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The FinancialStandardThe Financial Standard andAssessment Framework forthe Regulation of ApprovedHousing Bodies in Ireland

Published by:The Regulation Office,Housing Agency.Publication date:July 2015Contact DetailsRegulation Office,Housing Agency,53 Mount Street Upper,Dublin 2.01 656 4170regulation@housing.ieFor further information onthe regulation of ApprovedHousing Bodies, please visitwww.housing.ie/regulation

Contents1. Introduction 52. Background – The VoluntaryRegulation Code 73. Implementation Phase and Timeline 94. Objectives 115. The Financial StandardViability Requirement 136. What is Viability? 157. Risks 198. Notifiable Events 219. Group Structures andAncillary Housing Activities 2310. Our Assessment Process 2511. Assessment Reports andAddressing Issues Arising 2712. Further Developmentsand Conclusion 29Appendices 31APPENDIX A Classification of AHBsAPPENDIX B Tier 3 RequirementsAPPENDIX C Tier 2 RequirementsAPPENDIX D Tier 1 RequirementsGlossaryThe Financial Standard and Assessment Framework3

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IntroductionThe landscape of the social housing sector inIreland is changing. The Government’s ‘SocialHousing Strategy 2020 - Support, Supply andReform’ envisages a significant role for ApprovedHousing Bodies (AHBs), as not-for-profit housingproviders, in the delivery of social housing for Ireland.This new Financial Standard and Assessment Frameworkdevelops the regulatory framework for the AHB sector,and should support and assist in building the capacityof AHBs to deliver more homes.The Framework further develops the Voluntary RegulationCode for AHBs published by the Department ofEnvironment, Community and Local Government (DECLG)in July 2013, in which there was a commitment todevelop financial regulation and oversight of the sector.The Irish Government has invested and is continuing toinvest in AHBs to provide social housing for those whoneed it and therefore, it is important that we ensurethat this investment is managed effectively and that thesocial housing provided is available well into the future.The way that social housing is being delivered is changing.The AHB sector is becoming less reliant on capital grantsfrom the government and increasingly, borrowingprivate finance to support the development of social andaffordable housing. This will make more effective use ofmonies and enable the delivery of more homes. However,it also requires AHBs to change how they do businessand take on more risk, and it is important this is managedeffectively. Regulation, and in particular this new FinancialStandard and Assessment framework, is critical in thecontext of the enhanced role and importance of AHBs tothe delivery of future social housing.It is our role under this new Financial Standard (theStandard) to oversee and monitor the financial viabilityof AHBs signed up to Regulation. Our purpose in thefirst instance is to protect existing assets and therebytenants, and also to build the confidence of funders(lending institutions) to invest in social housing. Thisis important in terms of the supply of new socialhousing and in AHBs being able to access funds ataffordable costs to provide these new homes. The newregulatory framework, along with the commitmentby Government to provide statutory underpinning tothis regulatory framework by 2016, should allow bothpublic and private investors have confidence in oursystem of regulation and the reputation and creditworthiness of our AHBs.“ The Financial Standard is part of the Regulation Code,and details the standard expected of each AHB inrelation to financial viability. It outlines our approach tomonitoring and assessing the financial health of AHBs.”The Financial Standard and Assessment Framework5

01 Introduction / continuedThis Standard has been developed with the assistanceof Campbell Tickell, a UK consultancy firm with specificexpertise in housing regulation, and in consultationwith a series of working groups. These working groupsincluded the Financial Capacity group and sub group,the working groups for each of the Tier levels and also,the representative bodies - the Irish Council for SocialHousing (ICSH) and the National Association of BuildingCooperatives (NABCO), and the DECLG.The Standard details the standard expected of each AHBin relation to financial viability. This is to ensure that theAHB is viable into the future, that the housing assets forwhich it is responsible are safeguarded in the long term,and accordingly that the tenants to whom it provides aservice are protected.In order for the Regulation Office to assess viability,certain information is required from each AHB. Thedocument sets out the details of the informationrequired, and importantly explains why the informationis necessary. The collation and examination of thisinformation will be a useful management tool inassessing performance, as well as allowing each AHBto examine the robustness, or otherwise, of its ownfinancial model. It will also give AHBs confidence in theirown financial viability and sustainability in the future byproviding a framework by which to measure viability.pilot with a number of the larger AHBs as the first phaseof the implementation. This pilot will be initiated in 2015(in respect of the 2014 financial year). Recommendationsarising from completion of the Pilot will be consideredin the further roll-out and implementation of theStandard. Learnings from the pilot will also support thedevelopment of a user guide for the sector, which willprovide more detail to practitioners as to some of themore technical aspects of the Standard.In addition, given that we are at the early stages ofregulation in Ireland, the role of the Regulation Officewill not solely be to monitor and evaluate returns.Within a system that is embryonic and evolving, ourremit must be broader and more supportive than this.We will seek to work with AHBs and their Boards toprovide education, guidance, and support inmeeting these new regulatory commitments.The Standard is underpinned by the guiding principlesof the Voluntary Regulation Code, which includeproportionality, accountability and transparency.Therefore, the requirements will differ dependent on thesize and Tier level of an individual AHB. The Appendicesin this document contain the specific requirements ofeach Tier level. It is important that all AHBs familiarisethemselves with the overall document, as it sets outthe implementation timeline, the viability standard,notifiable events and the assessment framework.The Regulatory Framework and the Financial Standardwill evolve as both the sector and the Regulator growand develop. Given the maturity of both the sector andthe Regulator, it is important that we test our systemsto ensure that they are fit for purpose and work asintended. To facilitate further strengthening and thedevelopment of the Standard, we have provided for a6Housing Agency Regulation Office

Background:The VoluntaryRegulation CodeApproved Housing Bodies, which are privatenot-for-profit providers of social housing,have a strong track record in the provisionof social housing with over 30,000 homesprovided to date. The Government’s housing policysees a greater role for AHBs in the provision ofsocial housing.Better regulation of the sector is a key aspect ofthis increasing role, and is necessary to access nonexchequerfunding (non-government funding) as wellas to ensure that AHBs are providing the best servicespossible to tenants. It is within this context that theVoluntary Regulation Code (‘the Code’) was publishedin July 2013. The Code sets out key governance, financialand performance management principles that allAHBs signed up to the Code are required to adhere to.The Code is an evolving document and will developfurther over the next year to allow for a smoothtransition to statutory-based regulation.2.1 ProportionalityThe Code is both proportionate and risk-based, meaningthe extent of regulation and what is required by anAHB is dependent on the size, scale and level of risk ofeach individual AHB. Larger scale AHBs and AHBs withsignificant development plans will be subject to morerigorous regulation. A three tier level system is used tocategorise AHBs for regulatory purposes: Tier 1 refers tosmaller AHBs, Tier 2 to medium sized AHBs, and Tier 3refers to larger AHBs.“ The Code sets out key governance, financial andperformance management principles that all AHBssigned up to the Code are required to adhere to.”The Financial Standard and Assessment Framework7

02 Background / continuedAHB Tier ClassificationTier 1Tier 2Tier 30-50 units with no developmentplans or development plans thatkeep the total under 50 units.50-300 units or developmentplans that keep the total under 300units, or the use of loan finance fordevelopment.>300 units or sizeable developmentplans, including the use of loanfinance for development.2.2 Voluntary nature of regulationThe initial sign up to the Code is based on a voluntarysign-up by the AHB. However, once an AHB has signedup to the Code, they should be aware that this signifiesthat they have committed to adhere to the Code’sprovisions in relation to governance, financial andbusiness management, performance managementand tenant service best practice. The Code operateson a “comply or explain” principle, which allows someflexibility for organisations where they do not complywith elements of the Code but provide a reasonable andacceptable explanation for departure from the Code.It should be noted also that while sign up to the Code isvoluntary, funding from the DECLG will be prioritised tothose signed up to and compliant with the Code. A fulllisting of all AHBs signed up to Regulation is availableon our website. The Government’s Housing Strategy hascommitted to introducing statutory based regulation forAHBs by 2016.2.3 Role of the Regulation OfficeThe Regulation Office, operating within the HousingAgency has been designated by the DECLG as theinterim Regulator of AHBs. The Office reports to theinterim Regulatory Committee (iRC) which is a nonstatutoryindependent committee established by theMinister in February 2014 to oversee the implementationof the Code and to advise on the development ofstatutory regulation.2.4 Application of theFinancial StandardThis Financial Standard is now part of the Code, and assuch is applicable to all AHBs who sign up to the Code.However, it will be implemented on a phased basis as setout on page 9 and will not apply to Tier 1 (smaller AHBs),for example, until 2018.8Housing Agency Regulation Office

ImplementationPhase and TimelineThe implementation of this Financial Standard ison a phased basis and follows the principle ofproportionality, initially applying only to Tier 3bodies (larger AHBs). All AHBs are expected tobe compliant with their particular elements of the Codeand Standard by 2018.A pilot will be initiated in 2015 with a select group ofTier 3 AHBs in respect of the 2014 financial year. By2016, all Tier 3 AHBs will come under the provisions ofthe Financial Standard and will be required to returnfinancial information relating to their 2015 accountsin accordance with these provisions.By 2017, all Tier 2 AHBs will be required to adhere tothe provisions of the Financial Standard (relating to theirTier level) in respect of the 2016 financial year. This willhave been preceded by a Tier 2 Pilot Group adapting theFinancial Standard in 2016 in relation to their 2015 return.By 2018, all Tier 1 AHBs will be required to adhere to theprovisions of the Financial Standard relating to their Tierlevel and make a return in respect of the 2017 year. This willhave been preceded by a Tier 1 Pilot Group adapting theFinancial Standard in 2017 in relation to their 2016 return.The table below provides a summary of thetimescales involved.AHBs are welcome to fulfil the requirements of theCode, including the Financial Standard in advance ofthe official compulsory compliance dates. A summary ofthe requirements of the consolidated Code (includingthe Financial Standard) are set out in Appendices B – D.Appendix B refers to Tier 3s, Appendix C refers to Tier 2sand Appendix D refers to Tier 1s.AHBs who have signed up to the Code continue tocomplete an Annual Return Form. As the FinancialStandard is phased in, (according to Tier level asper Table below) AHBs will be required to provideadditional information and adhere to the requirementsof the Standard in order to be viewed as meeting theregulation requirements.Implementation Year Tier Level Assessment2015Pilot Group of Tier 3s Assessment relating to 2014financial performance and data2016All Tier 3 bodies & Pilot Groupof Tier 2s2017All Tier 2 bodies & Pilot Groupof Tier 1sAssessment relating to 2015financial performance and dataAssessment relating to 2016financial performance and data2018All Tier 1 bodies Assessment relating to 2017financial performance and dataThe Financial Standard and Assessment Framework9

