2. Programme Management 2015 to 2018 AHP
This chapter sets out the Agency's requirements in relation to management of a provider's approved allocation funded through the 2015 to 2018 Affordable Homes Programme.
1.1.1 This chapter sets out the Agency’s requirements in relation to management of a provider’s approved allocation funded through the 2015 to 18 Affordable Homes Programme (AHP).
1.1.2 Approved bids (accepted offers in IMS) are subject to a 2015 to 18 Affordable Homes Grant Agreement – for further information see section 2 below. Throughout the Capital Funding Guide the 2015 to 18 Affordable Homes Grant Agreement is referred to as the grant agreement.
1.2 Investment Management System (IMS)
1.2.1 All providers who have received an allocation for Agency funding or an agreement to deliver nil grant units will be required to manage their programme of schemes via the Agency’s Investment Management System (IMS).
1.2.2 For details on how to access and use IMS please refer to the IMS page on the Agency’s website or contact the helpdesk on 01908 353 604.
2. 2015 to 18 Affordable Homes Grant Agreement
2.1.1 All grant recipients and providers delivering new Affordable Rent units are required to enter in to a new supply contract with the Agency. Robust contract management is a key principle of the 2015 to 18 delivery model. This section summarises the contract management process providers must follow with regard to their grant agreement.
2.1.2 The grant agreement is a standard form contract that will be applied by the Agency to all 2015 to 18 AHP providers. There are a number of variations dependent on the nature of grant recipients – namely:
- Former RSL/Registered Provider
- Former RSL/Registered Provider-led consortium
- New Registered Provider not for profit (including local authorities)
- New Registered Provider-led not for profit consortium
- New Registered Provider for profit
- Community-led (single scheme)
- Unregistered Providers
There is also a ‘Short-Form Agreement’ for providers who are not party to a new supply contract either in their own right or as a member of a development consortium, but who wish to deliver new Affordable Rent units without grant funding or application of conversion funding capacity.
2.1.3 For details of programme management requirements for outstanding schemes bid for under the 2011 to 15 AHP please see the Programme Management Chapter AHP 2011 to 15 and for the 2008 to 11 NAHP and subject to a Programme Partnering Agreement, please see the Programme Management NAHP chapter, section 2.
2.2.1 Following approval of funding, the Agency will produce and send the lead partner a legally binding contract to deliver the agreed number of completions within the prescribed timeframe.
2.2.2 The grant agreement details the Agency’s and provider’s obligations and rights. Each grant agreement will include:
- Conditions of grant (including eligible expenditure)
- Total allocated grant and conversion capacity
- A schedule summarising the approved bid including firm and indicative scheme details and the associated grant allocation. Note that the allocation will also comprise all current and subsequent offer and scheme level data submitted and accepted via IMS including cost contribution assumptions and milestone forecasts; representations and warranties
- Grant claim and payment procedures
- Reporting obligations
- Default and termination terms
- Dispute resolution
- Standard Agency contract terms (e.g. on freedom of information, health & safety, intellectual property etc.)
2.2.3 The grant agreement also contains conditions which have to be met before payment of grant will be made. For schemes delivered under the 2015 to 18 AHP there are no separate funding conditions to be met.
2.2.4 The grant agreement is valid for the duration of the allocation, but will allow for variations to account for flexibilities in delivery subject to agreement of such a change by the Agency – see section 5.
2.2.5 A copy of the standard form of grant agreement is available.
2.2.6 For information purposes, details of the process for entering in to the grant agreement please see below.
Subject to allocation the Agency will first provide the provider (or Lead Partner provider in case of a consortium) with a draft grant agreement including relevant party details and the allocation. Once agreed to be accurate the Agency will issue hard copies (engrossments) to the provider (or Lead Partner provider) – one copy for each party. If acceptable to the provider/all consortium members (and subject to any necessary board approvals) the provider should arrange for execution (by each member provider when in a consortium) and return all signed copies to the Agency. The Agency will then undertake its own execution and agree a document completion date that is the date the grant agreement becomes effective. The Agency will then send each provider party an original copy for their records.
