Ascham Homes Limited
Financial Report 2010/11
Appendix 1
COMPANY NO: 04447876
Ascham Homes Limited
(A Company Limited by Guarantee)
ANNUAL REPORT AND FINANCIAL STATEMENTS
Year ended 31 March 2011
1
Ascham Homes Limited
Financial Report 2010/11
Appendix 1
Contents of the Annual Report
Section
Page
Company Information
3
Chair’s Statement
4
Report to the Board
5-7
Operating & Financial Review
8 -10
Report of the Independent Auditor Report to the Members
10 - 12
Income and Expenditure Account
13
Statement of Total Recognised Gains and Losses
14
Balance Sheet
15
Cash Flow Statement
16
Notes to the Financial Statements
17 - 33
2
Company Information
Board
Chair
Paul Lowenberg
Vice Chair
Barry Coppock
Other Members
Kellie Carson
Clare Coghill
Paul Douglas
Grace Igwe
Ahsan Khan
Annie Niner
Foluso Olomolaiye
Liz Ormston
Alan Siggers
Ron Tamcken
Michael Todd
Wendy Wilson
Company Secretary
Sonya Jackson
Executive Management Team
Chief Executive
Deputy Chief Executive
Interim Director of Finance
Madeleine Forster
Jo Murphy
Derek Young
Registered office
Willow House
869 Forest Road
Walthamstow
London E17 4UH
Company number
04447876
PKF (UK) LLP
16 The Havens
Ransomes Europark
Ipswich
Suffolk
IP3 9SJ
Auditor
Bankers
The Co-operative Bank
Hoe Street Branch,
Walthamstow,
London E17 3AN
3
Chair Statement
This year has been a very exciting year for Ascham Homes, with changes at Board and senior
level, and significant progress in delivering our core objectives. I would like to thank both staff and
Board members for their hard work during the year.
Madeleine Forster started as Chief Executive in June 2010, and her Deputy Chief Executive
started in September 2010. Their leadership has brought a clear sense of direction, a focus on
delivery and a positive shift in the culture at Ascham Homes. The Board has also benefited from
some changes, with 1 reappointed resident Board member, and two newly elected resident Board
members, who are making a great contribution to ensuring that the resident voice is heard at
Board meetings.
A number of achievements stand out this year;
We have improved 1,300 homes to the Decent Homes standard, by procuring two contractors,
getting on site by October and working hard together to deliver. By driving efficiencies through the
process we will have been able to carry out works to 1,500 more homes than we had originally
intended and stand on track to complete the decent homes programme in 2012 as originally
predicted. Not only that, but because of our financial efficiencies, we will have completed the final
10% of homes to be made decent without additional government funding.
This year we have negotiated an extension to our repairs and maintenance contract and delivered
£800,000 in efficiency savings from this process. Through these efficiency savings we were able to
deliver significant communal repairs to improve overall estate environments in line with our
residents wishes.
We have defined our service model, and started the organisational restructuring to deliver
neighbourhood management. Our ‘front facing’ services have been reviewed and next year we will
be reviewing all our back office services. The focus for our approach is to prioritise resources on
outcomes for residents, ensuring compliant processes and good financial management, while
creating opportunities for staff to develop and extend themselves. We held a very successful
residents conference during the year, and have received positive feedback on the outcomes we
are achieving.
We have put in place robust risk management arrangements, and are very much focused on the
top risks:
 Securing a new management agreement with the Council at or prior to the end of the
current agreement in April 2013
 Ensuring a satisfactory outcome from the claim relating to the Leasehold Valuation Tribunal
Decision
 Producing in partnership with the Council a sustainable 30 year business plan with the
commencement of the self-financing housing revenue account arrangements in April 2012.
We believe that work is paying off, our reputation is improving, we have had regular ‘good news’
stories published in the press, and councillors and residents groups are keen to work with us. We
have ended the year well placed for the Council to decide to re-negotiate a new contract with
Ascham Homes
Paul Lowenberg
Chair of Ascham Homes
26 September2011
4
Report of the Board
The Board is pleased to present the financial statements of the company for the year ended 31
March 2011.
Principal Activities
Ascham Homes Limited is a local authority controlled company of the London Borough of
Waltham Forest (“The Council”) established with no share capital and limited by guarantee. It
provides a housing management and maintenance service to the Council’s residents and
leaseholders. These activities were delegated to Ascham Homes Limited under section 27 of the
Housing Act 1985 (as amended by the Housing and Urban Development Act 1993). Under the
delegation the company is responsible for the following functions:

Maintenance of the Council’s residential stock including carrying out major works planned
maintenance and responsive repairs and developing partnering arrangements.

Housing management of the Council’s residential stock including estate management,
enforcement of tenancy conditions, leasehold management and repairs ordering;

Financial management including collection of rent and service charges; and

Tenant involvement and community development.
Business Review
The results for the year reveal a deficit of £4,336,408 after taxation, (2009/10: £384,549 deficit).
