Almshouse Charities - OG 65 B2 Management of Almshouses

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OPERATIONAL GUIDANCE

ALMSHOUSE CHARITIES

MANAGEMENT OF ALMSHOUSES

OG 65 B2 – June 2009

Purpose

To outline key areas of almshouse management and the organisations which exist to assist trustees in their work.

Functional responsibility

For action

Charity Services

For information

All operational divisions

Contents

1. Introduction
2. The Almshouse Association
3. Almshouse charities which are registered social landlords
4. Regulations and governance of almshouse charities
5. Management agreements
6. Weekly maintenance contributions
7. Maintenance funds
8. Repair and modernisation of buildings
9. Additional almshouses
Glossary of Terms used in this Guidance

Index to further related information


The Law	Refer to a lawyer	Refer to an accountant

1. Introduction

Most of the material contained in this OG is for background information purposes. Trustees should be referred to the appropriate organisation for advice on the day-to-day running of almshouses. The main issue which requires our active involvement is the merger of almshouse charities, which is covered in OG 65 B3 and the disposal and replacement of almshouse property, which is dealt with in OG 65 B4.

2. The Almshouse Association
	The Almshouse Association is a registered charity (245668) which was founded in 1951 as an extension of the London Association of Almshouses. Its aims and objects are:
	to advise members on any matters concerning almshouses and the welfare of the elderly;
	to promote improvements in almshouses;
	to promote study and research into all matters affecting almshouses;
	to make grants or loans to members;
	to keep under review existing and proposed legislation affecting almshouses and when necessary to take action thereon; and
	to encourage the provision of almshouses.
	Membership of the Association is open to any almshouse charity in Great Britain and Northern Ireland. Members pay an annual subscription based on the number of units of accommodation they provide, although subscriptions can be reduced for charities with insufficient funds. By joining the Association, members can enjoy the following benefits:
	grants and interest-free loans available towards the cost of repairs and improvements to almshouse property;
	a panel of architects with specialised knowledge of almshouses and of the procedures for obtaining housing subsidies;
	financial guidance, including the preparation of feasibility projections and draft budget of income and expenditure; and
	the opportunity to insure through the Association's comprehensive insurance policy, which has been specially tailored to the needs of almshouses.
	The Association publishes "Support and care of almshouse residents" (5th edition 2007) and "Standards of almshouse management: a guidance manual for almshouse charities" (5th edition 2008), both of which are in the Taunton and Liverpool Information Centres. The latter book includes sections on:
	the duties of trustees and statutory requirements;
	management of staff and facilities;
	selection, appointment and welfare of residents;
	maintenance, improvement and development of almshouses;
	the Housing Corporation (now the Tenant Services Authority or TSA and Homes and Communities Agency or HCA); and
	financial management.
	The attention of trustees should be drawn to these publications wherever it seems appropriate.
	The Commission and the Association work closely together on all matters affecting almshouse charities and it is always advisable to refer trustees who are experiencing difficulty in managing their charity to the Association for help. This is particularly so if a charity's almshouses are falling into disrepair, or the trustees are considering embarking on a major modernisation project, or rebuilding programme.
	The address of the Association is:
	Billingbear Lodge Maidenhead Road Wokingham Berkshire. RG40 5RU
	Tel: 01344 452922
	e-mail: naa@almshouses.org

	website: http://www.almshouses.org
	The Association administers the Leonard Hackett Memorial Trust (281866) which has power to act directly in the management of almshouse charities. The Trust provides management where it has been found impossible to secure independent local trustees to undertake major improvements or satisfactory administration.
	The Association also operates NAACIF - a Common Investment Fund (registered number 223887), established by a Scheme of the Commission in 1962. It is open only to almshouse charities and offers both income and accumulation shares. The accumulation shares are a frequent choice of investment for almshouse charities' Extraordinary Repair Funds (see section 7 below).