03 Implementation Phase and Timeline / continued10Housing Agency Regulation Office

ObjectivesThe overall purpose of this Financial Standardis to define and set a standard for financialviability for the sector. Financial viability iscrucial to ensure the safeguarding of socialhousing assets into the future and, ultimately, toprotect the long-term interest of tenants.Accordingly, this Financial Standard has been developedwith six key objectives in mind:a. To provide the Regulation Office and AHBs withthe earliest possible warnings of emerging riskswhich may cause financial problems for AHBsand put the social housing asset at riskb. To detail the financial governance andmanagement disciplines which will supportAHBs in delivering their services and inpotentially engaging in developmentand loan financec. To monitor key financial ratios such ascurrent ratios, interest cover, gearing etc.which should be maintained whereborrowings have been undertakend. To provide a basis from which summarisedaggregated data for the sector can bedeveloped which will result in importantsector-wide informatione. To build the confidence of funders and otherstakeholders that the Regulatory process hasthe visibility and tools to provide appropriateoversight and act where issues arisef. To safeguard long-term viability of housingassets in the interest of tenants and residentsConsequently, the key issues for the Regulatorare viability, governance, and good consumermanagement practices (to the extent that theyaffect viability and governance).“ Financial Viability is crucial to ensure the safeguarding ofsocial housing assets into the future and to protectingthe long term interests of tenants.”The Financial Standard and Assessment Framework11

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The Financial StandardViability RequirementWhat does the Financial Standardrequire of AHBs?The Financial Standard requires that AHBsmanage their resources and risks effectivelyto ensure their viability is maintained at alltimes, and that social homes are protectedin the interests of their tenants and are notput at undue risk.The Financial Standard and Assessment Framework13

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What is Viability?Financial viability is about being able to generatesufficient income to meet operating paymentsand debt commitments as they fall due, whilemaintaining service levels.The Code requires that AHBs be financially viable andhave adequate resources to meet both current andfuture business and financial commitments. The IrishState has invested and is continuing to invest in thegrowth of social and affordable housing for those whoneed it. We must ensure this investment is managedeffectively and that homes are safeguarded. Once AHBshave signed up to the Regulation Code, they havecommitted to demonstrating financial viability. Thedetail of how the Regulation Office assesses financialviability (both short term and longer term viability), whatinformation is required from AHBs, and the purpose ofgathering this information is outlined below.6.1 Short-term viabilityIn assessing short-term viability, the Regulator isestablishing whether an AHB has access to sufficientcash as required. This is assessed by monitoringliquidity and cash flow which we do by reviewingthe following:n Audited financial statements of the AHB for theyear just ended, as well as auditor’s managementletter (and where necessary the AHBs response tothe management letter)n Annual Financial Returns (AFR). For Tier 3 AHBs,the full AFR requires 4 years information, being thelatest audited financial statements (historic), thecurrent year’s information and two years forecasted.For Tier 2 AHBs the AFR requires details of latestaudited financial statements. Tier 1 AHBs will notbe required to complete an Annual FinancialReturn but rather will submit detailed auditedaccounts containing comprehensive income andexpenditure account, balance sheet and cash flown Cash from operations (it is expected each AHBshould be cash-generative and it is a cause forconcern if this is marginal or negative)n Sources of income, including level of relianceon fundraisingn Liquidity – i.e. measuring the funds readilyavailable to meet current liabilitiesn Uses of cash as per Cash Flow Statementsn Whether there is a reliance on an overdraft“ Financial viability is about being able to generatesufficient income to meet operating paymentsand debt commitments as they fall due, whilemaintaining service levels.”The Financial Standard and Assessment Framework15

06 What is Viability? / continuedn Interest cover (where applicable) to examine howeasily the AHB can meet interest payments on itsdebt commitments.As part of the analysis, the Regulation Office assessestrends and overall performance and compares resultswith budget or prior year projections. Forecasts (whereavailable) are analysed to ensure the AHB remainsviable into the future.6.2 Long-term viabilityThe long-term viability of asset-based organisationshinges on the balance of assets and liabilities, theexistence of realisable positive value at any point in thefuture, and the continued generation of cash surplusesover the long-term.Accordingly we monitor:n Cash from operations over the long-term as per30-year financial projectionsn The profitability of the AHB in particular looking atoperating margins and financial efficiencyn The level of debt to equity (the gearing ratio)n Sinking fund and capacity to meet futuremaintenance needs which is fundamentalto long-term viabilityn Stock condition surveys, where we consider howcurrent the survey is, the sample size used andthe underlying assumptionsIt is not possible to adequately assess any organisationpurely by financial data. While ratios can illuminate somekey financial relationships, they do have limitations - theydo not explain underlying causal factors and whether theywill continue. Therefore, we also review the AHBs businessand strategic plans, and familiarise ourselves with eachorganisations history and management structure, as wellas their perspective on their business. We also considertheir plans for growth and their understanding of the riskenvironment in which they operate. Further details areprovided in Section 10 - “Our Assessment Process”.6.3 Business Plans and 30-yearFinancial ProjectionsAll Tier 3 (large) AHBs and some Tier 2 (medium) AHBsexceeding a debt threshold 1 are required to preparea business plan (3 -5 years) with accompanying30-year financial projections consisting of incomeand expenditure account, balance sheet and cash flowwith accompanying underlying assumptions and coredata. The projections should also include adequatesinking fund provision, based on the results of stockcondition surveys.The Business Plan should provide further detailpertaining to each AHB’s Strategic Plan and shouldinclude details of its Development Plan.The 30-year financial projection will then set out theresults and consequences of the 3-5 year Business Planinto the long term. It serves to highlight and reiteratethat a decision taken today impacts into the future. Itallows AHBs to anticipate and avoid problems that maybuild into the long-term due to decisions made today. AsAHBs are custodians of long-term social housing assets,all decisions have to be made with the future in mind.The 30-year financial projections should take intoaccount current stock and current commitments,future investment requirements in existing stock, anddevelopment plans and funding plans into the future.Additionally, the underlying economic assumptionsshould be clearly set out.The Business Plan should be reviewed by the AHB wherethere are any changes to external environmental factorsthat may affect it, such as interest rate movements,inflation and any changes to the development plan andexisting stock. Please note that, although an organisationmight review its Business Plan more than once a year,it is only required to be submitted to the RegulationOffice on an annual basis.The plans should be tested by applying appropriatesensitivity analysis variables as detailed below.1. Guideline threshold: If borrowings exceed €1.5M or loan financed stock exceeds ¼ of total stock, a full business plan and accompanying30 Year Financial Projections will be required.16Housing Agency Regulation Office

6.4 Financial Plans andSensitivity AnalysisThe capacity of an individual AHB to understand theeffect of various changes on its Business Plan is animportant contributor to its ability to manage the risksinherent within its business. The adopted Business Planmodel used by the AHB should therefore be capableof varying its assumptions and provide a series ofoutputs that can be used to test the plan’s abilityto withstand shocks.A typical minimum set of variables to be sensitivitytested would include:n Levels of inflationn Interest ratesn Void and bad debt lossn Management costs, including staffingn Development programmen Maintenance costsn Variations on market rent and their impact onPayment and Availability Agreementsn Changes in rental income from tenantsThe above list should not be taken as exhaustive. It is notappropriate for the Regulator to advise on the variablesfor testing as they are unique to each AHB based on thatorganisations’ activities and historic experience. It is theprime responsibility of any governing body to identifyand manage the risks of its own business.6.5 Sinking Fund & Stock Surveys –required by all AHB TiersIt is critical that AHBs maintain the housing stockappropriately to enhance the life of the housing assetand to ensure that it is in good lettable conditionthroughout its life. AHBs are aware of the importance ofregular repairs and maintenance, and AHBs incur regularexpenditure in this regard. However, a sinking fund isnot related to current expenditure. It is a fund requiredfor the longer term systematic repair and refurbishmentof housing stock e.g. roof replacement. Accordingly, it isnot expected that there would be frequent use of thesinking fund as it is designed to provide for major repairsand longer term expenditure items only.The sinking fund should not be provided for on the basisof a percentage of rents as this does not ensure that thefund is sufficient or adequate for its needs. Rather, thelevel of provision in the sinking fund should relate to thecondition and required works of the stock. The adequacyof the sinking fund provision can only be judged by theAHB through stock condition surveys. A stock conditionsurvey looks at all parts of a building to assess thecondition and state of repair and plan for immediateand long-term future works.The Regulation Office needs assurance that themethodology followed by the AHB in its stock conditionsurvey is appropriate and that the AHB adequatelyidentifies the investment required over the longer term.It is therefore necessary that there is external validationby an appropriately qualified and independent thirdparty of the methodology used, both in terms of thesample size used and in the quality and accuracy of itsassessment of stock.The Regulator is cognisant of the need for this regulatoryrequirement to be both practical and cost effective.However, the sinking fund provision is a vital componentof the Code as it safeguards the social housing assetand accordingly, the verification of the sinking fund isa critical issue for the Regulation Office. It is expectedthat stock condition surveys will be carried out on aregular basis.The Financial Standard and Assessment Framework17

