacted the operations of the company and its risk profile overall. There were a number of additional mitigations put in place throughout the year, principally around staff, contractor and customer health and safety, aimed at ensuring that none of our activities contributed to the spreading of Covid-19. In addition there was stopping of activities that could not be completed safely, more regular review of current and emerging risks with key operational Managers, and more regular risk-update meetings for the NDH and Anchorwood Ltd Boards. The majority of staff also worked from home during the year with office staffing dependent on restrictions, the service offer in place, and local case rates.
In an uncertain environment following the pandemic and Brexit, a number of risks are being considered particularly carefully to ensure the continued financial viability and effectiveness of the Group:
- **Covid Pandemic:** Although the vaccine programme has been successful, there is a need to continue to be ready for any disruption and to ensure there are mitigations in place to keep customers and staff safe. Any business-continuity measures will also provide mitigation against associated risks such as a more difficult winter for general respiratory illnesses, as lockdowns over the past year are likely to have reduced immunity in the population.
- **Asset Management:** the Group is planning for additional and significant costs associated with fire safety compliance and decarbonisation over the coming years. The fire safety legislation is emerging, and the relevant authorities such as the Fire Service are changing how they operate. Work is being undertaken to understand the full impacts of the zero carbon agenda, the full details of which are still awaited.
- **Regulatory expectations:** The Social Housing White Paper published in 2020 set out a number of expectations around customer service, and signalled a raft of strengthened consumer regulation. The Association has a good starting position from which to meet these expectations. The risks from any non-compliance will increase as the expectations are firmed up in legislation and through the introduction of a consumer regulator.
- **Taw Wharf:** Although the housing market is currently strong, the uncertain economic conditions increase the risk of a housing market decline, which would impact market sales and cashflow in Anchorwood. There are mitigations in place, which would allow an exit from the scheme or to amend the scheme at key decision points; and buyer interest has remained strong throughout despite the volatile external environment.
- **Staff culture / ways of working:** With offices closed to most people, staff had to adapt to working remotely. As we aim to build back better, there will be new ways of working supported by a new IT infrastructure and new Integrated Housing Management system. Change such as this brings significant opportunities, but also risk, which will be addressed by taking on board the lessons from the Pandemic where change was implemented swiftly and successfully.
A key mitigation for all these risks is the new Corporate Plan 2021-24, which has refocused our objectives and ambition, in light of the challenges faced by the Group and our Customers over the next few years, in order to ensure they are achievable.
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## **Strategic Report (continued)**
## **Value for Money Statement 2021**
As a community landlord, Value for Money (VfM) is a key driver of our culture and is integral in everything that we do, from setting strategies at Board level through to delivering good value services to our customers. Delivering VfM is one of the four main strategic objectives in our 20182021 Corporate Plan. We aim to deliver a high quality service as efficiently and effectively as we can, maximising the value of the services we provide within available resources. VfM also continues as a key objective in our 2021-2024 Corporate Plan.
This VfM statement outlines our key areas of achievement during the year as well as highlighting those areas where we could have performed better.
Benchmarked data is contained in the report to show how well we are performing compared to our peers and the sector as a whole. In line with the Regulator’s VfM Standard, our statement is focused on the seven key metrics that the Regulator of Social Housing (RSH) uses to compare providers. Wider benchmarked data for operational areas is used in addition to demonstrate the VfM we achieve.
## **Value for Money performance**
The latest benchmarked data for the seven metrics, as published in the Regulator’s Global Accounts data for 2019/20, is set out below. This shows the Association’s performance compared to the sector median.
The following table sets out the Association’s performance against the seven VfM metrics for 2020/21, comparing it to the target set out in the current VfM Strategy. The table also sets out the VfM targets for the next three years, which are included in the VfM Strategy 2021-24.
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## **Strategic Report (continued)**
## **Value for Money Statement 2021**
A summary commentary on performance over the last two years is provided below:
- **Reinvestment** was below the sector median in 2019/20 – with a relatively small major repairs programme and a smaller development programme in the year with 59 new units being delivered. 2020/21 performance of 2.4% was above the target of 2.1% due to the value of new housing property investment in the year exceeding the original forecast.
- **New supply** of both social and non-social units was above the sector median in 2019/20. In 2020/21 social housing delivery at 0.8% was above the target of 0.6%; delivery of non-social housing (market sale) units was well below the target of 1.4% due to delays in phases of Taw Wharf against the original 2018 plan. The 2021-24 targets for delivery take into account the updated Group development programme.
- **Gearing** was above the sector average for 2019/20 because, as a Large Scale Voluntary Transfer Association, we carry more debt arising from the stock transfer in February 2000, than traditional providers. In 2020/21, gearing fell and was within target, as loans for the development at Taw Wharf were repaid ahead of plan, following strong sales performance in the year.
- **EBITDA MRI** was below the median in 2019/20 due to the loss on the affordable units at Taw Wharf reducing the operating surplus in the Group accounts. The position improved in 2020/21 to 154.4%, only falling slightly below the target of 155%.
- **Headline Social Housing Cost per unit** remained significantly lower than the sector median in 2019/20, demonstrating that NDH costs are well controlled. The 2020/21 performance shows a small increase of £70 per unit mainly as a result of increased maintenance costs, but remained £100 below our target.
- **Operating margin** on social housing lettings was above target in 2019/20, but overall margin dropped just below the sector median due to the Anchorwood Limited small profit margin for the year affecting the Group operating surplus. In 2020/21 due to good financial performance across the Group, the margin on social housing lettings at 28.6% and the overall margin at 26.4% were better than the previous year and both were above target.
- **Return on Capital Employed (ROCE)** was just below the median in 2019/20 and improved in 2020/21 to 3.5% - better than our target of 3.2%. Performance in both years reflects the relatively low level of operating surplus against net assets.
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## **Strategic Report (continued)**
## **Value for Money Statement 2021 (continued)**
In addition to the metrics used by the RSH, the table below shows VfM performance for 2019/20 compared to 2018/19 for different operational areas of NDH. This table utilises Housemark data. Where an area is flagged red, performance is below the median, or costs are higher; where an area is flagged green, the opposite is true.
This data (the latest comparative data available) takes into account the cost of the service and the performance of the service – giving a good indicator of VfM. The data has been benchmarked against our Housemark peer group of Southern Traditional Housing Associations, rather than the whole sector.
The data above suggests that for most areas where data is available, performance is unchanged, and remained good in 2019/20. The only change from 2018/19 related to void rent loss. In 2018/19, it was 0.83%, and just above the Peer Group median of 0.79%. In 2019/20, void rent loss fell to 0.41% as a result of restructuring our void works management and other efficiency improvements. This was well below the Peer Group median, which changed only marginally to 0.8%.
Areas where cost per property has remained above the peer group median are:
- Community Investment: Our CPP has fallen from £105 to £79, whilst others in the Peer Group have seen costs rise (median rose from £30 to £52). The greater costs we have compared to the Peer Group median reflect the investment we continue to make in our youth service.
- Resident Involvement: Costs have fallen slightly from £99 to £91, and remain just above the median of £88. Both pay and overhead costs are only marginally above the median – with the relative gap greater for non-pay costs (£12 per property against a Peer Group median of £4). However, these represent only a small element of the total cost.
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## **Strategic Report (continued)**
## **Value for Money Targets**
As noted above, the key VfM targets are against the seven VfM metrics set by the RSH. However, the Board has also outlined three other targets in its 2018-21 VfM strategy. These are set out in the table below:
|**Measure**|**2018/19 Target**|**2019/20 Target**|**2020/21 target**|
|---|---|---|---|
|No. of changes as a result of customer
consultation / feedback|12|12|12|
|Financial welfare referrals having a positive
impact for customers|50%+ referrals
receiving
positive
financial
outcome|50%+ referrals
receiving
positive
financial
outcome|50%+ referrals
receiving
positive
financial
outcome|
|Staff volunteer days linked to customers and
community|-|50|50|
In terms of performance against these targets for 2020/21:
- **No. of changes as a result of customer consultation / feedback:** Customers are consulted and can feed back through our customer involvement processes, led by the Customer Board Partnership. In 2020/21, 509 changes were made as a result of customer input, far outperforming the target. Examples included changes to the information provided to customers about our services in leaflets and online, changes to our customer communications, and changes to key policies impacting customers. Customers were involved throughout the pandemic reviewing and amending communications as services were altered in line with restrictions – ensuring that communications were clear and effective for all customers.
- **Financial welfare referrals having a positive impact for customers:** In 2020/21, there were 484 referrals compared to 442 in the previous year. Customers who engaged with the team were supported to get the benefits they were entitled to, were given advice about how best to prioritise their repayments with limited funds, and / or were referred to other specialist organisations that could assist them (e.g. LEAP regarding reducing energy bills). During the year £140k of additional income was received by customers where staff helped identify additional benefits / assistance that they were entitled to (compared to £141k in the previous year).
- **Staff volunteer days linked to customers and community:** The scheme was set up and launched in 2018/19, and got off to a successful start with 88 days of staff time volunteered to support community projects and activities in 2019/20. However, no activities have taken place in 2020/21 due to the pandemic and associated risks and restrictions.
## **Social value**
The social value that NDH provides to its customers includes a social return for the benefit of communities. We have continued to invest in our Independent Living Service to support older customers in their homes and additionally we are using staff from the Service in the community to identify and resolve wider issues that vulnerable customers may have. Our youth project continues to deliver significant value for young people and has been especially valuable this year throughout the pandemic. The team has carried out family intervention and support, supported young people of school leaving age into college or paid employment, and is continuing to evaluate outcomes to demonstrate the benefits and VfM offered by the programme.
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## **Strategic Report (continued)**
## **Customer Board Partnership (C90), Customer Health and Safety Partnership, and Scrutiny Panel**
As a community landlord, engaging with our customers is a core part of delivering VfM. As a result of customers volunteering their time through our customer groups such as our Customer Board Partnership (previously C90), Customer Health and Safety Partnership and our Scrutiny Panel capacity has been further developed this year to support meaningful and effective customer involvement. Of particular note is the development of the Customer Health and Safety Partnership the members of which have received a structured programme of training supported with further awareness sessions to support meaningful engagement and contributions to our landlord compliance and customer safety agendas. Throughout the year customers were consulted on a number of initiatives including:
- The development of the 2021-24 Corporate Plan
- The approach to rent setting
- The asset management strategy
- The environmental strategy
- How performance information is presented to customers
A number of policies and procedures have also been reviewed in the year leading to process efficiencies and better outcomes for both customers and the Association.
Our customers were also engaged in our digital transformation project to inform the value that proposed changes would make to the customer service provided by NDH.
## **Plans for the year ahead**
In addition to focussing on the VfM targets outlined above, other key priorities for the year 2021/22 are:
- Continue to progress with our Digital Transformation project, replacing old IT software with new systems that will allow us to be more efficient and provide a better experience for our customers. The new customer portal is planned to go live in 2021/22.
- Work with our partners in Advantage South West (in which NDH has a 25% shareholding) to develop the modern methods of construction initiative, enabling quicker and cost efficient delivery of new homes in our communities. ASW is also working on an apprenticeship and training initiative to encourage new opportunities for developing careers in social housing.
- Work with the local authority and other key partners such as One North Devon to develop a strategic approach to alleviating poverty and providing new affordable homes in North Devon.
- Engage effectively with our customers to challenge and refine service delivery. Continue to utilise feedback from complaints to make service improvements.
- Through Anchorwood Limited, ensure that profitability levels are maintained to enable gift aid receipts from profits to be passed back to NDH to allow it to invest in more affordable homes in the wider area as well as delivering the remainder of the 37 affordable homes at the Taw Wharf scheme.
- Through our strong Team NDH culture, continue to invest and develop our staff through our organisational development strategy (Team NDH plan) and, as a result of the Covid-19 pandemic, review our ways of working to build back better.
- Continue to invest in our robust health and safety compliance arrangements and be prepared for any future legislative changes.
Delivery of the VfM strategy will be a continued focus during the coming year for our Board through its decision making; for customers including our Customer Board Partnership, Customer Safety Partnership and Scrutiny Group; and for staff through our VfM culture and delivery of key projects delivering our corporate plan objectives. We continue to monitor and report performance against all of our targets and in our communications with customers and staff.
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## **Strategic Report (continued)**
## **Operating and Financial Review**
## **Financial Review**
2020/21 was the first year for rents to be increased following the previous four years of the -1% government policy rent reduction. Increases of 2.7% were applied to the majority of properties (based on the CPI +1% formula). As a result, income from social housing lettings increased in the year to 31 March 2021 by 3.9% (2020: 1% increase) from £14,960k in 2020 to £15,540k in 2020/21. 6 general needs properties were lost through Right to Buy/Acquire and strategic disposals in the year. 26 new social housing properties were added, resulting in an overall increase in social housing lettings income.