The grant agreement only has to be executed once and is effective for the provider’s entire 15 to 18 programme regardless of whether schemes are amended, substituted or added subsequently via agreement in IMS.
Note - providers belonging to more than one consortium will be required to enter a Contract for each consortium.
After the Agency’s head office have manually executed and dated the contract with appropriate signatures they will then create and approve the grant agreement within the IMS. The provider must then confirm within the IMS system that they agree to the terms of the Contract. It is then finally signed off by the Agency’s lead area. Until this process is complete no scheme creation is possible on IMS.
2.2.7 2015 to 18 AHP offers are likely to be mainly based on firm schemes only, but qualified providers with prior Agency approval, will be able to deliver a mixture of firm schemes and indicative schemes (with outline delivery information). The Agency will pay the relevant start on site and/or practical completion tranche percentage of grant to providers (or the lead partner provider in case of a consortium) based on the actual grant required for each firm scheme. For avoidance of doubt, grant can only be claimed and paid on firm schemes.
NB There is no concept of an averaged ‘agreed payment rate’ for the 2015 to 18 AHP.
2.3 Contract management
2.3.1 The 2015 to 18 Affordable Homes grant agreement acknowledges that changes may be required to the agreed programme offer in order to ensure that:
- The allocated grant and conversion capacity is properly and effectively spent
- The delivery of affordable housing under the programme offer is maximised
- The provider remains capable of delivering the approved bid
2.3.2 It is a strong principle of the contract review process that any variation to delivery of the approved bid must always be discussed with the Agency as these circumstances arise. These matters do not have to be confined to the quarterly contract review meetings – they can be raised with the Agency at any time.
2.3.3 Changes to a provider’s allocation will be recorded through IMS. Where a material change is recorded this will require the Agency’s approval. Please see below for guidance on material changes. Change is further sub-divided between pre and post start change for the 2015 to 18 AHP.
A material change is a specified variation from the contracted position between the Agency and the provider (i.e. a change to the funding required, capital contributions, units or delivery profile). A provider must obtain operating area approval for material changes before it can progress the allocation or scheme.
Non-material changes can be validated without requiring Agency input.
2.3.4 A pre-start change relates to changes to a scheme where a payment for start on site has not yet occurred. A post-start change relates to changes to a scheme where a payment for a start on site has already occurred but before the payment of the final tranche grant.
2.3.5 The Agency or the provider may propose a change at any time but usually these will be discussed at and/or arise from regular review meetings (see 3.3.2).
2.3.6 The Agency will review providers’ delivery progress of new supply, conversion and disposals against their anticipated provision, and any proposed changes to their programme by means of review meetings, as detailed in the grant agreement. Each review meeting will principally consider two aspects, namely:
- Actual delivery achieved
- Forecast delivery
2.3.7 The Agency will also undertake a full strategic annual review of providers’ programme of allocation to:
- Ascertain how the programme has been delivered and is forecast to deliver in future years and
- Ensure the provider is meeting all of its contractual obligations
- Capture any variations agreed at previous review meetings
2.3.8 It is a requirement of the grant agreement that data, including an Officer’s Certificate, are provided to the Agency on an open book basis to inform the review meetings. The Officer’s Certificate must be submitted five working days in advance of the scheduled contract review meeting.
2.3.9 Where a pre or post start change to an allocation is agreed that change becomes part of the agreed programme and is subject to review at future meetings
2.3.10 For further information regarding these meetings please see the reporting section in the relevant Affordable Homes Grant Agreement.
2.3.11 Where delivery progress is behind that agreed under the grant agreement, a fundamental principle is that the provider will have an opportunity to put forward proposals to increase or accelerate delivery in the first instance. The Agency will take a view on the realism and likelihood of achievement of remedy, informed by the scale of variation and the stage reached in the programme (i.e. a risk assessment). The view taken will be informed by past performance of the provider in remedying delivery issues.
