CORPORATE FINANCE STRATEGY APRIL 2014 - 2017

Prepared by: Click here to enter name. EIA Required? ☐ Date effective from: Click to enter a date. EIA Completed? ☐ Policy approved by: Click here to enter name. Revision number: Click here to enter number. Review Date: Click to enter a date. Lead officer: Click here to enter name. Stockport Homes Strategy

CORPORATE FINANCE STRATEGY 2014 - 2017 1 INTRODUCTION 1.1 The aim of this strategy is to set a framework for corporate financial management for the business over the next three years during a period which is set to present constant growth, change and challenge for the organisation. Most if not all key business decisions have a financial impact in some way. It is important that financial management and financial governance remain robust, up-to-date, flexible, fit-for-purpose and alive throughout the organisation during this time of significant change. 1.2 Corporate financial management is not just the responsibility of the Corporate Finance Team, but all staff, and Budget Managers, the Leadership Team and the Board in particular. Everyone will have a part to play in ensuring successful financial management during this time of growth. 1.3 There are changes presented that do not just relate to the maturity and growth of the organisation, but also regulatory advancements that the organisation will have to respond to and comply with during this strategy period. It is vital that the Corporate Finance Team keep abreast of these changes and implement them accordingly. 1.4 This strategy and its associated action plan will ensure that Stockport Homes will continue to have the most effective financial management arrangements, systems, skills and focus to support the business to grow successfully, at the same time as maximising opportunities presented by evolving business areas, maximising structure efficiencies and remaining compliant with the changing accounting standards. 1.5 A robust financial management service, providing accurate and timely information for staff and customers alike, enables internal and external stakeholders to make informed decisions which will ensure the continued success of Stockport Homes. 1.6 The priorities in this strategy have been developed following consultation with staff, managers, and technical partners, and are integral to the delivery of Stockport Homes’ Vision, Mission and Aims. 2 CONTEXT 2.1 Stockport Homes has had a successful eight and a half years in operation with the Finance Management function growing and evolving with the organisation, with clear year-end audit reports and very few internal audit recommendations for improvements, being testament to the strength of the core function. The finance function is business critical, not just because of the legal requirements that the company has to comply with and demonstrate, but because timely and accurate financial performance information is an enabler – it enables managers and staff at all levels to make business decisions about how to use

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resources. It is also an area that it is judged externally and has huge reputational issues when it goes wrong.

2.2 The Corporate Finance function supports the whole organisation, not just one business area, and therefore its remit is broad (see Appendix One). Given the various facets of the business areas of the organisation, the accounting is also complex with different politics, policies, systems and accounting requirements in each individual area of the business. Regardless of the individual nuances, statutory accounts for the organisation are pulled together as one set of accounts. The finance function need a good overview and understanding of the whole organisation.

2.3 Stockport Homes are also responsible for the financial management of the Council’s Housing Revenue Account and the Capital Programme. These bring additional complexities and responsibilities. Stockport Homes wrote the 30 year HRA Business Plan and its associated Asset Management Strategy and the skills in-house keep this up-to-date taking into account policy, political and fiscal changes, as well as impacts on customers.

2.4 In addition to the above, growth in the last eight years has seen financial appraisal models grow and evolve, to include the implementation of a financial appraisal process for appraising new build schemes, technical component accounting regimes put in place, accounting for shared ownership fixed assets, and the accounting for the organisation’s asset base generally, which has grown from zero to £8million in that time alone.

2.5 The business and its aims are changing. Audit Commission inspection regimes and only delivering core business activities are things of the past. New business activities bring greater levels of understanding required, controls, and additional volumes of works and systems usages. It requires more than ever real time information regarding levels of available reserves and the assessment of the best use of those reserves when faced with competing priorities. In light of this the Corporate Finance Team will need to continue to review its focus and skills base with regard to the balance of delivering core accounting requirements whilst advancing business enabling information and advice. Cyclical and monthly pressures for producing works are core in any finance team, i.e. monthly management accounts, the year-end months, the budget setting months. However the time spent on planning, advising and forecasting is also key.

2.6 The relationship with the Council is also changing. The new Management Agreement is likely to see a closer working relationship and that will undoubtedly translate to closer working on how to maximise resources. This also brings added complexities and politics around managing the finances and it is crucial that the business understands its own position at all times in order to offer opportunities going forward.

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2.7 The regulatory framework is changing, which will see Stockport Homes having to prepare accounts compliant with International Accounting Standards from 2016. This has implications such as how property assets are valued and will need technical knowledge and training within the team.