The Balance Sheet presents a negative revenue reserve position excluding pension liability of
£5,050,893 (2009/10: £200,515). This position arises because of a £5.4m provision which has
been made in the accounts under the requirements of Financial Reporting Standard 12 (FRS 12)
resulting from the London Borough of Waltham Forest’s claim against the Company for financial
loss. This is referred to in more detail in note 20 to the accounts. Without this provision and the
pension liability (FRS 17), the accounts would have shown a surplus of £148,592 for the year
and a revenue reserve position of £349,107.
The Company is able to continue trading as a going concern because:
1. The Council has agreed to meet any deficit arising from the pension liability
2. The Council have made a claim for financial loss but no demand for payment has been
made.
Details about the achievements of the company during the year and future developments are
addressed in the Chair’s Statement on page 4 and the Operating and Financial Review that
follows this report.
In relation to the pension liability our accounts have been prepared in accordance with Financial
Reporting Standard 17. This relates to the assessment of the employer’s liability in respect of the
pension scheme. The impact of this is to increase the deficit on the balance sheet. This position
is not peculiar to Ascham Homes but is common to most Council owned ALMOs, (Arms Length
Management Organisations). The employer’s contribution is regularly reviewed to address this
deficit. Under the signed management agreement, the London Borough of Waltham Forest has
agreed to meet this liability should the Company be liquidated.
5
Directors
The present Board of Directors of the company are set out on page 3. The directors who served
during the year to date were as follows:
Paul Lowenberg (Chair)
Barry Coppock (Vice Chair)
Mark Boisson
Resigned 17.01.11
Margaret Broadley
Resigned 20.05.10
Kellie Carson
Clare Coghill
Appointed 20.05.10
Paul Douglas
Appointed 20.05.10
Grace Igwe
Appointed 09.12.10
Ahsan Khan
Appointed 20.05.10
Mohamed Jiva
Resigned 31.10.10
Annie Niner
Paul Olford
Resigned 13.09.10
Foluso Olomolaiye
Appointed 09.12.10
Liz Ormston
Alan Siggers
Eric Sizer
Resigned 20.05.10
Ron Tamcken
Reappointed 09.12.10
Michael Todd
Peter Woolcott
Resigned 20.05.10
Also assisting the Board is:
Wendy Wilson
(Independent Board Advisor and Chair
of Audit and Risk Committee)
In accordance with the Articles of Association, one resident member and two independent
members will retire by rotation at the forthcoming Annual General Meeting.
Company Secretary
The following served as the company secretary from 22nd December 2009 to date:
Sonya Jackson
6
Management Team
The Senior Management Team who formed the company’s Management Team at 31 March
2011 are listed on page 3. Under authority delegated from the Board, they ensure the Delivery
Plan is achieved as agreed with London Borough of Waltham Forest, and that the Company
complies with financial and other regulatory requirements.
Auditors
A resolution to appoint PKF (UK) LLP as auditor for the next four years was agreed by the Audit
Committee on 1 December 2009 and was proposed and agreed at the annual general meeting.
Under section 487(2) of the Companies Act 2006, PKF (UK) LLP will be deemed to have been
reappointed as auditors 28 days after these financial statements are sent to members or 28 days
after the latest date prescribed for filing the accounts with the registrar, whichever is earlier.
Disclosure of information to auditors
At the date of making this report each of the company’s Board directors, as set out on page 3,
confirm the following:

so far as each director is aware, there is no relevant information needed by the company's
auditors in connection with preparing their report of which the company's auditors are
unaware; and

each director has taken all the steps that they ought to have taken as directors in order to
make themselves aware of any relevant information needed by the company’s auditors in
connection with preparing their report and to establish that the company's auditors are aware
of that information.
Approval
The report of the directors was approved by the Board on 26 September 2011 and signed on its
behalf by:
S. Jackson
Company Secretary
7
Operating and Financial Review
Performance and development
The key performance indicators (KPIs) used to monitor achievement of the company’s key
objectives are set out below. The Board and the London Borough of Waltham Forest agree
targets each year that are designed to manage development and deliver continuous service
improvement.
Performance indicator
Average relet times1
Emergency repairs completed in 24 hours2
Urgent repairs completed in 3 working days2
Routine repairs completed in 21 working days2
Percentage of tenants with more than 7 weeks gross
rent arrears3
Current tenant arrears as a percentage of the annual
debit4
Percentage of rent collected (excl. arrears b/f) 5
Target
2011
23 days
100.00%
99.00%
99.00%
2011
2010
27.6
98.99%
98.54%
98.63%
27.3
98.05%
99.28%
97.03%
7.75%
8.14%
7.77%
4.0%
4.47%
4.80%
100.25%
99.08%
99.59%
Notes to KPIs
1
The average re-let time in days measures the average number of days taken to repair and let
empty homes
2
The repairs completed within timescale indicators measure the number of repairs carried out
within timescale as a percentage of all repairs completed.
3
The percentage of tenants with more than 7 weeks arrears measures the number of tenants in
significant arrears as a percentage of the total number of tenants.
4
The current tenant arrears as a percentage of the annual debit measures the amount of arrears
as a percentage of the total annual rent charges billed.
5
The percentage of rent collected measures the amount of rent collected in the reporting period
as a percentage of the rent due.
Principal risks and uncertainties facing the company
The main uncertainty facing the Company involves claim for financial loss as set out in note 20 to
the accounts.