2.3.12 However, an increase in the amount of grant in a scheme or offer line, without a proportionate increase in homes, will not be accepted as a remedy. Any additional funding required would have to be generated from providers’ own resources or capacity (where that is achievable without adversely impacting their financial viability).
2.4 Indicative schemes
2.4.1 Qualifying Agency investment partners are able to submit both firm and indicative schemes under the mixed route for submitting offers. Indicative units must not form more than 50% of the total units in a provider’s offer and must become firm by no later than 31 May 2016. Indicative schemes are those schemes where providers are not yet in position to be able to give precise scheme details required for schemes to be considered firm, such as a post code, x/y co-ordinates and details of ownership or control by the bidder.
2.4.2 If insufficient progress is made by providers to convert indicative to firm schemes, then the number of indicative units proposed under the grant agreement may be reduced, and a proportionate amount of allocation withdrawn for re-distribution to other providers.
2.5 Consortium arrangements
2.5.1 Where providers have formed a consortium to deliver a programme of affordable homes, one provider must undertake the role of consortium lead. The consortium lead is expected to work closely with other consortium members to deliver the anticipated supply throughout the contract period. Consortium leads are the initial recipient for the Agency’s grant and are responsible for collating and providing information to the Agency (including the quarterly Officer’s Certificate). They also have additional responsibilities and obligations on behalf of the other members as outlined in the consortium version of the 2015 to 18 AHP Grant Agreement.
2.6 Breach of contract
2.6.1 The grant agreement specifies actions that may constitute a default. The levels of default range in severity from scheme to fundamental
- Scheme default – usually capable of remedy and always scheme specific
- Specified default – capable of remedy and applying to approved bid level obligations such as reporting and other obligations
- Bid default – Agency determines (acting reasonably) that proper progress is not being made to deliver schemes
- Fundamental default – Less likely to be remedied such as a prohibited act
2.6.2 In most circumstances the Agency anticipates that the partner/consortium will be able to rectify a breach. However, a fundamental or severe bid default may give rise to the Agency terminating the agreement.
2.6.3 Within the levels of default listed above, default events are further graded within the grant agreement with regard to the severity of the action resulting from these withholding events.
2.6.4 Grant withholding events are graded GW1 – GW3 operate at the level of the allocated programme
- GW1 – usually capable of remedy such as a problem with reporting or repayment
- GW2 – more serious for example loss of Investment Partner status but still the opportunity to remedy
- GW3 – very serious such as a prohibited act
2.6.5 Scheme withholding events are graded SW1 – SW3 and are scheme specific;
- SW1 – failure to deliver a scheme in accordance with the scheme details
- SW2 – a material breach, consents withdrawn, in delivering the scheme and steps taken have not provided remedy and
- SW3 – failure to deliver a scheme in accordance with the agreed timetable
2.6.6 Termination Events – Severe breaches may result in termination of the allocation for a specific scheme, or, in the case of a fundamental termination, the entire allocated programme for a provider may be terminated.
2.6.7 Although repayment of grant is expected to be a rare event, it could happen upon either a scheme or fundamental termination event. More detail on contract breaches, grant withholding and termination events can be found in the grant agreement.
2.6.8 As per the Agency’s Grant Recovery Determination 2015 clause 17, a breach of the Agency’s requirements could result in the withdrawal of a provider’s use of its Recycled Capital Grant Fund (RCGF) and repayment of all or part of recycled grant held in its RCGF. For more information on the Determination and grant recovery please refer to the Grant Recovery chapter and in particular section 5.3.2.
3. Scheme administration and data collection
3.1 Bid capture
3.1.1 A provider’s bid may consist of any number of offer lines. Each offer line represents an individual firm scheme or, in the case of indicative proposals, delivery of a given number of homes within a certain area, at a minimum geography level. Each offer line within the bid will have its own funding requested amount which will be used to determine the payment for that particular offer line.
