Narrative regulatory judgment

• Supplier: Honeycomb Group Limited
• Regulatory Code: LH2162
• Publication date: April 28, 2021
• Governance level: G2
• Viability level: V1
• Reason for publication: demotion of governance
• Regulatory route: in-depth assessment

This regulatory judgment lowers our previously published assessment of Honeycomb Group Limited’s governance from G1 to G2 and confirms its existing V1 rating.

Honeycomb Group Limited (HGL) continues to meet the governance requirements set out in the Standard on Governance and Financial Sustainability. However, following an in-depth assessment (IDA), we concluded that LGH needs to improve certain aspects of its governance mechanisms to support continued compliance.

HGL should strengthen its risk management and internal control frameworks, including integrity and data management to improve the strategic oversight of the board and ensure that it effectively manages key risks.

The weaknesses are reflected in the key areas of its business. Currently, HGL does not have an up-to-date register of its assets and liabilities or an asset management system that guarantees complete information on the status of stocks. He also reported issues with compliance with health and safety requirements related to asbestos and fire safety. HGL’s controls are not operating consistently in accordance with its policies and procedures, and the timeliness and coordination of management reporting needs to be improved.

Addressing these governance weaknesses will allow the board to better understand the potential impact of risks on its decisions and means that LGH’s business planning and performance monitoring is better informed. HGL is fully engaged with the regulator to take the necessary measures to address the weaknesses identified.

The regulator’s assessment of HGL’s compliance with the financial sustainability elements of the Governance and Financial Sustainability Standard remains unchanged. Based on the evidence obtained from IDA, the regulator is confident that HGL’s financial plans are consistent and support its financial strategy. The supplier has an adequately funded business plan, sufficient security in place and is expected to continue to meet its financial commitments under a wide range of adverse scenarios.

Other providers included in the judgment

Nothing

About the supplier

Origins

Formerly known as the Staffordshire Housing Association Limited, HGL was originally established in 1985 to provide social housing and related services to the people of Staffordshire and East Cheshire.

LGH is the parent of the registered group and is an exempt charity and community charitable corporation.

The main objective of the group is to provide quality houses and services, increase the supply of affordable housing, prevent people from becoming homeless and support victims of domestic violence.

Registered entities

HGL is the parent company and is the only registered entity of the group.

Unregistered entities

HGL has two active unregistered subsidiaries:

• Honeycomb Charitable Services Limited provides charitable services. Trader as a ‘real’, he seeks to prevent people from being homeless, and as a ‘glow’ he provides support to victims of domestic violence.

• Stillness (924) Limited supplies photovoltaic solar panels to certain properties of HGL and has a small number of rental properties in the market.

Two other unregistered subsidiaries are currently inactive: Blue Mountain Limited and Search Housing Association Limited.

Geographic distribution and scale

HGL owns and operates around 3,100 houses, most of which are located in Staffordshire and surrounding areas.

Staffing and turnover

In April 2021, the group employed around 290 people. Group revenue for the year ending March 31, 2020 was £ 21.1million.

Development

HGL’s development program through 2022/23 has a target of 188 units.

About our judgments

Key to Notes

Governance:

• G1 (compliant): the supplier meets our governance requirements
• G2 (Compliant): Supplier meets our governance requirements, but needs to improve aspects of their governance arrangements to support continued compliance
• G3 (non-compliant): The supplier does not meet our governance requirements. There are serious regulatory issues and in agreement with us the supplier is trying to improve their position.
• G4 (non-compliant): The supplier does not meet our governance requirements. There are serious regulatory issues and the supplier is subject to regulatory intervention or enforcement action.

Viability:

• V1 (Compliant): The supplier meets our viability requirements and has the financial capacity to cope with a wide range of adverse scenarios.
• V2 (Compliant): The supplier meets our viability requirements. It has the financial capacity to withstand a reasonable range of adverse scenarios, but must manage significant risks to ensure continued compliance.
• V3 (non-compliant): the supplier does not meet our viability requirements. There are serious regulatory issues and, in agreement with us, the supplier is trying to improve their position.
• V4 (non-compliant): the supplier does not meet our viability requirements. There are serious regulatory issues and the supplier is subject to regulatory intervention or enforcement action.

Definitions of regulatory processes

In-Depth Assessment (IDA): An IDA is a tailored assessment of a vendor’s viability and governance, including their approach to value for money. It involves on-site work and examines in detail a supplier’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.

Stability checks: Based on the information provided through regulatory statements, a stability check is an annual review of a supplier’s financial condition and its latest business plan. The purpose of the review is to determine whether there is evidence that a supplier’s current judgments merit reconsideration.

Reactive engagement: Reactive engagement is unplanned work that is triggered by new information or a developing situation that may have implications for a vendor’s current regulatory judgment.

Stability checks and reactive engagement: In some cases, we will publish narrative regulatory judgments that combine evidence obtained from both stability checks and reactive engagement.

For more details on these processes, please see “Regulation of Standards”.