The current management agreement with the London Borough of Waltham Forest runs out in April
2013. The Council is due to decide whether it wishes to negotiate a new management agreement
with the Company, this decision is essential for the continuation of the Company.
Other key risks facing the company in the coming year include managing within the constraints of
the management fee whilst ensuring that systems, processes and people are in place to continue
to deliver improving services to residents.
We are procuring a new repairs contract during 2011 which will be effective from April 2012. A
large procurement process like this will create opportunities for the Company to gain further
8
efficiencies and set standards in line with residents expectations. The process may also create
some risk in terms of delivery and performance; management recognise these risks and will
manage the risks in line with the Company’s robust risk management strategy.
Efficiency
The company strategy in 2010/11 was to achieve a 3% efficiency savings for the 2011/12 budget
and this was more than achieved with a 4.6% saving primarily through the negotiation of an
extension to 31st March 2012 of the repairs and maintenance contract. The Company has also
agreed to work towards a 15:85 ratio of expenditure between the backoffice functions and front
line services which is currently running at a ration of approximately 19:81. The Efficiency target
for 2011/12 to impact on the 2012/13 budgets is set at 3%.
Corporate Governance
The Board seeks to conduct all its activities in accordance with its core values. In addition to the
company’s Memorandum and Articles of Association the Board has a Code of Governance to
address wider issues of governance and is pleased to report its compliance with this document.
The Board is responsible for the strategic direction and policies of the Company. The day-to-day
management and implementation of the policies is the responsibility of the Chief Executive and
the Management Teams.
The Board is made up of sixteen non-executive directors of the Company of which seven are
voted onto the Board by residents, four are Council nominees and five are independents. A full
list of the directors who served during the year is shown on page 6; as at 31 March 2011 there
were three vacant Board member positions. The two independent Board member vacancies
have subsequently been filled.
The Board met 8 times during the last year. The Board’s four committees met the following
number of times:
Audit (4), Resources (5), Governance and Remuneration (6), and
Performance and Development (6). The Board has now disbanded both the Performance &
Development and Resources Committees and set up a Scrutiny Committee. The functions of the
disbanded committees have been distributed between the new Scrutiny Committee and an
expanded Audit Committee. The Board and committees can obtain specialist advice from time to
time as necessary. Terms of reference set out the remit of each committee.
The Company undertook an independent wide-ranging Governance Review and has
implemented the recommendations to improve its governance arrangements to meet current
best practice. This has enabled the Board to deliver improved strategic direction and lead the
Company to focus and deliver its key priorities and quality services for residents.
Insurance
The Company maintains insurance policies for members of the Board, the staff and the
management team against liabilities in relation to the Company.
Employee HR Strategy
Our vision is to create an environment that enables the Company to help itself through enabling
the potential of all staff, empowering managers to find their own solutions and providing support
when it is needed.
9
Through this empowerment and development, the working conditions are created that will
ensure that staff respond to the challenges of their job and look forward to undertaking their work
within the Company. We have invested in staff communication in order to involve staff in
decision making. Under the new management arrangements we are striving to provide
employees with a definite sense of direction and purpose during 2010/11. The Company has an
excellent tradition on which to build, supported by deep-rooted equalities policies and
procedures. In 2011/12 we will apply for our Investors in People (IiP) accreditation. We will
encourage staff to seek and try different approaches for solving complex problems.
Statement of Directors’ Responsibilities
The directors are responsible for preparing the directors' report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year.
Under that law the directors have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of
the company and of the surplus or deficit of the company for that period. In preparing these
financial statements the directors are required to:




Select suitable accounting policies and then apply them consistently
Make judgments and estimates that are reasonable and prudent
State whether applicable UK accounting standards have been followed subject to any
material departures discussed and explained in the financial statements
Prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the company's transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial
information included on the company's website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements and other information included in
annual reports may differ from legislation in other jurisdictions.
10
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF
ASCHAM HOMES LIMITED
We have audited the financial statements of Ascham Homes Limited for the year ended 31
March 2011 which comprise the profit and loss account, the balance sheet, the cash flow
statement, the statement of total recognised gains and losses and the related notes. The
financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).
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.
Respective responsibilities of directors and auditor
As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial statements. In
addition, we read all the financial and non-financial information in the annual report to identify
material inconsistencies with the audited financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
•
give a true and fair view of the state of the company's affairs as at 31 March 2011 and of
its loss 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.
Emphasis of matter – going concern
In forming our opinion on the financial statements, which is not modified, we have considered the
adequacy of the disclosure made in notes1 and 20 to the financial statements concerning the
company’s ability to continue as a going concern. The company incurred a net loss of
£4,336,408 during the year ended 31 March 2011 after making a provision of £5,400,000 in
respect of the claim made against the Company by the London Borough of Waltham Forest as
described in Note 20. These conditions along with other matters described in those notes
indicate the existence of a material uncertainty which may cast significant doubt about the
company’s ability to continue as a going concern. The financial statements do not include the
adjustments that would result if the company was unable to continue as a going concern. Our
opinion should be read in the context of the disclosures made within Notes 1 and 20.
11
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where 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.
