Guidance

2023 to 2024 Compliance Audit checklist for schemes not delivered through Strategic Partnerships contracts (accessible version)

Updated 21 June 2023

Applies to England

Relevant programmes: 2015-18 AHP, 2016-21 SOAHP, 2021-26 AHP, CASSH, Move On Fund, Next Steps/Rough Sleeping Accommodation Programme-2021-24

For use by ‘Independent Auditors’ undertaking self-assessment compliance audits under Affordable Homes Programme and Shared Ownership and Affordable Homes Programme Contracts.

Applies to  schemes not delivered through Strategic Partnership contracts.

This checklist is to ensure that requirements and funding conditions for AHP (Affordable Homes Programme) contracts have been met according to the Capital Funding Guide (CFG). All audits are undertaken online through the Compliance Audit system. This document is for information only and is not intended to be used to record or submit information regarding any audit. All questions will require a yes or no answer and additional explanatory text to clarify the full details.

Please note the numbers below will not correspond with the numbers of the questions presented in the audit compliance system for individual schemes selected for audit.

General questions

1: Has a comprehensive scheme file (or equivalent) been provided containing all relevant documents as set out in the CFG?

If no, please provide details of what documents are missing.

Auditor notes

Check for documentation omissions e.g. dated valuation, consultants appointment etc.

NB: attachments are required only to support specific audit findings or to evidence any mitigating circumstances. There is no requirement to upload complete scheme file as a matter of course.

For more information, read section 7.3.4 in the Capital Funding Guide - 6. Programme Management: Reporting and audit requirements.

2: Does key cost data (acquisition and works costs only) entered in the system, along with any updates, match scheme file evidence at the time of each grant claim?

Auditor notes

Check final cost information in system against supporting filed evidence to confirm accuracy of data entry and eligibility of costs. (Record detail, e.g. dates and payments from screen data).

System should match the cost figures known at time of scheme handover/final claim; and the evidence on file should support the figures entered into the system. Once costs are finalised (which could be months later) differences can be recorded in the Scheme Comment on the system.

Data should be kept up to date and accurate at all stages of development, so far as is reasonably practicable.

For more information, read section 3 in the Capital Funding Guide - 6. Programme Management: Scheme administration and data collection.

3: Was planning permission free from condition(s) that would make development ineligible for grant funding?

If no, please provide details.

Auditor notes

For more information, read section 7.2 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Planning Permission and Building Regulations.

4: Where required, were other specified consents obtained for the relevant works?

If no, please explain the reasons, or select “No other specified consents applied” as appropriate.

Auditor notes

Check if other consents apply and if they were obtained e.g. party wall award, listed building consent, permission to demolish, Environment Agency remediation plan etc.

5: Where there is documented evidence of factors that may adversely affect mortgageability, have relevant expert reports been obtained and where applicable has necessary warranty been documented?

If there is no documented evidence of factors, select “There is no documented evidence of factors that may adversely affect mortgageability”.

If there is documented evidence and relevant expert reports have been obtained/warranty been documented select yes and provide an explanation of what these factors were and how the risks associated with them were mitigated.

For example:

• NHBC (National House Building Council) Buildmark certification/equivalent
• valuation
• structural report
• site investigation
• solicitor’s report
• indemnity insurance

If there is documented evidence and relevant expert reports have not been obtained/warranty been documented select no and provide an explanation of what these factors were, and risks associated with them.

Auditor notes

Check filed documentation, noting which documents have been seen and their date.

House builder warranties/CML (Council of Mortgage Lenders) cover notes must be available on completion.

This question applies equally to both look-back and in-year schemes.

Attachments are required only to support specific audit findings or to evidence any mitigating circumstances.

For more information, read section 2.2. in the Capital Funding Guide - 9. Procurement and Scheme Issues: Procurement.

6: Where there are variations to agreed submitted standards, have these been authorised by Homes England?

If no, please explain the reasons, or write “No variation requests” as appropriate.

