Our approach to Service Charge Examinations

Transcription

1 Our approach to Service Charge Examinations

2 Contents Our Experience 1 Value Added Services 4 Our Approach 5 About Us 9 SERVICE CHARGE EXAMINATIONS PAGE 2

3 Our Experience As a Top 5 provider of audit services to the sector, Beever and Struthers is fully committed to meeting the rapidly evolving needs of Registered Providers (RPs). Our wide-ranging experience enables us to provide tailored services to RPs managing from under 1,000 units to over 20,000 units and covers both simple and complex group structures. So nobody is better placed to provide the auditing and consultancy services you need. We have been involved in the housing sector for over 45 years and our knowledge of this sector means that our aim of providing clients with the best possible service is both realistic and achievable. We are highly committed to the Social Housing sector and have developed a specialised team of dedicated, enthusiastic and qualified staff with excellent technical knowledge. Service charges Our experience of service charges is extensive and below are a few of our areas of expertise: Lease reviews to ensure compliance with terms and relevant legislation. Detailed compliance checks of the allocation of costs, overheads and management fees to schemes as well as to individual leaseholders. Assessing compliance with Section 20 consultation set out in the Landlord and Tenant Act Compliance with ICAEW guidelines. Lean process reviews for cost effective certificate production. System mapping from financial information to service charge modules. Review of budget and costs for improved recoverability. Review of systems implementation. Detailed management letter on issues including process improvement and benchmarking. Lean process reviews of practices, systems usage and recoverability of relevant costs. All staff are highly trained and experienced in service charge accounting and we service a number of clients providing Section 21 (Landlord and Tenant Act 1985) examination work and engagements to report on factual findings in line with the ICAEW Technical Release 03/11: Residential Service Charge Accounts. We also conduct service charge examinations on commercial service charges following the latest ICAEW and RICS guidelines. SERVICE CHARGE EXAMINATIONS PAGE 1

4 Our Experience You can be confident that by working with Beever and Struthers, you will be fully supported in achieving best practice in service charge management. Beever and Struthers In relation to best practice, benchmarking and internal audit services for service charges, we use our own in-house developed manual which is tailored to our housing sector clients. The risks and controls identified in that document are specific to the housing sector and the methodology follows the guidance of the Institute of Internal Auditors, the ICAEW and the Housing Association Internal Audit Forum (HAIAF). We have experience in dealing with the setting up, administration, accounting and operations of management companies as well as conducting service charge examinations at private management organisations on behalf of leaseholders and housing associations. We recognise the risks associated with the management of variable service charges including: managing cost recovery, complying with regulations and the impact of current government policies including Welfare Reform and Universal Credit on the available income of your residents. Why choose Beever and Struthers? A specialist service charge team. A proven track record of delivering circa 4,000 Leaseholder Service Charge reviews annually covering over 40,000 leaseholders. Bespoke efficient approach in compliance with ICAEW Technical Release 03/11. A committed and accessible team with exceptional sector experience including continuing sponsorship of the National Leasehold Conference. Significant involvement of senior personnel. Value for money. Influence at the highest level working closely with the regulator, sector bodies and the technical committees. Board, team training and seminars. An award winning firm. Our clients SERVICE CHARGE EXAMINATIONS PAGE 2

5 Our Experience Transition to ICAEW Technical Release 03/11: Residential Service Charge Accounts Following the introduction of the ICAEW Technical Release, we supported our clients in adopting these best practice standards at the earliest opportunity. Our extensive experience of service charge examinations means that the work that we undertake already meets best practice standards. Therefore there were virtually no changes required to our internal examination approach. As a practice, we are represented on the ICAEW Social Housing Committee and the National Housing Federation RP SORP Working Party. Our membership of these groups recognises our status in the sector and ensures that we can influence sector accounting practice, stay ahead of the game in terms of upcoming issues including changes to service charge legislation and accounting changes. Our clients benefit directly from this involvement where our first hand involvement allows us to provide solutions to our clients on these matters at the earliest opportunity and continue to meet best practice standards. We are represented on the ICAEW Social Housing Committee which allows us to influence service charge accounting and legislation which enables us to support our clients in meeting best practice standards. Beever and Struthers SERVICE CHARGE EXAMINATIONS PAGE 3