3.1.2 Decisions will be made on an offer line basis, not for whole bids. A provider may therefore receive an allocation for some, all or more of their offer line bids.
3.2 Updating profiles and scheme processing
3.2.1 For all firm schemes the provider must update the details in the scheme profile including complete scheme cost information and then create a scheme. The provider then submits the scheme for review/approval to the relevant operating area. Once approved the scheme is eligible for grant payment at start on site (for Registered Providers and eligible scheme types). Grant is paid 100% on completion for unregistered providers.
3.2.2 Please see the IMS help page for guidance on updating profiles and schemes.
3.2.3 Not less than five days prior to a scheme reaching the start on site milestone (please see 4.2.2), providers are obliged by the grant agreement to have submitted details of the scheme to the Agency via IMS. However, owing to the practicalities of achieving this, especially where providers have large numbers of schemes starting on site, the Agency has agreed that in exceptional circumstances details may be submitted up to 30 business days after start on site has been achieved.
3.3 Submission requirements
3.3.1 Providers’ programmes must comply with the grant agreement that contains Funding Conditions and other Agency requirements. The 2015 to 18 grant agreement replaces the requirement (in previous programmes) for providers to sign a separate set of annual Funding Conditions in IMS, as these are now contained within the grant agreement.
3.3.2 Providers must submit the required information on to IMS prior to claiming grant. For details please see the Investment Management System: guidance documents - Detailed guidance.
3.3.3 Providers must submit the following data in relation to the milestones on to IMS following confirmation of their allocation. Please note that not all milestones will necessarily apply to all schemes (please see section 4 for details):
- Planning consent
- Development contract (off the shelf only)
- Acquisition of land
- Start on site date
- Final cost (practical completion)
- Exchange of contracts (for incentive schemes only)
3.3.4 Providers must confirm acceptance of the on-screen certifications.
3.3.5 Detailed guidance on how to input data on to IMS is provided on the IMS help page.
3.4 Scheme cost information
3.4.1 The Agency collects scheme cost information, in respect of the following areas:
- Acquisition cost
- Works cost
- On cost
3.4.2 Only certain types of expenditure are eligible for funding in each of these cost areas. The grant agreement refers to actual development costs, meaning the expenditure actually incurred in delivering either through developing the firm scheme units, as opposed to the projected expenditure. Public sector subsidy (i.e. grant plus all other public funding) must not exceed the actual development costs.
3.4.3 For acquisition costs, funding is available in respect of the purchase price of land/property and Stamp Duty Land Tax on the purchase price of the land/site.
3.4.4 For works costs, funding is available in respect of the following:
- Main works contract costs (excluding any costs defined as on costs)
- Major site development works (where applicable). These include piling, soil stabilisation, road/sewer construction, major demolition
- Statutory agreements, associated bonds and party wall agreements (including all fees and charges directly attributable to such works) where applicable
- Additional costs associated with complying with archaeological works and party wall agreement awards (including all fees, charges and claims attributable to such works) where applicable
- Irrecoverable VAT on the above, where applicable
3.4.5 For on costs, funding is available in respect of the following:
- Legal fees and disbursements
- Net gains/losses via interest charges on development period loans
- Building society or other valuation and administration fees
- Fees for building control and planning permission
- Fees and charges associated with compliance with European Union directives, and the Agency’s requirements relating to energy rating of dwellings and legacy Code for Sustainable/Eco-Homes certification (for AHP 2011 to 15 and NAHP 2008 to 11 schemes only). In-house or external consultants’ fees, disbursements and expenses (where the development contract is a design and build contract)
- Insurance premiums including building warranty and defects/liability insurance (except contract insurance included in works costs)
- Contract performance bond premiums
- Borrowing administration charges (including associated legal and valuation fees)
- An appropriate proportion of the provider’s development and administration costs and
- Irrecoverable VAT on the above, where applicable
3.4.6 Where the development contract is design and build, the on costs are deemed to include the builder’s design fee element of the contract sum. The amount included by the builder for design fees should be deducted from the works cost element referred to above, as should other non-works costs that may be submitted by the builder such as fees for building and planning permission, building warranty, defects liability insurance, contract performance bond and energy rating of dwellings.
