VALUE FOR MONEY

INTRODUCTION

We see Value for Money as a way of getting the most out of our resources to achieve more for our current and future tenants.

It is a fundamental business principle and is an integral part of our overall strategy rather than a separate activity or strategy.

Bernicia is an efficient business with a good track record of improving housing stock, building new homes and developing financial strength. We have always recognised the need to generate efficiencies and in turn surplus to invest in our business, improve the services we provide and build more homes.

We have therefore driven Value for Money for our own ends but have since 2012 been subject to regulatory requirements to explain what we do to stakeholders. This involves reporting on our return on assets, the absolute and comparative costs of delivering services and how we have generated Value for Money gains and where these have been invested.

Our regulator the Homes and Communities Agency, requires us, as part of its regulatory framework, to prepare an annual self-assessment report to our residents and stakeholder. This sets out how we comply with the Value for Money Standard and our plans and priorities for the future.

OUR APPROACH

Our approach starts with the Board setting the strategic direction and priorities for the Group. Delivery of Value for Money is driven by our focus on two key corporate objectives, developing our business strength to optimise the Group resources which are then invested to provide quality homes and services and deliver our added value objectives.

Bernicia’s Value for Money principles centre around:

Effective Governance;

Customer Focus;

Best use of our Assets;

Managing Resources and Performance.

Governance structures enable the Board to lead the way on Value for Money through a full and robust planning process, involving all our key stakeholders. This is supported and informed by customer focus reflecting the needs of our tenants and residents.

We understand our assets, by way of both stock condition information and the experience of our people and invest time in understanding their value both now and in the future.

Our dedicated people translate these plans into action plans to achieve objectives and deliver the standard of services required; managing resources and performance to ensure we consistently deliver quality, value for money services and compare how we perform against our peers.

This commitment to service delivery and high quality sustainable assets is only made possible by our stable and firm financial foundations, which we monitor and publish to provide not only information for future planning, but transparency and accountability to all our stakeholders.

We have worked to embed Value for Money into all we do and believe our approach is evident from the way we run our business and what we achieve.

Two key events occurred during the year. Firstly the discussions we had commenced with another provider (Four Housing Group) were successful and led to a business case for merger being approved by both organisations. Regulatory approval was subsequently received and the merger was formally implemented on 1st June 2016. Secondly, we put in place plans to deal with the impact of the four year rent reduction from April 2016 that was announced by the government in July 2015. Both these events have had a major impact on Bernicia’s value for money strategy and further details are provided in the sections below:

MERGER

On June 1st 2016 Four Housing Group joined Bernicia thereby creating an organisation with 14,000 properties and an annual turnover of £70m.

The merger meets Bernicia’s strategic objectives. We believe it is the most significant single action that we can take in terms of its impact on our ability to deliver value for money.

In developing Bernicia’s future business strategy the Board recognised that as a strong organisation with an excellent reputation for getting things done, Bernicia would be an attractive proposition for organisations considering strategic partnerships, alliances and, or mergers.

As if to demonstrate this view, Bernicia were approached by a National Registered Provider with a view to joining their existing Group structure. In considering the approach, in detail, members and tenants took the opportunity to determine that the Group’s strategy for joining with other organisations would centre on the key criteria of being a strong regional housing association based in the North East of England. This was a particularly important requirement of our tenants and local authority partners, who wanted the Group to deliver maximum value for local partners and communities within the North East, at a time, when, arguably this was needed the most.

Bernicia’s growth and development strategy was to centre around the commitment to the North East and seeking opportunities to join with other local organisations to enhance the potential to deliver our strategic objectives, build more homes, provide cost effectiveness and contribute to other social initiatives. The approach from Four Housing was therefore timely and fitted the Board’s criteria.

A business case was subsequently prepared and approved by both organisations and regulatory consent gained. The merger was formally implemented on 1st June 2016.

