The Trust was established by the South Australian Housing Trust Act 1936 to administer the Act. The Trust also administers the Housing Improvement Act 1940.
The South Australian Housing Trust Act 1995 repealed the South Australian Housing Act 1936 and amended the Housing Improvement Act 1940. It provides for the continuation of the Trust and for the Trust to continue to undertake, as the principal provider of public housing in the State, the following functions:
The ownership of houses and units for tenant occupation.
The construction and purchase of houses and other properties.
The management of tenancy arrangements for Trust properties including the assessment of rents and provision of reduced rents, and the raising and receiving of rent and other monies from tenants.
The management of costs associated with ownership of Trust properties including the maintenance of those properties.
In addition, the Trust administers a range of programs related to housing on behalf of the Government with respect to which the Trust receives direct capital and recurrent grant funding. The range of programs administered is detailed in Note 13 to the Trust’s financial statements.
The Trust’s Operating Deficit after Tax was $18.7 million which compares with an Operating Deficit of $14.8 million last year.
Recurrent grant funding to the Trust was $49.2 million ($58 million) a reduction of $8.8 million. Additional grant funding included Tax Equivalent Regime reimbursement of $54.9 million ($53.3 million), Capital Grants of $1.7 million ($1.5 million) and GST compensation of $11.9 million ($11.8 million).
The South Australian Housing Trust Act 1995, subsection 27(2), requires the Trust to keep proper accounting records, and to produce financial statements, in respect of each financial year. Subsection 27(4) of the Act requires the Auditor-General to audit the accounts and financial statements.
The audit program covered all major financial systems and was directed primarily towards obtaining sufficient evidence to enable audit opinions to be formed with respect to the Trust’s financial statements and internal controls.
During 2001-02 specific areas of audit attention included:
rent raising and recovery
house sales
accounts receivable
maintenance expenditure
capital expenditure
systems reconciliation.
Systems operations and activities undertaken by the Department of Human Services on behalf of the Trust, which included corporate related services, payroll and, for part of the year, accounts payable processing, were reviewed as part of the audit of the Department.
Reliance was placed on the work of internal audit in assessing the effectiveness of the Trust’s internal controls. Specific areas in which reliance was placed on internal audit work included the review of Trust information systems development and implementation activities.
During the year letters communicating issues arising from the audit were forwarded to the Trust and satisfactory responses were received.
The Trust is required by the Treasurer’s Instructions to implement the Financial Management Framework. The review of controls in operation at the Trust indicate that the prescribed elements of the Financial Management Framework have received adequate attention by the Trust. The following provides an overview of key areas of the Trust’s control environment relevant to the Financial Management Framework.
The Trust has established Risk Management programs which continued during the year. Arrangements for reporting upon and monitoring risk management outcomes were reviewed by the Trust and changes were being considered by Trust Executive and the Board at the time of preparation of this Report.
The Trust Board has an Audit Committee comprising members of the Board and an external adviser. Trust executives, Internal Audit staff and representatives of the Auditor-General attend Audit Committee meetings. The Audit Committee meets on a regular basis to review progress in addressing the Trust’s Internal Audit Program, the outcomes of specific reviews completed, action taken with respect to previous findings and other relevant matters which emerge.
Management of the Trust’s Internal Audit function is undertaken by Department of Human Services staff under a Service Level Agreement between the Trust and the Department. Specific Internal Audit assignments are performed either by Departmental staff or by external contractors from a panel of approved service providers.
The Trust supplements the work of Internal Audit with a program of self assessments which provides for the checking of processes undertaken by the Trust’s regional staff. The self assessment programs cover the core business activities of Public Housing, Private Rental programs and Maintenance with the outcomes of reviews being reported upon to the Audit Committee.
Work has been undertaken in the year to 30 June 2002 to update self assessment arrangements including the systems facilities which support self assessment reviews in response to the outcomes of a review undertaken in 2000-2001.
The Internal Audit program for the year ended 30 June 2002 incorporated:
information systems audits with an emphasis on modules of the HOMES system;
review of the Trust’s Capital Projects area including urban renewal projects;
review of aspects of Maintenance operations.
The Rent Rebates provided by the Trust are a significant element in its program of providing housing assistance to those in housing need. The value of rebates for the year to 30 June 2002 was $124.7 million ($124.6 million) of which $27.7 million is provided to the Trust as grant funds and the balance represents foregone revenue to the Trust.
Audit have focused on a number of areas of Trust processes which provide assurance that rent rebates provided to Trust tenants are determined in accordance with established policies and guidelines including obtaining proof of income from tenants, home visits to tenants by Trust staff and arrangements for provision of information regarding tenants income by Centrelink to the Trust.
A high proportion of Trust tenants and other benefit recipients receive benefits from a Commonwealth agency, Centrelink. As part of Trust processes for verifying these tenants’ incomes, and hence their entitlement to rebated rent, the Trust obtains details of the tenants’ income from Centrelink. Existing processes require provision of documented proof of income by Centrelink to the tenant who then provides that documentation to the Trust.
The Trust, Centrelink and other State Housing Authorities have identified the benefit of automating the exchange of information regarding tenants’ income between the Commonwealth and the Housing Authorities. Audit understands that there has been ongoing discussion between officers of the State Housing Authorities and Centrelink and that in 2001 Centrelink had commenced development of a capability to provide required information to the State Housing Authorities. It is further understood that the Trust will develop its system capacity to use the data provided by the Commonwealth as part of a redevelopment of its Homes system. This is scheduled for implementation in early 2003.
