7  Reporting and Audit Requirements 

7.1  General

7.1.1  The Reporting & Audit requirements apply to all schemes.

7.1.2  For schemes funded under the Specialist Route, the Reporting requirements relating to the relationship between Lead RSL's and Partnership RSLs obviously do not apply.

7.2  Reporting Requirements

7.2.1  The Regional Investment Team and the RSL (Lead) will agree a programme of Quarterly Review Meetings (QRM) throughout the period covered by this PPA. At each QRM the Regional Investment Team and the RSL (Lead) will:

1. Review progress against the agreed targets;
2. Discuss impact assessments, the value for grant comparator and such other issues as either party may think relevant; and
3. Monitor compliance with the method statements submitted and any other obligations assumed as part of the bidding process.

7.2.2  Representation on both sides must be at a senior level in order that decisions and actions can be agreed and implemented immediately if necessary.

7.2.3  Schedules indicating the status of each scheme including output delivery must be provided to the Agency's nominated Lead Investor one week prior to each QRM.

7.2.4  Additional liaison meetings may be called by either the Agency or RSL (Lead) to address any important issues that may arise between QRMs. Representation should include the Agency's Lead Investor together with financial appraisal and/or lead regulation representatives as appropriate.

7.2.5  The RSL (Lead) has the responsibility to provide timely notification to the Agency's Lead Investor of any unresolved problems that:

1. are encountered with complying with the funding conditions or meeting the specified targets;
2. are identified during the self-assessment process and which threaten the objectives set out;
3. indicate shortfall in financial capacity and which affects the ability of the RSL (Lead), or any other participating RSLs, to deliver their obligations.

7.2.6  Where the RSL is acting as the “Lead” for a group of other RSLs that are participating in the delivery and/or management of homes via this PPA, then the RSL (Lead) is responsible for the arrangement of regular delivery review meetings involving all members of the Partnership. These meetings should be planned so that up-to-date information may be reported to the Regional Investment Team at planned QRMs.

7.2.7  During the course of the PPA the Agency's Innovation and Development Managers (IDMs) and/or Advisers (IDAs) will liaise with the RSL (Lead) on technical performance issues and to maintain working relationships with the nominated Design Champion.

7.3  Audit Requirements - PPA

7.3.1 RSLs developing schemes under the PPA arrangements are required to carry out self-assessment procedural compliance tests. In addition a member of the Agency's Innovation and Development team will:

• provide guidance and support to the independent accountant as required; and
• reserve the right to carry out at least one shadowing visit on one of the planned procedural audit visits to monitor the process.
  

7.3.2  RSLs may commission any suitably experienced and qualified accountant to undertake this audit function, including either their External Auditors or external accountants undertaking the RSL’s Internal Audit function

7.3.3  Procedural compliance must be undertaken on a self-assessment basis using an independent auditor operating under the guidance contained in “Technical Release – Audit 03/03, Public Sector Special Reporting Engagements – Grant Claims” (September 2003) published by the Institute of Chartered Accountants of England and Wales (ICAEW).

7.3.4 However, qualified accountants directly employed by the RSL or any other of its RSL partners are excluded as they are not considered to be appropriately independent.
Arrangements where qualified surveyors and/or development consultants are employed by a qualified accountant to act in its name, are acceptable to the Agency on condition that the arrangement maintains the duty of care required by the Agency and the commissioning agreement is between the RSL and the accountant.

7.3.5 As of April 2008 RICS Surveyors can undertake the above audit function in their own right where they are operating in accordance with the relevant Guidance Note (April 2008) published by the RICS.

7.3.6 Exceptionally, any RSL (Lead) wishing to use independent consultants that are not Chartered Accountants must obtain prior approval from the Agency's Procurement section, Investment Division, Headquarters. However, the Agency may elect not to exercise its discretion to approve the use of non-accountants.

7.3.7 The Agency will undertake to become a party to the commission via the “standardised terms of engagement” route utilising agreed upon procedures as set out in Appendix 3 of the ICAEW publication.  The Agency's standardised terms of engagement can be viewed by following the asterisk.  

 

Compliance Checklists can be accessed from the CFG homepage under the related information tab. Please click on the asterisk to go to the homepage.