06 What is Viability? / continued6.6 Importance of Governance to ViabilityRegulatory experience in other markets and jurisdictionsshows that there is a strong link between viabilityand governance, and with that a recognition that thecompetence and experience of Governing Boards andExecutives play a crucial role in ensuring good financialmanagement. Therefore, it is expected that Board andmanagement teams have the necessary expertise andskills appropriate to the level of business and financialcomplexity of the AHB. Risk assessment and riskmanagement is critical to good governance and it isimportant that the board is fully aware of the risks facingthe AHB, can anticipate risks and manage them. This is notabout having a ‘tick-box’ approach, but rather generatingmeaningful risk reports which identify the key risks faced,explain which risks are critical and how to mitigate them.It is also important that the Board have approved thecontrol measures in place to mitigate risk.It is also necessary that there are clear segregationof duties and reporting lines between the Board andexecutive management. The Board should take ultimateresponsibility for the AHBs strategic direction, its policiesand performance; while the executive managementimplement these policies on a day-to-day basis on anoperational level. The quality of the relationship betweenthe Board and management have an important impact onthe good functioning of an AHB. An AHB does not haveto adapt a specific form of governance or management,rather how it is governed should reflect good practice.In recognition of the importance of risk management,this Financial Standard has a requirement for Tier 2 andTier 3 AHBs to have an Audit and Risk Committee. Thisreplaces the requirement for a Finance Committee asset out in the original Code. It is expected that therebe sufficient competence on the Board to reviewfinancial affairs of the AHB. An Audit and Risk Committeeperforms a different function to a Finance Committeeand this focus on risk fulfils a vitally important function.The Audit and Risk Committee is an oversightcommittee, which on behalf of the Board, works toensure the effectiveness of the AHB’s internal controlsand risk management systems. This includes havingan active and evolving Risk Register. The Audit andRisk Committee provides assurances to the Boardthat it is meeting its legal and regulatory responsibilitiesand that it can rely on the information presented.The Regulator sees the Audit and Risk Committeeas a critical component of Tier 2 & 3 AHBs effectivemanagement and control.18Housing Agency Regulation Office

RisksAn AHB’s financial position and ongoing viabilityare influenced by its operating environment,history and planned future activities. We takeaccount of these in our risk-based approach.The Regulator has adopted a risk-based approach toregulation as is demonstrated in the Tier classificationsystem. However, there are risks to AHBs irrespective ofthe Tier in which they operate, and these risks can besector-wide or individual to a particular organisation.We require all AHBs to be cognisant of risks which couldjeopardise their effective management and long-termsafeguarding of social housing assets. This Standardincludes a section on sector risks and business risk.This list of risks is not exhaustive, as it is not the role ofthe Regulator to manage the AHBs risk and nor is thispossible. Each AHB must review its own unique set ofcircumstances and carry out its own risk assessment.Nonetheless, it is useful to briefly highlight some ofthe common sector and business risks.In highlighting risks, it is not the intention of theRegulator to imply that all risks should be avoided oractivities not undertaken because they may incur risk.The Regulator recognises that risk is an inherent partof all business. For AHBs that seek to grow and developin order to provide much needed additional socialhousing, there will inevitably be risk. The Regulatoris concerned only with excessive risk, or risk that hasnot been anticipated when it could have been, hadthere been appropriate risk management systems inplace. The Regulation Office wants to ensure that thereis an appropriate level of risk awareness in the sector,and that risk management and mitigation is an inherentpart of AHBs operations. We do not see this as beingincompatible with development but rathera fundamental inherent part of it.7.1 Sector RisksSome of the key sector risks which AHBs should beaware of include:a. Reputational risk caused by the default on bankloans or leasing arrangements. It is important thatthe treasury, governance, and business skills ofthe AHBs are appropriate particularly wherethere are aspirations for growth and availingof new private finance“ An AHB’s financial position and ongoing viability areinfluenced by its operating environment, history andplanned future activities. We take account of thesein our risk-based approach.”The Financial Standard and Assessment Framework19

07 Risks / continuedb. Reputational risk to the sector caused by failure ofAHBs to comply with regulations including healthand safety, property standards, and landlord andtenant legislationc. It is important that AHBs are aware of the impactthat macroeconomic issues may have on AHBsactivities (such as movements in CPI, changes inGovernment policy).7.2 Individual AHB Business RisksIndividual business risks may include some of thefollowing.a. As the revenue contributions are not fixed overthe long-term and are subject to periodic review,medium and long-term financial planning withstress testing and scenario testing is importantb. Some AHBs may be reliant on fundraising incomethat, whilst there is evidence of historic support,cannot be fully relied on for robust planning ofdebt servicing capacityc. Loss of income through voids and rent loss dueto non-occupancy is another risk area for AHBs.Certainty of demand and of funding for anyrequired support services are critical factorsin mitigating this risk. In addition, ensuringthat nominations (where required) from localauthorities are made in a timely fashion isalso criticald. The fact that there is a requirement to maintainproperty for the life of the building, means thatthe AHB should have an adequate mechanismfor the forward assessment and provisionfor asset maintenance (including reactive,servicing, cyclical and planned improvements/replacements of construction elements). AHB’smay not have adequately provided for long-termmaintenance requirementse. Many AHBs have a strong voluntary sector cultureand style of Board membership. The sector isreliant on the goodwill and significant effort ofvolunteers who are committed to the provision andmanagement of social housing. However, whereAHBs take the decision to provide housing throughprivate finance or commercial loan, this bringsnew risk and Board members may not have muchexperience of borrowing significant sums or ofthe changed operating dynamic beyond full grantfunding. The scaling-up to accessing private financeinvolves greater risk-taking and risk managementfrom Boards, and the skills and understanding ofBoard members will need to be developed to meetthose new challenges. The Regulator recommendsthat AHBs bear this in mind when making newappointments to the Boardf. Many AHBs offer ancillary support services to theirtenants such as childcare, meals, health relatedservices; the funding for which may be insecure ormay not adequately cover expenses incurred. Thismay result in a risk that funding for the long-termhousing assets may effectively subsidise otheractivities, and in the long-term this could jeopardisethe integrity of the housing asset. AHBs should becognisant of this issue20Housing Agency Regulation Office

Notifiable EventsAs stated previously, it is the individual AHB thatis responsible for managing its own risks andnot the Regulator. The Regulator expects theAHB to demonstrate a cooperative approachto regulation and to be forthcoming with informationthat it regards as important, such as identifying risks tobe managed.Indeed, all AHBs (irrespective of Tier classification) willbe required to inform the Regulation Office of certainnotifiable events (events or key risks that in the AHBsopinion give serious cause for concern), the purpose ofwhich is so that the Regulation Office has a knowledgeof any new risks which arise. The governing Boardshould be cognisant of these requirements.Notifiable events are events which may be seen tobring the AHB into disrepute, threaten the organisation’sstability, efficient operations and viability. Events wherethe AHB would be expected to contact the RegulationOffice include, but are not limited to:n Resignation of a Chair, CEO or Finance Directorn Resignation of internal or external auditorsn Before entering into loan finance for developmentpurposes (only where loan finance for developmentpurposes has not previously been used by the AHB)n Discovery of serious fraudn Potential litigation/material third party claim whichwould have a significant impact on businessn Material breaches of health and safety whichpresent significant risk to life or serious threatto safetyn Significant liquidity issues. In the case of Tier2 and Tier 3 AHBs with development finance,the Regulator expects the Board of the AHB toregularly review (at least quarterly) the financialinformation pertaining and to notify the Regulator,if over a period of time, key liquidity ratios (as setout in Appendix C4 and B5) are being breached.If liquidity issues are identified as having beenbreached, there should be an onus on themanagement team to notify the Board of thisoccurrence, where the Board is not meeting on amonthly basis. Liquidity is an organisation’s abilityto pay its immediate debts as they fall due and itcan be monitored by reviewing ratios, such as theCurrent Ratio i.e. Current Assets divided by CurrentLiabilities, Cash from Operation and Interest Cover.(Full details are set out in Appendix C4 and B5)n Material fall in income which may affect liquidityn Proposed mergers or acquisitions with other AHBsn Guarantees given by group companies whichcould significantly impact the AHBn Any other events which could give seriouscause for concernAny of the above information should prompt a dialoguebetween the Regulation Office and the AHB. Assurancescan be sought/obtained by the Regulator regardingthe impact of the event. These assurances should notimpact on the day-to-day running of the AHB’s businessand it is not our intention to be involved in the generalmanagement of any AHB’s business.The Financial Standard and Assessment Framework21

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Group Structuresand AncillaryHousing ActivitiesAnumber of AHBs are part of larger groupstructures or operate subsidiary companies. Itis important that AHBs manage relationshipand performance within a group structureso that any risk to the AHB and to tenants’ and otherstakeholders’ interests are managed effectively.9.1 Group StructuresWhile we require AHBs to submit financial reports atan individual level, some AHBs may be a subsidiary ofa larger parent company, or may be a parent companyitself with subsidiaries whose business activities havethe potential to affect the AHBs own business. Inthese instances, the Regulator will need to know thegovernance arrangements and where responsibility andcontrol lie within the group, particularly in relation to thehousing assets.The Regulator expects there to be some type of aninter-group agreement in place which defines all aspectsof the parent / subsidiary relationship and how thegroup operates. Where relevant, the Regulator requiresfinancial statements related to the parent company andthe consolidated group entity. Our primary concern isthe viability of the AHB and to understand if there arerisks to the AHB from a group structure. In this context,the Regulator requires to be notified if a member ofthe group structure is providing guarantees that couldpotentially impact on the AHBs business (as stated inNotifiable Events at Section 8).The Regulator expects the AHB to have a sufficientlyrobust model in its own right and not to be overlyreliant on another group company.9.2 Ancillary ActivitiesWe recognise that many AHBs carry out ancillaryactivities, typically in education, training, health, careand/or support areas. Indeed for some, the provisionof social housing forms a minor part of their operations.It is necessary for the Regulation Office to collect datarelating to the whole of the business in its entirety.It would be inappropriate to focus only on the housingelement of an organisation’s activities for severalreasons, including the following:n A severe financial crisis would affect the wholelegal entity, not just the housing elementn The financial performance of the non-housingactivities has the potential to impact on thehousing assets, andn Funders will assess the financial strength of thewhole entity when taking lending decisions.The Financial Standard and Assessment Framework23