2.8 Finally nationally politics is changing. This strategy cannot ignore policy impacts to customers. Whilst cash collection management and financial services to customers is in the main dealt with outside of this strategy, ie in the Customer Finance Team and its own Income Management Strategy, its effects have a direct correlation in terms of resources available in the HRA, and therefore Management Fee and the relationship with the Council over allocating resources in the HRA. This also makes business diversification more pertinent in terms of maximising monies into the business and reducing shared costs. As the HRA comes under pressure, how to use monies in the best possible way in the HRA will also remain critical, for example the HRA headroom cap will need reviewing and dynamic ways to fund New Build/competing asset priorities will need to be investigated.

2.9 All of the factors highlighted above provide the context for this strategy and highlights the need for a co-ordinated and coherent plan of direction for corporate financial management in the organisation during 2014-17.

LINK TO VISION, MISSION AND AIMS 2.10 In April 2012 Stockport Homes launched a new vision, mission and aims, which are highlighted below;

Vision: to deliver the best services to customers by being a great place to work Mission: Transforming Lives Aims:  Exceed customer expectations and always do the right thing.  Support customers in all aspects of their lives through effective partnership working.  Create greener places to live and work and continually minimise our impact on the environment.  Develop our thriving, safe and sustainable neighbourhoods, maximising our contribution to meeting housing need.  Involve customers, staff and the Board in decision making and create opportunities for them to fulfil their potential.  Grow by making the best use of our resources and diversifying into businesses that complement what we already do.

This Strategy is cross-cutting, contributing to the delivery of all aims with specific emphasis upon the aims of ‘growing by making the best use of

Page 4 of 11 Stockport Homes Strategy resources and diversifying into businesses that complement what we already do. 3 STRATEGIC OBJECTIVES & OUTCOMES 3.1 This strategy identifies nine key priorities for the business over the next three years, with 35 actions identified in the associated action plan encompassing governance, support, and business transformation. Taken collectively, these priorities seek to deliver the maximum potential and value from Stockport Homes’ management of its money.

Priority One – Maximising resources and reserves management Implement a clear framework plan for maximising monies into the organisation to aid achievement of its goals

High Level Action Outcome Investigate other sources of Maximise investment opportunities borrowing for the ALMO and HRA such as to increase housing stock in Stockport through new build. Respond to CLG headroom cap Maximise opportunities to increase changes housing stock in Stockport through new build. Work with the Council to agree the Ensure that high quality service best available Management Fee delivery can be sustained into the levels future. Develop a reserves management Clear understating conveyed at all strategy times to senior management of the organisation’s available monies to enable decision making Develop return on investment Demonstration that reserves are indicators for reserves usages and being utilised in an effective way investments that maximises returns for the Company. Develop clear forecasting for core Informed and proactive discussions cost pressures, i.e. pension with the Council to ensure increases management fee levels and reflective of core pressures. Develop clear reporting for new Clear information to support robust business areas and surpluses decision making regarding use of surpluses. Review banking and treasury Ensure that cash is being managed management arrangements in the most effective way so as to maximise returns to the Company.

Priority Two – Asset Management Manage and maximise resources and efficiencies from the growing asset base of the organisation and the HRA

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High Level Action Outcome Implement budgetary framework Effective financial management of for Head Office build and fit-out the Head Office project leading to costs clear and informed decision making throughout the time period of the project. Oversee loan drawdown and Ensures that cashflow is effectively agreement for Head Office managed throughout the project and the loan is drawn down on most preferential terms. Head Office vat review The construction process/services delivered from the site will be carried out in the most tax efficient/compliant way. Ensure 30 year HRA Business There will be a clear picture of on- Plan is kept up-to-date going asset investment requirements against available resources, which significantly affects investment decisions Implement component accounting The depreciation charge will more in HRA accurately reflect lifecycles of the housing stock and the process will be legally compliant. Develop financial appraisal NPVs There will be robust information to for Asset Management Strategy estimate future income streams decisions against investment costs, informing decision making about long term viability across the housing stock portfolio. Review debt management Clear information on levels of debt portfolio for new build and leading to robust decision making property/other assets on overall debt levels and future new build appraisal options. Maximum efficiencies gained in terms of interest levels.

Priority Three – Business Diversification Set a clear process for bidding for new works/costing methods and financial decision making for new business areas, as well as embed a framework for evaluating the success of those new business opportunities.

High Level Action Outcome Implement process for Informed decision making leads to valuing/approving new business successful outcomes, along with options. robust monitoring over time to assess the critical success of new

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business areas. Implement organisational wide Clear, consistent approach to overheads methodology to include applying overheads to commercial in new business financial ventures so as to allow consistent modelling. financial performance appraisal. Clear understanding from Budget Managers as to why overheads are shown. Ensure all tax aspects of new Compliance with tax legislation and business ventures are considered informed decision making and implemented. regarding efficient tax structures. Develop financial management Clear, more useful financial reporting to ensure clear reporting information on the whole separation of commercial/ income Company that better reflects the generating financial information growing diversity of the Company. from financial information on core management fee funded activity. Develop the Corporate Finance Leadership Team and budget Team further to provide an managers are better supported to enabling, expert advisory service. deliver services with full financial knowledge and information.

