Regulatory expectation in relation to returns

Nathan Mallows, Chair of the NHF Finance Policy Advisory Group, and Director of Finance, People and Change at Coastline Housing, reflects on his experience of regulatory expectation in relation to returns over the last 22 years.

Part of the work that the NHF does through the Financial Policy Advisory Group (FPAG), and the regional finance forums, is to gather feedback and opinions that help inform policy development. 

This article follows on from some initial feedback that the South West Group pulled together, which was then shared with other NHF groups and resulted in a request to the Regulator of Social Housing (RSH) for an opportunity to discuss.

As part of feeding back from that meeting, which was very positive, the process has made me reflect on my own experiences in relation to regulatory returns over the last 22 years – covering organisations of all sizes, from those operating with under 1,000 homes, to those with more than 40,000.

The main themes were:

• Nothing in the regulatory returns are designed to trip housing associations up.
• The RSH is looking at ways to allow for data to be transferred/pre-population between returns (organisations have been contacted to help testing).
• Systems of data collection have evolved over time and feed different audiences and so are not easy to change.
• Validation checks are published and available to all but may need more promotion.
• Housing associations do not need to escalate minor irregularities/inconsistencies to boards.

I do not think there is much in the above to surprise, but to give some context to my thoughts on the conversation and resulting feedback.

Up until 2016 I would have to say that my thoughts on regulatory returns and the process for querying and understanding the data within was wholly positive. I have been the lead on the Statistical Data Return (SDR), 30-year Business Plan Return (FFR or previously the FV30), Quarterly Finance Return, and Annual Accounts (FVA), and in all cases had good oversight of organisational issues and was able to consolidate reporting and “own” the whole process. This is inevitably simpler, but not necessarily easier, in smaller businesses as there are just fewer data points and rows in the spreadsheets. As organisations get more complex or take on the challenge of building new homes, the number of people that need to put in a row increases.

Reflecting on 2016, the limited number of downgrades for poor data quality and the “warning” (my words, not from the RSH) letters sent to a number of housing associations (which included Coastline who I had just joined in January 2016) created a bit of an industry for us all. I would accept that my “fear” at not being able to produce a return that the RSH would be happy with, and might want to downgrade our business with, led to me creating a process which included a wider review and, with feedback from internal auditors, also included escalation and reporting to the Audit and Risk Committee and Board on these issues.

What followed for me was 12 months of doing what I normally would do, in terms of providing returns, but now with an added number of steps to audit and check the returns and share them with executive colleagues and the Audit Committee. This has benefits and some elements of which we have retained but it also has an unfortunate gap. What to do when the RSH asks questions to understand your return or query, such as, why something isn’t the same as something else. 16 years of experience should have told me that there are “normal” queries which aid analysts from the RSH understanding of the business, or that these might be simple errors.

Should we report all the RSH’s questions to the Audit Committee? Some committee members wanted that as they wanted control and ownership to make sure that they knew what was going on. However the process has to be about gaining assurance on what the executive and our teams are doing – eyes on, hands off mantra.

I share all of this as I think it’s pretty common – like our annual audit, it shouldn’t raise issues – and that’s what we are used to. Regulatory returns are the same – they shouldn’t raise issues – or at least not ones you are not aware of. Analysts at the RSH, like audit teams, are just triangulating both data and information, and the more helpful and consistent you are at communicating with them, the easier the whole process is.

Like any relationship – trust is built over time by consistency, care and responsiveness. So if you make lots of pointless errors there will be questions. If you make bigger errors and create more work, stress or headaches, then our regulatory partners may become concerned. If you don’t respond then again, given the burden the regulator carries, what should we expect them to do?

The feedback from the meeting reinforces the above – the RSH has created an escape room as it’s just a process of communication that is as old as housing regulation. It may change a bit over the years but is essentially very constant.

The good news is that we have been heard and work is in progress to improve the returns and consider how they fit together. The RSH is keen to make things more data based so that one set of data can be provided rather than us having to manipulate data into the formats that are currently required. For us the challenge remains ensuring that data is accurate and it is worth noting how data has been covered off in the Sector Risk Profile.

Hopefully the bits you may remember from this article are:

• The NHF and housing associations work well together in terms of communicating issues and being able to get them aired effectively.
• The RSH wants to work in partnership with us – the essence of co-regulation.
• All partnerships need good relationship fundamentals – care, consistency, honesty and responsiveness.
• Don’t let our concerns over proving we are doing a good job create an industry to serve that.