Social housing specialist Dave Roberts on the important good governance steps RSLs should follow to prevent from going into high regulation.
Being in High Regulation can be an intensive and continuous process that saps energy, time and resources. All RSLs should aim to avoid it – so they can do what they do best and provide services to their tenants.
There are a number of points to consider to help ensure you do not fall into High Regulation. While it may seem obvious for a social housing specialist to say it, the critical starting point here is to take expert advice. RSL management and board members who are not confident in the potential impact of a decision should invest in some professional support as a misjudgement could end up being very costly for their organisation in the longer term.
Because decision-making is the collective responsibility of an RSL board, it is vital that all members fully understand what they are putting their name to, but without some professional guidance this can often be extremely challenging. Boards tend to be made up of people with a diverse range of experience, so every member can’t be an expert on every aspect of governance, including signing off on accounts. It’s therefore essential to create a culture where people will speak up and seek advice before committing to important decisions.
Keeping clearly recorded minutes from meetings, including the decisions made by the board and why, is another essential piece of advice for RSLs. I’ve seen minutes which highlight how a specific topic was discussed in a board meeting, but often a conclusion to the discussion is missing. Board minutes should therefore record what was authorised and why the ultimate decision was made. This will ensure comprehensive and accurate documents available should they be required by the Regulator in future.
Another important issue is for RSLs to put proper subsidiary governance in place. If any board members sit on both the RSL and subsidiary boards this will bring into question the independence of decision-making and could therefore impact on any agreements made.
I would advise that annual appraisals, conducted by an RSL’s chairman, should also be put in place for all board members to ensure they are doing their job properly and making an appropriate contribution to the organisation. Board members taking an active interest in the sector can form part of this process – are they avid followers of Scottish Housing Regulator notices, do they regularly attend events to understand what’s happening within the sector and how these developments might impact within their own organisation?
Given the importance of understanding financial and reputation risks, all RSLs should regularly review their risk register to ensure it is fit for purpose. It’s also essential that RSLs ensure they are complying with any bank covenants as failure to do so will put them at immediate financial risk and likely put them into High Regulation with the Regulator.
Board members should always prioritise the protection of tenants over the business interests of their organisation. Independent decision-making is the key in delivering this outcome, and will help to avoid High Regulation.
While it is an essential facility for the Regulator to have at its disposal, High Regulation is something for RSLs to steer clear of. They can do so by instilling strong governance supported by professional advice when it is needed. Remember, decisions made today will have an impact over a number of years, so planning and sound advice is the wisest approach.
- Dave Roberts is director and social housing specialist at accountants Chiene + Tait