Year ended

31 December 2014

VALUE FOR MONEY SELF-ASSESSMENT

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BOURNVILLE VILLAGE TRUST (BVT)

VALUE FOR MONEY

SELF ASSESSMENT 2014

I N D E X

Page Introduction 2 Executive Summary 3 VFM Strategy 5 Governance 6 Benchmarking 8 Return on Assets 11 Social Impact Review 13 Specific VFM Examples 14 Looking Ahead 16

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1. INTRODUCTION

1.1 In 2012, the regulator for our sector, the Homes and Communities

Agency (HCA), produced a new Regulatory Framework applicable to the whole of the social housing sector. The Regulatory Framework consists of seven Regulatory Standards covering the following areas: -

i) Governance and Financial Viability ii) Value for Money iii) Rent iv) Tenant Involvement and Empowerment v) Home vi) Neighbourhood and Community vii) Tenancy.

1.2 This document is focussed on the Value for Money (VFM)

Standard.

1.3 The VFM Standard, amongst other things, requires all Registered Providers (RP) in the sector to publish a self-assessment of their VFM approach which will be accessible and understandable by all their stakeholders. This document is BVT’s 2014 self-assessment, an extract of which is incorporated in BVT’s 2014 financial statements.

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2 EXECUTIVE SUMMARY 2.1 BVT acknowledges its responsibility to demonstrate Value for

Money (VFM) so we can show our customers/stakeholders that we strive to provide the highest possible level of service for the most cost effective price. This philosophy is embedded into our VFM Strategy, approved by Trustees. The VFM Strategy recognises that VFM is not just about cutting costs, but is about the balance between economy, efficiency and effectiveness. It’s about: -

Procuring goods and services as economically as possible, whilst ensuring that the quality of those goods and services meets our expectations. Also, allowing managers to consider factors such as preference for local suppliers in determining their procurement choices.

Examining how we work and whether that can be done more efficiently either through simplifying our working practices or making better use of new technology

Reviewing the feedback from our customers to see how effective our services are in meeting their needs and constantly looking at how we can do more to improve or expand those services.

2.2 In order to deliver the VFM Strategy, Trustees have put

mechanisms in place to ensure that the VFM objectives are embedded into our business. Such mechanisms include: -

Scrutinising the draft budgets and business plans before they are sent to Trustees, ensuring that such budgets and business plans meet key financial targets as well as deliver a reasonable level of headroom against funding covenants.

Setting the relevant key financial targets and updating these as necessary to reflect changing market and economic conditions.

Reviewing benchmarking data.

2.3 In terms of benchmarking data, BVT subscribes to Housemark, but also looks at other relevant benchmarking data for areas of our business that Housemark does not really cover. The most recent Housemark report shows that BVT has very low overheads and is therefore spending most of its money on front-line services (see table 1 on page 8). This is exactly what we should be doing, but the Housemark report also suggests that we are not as efficient as we might be in delivering these front-line services. This is something that we need to take a closer look at and understand why this is the case.

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2.4 Trustees also now have a clearer focus on assessing return on assets. They have established an Asset Management Steering Group to put this area of our business “under the microscope”. Already, this has led to a major strategic decision to transfer all our housing properties in Bromsgrove and Redditch to another Registered Provider. The Asset Management Steering Group looks at more than financial returns on assets. The Group also consider social and environmental factors in making its recommendations to Trustees.

2.5 Social impact is something that has always been at the heart of our

business. A good deal of what BVT is all about is based around social principles rather than financial principles. During 2014, this was demonstrated very clearly through an independent review of six service areas. The review, undertaken by Baker Tilly, was able to show the following in terms of true social impact of these six services.

Anti-Poverty / Welfare Support £ 1,493,574 Selly Manor Museum £ 800,223 Community Halls £ 1,077,898 Community Support £ 453,042 Home Support £ 471,627 Equipment & Adaptations £ 1,049,158

Total Social Value £ 5,345,522

2.6 Given that our annual expenditure in these six service areas is

around £750,000, the review effectively demonstrates a social return on investment in excess of 700%.

2.7 In terms of VFM, all businesses needed to consider new opportunities to improve services and improve VFM. The best recent example of this for BVT has been our office relocation project, where four Bournville offices were relocated to one new central building. Not only has this helped us to improve the customer service we offer, but it has also delivered efficiency savings of almost £250,000 per annum.

2.8 Clearly, we must continue to look at future opportunities, albeit

recognising the increasing challenges arising from Welfare Benefit Reform and more recent changes to the HCA Regulatory Framework. The focus for further VFM improvements therefore continues.