3. Almshouse charities which are registered social landlords
	3.1 Obligations and supervision 3.2 Guidance from the Tenant Services Authority & Homes and Communities Agency

	3.1 Obligations and supervision
	The Housing Corporation is now the Tenant Services Authority (TSA) and Homes and Communities Agency (HCA). The Tenant Services Authority is a Non-Departmental Public Body (NDPB) responsible for regulating social housing landlords, setting high standards of management for housing associations and local authority homes. For the foreseeable future the TSA are adhering to the regulatory practices set by the Housing Corporation. More information is available on their website http://www.tenantservicesauthority.org The Homes and Communities Agency is also a NDPB and is responsible for delivering new housing, community facilities and infrastructure. More information is available on their website http://www.homesandcommunities.co.uk/home Previously, the Housing Corporation and the Commission seek to harmonised advice and information given to trustees by publishing joint Guidance for Charitable Registered Social Landlords which is available on our website. If we make a Scheme for an almshouse charity which is also a RSL, we should inform the TSA of the fact.
	The TSA does not operate in Wales, Scotland or Northern Ireland. The same functions are carried out in Wales by the National Assembly for Wales.
	In April 2002, the Housing Corporation launched a new regulatory code "The way forward: our approach to regulation". For the foreseeable future the TSA are still referring to the guidance on the Housing Corporation website. A key feature of this code is an inspection service which, for the first time, gives tenants the opportunity to have a say on the performance of their landlords and the services they receive. RSL almshouse charities with 250 or fewer units come within the Housing Corporation's Regulatory Arrangements for Small Associations (RASA). This includes the majority of RSL almshouse charities. They are subject to a less onerous regulatory regime. The TSA has confirmed that if a RSL almshouse charity with fewer than 250 units manages its almshouses in accordance with "Standards of Almshouse Management", it is deemed to comply with the Housing Corporation’s regulatory code.
	Almshouse charities which are RSLs are subject to:
	special accounting requirements (see section 7 of OG 65 A1); and
	to the monitoring and supervising functions of the TSA.

	3.2 Guidance from the Tenant Services Authority and Homes and Communities Agency
	Under s.36(a) of the Housing Associations Act 1985, the Tenant Services Authority (TSA), with the approval of the Secretary of State, is empowered to issue guidance about the management of housing accommodation by registered social landlords. In considering whether action needs to be taken to secure the proper management of an association's affairs, or whether there has been mismanagement, the TSA may take into account the extent to which any such guidance is being or has been followed.
	The Homes and Communities Agency (HCA) have made it clear that before deciding that an almshouse charity should receive a grant from them, they will take into account the extent to which the charity complies with the Housing Corporation's guidance (now the TSA). The TSA carries out monitoring visits to almshouse charities, especially those applying to develop schemes with a grant. If failure to comply with the guidance is found, the charity will be advised by the TSA and a timetable agreed for bringing the housing management up to standard.
	A charity applying for registration as a registered social landlord may not be successful unless the trustees undertake to comply with the guidance.
	If an almshouse charity questions the need to comply with the guidance, it should be pointed out to the trustees that registration as a registered social landlord brings with it certain obligations, not the least of which is that the trustees must meet the requirements of the TSA as prescribed from time to time, as well as those of the Commission. They should remember that trustees are required at all times to act in the best interests of their charity, and therefore they should consider very carefully whether in refusing to comply, they can be said to be putting the charity's interest first. Their attention should be drawn to the probable consequences of non-compliance, for example, the rejection by the HCA of any future application for a grant and the carrying out of a monitoring visit by the TSA, possibly leading to a formal inquiry into the affairs of the charity if the trustees refuse to comply.
	Under the Housing Act 1996 an RSL almshouse charity can apply to the TSA to de-register. Formal application to de-register has to be made and the TSA must be satisfied that their current de-registration criteria will be met. We should advise trustees to carefully consider both the advantages and disadvantages of de-registration, and should draw their attention to the guidance published as chapter 9 of "Standards of almshouse management". Both the TSA and the Almshouse Association will provide more detailed advice.

4. Regulations and governance of almshouse charities
	4.1 Regulations 4.2 Clerk to the trustees

	4.1 Regulations
	Our Scheme for an almshouse charity usually includes the following clause:
	Power to make reasonable regulations consistent with this Scheme for the management of the almshouses and the welfare of the residents.
	Trustees occasionally ask if we issue a suitable set of regulations which they may adopt. We do not, but the Almshouse Association has produced a Model Letter of Appointment as annex D of "Standards of almshouse management" (reproduced as OG 65 C1) which lists the main regulations common to most almshouse charities. Trustees should be referred to the Association for further guidance.