There was a decrease in turnover within other social housing activities of £242k to £1,072k in 2020/21 (2020: £1,314k) as there were two less shared ownership property sales in the year, with nine sales (2020: eleven). Within non-social housing activity, turnover from open market sale activity was £4,614k, a similar level to the previous year (2020: £4,628k) as a result of the 23 sales at Taw Wharf through Anchorwood Limited (26 properties were sold in the previous year).
The Group operating surplus for the year was £6,335k(2020: £5,529k), an increase of £806k from the previous year. This includes gains from disposals of property, plant and equipment of £741k (2020: £1,093k) as we continued to disinvest in our poorest performing assets and reinvest in new affordable homes. There was an increase in Group turnover of £324k mainly arising from the increase in rental income, which was offset by lower gains on property disposals. Operating costs decreased by £834k from the previous year, which was largely as a result of the exceptional item in relation to Anchorwood Limited in 2020 (see Note 2a); operating costs for social housing lettings increased by £139k mainly as a result of increased routine maintenance costs. Cost increases that were forecast to arise as a result of the pandemic largely did not materialise. During the year £1,316k (2020: £1,424k) of major repairs expenditure was written off to the income and expenditure account and in addition £1,093k of works were capitalised (2020: £1,101k).
Surplus on property disposals was £741k, a decrease of £352k from 2019/20 as a result of fewer strategic disposals; there were three in the year compared to thirteen the previous year. Receipts from these disposals have been reinvested in the development programme for the provision of new social housing in the area.
The Group’s surplus before tax was £1,952k (2020: £1,287k). There was an actuarial loss in the year of £1,912k (2020: £1,321k gain) in relation to the Devon County Council Pension Fund and SHPS pension scheme, these schemes being impacted as a result of the economic uncertainty arising from the Covid pandemic.
The Group’s surplus after tax and pension losses for the year was £40k (2020: £2,608k). The surplus was credited to revenue reserves.
## **Debt Profile**
During the year, in order to secure the funding for phase 3 of the Taw Wharf development, Anchorwood Limited secured a new facility with NatWest for £4.731m (in addition to the existing phase 2b facility of £1.530m); none of this phase 3 facility had been drawn as at the year end. The phase 2a facility of £2.030m was fully repaid in the year. There was no change to the other facilities.
A summary of loan facilities as at the year end is below:
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## **Strategic Report (continued)**
## **Operating and Financial Review**
## **Financial Review (continued)**
|**Lender**|**2021**|2020|Description|
|---|---|---|---|
||**£’000**|£’000||
|Lloyds|**51,300**|51,300|Fixed|
|Lloyds revolving credit facility|**5,000**|5,000|Variable|
|Affordable Housing Finance|**8,000**|8,000|Fixed|
|GB Social Housing|**27,638**|27,638|Fixed|
|MORhomes|**12,500**|12,500|Fixed|
|NatWest|**6,261**|8,733|Variable|
|**TOTAL**|**110,699**|113,171||
Individual lenders specify their own covenant requirements. For Lloyds and GB Social Housing these are interest cover, asset cover and debt per unit. The two Affordable Housing Finance covenants are net annual income and asset cover. The MORhomes bond that was drawn in November 2019, requires asset cover only. Natwest covenants are based on loan to gross development value and loan to development costs. There were no covenant breaches during the year.
At 31 March the debt profile (excluding any interest applied) was as follows:
|**Loan Facility**|**2021**|**2020**|
|---|---|---|
|Fixed Rate Loans £’000|£99,438k|£99,438k|
|Variable Rate Loans £’000|£593k|£47k|
|**Total Loans Drawn £’000**|**£100,031**|**£99,485**|
|% unhedged|0.60%|0.05%|
|Average cost of funds|4.79%|4.86%|
|Undrawn facility £’000|£10,668k|£13,686k|
|**Total Facility £’000**|**£110,699k**|**£113,171**|
The average maturity of net debt was over five years (see note 15).
Treasury operations are managed by the Finance Director within parameters set down by the Board of Management through its Treasury Management Strategy and Policy. This activity is regularly reported to and monitored by the Board. External advice is sought in relation to policy, strategy and training in this area.
## **Cash Flows**
Cash inflows and outflows for the year under review are contained in the Consolidated Statement of Cash Flows on page 38. The main net cash inflows from operating activities are from housing management activities. The net cash outflow from investing activities is the net expenditure (after grant) on regeneration projects, development properties and planned maintenance improvements, including the replacement of components of housing properties.
## **Market value of land and buildings**
The most recent valuation in respect of property charged to Lloyds was completed in June 2020 and the value of the charged stock at 31 March 2021 was £75.05m, valued at Existing Use Value – Social Housing (EUV-SH). The next valuation is due in 2023.
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## **Strategic Report (continued)**
## **Operating and Financial Review (continued)**
The value of stock charged to Affordable Housing Finance at 31 March 2021 was £10.110m at EUVSH, based on the valuation that was concluded in March 2020. The value of the stock charged to GB Social Housing was £36.32m valued at Market Value - Subject to Tenancies (MV-ST) at the year end.
During the year the securitisation of the MORhomes loan completed and based on the updated desktop valuation as at March 2021, the MV-ST value of the charged stock was £16.75m.
## **Devon County Council Pension Scheme**
The Association has a potential unprovided liability for additional pension costs for the Devon County Council Pension Scheme of £1.521m. During 2017/18 a jointly controlled bank account was set up with Devon County Council as the administering authority, to provide an indemnity by way of a cash deposit. As at the year end the balance in this account was £1.521m.
## **Statement of compliance**
The Board of Management confirms that the Strategic Report has been prepared in accordance with the principles set out in the SORP 2018.
## **By order of the Board**
**Robert Stronge Chair of the Board 13 September 2021**
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## **Statement of the Board of Management’s Responsibilities**
The Board is responsible for preparing the Board’s Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Board to prepare financial statements for each financial year. Under those regulations the Board have elected to prepare the Financial Statements in accordance with UK Accounting Standards, including FRS 102 _The Financial Reporting Standard applicable in the UK and Republic of Ireland_ .
The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Association and of the income and expenditure of the Group and the association for that period.
In preparing these Financial Statements, the Board is required to:
- select suitable accounting policies and then apply them consistently,
- make judgements and estimates that are reasonable and prudent,
- state whether applicable UK Accounting Standards and the Statement of Recommended Practice have been followed, subject to any material departures disclosed and explained in the Financial Statements,
- assess the Group’s and the Association’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and,
- use the going concern basis of accounting unless it either intends to liquidate the Group, to cease operations or has no realistic alternative but to do so.
The Board is responsible for keeping proper books of accounts that disclose, with reasonable accuracy at any time, the financial position of the Association and enable them to ensure that its Financial Statements comply with the Companies Act 2006, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2020. It is responsible for such internal control as it determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the Association and to prevent and detect fraud and other irregularities.
The Board is responsible for the maintenance and integrity of the corporate and financial information included on the Association’s website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
The Report of the Board, the Strategic Report and the Financial Statements were approved by the Board on 13 September 2021 and signed on its behalf by:
## **By order of the Board**
**Robert Stronge Chair of the Board**
## **13 September 2021**
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## **Report of the Board on Internal Control**
The Board acknowledges that it has overall responsibility for establishing and maintaining the internal control systems and for reviewing their effectiveness. This responsibility applies to all organisations within the Group and to ensure that this has operated effectively during the Coronavirus pandemic the Board formed a Covid-19 group which met fortnightly (initially weekly) during the year.
The internal control systems in place focus on:
- the significant risks that threaten the Group’s ability to meet its objectives as described in its Corporate Plan;
- the prevention of fraud and the safeguarding of assets against unauthorised use or disposition.
The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against material misstatement or loss. The global Coronavirus pandemic has meant a change in working arrangements during the year with most office-based staff working remotely; whilst some controls have been updated and strengthened to reflect the new arrangements the overall internal controls system has remained largely unchanged.
The Group’s assurance framework aligns the assurance monitoring process from Board and Customer Board Partnership, through to operational level and clearly sets out the reporting framework. This framework supports the robust culture of internal controls within the Group.
The process for identifying, evaluating and managing the risks faced by the Group is ongoing and part of its Risk Management Framework that has been in place throughout the year, up to the date of approval of the annual report and Financial Statements. The framework is externally reviewed at least annually. The Board receives an update on key risks facing the Group at each meeting and the Group Audit and Risk Committee receives a detailed report on risk at each quarterly meeting focussing not only on reviewing current risks but also emerging risks. Board agendas are structured so that key risk issues are discussed as early agenda items and are clearly identified at the start of reports. The Board had a dedicated virtual risk workshop in the year to review risk, the risk management framework and risk appetite.
As a result of the pandemic the Incident Management Team consisting of the Executive Team and senior managers across the business has met twice a week (three times during the initial months of the pandemic) to raise and address any current or emerging risks in relation to customers and staff and to ensure that day-to-day operations were effectively managed and appropriate health and safety arrangements were put in place.
Specific risks resulting from the pandemic were added to the risk register in the year. The Strategic Performance Group comprising senior members of management across all areas of the business, met regularly in the year to review the Group’s risk register, ensure that risk management continued to be embedded and operate effectively within the business, and to identify emerging risks and review risk triggers. As a result of these controls and reviews of when controls have been effective, for example in the prevention of fraud, the risk register has been updated regularly throughout the year and risks realigned or developed in response to the many changes that the sector and indeed the world has faced.
As part of the risk management of the Taw Wharf scheme (which is the main Anchorwood Limited development), during the pandemic the Anchorwood Board has met fortnightly (initially weekly) during the year to review and manage the specific development risks resulting from the pandemic. The Taw Wharf development project group has also continued to meet weekly to review the project risk register as well as any new or emerging risks, and the project risk register is reviewed by the Anchorwood Board at each meeting. The highest residual score on the project risk register forms the score for Corporate Risk number 67 ‘Failure of Anchorwood Bank Project’.
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## **Report of the Board on Internal Control (continued)**
Our customer involvement framework is now well embedded and, as part of this, the customer Scrutiny Panel undertakes a programme of regular reviews into a broad range of service areas. The outcomes are reported to the Customer Board Partnership and ultimately the Board. This approach provides further assurance over performance and key policies, which form a key part of the internal control environment.
The Group produces a three year Corporate Plan and a 30 year financial business plan, which are updated on at least an annual basis and which are supported by detailed financial budgets and forecasts. The Plan identifies the threats and opportunities in the environment which may prevent the achievement of objectives; and sensitivity and scenario modelling is carried out to model different events and develop contingency plans. A key area of focus during the year has been scenario testing and the preparation and review of contingency plans in respect of the Taw Wharf scheme and the potential pandemic and Brexit impacts on this scheme and the wider Group activities.
The day-to-day operation of internal control is delegated to the Executive Officers. The Group has a clearly defined organisational structure based upon an approved system of delegation and authorisation that includes members of the Board of Management and the Officers. The levels of authority are set out in the Group Standing Orders and Financial Regulations and are subject to periodic review.
Some of the key policies that are established to ensure effective internal control are shown below.
- Anti-Fraud, Bribery and Corruption
- Group Code of Conduct
- Group Probity, Hospitality, Gifts and Interests
- Integrity at Work
- Information Security
- Data Protection
- Disciplinary
- Anti Money Laundering
- Investment
- Income Collection and Debt Recovery
- Treasury Management Policy (subject to external review annually)
- • Whistleblowing
- Health and Safety Policy statement and associated policies
North Devon Homes has suitably qualified and experienced staff who are responsible for its business functions. Recruitment, induction and training processes are comprehensive and are designed to ensure that staff entering the organisation are both qualified and committed to working with the Group and the achievement of its objectives.
The Group has an ongoing internal audit plan and RSM were employed as internal auditors during the year. The Group also employs consultants, where necessary, who provide specialist support, advice and training where appropriate. Hargreaves Risk and Strategy consultants are also engaged to provide specialist advice on risk and Altair and Aquila Treasury and Finance Solutions are engaged to provide governance, funding and treasury advice.
The Group has an anti-fraud, bribery and corruption policy in place covering prevention, detection and reporting of fraud. The Board reviews the fraud register at each Board meeting and can confirm that there have been no frauds against the Group during the year that have resulted in any losses. Three attempted cheque frauds were identified during the year but no loss was incurred due to their early detection.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Report of the Board on Internal Control (continued)**
The Board cannot delegate ultimate responsibility for the system of internal control, but it can and has appointed a Group Audit and Risk Committee to oversee risk and internal control. A full report on Internal Controls Assurance was provided to the Group Audit and Risk Committee on 1 March 2021 and the results of the Board’s subsequent review of that report are the basis of this statement.