 

 

 

7.3.8 The RSL (Lead) must commission the independent auditor to undertake a programme of self-assessment procedural compliance tests. The Agency will discuss the scope of the audit and agree a provisional programme at the commencement of the PPA to assist RSLs in planning the arrangements and budgeting to meet these requirements.

Note1:
The HCA reserve the right to request copies of the signed ‘self assessment agreement’ as and when necessary throughout the life of the partnership.

7.3.9 The RSL (Lead) is strongly advised to discuss the principles and planned arrangements for self-assessment with the Regional Investment Team prior to commissioning the independent auditor.

7.3.10 The schemes to be selected for self-assessment performance will be determined by the Regional Investment Team and notified to the Lead RSL and to the commissioned independent auditor prior to the start of the self-assessment process. The scheme addresses will be confirmed 2 to 4 weeks before the audit is to take place.

7.3.11 The Lead Auditor at the Agency will provide the Lead RSL with a Scheme Sample Report listing proposed schemes to be audited. The Scheme Sample Report is part of the Audit Programme Agreement (APA) and must be agreed with the Lead RSL and the Regional Investment Team.  Each financial year a new APA is prepared and submitted to the relevant Lead RSL for agreement for each active partnership as set up in the HC IMS

7.3.12 There will be instances where an RSL is ‘Lead’ for partnerships in different ‘bid years’, i.e. 04-06, 06-08 etc. When this is the case the Regional Investment Team will produce an Audit Programme Agreement (APA) for each active partnership in that  ‘audit year’; this may therefore result in more than one audit programme agreement being issued to  the Lead RSL. 

7.3.13 The Lead RSL must be aware that the audit programmes relating to different bid years need to be kept separate as different rules may apply.

Note 2:
Schemes developed by partners RSLs which have been bid for under the ‘specialist’ route will be audited by the HCA; see Procurement and Scheme  Issues chap 8.

7.3.14 Annual Audit

The Agency expects that there will be an annual audit carried out on a sample of schemes. As the agreement covers a three year period this will generally result in a minimum of at least 4 audits; for example, for a PPA covering the three financial years 08/11 there are likely to be four audits, 08/09, 09/10, 10/11, and 11/12 (to cover the run off of schemes from the previous year). If schemes in year 10/11 were not to finish in 11/12, then further audits maybe required until the programme is complete.

7.3.15 Compliance Audit Management  Process

Procedural compliance audits are expected to be carried out over a 3 to 4 months period within the audit year (this is likely to happen within the period running from June to December).

7.3.16 The Lead RSL is required to notify the Regional Investment Team of the date/s when the independent auditors will commence the audits.

7.3.17 The Regional Investment Team will confirm the addresses of the schemes to be audited 2 to 4 weeks before the audit is due to commence.

7.3.18 Independent Auditor Report

Copies of the subsequently completed Independent Auditor Report (IAR) must be provided to the Regional Investment Team within two months of the last audit visit but not later than the end of December of that audit year, for each financial year and beyond until completion of the schemes contained within the programme. The audit represents a snap shot of the documentation available at the time of the audit. Where information is not available at time of audit this should be recorded as such in the independent auditor report.

Note: the Independent Auditor Report is available as a template document from the HC CFG homepage

7.3.19 Supporting and completed procedural checklists do not need to be submitted to the Agency with the independent auditor report. However the Agency reserves the right to request copies of the completed checklists as and when considered necessary.

Where required, it is recommended that the completed procedural checklists are returned to the HCA Lead Auditor via email. This is to facilitate electronic storage of the checklists.

Note 3:
The individual performance of current lead investment partners is to be one of the prime considerations of pre-qualification for future partner status. Therefore the impact of the Corporation not receiving the independent auditor's report by the due date may find reflection in an adverse development performance assessment.

7.3.20 Identified Deficiencies

Where the Independent Auditors Report highlights deficiencies or shortfall in procedural compliance the RSL (Lead) should submit to the Agency an initial response to these findings within 14 days of receipt of the independent auditor report  setting out the reasons for the deficiencies and the corrective measures being undertaken. Upon receipt of the independent auditor report  and the RSL’s response the Agency will consider the results of the auditor’s factual assessment and form an opinion on the extent that the Agency may be assured that procedures and funding conditions have been complied with, and that public funds have been used for the intended purposes.