David Eagles (Senior statutory auditor)
for and on behalf of PKF (UK) LLP, Statutory auditors
[Ipswich, UK]
26 September 2011
12
Income and Expenditure Account
For the year ended 31 March 2011
Note
Income
2
Direct costs
2011
£
45,989,111
2010
£
55,973,897
(45,921,287) (51,306,716)
Gross surplus
67,824
4,667,181
Administrative expenses
(4,221,335)
(4,747,654)
Operating Surplus / (Deficit)
(4,221,511)
(80,473)
(1,500)
0
Loss on disposal of fixed asset
Interest receivable and similar income
4
19,751
18,892
Other finance (costs) / income
18
(129,000)
(319,000)
(4,332,260)
(380,581)
(4,148)
(3,968)
(4,336,408)
(384,549)
Surplus / (deficit) on ordinary activities before
taxation
Tax on surplus / (deficit) on ordinary activities
Retained surplus / (deficit) for the year
7
All amounts related to continuing activities
There are no differences between the deficit for the year and its historical cost
13
Statement of Total Recognised Gains and Losses
For the year ended 31 March 2011
Note
2011
£
(4,336,408)
2010
£
(384,549)
18
148,000
(1,288,000)
(4,188,408)
(1,672,549)
(4,188,408)
(1,672,549)
Surplus / (deficit) for the financial year
Actuarial gain / (loss) relating to pension scheme
Total recognised gains / (losses) relating to the
year
Total recognised surplus / (deficit) since the last
annual report
Retained (deficit)/surplus excluding FRS17
For the year ended 31 March 2011
Note
Surplus/(deficit) for the financial year
2011
£
2010
£
(4,336,408)
(384,549)
18
(5,502,000)
(3,769,000)
Actuarial gain / (loss) relating to pension scheme
18
148,000
(1,288,000)
FRS17 pension liability c/f
18
4,439,000
5,502,000
(5,251,408)
60,451
200,515
140,064
(5,050,893)
200,515
FRS17 pension liability b/f
Operation surplus / (deficit) before FRS17
Revenue reserve b/f
Balance sheet revenue reserve before FRS17
14
11
Balance Sheet
At 31 March 2011
Note
2011
£
2010
£
Fixed Assets:
Tangible Assets
8
115,797
165,265
115,797
165,265
232,798
5,823,202
10,333,469
2,044,227
10,566,267
7,867,429
Current Assets:
Debtors
9
Cash at bank and in hand
Creditors: Amounts falling due within one year
10
(10,224,556)
(7,832,179)
Provisions
20
(5,508,401)
0
Net Current Assets
(5,166,690)
35,250
Total Assets less Current Liabilities, being net
assets excluding pension liability
(5,050,893)
200,515
(4,439,000)
(5,502,000)
(9,489,893)
(5,301,485)
(9,489,893)
(5,301,485)
Pension Liability
18
Net Assets / (Liabilities) including pension liability
Reserves:
Revenue Reserves
11
The financial statements were approved and authorised for issue by the Board on 26 September
2011 and signed on its behalf by:
Signed:
Director
15
Cash Flow Statement
For the year ended 31 March 2011
Note
Net cash inflow / (outflow) from operating
activities
Returns on investments and servicing of
finance
Interest received
2011
£
2010
£
15
8,315,026
(638,675)
4
19,751
18,892
(4,148)
(3,968)
(41,387)
(127,705)
8,289,242
(751,456)
Taxation (paid)/receivable
UK corporation tax
Capital expenditure and financial investment
Payments for tangible fixed assets
Increase/(decrease) in cash in the year
16
16
Notes to the Financial Statements
31 March 2011
1.
Accounting Policies
Basis of accounting
The financial statements are prepared under the historical cost convention and in
accordance with applicable accounting standards.
Going Concern
Despite the matter disclosed in Note 20 on Provisions and Contingent Liabilities
concerning the London Borough of Waltham Forest’s claim for financial loss, the financial
statements are prepared on a going concern basis as no demand for payment has been
made.
The main source of income is a management fee received on annual basis from the
Council in line with the approved Management Agreement which extends until 30 April
2013. The level of management fee is negotiated with the Council on an annual basis,
based on the agreed priorities for the forthcoming year. It is recognised that the company
continues to trade on the basis of the continued support from the Council excluding the
legal claim against the Company. The management fee for 2010/11 was £20,925,000
with an additional sum of £1,303,704 from the Council. Total 2009/10 fee was
£21,486,790.
Income
Turnover represents the amounts (excluding value added tax) derived from the provision
of goods and services to customers during the year. All turnover arises in the United
Kingdom. Our main source of income is annual management fee received in equal
instalments on a monthly basis from the Council in line with the approved Management
Agreement. The level of management fee is negotiated with the Council on an annual
basis.
Tangible fixed assets and depreciation
Depreciation is provided evenly on the cost of tangible fixed assets, to write them down to
their estimated residual values over their expected useful lives.
The principal annual rates used for other assets are:
Plant and machinery
Fixtures, fittings and equipment
Vehicles
Computer equipment
25%
25%
20%
33%
Where there is evidence of impairment, fixed assets are written down to recoverable
amount.
Leased assets
Rentals payable under operating leases are charged to the Income and Expenditure
account in the year in which it relates.