The Group Audit and Risk Committee approves an annual internal audit plan, reviews the effectiveness of internal control systems and has an active role in the promotion and monitoring of standards. The Group Audit and Risk Committee achieves this by considering risk reports, recommendations on internal audit reports and agreeing appropriate responses and actions with the Executive Officers; reviewing the external auditors’ management letter; and can undertake specialist reviews on areas such as health and safety. The internal and external auditors are guaranteed a right of direct access to the Board of Management and the Group Audit and Risk Committee should they identify any material internal control concerns.
By order of the Board
**Robert Stronge Chair of the Board**
## **13 September 2021**
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Independent Auditors’ report to the members of North Devon Homes**
## **Report on the Audit of the Financial Statements**
## **Opinion**
We have audited the Financial Statements of North Devon Homes (the ‘parent association’) and its subsidiary (‘the group’) for the year ended 31[st] March 2021 which comprise the Consolidated and Association’s Statements of Comprehensive Income, the Consolidated and Association’s Statements of Financial Position, the Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Reserves, Association Statement of Changes in Reserves and notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the Financial Statements:
- give a true and fair view of the state of the Group’s and of the Parent Association’s affairs as at 31 March 2021 and of the Group’s and the Parent Association’s surplus for the year then ended;
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
- have been prepared in accordance with the requirements of the Companies Act 2006, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2019.
## **Basis for opinion**
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
## **Conclusions relating to going concern**
In auditing the Financial Statements, we have concluded that the Board’s use of the going concern basis of accounting in the preparation of the Financial Statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the Financial Statements are authorised for issue.
Our responsibilities and the responsibilities of the Board with respect to going concern are described in the relevant sections of this report.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Independent Auditors’ report to the members of North Devon Homes (continued)**
## **Other information**
The other information comprises the information included in the annual report, other than the Financial Statements and our auditor’s report thereon. The Board is responsible for the other information contained within the annual report. Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the Financial Statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
## **Opinions on other matters prescribed by the Companies Act 2006**
In our opinion, based on the work undertaken in the course of the audit:
- the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements; and
- the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
## **Matters on which we are required to report by exception**
In light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
- adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
- the Financial Statements are not in agreement with the accounting records and returns; or
- certain disclosures of directors’ remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.
- the directors were not entitled to prepare the Financial Statements in accordance with the small companies regime take advantage of the small companies’ exemption in preparing the Directors’ Report and from the requirement to prepare a Strategic Report.
## **Responsibilities of the Board**
As explained more fully in the Statement of the Board’s responsibilities set out on page 28, the Board is responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Independent Auditors’ report to the members of North Devon Homes (continued)**
In preparing the Financial Statements, the Board is responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
## **Auditor’s responsibilities for the audit of the Financial Statements**
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Based on our understanding of the Group and the Parent Association and its industry, we identified that the principal risks of non-compliance with laws and regulations related to pensions legislation, employment regulation and health and safety regulation, and we considered the extent to which non-compliance might have a material effect on the Financial Statements. We also considered those laws and regulations that have a direct impact on the preparation of the Financial Statements, such as the Companies Act 2006.
We evaluated the Board and management’s incentives and opportunities for fraudulent manipulation of the Financial Statements (including the risk of override of controls) and determined that the principal risks were related to posting manual journal entries to manipulate financial performance, management bias through judgments and assumptions in significant accounting estimates, in particular in relation to loss reserves and significant one-off or unusual transactions.
Our audit procedures were designed to respond to those identified risks, including non-compliance with laws and regulations (irregularities) and fraud that are material to the Financial Statements. Our audit procedures included but were not limited to:
- Discussing with the Board and management their policies and procedures regarding compliance with laws and regulations;
- Communicating identified laws and regulations throughout our engagement team and remaining alert to any indications of non-compliance throughout our audit; and
- Considering the risk of acts by the company which were contrary to applicable laws and regulations, including fraud.
Our audit procedures in relation to fraud included but were not limited to:
- Making enquiries of the Board and management on whether they had knowledge of any actual, suspected or alleged fraud;
- Gaining an understanding of the internal controls established to mitigate risks related to fraud;
- Discussing amongst the engagement team the risks of fraud; and
- Addressing the risks of fraud through management override of controls by performing journal entry testing.
_“... working together to create communities where people want to live”_
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**North Devon Homes**
## **Independent Auditors’ report to the members of North Devon Homes (continued)**
There are inherent limitations in the audit procedures described above and the primary responsibility for the prevention and detection of irregularities including fraud rests with management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
## **Use of the audit report**
This report is made solely to the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body for our audit work, for this report, or for the opinions we have formed.
DRA Bott (Senior Statutory Auditor) for and on behalf of Mazars LLP Chartered Accountants and Statutory Auditor 90 Victoria Street Redcliffe Bristol BS1 6DP
27 September 2021
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Consolidated and Association Statements of Comprehensive Income for the year ended 31 March 2021**
|||**Group**|**Association**|**Group**|**Association**|
|---|---|---|---|---|---|
||**Note**|**2021**|**2021**|**2020**|**2020**|
|||**£’000**|**£’000**|**£’000**|**£’000**|
|**Turnover**|2|21,226|17,436|20,902|16,998|
|Operating Expenditure|2|(15,632)|(12,235)|(16,466)|(11,915)|
|Gain on disposal of property,|3|741|741|1,093|1,093|
|plant and equipment||||||
|**Operating Surplus**|**2**|**6,335**|**5,942**|**5,529**|**6,176**|
|Share of operating loss in|11|(2)|-|(9)|-|
|associate||||||
|Interest receivable|4|25|117|31|135|
|Interest and Financing Costs|5|(4,691)|(4,691)|(4,519)|(4,519)|
|Surplus on revaluation of|10c|285|285|255|255|
|investment properties||||||
|**Surplus before taxation**||**1,952**|**1,653**|**1,287**|**2,047**|
|Taxation|9|-|-|-|-|
|**Surplus for the year**||**1,952**|**1,653**|**1,287**|**2,047**|
|Actuarial gain/(loss) in respect of|21|(1,912)|(1,912)|1,321|1,321|
|pension schemes||||||
|**Total Comprehensive**||**40**|**(259)**|**2,608**|**3,368**|
|**Income/(expense) for the year**||||||
_“... working together to create communities where people want to live”_
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**North Devon Homes**
**Consolidated and Association Statements of Financial Position as at 31 March 2021** Registered number 03674687
||**Note**|**Group**|**Association**|**Group**|**Association**|
|---|---|---|---|---|---|
|||**2021**|**2021**|**2020**|**2020**|
|||**£’000**|**£’000**|**£’000**|**£’000**|
|**Fixed assets**||||||
|Intangible Assets|10a|949|949|640|640|
|Tangible fixed assets – Housing Properties|10b|158,855|159,631|158,177|158,953|
|Otherproperty,plant & equipment|10c|3,248|3,148|2,937|2,832|
|**Total fixed assets**||**163,052052**|**163,728**|**161,754**|**162,425**|
|**Investments**||||||
|Investment Properties|10c|2,252|2,252|1,967|1,967|
|Investment in Subsidiary|11|-|2,300|-|2,300|
|Investment in Associates|11|100|5|102|5|
|Other investments|11|399|399|399|399|
|||**2,751**|**4,956**|**2,468**|**4,671**|
|**Debtors due after more than oneyear**|12b|**54**|**1,605**|**-**|**3,751**|
|**Total investments and debtors due after**||**2,805**|**6,561**|**2,468**|**8,422**|
|**more than one year**||||||
|**Current assets**||||||
|Debtors|12a|2,595|2,309|2,041|1,790|
|Stock|13|5,518|257|7,275|877|
|Cash and cash equivalents||14,656|13,918|12,423|11,713|
|**Total current assets**||**22,769**|**16,484**|**21,739**|**14,380**|
|**Creditors: amounts falling due within one**|14|(5,313)|(3,344)|(3,617)|(3,071)|
|**year**||||||
|**Net current assets**||**17,456**|**13,140**|**18,122**|**11,309**|
|**Total assets less current liabilities**||**183,313**|**183,429**|**182,344**|**182,156**|
|Creditors: amounts falling due after more||||||
|than one year|15|(118,933)|(118,248)|(119,886)|(118,598)|
|Defined Benefitpension liability|21|(5,953)|(5,953)|(4,186)|(4,186)|
|**Net assets**||**58,427**|**59,228**|**58,272**|**59,372**|
|**Capital and Reserves**||||||
|Income & Expenditure reserve||13,969|14,770|13,929|15,029|
|Revaluation reserve||44,458|44,458|44,343|44,343|
|||**58,427**|**59,228**|**58,272**|**59,372**|
These Financial Statements together with the associated notes on pages 41 to 77 were approved and authorised for issue by the Board on 13 September 2021 and were signed on its behalf by:
Robert Stronge **Chair**
Diane Dimond
**Company Secretary**
_“... working together to create communities where people want to live”_
_37_
**North Devon Homes**
## **Consolidated Statement of Cash Flows for the year ended 31 March 2021**
||**Note**|**Group**|**Group**|
|---|---|---|---|
|||**2021**|**2020**|
|||**£’000**|**£’000**|
|**Net cash generated from operating**|16|**12,160**|**9,971**|
|**activities**||||
|**Cash flows from Investing Activities:**||||
|Purchase of tangible fixed assets||(6,443)|(6,270)|
|Proceeds from sale of tangible fixed assets||1,031|2,411|
|RTB Sharing Agreement||(310)|(317)|
|Grant received||81|303|
|Interest received||25|31|
|**Net cash used in investing activities**||**(5,616)**|**(3,842)**|
|**Cash flows from Financing Activities:**||||
|Interest paid||(4,826)|(5,021)|
|New secured loans||1,986|18,228|
|Repayment of Borrowings||(1,464)|(9,388)|
|Capital element of and finance lease||(7)|(6)|
|rental payments||||
|Investments||-|(63)|
|**Net cash generated (used in)/from**||**(4,311)**|**3,750**|
|**financing activities**||||
|Net increase in cash and cash equivalents|16|2,233|9,879|
|Cash and cash equivalents at beginning|16|12,423|2,544|
|of year||||
|**Cash and cash equivalents at end of year**|**16**|**14,656**|**12,423**|
_“... working together to create communities where people want to live”_
_38_
**North Devon Homes**
**Consolidated Statement of Changes in Reserves for the year ended 31 March 2021**
|**Group**|**Income**|||
|---|---|---|---|
||**and**|**Revaluation**||
||**Expenditur**|**Reserve**|**Total**|
||**e Reserve**|**£’000**|**£’000**|
||**£’000**|||
|Balance as at 1 April 2019|11,321|44,323|55,644|
|Surplus from Statement of Comprehensive|1,287|-|1,287|
|Income for the year||||
|Unrealised surplus on revaluation of Fixed Assets|-|20|20|
|Actuarial gain in respect of pension schemes|1,321|-|1,321|
|**Balance as at 31 March 2020**|**13,929**|**44,343**|**58,272**|
|Surplus from Statement of Comprehensive|1,952|-|1,952|
|Income for the year||||
|Unrealised surplus on revaluation of Fixed Assets|-|115|115|
|Actuarial loss in respect of pension schemes|(1,912)|-|(1,912)|
|**Balance as at 31 March 2021**|**13,969**|**44,458**|**58,427**|
_“... working together to create communities where people want to live”_
_39_
**North Devon Homes**
## **Association Statement of Changes in Reserves for the year ended 31 March 2021**
|**Association**|**Income and**|||
|---|---|---|---|
||**Expenditure**|**Revaluation**||
||**Reserve**|**Reserve**|**Total**|
||**£’000**|**£’000**|**£’000**|
|Balance as at 1 April 2019|11,661|44,323|55,984|
|Surplus from Statement of Comprehensive|2,047|-|2,047|
|Income for the year||||
|Unrealised surplus on revaluation of Fixed Assets|-|20|20|
|Actuarial gain in respect of pension schemes|1,321|-|1,321|
|**Balance as at 31 March 2020**|**15,029**|**44,343**|**59,372**|
|Surplus from Statement of Comprehensive|1,653|-|1,653|
|Income for the year||||
|Unrealised surplus on revaluation of Fixed Assets|-|115|115|
|Actuarial loss in respect of pension schemes|(1,912)|-|(1,912)|
|**Balance as at 31 March 2021**|**14,770**|**44,458**|**59,228**|
_“... working together to create communities where people want to live”_
_40_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021**
## **1 Accounting Policies**
## **General Information**
North Devon Homes is a registered charity and is a registered provider of social housing. It is a public benefit entity.