Auditor notes

Check files against submitted and agreed standards in IMS (Investment Management System) to ensure that any variations have been agreed by Homes England. Please specify:

• documentation seen
• authoriser
• date of authorisation
• details of agreement (including reasons for variation)

For more information, read section 3 in the Capital Funding Guide - 6. Programme Management: Scheme administration.

Development questions

7: For owned and leased properties, has the provider obtained secure legal interest in the name of the grant recipient, as defined in the grant agreement/CFG (see 10. Finance: section 3.1)

The provider must obtain secure legal interest prior to first grant claim.

If no, please provide details.

Auditor notes

For owned properties: Check exchange/completion dates of purchase contracts. Check for solicitor based evidence that completion has taken place at the agreed sum and confirmation is dated post completion. Are completion certificates or proof of ownership dated before first grant claim?

For lease properties: Check for solicitor’s written confirmation that any letter is legally binding and the term of the lease is in accordance with published guidance.

For lease and repair properties, ensure the lease covers a minimum five-year term. Was a lease signed on agreed terms before first grant claim? If not, confirm in comments section if there was a legally binding letter confirming agreement to lease.

For Empty Homes, ensure grant recovery rules fully applied and check that solicitor has confirmed a grant recovery mechanism within the lease.

Please note that, where the first grant claim is an acquisition tranche, the provider will need to have the freehold or long leasehold interest, not merely a conditional interest, prior to drawing down grant.

For more information, read section 3.1 in the Capital Funding Guide - 10. Finance: Grants claims and payments. This includes guidance as to the definition of secure legal interest and provisions covering where providers do not own the land.

8: Does the land/property have either of the following?

• ‘good title’ as defined in the CFG section 5.3 in the Capital Funding Guide - 9. Procurement and Scheme Issues
• defective title indemnity insurance in favour of the grant recipient, with a limit of indemnity equal to at least firm scheme grant for the site

Auditor notes

Checks to include freehold, leasehold and any empty homes.

Check solicitor’s report on title or lease if one has been prepared, and a copy of the Land Registry extract.

Please note that, where an acquisition grant claim is being made, the provider must have either the freehold or long leasehold interest prior to drawing down grant. A conditional interest and/or indemnity insurance would be insufficient.

For more information, read section 5.3 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Property title.

9: Have all of the following been achieved prior to Start on Site claim:

• the main building contract has been signed and dated (works order is acceptable where only minor works were undertaken)
• contractual possession of the site has been passed to the contractor
• Start on Site works have commenced

If any requirements have not been met, please provide details.

Auditor notes

Check site possession date recorded in signed and dated building contract. If contract dates do not reconcile, record detail and reason.

Homes England requires assurance that the contractor has entered a legally binding contract covering whole of the works required for the development. Therefore, a letter of intent, even where it creates a legal obligation to carry out part of the works or works up to a particular value, is not acceptable.

Where the building contract is signed by a legal entity other than the grant recipient, for example a development company, this may be acceptable where the entity is a wholly controlled subsidiary. The IA (Independent Auditor) should establish whether the grant recipient has sufficient oversight of the entity’s board and control over its business decisions.

Where the first grant claim is an acquisition tranche, (please consider whether this applies for profit) the grant recipient will need to have the freehold or long leasehold interest, not merely a conditional interest, prior to drawing down grant.

For more information, read section 3 in the Capital Funding Guide - 10. Finance: Grants claims and payments.

10: Is/was adequate insurance in place during development to cover the scheme for the full cost of the works during development?

Please provide full details of the insurance arrangements and clarify the adequacy of the arrangements for grant recipient and/or build contractor.

Auditor notes

Arrangements such as a group insurance that covers a portfolio value rather than specific property may be sufficient, where they provide adequate insurance cover for the full replacement value.

Where the provider is a developer and isn’t retaining ownership, the Deed of Adherence means that this question can be answered by the landlord.