2.9 A copy of this document is available on BVT’s website bvt.org.uk

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3 VFM STRATEGY 3.1 The starting point for any VFM self-assessment must be BVT’s

VFM Strategy. The VFM Strategy, which was last reviewed by Trustees in 2013, sets out seven key objectives which are: -

a) To incorporate VFM principles into our existing management, planning and monitoring processes.

b) To adopt recognised best practice, where appropriate.

c) Where considered useful and appropriate, to benchmark our activities against those of similar organisations.

d) To undertake a process of self-assessment to identify

areas of inefficiency and to streamline processes accordingly.

e) To evaluate the return on our assets, not just in financial

terms, but also in terms of social and environmental returns.

f) To deliver efficiency savings set by Trustees without

undermining quality of services we deliver to our customers.

g) To ensure that all staff recognise their continuing

obligation to seek VFM as part of their routine activities and to encourage staff to make their own suggestions for how services/processes can be improved.

3.2 The Strategy recognises that VFM is not just about cutting costs,

but is about the balance between economy, efficiency and effectiveness. It’s about: -

Procuring goods and services as economically as possible whilst ensuring that the quality of those goods and services meets our expectations. Also, allowing managers to consider factors such as preference for local suppliers in determining their procurement choices.

Examining how we work and whether that can be done more efficiently either through simplifying our working practices or making better use of new technology

Reviewing the feedback from our customers to see how effective our services are in meeting their needs and constantly looking at how we can do more to improve or expand those services.

3.3 Some examples of how we have improved VFM in each of these

categories are set out later in this document.

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4 GOVERNANCE

4.1 The Trustees of BVT place great emphasis on the delivery of our

VFM objectives. All Trust committees monitor financial and non-financial performance in their areas of the business, albeit the main focus is through the Finance, Audit and General Purposes (FAGP) Committee. The main methods that FAGP Committee use to assess VFM across the Trust are: - i) Scrutinising the draft budgets and business plans before they

are sent to Trustees, ensuring that such budgets and business plans meet key financial targets as well as deliver a reasonable level of headroom against funding covenants.

ii) Setting the relevant key financial targets and updating these

as necessary to reflect changing market and economic conditions.

iii) Reviewing self-assessments of all key business functions. iv) Reviewing all major capital investment decisions and

considering the subsequent “Benefits Realisation Reports” to check that the anticipated benefits have been delivered.

v) Reviewing benchmarking data.

4.2 During 2014, Trustees established an Asset Management Steering Group (AMSG), comprising Trustees and senior officers in order to put greater focus on this area. The core purpose of this group is: - “To undertake regular reviews of the value of the Trust’s assets, not only in financial terms, but also taking into account any moral, social, environmental or political issues which relate to the retention and use, change of use or disposal of those assets.”

4.3 The AMSG’s remit is to consider all BVT’s assets over a rolling five year period, paying particular attention to those assets that are considered to be peripheral either in terms of the Trust Deed or geographically. BVT’s area of operation has always been within the general West Midlands area and indeed we only operate in five local authority areas with the following stock numbers as at 31 March 2014. Birmingham 2,534 Borough of Telford & Wrekin 658 Bromsgrove 2 Redditch 43 Wychavon 1

4.4 During the course of 2014, Trustees agreed that the 45 properties we owned in Bromsgrove and Redditch would be transferred to

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another RP, on the basis that these were peripheral to our main areas of operation. The one unit in Wychavon will be sold when the property becomes vacant.

4.5 The Trust very much values the contribution our tenants and residents make to our governance structure and their input assists in streamlining procedures and services. In Shropshire, the Bournville Housing Partnership (BHP) is a board of tenants, Trustees and Officers, focusing on the landlord function in Shropshire. Developed in 2011, this is the first committee within BVT’s governance structure chaired by a tenant. A strong and committed group who get involved in void inspections, post cyclical maintenance inspections and resident engagement. The findings of this group fed into the void procedure review which has resulted in improved procedures.

4.6 BVT’s Scrutiny Panel also plays an important part in reviewing

services to improve service delivery and make efficiencies where appropriate. A recent example of a review was in relation to our Anti-Poverty Strategy which resulted in recommendations being action planned, shared with our Housing Services Committee and subsequent changes to our procedures being fed back to the Scrutiny Panel. For example one recommendation led to a more robust tenancy termination procedure whereby our processes and proformas were changed to establish why a tenant is leaving our home, i.e. could we have done more to make them stay, is it down to affordability? Whilst early days, we are hoping that this may result in reduced void costs.