Joining in partnership means expertise, resources and costs can be shared, achieving greater value for money through generating efficiencies and savings without reducing services. This will enable us to deliver more in terms of improving services, building new homes, and regenerating the communities in which we work. The merger will create an organisation that is more robust and better able to manage the risks presented by an ever changing operating environment and provide better safeguards against, for example, the impact of Welfare Reform and rent reduction.

The merger will result in two respected and high performing organisations coming together to create:

A strong regionally focussed housing company based wholly in and committed to the North East.

An organisation with a combined turnover of over £70million with existing

undrawn facilities over £26m and with access to unencumbered security of over £59m.

A merged company that will deliver £2m of efficiencies per annum by year 4.

An organisation which will have the capacity, skills and knowledge to deliver more new homes.

The Bernicia website will be updated with further details of the merged organisation and our plans for the future as these are progressed.

RENT REDUCTION

The government’s July 2015 budget made changes to the rent formula for the sector. The commitment made the previous year that rents would increase by inflation (CPI) plus 1% each year for ten years was replaced in the July budget by a four year annual rent reduction of 1% pa starting from April 2016.

Our initial assessment of the impact of the rent reduction was that:

In 2019/20 rental income will be £4.6m (13%) below the previously forecast amount.

Between now and 2019/20 total rent received will be some £10.2m less than the total previously expected in the same period.

In response we developed proposals to examine 5 areas of the Group’s business, these were:-

Assets. Finance. Services. People. Efficiency and Growth.

From this work we agreed a series of measures to be implemented with effect from April 2016. The Board also acknowledged that the Group should undertake a strategic review with an aim to ensure that the loss of future income could be managed to ensure the objectives of investing in new and existing homes, improving services and continuing added value projects could still be achieved.

The Group’s current position is also strengthened by having, in April 2015, completed a financing arrangement providing some £50.5 million for future investment and re-financing of existing loans. Bernicia is therefore, free of any requirement for funding within the next 5 years.

Savings of £2.8m pa were identified with the main area being asset (£1.7m pa). Bernicia has previously undertaken significant investment in its housing stock, modernising homes to the “Bernicia Standard” and carrying out significant sustainability projects which have included remodelling of properties and improvements to estate infrastructure and communal environments. We now hold 100% stock condition information and using this information a review of the requirements of our stock over 30 years has been undertaken. Following this review it was forecast that the identified savings could be achieved whilst still maintaining our homes to the agreed Bernicia standard. Savings of £0.55m pa have been identified within the services budget and a similar amount from staffing budgets. We also have identified additional income that we can generate of c£200k pa from other activities.

The savings are realistic and achievable. The implementation of the measures as identified above, together with the prudent approach to the financial plans enables the Group to manage the impact of the loss in rental income.

The merger and the efficiency savings that can be achieved will create additional resilience in the Group’s business plan to withstand any future financial challenges.

KEY ACHIEVEMENTS IN 2015/16

In addition to the merger and establishing our rent reduction strategy, our key achievements include:

We completed 93 new homes during the year at a cost of £10.3m with just £1.4m (14%) funded through grant from the HCA. These new homes will require a £3.7m internal subsidy to bridge the gap between their net cost and the income they will generate over the next 30 years.

Whilst our preference is to retain property where possible, we have completed the demolition of 16 properties where there was no long term demand for these homes due to the geographical isolation of the estate from local facilities and amenities and decommissioned two sheltered housing schemes as the accommodation no longer met the needs of existing or prospective tenants.

A £40m private placement funding arrangement was completed at the start of the year, this will reduce our overall cost of funds and provide finance for the next five years of our planned investment programme.