Please note, Homes England expects the insurance arrangements to cover all of the required circumstances set out in the CFG.

For more information, read section 3.4 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Scheme types and requirements.

Post-development questions

11: Does submitted scheme data match with IMS approved scheme data and data held on scheme file at PC (Practical Completion) claim?

Auditor notes

Check IMS submission against building contract details, scheme approval and PC approval.

Data should be kept up to date and accurate at all stages of development, so far as is reasonably practicable.

For more information, read section 3 in the Capital Funding Guide - 6. Programme Management: Scheme administration.

12: Was the Practical Completion certificate issued before the date of final (Practical Completion) grant claim?

If no, please explain the reasons.

Auditor notes

Check certificate date against final cost/Practical Completion final claim date and that it corresponds to the building contract.

Check that CFG definition of Partial Possession/Practical Completion met prior to final grant claim.

For more information, read:

• section 4.2.7 in the Capital Funding Guide - 6. Programme Management: Milestones
• section 3.6 in the Capital Funding Guide - 10. Finance: Grant claims and payments

13: Is adequate insurance in place to cover the completed scheme for its full replacement value?

If no, please explain the reasons.

Auditor notes

Arrangements such as a group insurance that covers a portfolio value rather than specific property may be sufficient, where they provide adequate insurance cover for the Full Replacement Value.

Where the provider is a developer and isn’t retaining ownership, the Deed of Adherence means that this question can be answered by the landlord.

Homes England expects the insurance arrangements to cover all of the required circumstances set out in CFG.

For more information, read section 3.4 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Scheme types and requirements.

14: For Affordable Rent, Social Rent, Rent to Buy and Specialist Rent properties - do expected rents/or rents being charged meet the requirements set out in the CFG?

If not a rent scheme, please select “not an Affordable Rent, Social Rent, Rent to Buy or Specialist Rent scheme”.

Auditor notes

For more information, read the Capital Funding Guide - 4. Housing for Rent.

15: For Affordable Rent, Social Rent, Rent to Buy and Specialist Rent properties - do rent figures and tenures entered in the system correspond to all the rents charged at point of final grant claim?

If not yet let, then do they match the expected rent and tenure?

If no, please explain the reasons, or write “not an Affordable Rent, Social Rent, Rent to Buy or Specialist Rent scheme” as appropriate.

Auditor notes

Please check and specify in the comments box the weekly and the annual rent per tenancy agreement and then compare with the rents recorded in IMS system.

If a difference is identified, please state the reason and the percentage of discrepancy.

Please note that Providers are required to enter weekly rents into IMS, which are then converted into annual rents in slightly different ways depending on the programme and tenure, hence it is important to apply correct conversion method to justify the reason for variance (if any)

For each variant figure, if there are multiple different rent levels on the scheme, provide rents on the system and actual rents.

For more information, read the Capital Funding Guide - 4. Housing for Rent.

16: Were all necessary planning consents obtained by Practical Completion?

I.e. were all reserved matters/conditions precedent signed off by the planners prior to the completion of the scheme?

If no, please explain the reasons, or select “No planning consents were required or reserved matters/conditions precedent” as appropriate.

Auditor notes

Providers may use the ‘deemed discharge’ route to confirm that planning conditions are no longer outstanding.

Ensure all necessary consents have been obtained by practical completion stage of the scheme.

If not, seek evidence that:

a) steps have been taken to obtain them

b) the delay is only due to late issue by the Local Planning Authority, and

c) there is no known reason why consents won’t be given or issued

In the event of planning consent not being granted before audit, note the detail of planning condition discharge outstanding (if applicable) and attach planning approval notice for reference.

For more information, read section 7.2 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Planning Permission and Building Regulations.

17: Were all the final certifications required under building regulations obtained by the grant recipient prior to scheme practical completion grant claim?

If no, please explain the reasons or select “No final certifications under building regulations were required”.

Auditor notes

Check all certification dates are prior to scheme practical completion grant claim.