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5 BENCHMARKING 5.1 BVT subscribes to the Housemark benchmarking services and we

compare ourselves with a range of 16 other registered providers whom we feel are the most appropriate organisations to compare ourselves with. This peer group is based on similar sized RPs in the West Midlands region as well as one or two others who are selected for specific purposes. The results of the latest Housemark report, which is based on our 2013 year end accounts are summarised below. Table 1

Resource Analysis – how we spend our money

Percentage Quartile

Overheads 13.93% Q1

Major / Cyclical Maintenance 25.91% Q2

Responsive / Void Maintenance 13.58% Q1

Housing Management 6.25% Q2

Development 1.87% Q3

Estate Services 2.93% Q2

Supported Housing 10.36% Q4

Other 25.00% Q4

5.2 Given the level of our Supported Housing Services and non-

housing activities, it is not surprising to find that we spend more than most of our peer group in the last two categories. Also, for an association of our size, we currently have quite a large development programme, so it is understandable that we spend more on development than most of our peers. In other areas, we are either in Q2 or Q1. It is particularly pleasing that we are in the top quartile in terms of overhead expenditure, as this means more of our money is spent on front-line services. Indeed, our overhead costs are the second lowest of all 17 RPs in the peer group.

5.3 When we drill down into some of the more detailed sections of the Housemark report, it is clear that we do have more work to do to understand why our costs seem to be higher than others: -

Table 2

Cost per property £ Quartile

Housing Management 595 Q4

Major / Cyclical Maintenance 1,760 Q4

Responsive / Void Maintenance 975 Q4

Estate Services 233 Q3

5.4 To give an example of how we use benchmarking data to improve

our services, in 2014, the Housing Services Team analysed the Housemark data which highlighted the areas in which they

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performed less well. The team action planned their findings and took steps to unpick that data and learn from the better performing RPs how to improve service delivery. This highlighted:

We need to understand the data presented. Rent arrears reported in Housemark is a gross figure. Taking account of housing benefit, performance was much improved but could be better. Arrears processes have been refined in 2014 with ongoing work in 2015.

Void processes and the gas servicing procedure could be improved. With reference to other RPs and cross team working, procedures were streamlined resulting in a better service to customers and cost savings to BVT.

5.5 This is something that senior managers will be looking at further

over the next 12 months to ensure that we are achieving full value for money in these key service areas. However, this will need to recognise the additional costs that BVT has in terms of its extensive estate management responsibilities, particularly in maintaining over 75 acres of open space on the Bournville Estate.

5.6 In terms of benchmarking data areas of non-financial performance, the following table summarises a variety of performance indicators:-

Table 3

Performance Quartile

Current tenant arrears 5.89% Q4

ASB resolution rate 84.18% Q3

Average re-let time (all re-lets) 26.37 days Q2

Tenancy turnover 7.64% Q2

Average SAP rating 72.2 Q2

Repairs satisfaction 94.2% Q2

Repairs completed first time 96.5% MEDIAN

Staff turnover 10.3% Q1

5.7 In relation to the data above in table 3, a good example of

understanding the data is in respect of ‘Tenancy Turnover’ at 7.64%. Whilst this is above our target, we do know that this figure is high due to the number of tenants we have been able to ‘downsize’ (transfer) to smaller properties to help them avoid the ‘Bedroom Tax’. We feel that our pro-active approach to working with tenants to achieve this is a positive outcome, even though the data puts us into Q2. An improved position was observed as at the end of Q4 2014, with turnover out-turning at 2.07% against a target of 1.75% whilst still ensuring a number of ‘downsizers’ could be accommodated.

5.8 It is important to us that benchmarking is meaningful. In relation to Supported Housing, we are currently working closely with the

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National Care Forum (NCF) to produce a meaningful suite of benchmarking data. Our Director of Supported Housing is working closely with the NCF to produce this framework. Considering data produced by the NCF in 2013, BVT scored 100% in seven out of 10 service areas. Our Supported Housing teams review the results of all inspections to continually improve service delivery and to retain their “good” service ratings by the CQC, whilst of course aiming for excellent.

5.9 BVT is a firm believer in partnership working to deliver a holistic

service to customers and therefore deliver improved value for money. Working closely with the Birmingham Social Housing Partnership (BSHP), various Shropshire forums and other RPs, we ensure that workload relating to current agendas (Welfare Reform, work and skills, the new Care Act etc.) is shared amongst us which in turn avoids several organisations undertaking the same pieces of work. Our Director of Housing & Community Services sits on both the NHF Regional Board and the BSHP Executive Team to contribute to strategic issues across the region and nationally and to ensure that BVT are represented and have a voice. Again best practice is shared through joint briefing sessions and training and seminars benefit all. A practical example that works across Birmingham is a jointly funded ASB co-ordinator who pulls together data from across the City so that each landlord does not consider their own areas in isolation and help support each other with the Community Trigger reviews. BVT is also a member of the Placeshapers group, working with over 100 RSL’s nationally to have one voice, to benchmark and to deliver a network of contacts to draw upon to share knowledge and experience.