Year 3 of our stock investment programme was successfully delivered investing £11m with the benefit of £1.2m savings on contract procurement. We also continued to roll out mobile working including the introduction of hand-held technology for tradesman creating efficiencies in the way we work. In addition we have identified with future savings on the programme of £1.7m pa. Bernicia has previously undertaken significant investment in its housing stock, modernising homes to the “Bernicia Standard” and carrying out significant sustainability projects which have included remodelling of properties and improvements to estate infrastructure and communal environments. We now hold 100% stock condition information and using this information a review of the requirements of our stock over 30 years has been undertaken. It is now forecast that the identified savings could be achieved whilst still maintaining our homes to the agreed Bernicia standard.

An estate management company was acquired during the year to compliment and strengthen our portfolio of trading companies and increase the future contributions they make to our social housing business.

We have embedded our approach to the provision of pre-tenancy advice and support to prevent tenancy failure, something which now forms part of our day to day management service. Our Intensive Housing Management Team helped 255 tenants during the year, with 66% of completed cases achieving a positive outcome. This approach has resulted in strong rent collection and arrears performance including a significant reduction in amounts transferred to former tenant arrears, an indication that our advice and prevention initiatives are working.

We have delivered a number of added social value initiatives during the year including: fitting 785 adaptations to our homes, at a cost of £91,000 to support continued independent living; delivering 160 work experience and school engagement opportunities for young people including work taster days, employability skills and school engagement through our Runway Programme; and a focus on environmental awareness has seen us achieve the SHIFT (Sustainable Homes Index for Tomorrow) silver award during the year.

In last year’s VFM Statement we set ourselves the challenging target of achieving efficiencies with a value of £1.9m in 2015/16. The table below sets out how we have performed:

Target Actual£k £k

Asset Management 400 1,315 Development 250 253Finance 630 592Operations 670 497

Total 1,950 2,657

Asset management savings exceeded their target significantly thanks to savings on the procurement of contracts and securing grants towards energy efficiency works.

Operational savings were below the target level as a number of changes were put on hold as a consequence of the merger discussions with Four Housing.

HOW WE PERFORM AND HOW WE COMPARE

We believe that comparing our performance with that of our peers can provide an important benchmark across a range of outputs. It provides key business comparisons, helps us understand areas of strength and weakness and identify areas for improvement. For a number of years we have therefore compared both our financial and operating performance with the sector as a whole and our peer group. We use the HCA’s Global Accounts Analysis of the sector (the latest available is for 2014/15) and Housemark.

At the time of writing the full Housemark VFM analysis and report had not been received. When it is detailed consideration of the results will be undertaken by officers and by our Tenant Scrutiny Panel. This will be used to inform our priorities in future years. The Tenant Scrutiny Panel will use the information to inform their decisions on which areas they will undertake service reviews on. Appropriate action plans will be developed and implemented.

The following tables shows Bernicia’s performance for 2015/16 and 2014/15 and provides a comparison with the peer group and, where the information is available, the latest HCA global accounts analysis.

Financial Analysis The comparative data is from HCA Global Accounts Analysis - 15/16 figures not available

The costs of major repairs remained high when compared to our peer group and national benchmarks. Our costs reflect the requirements of our stock transfer subsidiary, Wansbeck homes. As we have now completed a number of agreed sustainability projects, we expect major repair costs will continue to reduce. Given the nature of our stock and our commitment to the Bernicia Homes Standard we do not expect that this will fall below our peer group median level.

503 480 488

990 950

0

200

400

600

800

1000

1200

2014 2015 2016

Management Cost per Unit (£)

Bernicia

Median

We continue to control our management costs which remain below the level of two years ago. Compared to the sector as a whole they are in the top quartile, being almost half that of the sector average.

820 880 905

1015 980

0

200

400

600

800

1000

1200

2014 2015 2016

Maintenance Cost per Unit (£)

Bernicia

Median

16401490

1290800

913

0200400600800

10001200140016001800

2014 2015 2016

Major Repair Cost per Unit (£)

Bernicia

Median

Housing ManagementThe comparative data is from Housemark

We’ve also seen a reduction in amounts transferred to former tenant arrears, an indication that our advice and prevention initiatives are working.

