Examination of Witnesses (Questions 20
- 39)
WEDNESDAY 2 MAY 2001
DR NORMAN
PERRY AND
MRS CLARE
MILLER
20. Which ones?
(Dr Perry) The 600 large ones whose performance is
really looked at in the NAO Report. 83 per cent of the people
who do not put in accounts on time are organisations that have
fewer than 250 homes and they are not in receipt of money.
21. So you do have an analysis by type, size
and region of those who are failing to submit their annual accounts
and we could have a copy of those sent to the Committee?
(Dr Perry) I would be happy to put a note in on that[1].
22. You mentioned about court action. How many
have you taken to court?
(Dr Perry) I did not say. I do not have that information
to hand.
23. Could you let us have that information as
well?
(Dr Perry) Yes[2].
24. You said that the court was not all that
happy about some of them being brought to court because it was
bureaucratic, but at the end of the day that is in the regulations
and therefore, regardless of what the courts say, you are obliged
to do that. When they go to court what are the punishments? What
are the fines?
(Dr Perry) The fines are usually small and very often
if they are not paid the courts do not seek to enforce them.
25. Right. So you are doing your job but the
court is not?
(Dr Perry) I did not say that, Chairman.
26. Let us say there was a rapid deterioration
in the financial stability of an RSL, how would you pick that
up and take action immediately?
(Dr Perry) It depends on the size of it. If it is
one of the larger ones they have to produce quarterly financial
returns which are based on their own management accounts. Every
quarter we need to get them. They also have to do us a five-year
projection of their financial performance. For the smaller ones
we rely on annual accounts so there would be more of a time-lag.
On the other hand, the regulation system does rely on quite a
lot of intelligence passing backwards and forwards between RSLs
and our offices and I would hope that we would not be unaware
of problems that were arising.
27. What would you consider to be a balance
between a proactive action and a reactive action, if you like?
Do you know what I mean?
(Dr Perry) Well, proactive action would be when we
received maybe two sets of quarters' accounts and we saw that
something seemed to be happening, and if we had not already spoken
to the chief executive and the finance director of that RSL, then
we would certainly do so at that point. For those associations
which are lead regulated, their lead regulator would go in pretty
quickly.
28. What you are basically saying—and
I was going to ask you what action the Corporation took and what
are the measures the Corporation has for assessing financial viability—is
that the five-year forecasts and the quarterly financial forecasts
are the two methods that you would have. You seem to be saying
they are successful. Are they successful in picking up a situation
like I mentioned where suddenly somebody gets into real trouble?
(Dr Perry) We are rarely completely surprised when
someone is in trouble. Hopefully we will have been there beforehand.
29. Right. So how do you interpret those returns?
(Dr Perry) We are moving to a more specialised system
now where we have just recruited a number of specialist financial
regulators, a number of them coming in from the financial services
industry other regulators, and they will look at the quarterly
returns, and assess the ratios on the basis of those.
30. Would you say that they are of value?
(Dr Perry) The quarterly returns are absolutely essential,
yes.
31. Are you not putting too much bureaucracy
onto them or do you feel that that is the best way to do it?
(Dr Perry) I would not have called that bureaucracy.
They are making a regular financial report to the regulator.
32. Fine, fine. I have got to be careful what
I say because I always get myself into a little bit of trouble.
I know some housing associations and very often the success of
the housing association depends upon the standard of the board
of the housing association. How confident are you that the boards
are, in fact, competent, bearing in mind these people are the
ones who are ultimately responsible for the financial and overall
performance of a housing association? How confident are you that
the boards are competent?
(Dr Perry) I cannot say with any absolute certainty
that we have complete confidence in every board all of the time.
There are 29,000 people who sit on RSL boards. They are people
who work entirely without payment. It one of the biggest voluntary—
33. That is not an excuse that they can use,
though, is it?
(Dr Perry) Absolutely not and one housing association
board found that out recently. We have been working on governance
issues with housing associations for some time. The National Housing
Federation does a very large amount of work with the boards of
housing associations. We have at the moment the consultation paper
out on modernising governance to which we are getting a good response,
which raises issues and develops issues like appraisal of board
members, proper recruitment systems for board members, peer appraisal
and mentoring for board members, and tries to introduce into the
RSL sector best practice—the sort of thing that the Institute
of Directors and the CBI have been doing.
34. You reckon that you do take a certain amount
of action to ensure that the boards are competent?
(Dr Perry) We encourage RSLs to develop methods which
will give them reassurance that their boards are competent.
35. Do you assess the boards at all?
(Dr Perry) We do not assess the boards personally.
Our lead regulators would certainly take a view on whether a board
is on top of the job, is interacting properly, engaging properly
with their own senior staff, and receiving the right kinds of
report and doing with the reports what they are supposed to do.
To that extent we do have an informal finger on the pulse of the
quality of boards.
36. The Chairman talked about the new Regulatory
Code that is coming in, which is at consultation stage. Do you
plan for that Regulatory Code to assist you in the assessment
of the competence of the boards?
(Dr Perry) Yes because the contents of the Code will
include issues about the competence of the board. Mrs Miller has
been responsible for doing a lot of this work.
(Mrs Miller) There are three key elements to the Regulatory
Code and they are to ensure that the organisation is viable, to
ensure that it is properly governed, and to ensure that it is
properly managed. In holding associations to the Regulatory Code
we place great emphasis on the boards' responsibility in making
sure that they meet our requirements.
37. I will move on then. When you assess a housing
association's or an RSL's financial viability, what account do
you take of the salary levels of the senior staff and the benefits
that they get and the golden handshake that they might be given?
I can always remember a housing officer of a local authority coming
to me with an annual report of a housing association and saying,
"Look at the back page there, have a look at it, see the
salaries they are paying them and what I am getting compared to
them."
(Dr Perry) I think it is fair to say that since there
have been a couple of high profile cases in the last year or so
that the word has gone out in the sector that this is something
which has to be regarded seriously by them. We do have the power
where payments are made which are non-contractual to intervene
and we have used that power recently. Where very, very good packages
are built into the contracts of employment we have less intervention
powers. I think the power of peer pressure within the movement
is getting quite strong now and I think such cases as there have
been in the past are unlikely to be repeated.
38. Okay. Let us move on. Paragraph 4.7—this
is about the regulatory teams—how do you actually appoint
the regional teams?
(Dr Perry) We have been going through that process
now. I was personally involved, and I selected with board members
the assistant chief executive for regulation and I was also a
member of the interview panels for the four directors of regulation
in the country. We have now appointed assistant directors. We
have recruited by public advertisement widely in the media and
we have been successful in recruiting people from outside the
Corporation.
39. Are you confident that you are getting the
right people for the job? It is a fairly junior post, is it not?
(Dr Perry) No.
1 Note: See Evidence, Appendix 1, page 11
(PAC 00-01/174). Back
2
Note: See Evidence, Appendix 1, page 11 (PAC 00-01/174). Back
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