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Our Assessment ProcessOnce an AHB has signed up to regulation, weassess them annually. If a significant eventoccurs in an AHB’s business, assessmentmay come earlier than the next scheduledassessment of the AHB, or become more frequent.10.1 How we assess AHBsWe review all of the submitted data including theAnnual Return Form, the Annual Financial Return(where applicable) and audited accounts. In additionto this quantitative data, and in conjunction with it,we will consider:n the history and management of each AHBn the markets the AHB works in, and consequentlythe risks it faces, andn how management responds and adaptsstrategically to markets and risk.In relation to Tier 3 bodies, our assessment is informedby review of their strategic business plan and fromattendance at an annual meeting with the RegulationOffice to discuss the AHB’s business generally and toconsider the annual return and matters arising.In forming our assessment opinion, we are concernedwith both short term and longer term viability, andwe will also consider key indicators including, but notlimited to those set out on the following page (see over).“ In assessing Financial Viability we are concernedwith both short term and long term viability.”The Financial Standard and Assessment Framework25

10 Our Assessment Process / continuedFinancial Health and Management IndicatorsIndicatorWhat it indicates1. Net cash flow generatedfrom OperationsA positive cash flow indicates the AHB’s ability to generate cashand can correspond to good business management.2. Operating Surpluses and Margins Over time this can provide an insight into the stability ofearnings, the AHB’s ability to generate surpluses on an ongoingbasis, and its efficiency and effectiveness.3. Liquidity – extent that Current Assetsexceed Current LiabilitiesAssesses if AHB has readily available funds to meet itsshort term commitments.4. Gearing Considers the extent of debt compared to equity and whetherthe AHB has capacity for development and loan finance.5. Sinking funds Indicates that adequate provision has been made for long-termsafeguarding of social housing assets and indicates whethermanagement of AHB are cognisant of long-term nature of itsbusiness and consequent risks.6. Overdraft The reliance on an overdraft in a long-term property business canbe an indicator of potential viability issues.7. Interest cover Where debt has been undertaken this can give an indication asto whether the level of debt is appropriate and sustainable.8. Performance Ratios includingarrears, bad debts, and voidsProvides insight into AHB’s performance in respect tohousing management.26Housing Agency Regulation Office

Assessment Reportsand AddressingIssues ArisingWe give feedback to AHBs on their viability,governance and performance via anAssessment Report.We assess compliance with the Code and FinancialStandard under the headings of Governance, FinancialViability and Performance Management. A summary ofour financial viability assessment and recommendationwill be included in the overall annual assessment reportissued to each AHB following review of their annual returnsubmission. At the end of the phased implementationperiod, it is envisaged that in addition to a narrativeassessment report, the Regulation Office will issue anadditional determination solely in relation to FinancialViability, with a clear pass or fail rating. In determining apass or fail rating, the office will consider and assess theissues highlighted in Section 6, Viability, and follow anassessment process detailed in Section 10. In due course, itis expected that Regulatory Assessments or a summary ofthe assessment in relation to larger AHBs will be published.AHBs will have a period of time to review the issuedassessment reports and to contact the Regulation Officeto correct factual inaccuracies or interpretations.AHBs will usually have until the next annual return dateto work on any particular recommendations providedby the Regulation Office. There may however be someissues identified in assessments that will require amore immediate response and engagement withthe Regulation Office.11.1 Addressing issues arisingfrom assessmentWhere the Regulation Office has identified issues duringthe assessment process, it engages with the AHB toensure they are addressed in an appropriate time frame.If issues are not adequately addressed or appropriatelyexplained, the Regulation Office takes this seriously andwill take further action.“ Where the Regulation Office has identified issues duringthe assessment process, it engages with the AHB toensure they are addressed in an appropriate time frame. ”The Financial Standard and Assessment Framework27

11 Assessment Reports and Addressing Issues Arising / continuedThe consequences for an AHB of failing to complywith any element of the regulatory framework willbe strengthened by statute in due course. The use ofregulatory powers will be proportionate, progressive,and accountable with a gradual approach to escalationdepending on the issue identified. An example of astepped escalatory approach is as follows, with anysteps beyond the issuing of a formal assessment onlybeing taken if the previous answers do not providesufficient assurance:a. Normal regulatory returnsb. Assessment by Regulatorc. Discussions with the AHB, including theopportunity to comment on the draft assessmentd. Formal assessment issued to AHBe. Where issue(s) identified, further data andreassurance soughtf. Request AHB take specific corrective actionwithin an agreed timetable, which may includecommissioning external adviceg. Further access to development funding, land andother forms of state subsidy may be suspendedh. Recommend appointing co-optees to the Boardi. Recommend appointing a special managerj. Liaise with Local Authorities and DECLG to takeaction on any breaches in terms and conditionswith Payment & Availability agreements andmortgage agreements which AHB are obligedto comply withk. Recommend directing transfer of assets toanother AHB28Housing Agency Regulation Office

Further Developmentsand ConclusionThis is the first time a framework has beendeveloped to oversee and monitor the financialviability of AHBs. The regulatory framework forthe not for profit housing sector in Ireland is stillevolving and will be further developed as regulation isbedded in and as the sector and the risks it faces evolve.12.1 Information requirementsCurrently, there is no single universal standard for thepresentation of annual financial statements. Therefore,the usefulness of published accounts is reduced, andit is difficult to interpret information accurately andconsistently. The Regulator is involved in the WorkingGroup to develop the next iteration of a universalhousing Standard of Recommended Practice (SORP).However, it is not appropriate at this early point inregulation to issue a standardised accounting directive,although this will be reviewed in time. Accordingly, theRegulator will rely on AHBs providing information in arequired form (The Annual Financial Return). It is notexpected that this will place undue burden on the AHB,as the information sought should be readily availablewithin the AHBs management and financial systems.The appendices set out in detail the information tobe collected via the Annual Financial Return (AFR) forall AHBs. In addition for Tier 2 and Tier 3 AHBs furtherinformation will be required in the Annual FinancialReturn component and that is also detailed in theappendices. Throughout the appendices references aremade to income and expenditure accounts and balancesheets not withstanding that FRS102 uses terminologyof Statement of Comprehensive Income and Statementof Financial Position. A ‘User Guidance Manual’ for theAnnual Financial Return is currently under developmentwith a pilot group to provide further guidance anddirection, and this will be issued in due course.In due course we also expect that the informationprovided by AHBs to the regulator will be submittedelectronically, using a standard form.“ Good financial health is critical. It is a critical step indeveloping the capacity of the sector and buildingthe confidence of both public and private funders toinvest in the sector.”The Financial Standard and Assessment Framework29

12 Further Developments and Conclusion / continued12.2 ConclusionRegulation is an integral part of an effective housingsystem and an enabler for investment and new supply.Regulation is important in terms of safeguarding thesignificant investment that has been made by the Statein providing social housing, as well as protecting existingtenants. Good financial health is critical. It is a critical stepin developing the capacity of the sector and buildingconfidence of both public and private funders to investin the sector. This Financial Standard and AssessmentFramework provides specifically for more robustfinancial regulation and narrows the gap betweenthe current regulation position and the shift to astatutory framework in 2016.The pilot with a number of Tier 3 AHBs gives us anopportunity to test the framework before full roll-outand to develop a User Guide, which will assist thesector further in their implementation. The followingappendices are divided into tabulated sectionsaccording to each Tier level and provide furtherdetail of the individual Tier requirements.The Regulation Office looks forward to workingwith the Sector on the continued strengtheningand evolution of the Regulatory Frameworkfor social housing provision in Ireland.We have developed a thorough approach to assessingand monitoring AHBs financial health and viability.The work and support that the sector has put in todeveloping this framework is acknowledged in particularthe contribution of the Financial Capacity group andsub group, the working groups for each of the Tierlevels and the representative bodies, the ICSH andNABCO. We believe the framework will support thesector’s continued growth and strengthen its capacityto manage social housing, while providing assurance totenants, Government and investors that investment isbeing well managed.Regulation of the sector is still relatively new and theevolving framework will be challenging for some AHBsto implement. The phasing in of the requirements overthe three year timeframe will allow time, particularlyfor smaller AHBs to adapt to the new requirements.The Framework has also followed the Code’s principleof proportionality and therefore the requirementsare proportionate to each Tier level. The role of theRegulation Office will be more than just about assessingand evaluating returns. We want to continue to workwith and support the sector in meeting the newregulatory requirements. We are conscious also of themany other competing regulatory requirements thatthe sector has and will focus on trying to achieve anyefficiencies we can in this regard.30Housing Agency Regulation Office

Appendices

Tier 3Tier 2Tier 1See Appendix BB1 Information RequirementsB2 Consolidated Code andFinancial StandardB3 Annual Financial ReturnData RequirementsB4 Business Stream AnalysisB5 Liquidity Ratio CovenantsSee Appendix CC1 Information RequirementsC2 Consolidated Code andFinancial StandardC3 Annual Financial ReturnData RequirementsC4 Liquidity Ratio CovenantsSee Appendix DD1 Information RequirementsD2 Consolidated Code andFinancial Standard

