Decision

Previous regulatory judgement: St Mungo Community Housing Association (15 December 2021)

Updated 13 December 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: St Mungo Community Housing Association
• Regulatory code: LH0279
• Publication date: 15 December 2021
• Governance grade: G2
• Viability grade: V2
• Reason for publication: Governance downgrade and changed basis for viability grade
• Regulatory route: In Depth Assessment

This regulatory judgement downgrades the regulator’s previous published assessment of St Mungo Community Housing Association’s (St Mungo) governance from G1 to G2 and confirms its existing V2 grade for viability.

St Mungo continues to meet the requirements on governance set out in the Governance and Financial Viability Standard. However, following an In Depth Assessment (IDA) we have concluded that St Mungo needs to improve some aspects of its governance arrangements to support continued compliance.

Our IDA has identified that St Mungo’s asset and liability records are incomplete. It needs to improve its understanding of its property assets, including property classifications and associated rents, and liabilities to ensure that it is able to identify, assess and manage the risks associated with its complex property portfolio. St Mungo is unable to assure itself that it is operating in line with rent setting requirements and needs to strengthen its controls and assurance around Rent Standard compliance.

In addition, the quality of reporting to the board requires improvement to facilitate more effective monitoring of performance against the provider’s strategic aims. A limited range of targets in both internal and external reporting restricts the ability of the board and other stakeholders to assess strategic performance.

Based on evidence gained from the IDA, the regulator has assurance that St Mungo continues to comply with the financial viability elements of the Governance and Financial Viability Standard and can deal with a reasonable range of adverse scenarios. The business plan is fully funded and based on reasonable assumptions. St Mungo has no funder covenants and has access to a significant level of cash reserves.

However, its financial plans do not currently align to its financial strategy to improve operating margins and there remain material risks which St Mungo needs to manage. The business plan and nature of its work is inherently low margin which reduces the organisation’s ability to absorb adverse shocks. St Mungo relies on a combination of rent and service income, fundraising and efficiency savings to deliver its financial strategy.

Other providers included in the judgement

None

About the provider

Origins

St Mungo is a limited company and registered charity. It provides hostels, supported housing, care homes, resettlement and other rehabilitation services for homeless people.

Registered Entities

St Mungo is the only registered entity in the group.

Unregistered Entities

Five unregistered subsidiaries undertake activities linked to St Mungo’s core business: Broadway Homelessness and Support; Street Impact Limited; Street Impact London Limited; Street Impact Brighton Limited; and Social Impact Bristol Limited.

Geographic Spread and Scale

St Mungo owns, leases and manages around 3,400 units and provides accommodation and support to around 32,000 people. It owns the freehold or long leasehold of 66 properties (1,160 units) including hostels, care homes and supported housing. Its activities are concentrated in London and southern England.

Staffing and Turnover

St Mungo reported turnover of £122m for the year ending 31 March 2021. It employs 1,595 full-time equivalent staff.

Development

St Mungo does not have any material development schemes.

About our judgements

Key to Grades

Governance:

• G1 (Compliant): The provider meets our governance requirements.
• G2 (Compliant): The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.
• G3 (Non-compliant): 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 (Non-compliant): 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:

• V1 (Compliant): The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
• V2 (Compliant): 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.
• V3 (Non-compliant): 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 (Non-compliant): 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 Processes

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’.