6 Value Added Services We will provide service charge training courses to teams across the organisation including housing, maintenance and finance to ensure staff are aware of legal requirements, changes in legislation and to assist in maximising recovery in service charge costs. Beever and Struthers In addition to providing accountants factual reports of findings on service charge accounts, our examination work includes a review of service charge recovery as well as cost allocation and data capture at scheme, block and dwelling level. We have also completed a number of special assignments over the past year: Review of rent disaggregation into service charge and rent elements. Training of client staff on what is service chargeable to raise awareness. Review of controls over service charges and the use of sinking funds. Review of the implementation of housing management service charges and rent modules as well as stand-alone service charge systems. Overview of systems to generate service charges to ensure recoverability is maximised. Review of the automation of the service charge process from the nominal ledger into the service charge module to ensure a more efficient, accurate and timely process with automated production of statements. We also provide information to clients about best practice including benchmarking of management fees, cost apportionment bases and statement generation We understand that adding value to the service charges review process is an important factor in selecting your advisors. We offer a range of added value services which include: Update Seminars On an annual basis, we run accounting update seminars for Board members and finance staff from all our charity and social housing clients. The seminars are specifically tailored to sector topics. Recent seminars covered: The new accounting framework. Regulatory impacts and the new Code of Practice. Opportunities for funding. Stress testing of business plans. Board and Management Training We can provide training to the Board of Management when we attend to present our reports. The topics are tailored to the specific needs of your Board. Recent areas include: the new accounting framework and its impact on RPs, governance, risk management, fraud, and compliance with internal control assurance requirements. Newsletters We issue regular newsletters to assist you in keeping up to date and applying general developments to the housing sector. Sector Review We provide an annual analysis of the Top 100 RPs financial statements. This provides advice on best practice across a range of financial and non-financial issues and enables benchmarking with peers in the sector. Through our sponsorship and exhibit work at the National Leasehold Conference we are able to help you keep ahead of the game with technical and regulatory issues. SERVICE CHARGE EXAMINATIONS PAGE 4

7 Our Approach In addition to the experience of special assignments that our team brings to the service charge certification process, we will produce a report at the end of our work setting out our findings and making recommendations for changes and improvements. Process of final checking We keep detailed electronic records of all property addresses and the stage we are at of the work being carried out for each property by block and by estate. On completion of the work per block for an estate, we will send you the accountants reports with a list of properties certified and the individual fee to be uploaded into your finance system. At each stage we will send you an update of completed properties and schemes outstanding. Systems We are experienced in using a variety of systems at our clients. We have excellent knowledge of the following housing management and service charge systems: Orchard. Universal Housing. Qube. Ensemble. BlueBox. Microsoft Excel spreadsheets. Our work not only includes certification work on system balances but also an implementation review of new systems and lean process reviews of data collation and statement generation. On appointment we will conduct a review including evidence requirements. We will document the system and check allocations of income and costs from estate to block to dwelling. For each estate, we will select a sample of invoices that we will wish to review and ask that these be supplied to us. We will do the same for any Section 20 notice works again on a sample basis. SERVICE CHARGE EXAMINATIONS PAGE 5

8 Our Approach Current issues affecting services charges and recoverability There are a number of changes to legislation and housing policy which will affect service charges and its recoverability including: Welfare Reform Affordable Housing Pay to Stay We have conducted reviews on developing risks affecting the sector and have advised clients as to the steps they can take to minimise the impact of these changes to their organisations. Beever and Struthers Service Charge Modular Approach Beever and Struthers has developed a service charge module to assist in the examination of service charge statements. This provides significant benefits to our clients by making the process as efficient as possible by using smart systems to interrogate service charge data to assist in sample selection and focusing our work on areas of high risk within the service charge systems. The development of this system enables us to provide a best practice service which meets all legislative and accounting requirements whilst providing a value for money service to you. Benefits of our approach We have carefully considered how to maximise efficiencies in our examination approach whilst still capturing and dealing with queries on income, expenditure, budgets, allocations and sinking funds in a way that provides you with confidence that the examination is thorough, yet flexible, in order to meet your timetable. We achieve this in the following ways: Our service charge modular system provides both ourselves and our clients with as up to date information as possible to ensure queries raised are dealt with in a timely and efficient manner. Progress meetings throughout the service charge examination process. Certificates issued in batches to avoid bottlenecks close to statutory deadlines. Flexible and experienced staff allocated to meet peak outputs and agreed timetables. We bring vast experience, real energy and genuine commitment to the social housing sector. Beever and Struthers SERVICE CHARGE EXAMINATIONS PAGE 6