17
Development
Development expenditure on the iWorld computer system is written off in the year in which
it is incurred.
Notes to the Financial Statements
31 March 2011
Deferred taxation
Deferred tax is provided, except as noted below, on timing differences that have arisen but
not reversed by the balance sheet date, where the timing differences result in an obligation
to pay more tax, or a right to pay less tax, in the future. Timing differences arise because
of differences between the treatment of certain items for accounting and taxation purposes.
In accordance with FRS 19 deferred tax is not provided on timing differences arising from:
a) revaluation gains on land and buildings, unless there is a binding agreement to sell
them at the balance sheet date; and
b) gains on the sale of non-monetary assets, where on the basis of all available evidence
it is more likely than not that the taxable gain will be rolled over into replacement
assets.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not
that they will be recovered.
Deferred tax is measured at the tax rates that are expected to apply in the periods when
the timing differences are expected to reverse, based on tax rates and law enacted or
substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not
discounted.
Where law or accounting standards require gains and losses to be recognised in the
statement of total recognised surpluses and deficits, the related taxation is also taken
directly to the statement of total recognised gains and losses in due course.
Corporation Tax
Corporation Tax is calculated at the tax rates that are expected to apply in the period of
the financial statements. HM Revenue & Customs guidance BIM58210 states that
arrangements between an ALMO and its Council are not considered as trading activities
and therefore profits and losses incurred as a result, fall outside the scope of Corporation
Tax. Accordingly, no provision for Corporation tax has been made in the financial period.
Profits generated from trading with third parties, including interest receivable are subject
to Corporation tax within one year.
Pensions
The company operates a defined benefit pension scheme. The assets of the scheme are
invested and managed independently of the finances of the company. Pension costs are
assessed in accordance with the advice of an independently qualified actuary. Costs
include the regular cost of providing benefits, which it is intended should remain a
substantially level percentage of current and expected future earnings of the employees
covered. Variations from the regular pension costs are spread evenly through the profit and
loss account over the average remaining service lives of current employees.
The operating costs of providing retirement benefits to participating employees are
recognised in the accounting periods in which the benefits are earned. The related finance
costs, expected return on assets and any other changes in fair value of the assets and
18
liabilities, are recognised in the accounting period in which they arise. The operating costs,
finance costs and expected return on assets are recognised in the profit and loss account
with any other changes in fair value of assets and liabilities being recognised in the
statement of total recognised gains and losses.
During the year it was announced by the Government that future pension increases are to
be linked to the Consumer price Index (CPI) rather then the Retail price Index (RPI). This
has given rise to a past service gain within theses financial statements, and a consequent
reduction in the year end liabilities.
19
Notes to the Financial Statements
31 March 2011
2.
Income
The company’s income arose wholly in the United Kingdom.
3.
Capital Income
2011
£
22,502,902
2010
£
33,073,330
Revenue Income
23,486,209
22,900,567
Total Income
45,989,111
55,973,897
Operating Surplus/ (Deficit)
Operating surplus/ (deficit) is arrived at after charging:
2011
£
2010
£
Operating lease rentals:
- land, vehicle and buildings
0
17,138
20,010
15,990
0
1,500
93,107
87,529
Fees payable to the Company’s auditors for:
- the audit of the financial statements
- Taxation services during financial year
Depreciation of tangible fixed assets
4.
Interest Receivable
2011
£
Bank interest
19,751
20
2010
£
18,892
Notes to the Financial Statements
31 March 2011
5.
Employees
Average number of employees:
2011
£
2010
£
Chief Executive
1
1
Chief Executive’s Office
1
1
51
42
Operations
0
86
Property & Investment
0
82
Housing Management
63
0
Asset Management
48
0
Customer Services
28
0
192
212
Finance, Legal and Business Transformation
There was a company restructure which took effect from July 2010. Most functions of the
old Operations division moved to Housing Management, with the rent collection function
moving to Finance. Most functions of the old Property & Investment division moved to
Asset Management, with the Right to Buy and Leasehold Services function moving to
Finance. The previous Customer Service function within the old Property & Investment
division was established as a separate division along with some functions from the
Operations and Resources and Legal divisions. The old Resources and Legal division
has been separated into Finance, Legal and Business Transformation departments.
Staff costs, including directors:
2011
£
5,558,946
2010
£
6,437,106
Social Security costs
466,924
510,884
Other pension costs
556,382
646,000
6,582,252
7,593,990
Wages and salaries
6.
Directors’ Remuneration
From November 2009 the Company recruited a paid Chair. The sum paid to 31st March
2011, including expenses, was £10,536 (2010: £3,591). The directors of the Company
are defined as being members of Ascham Homes Limited’s main Board. None of the
other directors received any remuneration such as salary, bonuses, commission or
benefits in kind, during the year. They were entitled to reimbursement for incidental
expenses incurred when attending Board meetings and other formal events in their
capacity as Board members. These expenses totalled £1,574 (2010: £5,192).
21
Notes to the Financial Statements
31 March 2011
7.
Taxation
Taxation charge for the year
The taxation charge for the year is analysed below:
2011
£
2010
£
Current taxation:
United Kingdom Corporation Tax
4,148
3,968
Tax on (deficit)/surplus ordinary activities
4,148
3,968
Current tax reconciliation
The current tax charge is lower than the standard rate of corporation tax in the UK.
