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Housing Association Guide Part 1 - Appendix 10 Annex A

Effective Governance

1.00 Introduction

1.01Effective governance arrangements can be framed around the following questions:

To what extent does the governing body perform its key governance roles well?
To what extent does the governing body work well together?
To what extent does the governing body comprise appropriate people?

1.02Good governance is critical. Experience has shown that when an Association gets into difficulties, poor governance is generally the root cause of the problem.

1.03All organisations need effective leadership to perform well and governance is an important component in the leadership of a high performing Association. Associations can be led in different ways depending on their business needs, operating context, culture and history. What is essential is a good partnership between a high-calibre and effective management team and a strong independent non-executive governing body.

1.04Whilst the board takes ultimate responsibility for the Association’s strategic direction and its policies and performance, the executive is delegated to implement these policies and to manage the financial and operational performance of the Association from day to day. The relationship between the board and the executive is vital to the success of the organisation. Good governance can be promoted by adopting good practice but its success also depends as much on effective relationships and working style, as on tangible structures and processes.

2.00 The Role of the Board

2.01In carrying out an effective governance role, the board needs to determine how it:

Leads the Association in establishing its mission, strategic direction, values and operational policies and standards. Significant issues that determine these objectives need to be properly and fully appraised and then translated into corporate and operational plans accompanied by appropriate structures for risk management and development. Clear management targets and executive responsibilities are essential. A board also needs to set and evaluate policies and standards for service delivery, communicate with stakeholders and at the same time control behaviour in the organisation as a whole;
Monitors performance against agreed targets and milestones, critically appraising financial, development and operational achievements;
Complies with all statutory and regulatory requirements through effective and regular internal and external audit of all financial, control and assurance systems;
Holds management to account by rigorously challenging assumptions and policy proposals. This will require scrutiny of plans for performance improvement and changes in activities or direction;
Guarantees the probity of all aspects of the Association’s work; and
Fosters an appropriate governance style for the Association in a deliberate and reflective way, at the same time appraising its own performance as the governing body.

2.02Governance concerns the whole control and management within an Association or group. Whilst this ultimate responsibility is owned by and rests with each board, the importance of the relationship between the board and the executive cannot be ignored. Governance does not merely focus on the operation and outputs of the board, where ultimate responsibility lies, but also on the role of the executive in the running of the organisation and its relationship with the board.

2.03Whilst not specifying the precise form of governance that an Association should adopt, the DSD assumes that:

Boards are ultimately responsible for ensuring that Associations are viable, properly governed and properly managed;
Differences in size and the diversity of Associations activities mean that a single model of governance, prescriptively defined, does not work for the sector as a whole;
Different models of governance are to be encouraged providing they fulfil the basic responsibilities of a board not to put at risk public funds, residents’ interests and the sector’s responsibilities; and
Continuous improvement and good practice is dynamic and fundamental to improving performance.

3.00 Characteristics of High Performing Associations

3.01There is a general expectation that the governance framework provides the board with the means to ensure that proper and effective internal controls are in place. Experience has shown that high performing Associations have the following characteristics:

The board gives effective leadership and maintains control, controlling the strategic direction of the Association through an effective business plan;
The board and senior management are clear about organisational goals and work together effectively to achieve them;
The board is of an appropriate size and has the necessary range of skills, experience, gender, age and ethnicity;
The board works cohesively, using its skills and the experience of its members;
All board members are committed, demonstrating a good level of attendance and contribution;
The board functions effectively and has the necessary structure, systems and terms of reference;
The governing body is supported by appropriate governance and executive arrangements in order to improve its own performance and that of the organisation, particularly in respect of board self appraisal, development and support;
Both the board and the Association have a forward looking and comprehensive risk management systems, which includes internal controls, that detects the possibility of adverse and external events, allowing probability to be reduced and at the same time demonstrating a preparedness to effectively manage and mitigate such events, if they occur;
Adequate controls exist for all procurement activity;
Diversification, particularly into non-social housing activities, is only undertaken after a comprehensive assessment of the risks and the establishment of appropriate controls;
The board demonstrates appropriate involvement in the preparation, review and timely submission of its self assessment and assurance processes;
The board and the Association ensure compliance with all equality and diversity requirements;
Support for, and the level of, resident consultation, information and involvement are adequate;
The Association is open and honest in its dealings with the DSD and other key stakeholders.

3.02The Association’s Board must:

Ensure that timely forecasts and monitoring information on performance and finance are provided and if overspends or underspends are likely corrective action is taken.
Bring any significant problems, whether financial or otherwise, and whether detected by internal audit or by other means to the attention of the Department in a timely fashion;
Be aware of it’s responsibilities on the discharge of it’s activities as set out in the Criteria for Registration and in any other relevant instructions and guidance that may be issued from time to time by the DSD;
Be informed of the Association’s performance compared with its aim(s) and objectives;
Ensure that financial considerations are taken fully into account at all stages in reaching and executing its decisions, and that standard financial appraisal techniques are followed appropriately;
Advise the DSD if its Chairman is contemplating a course of action involving a transaction which the Chief Executive or any other senior staff or Board member considers would infringe the requirements of propriety or regularity, or does not represent prudent or economical administration or efficiency or effectiveness;
Ensure that a system of risk management is maintained to inform decisions on financial and operational planning and to assist in achieving objectives and targets;
Make certain that an effective system of programme and project management and contract management is maintained;
Make sure that all public funds made available to the Association (including any approved income or other receipts) are used economically, efficiently and effectively;
Guarantee that adequate internal management and financial controls are maintained by the Association including effective measures against fraud and theft;
Maintain a comprehensive system of internal delegated authorities that are notified to all staff, together with a system for regularly reviewing compliance with these delegations;
Have effective personnel management policies maintained; and
Put in place an Equality Scheme that is reviewed and equality impact assessed as required by the Equality Commission.

3.03The National Housing Federation has produced further guidance entitled ‘Competence and Accountability: Code of Governance for Members of the National Housing Federation’. A copy of the guidance can be obtained from the NHF.

3.04There are practical measures that an Association can put in place:

Review of budgeting;
Regular and frequent use of performance measures i.e. self-assessment;
Review of unusual items;
Internal Audit/ Management Supervision;
Anti-fraud policies and controls;
Controls over accounting and management systems;
Compliance controls;
Control over safekeeping of Assets; and
Value for Money controls.