Appendix AClassification Of AHBsTier classification is based on the following:n Level of housing stock, both current and futuren Extent of loan finance for developmentn Extent of business complexity based on regulatory judgement during the assessment processPlease be aware that the existence of any Housing Finance Agency (HFA) or private sector borrowing triggersreclassification to Tier 2.Additionally, if the Regulator’s view is that the business of the AHB is sufficiently complex, or the incomeespecially large due to increased ancillary elements, the Regulator may assess the AHB in a higher Tier than setout in the parameters below.A summary of the Tier categorisation is provided below. Each of the parameters under the individual Tiercategorisation should be read in order to determine the relevant level.Criteria Tier 3 Tier 2 Tier 11 Size More than 300 units 50-300 units Less than 50 units2 DevelopmentProgramme3 Borrowing fromHFA or privatefundersIf Development plansbrings total stock>300 unitsAny borrowing wheretotal stock is / will be> 300 unitsAny development planresulting in total stock

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Appendix BTier 3RequirementsAppendix BTier 3 Requirements

Appendix B1Tier 3 InformationRequirementsThe following are the information requirements under the provisions of the Financial Standard for Tier 3 AHBs.They are, where possible, based on usual business requirements but there are areas that will require the AHB toevolve its response over the transition period.In line with the principles of the Voluntary Regulation Code, there is a “comply or explain” policy. Someorganisations will need to explain how they are working to deliver on a particular element of the FinancialStandard, and we expect this to be particularly relevant for the transition phase. For Tier 3s, full compliancewill be expected by 2016 as per phased implementation as set out in Chapter 3.Information Requirements of Financial StandardInformation RequirementDetails/Comments1 Financial Statements Submit Audited Financial Statements signed by the Board within 9 monthsof their year-end.2 Audit Management Letter Submit Audit Management Letter with management responses within 9months of their year-end.3 Asset Register All AHBs are required to have an asset register recording its housingstock and capable of reconciliation to audited financial statements andRegulation Office Annual Return Form.4 Business Plan with 30-year Financial ProjectionsEach Tier 3 AHB must submit a Board-approved Business Plan annually.This Business Plan is a written document, complemented by tables andcharts where appropriate, and must contain the following:1) The organisation’s strategic objectives.2) Annual financial projections over 30 years including clear economicassumptions underlying the forecast income and expenditure,balance sheets and cash flows.3) Demonstrate a clear understanding of future investmentrequirements in all owned, leased and managed stock.continued overThe Financial Standard and Assessment Frameworkv

Appendix B1 Tier 3 Information Requirements / continuedInformation RequirementDetails/Comments5 Annual Financial Return(Full)4) Development plans including committed and unidentified projects.5) Funding plans including committed and unidentified future funding.6) Scenario testing and sensitivity analysis of the forecast income andexpenditure, balance sheets and cash flows.7) Strategic risk register set out in a suitable format including assessmentof impact, probability and a hierarchy of risk.Each Tier 3 AHB must submit an Annual Financial Return 2 that contains4 years information, being the latest audited accounts (historic), thecurrent year’s information and 2 years forecasted projections.6 Tax Clearance Certificate Each AHB must submit a Tax Clearance Certificate with their AnnualReturn Form7 Notification ofIssues ArisingAll AHBs should notify the regulator immediately of issues arising which in itsopinion give ‘cause for concern’ and represents ‘a potential impact on viability’.Notifiable events are listed within Chapter 8. This list is not exhaustive.The Boards of Tier 3 AHBs are required to monitor key liquidity ratios (as perAppendix B5) and notify the Regulation Office of breaches over a period.Other RequirementsTenancy PerformanceManagement IndicatorsA sinking fundStock Condition SurveysExternal validation ofstock condition surveyAudit and Risk CommitteeMeeting withRegulation OfficeDetails/CommentsAll AHBs should be able to provide basic data each year on its managementperformance under a number of headings such as rent payment/arrears,voids, repairs and management and maintenance costs per unit.All AHBs are required to have a sinking fund for the longer term systematicrepair and refurbishment of housing stock. The level of provision mustrelate to the condition of the stock.All AHBs are required to perform stock condition surveys to ensureappropriate level of provision is being made to a sinking fund.All AHBs are required to have external validation by an appropriatelyqualified and independent third party of the stock condition survey bothin terms of the sample size used and in the quality and accuracy of itsassessment of its stock. The User Guide to the Financial Standard willinclude more detail.In recognition of the critically important issue of risk assessment and riskawareness Tier 3 AHBs are required to have an Audit and Risk Committee.Tier 3s are required to attend an annual meeting with the Regulation Officeto discuss the AHBs business generally and to consider the Annual ReturnForm and Financial Return that was submitted and matters arising.2. This Annual Financial Return will be in electronic format in due course.viHousing Agency Regulation Office

Appendix B2Tier 3 Consolidated Codeand Financial StandardThe following table collates and summarises the requirements of the current Code and the Financial Standard.Current CodeRequirementAdditionalFinancialStandardRequirements3from 2016GovernanceFunctioning Board or Management Committee (in the case ofco-operative housing societies) 3Board must have clearly defined roles and responsibilities 3Board and Management have a good working relationship wherestrategic guidance results in agreed goals being achieved 3Board has at least 5 members. 3At least 5 members of the board should be resident in the State 3The chairperson and secretary shall be resident within the State 3No member should serve more than 2 consecutive 5 year terms(1st year of service is deemed to be from July 2013 for board members3already appointed at that date)Expectation that members have appropriate skills and experience. 3Board has an annual general meeting and should meet at least4 times a year. 3No employee should act as chair of the Board 3AHB complies with existing companies law 33. In the 2016 calendar year the Annual Return Form relating to the 2015 Financial Year will issue and will have to be completed in accordance with theCombined Code and Financial Standard provisions.The Financial Standard and Assessment Frameworkvii

Appendix B2 Tier 3 Consolidated Code and Financial Standard / continuedCurrent CodeRequirementAHB complies with charities requirements 3AHB complies with conditions of Approved Body Status 3AHB has a number of Board policies in place including membership,membership renewal, code of conduct, conflict of interest and aregister of interestsNo individual may be elected or appointed as director / trustee orsenior employee of an AHB where they have a material interest /benefit arising from the AHBs operations.33AdditionalFinancialStandardRequirements4from 2016Maintenance of a risk register identifying key risks, likelihood ofthem occurring and proposed actions to mitigate risk 3Alert Regulation Office of Notifiable events 3Meeting with Regulation Office annually 3Financial and Business ManagementHave a Finance Committee3to be phased outNo longer requiredHave an Audit and Risk Committee 3Have a tax clearance certificate 3Have a sinking fund 3Perform regular stock condition surveys and ensure they areexternally validated 3Submit the Annual Report (if available) and Financial Statements(with Directors Report) / accounts 3Have an external audit process in place 3Submit audit management letter and management responses 3Have an asset register 3Have a strategic plan 3Have a 3 year financial plan in place3to be phased outHave a board approved business plan with 30-year financial projections 3No longer required4. In the 2016 calendar year the Annual Return Form relating to the 2015 Financial Year will issue and will have to be completed in accordance with theCombined Code and Financial Standard provisions.viiiHousing Agency Regulation Office

Current CodeRequirementAdditionalFinancialStandardRequirementsfrom 2016Complete an Annual Financial Return with 4 years data, 1 yearhistoric, current year and 2 forecasted years 3Performance ManagementHave an agreed set of performance management indicatorsin relation to rent payments and rent arrears, voids, repairs,management and maintenance costs per unitSubmit data on performance management including rentpayments and arrears, voids, repairs, management andmaintenance costs per unitHave a written allocations policy explaining eligibility criteriaand the application process 3Liaise with local authorities to let properties quickly and efficiently 3Provide tenants with information and statements on rents andservice charges 3Have a rent arrears policy and procedure and make it availableto tenants 3Have a repairs policy in place which commits to dealing withplanned, cyclical and responsive repairs within agreedtimescales and make it available to tenantsHave a statement on communication with tenants, regularlycommunicate with tenants and monitor feedback 3Provide pre-tenancy training for all new tenants 3Provide a tenants handbook detailing policies and procedures 3333The Financial Standard and Assessment Frameworkix

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Appendix B3Tier 3 AnnualFinancial ReturnCurrently, there is no uniform way in which AHBs report income, assets and liabilities. It is not proposed at thisstage to require a standardised set of accounts for the sector. Instead, it is proposed that key data from the annualaccounts is restated in a standard format in an Annual Financial Return to the Regulation Office. This will be usedas the basis for regulatory assessment and sector-wide aggregation of data.The Annual Financial Return for Tier 3 AHBs will also require some additional financial information and require twoyear financial projections i.e. the Tier 3 Return will then be in respect of the previous financial year consistent withthe latest published financial statements, the current year actuals and two-year projections, so four years in total.The Tier 2 Return will only be 1 year’s data, being the latest set of audited financial statements.Information RequirementDetails/Comments (to be completed by the AHB)Number of units1 Owned2 Leased3 Managed Managed only, including SLA agreementsIncome & Expenditure (as in Financial Statements)4 Turnover Including rents, fundraising, grants, contract fees, and service charges5 Rental income6 Operating Surplus7 Net Interest payable8 Profit/(loss) from sales9 Sinking Find Transfers10 Surplus /(deficit) for year11 Depreciation ofhousing propertiesAny amounts charged/(credited) to the income and expenditure accountin the periodThe Financial Standard and Assessment Frameworkxi

