Decision

Previous regulatory judgement: Salvation Army Housing Association (31 May 2023)

Updated 29 November 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Salvation Army Housing Association

• Regulatory code: LH2429

• Publication date: 31 May 2023

• Governance grade: G2

• Viability grade: V2

• Reason for publication: Governance upgrade

• Regulatory route: Stability Check and Reactive Engagement

Regulatory judgement

This judgement upgrades our assessment of Salvation Army Housing Association’s governance from G3 to G2 and confirms its existing V2 grade for viability.

The regulator now has assurance that Salvation Army Housing Association’s (SAHA) governance arrangements are supporting the organisation to meet its objectives. However, SAHA still needs to improve some aspects of its governance to support continued compliance.

In May 2021 we downgraded our assessment of SAHA’s governance because we lacked assurance that its governance, risk management and internal control frameworks were effective. In addition, the board was not sufficiently sighted on the extent of SAHA’s financial exposures. SAHA agreed a recovery plan to return to compliance with the regulator and, based on evidence gained from Reactive Engagement, the regulator now has assurance that the required improvements have been implemented.

SAHA has reviewed and enhanced its processes and controls in relation to risk management and business planning. These include protocols to understand and manage the risks arising from the potential surrender of third-party lease agreements, and an external validation of its stock condition data. SAHA has improved compliance reporting on its financial covenants and this is now sufficient to enable the board to exercise effective oversight. In addition, SAHA has improved its stress testing and strengthened its mitigation strategies. The board now has appropriate oversight of key risks facing the business.

There is greater clarity on the respective roles and responsibilities of SAHA and its unregistered parent as set out in an updated intra-group agreement. Co-operation and information sharing between the two bodies has improved through the establishment of joint working groups. SAHA is also engaging more proactively with its local authority and commissioning body partners about future strategies for its supported housing schemes.

Board skills and capacity have been strengthened through training and by refreshing the board membership. Following a board effectiveness review, an Operations Committee has been formed to maintain oversight of the delivery of operational performance, and allow the board to focus on strategic matters.

SAHA has developed a governance improvement plan with the aim of enabling it to achieve an upgrade to G1. This includes delivery of a board learning and development plan and the implementation of a new assets and liabilities platform.

Based on evidence gained from the Stability Check, the regulator has assurance that SAHA continues to comply with the financial viability elements of the Governance and Viability Standard and that its financial plans are consistent with, and support, its financial strategy. It has an adequately funded business plan, sufficient security in place, and is forecast to continue to meet its financial covenants under a reasonable range of adverse scenarios linked to its key risks. SAHA needs to manage the material risks that arise from its operating model, including relatively short-term revenue funding arrangements for supported housing, combined with the long-term funding arrangements, including reliance on grant, for the buildings through which this service is delivered.

Other providers included in the judgement

None

About the provider

Origins

SAHA is a community benefit society and exempt charity. It is a Christian faith-based organisation and is a subsidiary of The Salvation Army which is a registered charity and not a registered provider. SAHA works with its parent to transform lives by providing solutions to homelessness and enabling people to develop and achieve their full potential.

SAHA provides agency-managed and directly managed supported housing, general needs accommodation and housing for older people. Its housing offer and support services focus on helping vulnerable people including rough sleepers, young homeless, individuals with addiction or mental health issues and ex-offenders. SAHA also manages homes for retired Salvation Army officers.

Registered Entities

SAHA is the only registered entity in the group.

Unregistered Entities

SAHA has two unregistered subsidiaries, Kingsown Property Limited and SAHA Developments Limited. Both are wholly owned subsidiaries of SAHA.

Geographic Spread and Scale

SAHA operates throughout England in 86 different local authority areas. It owns and manages approximately 3,800 homes.

Staffing and Turnover

SAHA employed 203 full-time equivalent staff and reported a turnover of around £32m in the year ended 31 March 2022.

Development

SAHA has no planned development for new housing stock at present.

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.

Note: The use of an asterisk (*) against a grade indicates that the assessment refers to a provider that is designated as being for-profit.

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.