Agenda item

8.1   Report on i4B Ltd

This report provides the Audit and Standards Advisory Committee with an update on the work of i4B Holdings Ltd to deliver against its business plan for 2023-24 which was agreed with the Council as Shareholder, and an update on the company’s upcoming 2024-25 business plan.

8.2   Report on First Wave Housing Ltd

This report provides the Audit and Standards Advisory Committee with an update on the work of First Wave Housing Ltd to deliver against its business plan for 2023-24 which was agreed with the Council as Guarantor, and an update on the company’s upcoming 2024-25 business plan.

Ahead of the formal introduction of the item, the Chair reminded members of the change in reporting arrangements for i4B Holdings Ltd (i4B) and First Wave Housing Ltd (FWH) with the role of the Audit & Standards Advisory Committee now focussed around assurance relating to the arrangements the Council, as Shareholder (in the case of i4B) and Guarantor (in the case of WFH), had in place to oversee the governance and performance of both companies rather than on their detailed operational management & performance, which would be monitored through the Council’s scrutiny function.

Minesh Patel, Corporate Director of Finance & Resources then introduced the reports that updated the Committee on the governance arrangements of both i4B and FWH, including updates on issues considered at the most recent Shareholder and Guarantor meetings in relation to delivery against each respective Business Plan, financial and operational performance along with outline of key risks and the reports provided for the most recent Shareholder and Guarantor meetings attached as an appendix to the update reports on i4B (Agenda Item 8.1) and FWH (Agenda Item 8.2).

Key issues highlighted were as follows:

·             The Committee’s attention was drawn to section 3.4 in both the i4B and FWH reports which detailed the governance arrangements in place relating to both companies along with the updates provided in section 3.5 of both reports on the key issues covered at the most recent Shareholder meeting between the Council and i4B (February 2024) and Guarantor meeting between the Council and FWH (February 2024) relating to operational performance and financial performance as well as progress against each respective Business Plan.

The Chair welcomed Andrew Hudson to the meeting (as newly appointed Chair of the Boards for both i4B Holdings Ltd and FWH Ltd) and then invited the Committee to comment on the updates in relation to both i4B and FWH, with the following issues discussed:

·             Further details were sought on the current structure of both companies and the consideration given to a potential merger in order to generate further efficiencies.  In response, members were advised that expert advice had been sought on a merger in seeking to explore potential tax efficiencies, however, the advice provided had confirmed this would be difficult to achieve given the way both companies had been established particularly with FWH being limited by guarantee and with limited ability to dispose of its assets.

·             In referring to the need for regular scrutiny to be established (under the new performance monitoring arrangements) in relation to the operational performance of i4B and FWH, further details were sought on progress in establishing the joint scrutiny Committee meeting between the Resources & Public Realm and Community & Wellbeing Scrutiny Committees to examine the companies in more detail and consider how the process could best be incorporated within the relevant sections of each Committee’s work programme.  In response, it was agreed by the Chair that a further update be requested on progress in seeking to establish a joint scrutiny work programme planning session to consider the arrangements and remit of each Scrutiny Committee in terms of their operational review of both i4B & FWH.

·             Referring to the strategic risk register provided in relation to both companies, further details were sought on the mitigations in place covering the risk identified around the impact of high capital programme costs (including future climate change expenditure) and its impact on future viability of the Business Plan.  In response, officers advised that current mitigations included the development of a costed asset management plan (including stock condition and energy surveys) and decarbonisation strategy designed to support financial and investment forecasts and delivery of the ongoing acquisition programme and each companies respective Business Plan.

·             In relation to the other key strategic risks identified, members were advised that whilst future capital cost decisions, including i4B properties at Granville New Homes, energy efficiency works and the schedule of planned company loan repayments remained a focus for the i4B Board and capital programme costs, health and safety compliance, rental affordability for the FWH Board both companies had mitigations in place to effectively manage the overall level of risk.  This would include regular monitoring of the external environment, including economic factors such as inflation and interest rates, as well as changes in regulation and other contextual factors with regular updates provided for each Board in order to assess the impact on each companies tenants, financial and operational performance and overall Business Plan and strategy.  In the case of i4B this had recently led to a pause in their street property acquisition programme due to unfavourable interest rates and the housing market environment which had now resumed following a further review of the property market.  As further assurance, Andrew Hudson (as chair of both the i4B & FWH Boards) advised of the process being established to undertake specific deep dives in relation to the effectiveness of mitigation strategies for key risks as well as continue the process of horizon scanning for any future emerging issues.