Appendix B3 Tier 3 Annual Financial Return / continuedInformation RequirementDetails/Comments (to be completed by the AHB)12 Amortisation of grants Any amounts charged/(credited) to the income and expenditure accountin the period13 Capitalised repairs See definitions14 Proceeds from sales of assets15 Cash flow from operations Surplus adjusted for non-cash itemsBalance Sheet (as in Financial Statements)16 Housing Properties Cost17 Housing Properties Depreciation18 Grants Received Total of all Capital Grants Received from inception to date –classified by Category (see definitions)19 Grants Amortised Details of grants amortised and released to Income & Expenditure (I&E)account / reserves from inception to date. Additionally disclose sumreleased to I&E account in the year20 Grants Balance Balance of grants not yet amortised21 Non-Housing fixed assetsand investments22 Debtors Arrears plus other debtorsOther fixed assets and investments that are not included inhousing properties23 Current liabilities Excluding the current portfolio of loans repayable within 12 months24 Loans See definitions and also including the current portfolio of loans25 Cash/(overdrafts) Cash plus Overdraft26 Provisions AHBs latest Financial Statements for that year27 Reserves includingDesignated ReservesSinking FundsAHBs latest Financial Statements for that yearProvision (€)Last external reviewSufficiency of funding….. explain the date, scope and extent of the review such as sample size andassumptions regarding the lifetime of major components…… certify that this sum represents sufficient funds to meet current andfuture obligationsFundingLoans – CALFxiiHousing Agency Regulation Office

Information RequirementLoans – HFALoans –other fundersLoans – current fundingUndrawn committed fundsFixed and VariableDerivativesDetails/Comments (to be completed by the AHB)………explain amount and nature of loans and lenders…….. explain current funding and requirements and plans………explain any restrictions on how the undrawn funds can be usedProvide % of fixed rate debt (fixed for longer than 5 years) as a % of total debt………explain nature of derivatives and any covenantsInterest Cover Type CovenantMost exacting requirementInterest Cover…….. describe the nature of the covenants(Surplus before Interest and Tax) divided by / Interest PayableGearing Type CovenantsMost exacting requirementGearing….. .describe the nature of the covenantsRatio of Loans to Reserves including Capital Grants(note – while CALF is a loan for the purposes of this gearing ratio it can be excluded)Asset Cover Type CovenantsMost exacting requirement….. .describe the nature of the covenantsAsset Cover Total assets less current liabilities (excl. short term debt obligations) /divided by total debtUnencumbered Land and PropertyNumberValueNumber of unencumbered housing propertiesEstimate of security value of unencumbered housing properties, otherproperties and undeveloped landDevelopment ProgrammeProgrammeOwned PipelineLeased PipelineManaged Pipeline…… set out the number of units and mix of development programme by sizeand type (rented, sale, market rent, etc.) and whether fully approved or notAt the current date set out future pipelineAt the current date set out future pipelineAt the current date set out future pipelineThe Financial Standard and Assessment Frameworkxiii

Appendix B3 Tier 3 Annual Financial Return / continuedInformation RequirementDetails/Comments (to be completed by the AHB)Funding for Development Programme (€)GrantNew debtOwn resourceLease payments to landlordsHousing Leasing Commitments by Remaining Length of Lease (€)1 year2-5 years6-10 yearsThereafterOtherCurrent and former tenantarrears as % rent rollCurrent and former tenantarrears as % rent rollArrears Provisioning PolicyManagement costs per unitMaintenance costs per unitOperating costs per unitAverage void turnaround -General needs unit (days)Average void turnaround –Supported Housing (days)Void loss in year (€)After deducting provisions for bad debts on these arrears…… set out arrears provision policy….. set out void period due to maintenance and lettingxivHousing Agency Regulation Office

Appendix B4Tier 3 BusinessStream AnalysisThe Annual Financial Return (AFR) for Tier 3 AHBs also includes business stream analysis. This is to take account that incomeof AHBs can be derived from a number of activities. As the variable nature and collectability of income can be a risk factor,this table sets out the composition of revenue and expenditure in more detail. This business stream analysis needs to coverthe four years covered by the AFR.SocialHousingLettingsOtherLettingsFundRaisingCare,Support,HealthOtherTOTALIncome1 Rents2 Service Charges3 Void Loss4 Revenue Grants andAvailability Payments5 Other IncomeExpenditure6 Management7 Service Charge payments tosuperior landlords such asmanagement companies8 Bad debts9 Planned maintenance10 Reactive maintenance11 Direct Labour12 Operating SurplusThe Financial Standard and Assessment Frameworkxv

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Appendix B5Tier 3 Liquidity RatioCovenantsWhere an AHB has debt finance it is critical that short term and long-term viability are maintained. The Boards ofTier 3 AHBs are required to regularly review their financial position and to notify the Regulation Office if over aperiod key liquidity ratios are being breached. The key liquidity ratios and their recommended levels are as follows:Key Ratio How it is calculated Recommended Level What it indicatesCurrentRatioCurrent Assets (i.e. cash + debtors)divided by Current LiabilitiesAt least 1:1Readily availablefunds to meetcurrent liabilitiesCash fromOperationsNet Income adjusted for non-cash items.(i.e. net income+ depreciation– amortisation+ decrease in current assets+ increase in current liabilities– increase in current assets– decrease in current liabilities)At least a positive figure.Indicates goodbusiness managementInterestCoverSurplus before interest divided byinterest expenseAt least 1.5 timesIndicates how easily anorganisation can paythe interest expenseon outstanding debtThe Financial Standard and Assessment Frameworkxvii

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Appendix CTier 2RequirementsAppendix CTier 2 Requirements

Appendix C1Tier 2 Liquidity RatioCovenantsThe following are the information requirements under the provisions of the Financial Standard for Tier 2 AHBs.They are, where possible, based on usual business requirements but there are areas that will require the AHB toevolve its response over the transition period.In line with the principles of the Voluntary Regulation Code, there is a “comply or explain” policy. Someorganisations will need to explain how they are working to deliver on a particular element of the FinancialStandard, and we expect this to be particularly relevant for the transition phase. For Tier 2s, full compliancewill be expected by 2017 as per phased implementation as set out in Chapter 3.Information Requirements of Financial StandardInformation RequirementDetails/Comments1 Financial Statements Submit Audited Financial Statements signed by the Board within 9 monthsof their year-end.2 Audit Management Letter Submit Audit Management Letter with management responses within9 months of their year-end.3 Asset Register All AHBs are required to have an asset register recording its housingstock and capable of reconciliation to audited Financial Statementsand Regulation Office Annual Return Form.4 Business Plan with 30-year Financial ProjectionsIf Tier 2 AHB has:1. No development finance – Business Plan not required2. Development loan finance below a threshold level 5 – will only berequired to provide loan repayment schedules and cash flows directlyrelating to the projects being financed for the full term of the borrowings.3. Development loan finance above threshold level 5 – full businessplans and accompanying 30-year financial projections will berequired as per Tier 3 requirements.5. Guideline threshold: If Borrowings exceed €1.5M or loan finance stock exceeds 1/4 of total stock, then a full business plan and accompanying30 Year Financial Projections will be required.The Financial Standard and Assessment Frameworkxxi

Appendix C1 Tier 2 Information Requirements / continuedInformation RequirementDetails/Comments5 Annual Financial Return Each Tier 2 AHB must submit an Annual Financial Return with just 1 yearsdata based on the latest audited Financial Statements.This information will be required in the format set out in Appendix C3.6 Tax Clearance Certificate Each AHB must submit a Tax Clearance Certificate with their AnnualReturn Form.7 Notification ofIssues ArisingAll AHBs should notify the Regulator immediately of issues arising whichin its opinion give ‘cause for concern’ and represents ‘a potential impacton viability’. Notifiable events are listed within Chapter 8. This list isnot exhaustive.The Boards of Tier 2 AHBs who have development loan finance overa threshold level 6 are required to monitor key liquidity ratios (as perAppendix C4) and notify the Regulation Office of breaches over a period.Other RequirementsPerformanceManagement IndicatorsA sinking fundStock Condition SurveysExternal Validation ofStock Condition SurveyAudit and Risk CommitteeMeeting withRegulation OfficeDetails/CommentsAll AHBs should be able to provide basic data each year on its performancemanagement under a number of headings such as rent payment/ arrears,voids, repairs and management and maintenance costs per unit.All AHBs are required to have a sinking fund for the longer term systematicrepair and refurbishment of housing stock. The level of provision must relateto the condition of the stock.All AHBs are required to perform stock condition surveys to ensureappropriate level of provision is being made to a sinking fund.All AHBs are required to have external validation by an appropriatelyqualified and independent third-party of the stock condition survey bothin terms of the sample size used and in the quality and accuracy of itsassessment of its stock. The User Guide to the Financial Standard willcontain more detail.In recognition of the critically important issue of risk assessment and riskawareness Tier 2 bodies are required to have an Audit and Risk Committee.Not required every year for Tier 2 AHBs.However, some Tier 2 AHBs may be required to engage with theRegulation Office in relation to issues arising from either theassessment process or notifiable events.Additionally, others may be invited to meet with the Regulation Officeto facilitate enhanced cooperation and mutual understanding withinthe sector.6. Guideline threshold; If Borrowings exceed €1.5M or loan financed stock exceeds ¼ of total stock, a full business plan and accompanying30 Year Financial Projections will be required.xxiiHousing Agency Regulation Office

Appendix C2Tier 2 Consolidated Codeand Financial StandardThe following table collates and summarises the requirements of the current Code and the Financial Standard.Current CodeRequirementAdditionalFinancialStandardRequirements7from 2017GovernanceFunctioning Board or Management Committee (in the case ofco-operative housing societies) 3Board must have clearly defined roles and responsibilities 3Board and Management have a good working relationship wherestrategic guidance results in agreed goals being achieved 3Board has at least 5 members. 3At least 5 members of the board should be resident in the State 3The chairperson and secretary shall be resident within the State 3No member should serve more than 2 consecutive 5 year terms(1st year of service is deemed to be from July 2013 for board members already 3appointed at that date)Expectation that members have appropriate skills and experience. 3Board has an annual general meeting and should meet at least4 times a year. 3No employee should act as chair of the Board 3AHB complies with existing companies law 37. In the 2017 calendar year the Annual Return Form relating to the 2016 Financial Year will issue and will have to be completed in accordance with theCombined Code and Financial Standard provisions.The Financial Standard and Assessment Frameworkxxiii

