COMPLIANCE AUDIT

1 Introduction

2 Method of audit

3 Audit documents

4 Result of audit

1 INTRODUCTION

1.1 Compliance audit is the process by which the Corporation will check the quality of schemes developed by the RSL and procedural compliance.  The Corporation’s requirements are set out in the Capital Funding Guide and Scheme Development Standards (SDS).

1.2 The purpose of the audit will be to verify that all requirements and the Funding Conditions have been met, and that the RSL has properly exercised its responsibilities as set out elsewhere in this procedure guide, and with SDS.

1.3 Compliance audit does not reduce the responsibility of the RSL and the Corporation to ensure that the costs in any claim for SHG are appropriate and have been properly incurred.

1.4 If a local authority has concerns about a particular scheme they should contact the local office of the Corporation to request that this be included in the next sample of schemes for audit.

1.5 Challenge Fund schemes and schemes funded via the Partner Programme Approach (PPA) route are subject to Corporation scrutiny in regards to their Quality compliance only.  These schemes must still comply with Corporation’s Procedural requirements but RSLs will self-regulate.  A certification is required to be completed by an independent suitably qualified, experienced and professionally indemnified consultant or auditor on Challenge Fund and PPA schemes.

2 METHOD OF AUDIT

2.1 SDS are the basis of the standards in development within the general Social Housing Standard expected by the Corporation.  Where the RSL has stated that the scheme includes SDS ,  Egan compliance, other quality criteria etc., these additional standards will be checked as part of the compliance audit.
 
2.2 RSLs with a SHG a specialist funded programme, can expect a Compliance Audit visit every two years, or more frequently at the discretion of the Corporation.  The visit may be combined with a regulatory visit by the Corporation, embracing both investment and regulatory issues relating to SHG funded schemes.

3 AUDIT DOCUMENTS

3.1 The RSL is expected to maintain a comprehensive scheme file that contains all relevant documents.  Phased schemes must be identified separately on documentation.  The following list is indicative, but not comprehensive, of the types of documents which will be examined:

• valuation report for the site/property acquired.  The report should:
   take account of all the relevant factors affecting the site/property and its development;
   carry the Valuer’s original signature;
   clearly identify the site/property which is the subject of the valuation on an accompanying plan endorsed by the valuer;
   be valid at the date of exchange of purchase contracts;
   for historic acquisitions the original valuation and a valuation of the property  at Grant Confirmation;
   be unfettered of any s106 requirements.
• where vendor is a local authority - letter from authority endorsing valuation;
• confirmation from the RSL’s solicitor of the dates of exchange of purchase contracts and of completion, the purchase price paid and a comprehensive report on title;
• documentary evidence to indicate that the procurement arrangements used agree with arrangements and procedures approved by the RSL’s Governing Body;
• where the RSL is to meet the cost of any non-qualifying costs, documentary evidence that the Governing Body resolved to commit the necessary resources;
• where the scheme involves a non-housing element the RSL must maintain on file a funding profile showing that SHG is not being used to finance non-qualifying items;
• where the RSL is receiving any other subsidy the RSL must maintain on file a funding profile showing that SHG is not being received in respect of costs subsidised by any other body;
• where capital contributions to the scheme from other sources, including other public sources, are involved, confirmation of the amounts on offer and the sources of funding should be retained, including any correspondence with the third party (parties);
• s106 - full details of off-site works required by vendor or obligations imposed by the local authority;
• s106 - detailed estimated costs associated with s106 works;
• surveys, drawings, specifications, specialist and other consultants’ reports;
• terms of appointment of consultants;
• evidence of the basis of selection of consultants and building contractor;
• copies of the building contract document and final account documentation;
• TSH schemes - copy of lease/licence agreement;
• TSH schemes where a lease from a local authority was not signed before the start on site - a letter from the local authority confirming their agreement to lease, written confirmation from the RSL’s solicitor that the local authority’s letter is legally binding and copies of the relevant pages of the draft lease;
• TSH schemes - local authority agreement to rents above prospective rents;
• planning permissions, building regulations approval and any other statutory consents;
• details of the insurance of the property during construction and following completion;
• sale valuations (Sale schemes only);
• details of prospective rents must be documented on the RSL’s development files;
• copy of leases (Shared Ownership only);
• certificate of Practical Completion;
• copy of the latest certificate relevant to SHG claimed at Final Cost stage;
• for major site development works and VAT - final certificate/account in respect of the pre works and VAT certificates equating to the actual works costs above;
• Consultant’s estimate of final works costs and, where appropriate (Design and Build and Package Deals, etc) a separate estimate of the non-works elements, eg on costs;
• SPPA claimed - copy of any Management Agreement between RSL and agency;
• detailed description of Major Repairs and Miscellaneous Works including estimated prices and recent maintenance history, where these documents had not been previously submitted to the Corporation;
• written confirmation from the appropriate Social Services authority, general practitioner or other suitably qualified professional that works are necessary and appropriate to the need of the individual concerned (Aids and Adaptation schemes only);
• for charitable RSL’s that have claimed SHG to cover VAT - a letter from Customs & Excise or the RSL’s professional adviser confirming that the supply cannot be zero rated;
• Rural Repurchase - record of surpluses made on staircasing transactions.