## **Significant accounting policies**
The principal accounting policies applied in the preparation of these consolidated statements as required by statute, and separate Financial Statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
## **Basis of preparation**
The Group’s Financial Statements have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) including Financial Reporting Standard 102 (FRS102), the Housing and Regeneration Act 2008, the Statement of Recommended Practice for Registered Social Housing Providers 2018 (‘SORP 2018’) and comply with the Accounting Direction for Private Registered Providers of Social Housing 2019.The Group chose to early adopt the SORP 2018 in the year 2018/19.
North Devon Homes meets the definition of a qualifying entity under FRS102. The following exemptions available under FRS102 in respect of certain disclosures have been applied:
- the requirement to present a separate statement of cash flows and related notes for the Association;
- financial instrument disclosures as the information is provided in the consolidated disclosures.
## **Basis of consolidation**
The Group Financial Statements consolidate the Financial Statements of North Devon Homes (the “Association”) and its subsidiary undertaking Anchorwood Limited.
## **Going concern**
The Financial Statements have been prepared on a going concern basis, which the Directors consider to be appropriate for the reasons below.
The Group prepares a 30 year business plan, which is updated and approved on an annual basis. The most recent business plan was approved in May 2021. As part of the business plan approval the Board updated its stress testing and multi-variate scenario testing against the base plan, and particularly considered impacts of a volatile housing market and economic uncertainty as a result of the pandemic and Brexit. The stress and scenario testing impacts were measured against loan covenants and cash facilities, with potential mitigating actions identified where these would be necessary.
The Board, after reviewing the Group 30 year business plan and budget for 2021/22, is of the opinion that, taking account of severe but plausible downsides, the Group and Association have adequate resources to continue in business for the foreseeable future.
The Board believes the Group and Association has sufficient funding in place and expects the Group to be able to comply with loan covenants, even with severe scenarios occurring, due to the recovery actions that it has identified and prioritised. The Board has set golden rules and a risk appetite against these in order to ensure that covenant compliance is maintained and early warnings of a downward movement in performance that impacts loan covenants are identified.
_“... working together to create communities where people want to live”_
_41_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1 Accounting Policies (continued)**
## **Going concern (continued)**
Therefore, despite the impacts of the global pandemic and future economic uncertainty, the Board continues to believe that the Group and Association are well placed to manage their business risks successfully and that the Group and Association have adequate financial resources based on current forecasts, to continue in operational existence for the foreseeable future. The Board has therefore continued to adopt the going concern basis in preparing its Financial Statements.
## **Significant judgements and key sources of estimation uncertainty**
The preparation of Financial Statements in conforming with generally accepted accounting practice requires management to make judgements, estimates and assumptions that affect the reported amounts for assets and liabilities at the Statement of Financial Position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.
The following Management Judgements have had the most significant effect on amounts recognised in the Financial Statements:
## Development expenditure
The Group capitalises development expenditure in accordance with the accounting policy given below. Initial capitalisation of costs is based on management’s judgement that the development scheme is confirmed, usually when Board approval has taken place, including that there is access to the appropriate funding. In determining whether a project is likely to cease, management monitors the development and considers if changes have occurred that result in impairment.
## Onerous contracts
Where construction contracts are loss making, if management has assessed that the contract is onerous a provision is made based on forecast cost estimates. The provisions will be unwound over the remaining term of the contract.
## Categorisation of housing properties
The Group has undertaken a detailed review of the intended use of all housing properties. In determining the intended use, the Group has considered if the asset is held for social benefit or to earn commercial rentals. The Group has determined that market rented properties are investment properties.
## Impairment
The Group has undertaken an impairment assessment as part of its preparation of the Financial Statements and in light of the Covid-19 pandemic. In carrying out the assessment, management has considered the detailed criteria set out in the SORP.
## Bank Loan
Where loan agreements contain two-way break clauses in respect of early repayment, these loans have been treated as basic financial instruments, within section 11 of FRS102.
Other key sources of estimation:
## Tangible fixed assets
Other than investment properties, tangible fixed assets are depreciated over their useful lives, which are assessed annually and may vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account.
_“... working together to create communities where people want to live”_
_42_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1 Accounting Policies (continued)**
## **Significant Judgements and key sources of estimation uncertainty (continued)**
## Defined benefit pension scheme
The Group has obligations to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depend on a number of factors including life expectancy, salary increases, inflation, asset valuations and the discount rate applied. Management estimates these factors in determining the net pension obligation in the Statement of Financial Position. The assumptions reflect historical experience and current trends. Further details are given in Note 21.
## Impairment of non-financial assets
Reviews for impairment are carried out when a trigger has occurred and any impairment loss is recognised by a charge to the Statement of Comprehensive Income.
The Group has assessed that the Covid-19 pandemic represents a trigger for impairment and has undertaken a review which has included the office property fixed asset and the Anchorwood Bank site. The Group has carried out an assessment of impairment in accordance with the SORP and no impairment losses were identified in the reporting period.
## **Associates**
An entity is treated as an associated undertaking where the Group has a participating interest and exercises significant influence over its operating and financial policies.
The consolidated income and expenditure account includes the Group’s share of the associate’s operating results and in the consolidated statement of financial position, the Group’s share of the Associate’s assets under the equity accounting method. In the results of the Association, associates are accounted for under the cost model.
## **Turnover**
Turnover represents rental income and service charges receivable net of voids, fees and capital grants from local authorities and Homes England, recognised in income on a systematic basis; income from first tranche shared ownership sales and market sales; revenue grants and income receivable from other sources (excluding VAT).
Rental income is recognised on the basis of the amount receivable for the year. Rental income received in advance is disclosed within creditors in the statement of financial position.
Other income, including service charges, is accounted for on the basis of the value of goods or services supplied during the period. Income from first tranche shared ownership sales and properties developed for outright sale is recognised when legal completion occurs.
Surpluses on sales of housing accommodation comprise proceeds from property sales, which are recognised at the date of completion, less the following amounts:
- (a) the net book value of the properties; and
- (b) any liabilities under Right to Buy sharing agreements with the local authority.
_“... working together to create communities where people want to live”_
_43_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1 Accounting Policies (continued)**
## **Operating Surplus**
Operating surplus is defined as turnover less operating expenses plus gains or losses on disposals prior to adjustments for share in associate profits or losses, finance income and costs, revaluation and fair value adjustments and taxation.
## **Shared ownership property sales**
Shared ownership properties, including those under construction, are split between fixed assets and current assets. The split is determined by the percentage of the property to be sold under the first tranche sale which is shown on initial recognition as a current asset, with the remainder as a fixed asset within property, plant and equipment. Where this would result in a surplus on the disposal of the current asset that would exceed the anticipated overall surplus, the surplus on disposal of the first tranche is limited to the overall surplus by adjusting the costs allocated to current or fixed assets.
Proceeds from first tranche sales are accounted for as turnover in the Statement of Comprehensive Income for the period in which the sale occurs and the cost of sale is transferred from current assets to operating costs. Proceeds from subsequent tranche sales are treated as disposals of fixed assets.
## **Housing Properties**
Tangible fixed assets are stated at cost, less accumulated depreciation. Development cost includes the cost of acquiring land and buildings, the cost of contracted works completed to date, directly attributable development costs and attributable interest charges incurred during the development period. Housing properties in the course of construction and those subject to shared ownership are stated at cost. All costs relating to capital expenditure incurred in the year are included in the Financial Statements at gross value before retentions.
Expenditure on items not separately identified as components is capitalised if the expenditure results in an increase in the net rental stream over the life of the property, over the standard originally assessed when the property was first acquired or constructed.
## **Capitalisation of development costs**
Development costs which arise directly from the construction or acquisition of a property are capitalised to housing properties in the course of construction. Capital expenditure on schemes which are aborted is charged to the Statement of Comprehensive Income in the year in which it is recognised that the schemes will not be developed to completion.
## **Capitalised interest**
Interest on borrowings, to the extent that the borrowings are financing developments, is capitalised up to the date of practical completion of the scheme.
## **Depreciation**
Freehold land and housing properties under construction are not depreciated.
## Housing properties
The Association separately identifies the major components which comprise its housing properties and depreciates components over their individual useful economic lives. The components identified, with their respective economic lives are as follows:
_“... working together to create communities where people want to live”_
_44_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1 Accounting Policies (continued)**
## **Depreciation (continued)**
|**Component**|**Years**|**Component**|**Years**|
|---|---|---|---|
|Structure|100|Pre-cast reinforced concrete
existingwall refurbishments|20|
|Bathrooms|30|Electric heating|20|
|Kitchens|20|Gasheating|30|
|Doors|30|Solid fuel heating|25|
|Windows|30|Air and ground source heating|20|
|Electrics/rewires|30|Lifts|25|
|Gas boilers|15|Roofs|75|
|Biomass boilers|25|||
Where a separately identified and depreciated component of an existing property is replaced, the carrying value of the component is expensed within accelerated depreciation and the cost of the replacement component capitalised.
Properties held on long leases are depreciated over the shorter of their estimated useful economic lives and the unexpired term of the lease.
## Other tangible fixed assets
Depreciation on other fixed assets is provided for on the following straight line basis:
|**Asset **|**Years**|
|---|---|
|Freehold office buildings|50|
|Photovoltaic panels|30|
|Freehold officeimprovements|15|
|Leasehold office improvements|15 years or over the unexpired term
of the lease|
|Plant and machinery|10|
|Furniture, equipment fixtures and
fittings|5|
|Computer equipment|3|
|Motor vehicles|3|
## **Social Housing and other Government Grants**
Social Housing Grant (‘SHG’) or other government grant received to subsidise the cost of housing properties is included in creditors. Grants due or received in advance are included as a current asset or liability. SHG received in excess of the cost of housing properties in the course of construction is shown as SHG received in advance and included as a current liability. SHG may be repayable on the sale, change of use or demolition of housing properties. If there is no requirement to repay the grant on disposal, any unamortised grant remaining in creditors is released and recognised as income.
Government Grants received for housing properties are recognised in income over the useful life of the housing property structure. The unamortised element of the grant is recognised as deferred income in creditors.
Grants relating to revenue are recognised in the Statement of Comprehensive Income over the same period as the expenditure to which they relate. Until the revenue grants are recognised as income they are recorded as liabilities.
_“... working together to create communities where people want to live”_
_45_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1. Accounting Policies (continued)**
## **Non-Government Grants**
Grants received from non-government sources are recognised under the performance model. If there are no specific performance requirements the grants are recognised when received or receivable. Where grant is received with specific performance requirements it is recognised as a liability until the conditions are met and then it is recognised as turnover. A grant received before the revenue recognition criteria are satisfied is recognised as a liability.
## **Impairment**
Properties held for their social benefit are not held solely for the cash inflows they generate and are held for their service potential.
An assessment is made at each reporting date as to whether an indicator of impairment exists. If such an indicator exists, an impairment assessment is carried out and an estimate of the recoverable amount of the asset is made. Where the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised in the Statement of Comprehensive Income. The recoverable amount of an asset is the higher of its value in use and fair value less costs to sell. Where assets are held for their service potential, value in use is determined using depreciated replacement cost.
An impairment loss is reversed if the reasons for the impairment loss have ceased to apply and included in the Statement of Comprehensive Income.
Following the assessment of the indicators of impairment, it was viewed that the Coronavirus pandemic was a trigger for impairment in relation to housing stock, WIP and investment property. An impairment review was undertaken for the following areas:
- social housing assets
- market sale properties at Taw Wharf, Barnstaple (including WIP)
-
- the investment part of the Head Office site at Westacott Road, Barnstaple
Following a detailed review, no impairment was identified and so no adjustment to carrying values was required.
## **Demolition**
Where properties are demolished for development, the cost (net of depreciation) of the property, excluding land, is written off to operating costs. The cost of demolition is capitalised as part of the cost of redevelopment. An impairment review is carried out at the point a decision is made to demolish.
## **Valuation of Investments other than investment properties**
Investments are shown at cost less any amounts written off. Provisions are made for reductions in value.
## **Investment properties**
Investment property includes commercial and other properties not held for the social benefit of the Group. Investment property is measured at cost on initial recognition, which includes purchase costs and any directly attributable expenditure and subsequently at fair value at the reporting date. Fair value is determined annually by external valuers. No depreciation is provided. Changes in fair value are recognised in the Statement of Comprehensive Income.