If building regulations sign off has not been achieved at time of audit, note the regulation to be discharged and reason for non-discharge.

For more information, read:

• section 4 in the Capital Funding Guide - 6. Programme Management: Milestones
• section 3.6 in the Capital Funding Guide - 10. Finance: Grant claims and payments

18: Where the Provider has entered into a management agreement with a managing agent, is it satisfied that:

• the agent is viable
• its aims are compatible with those of the provider
• appropriate capacity, experience and resources are available, in line with responsibilities

If no, please explain the reasons, or select “No management agreement” as appropriate.

Auditor notes

Check filed evidence and IMS submission to substantiate.

For more information, read section 6.3 in the Capital Funding Guide - 6. Programme Management: Management arrangements.

19: Do the management agreement terms allow the Provider to:

• retain overall responsibility for scheme financial control
• monitor property condition and occupancy
• let rented homes on a written tenancy agreement between the Provider and the occupant
• issue the SO leases to purchasers

If no, please explain the reasons, or select “No management agreement” as appropriate.

Auditor notes

Check filed evidence and IMS submission to substantiate.

For more information, read section 6.3 in the Capital Funding Guide - 6. Programme Management: Management arrangements.

20: Where applicable, has the contractual requirement to register a restriction on title with Land Registry, indicating a requirement to gain Homes England consent to dispose, been met?

If no, please explain the reasons, or select “No contractual requirement to register a restriction on title” as appropriate.

Auditor notes

Please note the restriction would only apply where the URB (Unregistered Body) is retaining ownership or where they have offered the land as security.

Please check relevant grant agreement for details.

Sale questions

21: Shared Ownership - have all of the fundamental clauses set out in the Shared Ownership chapter of the CFG at Chapter 1, Shared Ownership section 5 (Leases) and section 11 (Model Leases) been included in shared ownership leases?

Auditor notes

Registered Providers developing grant funded homes on Shared Ownership terms must ensure that their Shared Ownership leases are mortgageable and contain Homes England’s required fundamental clauses.

Please check the following:

• the correct model lease has been used
• the correct fundamental clauses for the relevant funding programme have been used.
• the fundamental clauses have been used in an unaltered state including no changes to the defined terms (Note: unless Homes England permission for a lease variation is held on file.
• for homes funded through the AHP 2021 to 2026 that the Initial Repair Period is 10 years from the lease grant date

For more information, read sections 5.2 and 11 in the Capital Funding Guide - 1. Shared Ownership.

22: Shared Ownership - has the applicant(s) been referred for independent financial advice and has the Provider evidence on file of a suitable financial assessment of every applicant to determine the share they are able to purchase and their overall affordability?

Auditor notes

Please check the following:

• the detailed affordability assessment for each purchaser has been carried out by qualified, regulated advisor or mortgage lender
• the share amount purchased has been recommended by a qualified, regulated advisor or mortgage lender
• a copy of the detailed affordability assessment for each purchaser should be held on file

For more information, read section 6 in the Capital Funding Guide - 1. Shared Ownership: Affordability guidance.

23: Shared Ownership - do purchasers meet the eligibility requirements in the CFG?

Auditor notes

Following an initial eligibility assessment by a Help to Buy Agent, Providers are required to conduct their own thorough assessment of the eligibility of an applicant to ensure that they meet all the criteria and that their purchase is affordable and sustainable.

Any exception to the eligibility criteria should have the written agreement of Homes England which should be documented on file.

Please check the following:

• evidence that all the eligibility criteria for each purchaser have been met should be held on file
• where an exception has been agreed by Homes England to any of the eligibility criteria their written agreement should be held on file alongside all supporting documentation relating to this

For more information, read section 3 in the Capital Funding Guide - 1. Shared Ownership: Applicant eligibility.

24: Shared Ownership - have the rents been calculated according to the formula set out in the CFG - specifically section 4.1 in the Capital Funding Guide - 1. Shared Ownership

If no, please provide details.