ADDITIONAL DOCUMENTS REQUIRED FOR THE HOMEBUY PROGRAMME
 
The RSL must keep on file all relevant documentation, in particular:

• a copy of the tenant’s application form;
• evidence of the purchase price;
• evidence that the applicant has been nominated by the local authority (where the applicant was on the waiting list of either the RSL or local authority);
• evidence of exchange of contracts;
• a copy of the buyer’s legal representatives undertaking to secure the RSL loan;
• a copy of the charge certificate as evidence the loan has been secured;
• evidence that a household in priority housing need has been directly or indirectly housed;
• where a RSL or local authority property has been vacated and the relet is not to a local authority nominee, written confirmation from the local authority that it could not provide a suitable nomination;

ADDITIONAL DOCUMENTS REQUIRED FOR KEY WORKERS PROGRAMME

Intermediate Rent Schemes

• copies of all promotional literature and information booklets;
• copies of all correspondence with employers and sponsoring local authorities;
• copies of desk instructions for RSL staff responsible for prioritising applicants;
• details of applicants who have benefited from the scheme in terms of occupation, household income etc;
• similar details for rejected applicants;
• ethnic origin of applicants and those who are successful;
• the RSL’s assessment of accepted and rejected applications;
• details of tenants who cease to be entitled and the treatment of this by the RSL. 

Home Ownership Schemes

• copies of all promotional literature and information booklets;
• copies of all leases, covenant and legal charges;
• copies of all correspondence with employers and sponsoring local authorities;
• Solicitor’s correspondence confirming dates of purchase completions and purchase prices;
• copies of desk instructions for RSL staff responsible for prioritising applicants;
• details of purchasers who have benefited from the scheme in terms of occupation, household income etc;
• similar details for rejected applicants;
• ethnic origin of applicants and purchasers;
•  the RSL’s assessment of accepted and rejected applications;
• details of grant repaid by purchasers on disposal or other event and the treatment of this by the RSL;
• details of any surpluses arising from KWHO and the treatment of this by the RSL.

4 RESULT OF AUDIT

4.1 Subject to any delay caused by missing documents the Corporation will write to the Chair of the RSL, copied to the Chief Executive, within 20 days of the last day of the visit giving:

• a brief summary of the main points raised in the attached detailed report, referring to any shortfalls found, and noting where the RSL significantly exceeds standards;
• a request for a suitable response to any recommended remedial action, with a time limit for any recommended action;
• a time limit for the response to this letter, usually being two months from the date of the letter; and
• a request that the report be brought to the attention of the Board of Management of the RSL.

4.2 Further action by the Corporation following an audit will depend upon the nature and extent of any weaknesses revealed.  Where significant deficiencies are identified, this may result in a reduction or cancellation of the Corporation’s financial support to the RSL or the instigation of the Corporation’s statutory powers to supervise and control RSLs.

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