45.94

35.16

25.15 27

32.48

0

5

10

15

20

25

30

35

40

45

50

2012 2013 2014 2015 2016

Average Re-let Time (days)

Bernicia

Median

3.383.1 3.04

2.78 2.84

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2012 2013 2014 2015 2016

Current Arrears %

Bernicia

Median

Current arrears have increased marginally but are still below our peer group average despite the challenging operating environment. This reflects the success of our approach to the provision of pre-tenancy advice and support to prevent tenancy failure, this now forms part of our day to day management service.

Turnover of void properties, whilst high at 12.75% fell for the second successive year, due to the success of management initiatives and targeted stock investment through active asset management. By the end of the year the number of vacant units had fallen by 15%.

Whilst overall voids showed a marginal increase, this was planned as we held properties empty to facilitate the implementation of active asset management plans. This has also effected re-let times.

2.3

1.8 1.81.9 2

0

0.5

1

1.5

2

2.5

2012 2013 2014 2015 2016

Void Rent Loss (%)

Bernicia

Median

10.52 10.7

14.4912.98 12.75

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016

Tenancy Turnover (%)

Bernicia

Median

Customer SatisfactionThe comparative data is from Housemark

During 2016 we received the results of the 2015 customer satisfaction (STAR) survey. The results are in line with expectations with satisfaction levels largely consistent with peer group medians for 2014/15 but down from the high levels reported in the 2012 survey. In the 2012 survey significant increases in tenant satisfaction were evident across all core indicators in comparison to 2009. The level of investment and consolidation and improvement of services in years leading up to 2012 undoubtedly had a positive influence on results. In reporting the results of the 2012 survey, a note of caution was exercised, that in the case of Large Scale Voluntary Transfer organisations satisfaction tended to increase due to the level of investment in the early years and then show signs of decrease once ‘the honeymoon’ period was over.

We maintain good resident satisfaction across a range of indicators, a reflection that our homes and services continue to meet the needs of our tenants. Three key indicators are shown below:

Whilst overall results are good, there is scope to improve perceptions of Bernicia particularly in relation the expectations of our customers as regards repairs and maintenance. Whilst most tenants remain satisfied with this service area we had already identified the need for further work to ensure a clearer understanding of our agreed service standards. We will communicate these to tenants, apply them fairly and consistently and support our staff to deal confidently and efficiently with enquiries and requests for service.

Findings from the research will inform Bernicia’s approach to improve access via channel shifting whilst confirming assumptions on the level of knowledge and understanding of Universal Credit.

A copy of the 2015 STAR survey is available on our website under ‘Strategies & Reports’.

BEST USE OF OUR ASSETS

Asset Management

The Bernicia Group’s property and assets are crucial to our long term business plans. We have implemented an Asset Management Strategy which governs the decisions we make on future stock investment. This is based on full financial appraisal of current stock collectively and individually, together with the assessment of other factors such as social and environmental issues of each estate enabling us to take a view on the future potential of each asset we own.

To inform our investment decisions we consider:

We hav

Stock Condition Information Surveyed 100% of our existing stock enabling better planning of work and expenditure. This has helped us identify savings of £1.7m pa to the planned programme as part of our rent reduction mitigation strategy.

Asset Management Matrix We have developed the matrix to enable the analysis of a range of indicators to assess the future sustainability of our homes including; property condition, demand and socio-economic factors. From this we categorise our estates as high, medium high, medium and low risk.

Financial Return on Assets To help us determine the financial return on our assets and inform investment decisions we have implemented a model to assess the net present value (NPV) of each estate and individual property, taking account of income and expenditure.

This information tells us a lot about our properties and estates as we have a full financial appraisal of our current stock, helps us form an overall assessment when making decisions to invest in our existing homes.

