Compliance Audit Overview

The annual Compliance Audit programme provides assurance that organisations receiving grant (providers) have met all of Homes England’s requirements and funding conditions, and have properly exercised their responsibilities as set out in the Capital Funding Guide (CFG). Standardised checks are made by provider-appointed independent auditors on an agreed sample of schemes and, or sites, that have received Homes England funding under current and earlier affordable housing programmes.

Compliance Audit does not reduce the responsibility of the provider and Homes England to ensure that the costs in any claim for grant are appropriate and have been properly incurred.

Compliance Audit System

Homes England manages the annual Compliance Audit programme using a web-based IT system. Registered users can access the Compliance Audit systemSystem here.here. Be mindful that not all browsers support the Compliance Audit system. If you cannot access the system on the browser you are using, try another browser.

The system is accessible to Homes England staff and non-Homes England staff such as providers and their appointed independent auditors. It provides a communication platform including alerts to users, tracks programme delivery and records annual audit findings and outcomes.

Provider user access to the Compliance Audit system is managed through the Investment Management System (IMS)(IMS) security module. New users will need to be set up by their organisation’s IMS Security Administrator and will be required to log in with a username and password. Independent auditor access will need to be arranged by the provider’s nominated Compliance Audit Lead.

Avoid delays on your audit

Providers are required to complete all set-up steps for the Compliance Audit system no later than 5 weeks before the long-stop date which is set each year by Homes England. The long-stop date will be communicated to providers selected for audit in the notification email.

We have introduced this deadline to enable us to quickly support any providers struggling to access and update the system, and to make sure that independent auditors can start the audit on the agreed date.

If you experience any problems with setting up on the Compliance Audit system, contact us by email.

Access Compliance Audit system user guidance.guidance.

Access IMS guidance and support.support.

Audit programme and process

Compliance Audit follows an annual cycle.

Scheme sample and notification

Scheme sample selection will take place early in the audit cycle, after which Homes England will notify providers of their selection and inform them of the number and type of schemes inand, theiror, sample.sites selected.

Independent auditor suitable qualifications update, appointment and training for providers and independent auditors

Providers must engage an independent auditor in line with published guidance in Chapter 6 of the Capital Funding Guide. Compliance Audits are expected to be carried out during the notified period and before the long-stop date. Providers must confirm their independent auditor appointment, audit start date and contact details through the Compliance Audit system. Providers and their appointed independent auditors can access the schemes selected for audit in the Compliance Audit system 4 weeks before the audit is scheduled to commence.

Each year, Homes England organises Compliance Audit training for providers and independent auditors. This is delivered via training packs, videos and guides. These will give the provider and appointed independent auditor an overview of the programme, details of any updates, information on resources and further information on the audit process. We require all providers being audited and their appointed independent auditors to self-certify (via the Compliance Audit system) that they have observed the guidance issued.

Independent auditor review and submission

During the audit, the independent auditor considers each selected scheme and, or, site against the questions presented in the Compliance Audit System,System usingwhich the Homes England checklists. The Compliance Audit system automatically presents the correctappropriate set of questions for each scheme.scheme and, or, site.

The independent auditor reviews scheme and, or, site information contained in the provider’s files and Homes England’s Investment Management System (IMS).(IMS) Theand independent auditor is required to complete all the questions presented in the checklists,compliance audit system, setting out all audit findings against published Homes England policy and procedures.

Independent auditors may also upload onto the Compliance Audit system documentary evidence in support of their responses to checkliststhe questions. Under no circumstances should the independent auditor share their findings with the provider prior to submission, in any form.

Once all questions have been completed, the independent auditor submits their findings through the Compliance Audit system - this should take place within five weeks of the commencement of the audit and before the long-stop date. The system then notifies the provider and the Homes England lead auditor that the findings are available to view.

Fraudulent behaviour

Compliance Audit is not a first line of defence against fraudulent behaviour but occasionally behaviour of this type is identified during audits. If an independent auditor becomes aware of potentially fraudulent behaviour during the audit year or whilst the audit is being undertaken, they should take steps immediately to notify the Homes England Compliance Audit team who in turn will notify the relevant Homes England contacts.

Provider responds to independent auditor findings

Providers will then have 10 working days to respond to independent auditor findings. It is important that providers use this window as an opportunity to review all findings, even where the independent auditor has submitted a ‘yes’ response. If there is additional information or points to raise, providers can include a response comment via the Compliance Audit system. Providers may also upload onto the Compliance Audit system documentary evidence if it supports their response.

If the provider does not respond within the 10 working day window, Homes England will form an opinion based solely upon the independent auditor findings and will not be able to take further information into consideration at a later stage.

Homes England assesses audit findings and prepares audit report

Once the 10 working day window for providers to comment on independent auditor findings closes, the Homes England lead auditor reviews the independent auditor findings and any provider responses where submitted. Queries may be raised if more information is required or an independent auditor or provider response is not clear. A query does not inform the provider whether non-compliance has been identified or not.

The Homes England lead auditor then assigns breaches for any non-compliance identified through the audit findings using the Homes England breach list.