5.10 Overall, the latest benchmarking data shows BVT performing reasonably well, albeit there are some areas where there seems to be some scope for improvement. This is something officers will be examining closely in the coming months.

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6 RETURN ON ASSETS 6.1 In undertaking their review of BVT’s various assets, the Asset

Management Steering Group (AMSG) considers the return on each asset, or group of assets that it reviews. Having said that, perhaps the key driver behind recent asset management reviews has been the location of stock. Trustees are looking to concentrate on our core areas of business which are currently seen to be Birmingham Shropshire

6.2 As a result, all of the properties we own in Bromsgrove and Redditch (except for one care home) have been transferred to another RP during the course of 2014. The future of the care home will be assessed when the current lease expires in 2017. BVT also owns one property in Wychavon, but this will be sold off when the current tenancy comes to an end.

6.3 Return on assets is not only considered from a financial viewpoint, it also considers social, environmental, moral and political factors. In terms of the Bournville Estate, for example, there is a very strong moral perspective to retain the assets that remain a key principle of George Cadbury’s legacy. Bournville holds a special place within the garden city movement – a movement that seems to be coming back into fashion. Trustees therefore regard Bournville as “the family silver”, not to be sold unless no other option exists. This includes our commercial portfolio of shops, offices and other facilities that help to make Bournville a village, rather than just another housing estate.

6.4 The Trust’s agricultural estates need to be considered primarily

from an environmental perspective. These estates were gifted to BVT as green belt land, providing vital farmland and amenity space to the residents of Birmingham and other neighbourhoods. Whilst Trustees recognise that managing agricultural estates cannot be considered as part of our core business, there is equally an understanding that such land has been gifted to us on the understanding that BVT would help to protect it as green belt land. This is not to say that Trustees are unwilling to consider any development on the agricultural estates. Indeed, Trustees have asked officers to undertake feasibility studies on four small development opportunities at various locations within our agricultural estates. Equally, there are a small number of residential properties in the agricultural estates and Trustees have approved the sale of such properties over time when the cost of refurbishment has been excessive.

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6.5 Looking at return on assets from a purely financial perspective over the last few years, this is summarised in the table below: -

Table 4

Return on Assets

Asset Class 2011 2012 2013 2014

Housing 3.23% 4.02% 3.74% 3.92%

Agriculture (1.28%) 0.80% 1.12% 5.88%

Commercial 7.44% 5.50% 4.86% 4.51%

6.6 Housing assets tend to average out below the 4% mark in recent

years, albeit the figures are influenced by the level of repairs expenditure which has been higher in the last couple of years mainly due to greater void expenditure.

6.7 The relatively low level of return on agricultural assets reflects the fact that, for some considerable time, there was a lack of a proper investment programme. This has been addressed and over recent years, BVT has been spending a good deal on bringing our agricultural buildings up to a modern standard.

6.8 Returns for commercial properties have been deteriorating in

recent years. This reflects the general economic downturn and the fact that we have to let shops on lower rents (or even on a rent free basis in some cases) in order to attract new business to the areas in which we operate. This is particularly the case in Lightmoor where we have four new commercial units and have had to agree low rents or even rent-free periods to attract appropriate business when the village is still less than 50% complete.

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7 SOCIAL IMPACT REVIEW 7.1 There are some areas of our business which do cost BVT money

each year, but that Trustees feel are important. These are activities / services / facilities that BVT have provided for many years as part of George Cadbury’s ethos for a garden village, but they also include services that we have developed more recently where Trustees feel the need to fill the void created by a lack of government funding.

7.2 Our founder’s success in building strong communities continues today. The Community Services Team works with colleagues from across the Trust to help our communities flourish. This of course impacts on our management cost and in part we understand why we are not top performers in this area. Nonetheless, we do not allow this to “mask” any efficiencies that could be made through scrutinising our services further.

7.3 During the course of 2014, BVT commissioned Baker Tilly to undertake a Social Impact Review of six of these service areas. Baker Tilly were chosen because they had developed an approach to assessing social impact that was both robust and comprehensive. Staff from Baker Tilly worked alongside our own staff in undertaking the review to assess the full impact of the six service areas. In summary they evaluated the social value of the six service areas as follows: -

Table 5

Anti-Poverty / Welfare Support £ 1,493,574 Selly Manor Museum £ 800,223 Community Halls £ 1,077,898 Community Support £ 453,042 Home Support £ 471,627 Equipment & Adaptations £ 1,049,158

Total Social Value £ 5,345,522

7.4 BVT currently spends around £750,000 each year providing these

activities / services / facilities. It is therefore quite remarkable that the social returns on this investment is around 700% per year.