In taking those decisions the Bernicia Board will balance financial investment decisions against the overall objectives of the organisation, which takes into account issues such as the geographical areas where we operate, the local housing markets and the nature of the communities that we want to help. Of particular notice is the relatively deprived nature of our communities and the positive impact that good quality affordable housing can have to the quality of their lives.

During 2015/16 we have:

Successfully delivered year 3 of our stock investment programme investing £10.5 million with the benefit of £1.2 million efficiencies resulting from our procurement methodology key component procurement and having 100% stock condition information.

Successfully managed the potential impact to sustainability works of a contractor going into administration.

Phase 2 of Burnside regeneration, a scheme to enhance and protect 100 homes, is nearing completion, allowing the allocation of a number of long term void properties.

Regeneration of a 7.5 acre brownfields site adjacent to the town centre in Ashington continues after the 1st phase completion of 66 homes during the year. This mixed tenure scheme of 104 properties supports and compliments an overall strategy to regenerate the town centre of a key settlement in Northumberland, where Bernicia has significant stock holdings.

Completed the demolition of 16 properties at East Sleekburn as there was no long term demand for these homes due to the geographical isolation of the estate from local facilities and amenities.

Decommissioned two sheltered housing schemes as the accommodation no longer met the needs of existing or prospective tenants.

Developed 93 new homes, 70 of which were delivered through the HCA's various affordable homes programmes and 23 section 106 units acquired from developers.

Acquired an estate management company to complement our existing

portfolio of trading companies and increased the forecast return to Bernicia from these activities by £200k pa.

In terms of assessing the overall returns from our assets we have developed our own asset management matrix. This uses a range of indicators including demand and socio-economic factors to assess future sustainability of our estates, and provides us with an indication of the social value that our estates provide to our communities.

We update our asset management matrix every three years. During 2014/15 we further enhanced this matrix to include the impact of Welfare reform, resulting in a number of estates with high concentrations of 3 bedroom houses moving into the medium high risk category. The current classification is shown below:

1. Low Risk – 64%2. Medium – 13%3. Medium/High – 22%4. High Risk - 1%

We plan to update this matrix again in 2016/17, once the position on an a number of factors that will impact on the sustainability of our homes is clear, such as the intention as regards the future funding of supported housing.

Financial Return on Assets

We use a model to annually assess the financial return from our assets that determines the net present value of each of our estates and property types once current and future expenditure and income assumptions are factored in. The results of this analysis from the last three years is shown below:

2013/14 2014/15The tables above shows how the position continues to improve with a significant increase in both schemes and homes that fall within the low risk category. This is a result of the positive impact of both investment and disinvestment decisions, and a range of management initiatives that have been based on a sound understanding of our stock. We currently assess that 66 of our properties have a negative or marginal rate of return (high risk) over the next 30 years compared to over 7,000 with a

2013/14 2014/15 2015/16 2013/14 2014/15 2015/16Schemes HomesHigh 2.0% 1.8% 1.5% High 2.0% 1.3% 0.8%Med/High 8.5% 4.3% 2.9% Med/High 7.6% 4.0% 3.1%Medium 8.3% 9.3% 8.5% Medium 12.9% 11.0% 9.3%Low 81.2% 84.8% 87.2% Low 77.5% 83.8% 86.9%

significantly positive rate of return (low risk).

We also use an NPV model to aid our investment decisions in the provision of new homes. The level of capital funding that is available for new development and the revenue streams that it produces are such that each new unit requires an internal subsidy to be provided for a positive NPV to be produced. This internal subsidy is generated from the surpluses generated from our existing assets and the amount that can be provided is therefore dependent upon and related to the financial performance of the Group. In 2015/16 the Board agreed to provide an internal subsidy of £3.7m for the 93 units completed in the year (an average of £40k per unit).