3.4.7 Similarly, other non-works costs that may be included by the builder such as fees for building and planning permission, building warranty and defects liability insurance, contract performance bond and energy rating of dwellings should also be deducted from the works cost element submitted by the provider to the Agency.
4.1.1 The progress of programmes and schemes will be monitored against a series of milestones as detailed below.
4.1.2 Milestones consist of the milestone event and the milestone date that the milestone event is forecast to take place. The grant agreement refers to forecast dates as milestone dates, but this section of the CFG will use the term forecast date, in line with IMS. Not all milestones are mandatory for all schemes, and the number of milestones will depend of the type of scheme being developed.
4.1.3 Please note that these requirements apply to schemes being funded under the 2015 to 18 AHP.
4.1.4 A milestone refers to each stage in the delivery of the firm scheme agreed by the parties and as set out in IMS (including a start on site and completion date). Milestones have two functions:
- To monitor performance (i.e. the provider’s reliability in predicting programme/scheme progress) and
- To trigger liability to pay grant, which may be discharged by either payment of grant during that financial year, or raising a year-end accrual.
4.1.5 The liability to pay grant is triggered by an agreed forecast date in IMS.
4.1.6 The Agency uses a defined set of milestones, shown in the table. All products bid for will have at least one milestone to forecast.
- Some milestones trigger payments
- Some non-payment milestones are not required for all schemes, depending on the programme under which they are funded
|Milestone||Relevant products||Triggers Payment?||Creates countable output?|
|Acquisition of land||All (excluding Social HomeBuy, HOLD, Leasehold Repurchase, and Off The Shelf purchases)||No||No|
|Planning Permission||All (excluding Social HomeBuy, HOLD, Leasehold Repurchase, and Off The Shelf purchases)||No||No|
|Start on site||All (excluding Social HomeBuy, HOLD, Leasehold Repurchase, and Off The Shelf purchases)||Is equivalent to 75% of the firm scheme grant. Please note that start on site payments do not apply to unregistered providers||No|
|Practical Completion(PC)/Final Cost||All||100% (for unregistered providers), or 25% of the firm scheme grant for Registered Providers.||Yes|
|Exchange of contracts (please note this applies to purchase contracts rather than build contracts)||Social HomeBuy and HOLD||100% of grant (Paid at final cost milestone)||HOLD (Yes), Social HomeBuy (No)|
|Occupancy||All (excluding Social HomeBuy, HOLD, Leasehold Repurchase, Affordable Rent and Social Rent)||No||No|
Social HomeBuy - providers should forecast milestones for exchange of contracts and final cost. Claim for grant can only be made once an applicant has exchanged contracts.
Off The Shelf schemes and HOLD - providers should only forecast the final cost milestone as these units should be ready for occupation.
4.2.1 Acquisition of land
The forecast date for the completion of acquisition contracts. This is a non-payment milestone for the 2015 to 18 AHP.
4.2.2 Planning permission
There are two types of planning permission – outline and full planning permission. Outline planning permission gives an indication of permitted development but may be subject to full planning permission being obtained before building can commence. Full planning permission must be submitted within a specific time limit normally three years from the date outline planning permission was granted.
It is a requirement that in order for a provider to achieve the planning consent milestone in IMS FULL planning permission needs to have been achieved.
4.2.3 Start on site
The start on site or first tranche grant claim, which applies as a payment event only to eligible schemes delivered by eligible providers where start on site is achieved, is triggered by the date when:
- The provider and the building contractor have entered in to a building contract
- The building contractor takes possession of the site or property
- The works have commenced
This will trigger payment of 75% of the grant for Registered Providers.