7.5 The review covered six areas of our business, but BVT undertakes other services for the benefit of our residents which we may look to value in the future. But this review clearly demonstrates the true value of what BVT does for not only our own residents, but the wider community.

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8 SPECIFIC EXAMPLES OF EFFICIENCY SAVINGS A Office Relocation

8.1 In May 2013, BVT relocated from four separate offices in Bournville to one central office. Part of the rationale for this was to introduce a centralised Customer Service Team to help us deal more effectively with customer contacts. But it was also undertaken to deliver some cost savings. Now that we have had a full 12 months in our new office, it has been possible to assess whether these objectives were achieved.

8.2 In terms of our new Customer Services Team, we have seen

a big increase in the number of calls we are now able to deal with. Previously, due to the limitations of our switchboard system, we would only be able to process around 85% of telephone calls received. Now we handle 98% of all calls received, but even those calls we cannot deal with immediately, we offer a dial back facility so that we call back the customer when a CST representative is available.

8.3 In general terms of cost savings, our original target was to

generate savings of around £207,000 per annum. The actual savings achieved actually came out at £245,498.

B Water Charges Review

8.4 BVT has worked with a specialist procurement company,

Expense Reduction Analysts (ERA) for several years. ERA look at a specific area of procurement and test to see whether savings can be made through changing supplier or through other initiatives. Some modest savings have been achieved over recent years, but in 2014, ERA looked at the cost of water charges at our various sites. The review uncovered a faulty water meter at our Lightmoor extra care scheme as well as the benefit of fitting water meters at two of our sheltered schemes. This review has so far generated savings of just over £29,000 and whilst ERA take a share of those savings for the first two years, BVT is clearly making some sizeable savings as a result of this exercise.

C Welfare Benefit Reforms

8.5 In response to the Welfare Benefit Reforms, BVT have

invested in resources to support customers and protect our income, the result of which has been very positive. Whilst at the time of setting the budget a realistic approach has been taken, the team will, whenever possible look to integrate that support into existing roles, work jointly with other RPs to share best practice and avoid duplication and ensure welfare reform is planned for and challenges anticipated. Working in this way, the team saved £35,000 during 2014 compared with the

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available budget. Furthermore, BVT successfully negotiated Discretionary Housing Benefit payments of over £103,000 in the year ended 31 March 2015, helping our tenants to cope with the welfare benefit changes.

D Learning Disability Homes

8.6 In relation to our Learning Disability Homes, 2014 saw the impact of the cuts to Local Authority budgets with 25% being slashed from residents care costs. Through negotiation with the LA, this reduction was reduced to 15%. In order to work within the new budget, the staff of those schemes met to consider options to ensure their residents continued to receive the level of service they needed rather than the level of service the LA could afford. This resulted in a change to Terms & Conditions and a saving in staffing costs of around £56,000. This has helped to offset the reduction in LA support and ensure that these vulnerable clients continue to be well cared for in our homes.

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9 LOOKING AHEAD 9.1 Over recent years, BVT’s focus for value for money has been

through an Efficiency Agenda which sought to achieve 2% efficiencies year on year across all areas of our business. This worked successfully for several years and delivered savings of £1.6m through to the end of 2013.

9.2 The focus has now changed to a more targeted approach with the

main focus being benchmarking whether through Housemark or other similar services. It is clear from the latest Housemark report that there are some areas of our business where our costs do seem to be higher than our peers and clearly we will be looking into the reasons for this.

9.3 In addition, each team is now required to undertake an annual self-

assessment of its resources and services to establish whether there are opportunities to improve efficiency. The outcomes of the self-assessment are then reported back to the FAGP Committee annually to show whether the expected efficiencies were achieved and if not, why not.

9.4 Furthermore, Trustees require a full business case for any major

project to highlight the costs / benefits to be delivered. This is then followed through into a Benefits Realisation report which shows whether the predicted benefits were indeed achieved and if not, why not. This imposes a helpful discipline on senior managers when undertaking any new project.

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10 CONCLUSION 10.1 This statement sets out BVT’s approach in delivering value for

money. Trustees and officers recognise that a lot of work has been undertaken to improve VFM in recent years, but that there is still more to be done. Like all businesses, we need to look at what we do and how we do it, taking into account the changing environment we have to deal with. The journey continues.