·             Clarification was sought on reference within the i4B report to the Shareholders meeting in February 2024 (Appendix 1 - Agenda Item 8.1) to the option being explored (in support of the street property purchase programme) in acquiring new build property with off the shelf purchases through s106 schemes.  In response, members were advised this would involve the potential to acquire property through s106 obligations placed on developers in terms of the provision of affordable housing units.

·             Following concerns raised at previous meetings regarding health and safety compliance, further details were sought (give the ongoing risk identified) on the timescale for all governance arrangements in this respect being recognised as compliant with the necessary standards.  In response, members were advised of the health and safety compliance audits in relation to dwellings and blocks owned by both companies which had been completed and establishment of a monitoring system to track progress on the delivery of all compliance elements (including the issuing of electrical and gas safety certificates) which also involved monitoring updates being provided for both Boards in order for them to proactively track progress (as an area of priority) on a monthly basis.  Alongside this, as a longer-term solution, use of the True Compliance system (procured by the Council) was also being developed to track all elements of compliance as part of which all i4B and FWH properties were also being uploaded.  In response to a further query, clarification was provided on the legal process followed to gain entry to individual properties in order to undertaken necessary health and safety compliance checks where this could not be secured through the standard arrangements within each tenancy agreement and on the associated process for completing tenancy verification checks.

·             In response to a query regarding the composition of the Boards for each company, members were advised that each Board was made up of an independent Chair, two Council Directors & one councillor (all Council representatives) and one independent non-executive Director. Neither company employed staff directly with support functions secured through a Service Level Agreement between each company and the Council.  Responsibility for the Shareholder and Guarantor functions were represented through a separate structure within the Council involving the Chief Executive, Corporate Director of Finance & Resources and Deputy Leader in order to maintain a clear distinction of roles.

·             Further details were sought on impact of the 2024-25 uplift in Local Housing Allowance rates in relation to i4B and the impact this would have in enabling an increase in rents ahead of business plan assumptions and in any acquisition price caps.  In responding, Andrew Hudson took the opportunity to highlight the Board’s ongoing strategic focus in seeking to maximise the company’s contribution to the Council’s wider priorities, with a specific focus in supporting the work being undertaken to tackle the demand for housing given the increase in levels of homelessness.  As part of this approach, the Board were progressing workstreams aimed at seeking to increase i4Bs level of stock (utilising the rise in Local Housing Allowance (LHA) rates and increased price cap supported by discussions with the Council on the potential draw down of further funding) with initial activity focussed around the acquisition of 3-4 bed houses in the North West of the borough above the North Circular Road and small blocks as well as supporting tenants to move through i4B.  As part of the package of support to tenants, further details were also sought on the work being undertaken through BEAM, who members were advised had been commissioned as a partner organisation to provide specific financial and employment support for tenants as part of a wider package of support measures the Shareholder and Board were keen to see developed.

·             In response to comments regarding the economies of scale it might be possible to utilise across both companies in order to address projected growth, costs and performance, Andrew Hudson advised that whilst recognising the areas of operational performance that required focus these were not issues related predominately to scale with the approach instead based around implementation of the Value for Money Strategies which had been agreed by both Boards as a means of reducing costs and improving financial performance and with a particular focus on voids performance and financial controls.

·             As a final issue raised, further assurance was sought on the variance identified between the Annual Maintenance, Service Charge and Supplies and Services cost categories within the 2023-24 financial monitoring forecast provided for i4B.  In response, Officers advised that these variances reflected operational issues identified during previous years and had been accounted for as part of the company’s ongoing financial position and within its Business Plan.

As there were no further questions the Chair thanked officers along with Andrew Hudson for presenting the report and responding to the Committee queries. The Committee RESOLVED to note the update on the work and governance of both i4B Holdings Ltd and First Wave Housing Ltd in terms of delivery against their 2023-24 Business Plan along with the update on development of their 2024-25 Business Plan.