KEY FINANCIAL RATIOS

We have identified a number of key financial ratios covering growth, profitability and our ability to service debt. They have been calculated on a pre FRS102 basis to aid comparability. The table below sets out the changes in these other the past three years and compares our performance to the latest available data for the sector (2014/15):

Growth

KEY FINANCIAL RATIOS 2013/14 2014/15 2015/16 2014/15Actual Actual Actual Sector Average

Growth

Growth in Turnover 5.4% 7.1% 4.3% 4.1%

Growth in total assets 2.1% 2.9% 12.5% 6.0%

Growth in total debt -0.8% 0.6% 35.7% 6.9%

Profitability Ratios

Operating Margin 22.3% 22.3% 23.6% 28.3%

Op Margin - Social Housing 21.1% 21.3% 28.0% 31.0%

Effective Interest Rate 6.0% 5.4% 5.2% 4.7%

Debt Servicing Ability

EBITDA MRI Interest Cover 299% 244% 227% 156%

Adjusted Net Leverage 25% 22% 21% 44%

Debt to Turnover 167% 157% 205% 389%

Strong growth in turnover has continued reflecting the increase in rent levels, the development of new homes and the contribution from the trading subsidiaries. The next four years growth will of course be effected adversely by the annual rent reduction. Assets growth reflects the new units being provided under the development programme and the drawdown of the private placement funding. Growth in debt in the year also reflects the new funding put in place by Cheviot which will provide development finance for the next 5 years of the programme.

Profitability Ratios Operating margins have increased compared with previous years and are below the sector averages. This is in large part due to the lower amount of repairs that the Group capitalizes compared to other housing associations. As highlighted in the sections above, our management costs per unit are significantly below the sector average. The decrease in the effective interest rate reflects the competitive interest rate secured on the £40m private placement agreed during the year.

Debt Servicing Ability This remains strong even after the new funding put in place during the year and all are well below the sector averages. Following the completion of the decent homes work at Wansbeck and the merger, the Group will be reviewing its treasury strategy in the next year to identify how it can create additional capacity for investment to support the Group’s overall objectives.

INVESTMENT PLANS

Due to the positive impact that good quality housing can have on the deprived communities where we work, whilst we have always fully understood the financial impacts of providing new and of investing in our existing homes, our strategic asset management decisions are driven by the positive social return that our homes provide.

In the business case for merger we stated Bernicia’s aim is to build more new homes. The Group’s financial capacity to develop will increase as a result of the merger providing the scope to increase the planned numbers of new homes developed as efficiencies resulting from the merger are realised.

Whilst a development capacity exists the future strategy needs to be determined to reflect the change in government policy on housing (a move from providing ‘traditional rented’ accommodation to more diverse tenures), rent controls and the impact of welfare reform. Changes in our

operating environment will increasingly lead us to make decisions on investing in our existing stock and building new homes on the basis of the relative financial returns and the associated risks presented by the differing options available to us. The new Board will be carefully reviewing and considering the available options as we develop our future plans and strategy over the next year.

ADDED SOCIAL VALUEDelivering Value for Money enables the Group to optimise resources which are invested in providing quality homes and services and deliver our added value initiatives.

The Board has defined the added social value priorities that we will focus on; financial wellbeing, social wellbeing and building brighter futures. Some of our work on added value initiatives in 2015/16 included:

Financial Wellbeing

Supporting our tenants to deal with changes in welfare benefits, including debt and money advice and implementing initiatives to help tackle fuel poverty:

Our Intensive Housing Management Team helps residents at risk of tenancy failure. 255 tenants were supported during the year, with 66% of completed cases achieving a positive outcome and contributing to a stabilisation in tenancy turnover rates.

We introduced a furniture/white goods recycling programme for residents. The benefits of this include tenancy sustainment and a reduction in void rent loss.

Fuel poverty – Additional grants were secured through ECO and Warmzone to tackle fuel poverty by improving cavity wall insulation in older (pre-war) housing stock and introduce efficient heating systems in a number of our buildings.

Social Wellbeing

In 2015 we were awarded the Better Health at Work Gold Award evidencing commitment to staff well being.