Appendix C1 Tier 2 Information Requirements / continuedCurrent CodeRequirementAdditionalFinancialStandardRequirementsfrom 2017Cash flow projections where loan finance does not exceed acertain threshold 9 3 8AHB complies with charities requirements 3AHB complies with conditions of approved body status 3AHB has a number of Board policies in place including membership,membership renewal, code of conduct, conflict of interest and aregister of interests3No individual may be elected or appointed as director / trustee orsenior employee of an AHB where they have a material interest /benefit arising from AHBs operations.3Maintenance of a Risk Register identifying key risks, likelihood ofthem occurring and proposed actions to mitigate risk 3Alert Regulation Office of Notifiable events 3Meeting with Regulation Office annually on request 3Financial and Business ManagementHave a Finance Committee3to be phased outHave an Audit and Risk Committee 3Have a tax clearance certificate 3Have a sinking fund 3Perform regular stock condition surveys and ensure they areexternally validated 3Submit the Annual Report (if available) and Financial Statements(with Directors Report) / accounts 3Have an external audit process in place 3Submit audit management letter and management responses 3Have an asset register 3Have a strategic direction 3No longer required8. In the 2017 calendar year the Annual Return Form relating to the 2016 Financial Year will issue and will have to be completed in accordance with theCombined Code and Financial Standard provisions.9. Guideline threshold; If Borrowings exceed €1.5M or loan financed stock exceeds ¼ of total stock, then a full business plan and accompanying30 Year Financial Projections will be required.xxivHousing Agency Regulation Office

Current CodeRequirementAdditionalFinancialStandardRequirementsfrom 2017Where loan finance exceeds threshold level, there is arequirement to have Board approved business plan with30-year financial projectionsComplete an Annual Financial Return with 1 year historic data(being latest audited accounts data) 3Performance ManagementHave an agreed set of performance management indicatorsin relation to rent payments and rent arrears, voids, repairs,management and maintenance costs per unitSubmit data on performance management including rentpayments and arrears, voids, repairs, management andmaintenance costs per unitHave a written allocations policy explaining eligibility criteriaand the application process 3Liaise with local authorities to let properties quickly and efficiently 3Provide tenants with information and statements on rentsand service charges 3Have a rent arrears policy and procedure and make it availableto tenants 3Have a repairs policy in place which commits to dealing withplanned, cyclical and responsive repairs within agreed timescalesand make it available to tenantsHave a statement on communication with tenants, regularlycommunicate with tenants and monitor feedback 3Provide pre-tenancy training for all new tenants 3Provide a tenants handbook detailing policies and procedures 33333The Financial Standard and Assessment Frameworkxxv

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Appendix C3Tier 2 AnnualFinancial ReturnCurrently, there is no uniform way in which AHBs report income, assets and liabilities. It is not proposed at thisstage to require a standardised set of accounts for the sector. Instead, it is proposed that key data from the annualaccounts is restated in a standard format in an Annual Financial Return to the Regulation Office. This will be usedas the basis for regulatory assessment and sector-wide aggregation of data.The Annual Financial Return for Tier 2 AHBs will also require some additional financial information and 1 year’sdata, being the latest set of audited financial statements.Information RequirementDetails/Comments (to be completed by the AHB)Number of units1 Owned2 Leased3 Managed Managed only, including SLA agreementsIncome & Expenditure (as in Financial Statements)4 Turnover Including rents, fundraising, grants, contract fees, and service charges5 Rental Income6 Operating Surplus7 Net Interest payable8 Profit/(loss) from sales9 Sinking Find Transfers10 Surplus /(deficit) for year11 Depreciation ofhousing propertiesAny amounts charged/(credited) to the income and expenditureaccount in the period12 Amortisation of grants Any amounts charged/(credited) to the income and expenditureaccount in the periodThe Financial Standard and Assessment Frameworkxxvii

Appendix C3 Tier 2 Annual Financial Return / continuedInformation RequirementDetails/Comments (to be completed by the AHB)13 Capitalised repairs See definitions14 Proceeds from sales of assets15 Cash flow from operations Surplus adjusted for non-cash itemsBalance Sheet (as in Financial Statements)16 Housing Properties At cost17 Housing Properties Depreciation18 Grants Received Total of all Capital Grants Received from inception to date –classified by Category (see definitions)19 Grants Amortised Details of grants amortised and released to Income & Expenditure (I&E)account / reserves from inception to date. Additionally disclose sumreleased to I&E account in the year20 Grants Balance Balance of grants not yet amortised21 Non-Housing fixed assetsand investments22 Debtors Arrears plus other debtorsOther fixed assets and investments that are not included inhousing properties23 Current liabilities Excluding the current portfolio of loans repayable within 12 months24 Loans See definitions and also including the current portfolio of loans25 Cash/(overdrafts) Cash plus Overdraft26 Provisions AHBs latest Financial Statements for that year27 Reserves includingDesignated ReservesSinking FundsAHBs latest Financial Statements for that yearProvision (€)Last external reviewSufficiency of funding….. explain the date, scope and extent of the review such as sample size andassumptions regarding the lifetime of major components…… certify that this sum represents sufficient funds to meet current andfuture obligationsFundingLoans – CALFLoans – HFALoans –other fundersLoans – current funding………explain amount and nature of loans and lenders…….. explain current funding and requirements and plansxxviiiHousing Agency Regulation Office

Information RequirementUndrawn committed fundsFixed and VariableDerivativesDetails/Comments (to be completed by the AHB)………explain any restrictions on how the undrawn funds can be usedProvide % of fixed rate debt (fixed for longer than 5 years) as a % of total debt………explain nature of derivatives and any covenantsInterest Cover Type CovenantMost exacting requirementInterest Cover…….. describe the nature of the covenants(Surplus before Interest and Tax) divided by / Interest PayableGearing Type CovenantsMost exacting requirementGearing….. .describe the nature of the covenantsRatio of Loans to Reserves including Capital Grants(note – while CALF is a loan for the purposes of this gearing ratio it can be excluded)Asset Cover Type CovenantsMost exacting requirement….. .describe the nature of the covenantsAsset Cover Total assets less current liabilities (excl. short term debt obligations) /divided by total debtUnencumbered Land and PropertyNumberValueNumber of unencumbered housing propertiesEstimate of security value of unencumbered housing properties, otherproperties and undeveloped landDevelopment ProgrammeProgrammeOwned PipelineLeased PipelineManaged Pipeline…… set out the number of units and mix of development programme by sizeand type (rented, sale, market rent, etc.) and whether fully approved or notAt the current date set out future pipelineAt the current date set out future pipelineAt the current date set out future pipelineFunding for Development Programme (€)GrantNew debtOwn resourceLease payments to landlordsThe Financial Standard and Assessment Frameworkxxix

Appendix C3 Tier 2 Annual Financial Return / continuedInformation RequirementDetails/Comments (to be completed by the AHB)Housing Leasing Commitments by Remaining Length of Lease (€)1 year2-5 years6-10 yearsThereafterOtherCurrent and former tenantarrears as % rent rollCurrent and former tenantarrears as % rent rollArrears PolicyManagement costs per unitMaintenance costs per unitOperating costs per unitAverage void turnaround -General needs units (days)Average void turnaround –Supported Housing Units (days)Void loss in year (€)After deducting provisions for bad debts on these arrears…… set out arrears provision policyxxxHousing Agency Regulation Office

Appendix C4Tier 2 Liquidity RatioCovenantsWhere an AHB has debt finance, it is critical that short-term and long-term viability are maintained. The Boards ofTier 2 AHBs who have development loan finance over a certain threshold 10 are required to regularly review theirfinancial position and to notify the Regulation Office if over a period key liquidity ratios are being breached.The key liquidity ratios and their recommended levels are as follows:Key Ratio How it is calculated Recommended Level What it indicatesCurrentRatioCurrent Assets (i.e. cash + debtors)divided by Current LiabilitiesAt least 1:1Readily availablefunds to meetcurrent liabilitiesCash fromOperationsNet Income adjusted for non-cash items.(i.e. net income+ depreciation– amortisation+ decrease in current assets+ increase in current liabilities– increase in current assets– decrease in current liabilities)At least a positive figure.Indicates goodbusiness managementInterestCoverSurplus before interest divided byinterest expenseAt least 1.5 timesIndicates how easily anorganisation can paythe interest expenseon outstanding debt10. Guideline threshold; If borrowings exceed €1.5M or loan financed stock exceeds ¼ of total stock, a full business plan and accompanying30 Year Financial Projections will be required.The Financial Standard and Assessment Frameworkxxxi

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Appendix DTier 1RequirementsAppendix DTier 1 Requirements

Appendix D1Tier 1 InformationRequirementsThe following are the information requirements under the provisions of the Financial Standard for Tier 1 AHBs.They are, where possible, based on usual business requirements - but there are areas that will require the AHB toevolve its response over the transition period.In line with the principles of the Voluntary Regulation Code, there is a “comply or explain” policy. Someorganisations will need to explain how they are working to deliver on a particular element of the FinancialStandard, and we expect this to be particularly relevant for the transition phase. For Tier 1 AHBs, fullcompliance will be expected by 2018 as per the phased implementation table on as set out in Chapter 3.Information Requirements of Financial StandardInformation RequirementDetails/Comments1 Financial Statements Submit Audited Financial Statements signed by the Board within 9 monthsof their year-end.2 Audit Management Letter Submit Audit Management Letter with management responses within9 months of their year-end.3 Asset Register All AHBs are required to have an Asset Register recording its housingstock and capable of reconciliation to audited financial statements andRegulation Office Annual Return Form.4 Business Plan with 30-year Financial ProjectionsNot required5 Annual Financial Return Not requiredRather a detailed income and expenditure account, informative notesbalance sheet and a cash flow are to form part of the financial statementsas per item 1 above.6 Tax Clearance Certificate Each AHB must submit a Tax Clearance Certificate with their AnnualReturn Form.7 Notification of IssuesArisingAll AHBs should notify the regulator immediately of issues arising which in itsopinion give ‘cause for concern’ and represents ‘a potential impact on viability’.Notifiable events are listed onwithin Chapter 8. This list is not exhaustive.The Financial Standard and Assessment Frameworkxxxv