_“... working together to create communities where people want to live”_
_46_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1. Accounting Policies (continued)**
## **Intangible assets**
Intangible assets are stated at historic cost, less accumulated amortisation and any provision for impairment. Amortisation is provided on all intangible assets at rates calculated to write off the cost of each asset on a straight line basis over its expected useful life as follows:
- computer software 5 years
Intangible assets in the process of development are not amortised.
## **Stock and work in progress**
Stock and work in progress is stated at the lower of cost and net realisable value. Properties developed for outright sale and shared ownership first tranche sale are included in current assets as they are intended to be sold. At each reporting date stock and properties held for sale are assessed for impairment. Any impairment losses are recognised in the Statement of Comprehensive Income.
## **Long-term contracts**
Where the substance of a contract is that the contractual obligations are performed gradually over time, revenue and costs are recognised as the contract activity progresses to reflect the partial performance of contractual obligations.
## **Operating Leases**
Leases that do not transfer all the risks and rewards of ownership are classified as operating leases.
Payments under operating leases are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease.
## **Finance leases**
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the leased asset to the Group.
Assets held under finance leases are recognised initially at the fair value of the leased asset (or, if lower the present value of minimum lease payments) at the inception of the lease. The corresponding liability is included in the statement of financial position within long-term creditors. Lease payments are apportioned between finance charges and reduction of the lease obligation using the effective interest method so as to achieve a constant rate of interest on the remaining balance of the liability.
Rental payments are charged as expenses in the periods in which they are incurred.
## **Corporation Tax**
The Association is a registered charity and is not subject to Corporation Tax on its charitable activities but is subject to tax on any non-charitable activities. Anchorwood Limited is subject to Corporation Tax. The tax expense for the period comprises current and deferred tax.
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date where transactions or events that result in an obligation to pay more tax in the future or a right to pay tax in the future have occurred at the Statement of Financial Position date. Timing differences are differences between the Group’s taxable surpluses and its results as stated in the Financial Statements.
_“... working together to create communities where people want to live”_
_47_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1 Accounting Policies (continued)**
## **Corporation Tax (continued)**
Deferred tax is measured at the average tax rates that are expected to apply in the period in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the Statement of Financial Position date. Deferred tax is measured on a non-discounted basis.
A deferred tax asset is only recognised when it is more likely than not that the asset will be recoverable in the foreseeable future out of suitable taxable surpluses from which the underlying timing differences can be deducted.
## **Value Added Tax (‘VAT’)**
The Association is registered for VAT but a large proportion of its income, including its rents, is exempt for VAT purposes. The majority of its expenditure is subject to VAT which cannot be reclaimed, and expenditure is therefore shown inclusive of irrecoverable VAT.
Anchorwood Limited is separately registered for VAT and is able to reclaim VAT. Its expenditure is shown exclusive of VAT.
## **Interest Received**
Interest earned on short-term investments is accounted for when receivable.
## **Pensions**
Retirement benefits to employees are provided by the Social Housing Pension Scheme (“SHPS”) defined contribution scheme and the Local Government Pension Scheme (“LGPS”) (administered by Devon County Council Pensions) defined benefit pension scheme, details of which are given in Note 21. Past service retirement benefits to employees are also provided by the SHPS defined benefit schemes, details of which are given in Note 21. Pension costs accounted for as defined benefit schemes are in accordance with FRS102 (section 28).
## Defined contribution scheme
The Association participates in the SHPS defined contribution scheme where the amount charged to surplus or deficit in the Statement of Comprehensive Income in respect of pension costs and other post-retirement benefits is the contributions payable in the year.
## Defined benefit schemes
## _SHPS_
The Association also contributes to the SHPS defined benefit scheme for past service retirement benefits (as the scheme is closed to future accrual). The amounts charged to operating surplus are the costs arising from employee services previously rendered and the cost of benefit changes, settlements and curtailments. They are included as part of staff costs. The net interest cost on the net defined liability is charged to revenue and included within finance costs. Re-measurement, comprising actuarial gains and losses and the return on scheme assets (excluding amounts included in net interest on the net defined benefit liability) is recognised immediately in other comprehensive income.
## _LGPS_
The Association participates in the LGPS which is a multi-employer defined benefit scheme. The amounts charged to operating surplus are the costs arising from employee services rendered during the period and the cost of plan introductions, benefit changes, settlements and curtailments. They are included as part of staff costs. The net interest cost on the net defined liability is charged to revenue and included within finance costs. Re-measurement, comprising actuarial gains and losses and the return on scheme assets (excluding amounts included in net
_“... working together to create communities where people want to live”_
_48_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **1 Accounting Policies (continued)**
## **Pensions (continued)**
interest on the net defined benefit liability) is recognised immediately in other comprehensive income.
Defined benefit schemes are funded, with the assets of the scheme held separately from those of the Association in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit credit method. The actuarial valuations are obtained triennially and are updated at each Statement of Financial Position date.
## **Revaluation Reserve**
The revaluation reserve represents the difference on transition where deemed cost transitional relief was taken, between the fair value of social housing properties and other assets, or those assets that are re-measured annually and the historical cost carrying value.
## **Provisions**
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
## **Restricted Reserves**
There are currently no restricted reserves.
## **Financial Instruments**
Financial assets and financial liabilities are measured at transaction price initially plus directly attributable transaction costs and are recognised in the statement of financial position when the Association becomes a party to the contractual provisions of the instrument.
Trade and other debtors and creditors are classified as basic financial instruments and measured at initial recognition at transaction price.
Cash and cash equivalents are classified as basic financial instruments and comprise cash in hand and at bank, short-term bank deposits with an original maturity of three months or less and bank overdrafts.
Interest bearing bank loans, overdrafts and other loans which meet the criteria to be classified as basic financial instruments are initially recorded at the present value of cash payable to the bank, which is ordinarily equal to the proceeds received net of direct issue costs. These liabilities are subsequently measured at amortised cost, using the effective interest rate method.
The effective interest rate is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset or liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Non-basic financial instruments are recognised at fair value using a valuation technique with any gains or losses being reported in surplus or deficit.
## **Related parties**
The Group discloses transactions with related parties which are not wholly owned subsidiaries.
_“... working together to create communities where people want to live”_
_49_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
|**2a)**
**Particulars of turnover,**|**operating**|**costs and**|**operating surplus– Group**|**operating surplus– Group**|||
|---|---|---|---|---|---|---|
|**Income and expenditure**
**from general needs lettings**||**2021**|||2020||
||**TurnoverOperating**
**Costs**||**Operating**
**Surplus**
**/(Deficit)**|
TurnoverOperating
Costs||
Operating
Surplus
/(Deficit)|
||**£’000**|**£’000**|**£’000**|£’000|£’000|£’000|
|**Social Housing Lettings**|**15,540**|**(11,093)**|**4,447**|14,960|(10,954)|4,006|
|**(note 2b)**|||||||
|**Other social housing**|||||||
|**activities:**|||||||
|Shared ownership first|**782**|**(345)**|**437**|987|(440)|547|
|tranche sales|||||||
|Charges for support|**58**|**(365)**|**(307)**|61|(325)|(264)|
|services|||||||
|Other activities|**232**|**-**|**232**|266|-|266|
|**Non-social housing**|||||||
|**activities**|||||||
|Other activities|**4,614**|**(3,829)**|**785**|4,628|(4,518)|110|
|Exceptional item*||||-|(229)|(229)|
|**Total**|**21,226**|**(15,632)**|**5,594**|20,902|(16,466)|4,436|
_***** the exceptional item refers to a prior period adjustment in Anchorwood Limited in relation to the losses on the golden brick agreement which was not considered to be sufficiently material to necessitate a prior period adjustment in the Group consolidated Financial Statements in 2019/20._
## **2a) Particulars of turnover, operating costs and operating surplus – Association**
|**Income and expenditure**
**from general needs lettings**||**2021**|||2020||
|---|---|---|---|---|---|---|
||**Turnover**|**Operating**
**Costs**|**Operating**
**Surplus**
**/(Deficit)**|
Turnover|Operating
Costs|
Operating
Surplus
/(Deficit)|
||**£’000**|
**£’000**|**£’000**|£’000|£’000|£’000|
|**Social Housing Lettings**|**15,540**|**(11,093)**|**4,447**|14,960|(10,954)|4,006|
|**(note 2b)**|||||||
|**Other social housing**|||||||
|**activities:**|||||||
|Shared ownership first|**782**|**(345)**|**437**|987|(440)|547|
|tranche sales|||||||
|Charges for support|**58**|**(365)**|**(307)**|61|(325)|(264)|
|services|||||||
|Other activities|**232**|**-**|**232**|266|-|266|
|**Non-social housing**|||||||
|**activities**|||||||
|Other activities|**824**|**(432)**|**392**|724|(196)|528|
|**Total**|**17,436**|**(12,235)**|**5,201**|16,998|(11,915)|5,083|
_“... working together to create communities where people want to live”_
_50_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **2b) Particulars of Income and Expenditure from social housing lettings– Group and Association**
||**General**|**Supported**|**2021**|2020|
|---|---|---|---|---|
||**needs**|**Housing**|**Total**|Total|
||**£’000**|**£’000**|**£’000**|£’000|
|Rent receivable net of identifiable service|12,681|2,074|**14,755**|14,204|
|charges|||||
|Service charge income|141|487|**628**|600|
|Amortised Government Grants|157|-|**157**|156|
|**Turnover from social housing lettings**|**12,979**|**2,561**|**15,540**|14,960|
|**Expenditure on lettings:**|||||
|Management|(1,327)|(294)|**(1,621)**|(1,494)|
|Service charge costs|(409)|(430)|**(839)**|(850)|
|Routine maintenance|(2,743)|(668)|**(3,411)**|(3,116)|
|Planned maintenance|(811)|(185)|**(996)**|(997)|
|Major repairs expenditure|(751)|(565)|**(1,316)**|(1,424)|
|Bad debts|(19)|(12)|**(31)**|(66)|
|Depreciationof housing properties|(2,471)|(408)|**(2,879)**|(3,007)|
|**Operating expenditure on Social Housing**|**(8,531)**|**(2,562)**|**(11,093)**|(10,954)|
|**Lettings**|||||
|**Operating surplus/(deficit) on social**|**4,448**|**(1)**|**4,447**|4,006|
|**housing lettings**|||||
|**Void losses**|(35)|(73)|**(108)**|(66)|
_“... working together to create communities where people want to live”_
_51_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **3 Gain on disposal of property, plant and equipment**
|**Group and Association**|**Right to**|**Right to**|**Strategic**|**2021**|2020|
|---|---|---|---|---|---|
||**Buy Sales**|**Acquire**|**Sales**|**Total**|Total|
|||**Sales**||||
||**£’000**|**£’000**|**£’000**|**£’000**|£’000|
|Proceeds of sales (gross)|**127**|**170**|**734**|**1,03110**|2,411|
|||||**31**||
|Less costs of sales|**(79)**|**(54)**|**(82)**|**(215)**|(982)|
||**48**|**116**|**652**|**816**|1,429|
|NDC sharing of proceeds agreement|**(75)**|**-**|**-**|**(75)**|(336)|
|**Surplus/(deficit) on**|**(27)**|**116**|**652**|**741**|1,093|
|**disposal**||||||
## **4 Interest receivable**
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Interest receivable|**25**|**117**|31|135|
## **5 Interest and financing costs**
|**Group and Association**|**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Net Interest on defined benefit liability pension|**95**|**95**|128|128|
|(see Note 21)|||||
|Interest payable|**4,611**|**4,513**|4,539|4,425|
|Funding Management Charge|**112**|**112**|120|120|
||**4,818**|**4,720**|4,787|4,673|
|Borrowing costs capitalised|**(127)**|**(29)**|(268)|(154)|
||**4,691**|**4,691**|4,519|4,519|
_“... working together to create communities where people want to live”_
_52_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **6 Surplus before taxation**
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Surplus on ordinary activities before taxation is stated|||||
|after charging:|||||
|Depreciation of tangible fixed assets|**3038**|**3033**|3,138|3,134|
|Amortisation of intangible fixed assets|**32**|**32**|31|31|
|Auditors’ remuneration:|||||
|- Statutory Audit|**32**|**23**|59|52|
|- Taxation compliance services|**5**|**3**|10|7|
|- Other services|**4**|**4**|2|2|
|Other operating lease rentals|**181**|**181**|87|87|
## **7 Directors’ remuneration and transactions**
## **Group and Association**
Key management personnel are the Executive Team who oversee the day-to-day operational running and, working with the Board (Non-Executive Directors) and wider colleagues, identify and execute the Group’s strategic direction. They are detailed on page 3 of these Financial Statements.