	4.2 Clerk to the trustees
	Our Scheme will usually also include a clause for providing for the appointment of a clerk; either one of the trustees' own number, without remuneration, or some other fit person on reasonable terms. If the charity is regulated by a deed, this, also, may include provision for a clerk.
	The Almshouse Association will advise trustees on recruiting a person who would be willing to act as a clerk to an almshouse charity which is experiencing difficulty in its administration, or in finding a suitable person willing or able to act as a full or part time clerk, and in selecting and appointing a suitable organisation to act as a managing agent. Trustees should therefore be advised to contact the Association.
	We cannot make any recommendations, since it is for the trustees, acting in the best interests of their charity, to ensure its effective and efficient administration.

5. Management agreements
	Whilst trustees must retain overall responsibility for their charity, they can enter into arrangements with suitable third parties for the day to day management of the almshouses, unless such a course of action is specifically prevented by the charity's governing document, in which case the trustees may seek our advice.
	The issue of the delegation of trustees' powers and duties has been examined in some detail in court cases and is also covered in the Trustee Act 2000 - see OG 86 B3. Trustees of almshouse charities may rely on the statutory powers in section 11(3) of the Act if they are to delegate any of their functions. What may be delegated under s.11 is "any function consisting of carrying out a decision that the trustees have taken". It follows that the fundamental decision making powers of trustees cannot be delegated under s.11. However, the trustees may decide to delegate the day to day running of the almshouses to a manager, clerk, warden, or management company. The usual principles of delegation and duty of care laid down in the Trustee Act 2000 - see OG 86 B6 - apply.
	There have been instances where the trustees have appointed a housing association to manage the almshouses and effectively abdicated their responsibilities for the charity, contrary to s.11, so that the homes were managed as if they were part of the general housing stock of the association. We take the view that while we do not object to the use of a housing association as a managing agent, before the appointment is made the trustees should take independent advice on the economic aspects of the arrangement and should draw up a management contract specifying the exact duties and responsibilities of the managing agent.
	The Almshouse Association has reproduced a 'Model management agreement' as Annex B of "Standards of almshouse management", and we should draw trustees' attention to this guidance.
	There may be the odd case where our consent to the management agreement is needed (because, for example, the arrangement goes beyond the statutory power of delegation), but we do not need to routinely authorise them. We would generally expect the trustees to take advice from the Almshouse Association and a solicitor to ensure that an appropriate agreement is drawn up; we should only need to give advice if the trustees remain unclear about what they can properly delegate.

6. Weekly maintenance contributions
	The trustees of an almshouse charity cannot require the residents to pay weekly contributions towards the cost of maintaining the almshouses and the essential services in them unless the charity's governing document contains a power for them to do so. The vast majority of almshouse charities now have that power. Again, in the vast majority of cases, the governing document also provides that the amount of maintenance contributions charged from time to time must be approved by us.
	With effect from 1 September 1992, Schedule 1 to the Housing Act 1985 was amended by the Charities Act 1992 by the substitution of a new paragraph 12. Under this new provision, no mention is made of maintenance contributions, nor of the Commissioners' need to approve them. Furthermore, s.50 of the 1992 Act states that any provision in the trusts of an almshouse charity for the amount, or maximum amount, of maintenance contributions to be a sum specified, approved or authorised by the Commissioners shall cease to have effect.
	Since 1 September 1992 therefore, it has been unnecessary for us, under any circumstances, to approve the amount of almshouse maintenance contributions. Setting the level of the contributions is a matter entirely for the trustees' discretion, but they should still ensure that the amount charged does not cause hardship to any resident and is not more than is necessary to keep the almshouses in a proper state of repair. The contributions to the ERF and CMF (see section 7 below), may be taken into account in arriving at an appropriate figure.
	Trustees who wish to charge maintenance contributions, but do not have the necessary power in their governing document may now use the provisions of section 74(D) of the Charities Act 2006 to introduce such a power as it is regarded as an administrative amendment. A model letter - see OG 65 L1 - has been produced, which may be adapted for use in replying to any trustees who enquire as to the proper level of contributions, or as to the criteria they should use in arriving at this. Trustees may also be referred to "Standards of almshouse management".
	Trustees who are providing extra care facilities by means of bought in support packages (see section 2.1 of OG 65 B1) should be aware of recent changes to the scope of housing benefit, which has now been restricted to housing costs alone. Residents in almshouses can no longer recover the cost of additional support services via housing benefit. Such services are now directly funded by the local authority (in the case of those eligible for support) in accordance with a contract between the trustees and the local authority.
	This may mean, that in the case of eligible users of the support services, the WMC will have to be set at a lower level (so it only reflects costs which continue to be recoverable as housing benefit) than it is set for residents who are not eligible users of the support services.