Appendix D1 Tier 1 Information Requirements / continuedOther RequirementsPerformance ManagementIndicatorsA sinking fundStock Condition SurveysExternal Validation ofStock Condition SurveyAudit and Risk CommitteeMeeting withRegulation OfficeDetails/CommentsAll AHBs should be able to provide basic data each year on its performancemanagement under a number of headings such as rent payment/arrears, voids,repairs and management and maintenance costs per unit.All AHBs are required to have a sinking fund for the longer term systematic repairand refurbishment of housing stock. The level of provision must relate to thecondition of the stock.All AHBs are required to perform stock condition surveys to ensure appropriate levelof provision is being made to a sinking fund.All AHBs are required to have external validation by an appropriately qualified andindependent third party of its stock condition survey both in terms of the samplesize used and in the quality and accuracy of its assessment of its stock. The UserGuide to the Financial Standard will provide further detail.While it is not a regulatory requirement for Tier 1 AHBs, the establishment of anaudit and risk committee for Tier 1 AHBs is a matter for the governing body toconsider, depending on the scope and needs of the organisation.Not required every year for Tier 1 AHBs.However some Tier 1 AHBs may be required to engage with the Regulation Officein relation to issues arising from the assessment process or notifiable events.Additionally, others may be invited to meet with the Regulation Office to facilitateenhanced co-operation and mutual understanding within the sector.xxxviHousing Agency Regulation Office

Appendix D2Tier 1 Consolidated Codeand Financial StandardThe following table collates and summarises the requirements of the current Code and the Financial Standard.Current CodeRequirementAdditionalFinancialStandardRequirements11from 2018GovernanceFunctioning Board or Management Committee (in the case ofco-operative housing societies) 3Board must have clearly defined roles and responsibilities 3Board and Management have a good working relationship wherestrategic guidance results in agreed goals being achieved 3Board has at least 5 members. 3At least 5 members of the board should be resident in the State 3The chairperson and secretary shall be resident within the State 3No member should serve more than 2 consecutive 5 year terms(1st year of service is deemed to be from July 2013 for board members already 3appointed at that date)Expectation that members have appropriate skills and experience. 3Board has an annual general meeting and should meet at least4 times a year. 3No employee should act as chair of the Board 3AHB complies with existing companies law 311. In the 2018 calendar year the Annual Return Form relating to the 2017 Financial Year will issue and will have to be completed in accordance with theCombined Code and Financial Standard provisions.The Financial Standard and Assessment Frameworkxxxvii

Appendix D2 Tier 1 Consolidated Code and Financial Standard / continuedCurrent CodeRequirementAHB complies with charities requirements 3AHB complies with conditions of approved body status 3AHB has a number of board policies in place including membership,membership renewal, code of conduct, conflict of interest and aregister of interestsNo individual may be elected or appointed as director / trustee orsenior employee of an AHB where they have a material interest /benefit arising from AHBs operations.33AdditionalFinancialStandardRequirements12from 2018Maintenance of a risk register identifying key risks, likelihood of themoccurring and proposed actions to mitigate risk 3Alert Regulation Office of Notifiable events 3Meeting with Regulation Office as requested 3Financial and Business ManagementHave an Audit and Risk CommitteeHave a tax clearance certificate 3Have a sinking fund 3RecommendedPerform regular stock condition surveys and ensure they areexternally validated 3Submit the Annual Report (if available) and Financial Statements(with Directors Report) / accounts 3Audited accounts to include detailed income and expenditureaccount with analysis of key income streams, larger expensesincluding staffing, maintenance costs etc. Additionally balance sheetto include detailed notes particularly on assets and grants. Cash flowalso to comprise part of audited accounts.Have an external audit process in place 3Submit audit management letter and management responses 3Have an asset register 3Have a strategic direction 3312. In the 2018 calendar year the Annual Return Form relating to the 2017 Financial Year will issue and will have to be completed in accordance with theCombined Code and Financial Standard provisions.xxxviiiHousing Agency Regulation Office

Current CodeRequirementAdditionalFinancialStandardRequirementsfrom 2018Performance ManagementHave an agreed set of performance management indicatorsin relation to rent payments and rent arrears, voids, repairs,management and maintenance costs per unitSubmit data on performance management including rentpayments and arrears, voids, repairs, management andmaintenance costs per unitHave a written allocations policy explaining eligibility criteriaand the application process 3Liaise with local authorities to let properties quickly and efficiently 3Provide tenants with information and statements on rents andservice charges 3Have a rent arrears policy and procedure and make it availableto tenants 3Have a repairs policy in place which commits to dealing withplanned, cyclical and responsive repairs within agreed timescalesand make it available to tenantsHave a statement on communication with tenants, regularlycommunicate with tenants and monitor feedback 3Provide pre-tenancy training for all new tenants 3Provide a tenants handbook detailing policies and procedures 3333The Financial Standard and Assessment Frameworkxxxix

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GlossaryAHBApproved Housing Bodies (AHB) provide and managesocial rented housing. They are also known as HousingAssociations and include Co-operatives.They are not for profit organisations formed for thepurpose of managing and providing homes for thosein housing need. Tenants are mainly sourced from theRecord of Qualified Households (the Social Housing List)which is managed by housing authorities.Under Section 6 of the Housing (MiscellaneousProvisions) Act, 1992, bodies must obtain ‘approvedstatus’ from the Department of Environment,Community and Local Government. Homes areprovided at affordable rents to tenants.AHB Tier ClassificationRegulatory standards apply to all AHBs, but varydepending on the size, scale and the level of financialrisk associated with the development plans of anindividual AHB. A classification system has beendesigned to reflect this.Tier 1Tier 2Tier 30-50 units with no development plansor development plans that keep thetotal under 50 units.50-300 units or development plans thatkeep the total under 300 units, or theuse of loan finance for development.>300 units or sizeable developmentplans, including the use of loan financefor development.CALF FundingA capital advance loan made available from the DECLGvia Local Authorities to AHBs to assist AHBs accessingfinance from financial institutions. It is not repayable untilthe end of the term with a nominal interest rate accrued.CAS FundingCapital Assistance Scheme provides up to 100%capital grant funding to AHBs for provision of housingfor people with specific categories of need. It is providedby way of mortgage and is only repayable if conditionsof the grant provision are not adhered to.Cash from OperationsThis is the Net Income as per the income andexpenditure account but adjusted for non-cash items.(I.e. net income + depreciation – amortisation +decrease in current assets & increase in currentliabilities – increase in current assets & decreasein current liabilities).Capitalised repairsImprovements to existing housing properties thatincrease the value or extend the life beyond thatoriginally envisaged and have been added tothe costs of the assets.CLSS FundingCapital Loan and Subsidy Scheme provided 100% capitalgrant funding to AHBs to enable them to provide socialhousing for eligible families (no longer available). Itwas provided by way of mortgage and is repayable ifconditions of the grant provision are not adhered to.The CodeRegulation of the sector is based on the VoluntaryRegulatory Code for Approved Housing Bodies –‘Building for the Future’, launched in July 2013. It formsthe foundation of the Regulatory Framework for AHBsand sets out the key principles that will apply to all AHBsdepending on the size, scope and risk level of AHBs.DECLGDepartment of Environment, Community andLocal GovernmentThe Financial Standard and Assessment Frameworkxli

Glossary / continuedDesignated ReservesAmounts set aside by AHBs for specific futurecommitments and these include sinking funds for futuremaintenance requirements.Differential rentThe amount of rent paid by a tenant based onhousehold income. This varies depending on the LocalAuthority area, e.g. it could be 15% of the tenant’shousehold net income.GearingGearing is calculated as the total of loans divided byReserves and Grants. It is the ratio of Loans to Reservesincluding Capital Grants.(note – while CALF Loans are a loan due for repayment for thepurposes of this gearing ratio, they can be excluded)GrantsAmounts provided by the State and Local Authoritiesto fund the provision of social housing. These amountsare not repayable whilst the housing use remains asenvisaged. For the purposes of the Annual FinancialReturn all amounts received under the capital grantfunding regime should be included. All revenuerelated grants including Availability Paymentsshould be excluded.LiquidityLiquidity is a measure of the ability to pay debts as theyfall due and of how readily assets can be converted tocash. The Quick Ratio gives an indication of the extent ofliquidity of an organisation.LoansMonies borrowed to fund the development of housingproperties and other assets and repayable over aperiod of time to the HFA, banks or other institutions.(Includes CALF Loans).Net Interest PayableInterest payable less interest received from returnon investmentsP&A Payment and Availability AgreementsIn return for making a property available for socialhousing for a period of 10-30 years the DECLG makes anavailability payment based on market rent to the AHB.In addition the AHB is entitled to “differential rent” fromthe tenant.Quick RatioThe Quick Ratio can be used as an indicator of liquidity.It is calculated as (Debtors + cash + secured undrawnloan facilities) divided by (current liabilities) expressedas a ratio.RegulatorThe regulatory structure was established in February2014. The Housing Agency has been given responsibility,on an interim basis, for regulating Approved HousingBodies (AHBs).The Housing Agency has established a Regulation Officeto support this work. The Office reports to an interimRegulatory Committee appointed by the Minister.Sinking fundsDesignated reserves or other funds indicated on thebalance sheet as set aside for longer term systematicrepairs and refurbishment of housing stock e.groof replacement.Social Housing UnitsUnits that have been or are funded by capital or revenuegrants from the State or Local Authorities to providerents at below market levels.xliiHousing Agency Regulation Office

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