The remuneration paid to the Executive Team and the Non-Executive Directors during the year was as follows:
## **Group and Association**
|||**Other**||**2021**|**2020**|
|---|---|---|---|---|---|
|**Executive Team**|**Salary**|**emoluments**|**Pension**|**Total**|**Total**|
||**£**|**£**|**£**|**£**|**£**|
|Chief Executive|129,570|4,806|9,408|**143,784**|142,237|
|M Gimber||||||
|Director of Neighbourhoods|94,244|4,460|6,908|**105,612**|104,488|
|M Rostock||||||
|Finance Director|93,845|4,406|6,571|**104,822**|102,679|
|P Butler||||||
|**Total**|**317,659**|**13,672**|**22,887**|**354,218**|349,404|
The values above include any accrued amounts as at 31 March 2021.
_“... working together to create communities where people want to live”_
_53_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **7 Directors’ remuneration and transactions (continued)**
## **Non-Executive Directors**
|**Non-Executive Directors**|||||
|---|---|---|---|---|
||**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
||||£|£|
||**£**|**£**|||
|R Stronge (Chair)|**9,616**|**9,616**|9,370|9,370|
|A Butt *|**7,889**|**5,583**|7,100|5,100|
|J Barrah|**3,414**|**3,414**|5,000|3,000|
|S Goodman|**-**|**-**|1,250|1,250|
|D Hay|**3,414**|**3,414**|3,000|3,000|
|S Ingman|**3,414**|**3,414**|3,000|3,000|
|D Lloyd-Evans*|**5,720**|**3,414**|5,000|3,000|
|S Lowther|**3,414**|**3,414**|1,238|1,238|
|S Murray*|**5,720**|**3,414**|5,000|3,000|
|P Oldroyd|**5,533**|**5,533**|5,000|5,000|
|S Sanger-Anderson*|**5,720**|**3,414**|1,238|1,238|
|**Total**|**53,854**|**44,630**|46,196|38,196|
_*non-executive directors who were also non-executive directors of Anchorwood Limited._
Expenses paid during the year to Board Members amounted to £1,442 (2020: £15,050).
No Non-Executive Directors participate in the pension scheme. The three members of the Executive Team are ordinary members of the pension scheme. No enhanced or special terms apply.
_“... working together to create communities where people want to live”_
_54_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **8 Employee Information**
## **Group and Association**
The average number of persons employed during the year expressed in full-time equivalents was:
||**2021**|2020|
|---|---|---|
||**No.**|No.|
|Office staff|**88**|86|
|Maintenance staff|**28**|25|
|Wardens, caretakers and cleaners|**11**|12|
||**127**|123|
|**Staff costs for the above employees**|**2021**|2020|
||**£’000**|£’000|
|Wages and salaries|**3,866**|3,420|
|Social security costs|**363**|321|
|Pension costs|**297**|308|
||**4,526**|4,049|
The number of employees during the year, expressed in full-time equivalents whose remuneration exceeded £60k:
|exceeded £60k:|||
|---|---|---|
||**2021**|2020|
||**No.**|No.|
|Remuneration between £60k and £70k|**4**|3|
|Remuneration between £70k and £80k|**-**|-|
|Remuneration between £80k and £90k|**-**|-|
|Remuneration between £90k and £100k|**-**|-|
|Remuneration between £100k and £110k|**2**|2|
|Remuneration between £120k and £130k|**-**|-|
|Remuneration between £130k and £140k|**-**|-|
|Remuneration between £140k and £150k|**1**|1|
_“... working together to create communities where people want to live”_
_55_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **9 Taxation**
The tax charge comprises:
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Current tax|**-**|**-**|-|-|
|Adjustment in respect of previous|**-**|**-**|-|-|
|periods|||||
|**Total tax per income statement**|**-**|**-**|-|-|
The charge for the year can be reconciled to the profit per the income statement as follows:
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Profit for the period|**2,047**|**1,653**|2,093|2,047|
|Tax on profit at standard UK tax
rate of 19% (2020: 19%)|**389**|**314**|398|389|
|Effects of:|||||
|Income not taxable for tax|**(314)**|**(314)**|(386)|(387)|
|purposes|||||
|Losses|**(69)**|**-**|(12)|-|
|Effects of group relief/other reliefs|**-**|**-**|-|(2)|
|Otherpermanent differences|**(6)**|**-**|-|-|
|**Tax for the period**|**-**|**-**|-|-|
_“... working together to create communities where people want to live”_
_56_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **10a Intangible assets**
## **Group and Association**
||**Computer**|||
|---|---|---|---|
||**Software**|||
||**Under**|**Computer**||
||**Development**|**Software**|**Total**|
||**£’000**|**£’000**|**£’000**|
|**Cost**||||
|As at 1 April 2020|525|159|**684**|
|Additions|476|-|**476**|
|Disposals|(135)|-|**(135)**|
|**As at 31 March 2021**|**866**|**159**|**1,025**|
|**Accumulated amortisation**||||
|As at 1 April 2020|-|44|**44**|
|Charge for the year|-|32|**32**|
|**As at 31 March 2021**|**-**|**76**|**76**|
|**Net book value as at 31 March 2021**|**866**|**83**|**949**|
|Net book value as at 31 March 2020|525|115|640|
Intangible assets are software projects which are amortised on completion in accordance with the accounting policy in Note 1 (page 47).
_“... working together to create communities where people want to live”_
_57_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **10b Tangible fixed assets - Housing Properties**
## **Group**
|||**Social**|**Shared**|||
|---|---|---|---|---|---|
||**Social Housing**|**housing**|**Ownership**|||
||**property**|**property for**|**property**|**Shared**||
||**under**|**letting**|**under**|**Ownership**||
||**construction**|**completed**|**construction**|**completed**|**Total**|
||**£’000**|**£’000**|**£’000**|**£’000**|**£’000**|
|**Cost or deemed cost**||||||
|As at 1 April 2020|950|170,526|231|4,449|176,156|
|Additions|2,660|-|32|-|2,692|
|Component
additions/replacements|-|1,094|-|-|1,094|
|Disposals|-|(541)|-|-|(541)|
|Transfers|(2,636)|2,636|(231)|231|-|
|**As at 31 March 2021**|**974**|**173,715**|**32**|**4,680**|**179,401**|
|**Accumulated depreciation**||||||
|As at 1 April 2020|-|17,853|-|126|17,979|
|Charge for the year|-|2,849|-|30|2,879|
|(including accelerated||||||
|depreciation)||||||
|Disposals|-|(312)|-|-|(312)|
|**As at 31 March 2021**|**-**|**20,390**|**-**|**156**|**20,546**|
|**Net book value as at 31**|**974**|**153,325**|**32**|**4,524**|**158,855**|
|**March 2021**||||||
|Net book value as at 31|952|152,673|229|4,323|158,177|
|March 2020||||||
_“... working together to create communities where people want to live”_
_58_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **10b Tangible fixed assets - Housing Properties (continued)**
## **Association**
||**Social**||**Shared**|||
|---|---|---|---|---|---|
||**Housing**|**Social housing**|**Ownership**|||
||**property**|**property for**|**Property**|**Shared**||
||**under**|**letting**|**under**|**Ownership**||
||**construction**|**completed**|**construction**|**Completed**|**Total**|
||**£’000**|**£’000**|**£’000**|**£’000**|**£’000**|
|**Cost or deemed cost**||||||
|As at 1 April 2020|1,726|170,526|231|4,449|176,932|
|Additions|2,660|-|32|-|2,692|
|Component
additions/replacements|-|1,094|-|-|1,094|
|Disposals|-|(541)|-|-|(541)|
|Transfers|(2,636)|2,636|(231)|231|-|
|**As at 31 March 2021**|**1,750**|**173,715**|**32**|**4,680**|**180,177**|
|**Accumulated depreciation**||||||
|As at 1 April 2020|-|17,853|-|126|17,979|
|Charge for the year|-|2,849|-|30|2,879|
|(including accelerated||||||
|depreciation)||||||
|Disposals|-|(312)|-|-|(312)|
|**As at 31 March 2021**|**-**|**20,390**|**-**|**156**|**20,546**|
|**Net book value as at 31**|**1,750**|**153,325**|**32**|**4,524**|**159,631**|
|**March 2021**||||||
|Net book value as at 31|1,726|152,673|231|4,323|158,953|
|March 2020||||||
_“... working together to create communities where people want to live”_
_59_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **10c Other Property, Plant & Equipment**
## **Group**
||||**Other**|**Fixtures**|||
|---|---|---|---|---|---|---|
||**Investment**|**Office**|**land &**|**and**|**Motor**||
||**Properties**|**£’000**|**buildings**|**Fittings**|**Vehicles**|**Total**|
||**£’000**||**£’000**|**£’000**|**£’000**|**£’000**|
|**Cost or valuation**|||||||
|As at 1 April 2020|1,967|2,920|292|1,038|233|6,450|
|Additions|-|313|-|42|-|355|
|Revaluation|285|115|-|-|-|400|
|**As at 31 March 2021**|**2,252**|**3,348**|**292**|**1,080**|**233**|**7,205**|
|**Accumulated**|||||||
|**depreciation**|||||||
|As at 1 April 2020|-|490|82|744|230|1,546|
|Charge for the year|-|51|-|108|-|159|
|**As at 31 March 2021**|**-**|**541**|**82**|**852**|**230**|**1,705**|
|**Net book value as at**|**2,252**|**2,807**|**210**|**228**|**3**|**5,500**|
|**31 March 2021**|||||||
|Net book value as|1,967|2,430|210|294|3|4,904|
|at 31 March 2020|||||||
The Westacott Road investment property (long leasehold of 999 years with an option to purchase the freehold after five years),was valued to fair value at 31 March 2021 based on a valuation undertaken by Vickery Holman Limited, Property Consultants. The other investment properties, which are all freehold, were valued to fair value at 31 March 2021 by Webbers and Vickery Holman Limited, Property Consultants.
Both valuers are independent valuers with recent experience in the location and class of the investment property being valued. Despite the Covid-19 pandemic the valuations are not reported as being subject to material valuation uncertainty.
_“... working together to create communities where people want to live”_
_60_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **10c Other Property, Plant & Equipment (continued)**
## **Association**
||||**Other**|**Fixtures**|||
|---|---|---|---|---|---|---|
||**Investment**|**Office**|**land &**|**and**|**Motor**||
||**Properties**|**£’000**|**buildings**|**Fittings**|**Vehicles**|**Total**|
||**£’000**||**£’000**|**£’000**|**£’000**|**£’000**|
|**Cost or valuation**|||||||
|As at 1 April 2020|1,967|2,920|292|919|233|6,331|
|Additions|-|313|-|42|-|355|
|Revaluation|285|115|-|-|-|400|
|**As at 31 March 2021**|**2,252**|**3,348**|**292**|**961**|**233**|**7,086**|
|**Accumulated**|||||||
|**depreciation**|||||||
|As at 1 April 2020|-|490|82|730|230|1,532|
|Charge for the year|-|51|-|103|-|154|
|**As at 31 March 2021**|**-**|**541**|**82**|**833**|**230**|**1,686**|
|**Net book value as at**|**2,252**|**2,807**|**210**|**128**|**3**|**5,400**|
|**31 March 2021**|||||||
|Net book value as|1,967|2,430|210|189|3|4,799|
|at 31 March 2020|||||||
_“... working together to create communities where people want to live”_
_61_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **11 Investments**
## **Group companies**
The Group includes the following subsidiary, which is registered in England:
|**Name**|**Incorporation and**|**Regulated/non-**|**Regulated/non-**|**Nature of business**|**Nature of business**|**Nature of business**|
|---|---|---|---|---|---|---|
||**ownership**|**regulated**|||||
|Anchorwood Limited|Company 100%|Non-regulated||Property|||
|Westacott Road||||development|||
|Barnstaple|||||||
|Devon EX32 8TA|||||||
|||**Group**|**Association**||Group|Association|
|**Investments**||**2021**||**2021**|2020|2020|
|||**£’000**||**£’000**|£’000|£’000|
|Investment in Advantage South West LLP||**100**||**5**|102|5|
|Investment in Anchorwood Limited||**-**||**2,300**|-|2,300|
|Investment in MORHomes PLC||**82**||**82**|82|82|
|Investment in South West Mutual Ltd||**5**||**5**|5|5|
|Investment in Affordable Housing Finance PLC||
**312**||**312**|312|312|
|||**499**||**2,704**|501|2,704|
Advantage South West LLP: The Group’s investment represents a 25% shareholding and capital contribution. The Group’s share of net assets at 31 March 2021 was £100k (2020: £102k) and share of losses for the year was £2k (2020: £9k loss).