7. Maintenance funds
	7.1 ERF and CMF 7.2 Amount to be set aside 7.3 Investment of the funds 7.4 Withdrawals from the funds 7.5 Routine maintenance

	7.1 ERF and CMF
	It is our policy to encourage the trustees of almshouse charities to accumulate income and build up reserves in order to establish and maintain:
	an Extraordinary Repair Fund (ERF) for major "one-off" repairs and improvements (such as re-roofing or providing a new central heating system), or for rebuilding; and
	a Cyclical Maintenance Fund (CMF) for ordinary items of maintenance and repair which recur at infrequent but regular intervals, such as external and internal decoration.
	All model Schemes for almshouse charities include provision for an ERF and a CMF. In the case of an existing charity which has no such provision and for which a Scheme is not being made for any other purpose, the usual practice should be to tell the trustees that they do not need specific authority to accumulate for repairs, but:
	if the trustees have a particular need to have our formal authority to do so; or
	where the charity is also a registered social landlord,
	an Order may be made.
	Where the trustees formally set up an ERF or CMF, they are, in effect, creating a special trust; money held within these special trusts can only be applied for the stated purposes. Where, however, the trustees earmark money as a discretionary fund, the money may at any time be used for the general purposes of the charity.

	7.2 Amount to be set aside
	The amount of income to be set aside annually to the ERF or CMF and to be allocated for routine maintenance, is a matter for the trustees. As a guide, however, the Almshouse Association recommend each year what the minimum amounts should be for the following year (based on the location and age of the almshouses). Trustees should be encouraged to make regular payments to the Funds in line with these recommendations if the charity has sufficient income to do so. Such payments are a proper call on the charity's income and the trustees can include them as an item of expenditure when calculating the amount of the Weekly Maintenance Contribution (see section 6 above).

	7.3 Investment of the funds
	A Scheme or Order establishing an ERF or CMF will specifically state that it shall be invested in trust for the charity.
	In the case of a CMF, long-term investment in stocks and shares will usually be inappropriate, as withdrawals will need to be made at regular intervals. Investment in a Common Deposit Fund, or, in accordance with the trustees' powers of investment, with a bank or building society where money can be drawn at short notice and without loss of interest is likely to be more suitable. The trustees should normally give instructions for the interest to be reinvested in the account.
	In the case of an ERF, where the object is to build up the fund so that it is available to meet the cost of some major work, investment can be more long-term. A Common Investment Fund, such as accumulation shares in NAACIF (see section 1 above) is often used for this purpose.

	7.4 Withdrawals from the funds
	We are not concerned with withdrawals from ERFs and CMFs, and the trustees have access to the Funds as and when required. In the event of the charity disposing of its almshouses and changing its purposes:
	any money still held to the credit of a designated CMF or ERF can be used as income to be applied for the new purpose of the charity without our prior approval;
	where the setting up of the ERF (or less likely, the CMF) was mandatory, the Scheme establishing the new purpose should make provision for the closure of the fund(s), any permanent endowment held (for example, a capital nucleus in an ERF) being transferred into the permanent endowment fund of the charity.

	7.5 Routine maintenance
	In practice, it is unusual for a separate fund to be built up specifically to meet the cost of day-to-day repairs and maintenance, although trustees should, of course, budget for such contingencies. Any funds allocated to routine maintenance are not impressed with special trusts, and are, in effect, part of the general purpose monies of the charity available for expenditure for any of its purposes.

