Review of VFM reporting in the accounts and VFM Strategic Intelligence - 2024
Source: gov.uk (2025-03-13)

Summary review of the 2024 Value for Money report

The Value for Money Standard has four principal outcomes:
- that private registered providers (providers), have up to date strategic objectives
- that boards scrutinise their organisations’ performance management
- that boards ensure they make best use of their resources in the delivery of their strategic objectives
- that providers are transparent and accountable in the use of their resources and the outcomes they deliver.
The Standard requires providers to evidence the achievement of these outcomes and their value for money performance, assessed against a suite of measures in their accounts. It also gives providers an opportunity to publish supplementary data and narrative to improve readers’ understanding of the factors influencing their organisation’s performance.

The Standard includes other important expectations on providers including how they have performed against their own value for money targets, how their performance compares to their peers, and setting out where performance has fallen short of their targets. The Value for Money Code of Practice amplifies the outcomes and expectations of the Standard.

This report sampled 25 accounts from a population of 193 accountsfootnote 1 (#ftn1) received for the period ended March 2024. The sample included a diverse range of providers with different characteristics from across different regions in England.

Part A: explores the strategic topics related to VFM which providers reported on in their annual accounts

Part B: provides feedback on the quality of reporting which builds on previous years reports, which management should consider when preparing VFM reports in future accounts.

Part A - Value for money - Strategic intelligence review

The findings in the first section of this review, describes the decisions that boards are taking in response to the complex and often conflicting strategic challenges that they face. The implications of some of these decisions are yet to be realised.

To a large extent, providers continue to report on the challenging economic and operating environment and the impact of these on their strategic objectives and targets. Although some of the inflation-driven economic uncertainties faced by providers in recent years have started to diminish, disclosures of other uncertainties remain relevant. Boards also reported on the challenges of balancing their business obligations with a range of other competing pressures including demand for essential services, investment into existing homes, meeting sustainability targets as well as the delivery of new homes. Common themes drawn from a review of providers’ strategic reports include:

Investment in existing homes – safety and quality

Expenditure in relation to major repairs and maintenance is a significant focus in the commentary of all providers’ accounts in our sample. Supply chain costs and a continued focus on meeting statutory requirements and customer expectations, especially in relation to fire safety remediation (and building safety more generally), as well as maintaining homes to a decent standard were the primary issues reported.

Sustainability

A related aspect of investment into existing homes includes sustainability and related targets which is an important issue for boards. Climate related issues are a key feature in most reports especially where sustainability-linked loans require providers to report on ESG KPIs or where providers have adopted the Sustainability Reporting Standard to demonstrate ESG credential to investors. Most reports set out the number of homes that met energy efficiency targets, progress towards all homes meeting EPC C status or above by 2030, and planned objectives towards achieving net zero carbon emissions by 2050 including the replacement of older components with more energy efficient models – however associated costs related to meeting zero carbon were not a feature in any reports.

While there was an increasing acknowledgement of, and commitment to, meeting the net zero carbon target, boards also reported on the need to balance and manage business risk, meaning planned financial commitments that contribute to sustainability and responses to climate change risked being curtailed in the short term.

Other important considerations and actions included increasing fleets of electric vehicles, installation of electric vehicle charging points on estates, fitting photovoltaic panels to roofs of offices, and moving to sustainability linked loan finance that delivers cost savings related to achieving environmental objectives.

Geographic stock rationalisation

There is an increasing focus on “stock swaps” or disposals of homes outside providers’ core operating areas to other social housing providers. The advantages that boards set out in reports from stock rationalisation activity included:

a reduction in the costs and operating complexity that arise from maintaining homes in areas where they do not have significant presence

improved outcomes for customers living in those homes; and the realisation of proceeds to be reinvested in delivering new homes or improving existing homes in their core operating areas

the economic and social value and benefits of growth related to transferred stock which providers took on the ownership and management of in the year.

Conversely, providers with a national presence continue to remain committed to operating across a range of regions with further plans for organic growth and acquisition of smaller organisations. Providers expanding through this approach also aim to deliver more homes, and plan to provide localised approaches to housing management that are more responsive to customers’ needs.

Mergers

The effectiveness of organisational structures continues to be an important consideration for boards. Key drivers identified by boards included the realisation of synergies, financial leverage to deliver new homes and improved service delivery and cost effectiveness to their customers.

Business consolidation

Business consolidation is a growing consideration for many boards in the context of risk mitigation which also featured heavily in previous years accounts. In addition to geographic stock rationalisation, some boards are actively considering which business streams outside of their core activities they wish to pursue, and those they plan to pull back or exit from altogether. These approaches are not uniform.