Anchorwood Limited: The subsidiary company was established in June 2015. NDH has a 100% shareholding. The net assets at 31 March 2021 were £2.294m (2020: £1.907m) and profit before tax for the year ended 31 March 2021 was £393k (2020: £46k profit).
MORHomes PLC: The Group’s investment represents 82,500 ordinary shares of £0.10 each.
South West Mutual Ltd: The Group’s investment represents 333 of founders’ shares.
Registered office addresses for the investment companies are:
Advantage South West LLP, Collins House, Bishopstoke Road, Eastleigh, SO50 6AD
MORHomes PLC, Future Business Centre, Kings Hedges Road, Cambridge, CB4 2HY
South West Mutual Ltd, Devonport Guildhall, Ker Street, Plymouth, PL1 4EL
Affordable Housing Finance PLC, 3rd Floor, 17 St. Swithin’s Lane, London, EC4N 8AL
_“... working together to create communities where people want to live”_
_62_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **12a Debtors – amounts falling due within one year:**
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Rental arrears|**204**|**204**|203|203|
|Less provisions for bad debts|**(165)**|**(165)**|(165)|(165)|
||**39**|**39**|38|38|
|Prepayments and accrued income|**490**|**490**|272|272|
|Other debtors|**2,066**|**1,780**|1,731|1,480|
||**2,595**|**2,309**|2,041|1,790|
Included in other debtors is £1.521m (2020: £1.325m) being the value of the Local Government Pension Scheme indemnity that is held in a jointly controlled bank account with Devon County Council as the administering authority.
## **12b Debtors – amounts falling due after one year:**
|**12b Debtors – amounts falling due after**|**one year:**||||
|---|---|---|---|---|
||**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Amounts owed by subsidiary company|**-**|**1,551**|-|3,751|
|Other debtors|**54**|**54**|-|-|
||**54**|**1,605**|-|3,751|
Included in amounts owed by subsidiary company falling due after one year is £143k owed to the Association by Anchorwood Limited, relating to the purchase of photovoltaic panels on 31 March 2017, which is held as a long-term intercompany debt with no repayment date.
The intercompany loan balance at the end of the year was £1.408m (2020: £3.608m). The loan facility (excluding equity) at the end of the year was £4.955m (2020: £4.071m) and is repayable in July 2025, the North Devon Homes Board having agreed to renew the facility at its meeting on 23 March 2021. Interest payable during the year was at 3 month LIBOR plus 3.35% (2020: 2.25%).
Other debtors of £54k (2020: nil) represents amounts placed as additional security with Lloyds Bank PLC in respect of properties released from charge.
## **13 Stock**
|**Group**
**Association**
Group
Association
**2021**
**£’000**
**2021**
**£’000**
2020
£’000
2020
£’000
Properties held for sale
**714**
**251**
1,872
318
Work in progress
**4,804**
**6**
5,403
559|**Group**
**Association**
Group
Association
**2021**
**£’000**
**2021**
**£’000**
2020
£’000
2020
£’000
Properties held for sale
**714**
**251**
1,872
318
Work in progress
**4,804**
**6**
5,403
559|
|---|---|
|**5,518**
**257**
7,275|877|
_“... working together to create communities where people want to live”_
_63_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **14 Creditors: amounts falling due within one year**
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Rent and other receipts in advance|**801**|**801**|556|556|
|Trade creditors|**216**|**178**|135|122|
|Amounts due under Right to Buy sharing|**76**|**76**|310|310|
|agreement|||||
|Social Housing Grant received in advance|**180**|**180**|156|156|
|Other taxation and social security|**78**|**78**|80|80|
|Interest accruals|**33**|**33**|42|42|
|Other creditors|**613**|**10**|7|-|
|Loans|**597**|**-**|47|-|
|Accruals and deferred income|**2,719**|**1,988**|2,284|1,805|
||**5,313**|**3,344**|3,617|3,071|
## **15 Creditors: amounts falling due after more than one year**
## **Group and association**
|**Group and association**|||||
|---|---|---|---|---|
||**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Loans|**104,483**|**104,483**|104,748|104,748|
|Social Housing Grant Received in advance|**13,758**|**13,758**|13,836|13,836|
|Finance Lease Liability|**7**|**7**|14|14|
|Other creditors|**685**|**-**|1,288|-|
||**118,933**|**118,248**|119,886|118,598|
|Defined Benefit Pension Schemes|**5,953**|**5,953**|4,186|4,186|
||**124,886**|**124,201 **|124,072|122,784|
Other creditors represent S106 public open space and education monies that are due to be paid in later years as sale units are completed.
_“... working together to create communities where people want to live”_
_64_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **15 Creditors: amounts falling due after more than one year (continued)**
## **Debt Analysis**
|**Group and association**|**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
|**Loans**|**£’000**|**£’000**|£’000|£’000|
|Expiring in two years or more but less than 5 years|**15,000**|**15,000**|15,000|15,000|
|Expiring in more than 5 years|**89,483**|**89,483**|89,748|89,748|
||**104,483**|**104,483**|104,748|104,748|
The weighted average period for which interest rates are fixed is 22 years. All loans are repayable at the end of their fixed rate term. The weighted average total interest rate for all loans was 4.79% (2020: 4.86%). Loan values include £617k capitalised fees which are amortised on a straight line basis and £6,791k of loan premium amortised on a discounted cashflow basis.
The Group has one finance lease with ITEC printers.
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
|**Finance Lease Liability**|**£’000**|**£’000**|£’000|£’000|
|At 1 April|**14**|**14**|20|20|
|Depreciation|**(7)**|**(7)**|(6)|(6)|
|At 31 March|**7**|**7**|14|14|
||**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
|**Deferred Income – Government Grants**|**£’000**|**£’000**|£’000|£’000|
|At 1 April|**13,992**|**13,992**|13,823|13,823|
|Grants receivable|**81**|**81**|325|325|
|Amortisation to Statement of Comprehensive|**(157)**|**(157)**|(156)|(156)|
|Income|||||
|At 31 March|**13,916**|**13,916**|13,992|13,992|
||**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Amounts to be released within one year|**158**|**158**|156|156|
|Amounts to be released in more than one year|**13,758**|**13,758**|13,836|13,836|
||**13,916**|**13,916**|13,992|13,992|
_“... working together to create communities where people want to live”_
_65_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **15a Recycled Capital Grant**
||**Group and**|**Association**|
|---|---|---|
||**2021**|2020|
||**£’000**|£’000|
|**At 1 April**|**27**|-|
|Grants recycled in the year|**-**|27|
|Interest accrued|**-**|-|
|Withdrawals|**-**|-|
||**27**|27|
|Repayment of grant|**(8)**|-|
|**At 31 March**|**19**|27|
Withdrawals from the recycled capital grant fund will be used for the purchase and development of new housing schemes for letting and for approved works to existing properties.
## **16 Statement of Cashflows Cashflow from operating activities**
||**Group**
**Group**
**2021**
**£’000**
**2020**
**£’000**
Surplus for the year
1,952
1,287
Adjustment for non-cash items:
Depreciation of tangible fixed assets
3,038
3,136
Amortisation of intangible assets
32
31
Decrease / (increase) in stock
3,723
3,001
(Increase) / decrease in trade and other debtors
(554)
(284)
Increase in trade and other creditors
1,329
70
Pensions costs less contributions payable
(145)
(49)
Abortive costs written off
11
2
Share of operating deficit/(surplus) in associate
2
9
Adjustments for investing or financing activities
Proceeds from sale of property, plant and equipment
(741)
(1,121)
Increase in fair value of investment property
(285)
(255)
Government Grants utilised in the year
(628)
(156)
Interest Paid
4,691
4,519
Increase in recycled capital grant
-
27
Interest Received
(25)
(31)
Loan Amortisation Fee
(240)
(215)|
|---|---|
||**Net cashgenerated from operating activities**
**12,160**
**9,971**|
_“... working together to create communities where people want to live”_
_66_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
**Analysis of changes in net debt**
|**Analysis of changes in net debt**||||
|---|---|---|---|
||**At 31 March**|Cashflows|At 31 March|
||**2021**||2020|
||**£’000**|£’000|£’000|
|Cash and cash equivalents|**14,656**|2,233|12,423|
|Debt due after one year|**(104,483)**|265|(104,748)|
|Finance lease|**(7)**|7|(14)|
|Net debt|**(89,834)**|2,505|(92,339)|
## **17 Financial Commitments**
Capital commitments are as follows:
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Contracted for but not provided for in the Financial|**3,296**|**1,942**|4,088|2,971|
|Statements|||||
|Future expenditure approved by Directors but not|**-**|**-**|1,481|1,481|
|contracted for at theyear end|||||
||**3,296**|**1,942**|5,569|4,452|
Capital commitments will be funded by a mixture of loan facilities, grants and cash reserves.
Total future minimum lease payments under non-cancellable operating leases are as follows:
||**Group**|**Association**|Group|Association|
|---|---|---|---|---|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Payments due:-|||||
|- Within one year|**125**|**125**|96|96|
|- Between one and five years|**140**|**140**|60|60|
||**265**|**265**|156|156|
_“... working together to create communities where people want to live”_
_67_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **18 Financial Instruments**
The Group’s financial instruments comprise debtors, creditors, cash and cash equivalents and loans. All the Financial Instruments are considered to be Basic under the criteria specified under FRS102.
The Association’s financial instruments comprise debtors, creditors, cash and cash equivalents and loans.
|**Financial Assets**|**Group**|**Association**|Group|Association|
|---|---|---|---|---|
|**Debt instruments measured at amortised cost**|**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Cash & Cash equivalents|**14,656**|**13,918**|12,423|11,713|
|Debtors|**2,105**|**1,819**|2,025|1,518|
||**16,761 **|**15,737**|14,448|13,231|
|**Financial liabilities measured at**
**amortised cost:**|**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|**Borrowings:**|||||
|Housing Loans|**104,483**|**104,483**|104,748|104,748|
|**Total Borrowings**|**104,483**|**104,483**|104,748|104,748|
|**Other financial liabilities:**|||||
|Trade creditors|**532**|**178**|135|122|
|Accruals and other creditors|**3,625**|**2,010**|2,009|2,135|
|Finance leases|**7**|**7**|14|14|
|**Total**|**4,164**|**2,195**|2,158|2,271|
|**Interest income and expense**|||||
||**Group**|**Association**|Group|Association|
||**2021**|**2021**|2020|2020|
||**£’000**|**£’000**|£’000|£’000|
|Total interest income for financial assets at amortised|**25**|**117**|31|135|
|cost|||||
|Total interest expense for financial liabilities at|**4,691**|**4,691**|4,519|4,519|
|amortised cost|||||
_“... working together to create communities where people want to live”_
_68_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **19 Housing Stock**
## **Group and Association**
|**Group and Association**|||
|---|---|---|
||**2021**|2020|
||**Units**|Units|
|**Social housing**|||
|General needs housing:|||
|•
social rent|**2,277**|2,266|
|•
affordable rent|**426**|425|
|•
intermediate rent|**14**|14|
|Housing for older people:|||
|•
social rent|**510**|509|
|•
affordable rent|**31**|28|
|•
intermediate rent|**4**|4|
|Low cost home ownership|**75**|71|
|**Total owned**|**3,337**|3,317|
|Accommodation managed for others|**16**|16|
|**Total managed**|**3,353**|3,333|
|**Non-social housing**|||
|Accommodation let at market rent|**7**|7|
|Leasehold accommodation|**89**|89|
|**Total owned and managed**|**3,449**|3,429|
General needs housing - social rent includes 10 (2020: 9) properties owned but managed by others.
There were 2,830 (2020: 2,512) properties with a fixed charge as at 31 March 2021.
## **20 Related Party transactions**
During the year one Executive Officer was a Board member of Advantage South West (“ASW”) in which the Association has a 25% shareholding. The Group’s share of the operating deficit in the year was £2k (2020: £9k deficit). The Association paid membership fees to ASW of £13k (2020: £13k) and there were no amounts owed to ASW at 31 March 2021 (2020: £nil).
The Association has an investment of £2,300k (2020: £2,300k) in the share capital of its non-regulated subsidiary Anchorwood Limited and £1,408k (2020: £3,608k) in loans. As Anchorwood Limited is a wholly owned subsidiary, the exemption available under Financial Reporting Standard 8 has been applied and details of inter-company transactions in the year have not been disclosed.