Arts programme developed for residents of Etal House and Keir Hardie Court to enable residents to take part in arts and other creative activities such as photography, silk painting and pottery, enabling residents to have shared, new experiences, uncovering talents, learning new skills and combatting social exclusion.

We fitted 785 adaptations to our homes, at a cost of £91,000 to support continued independent living.

Big Lunch event with the aim to get as many people together as possible to have lunch with their neighbours in a simple act of community and to tackle social isolation.

Building Brighter Futures

Since starting on site in October 2014 at the Cheviots site, there has been £1.4m of additional social value generated from the scheme. Achievements include:

o 60 pupils from a local school have visited the site, o 490 pupils have participated in workshops, o 9 work experience placements have been given to

those aged 16+,o 3 apprenticeships have been created,o 9 operatives have attended short courses and health &

safety training, o 1 progression into employment for someone

unemployed for less than 6 months.

Our Runway Programme has delivered 160 work experience and school engagement opportunities for young people including work taster days, employability skills and school engagement. The social value from our Runway Programme is £150k.

A focus on environmental awareness has seen us achieve SHIFT (Sustainable Homes Index for Tomorrow) silver award during the year.

We have continued to move towards a more sustainable approach and have enhanced our e-procurement, digital access to services and mobile working - all reducing paper transactions and unnecessary travel. We have also continued our investment in more efficient vehicles, with 32 new vans entering our fleet.

FUTURE PLANS

Our two main priorities are to:

Implement the identified savings in response to the rent reduction; and

Deliver the aims of the merger as set out in the business case.

The aims of the merger are to:

Ensure the best possible return on assets and investments.

Effectively managing our operations to maximise performance and quality, minimise cost, whilst retaining a clear focus on the delivery of priorities and organisational objectives.

Share expertise, resources and costs to deliver efficiencies that will enable us to deliver more in terms of improved services, building new homes, supporting and regenerating communities.

Efficiencies are a significant driver, and indeed an expectation in the majority of merger proposals. Efficiencies, be they both an opportunity to optimise resourcing whilst striving to achieve service improvements and sustainable growth, must be recognised in tangible terms and they must be achievable.

A target of an additional £2m per annum cashable savings from Year 4 onwards has been set. The savings are felt to be challenging but realistic and a key priority of the Executive Team and Board will be to ensure that appropriate plans and managing and monitoring arrangements are put in place to deliver the savings whilst maintaining performance. This priority is reflected in the selection and recruitment of the Board and Executive with a strong emphasis on finance, governance and change management experience and skills’.

We have established a three phase plan to fully implement the merger and maximize the benefits over the next four years:

Consolidation

Integration

Restructure

The ability to, and the extent of any restructure will be dependent upon the refinancing options available to the Group at the time but it offers the potential to create further efficiency savings above the £2m target, increase the capacity to invest in new homes and services and hence deliver additional value for money.

Both Bernicia and Four Housing had established value for money strategies that ran up to the current year. The merger will mean that a single new VFM Strategy will be developed in 2016/17 for the enlarged Bernicia Group. The basis will be the business case produced for the merger and the primary focus will be on achieving the planned efficiency gains whilst maintaining high level operational performance and delivering our strategic objectives.

CONCLUSION

In completing this self-assessment we feel that we have demonstrated our current and future plans and approaches to VFM and the new merged organisation will be well placed to continue this work.

We believe that the merger with Four Housing is the most significant single action that we can take in terms of its impact on our ability to deliver value for money.

We also recognise that there are areas for improvement in our operational performance and this assessment together with Four Housing’s will be used by the new Bernicia Group to inform and update its VFM Strategy and action plan.

The Group Board has reviewed the key requirements of the HCA Value for Money Standard and is able to confirm that Bernicia complies with the requirements of the Standard. Additional information to support our Value for Money self-assessment including the latest Housemark benchmarking reports is available on our website (www.bernicia.com) from September 2016.