Information relating to the transfer of housing by Scottish Borders Council to Scottish Borders Housing Association
The three documents (attached below as PDF files) set out the type of assistance which was made available by the Executive. The letters dated 23 March 1999 and 20 November 2000 provide guidance to councils on the pre-transfer costs which may be met by the Executive. Whilst these do not specifically state that assistance will not be recoverable in the event that a housing transfer does not proceed, both set out the circumstances under which assistance will be recoverable, i.e. " in the event of a successful transfer, assistance with start up costs will be recoverable from the acquiring landlord on completion of the transfer". The Department's formal offer of grant to the Council, dated 13 February 2002 reinforces this point.
Letter from the Scottish Executive to Chief Executives of Councils dated 23 March 1999
Letter from the Scottish Executive to Chief Executives of Councils dated 20 November 2000
Letter from the Scottish Executive to Scottish Borders Council dated 13 February 2002
The Scottish Executive only provided funding to assist with the pre-transfer costs associated with the housing transfer. The transfer of the Council's Direct Labour Organisation to Scottish Borders Building Services Ltd (SBBS) did not require the consent of Scottish Ministers and the Executive had no formal role to play in this transaction.
Other than the grant to meet pre-transfer costs which was repaid following transfer, the Executive did not provide funding to Scottish Borders Housing Association (SBHA). The Association's business is funded by tenants' rents and private borrowings. The main public funding in this particular housing transfer comprised a grant from HM Treasury, which went to Scottish Borders Council to redeem the debt remaining in its Housing Revenue Account following the transfer.
SBHA is a Registered Social Landlord (RSL). The RSL regulator, Communities Scotland, is a Scottish Executive agency. The main objectives for the Regulation & Inspection Division include ensuring that:
- regulated bodies provide high quality services, and are open and accountable;
- social justice and equal opportunities for all exist across all aspects of social housing;
- public and private investment in social housing provision is protected;
- value for money is achieved.
To achieve registration with Communities Scotland, a landlord must meet and maintain a rigorous set of performance standards, both financial and non-financial. Further information on the registration and inspection process is available on the Communities Scotland website at:
www.communitiesscotland.gov.uk
As part of the assessment of SBHA's application for registration, Communities Scotland undertook an assessment of version 11 of SBHA's business plan in January 2003. The Regulation and Inspection Division have explained their role in the process as follows:
"We rely on organisations taking appropriate professional advice, and properly scrutinising the assumptions made in the business plan and making provision to manage risks. We do not review decisions properly taken by the board or committee of an organisation, as it is their responsibility to make sure that the business can operate properly. We do assess reasonableness of assumptions, but our primary objective in the assessment is to have assurance and confirmation that our registration criteria are met - that the business plan demonstrates that the landlord will be viable, able to meet funding costs and also deliver promises to tenants.
The results of our assessment of the business plan formed the basis of further discussions with SBHA, and some issues such as funding arrangements were not yet complete. It would therefore be misleading to conclude that all potential risks identified in our assessment are likely to or have crystallised, or that SBHA had not put arrangements in place to manage these risks.
We did not undertake a specific assessment of the Scottish Borders Building Services (SBBS) business plan. This was because:
- SBBS was not to be registered with us;
- Its turnover and costs were mirrored within SBHA's repairs' assumptions as the majority of its business is sourced from SBHA;
- Although a separate company with its own board, as a wholly-owned subsidiary SBBS would be expected to perform in line with targets set by SBHA and would be dependent on SBHA for much of its work and initial funding; and
- The same consultants who prepared SBHA's business plan were working on the SBBS business plan and advising the management committee.
The business plan was prepared by Tribal HCH in conjunction with SBHA's management and committee of management. RSM Robson Rhodes was commissioned by SBHA to undertake a validation of the business plan, which included commenting on SBBS's business plan. As a properly constituted industrial & provident society, it was SBHA's responsibility to ensure that it was satisfied about the information provided, the basis on which assumptions were made, and that it had made all necessary enquiries and carried out proper due diligence in relation to its subsidiary organisation. This included being satisfied that the turnover, on-lending requirements and costs of running SBBS were reasonable and accurate."
Additional Information
Communities Scotland has prepared an extract from its January 2003 assessment of version 11 of SBHA's business plan (the then current version) which lists the potential risks to the business at that point in time. It is important to emphasise that this is simply a snapshot of the business plan at that particular point in time which formed the basis of further discussions with SBHA. Many of these points were dealt with by SBHA prior to transfer and some potential risks have simply not materialised. This assessment and the subsequent discussions informed both Scottish Ministers' consideration of the Council's application for consent to transfer the houses and the Communities Scotland Regulation Board's decision to grant final registration to SBHA.