Breaches have an assigned severity - low, medium or high. Not all breaches apply to all funding programmes. The Compliance Audit system uses the severity of any breaches as the basis for assigning grades to providers.

The Homes England lead auditor will review assigned grades and decide on behalf of Homes England whether public funds have been used for the intended purposes and in line with contractual requirements, policies and procedures. The number of breaches and their severity will be taken into consideration along with the information and evidence available at the time of reviewing.

The Homes England lead auditor then drafts a judgment summary for inclusion in the audit report, recording the number of breaches identified, the reasons and their severity. If there is remedial action required a recommendation will also be set out.

Homes England moderates audits to ensure consistency

Homes England moderates all audit gradings to ensure consistency of breaches and final grades across the programme before Compliance Audit reports are issued.

Compliance Audit report issued to provider

When the report is available the Compliance Audit system will generate an email to notify firstly the provider’s Compliance Audit lead, development director and chief executive officer that the report is ready to download. Five days later the Compliance Audit system will notify the provider’s board chair (or equivalent).

The report is confidential between Homes England and the provider. The report itself, and any information contained within it, should not be shared with any third party or published in paper or online form, including on social media.

Provider grading

The Compliance Audit report assigns providers a green, amber or red grade based on the number and severity of breaches recorded.

Provider grades defined below may also be accompanied by further contextual comments and recommendations. Grades should be read in the context of comments.

Green grade: The Providerprovider meets requirements.

• No high or medium severity breaches identified, although there may be low breaches identified. The Homes England audit report will show that the provider has a satisfactory overall performance but may identify areas where minor improvements are required.

Amber grade: There is some failure of the Providerprovider to meet requirementsrequirements.

• One or more medium severity breaches identified. The Homes England audit report will show that the provider has failed to meet some requirements but has not misapplied public money. The provider will be expected to correct identified problem(s)problem or problems in future schemes and current developments.

Red grade: There is serious failure of the Providerprovider to meet requirementsrequirements.

• One or more high level severity breaches identified, the Homes England audit report will show that the provider has failed to meet some requirements and there has been a risk of misapplication of public funds.

Sanctions/reclaimingSanctions and, or, reclaiming grant

As set out in the Capital Funding Guide Homes England has the power to reclaim grant (in part or in whole), and/orand, or, apply interest.

Report and recommendations are acknowledged by provider’s board

Providers should ensure Compliance Audit reports and any recommendations are brought to the attention of their board chair (housing associations), cabinet members (local authorities) or chief executive/directorsexecutive and, or, directors (developers). After boards/committeesboards and, or, committees have met and within 3 calendar months of receipt of the report, the provider is required to sign into the Compliance Audit system to:

• verify the date that the board or committee met
• certify that their board/committeeboard and, or, committee has given their acknowledgement to the report and recommendations
• certify that their board/committeeboard and, or, committee has given their agreement to the action plan to address any breaches

It is the provider’s responsibility to note and act on any audit report breaches and recommendations.

Providers will be required for all breaches to agree with their organisation’s board/committeeboard and, or, committee any actions that will be undertaken in response to the recommendations raised by Homes England.

Policy, procedures and guidance

All Homes England funding requirements for providers are set out in the Capital Funding Guide together with the relevant contract or agreement, funding conditions and prospectus. Depending on the funding programme, the following documents may also be applicable:

Contracts

• Affordable Housing Programme 2021 to 2026 contract -— this page has examples of the grant agreements for the most common providers and delivery models receiving grant funding under the Affordable Homes Programme 2021 to 2026
• Shared Ownership and Affordable Homes Programme 2016 to 2021 standard form contract
• Affordable Housing Programme contract agreement (2015 to 2018)
• Care and Support -— refer to provider’s specific contract
• Move On Fund -— refer to provider’s specific contract
• Strategic Partnerships -— refer to provider’s specific grant agreement
• Single Homelessness Accommodation Programme -— refer to provider’s specific grant agreement

Prospectuses

• Affordable Housing Programme 2021 to 2026 funding guidance
• Shared Ownership and Affordable Homes Programme 2016 to 2021 prospectus
• Rough Sleeping Accommodation Programme 2021 to 2024
• Affordable Housing Programme 2015 to 2018 prospectus, standards guidance and FAQs
• Shared Ownership and Affordable Homes Programme bidding documents
• Care and Support Specialised Housing Fund Phase 2 prospectus
• Move On Fund prospectus
• Single Homelessness Accommodation Programme

Programme guidance

Policies and procedures may change depending on the funding programme; therefore, providers and independent auditors must satisfy themselves that they are referring to the policy and procedures current at the time. Where providers are delivering schemes funded under more than one programme, they will need to follow the procedures of the relevant programme for each scheme.

Find out more about our funding programmes.programmes.

Compliance Audit guidance

The Compliance Audit procedural requirements are set out in the Capital Funding Guide, Chapter 6 Programme Management. Section 7 of this chapter covers the current reporting and audit requirements for all programmes, including standardised terms of engagement for independent auditors.

Access the Compliance Audit checklists and system guidance (including video guides).