4.2.4 Start on site works are defined as:
a) Excavation for strip or trench foundations or for pad footings b) Digging out and preparation of ground for raft foundations c) Vibrofloatation, piling, boring for piles or pile driving d) Drainage works specific for the buildings forming part of the firm scheme or e) Such works of demolition or service diversion as are expressly and strictly contemplated Finance – Grant Claims and Payments
4.2.5 It is not intended that the definition of start on site works in the grant agreement excludes schemes where demolition works have begun or where infrastructure works (such as excavations to install drainage or highways infrastructure works including where such works are the subject of a section 278 or section 104 agreement) to support the scheme have commenced, subject to the conditions below. Starts on site can therefore be recorded (and where relevant a grant claim submitted) in circumstances where:
a) A building contract has been signed and dated with a single building contractor to undertake both demolition and construction works or infrastructure and construction works b) Demolition or infrastructure works have commenced and c) Upon completion of demolition works and site clearance, or of infrastructure works, construction works which meet one of the definitions in the 2015 to 18 Affordable Homes grant agreement and repeated above (a-e) will immediately follow on
d) A separate contract for demolition works or for infrastructure works has been signed and dated and a building contract with a building contractor has been signed and dated e) Demolition works or infrastructure works have commenced and f) Upon completion of demolition works and site clearance or upon completion of infrastructure works, the building contract with the building contractor will be unconditional; and as soon as the building contract becomes unconditional, start on site works which meet one of the definitions in the relevant 2015 to 18 Affordable Homes grant agreement will proceed
4.2.6 Start on site may occur before a provider has completed purchase of or acquired a leasehold interest in the site. The provider will need to have a building agreement/licence in order to claim grant.
Please see Finance 3.5 for further information
4.2.7 Practical completion
For grant purposes practical completion is when the last dwelling is handed over, the scheme having been completed in accordance with the terms of the relevant building contract and the terms of the grant agreement, as being fit for occupation as a residential development, in accordance with NHBC requirements. This excludes minor defects and/or minor omissions at the time of inspection which are capable of being made good or carried out without materially interfering with the beneficial use and enjoyment of the firm scheme. For instance, a scheme can be classed as completed even though external works such as landscaping may remain to be completed.
4.2.9 Any planning conditions or reserved matters, as far as practicably possible, must also be signed off prior to the achievement of practical completion – please see Procurement and Scheme Issues Planning Permission and Building Regulations 6.1.1.
4.2.10 This will trigger payment of 25% of the grant for Registered Providers when a start on site tranche has been paid or 100% for unregistered providers. Please refer to Finance 3.6 for further information on claiming practical completion payments.
4.2.11 For Social HomeBuy, HOLD, Leasehold Repurchase and Right to Acquire, practical completion will be the date when the purchase is completed.
4.2.12 For the purposes of Off The Shelf products the units must be ready for immediate occupation. In the case of a new Off The Shelf development, a claim for grant should not be made prior to the completion date (as specified on the practical completion certificate issued by the duly authorised contractual party). However, there are circumstances when grant can be claimed on exchange of purchase contracts please see Finance 3.3.2. Please see the guidance notes at Procurement and Scheme Issues 3.2.2 and Finance 3.6.2 for more details on Off the Shelf schemes. For these products, achievement of the practical completion milestone will trigger payment of 100% of the grant. Please refer to Finance 3.6 for further information on claiming practical completion payments.
This milestone only applies to sale schemes and is achieved when all units in the scheme have been let or sold to the appropriate target group.
4.3 Milestone forecasts
4.3.1 Milestone Alerts As schemes progress they will be monitored against the series of milestones. Providers are therefore required to record within IMS when the various milestones have been achieved.
4.3.2 Providers are expected to update and reforecast milestones as soon as they are aware of any changes. Procedures for dealing with changes to milestone dates are set out in section 7 of the grant agreement and will constitute a material change to the allocations (please see 2.3 and section 5).