_“... working together to create communities where people want to live”_
_69_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions**
Retirement benefits to employees are provided by the Social Housing Pension Scheme (SHPS) and the Local Government Pension Scheme (LGPS) which is administered by Devon County Council Pensions. The pension costs for the year were:
||**2021**|2020|
|---|---|---|
||**£’000**|£’000|
|**Devon County Council**|||
|Service cost|**50**|91|
|Administration Expenses|**3**|3|
||**53**|94|
|**Social Housing Pension Scheme**|||
|Employer contributions|**236**|182|
|Administration Expenses|**8**|8|
||**244**|190|
|**Total payments**|**297**|284|
The actuarial gains and losses in respect of the pension schemes for the year were:
||**2021**|2020|
|---|---|---|
||**£’000**|£’000|
|**Actuarial gain / (loss)**|||
|Devon County Council Pension Scheme|**(463)**|197|
|Social Housing Pension Scheme|**(1,449)**|1,124|
||**(1,912)**|1,321|
Defined benefit pension liability in respect of the pension schemes for the year:
||**2021**|2020|
|---|---|---|
||**£’000**|£’000|
|Devon County Council Pension Scheme|**3,679**|3,179|
|Social Housing Pension Scheme|**2,263**|995|
|SHPS deficit payment in advance|**11**|12|
||**5,953**|4,186|
_“... working together to create communities where people want to live”_
_70_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions (continued)**
## **Devon County Council Pension Scheme (DCCPF)**
The DCCPF is a multi-employer scheme, administered in accordance with the Local Government Pension regulations, a defined benefit scheme. The most recent formal actuarial valuation was completed as at 31 March 2019 and rolled forward, allowing for the different financial assumptions required under FRS102, to 31 March 2021 by a qualified independent actuary.
The net defined benefit liability at the year ended 31 March 2021 is £3,679k (2020: £3,179k).
The employer's contributions to the DCCPF by the association for the year ended 31 March 2021 were £90k (2020: £97k) at a contribution rate of 22.2% of pensionable salaries. The employer's contribution rate for the year ending 31 March 2022 has been set at 22.2%. Estimated employer's contributions to the DCCPF during the accounting period commencing 1 April 2021 are £90k.
## **Statement of financial position**
|**Net pension asset as at**|**2021**|2020|
|---|---|---|
||**£’000**|£’000|
|Present value of the defined benefit obligation|**8,226**|6,968|
|Fair value of Fund assets (bid value)|**4,583**|3,822|
|**Deficit**|**3,643**|3,146|
|Present value of unfunded obligation|**36**|33|
|**Net defined benefit liability**|**3,679**|3,179|
|**Reconciliation of opening and closing balances of the present**|**2021**|2020|
|**value of scheme liabilities**|**£’000**|£’000|
|**Opening scheme liabilities**|**7,001**|7,828|
|Current service cost|**50**|57|
|Interest cost|**162**|179|
|Change in financial assumptions|**1,501**|(630)|
|Change in demographic assumptions|**(78)**|(12)|
|Experience loss on defined benefit obligation|**(96)**|9|
|Estimated benefits paid net of transfers in|**(285)**|(472)|
|Past service costs including curtailments|**-**|34|
|Contributions by Scheme participants and other employers|**9**|10|
|Unfunded pension payments|**(2)**|(2)|
|**Closing scheme liabilities**|**8,262**|7,001|
_“... working together to create communities where people want to live”_
_71_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions (continued)**
## **Devon County Council Pension Scheme (DCCPF) (continued)**
|**Reconciliation of opening and closing balances of the fair value**|**31 Mar 2021**|31 Mar 2020|
|---|---|---|
|**of plan assets**|**£’000**|£’000|
|**Opening fair value of plan assets**|**3,822**|4,526|
|Interest on assets|**88**|102|
|Return on assets less interest|**864**|(444)|
|Other actuarial gains|**-**|8|
|Administration expenses|**(3)**|(3)|
|Contributions by employer including unfunded|**90**|97|
|Contributions by Scheme participants and other employers|**9**|10|
|Estimated benefits paid plus unfunded net of transfers in|**(287)**|(474)|
|**Closing fair value of plan assets**|**4,583**|3,822|
|**Amounts recognised in statement of comprehensive income**|**31 Mar 2021**|31 Mar 2020|
||**£’000**|£’000|
|Service cost|**50**|91|
|Administration expenses|**3**|3|
|**Amounts charged to operating costs**|**53**|94|
|Net interest (charged to other finance costs)|**74**|77|
|**Total loss**|**127**|171|
|**Re-measurement of net assets**|**31 Mar 2021**|31 Mar 2020|
||**£’000**|£’000|
|Return on Fund assets in excess of interest|**864**|(444)|
|Other actuarial gains|**-**|8|
|Change in financial assumptions|**(1,501)**|630|
|Change in demographic assumptions|**78**|12|
|Experience gain/(loss) on defined benefit obligation|**96**|(9)|
|**Re-measurement of the net assets**|**(463)**|197|
_“... working together to create communities where people want to live”_
_72_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions**
## **Devon County Council Pension Scheme (DCCPF) (continued)**
## **Principal actuarial assumptions:**
|**Financial assumptions**|**31 Mar 2021**|31 Mar 2020|
|---|---|---|
||**% pa**|% pa|
|Discount rate|**1.95**|2.35|
|Future salary increases|**3.90**|2.95|
|Future pension increases|**2.90**|1.95|
|Inflation assumption (RPI)|**3.35**|2.85|
|Inflation assumption (CPI)|**2.90**|1.95|
## **Mortality assumptions**
The post-retirement mortality assumptions adopted to value the benefit obligation at March 2021 and March 2020 are based on the S2PA tables. The assumed life expectations on retirement at age 65 are:
||**31 Mar 2021**|31 Mar 2020|
|---|---|---|
||**no. ofyears**|no. ofyears|
|Males retiring today|**22.6**|22.9|
|Females retiring today|**23.9**|24.1|
|Males retiring in 20 years|**24.0**|24.3|
|Females retiring in 20 years|**25.4**|25.5|
The estimated asset allocation for North Devon Homes as at 31 March 2021 is:
|**Asset breakdown**|**31 March 2021**|**31 March 2021**|31 March 2020|31 March 2020|
|---|---|---|---|---|
||**£000s**|**%**|£000s|%|
|Gilts|**156**|**3**|162|4|
|UK equities|**508**|**11**|509|13|
|Overseas equities|**2,367**|**52**|1,644|43|
|Property|**368**|**8**|360|9|
|Infrastructure|**186**|**4**|165|4|
|Target return portfolio|**431**|**9**|502|13|
|Cash|**47**|**1**|45|1|
|Other bonds|**205**|**4**|200|5|
|Alternative assets|**315**|**7**|235|6|
|**Total **|**4,583**|**100**|3,822|100|
The individual percentages shown are to the nearest percentage point for each asset class and may not sum to 100%.
_“... working together to create communities where people want to live”_
_73_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions (continued)**
## **Social Housing Pension Scheme (SHPS)**
SHPS is a multi-employer, defined benefit scheme. The most recent formal actuarial valuation was completed as at 30 September 2017 and rolled forward, allowing for the different financial assumptions required under FRS102, to 31 March 2020 by a qualified independent actuary.
Under the defined benefit pension accounting approach, the SHPS net deficit as at 31 March 2021 is £2,263k (2020: £995k).
## **Statement of financial position**
|**Net pension asset**|**31 Mar 2021**|31 Mar 2020|
|---|---|---|
||**£’000**|£’000|
|Present value of defined benefit obligation|**9,293**|7,407|
|Fair value of plan assets|**7,030**|6,412|
|**Net defined benefit liability**|**(2,263)**|(995)|
|**Reconciliation of opening and closing balances of the present**||**£’000**|
|**value of scheme liabilities**|||
|**Opening scheme liabilities as at 1 April 2020**||**7,407**|
|Current service cost||**-**|
|Expenses||**8**|
|Interest expense||**173**|
|Actuarial gains due to scheme experience||**(490)**|
|Actuarial losses due to changes in demographic assumptions||**31**|
|Actuarial losses due to changes in financial assumptions||**2,247**|
|Benefits paid and expenses||**(83)**|
|**Closing scheme liabilities as at 31 March 2021**||**9,293**|
_“... working together to create communities where people want to live”_
_74_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions (continued) Social Housing Pension Scheme (SHPS) (continued)**
|**Reconciliation of opening and closing balances of the fair value**|**£’000**|
|---|---|
|**of plan assets**||
|**Opening fair value of plan assets as at 1 April 2020**|**6,412**|
|Interest income|**152**|
|Experience on plan assets (excluding interest)|**339**|
|Contributions by employer|**210**|
|Benefits paid and expenses|**(83)**|
|**Closing fair value of plan assets as at 31 March 2021**|**7,030**|
|**Amounts recognised in statement of comprehensive income**|**2021**|
||**£’000**|
|Expenses|**8**|
|**Amounts charged to operating costs**|**8**|
|Net interest|**21**|
|**Amounts charged to other finance costs**|**21**|
|**Defined benefit costs recognised in statement of comprehensive income**|**29**|
|**Defined benefit costs recognised in other comprehensive**|**31 Mar 2021**|
|---|---|
|**income**|**£’000**|
|Experience on plan assets|**339**|
|Experience gains on the plan liabilities|**490**|
|Effects of changes in the demographic assumptions|**(31)**|
|Effects of changes in the financial assumptions|**(2,247)**|
|**Total amount recognised in other comprehensive income**|**(1,449)**|
_“... working together to create communities where people want to live”_
_75_
**North Devon Homes**
**Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions (continued)**
## **Social Housing Pension Scheme (continued)**
## **Principal actuarial assumptions:**
|**Financial assumptions**|**31 Mar 2021**|31 Mar 2020|
|---|---|---|
||**% pa**|% pa|
|**Discount rate**|**2.21**|2.35|
|**Future Salary increases**|**3.87**|2.55|
|**Future Pension increases**|**2.91**|1.73|
|**Inflation assumption (RPI)**|**3.22**|2.55|
|**Inflation assumption (CPI)**|**2.87**|1.55|
## **Mortality assumptions**
The post-retirement mortality assumptions adopted to value the benefit obligation at 31 March 2021 imply the following life expectancies:
||**31 Mar 2021**|
|---|---|
||**no. ofyears**|
|Males retiring today|**21.6**|
|Females retiring today|**23.5**|
|Males retiring in 20 years|**22.9**|
|Females retiring in 20 years|**25.1**|
_“... working together to create communities where people want to live”_
_76_
**North Devon Homes**
## **Notes to the Financial Statements for the year ended 31 March 2021 (continued)**
## **21 Pensions (continued)**
## **Social Housing Pension Scheme (continued)**
Major categories of plan assets as a percentage of total plan assets
|**Asset breakdown**|**31 March 2021**|**31 March 2021**|31 March 2020|31 March 2020|
|---|---|---|---|---|
||**£000s**|**%**|£000s|%|
|Global equity|**1,120**|**16**|938|15|
|Absolute return|**388**|**6**|334|5|
|Distressed opportunities|**203**|**3**|124|2|
|Credit relative value|**221**|**3**|176|3|
|Alternative risk premia|**265**|**4**|448|7|
|Fund of hedge funds|**1**|**-**|4|-|
|Emerging markets debt|**284**|**4**|194|3|
|Risk sharing|**256**|**4**|217|3|
|Insurance-linked securities|**169**|**2**|197|3|
|Property|**146**|**2**|141|2|
|Infrastructure|**469**|**7**|477|7|
|Private debt|**168**|**2**|129|2|
|Opportunistic illiquid|**179**|**3**|155|2|
|credit|||||
|High yield|**210**|**3**|-|-|
|Opportunistic credit|**193**|**3**|-|-|
|Corporate bond fund|**415**|**6**|366|6|
|Liquid credit|**84**|**1**|3|-|
|Long lease property|**138**|**2**|111|2|
|Secured income|**292**|**4**|243|4|
|Liability driven investment|**1,786**|**25**|2,128|33|
|Net current assets|**43**|**1**|27|-|
|**Total **|**7,030**|**100**|6,412|100|
The individual percentages shown are to the nearest percentage point for each asset class and may not sum to 100%.
## **22 Group Members**
North Devon Homes is the parent undertaking and has one subsidiary being Anchorwood Limited.
## **23 Legislative provision**
The Association is a company limited by guarantee and is registered with the Regulator of Social Housing under the Housing and Regeneration Act 2008.
_“... working together to create communities where people want to live”_
_77_