Reconciliation is shown below:
2011
£
Surplus / (Deficit) on ordinary activities before
taxation
Theoretical tax at UK corporation tax rate of
28% (2010: 28%)
Effects of:
- Non-taxable (profits)/non-allowable losses
of mutual trading
- Small companies relief
22
2010
£
1,176,141
(380,581)
329,319
(106,563)
(323,788)
111,853
(1,383)
(1,322)
4,148
3,968
Notes to the Financial Statements
31 March 2011
8.
Tangible Assets
Plant and
Vehicles
Office
Furniture and
Equipment
Total
£
£
£
Computer
Equipment
Machinery
£
£
345,869
118,997
73,157
39,151
577,174
Additions
22,669
18,892
0
3,578
45,139
Disposals
0
0
(3,750)
0
(3,750)
368,538
137,889
69,407
42,729
618,563
At 1 April 2010
299,823
54,694
41,836
15,556
411,909
Charged in year
37,306
31,380
13,881
10,540
93,107
0
0
(2,250)
0
(2,250)
337,129
86,074
53,467
26,096
502,766
At 31 March 2011
31,409
51,815
15,940
16,633
115,797
At 31 March 2010
46,046
64,303
31,321
23,595
165,265
Cost
At 1 April 2010
At 31 March 2011
Depreciation
Eliminated on Disposal
At 31 March 2011
Net book value
9.
Debtors
2011
£
40,918
2010
£
18,361
Other Debtors
Amounts due from parent undertaking
(London Borough of Waltham Forest)
CIS25 Withholding Tax
77,528
65,391
93,864
5,649,976
2,794
2,627
Prepayments & accrued income
50,449
86,847
(32,755)
0
232,798
5,823,202
Trade Debtors
Provision for Bad Debts
23
Notes to the Financial Statements
31 March 2011
10.
Creditors: Amounts Falling Due Within One Year
Trade Creditors
Amounts due from parent undertaking
(London Borough of Waltham Forest)
Corporation Tax
VAT payable
Other taxation and social security
Accruals and deferred income
11.
2010
£
3,516,472
49,721
865,100
2,730
2,549
1,653,142
740,802
132,589
218,315
7,747,152
2,488,941
10,224,556
7,832,179
Revenue Reserve
2011
£
(5,301,485)
2010
£
(3,628,936)
Surplus / (Deficit) for the year
Actuarial gain/(loss) relating to pension
scheme
(4,336,408)
(384,549)
148,000
(1,288,000)
At 31 March 2011
(9,489,893)
(5,301,485)
5,050,893
200,515
Pension liability
(4,439,000)
(5,502,000)
Revenue reserve including pension liability
(9,489,893)
(5,301,485)
2011
£
(5,301,485)
2010
£
(3,628,936)
Total recognised deficits relating to the year
(4,188,408)
(1,672,549)
Closing total funds
(9,489,893)
(5,301,485)
At 1 April 2010
Revenue reserve excluding pension liability
12.
2011
£
639,222
Reconciliation of movements in funds
Opening total funds
24
Notes to the Financial Statements
31 March 2011
13.
Related Party Transactions
Ascham Homes Limited is a London Borough of Waltham Forest (LBWF) controlled
company established with no share capital and limited by guarantee. The Council has
delegated responsibility for overseeing the management and maintenance of its
residential stock to Ascham Homes Limited in accordance with a ten-year management
agreement effective from 1st May 2003. The Council pays the company a monthly
management fee in accordance with the agreement and any variations subsequently
approved. In 2010/11 the total management fee for the year amounted to £22,228,704
(2009/10 £21,486,790).
The company undertakes capital works projects on behalf of the Council. The costs of
these works are recharged to the Council, with both the costs and the corresponding
income being recognised in the Income and Expenditure account. In 2010/11 these
capital works amounted to £22,502,902 (2009/10 £33,073,330).
Ascham Homes Limited currently utilises the Council’s Rent Accounting and Property
System (Northgate iWorld).
Amounts due from LBWF to Ascham Homes Limited at the year-end of 2010/11
amounted to £93,864; (2009/10: £5,649,976). Ascham Homes Limited’s indebtedness to
LBWF at the end of 2010/11 was £49,721 (2009/10: £865,100) for the provision of
support and other ancillary services. Deferred income value included in creditors
£1,028,047 relates to unused capital monies received from LBWF in 2010/11.
14.
Financial Commitments
Operating lease commitments
The payments, which the company is committed to make in the next year under
operating leases, are as follows:
2011
£
Land and buildings, leases expiring:
- After five years
Vehicles, leases expiring:
- After one year
Total operating lease commitments
25
2010
£
6,000
6,000
0
17,138
6,000
23,138
Notes to the Financial Statements
31 March 2011
15.