Key examples reported by providers include low margin business streams inherent to specialist services such as supported housing or care homes. Reports make clear some boards’ plans to exit from these types of activities entirely while some others are actively planning to ‘relaunch’ non-social housing care homes as supported social housing.

Separately, a small number of boards acknowledged that while low margin activities are vital to their customers they are planning to withdraw from providing direct care to customers with a view to focusing on other types of services such as support for rough sleepers. While the direct care contracts will be managed by other specialist organisations, providers within our sample and withdrawing from contracts will continue to be the landlord responsible for these homes.

New supply

Although most reports acknowledged that the operating environment was a primary cause of pulling back on committed development, a small minority of providers have tentative ambitions for growth. While the delivery of new homes continues to be an important objective, overall, many reports outlined the difficult decisions and trade-offs being made between delivering new supply and investing in to existing homes. Providers that are actively engaged in delivering new homes have continued to see construction costs rise above inflation with some reported figures as high as 25%. Other cost related drivers included construction supply chain costs and costs in relation to the impact of contractor insolvencies. Due to the uncertain economic environment, some boards have acknowledged pausing development in the short term or are committing to new development cautiously.

Within the context of this challenging environment some boards argued for greater financial support to meet demands for growth including a long-term rent settlement to facilitate the investment required to build new homes.

Digital innovation

A growing theme in most reports was the importance of new digital approaches and the contribution that technology has and will have in achieving value for money across a range of business areas. The use of enhanced technology is helping providers transition away from reactive to proactive and preventive maintenance models which aims to improve operational efficiency, customer services and satisfaction, and an improved understanding of the condition of homes., Some examples include:

The use of drones to inspect roofs, to identify levels of heat loss for energy efficiency improvements, and detecting damp and mould

Investing in new asset management systems with a view to enhancing their understanding of the condition and financial performance of their homes and informing decisions

Improved repairs scheduling systems that simplify the recording and diagnosis of maintenance issues to make more effective use of resources

Investing in automation for back-office tasks such as invoice processing, verification of universal credit claims and to update completed repairs with a view to employees focusing more on its customers.

Procurement

Strategic procurement remains a key focus for boards. Consideration of value for money in the procurement process and understanding of the balance between cost and quality was a key theme identified across most reports. There was also some acknowledgement of the revised Procurement Act (2023) and the Procurement Regulations (2024) which took effect from February 2025. The Act requires providers to deliver VFM through balanced economic, social, and environmental considerations. It also offers significant opportunities for providers to better align the tender process with their other objectives, such as their charitable objects.

Key strategic approaches to procurement identified from our sample included:

Opting to increase in-house initiatives: There is evidence to suggest that an increasing number of providers are looking to reduce their reliance on external advisors, with a view to savings and increased effectiveness. Examples included the creation of internal specialist roles such as tax advisors and legal / general counsel directorates that aim to better serve and support the organisation

A review of office estates, recognising that teams are working more flexibly than before, resulting in the closing of outdated offices, and creating modern office hubs more fit for purpose and closer to the communities they serve

Some providers disclosed the advantages of central strategic procurement teams, working with other departments to support competitive market testing to secure goods and services at the best possible prices across the group. This covers a wider area than just materials, and included the renewal of utilities contracts, and renegotiation of insurance policies in a challenging market.

Social value and supporting tenants

The importance of tenants’ wellbeing and wider local communities and economies was more pronounced compared to previous years reporting. Providers are more conscious of the diverse range of their customers’ needs and quantified the social value that the services they provide add.

The effect of inflation on energy prices and the impact on household income was a key theme for many providers. Initiatives to alleviate fuel poverty include innovative arrangements with energy companies or suppliers of new homes, replacing older lighting with new technology, improving insulation and fitting solar panels. Other reports disclosed the provision of direct support to their tenants through hardship funds to help with energy bills or supplying essential goods and furniture.

Financial inclusion was also another common theme with some boards reporting on their plans to increase their support function; for example, helping tenants access training and find employment, and providing debt and money advice to help tenants to sustain their tenancies. Boards also reported working in coalition with other providers and with contractors to assess the gaps in skills which could support the delivery of services to customers. To that extent providers have increased their use of apprentices or require suppliers to do so as part of their contract negotiations. Reports note that as well as adding social value, this enhances the resilience of providers’ workforces and helps mitigate future labour shortages.

Part B - Feedback on value for money reporting in the accounts and compliance against the specific reporting expectations of 2.2. of the VFM standard.

Providers must report performance against their own value for money targets and the metrics defined by the regulator.