9 Our Approach Our detailed approach to service charge examinations Housing Associations and external managing agents require an independent examination of variable service charges carried out in accordance with the Landlord and Tenant Act 1985 and ICAEW guidance. The main areas of our work would be: Compliance testing in relation to the Commonhold and Leasehold Reform Act 2002 and the Landlord and Tenant Act Sample testing on service charge transactions for supporting evidence and to confirm a complete audit trail is in place. Checks on a sample of service charges to confirm that they have been accurately recorded and allocated. Analytical review of service charge income against budgets and the costs incurred. Section 20 notices have been issued in accordance with legislation. System control testing on time allocations for staff and other costings which are apportioned in the service charges. Ascertain the current process and methodology for generating service charge statements. Where services are initially paid for by leaseholders and are used by third parties, recharges are made and the service charges are adjusted accordingly. This results in: Good practice recommendations in areas needing improvement Consideration of value for money Review of controls in place Improved control processes SERVICE CHARGE EXAMINATIONS PAGE 7

10 Our Approach How we engage with you and the service charge team We expect to deliver our service to you as follows: Planning Service charge examination work The senior members involved in the examination will be responsible for the detailed planning, scoping of work and assessing the risks facing the service charge process. The involvement of your team at the planning stage is crucial to be able to meet your needs and timetable. Our staff will visit your premises and conduct the work, interviewing the relevant staff and work with the service charge team. Appropriate tests of control and allocations will be performed. An exit meeting at the end of the site visit will provide initial feedback to you. Outcomes From our examination work, sample testing and discussions with your staff, we will make specific recommendations. We will consider whether the organisation is compliant with the relevant legislation. All work is reviewed by senior staff within the firm to ensure quality and to provide the benefit of experience of service charge examinations. All accountants reports are issued. A closing meeting is held with both the service charge and leasehold teams to go through issues encountered in particular areas such as income, expenditure, fixed charges and systems where recommendations are made to make further improvements in processes across all regions. Our modular systems approach allows us to provide a detailed management letter to the association which highlights the number of queries raised and provides recommendations to further reduce queries raised. This improves the efficiency of the overall process and reduces the time spent by your service charge team in addressing examination queries in future years. We discuss recommendations with you at our closing meeting as well as provide detailed analysis on our findings on an area basis for which your association can make further improvements. Beever and Struthers SERVICE CHARGE EXAMINATIONS PAGE 8

11 About us Beever and Struthers is an award winning firm of Chartered Accountants and Business Advisors, with offices in Manchester, Blackburn and London. We have been providing support and advice to clients for over 100 years and rank in the Top 60 national accounting practices in the UK. We have been involved in the housing sector for over 45 years and our wealth of experience in this sector means that our aim of providing clients with the best possible service is both realistic and achievable. We draw from our wide experience of the sector but continue to provide a personal and tailored service to our clients. Contact us We would be delighted to talk to you about your service charge processes, examinations and requirements, please contact a member of our team: Sue Hutchinson Partner, Manchester e. sue.hutchinson@beeverstruthers.co.uk t Richard Graham Senior Manager, Manchester e. richard.graham@beeverstruthers.co.uk t Stephanie Smith Audit Manager, Manchester e. stephanie.smith@beeverstruthers.co.uk t Rory O Carroll Partner, London e. rory.o carroll@beeverstruthers.co.uk t Michael Tourville Assistant Director, London e. michael.tourville@beeverstruthers.co.uk t SERVICE CHARGE EXAMINATIONS PAGE 9

12 Disclaimer: Please note that this literature is provided for your information only. Whilst every effort has been made to ensure its accuracy, information contained in this literature may not be comprehensive and you should not act upon it without professional advice.