8. Repair and modernisation of buildings
	8.1 Need for repair and modernisation 8.2 Assistance from the Almshouse Association 8.3 Capital funds available 8.4 Public funds 8.5 Need for a Scheme 8.6 Funds not raised

	8.1 Need for repair and modernisation
	Almshouse charities where the buildings have not been kept in a good state of repair, or particularly in the case of long established charities, which offer only basic accommodation lacking in comforts and facilities nowadays usually taken for granted, may find it difficult to attract beneficiaries.
	Whilst we cannot get involved in the day-to-day management of the charity, trustees should be encouraged to take steps to have their property repaired and suitably modernised. They have a duty to ensure that their charitable purposes continue for as long as possible, and must plan for the future as well as the present.
	We should, however, be careful not to press trustees to embark on works without sufficient planning and consideration and it should be borne in mind that the purpose of an almshouse charity should be to benefit the greatest number of beneficiaries and not to provide luxurious homes for a few.

	8.2 Assistance from the Almshouse Association
	Trustees who consult us because they are uncertain how to proceed, or are considering embarking on a major programme of repair or modernisation, should usually be put in touch with the Almshouse Association (see section 2 above). The Association has great experience in these matters and can be of particular assistance to trustees through its panel of architects and building surveyors. Members of this panel will undertake a simple feasibility study without charge but subject to agreed fees when the work proceeds.
	For major projects, the Almshouse Association recommends that a development agent (project manager) should be appointed to handle the formalities other than the architect's responsibilities (which are restricted to design, planning approvals and contract control). A local or national housing association can be appointed as the development agent. This is likely to be particularly helpful to trustees who have little or no experience of this type of project and feel daunted by the practicalities involved. It is a requirement of the HCA if they have funded all or part of the project with a Social Housing Grant.
	However, it is essential that trustees retain overall control and a proper system of reporting and consultation covering the whole project from initial feasibility study to completion of the works must be put into place. A model development agency agreement is included as Annex H of "Standards of almshouse management".

	8.3 Capital funds available
	Some charities may have capital funds available from which they could borrow part of the money needed for modernisation work. Any expenditure of permanent endowment will require the authority of an Order under section 26(4) of the 1993 Act, but provided their proposals are financially viable, there will generally be no reason why such an Order should not be made (provided the capital borrowed is replaced). The normal rules governing expenditure of capital should be followed, but in the case of improvements to almshouses, repayment should not usually be a problem, because the trustees can levy a higher weekly maintenance change on the improved property.

	8.4 Public funds
	If a charity does not have funds for the necessary repair or modernisation of its property, public funding in the form of a grant or loan may be available from either central or local government funds, though this is likely to entail registration with the TSA as a housing association. Such registration subjects the charity to the supervision of the TSA and brings with it certain obligations (see section 3 above). The availability of finance is another area in which the Almshouse Association has considerable experience or the HCA may be of help in some instances.

	8.5 Need for a Scheme
	Additional powers may be needed by trustees to enable them to proceed with a major project of this kind. In most cases, however, a new Scheme will only be necessary to replace the existing trusts of the charity if the trustees do not already have the power to charge residents weekly maintenance contributions and to set aside funds for repairs in the future. Case workers should discuss the various possible clauses with trustees who seek our advice. "Standards of almshouse management" reproduces a typical Scheme as Annex A.

	8.6 Funds not raised
	There may be a few cases where buildings are so run down, or would be so expensive to modernise, that despite the best efforts of the trustees, it proves impossible to fill vacancies or to raise sufficient money to make the buildings habitable by today's standards. In these circumstances there may be no option but for the trustees to dispose of the almshouses and provide replacements (see OG 65 B4).

9. Additional almshouses
	Trustees may wish to provide extra accommodation by building additional almshouses. They will not need our authority for the provision of the accommodation provided:
	there is nothing in the governing document of the charity to prohibit this type of expansion (eg, some governing documents include in the trusts the number of almshouses to be provided); and
	the beneficiary class and area of benefit, as set out in the governing document of the charity, are to remain the same; and either:
		the additional almshouses are to be built on the existing almshouse site, for instance in the gardens or grounds; or
		there is a specific provision in the governing document of the charity permitting the purchase of land for this purpose (although the Trustee Act 2000 permits trustees to purchase land for the furtherance of the purposes of the charity).
	Authority will, however, be required under the normal rules for any expenditure of capital (this will normally be subject to replacement) and authority may be required (subject to s.38 of the 1993 Act) if there is a need to borrow.

Glossary of Terms used in this Guidance
	1993 Act
	Governing document
	Homes and Communities Agency
	Housing Corporation
	Permanent endowment
	Tenant Services Authority
	Trustees

Index to further related information