What the review found

The VFM metrics Technical Note defines how the VFM metrics should be calculated for reporting in the accounts. For large providers, this is with reference to the specific entries in the FVA – the regulatory return that replicates the accounts in data form. Continuing a theme from last year, we identified some reports where the performance reported in the accounts was difficult to reconcile to the results in the FVA. Our review found that a small minority of providers had moved away from the requirements of the Technical Note, instead reported performance on the basis of loan covenant calculations or excluded the effect of exceptional items.

Feedback

A key aim of defining a suite of standard metrics is to support transparency and comparability across the sector. Inconsistent approaches to reporting undermine this objective. It is more important than ever that providers comply with the reporting requirements of all Technical Notes and calculate the metrics on the exact basis required. Failing to follow the technical requirements in calculating the VFM metrics does not provide assurance that the requirements of the VFM standard are being met. We will often engage with providers when we identify potentially material inconsistencies between disclosures in the accounts and reported performance drawn from the FVA.

We recognise that a provider’s performance may be affected by factors particular to its organisation, such as an exceptional level of expenditure on building safety, or the cost of

a refinancing which may impact key VFM measures such as EBITDA MRI Interest Cover in a particular year. In such cases, providers are encouraged to report on other similar measures that would enhance their stakeholders’ understanding of their VFM performance. However, the basis of any similar measures to the VFM metrics should be clearly set out, and presented in addition to, not instead of, those calculated on the basis set out in the VFM Technical Note. Boards should explain this in the narrative that accompanies the results.

2 Providers must set appropriate targets for their VfM measures and metrics and report performance against these.

What the review found

Disclosing targets for current and future years (and outturn for previous years) provides a well-rounded view of performance over time. This year, it was encouraging to see some improvement in this regard. However, in line with previous years, a small minority of providers in our sample review did not publish targets meaning it was difficult to assess whether a provider had achieved its intended goals.

Feedback

Publishing targets is integral to VFM reporting and essential for stakeholders’ understanding about a provider’s performance. Providing a trajectory of performance over time is critical for stakeholders’ understanding of what has been achieved and what the organisation is forecast to achieve. Failure to publish targets can be a sign of weak internal controls and monitoring of key priorities. Being able to measure, evaluate and understand what is driving performance means decisions can be made with a more complete understanding of how stakeholders will be affected and by which decisions.

The value for money standard expects providers to demonstrate how their performance compares to peers

What the review found

Reporting performance against peers is a requirement of the Standard. While there has been some improvement in the year, a small sample of reports suggest that it would be difficult for board to challenge its organisations performance based on the peer group selected and published in the accounts. For example, some providers compared their performance to a wide range of organisations but did not share similar characteristics with one another.

Feedback

Comparison against a relevant peer group allows boards to challenge management about their organisations’ performance and identify the potential for improvements. There are a range of factors that providers should consider when comparing themselves to a relevant peer group such as region of operation, core activities and stock characteristics. The regulator’s VFM benchmarking tool can help in selecting an appropriate peer group which includes new factors including stock height that goes some way to explain differences between providers VFM performance.

The value for money standard requires providers to have measurable plans to address any areas of underperformance

What the review found

Providers must have measurable plans in place to address areas of underperformance, including stating any areas where improvements would not be appropriate and the rationale for this. Where providers have fallen short of performance, they are expected to have plans to remedy the issue.

Our review found that reports which provided a trajectory of performance including current year targets also provided well rounded explanations where performance did not achieve expected results. Common causes for underperformance included inflationary cost increases, higher levels of investment in their homes, increased costs of borrowing, and difficulties in accessing skilled labour, including the impact of contractor failure.

These all contribute to lower margins, EBITDA MRI Interest Cover, and new supply targets not being achieved. The most transparent reports clearly set out revised targets in light of changed conditions and competing requirements. Some providers continue to find reporting on underperformance challenging and lack clarity around targets, and on loss-making activities. Overall, we felt there was scope for more clarity.

Feedback

Boards should disclose the nature and extent of underperformance. This may be due to changes in operational approach or due to change beyond their control. Where the financial statements report loss-making activities, this should be acknowledged as a part of the VFM report.

Conclusion

While there has been a gradual improvement in providers’ value for money reporting, our review continues to find recurring issues, despite maintained quality and improvement in some areas. Our feedback is an important resource for boards and should prompt further improvements in all future reporting.

In future, it is important that providers acknowledge where there are shortfalls in performance particularly in relation to non-core activities and disclose the reason for this in their reports. This will remain an area of close focus in future. Where providers are unclear regarding the reporting expectations of the VFM standard, they should re-familiarise themselves with the VFM Code of Practice.

Many of the points raised above are not new. VFM reporting is a unique part of the strategic report, and we expect all boards to provide open and transparent information about their VFM progress.

1: For profit providers are excluded from the VFM Metrics and Reporting Publication - 2024. ↩ (#ft1)