Auditor notes

Check filed evidence against the CFG Rents and Service Charges section.

Check the rents have been calculated according to the percentage of unsold equity outlined in the original bids. For example, if the bid outlined that rents would be calculated on 2.75% of unsold equity, this should be reflected in the rents at initial sale.

For new Shared Ownership homes funded via the AHP 2021 to 2026 the calculation of any annual sinking fund charge (included in the service charge and where relevant) should not include any external and structural repair work, expected or unexpected, within the first 10 years.

Please check the following:

• rents and service charges have been set in accordance with the requirements in the CFG for initial sale, rent increases and resale
• the requirement concerning ground rents where contracts have not been exchanged before 23 May 2022 for AHP 21-26 and SOAHP 2016-21 has been met. This includes OPSO (Older Persons Shared Ownership)
• for new Shared Ownership homes funded via the AHP 2021 to 2026, the requirement concerning the calculation of any annual sinking fund charge has been met

For more information, read section 4 in the Capital Funding Guide - 1. Shared Ownership: Rents and service charges.

Specialised housing questions

25: Lease and repair (Empty Homes) - is the property an existing social home owned by the provider or another provider (e.g. local authority or housing association)?

If yes, please provide details.

Auditor notes

Ensure supporting filed evidence.

For more information, read section 4.1 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Other scheme types.

26: Traveller pitches - does the scheme match the Homes England traveller pitch standard definition?

Auditor notes

Check supporting filed evidence. If scheme is not a standard type check for evidence of fixed sleeping accommodation.

For more information, read section 4 in the Capital Funding Guide - 3. Specialist Homes: Traveller pitches.

27: Traveller pitches - has the contractual requirement for providers to register a restriction on title with Land Registry, indicating a requirement to gain Homes England consent to dispose, been met?

If no, please provide details.

Auditor notes

The following wording may be used:

“No disposition other than a lease for a term expiring less than seven years after the date of the lease, or transfer of the registered estate by the proprietor of the registered estate, is to be registered without a certificate signed by Homes England (the trading name of the Homes and Communities Agency) of Coventry Office, One Friargate, Coventry, CV1 2GN.”

Please check relevant grant agreement for details.

Move On questions

28: Move On - does the scheme offer the required type of accommodation?

Auditor notes

For more information, read:

• chapter 2 of the Move On Fund prospectus
• section 4.2 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Move On Fund

29: Move On - (for schemes providing accommodation to survivors of domestic abuse) does the scheme comply with the ‘Move On Standard’ as per CFG?

Auditor notes

For more information, read section 4.2.2 in the Capital Funding Guide - 9. Procurement and Scheme Issues: Move-On for Survivors of Domestic Abuse Standard.

Care and Support Specialised Housing Fund (CASSH) questions

30: CASSH - does the scheme offer the required features?

Auditor notes

Ensure supporting filed evidence.

It is generally expected that all schemes funded under CASSH will be individual dwellings with their own front door. Please note Shared Accommodation was not allowed in phase one of the CASSH programme. However, under phase two schemes for people with mental health needs or learning difficulties who would more suitably be housed in a shared home with care will be considered by exception. It is not expected that these homes will be large multi-unit buildings.

For more information, read section 1.5 in the Capital Funding Guide - 5. Department of Health and Social Care Programmes: Overview.

31: CASSH - do the residents/clients reflect the published group definitions?

Auditor notes

Ensure supporting filed evidence.

For more information, read section 1.4 in the Capital Funding Guide - 5. Department of Health and Social Care Programmes: Overview.

32: CASSH - do the service charges included in the rent only cover building related charges?

If no, please explain the reasons, or write “There are no service charges” as appropriate”

Auditor notes

Ensure supporting filed evidence and any personal care/support charges are excluded from the service charges.

For more information, read section 2.2 in the Capital Funding Guide - 5. Department of Health and Social Care Programmes: Rents.