NB: If the RSL fails to respond within the 14 days, the Agency will form an opinion based solely upon the independent auditor report without any mitigating considerations

7.3.21 Quality Checks      

As of April 2008 for schemes funded via the Partner Programme Approach (PPA) route, quality compliance will be assessed through a new Quality Assurance & Impact Assessment approach.

7.3.22 Agency Final Audit Report

The Agency will issue a Final Audit Report summarising salient audit findings of the procedural compliance audit  to the Lead RSL within 2 months (eight working weeks) of receiving the independent auditor report.

7.4  Audit Requirements – non PPA

7.4.1  Compliance audit is the process by which the Agency will check the RSL in terms of procedural compliance.  The Agency's Requirements are set out in this Capital Funding Guide.  For comments on compliance audit click on the asterisk.  

 

7.4.2  If a local authority has concerns about a particular scheme they should contact the Regional Investment Team to request that this be included in the next sample of schemes for audit.

7.4.3  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 Agency.  The visit may be combined with a regulatory visit by the Agency, embracing both investment and regulatory issues relating to SHG funded schemes.

7.5 Audit Document File

7.5.1 The RSL should maintain a comprehensive scheme file that contains all relevant documents.  Phased schemes should be identified separately on documentation.  The following list is indicative of the types of documents which will be examined. It is not intended to be a comprehensive listing.

7.5.2 PPA and Specialist RSLs scheme files:

• valuation report for the site/property acquired.  The report should:
  o take account of all the relevant factors affecting the site/property and its development;
  o carry the Valuer’s original signature;
  o clearly identify the site/property which is the subject of the valuation on an accompanying plan endorsed by the valuer;
  o be valid at the date of exchange of purchase contracts;
  o for historic acquisitions the original valuation and a valuation of the property  at Grant Confirmation;
  o 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 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;
• For new build schemes confirmation and copy of submission of Tender Price Index Social Housing data to BCIS. TPISH forms can be found at http://www.bcis.co.uk/ConstructionCosts/Data/TPISH+forms.htm. Please note that the Homes and Communities Agency report on a monthly basis to the BCIS schemes that have started on site, who then monitor the return of forms. The BCIS compile the TPISH data for BERR (formerly DTI)
• SPPA claimed - copy of any Management Agreement between RSL and agency;
• detailed description of Major Repairs and Minor Miscellaneous Works including estimated prices and recent maintenance history, where these documents had not been previously submitted to the Agency;
• 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 that received approval for SHG before April 2008);
• 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.

 

7.5.3  Additional documents required for the Expanded/Open Market 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;

7.5.4  Additional documents required for Key Worker Living 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.

7.5.5  Other 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.

7.5.6 NewBuild HomeBuy

RSLs must retain on file the following for Compliance Audit purposes. 

• certificate of Practical Completion or equivalent. A certificate of Partial Completion is acceptable provided that all the units have been handed over leaving external works to be completed;
• solicitors’ letter confirming that the purchase has been completed and setting out the sum paid and date of completion (except works only schemes);
• latest interim certificate showing actual costs to date;
• where major site development works and VAT are included in the works cost, the final certificate/account in respect of the pre-works and VAT certificates must be provided.  (NB: these figures must together equate to the actual works cost element included in the final costs statement mentioned above);
• a property schedule showing addresses, floor areas, and valuations for the completed properties, together with actual rents and HB eligible service charges. This is populated by valuation and rents so useful;
• 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, e.g. on costs.

7..5.7 Self Build Shared Ownership Schemes

The RSL must ensure that the following supporting documents are kept on file for Compliance Audit purposes:

• details of the individual mortgages being obtained by the self builders or evidence of mortgageability e.g. an in principle offer from building society/bank;
• details that the self builders’ incomes are sufficient;
• (if the self builders do not at the time of the submission have the necessary level of skills to complete the scheme) information on training arranged for the group and details of site supervision;
• evidence that the majority of the self builders are first-time buyers who are unable to afford to purchase outright a home sufficient for their housing needs;
• the cost/value relationship for the scheme is less than 80%  ;
• copy of Membership Details Form. See relevant Section of the Self Build Housing Procedure Guide.
• Self Builders’ Governing Instrument;
• audited accounts (if any);
• Self Build Group’s Certification of Registration issued by the Registrar of Friendly Societies; if not available the RSL must certify that the Registrar’s Certificate is expected to be available within the next three months.