Reconciliation of Operating Surplus To Net Cash Inflow From Operating Activities
2011
£
(4,221,511)
2010
£
(80,473)
Asset Disposals
(3,750)
0
Depreciation
93,107
87,530
(Increase) / Decrease in debtors
5,590,404
814,154
Increase / (Decrease) in creditors
2,392,377
(1,585,886)
Pension contributions
(676,000)
(520,000)
768,000
546,000
Pension past costs / (gain)
(1,295,000)
100,000
Pension Curtailment Costs
158,998
0
Provisions
5,508,401
0
Net cash outflow from operating activities
8,315,026
(638,675)
Operating (deficit) / surplus
Pension current service costs / (gain)
16.
Analysis of Net Cash Flow to Movement in Net Funds
Increase / (Decrease) in cash in the period
2011
£
8,289,242
2010
£
(751,456)
Net funds at 1 April 2010
2,044,227
2,795,683
10,333,469
2,044,227
Net funds at 31 March 2011
26
Notes to the Financial Statement
31 March 2011
17.
18.
Analysis of Changes in Net Funds
Cash flows
Cash at bank and in hand
At 1 April
2010
2,044,227
8,289,242
At 31
March 2011
10,333,469
Net funds at 31 March 2011
2,044,227
8,289,242
10,333,469
Pensions
Ascham Homes Ltd participates in the Local Government Pension Scheme. The Local
Government Pension Scheme is a defined benefit scheme based on final pensionable
salary.
The last valuation was carried out as at 31 March 2010, and has been updated by
independent actuaries to the London Borough of Waltham Forest Pension Fund (the
Fund) to take account of the requirements of FRS17 in order to assess the liabilities of
the Fund as at 31 March 2011. Liabilities are valued on an actuarial basis using the
projected unit method, which assesses the future liabilities discounted to their present
value.
Future pension increases are to be linked to the Consumer price Index (CPI) rather then
the Retail price Index (RPI). This has given rise to a past service gain within theses
financial statements, and a consequent reduction in the year end liabilities.
The contributions by Ascham Homes Limited for the year ended 31 March 2011 were
£676,000 (2009/10: £520,000) at a contribution rate of 13.0% (2009/10: 11.8%) of
pensionable salaries. The results of the actuaries valuation in March 2010, set the
employers contribution rate for 2011/12 at 13.01%.
The company expects to contribute £560,000 to its defined benefit scheme in 2012.
27
Notes to the Financial Statements
31 March 2011
18.
Pensions (contd)
Assumptions used by the actuary at the balance sheet date were:
Discount rate
2011
% per
annum
5.50%
2010
% per
annum
5.60%
2009
% per
annum
7.10%
Rate of increase in salaries
4.40%
4.80%
4.80%
Rate of increase in pensions in payment
2.90%
3.30%
3.30%
Rate of inflation (RPI)
3.40%
3.30%
3.30%
Rate of inflation (CPI)
Proportion of employees opting to take a
commuted lump sum
2.90%
N/A
N/A
50%
50%
50%
Life expectancy assumptions on retirement at age 65 are (based on PA92mc
tables):
Males
2011
2010
Current Pensioner
Future Pensioners
Females
2011
2010
21.3
years
20.4
years
24.1
years
23.2
years
22.7
years
21.3
years
25.6
years
24.1
years
Long term expected rates of return on assets
Equities
2011
7.50%
2010
5.60%
2009
7.50%
Bonds
5.10%
5.20%
6.00%
Property
6.50%
6.50%
6.50%
Cash/Liquidity
0.50%
0.50%
0.50%
Other
7.50%
7.50%
7.50%
2011
£000
2010
£000
2009
£000
Equities
13,921
12,346
7,802
Bonds
Property
2,335
2,321
1,386
898
938
1,163
Cash
269
230
380
Other
539
625
447
Total
17,962
16,460
11,178
Assets are valued at mid–market value, and comprise of:
The proportions of total assets held in each asset type, shown above, reflect the
proportions held by the Fund as a whole at 31 March 2011.
28
Notes to the Financial Statements
31 March 2011
18.
Pensions (contd)
Net Pension Liability
2011
£000
Benefit obligation at end
of period
Fair value of planned
assets at end of period
Ascham Homes Ltd deficit
in the Fund
2010
£000
2009
£000
2008
£000
2007
£000
(22,401)
(21,962)
(14,947)
(17,291)
(16,200)
17,962
16,460
11,178
14,174
14,970
(4,439)
(5,502)
(3,769)
(3,117)
(1,250)
2009
£000
2008
£000
2007
£000
(677)
(788)
Analysis of amount charged to operating profit
2011
£000
Current service cost
(17.8% of pensionable
payroll, 13% 2010)
Past service gains
Past service curtailment
Total operating
(charge)/credit
2010
£000
(768)
(546)
(822)
1,295
(100)
-
(231)
(159)
-
-
-
368
(646)
(822)
(71)
-
(908)
(859)
2008
£000
2007
£000
996
816
Analysis of amount credited to other finance income
2011
£000
Expected return on
pension fund assets
Change in pension fund
assets
Change in benefit
obligations
Interest on pension
scheme liabilities
2010
£000
2009
£000
1,106
754
984
-
-
3
-
-
(45)
(1,235)
(1073)
(1079)
(890)
(778)
(129)
(319)
(137)
106
38
Analysis of actuarial gains and losses recognised in the statement of total
recognised surpluses and deficits
2010
£000
Actual return less
expected return on
pension scheme assets
Experience gains and
(losses) arising on
scheme liabilities
Changes in assumptions
underlying the present
value of scheme activities
2010
£000
2009
£000
2008
£000
2007
£000
296
4,213
(4,378)
(2,211)
(148)
(5,501)
4,221
1,119
-
-
-
(364)
978
148
(1,288)
(157)
(1,456)
1,068
29
90
Notes to the Financial Statements
31 March 2011
18.