5. Changes to allocations
5.1.1 Changes or variations to the programme will be handled via IMS and, if material, will require approval by the Agency. Where the provider becomes aware of circumstances which give rise to the need for a change to be implemented to the allocation bid this must be submitted via IMS, specifying the reasons for the proposed change to the approved bid.
5.1.2 The Agency will decide whether to accept any changes on the basis of whether they will continue to meet the strategic need for which the offer was originally approved.
5.1.3 Changes could consist of:
- A reduction or increase or other change to the number of AHP dwellings to be delivered or to the conversion capacity
- A reduction or other adjustment to the allocated grant or to any firm scheme grant
- Any necessary change to the approved bid the Agency deems reasonable necessary
- Change to the forecast date
- Substitution of schemes that are no longer able to be delivered within the programme requirements
5.1.4 Each variation, submitted via IMS, will initially be considered on its own merits. However, the Agency may opt not to agree to proposals and, in some circumstances, may choose to withdraw funding regardless of how far a particular scheme has progressed. Therefore it is in providers’ interests to keep the Agency appraised of any proposed programme changes as soon as possible.
5.1.5 All material changes must be identified and discussed with the Agency before providers claim grant on affected schemes. Where changes are not disclosed to the Agency or have not been approved, providers will be at risk of falsely certifying on IMS that the data are correct and meet the requirements in the grant agreement.
5.1.6 In the case of a fundamental termination event (see section 2.6) the Agency may terminate the contract and reclaim any grant paid plus interest, except on schemes which competed before the default notice date.
5.1.7 Where changes are acceptable and approved by the Agency, the Agency will pay grant on affected schemes upon receipt of a valid claim.
5.1.8 Where there are differences, not previously agreed via a request made through IMS, between data input following legal completion and the data input at programme approval, providers will be required to give reasons for the variations in order for the Agency to approve the grant payment.
5.1.9 In some situations, if a material change to the allocation results in reduced delivery outputs or value, they may result in a reduction of the allocated grant.
5.1.10 The inclusion from the outset of the addition of nil grant schemes has no effect on the amount of payment of firm scheme grant for (only paid on schemes that require grant). Unlike the previous Affordable Homes Programme the Agency will pay the actual grant required and approved on each firm scheme, rather than averaging grant and paying on all schemes.
6. Reporting and audit requirements
6.1.1 The reporting and audit requirements apply to schemes delivered under the 2015 to 2018 AHP. In addition, the compliance audit requirements set out below apply to all schemes selected for audit, regardless of funding period.
6.2 Reporting requirements
6.2.1 The operating area and the lead provider (whether the lead of a consortium or a provider delivering through a standalone grant agreement) will agree a programme of review meetings throughout the period covered by this programme. The minimum grant agreement requirement is that the parties should meet quarterly and include an annual contract review. Review meetings can be agreed with greater frequency and close dialogue between the provider and Agency is encouraged. At each review meeting the operating area and the provider will:
- Review progress against the agreed targets
- Monitor compliance with the method statements submitted and any other obligations assumed as part of the bidding process.
6.2.2 Representation on both sides must be at a senior level in order that decisions and actions can be agreed and implemented immediately if necessary.
6.2.3 Schedules indicating the status of each scheme including output delivery must be provided to the Agency’s nominated lead one week prior to each review meeting.
6.2.4 Additional liaison meetings may be called by either the Agency or lead provider to address any important issues that may arise between review meetings. Representation should include the Agency’s contract manager together with financial appraisal and/or representatives from the Social Housing Regulator as appropriate.
6.2.5 The lead provider is required to provide timely notification to the contract manager of any unresolved problems that:
- Are encountered with complying with the funding conditions or meeting the specified targets
- Are identified during the self-assessment process and which threaten the objectives set out and/or
- Indicate shortfall in financial capacity and which affects the ability of the lead provider, or any other participating providers, to deliver their obligations
6.2.6 Where the provider is acting as the lead in a consortium, then the lead provider is responsible for the arrangement of regular delivery review meetings involving all members of the consortium. These meetings should be planned so that up-to-date information may be reported to the Agency at planned review meetings.
