Decision

Previous regulatory judgement: Christian Action (Enfield) Housing Association Limited (14 December 2022)

Updated 5 April 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Christian Action (Enfield) Housing Association Limited
• Regulatory code: LH0676
• Publication date: 14 December 2022
• Governance grade: G3
• Viability grade: V2
• Reason for publication: Governance downgrade
• Regulatory route: Reactive Engagement

Regulatory judgement

This regulatory judgement downgrades our previous assessment of Christian Action (Enfield) Housing Association Limited’s governance grade from G1 to G3 and reconfirms its V2 viability grade. This means that there are issues of serious regulatory concern, which the provider is working with us to address.

Following a Reactive Engagement process, the regulator has concluded that it lacks assurance that Christian Action (Enfield) Housing Association Limited (CAHA) has a robust and prudent business planning, risk and control framework.

Evidence gathered by the regulator during its investigation confirmed weaknesses in CAHA’s internal controls framework, and that the board of CAHA has not been managing its affairs with an appropriate degree of skill, diligence, prudence and foresight.

Weaknesses in financial governance including inadequacies in financial monitoring and board reporting, coupled with a lack of effective board oversight and scrutiny, meant CAHA failed to identify the potential crystallisation of a serious risk in sufficient time for the board to effectively manage it.

As a result, CAHA came within weeks of a potential loan covenant breach that required it to rely on the actions and agreement of third parties to achieve covenant compliance at year end. This potential ceding of control by the board is a serious failure of governance.

The principles of co-regulation and transparency are fundamental pillars of the regulatory framework. In reporting challenges in meeting covenant compliance, CAHA did not disclose in a timely manner the full extent of the risks it was facing and, as a result, CAHA’s communication with the regulator fell below the required standard.

During its extended time on the regulator’s Gradings Under Review list to allow the annual Stability Check to complete, CAHA has taken steps to initiate several planned remedial actions. This has included a review of its governance and risk management framework, as well as implementing controls to improve the management of its repairs and maintenance service.

The regulator’s assessment of CAHA’s compliance with the financial viability elements of the Governance and Financial Viability Standard is unchanged. The regulator has assurance that CAHA complies with the financial viability elements of the Governance and Financial Viability Standard and that its financial plans are consistent with, and support, its financial strategy.

However, delivery of CAHA’s financial plans remain challenging. CAHA is exposed to material financial risks that it needs to manage. It forecasts operating margins that are well below sector averages. Whilst this is not untypical of providers with a similar service offer, it does mean that CAHA may have less capacity to absorb financial shocks and other adverse scenarios. This has been evidenced by the provider’s own stress testing and other analyses. To protect viability in the longer term, CAHA will need to retain reasonable business planning assumptions and effective cost controls.

Other providers included in the judgement

None

About the provider

Origins

CAHA is a charitable community benefit society, and the parent of the group.

Registered Entities

CAHA is the only registered entity.

Unregistered Entities

CAHA is the parent of three wholly owned subsidiaries:

• Neighbourhood Estates Solutions Limited is a social enterprise company providing cleaning and gardening services for CAHA’s tenants;

• Christian Action Housing Association Trust is a charitable trust responsible for bidding and receiving charitable donations; and

• Christian Action Housing Special Projects Limited was previously responsible for undertaking development on behalf of CAHA and is soon to be made dormant.

Geographic Spread and Scale

CAHA owns and manages around 1,600 properties primarily in the north London boroughs of Enfield and Waltham Forest, but also in Haringey and Barnet.

Staffing and Turnover

CAHA reported a turnover of £15m for the year ended 31 March 2022 and employs the full-time equivalent of 77 staff.

Development

CAHA plans to build 45 new homes by November 2025.

About our judgements

Key to Grades

Governance:

	Compliant
G1	The provider meets our governance requirements.
G2	The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.

	Non-compliant
G3	The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
G4	The provider does not meet our governance requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Viability:

	Compliant
V1	The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
V2	The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.

	Non-compliant
V3	The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
V4	The provider does not meet our viability requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action.

Definitions of Regulatory Routes

In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.

Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.

Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.

Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.

For further details about these processes, please see Regulating the Standards.