Priority Four – Corporate Structures

High Level Action Outcome Review structure options and The company structure will support implement/set-up most efficient the growth of the company and its option housing stock and minimise associated tax liabilities. Implement VAT structure to fit the VAT liabilities will continually structure of the organisation - reflect the changing/growing partial exemption and special activity of the Company, which is a method assessments regulatory requirement and incurs fines if not implemented correctly.

Priority Five – Strategic clarity and enablement Ensure clear, strategic financial information enables informed, proactive decision making.

High Level Action Outcome Develop financial understanding of Political parties understand the SHL within the Contributors financial efficiency and Committee maximisation of resources that SHL deliver which will add to the

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positive relations re the ALMO vehicle Develop ratios for return on Senior management can appraise investments /compare performance of invested funds. Redesign the management Clear, focussed report with accounts report to reflect growing emphasis on key business diversity of business. indicators ensures strategic messages are captured and not lost in the detail. Continuous framework for Board Board can make strategic decisions training on technical financial with full regard to financial issues implications

Priority Six – Information and systems Streamline financial processes/interfaces and improve clarity over the whole business operations to aid decision making and improve the quality and efficiency of financial information

High Level Action Outcome Review use of systems for Financial processes relating to new financial information by new business areas are set up in the business areas most accurate and efficient way. Evolve the management accounts Clear, more useful financial pack to ensure information is kept reporting information on the whole concise and high level to support Company that better reflects the business decision making growing diversity of the Company. Develop financial information More efficient, targeted reporting reporting capabilities within the structures. team. Work with teams to critically Efficient processes resulting in evaluate use of systems for clear, reliable financial information. financial information and decision making.

Priority Seven – Regulatory compliance/financial governance Ensure the organisation’s accounting complies with regulatory changes

High Level Action Outcome Partial exemption and special Future VAT liabilities will more methods for VAT accurately reflect the activity of the Company. Compliance plan for switch to Financial statements are compliant International Financial Reporting with changes in accounting Standards (IFRS) and FRS 102 in legislation with minimum additional 2016 cost.

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Priority Eight – Financial Management skills base Develop the financial management skills base in the business in line with business growth

High Level Action Outcome Review Corporate Finance Team Skilled, expert team effectively skills base and match to business supporting senior management to requirements make informed and pro active financial decisions. Implement Leadership Forum Enable informed and complete financial training package financial decision making at strategic level. Improve Repairs accounting Clear, concise and relevant service provision from Corporate financial information to support Finance following higher turnover critical decision making. Clear view of finance staff in this area at all times of repairs costs to the organisation. Review skills of team against Skilled, expert and enabled team. recognised quality accreditations, eg accountancy bodies. Address any areas where improvements could be made. Seek awards for accountancy Will supplement the already team accredited status of the team via accountancy bodies and produce positive press

Priority Nine – Capacity building with customers

Support the financial development of customer groups through advice, support and mentoring.

High Level Action Outcome

Develop links with customer and More effective financial community groups to provide management by community groups support and mentoring with leading to stability, increased skills financial management and improved funding chances. Use specialist skills of the team to Contribution towards improved link in with local schools and outcomes for young people. provide volunteer support with Young people engaged in mathematics. opportunities for careers in finance.

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4 EQUALITY IMPACT ASSESSMENT (EIA) 4.1 The Equality Impact Relevance Screening has been completed. This strategy has a low impact on customers and staff and therefore a full Equality Impact Assessment is not required. 5 LINKS TO OTHER POLICIES AND STRATEGIES 5.1 This strategy links to and/or supports the following other strategies and policies within the organisation:  SHL 3 year Business Plan  Risk Management Strategy  Income Management Strategy  Fraud Policy  Various team specific Business Plans  Value for Money Strategy These strategies collectively provide the framework to support the organisation in its management of money. It is essential that these strategies are integrated to ensure the Stockport Homes continues to maximise its financial management arrangements.

6 ACTION PLAN 6.1 The objectives in this strategy are linked to Stockport Homes Corporate Aims. The high level actions in this strategy are supported by a detailed action plan which is set out in Appendix two.

7 OWNERSHIP, MONITORING & REVIEW 7.1 The Head of Finance will monitor the delivery of the action plan. Delivery of the strategy will be managed through the Personal Development Review of the Corporate Finance Team Members. This will be overseen at a strategic level by the Director of Finance. 7.2 Annual updates will be provided to the Business Development Sub- Group of the Board.

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