Pensions (contd)
Movement in deficit during the year
Deficit in scheme at beginning of year
2011
£000
2010
£000
(5,502)
(3,769)
Movement in year:
Current service cost
(768)
(546)
Employer contributions
676
520
Past service/curtailment/settlement (loss)
1,136
(100)
Net Interest/Return on Assets
(129)
(319)
148
(1,288)
(4,439)
(5,502)
2011
£000
2010
£000
16,460
11,178
1,106
754
Employer contributions
676
520
Members contributions
291
295
Actuarial gain/(loss)
296
4,213
(867)
(500)
17,962
16,460
Actuarial loss
Deficit in scheme at end of year
Analysis of movement in the fair value of the scheme assets
Fair value of plan assets at beginning of period
Expected return on planned assets
Benefits/Transfers paid
Fair value of plan assets at end of period
30
Notes to the Financial Statements
31 March 2011
18.
Pensions (contd)
Analysis of movement in the present value of the scheme liabilities
2011
£000
Benefit obligation at beginning of period
2010
£000
21,962
14,947
768
546
1,235
1,073
Curtailment Costs
159
-
Members contributions
291
295
(1,295)
100
148
5,501
(867)
(500)
22,401
21,962
Current service cost
Interest on pension liabilities
Past service cost / (gain)
Actuarial loss/(gain)
Benefits/Transfers paid
Benefit obligation at end of period
History of experience gains and losses
2011
£000
2010
£000
2009
£000
2008
£000
2007
£000
Difference between the expected and actual
return on scheme assets
Amount (gain)/losses
(296)
(4,213)
(4,378)
(2,211)
90
Percentage of scheme assets
1.6%
25.6%
39.2%
15.6%
0.6%
276
5,501
4,221
1.119
-
1.2%
25.0%
28.2%
6.5%
0%
148
(1,288)
(157)
(1,456)
1,068
0.7%
5.9%
1.10%
8.4%
6.6%
Experience (gains) and losses on
scheme liabilities
Amount
Percentage of present
scheme liabilities
value
of
Total amount recognised in statement of
total recognised gains and( losses)
Amount
Percentage of present value of
scheme liabilities
Commutative actuarial gains/(losses) for the last 5 years are (£1,685,000).
31
Notes to the Financial Statements
31 March 2011
19. Parent Undertaking
The Company is a local authority controlled company within the meaning of Part V of the
Local Government and Housing Act 1989, being a Company under the control of London
Borough of Waltham Forest; a copy of the Consolidated Accounts can be obtained from
London Borough of Waltham Forest and copies are readily available from the Director of
Finance, London Borough of Waltham Forest, Waltham Forest Town Hall, Forest Road,
Walthamstow, London E17 4JF
The Directors consider that London Borough of Waltham Forest is the ultimate controlling
party.
20. Provision for liabilities
Staff
£000
1 April 2010
Other
£000
Total
£000
0
0
0
Arising during the year
108
5,400
5,508
Utilised during the year
0
0
0
108
5,400
5,508
31 March 2011
The London Borough of Waltham Forest has brought a claim for financial loss against
Ascham Homes arising from Ascham Homes' alleged breach of contract and /or negligence
in failing to properly conduct resident consultation procedure under Section 20 of the
Landlord and Tenant Act 1985. The allegations of breach of contract and /or negligence are
not admitted. In accordance with FRS 12 the Company has set aside a provision of £5.4m
in the 2010/11 financial accounts for the potential liability resulting from the claim. As a
present obligation has been created, Ascham Homes is bound to set aside the provision in
accordance with accounting regulations; the present obligation does not compromise
Ascham Homes' Going Concern status and will continue to be treated this way until an
immediate legally enforceable demand for the monies is made to Ascham Homes by the
London Borough of Waltham Forest.
Ascham Homes' insurers, Zurich Insurance plc, have agreed to indemnify Ascham Homes in
respect of any legal liability to pay damages and legal costs as a result of a negligent act,
accidental error or accidental omission. Zurich Insurance plc has confirmed that the breach
of contract claim would be excluded from the insurance policy. The claims in negligence
and contract allegedly give rise to the same loss. The allegations of breach of contract and
/or negligence are not admitted. In the event that the claim in negligence fails but the London
Borough of Waltham Forest are successful in a claim in contract, then it is unlikely Ascham
Homes will be in a position to meet the majority of any subsequent liability with consequent
impact on the ability of Ascham Homes to continue as a going concern.
Staff Liabilities
This provision relates to 2 employment tribunal cases that were settled shortly after the year
end
32
21. Contingent Liabilities
As at 31 March 2011 the Company was involved in 5 Employment Tribunal cases. It is not
possible to reliably estimate the financial effect of the claims and the timing of any potential
outflow of monies is uncertain.
33