6.3 Audit requirements
6.3.1 Compliance Audit is the process by which the Agency will check the provider in terms of procedural compliance. The Agency expects that an annual audit will be carried out on a sample of eligible schemes by an Independent Auditor, appointed by each Provider being audited. Independent Auditor’s will review schemes for compliance against a checklist of relevant questions and report any findings to the Agency. Providers must therefore maintain a comprehensive scheme file that contains all relevant documents for each scheme. A Compliance Audit System has been provided by the Agency for the purpose of completing this process.
6.3.2 The purpose of the audit is to verify that all requirements and the funding conditions have been met, and that the provider has properly exercised its responsibilities as set out elsewhere in this Guide. It does not reduce the responsibilities of the provider and the Agency to ensure that the costs in any claim for grant are appropriate and have been properly incurred.
6.3.3 If a local authority has concerns about a particular scheme they should contact the operating area to request that it be included in the next sample of schemes for audit.
6.3.4 The population of providers eligible for selection for compliance audit (eligible providers) is made up of developing providers with eligible schemes across all funding programmes. All schemes are eligible except:
- Previously audited schemes
- Terminated schemes
- Schemes with an investment code of 8 (London) or 86 (HCA London)
- Schemes with zero grant and no RCGF or DPF
- Help to Buy
6.3.5 Eligible schemes include both:
- Look-back schemes – any scheme which completed in the previous financial year
- In-year schemes – any scheme which, at start of year position, has a forecast payment event from April to December of the current financial year
6.3.6 The Agency aims to audit all developing providers with schemes eligible for audit every financial year. However, providers which have received a Green audit grade in the preceding year may be eligible for a reduced or zero sample for up to two years.
Independent Auditor Appointment
6.3.7 Providers may commission any suitably experienced and qualified member of one of the following professional bodies:
- IACEW (Institute of Chartered Accountants in England) – ACA / FCA Chartered Accountant
- ACCA (Association of Chartered Certified Accountants) – ACCA / FCCA Chartered Certified Accountant
- RICS (Royal Institution of Chartered Surveyors) – FRICS / MRICS (but not Assoc RICS) Chartered Surveyor)
6.3.8 The independent auditor may be the provider’s external auditors or external accountants undertaking their internal audit function.
6.3.9 However, qualified accountants or surveyors directly employed by the provider or any of its fellow consortium members are excluded as they are not considered to be appropriately independent. Arrangements where qualified development consultants are employed by a qualified accountant or surveyor to act in their 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 provider and the accountant or surveyor.
6.3.10 Reciprocal arrangements between organisations with dedicated internal audit functions are permitted, as long as they comply with the requirements in paragraphs 6.3.7 – 6.3.9 above.
Standardised Terms of Engagement
6.3.11 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 F of the Institute of Chartered Accountants of England and Wales (ICAEW) Technical Release – AAF 01/10 publication. For further guidance please see below.
By publishing standardised terms of engagement, the Agency makes an offer to engage on these terms without the need to sign a commissioning document. The Agency will engage on these terms with suitably experienced and qualified Chartered Accountants, Chartered Certified Accountants and RICS Chartered Surveyors. If the offer to engage is accepted by a provider and an accountant or RICS surveyor, then an agreement is formed.
6.3.12 The provider 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 programme to assist providers in planning the arrangements and budgeting to meet these requirements.
6.3.13 The Agency reserves the right to request copies of the signed ‘self-assessment agreement’ as and when necessary throughout the life of the agreement.
6.3.14 The provider is strongly advised to discuss the principles and planned arrangements for self-assessment with the Agency prior to commissioning the independent auditor.
6.3.15 The Agency will issue the provider with a scheme sample report listing the details of the schemes to be audited, forming part of the Audit Programme Agreement. The list is issued four weeks before the audit is to take place.
6.3.16 Detailed guidance on the compliance audit process can be found on the Compliance Audit web pages.