The South Australian Housing Trust Act 1995 provides for an independent review of Trust operations to be undertaken every three years. During the year the most recent review was completed and a report was prepared by the Department of Human Services (the Department) and tabled in State Parliament in March 2002.
The report identified a range of strategic responses to the review considerations which fall into the following broad areas:
Asset Management Implement specific action with respect to identified asset groups
Develop improved asset management arrangements
Financial viability Seek to influence the level of funding committed to public housing by State and Commonwealth Governments
Increase revenue from rents
Better manage administrative costs and reduce them in line with reducing housing stock
Negotiate a principal repayment holiday on loans from the Treasurer
Community Development Seek additional funding from Local and Commonwealth governments to upgrade infrastructure associated with Urban Renewal projects
Client Focus Review waiting list arrangements to ensure they effectively meet the needs of identified target groups
Review the extent and effectiveness of utilisation of services provided by the Department to support achieving successful tenancies
Evaluate whether tenancy arrangements incorporate disincentives to tenants improving their educational, training or employment outcomes
The Report’s recommendations include some matters which are directly controllable by the Trust and others which require interaction with external parties and require cooperation and agreement to proceed. Audit have identified action taken by the Trust which directly relate to report recommendations. These include:
areas of cooperation with the Department on initiatives which
support successful tenancies through provision of skill development in
tenant’s financial management capabilities;
the Trust’s implementation of enhanced asset management structures;
development of asset condition information systems and planning for the collection of information;
adjusting rent setting arrangements for some categories of tenants to increase rents raised.
The focus by the Review upon assessing the financial viability of the Trust follows a similar emphasis by previous Reviews. A number of factors impact on the Trust’s financial viability:
Constraints on Revenue Raising
The Trust operates within Government policy and the terms of the Commonwealth State Housing Agreement when setting rents which means it has limited opportunity to increase its rental income.
In accordance with State and Commonwealth Government policy the Trust has implemented changes to arrangements for allocating properties to tenants to a needs based approach which means its rental income is less and costs of administering are increased.
As a matter of policy the Commonwealth has reduced the level of funding committed to State public housing agencies in favour of providing direct support to tenants in the private rental market, with an impact on the level of funding to the Trust.
Cost Pressures
As a public land lord the Trust is required to maintain its properties to an appropriate standard with consequent maintenance costs.
The Trust has a significant number of older properties which will require either significant maintenance, upgrading or replacement all of which involve significant costs.
There are areas in which the Trust owns a high proportion of properties which do not meet contemporary needs and in which it may be expected the Trust will take a lead role in urban renewal initiatives.
The following chart illustrates the extent to which the financial viability of the Trust depends on a significant program of asset sales to generate funds for its ongoing operations.
Sources of Funding
The observed trend for an increasing proportion of the Trust’s income to be derived from asset sales is associated with the ongoing reduction in Trust Housing Stock. The generation of funds from asset sales is appropriate where the asset sales program and the use of funds generated are consistent with the Trust’s strategic directions. The Westwood urban renewal project illustrates this:
The project meets Community development strategic objectives through redevelopment of an ageing neighbourhood.
Reducing the concentration of Trust home ownership is consistent with the Trust’s Asset management strategies.
Old houses with high maintenance requirements and inappropriate amenity levels will be replaced or upgraded, again in line with asset management strategic objectives.
Westwood also illustrates the impact of the reliance on funds from asset sales on the stock of Trust houses with 2 450 Trust houses being committed to the project with a planned outcome of 1 217 new and refurbished properties being retained by the Trust.
As required by subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987, the audit of the South Australian Housing Trust included an assessment of the controls exercised in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities. The assessment also considered whether those controls were consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 ‘Financial Management Policies’.
Audit formed the opinion that the controls exercised by the South Australian Housing Trust in relation to the receipt, expenditure and investment of money; the acquisition and disposal of property; and the incurring of liabilities, were sufficient to provide reasonable assurance that the financial transactions of the organisation were conducted properly and in accordance with law.
The Trust has continued to experience a high level of demand for its rental accommodation as it received 9 478 (9 647) new applications for tenancies and was able to house 4 419 (4 678) new tenants during the year. The level of applications received, and new tenants housed, compares to the level of housing stock which was 49 543 (51 251) at 30June2002.
The trend identified in previous years, for a higher proportion of Trust tenants to be eligible for reduced rent due to low income continued and, at 30 June 2002, 40 004 (39 977) tenants or 84.9 percent (82.4 percent) of all tenants were eligible for rent rebates. The trend is illustrated in the following chart:
Trust Rental Income
The number of Department of Human Services’ employees assigned to the Trust at 30 June 2002, expressed as full time equivalents was 624.3 which compares to 624.7 staff as at 30June2001.
The Trust’s recurrent expenditure with respect to grant-funded programs was $23 million ($26.4 million) reflecting direct expenditure on the programs of $11.7 million ($14 million) and administration costs of $11.3 million ($12.4 million).
The overall reduction in the Trust’s expenditure on grant funded programs was due principally to the reduction in expenditure on rent relief following the closure of this program to new claimants, and reduced expenditure on the Private Rental Assistance programs.
The Private Rental Assistance programs include a bond guarantee scheme which provides for the Trust to guarantee payments to landlords in the event of a claim against a bond. The Trust’s contingent liability with respect to Bond Guarantees increased by $550 000 to $10.4 million as at 30 June 2002.
The two programs with respect to which the Trust incurs the largest expenditure are the Private Rental Assistance Program (PRAP) and the Rent Relief Program (RRP) which both provide support to tenants who are not placed in Trust accommodation. The following graph shows the changing level of grant funded spending.
PRAP and RRP Grants
The RRP provides assistance to tenants in private rental accommodation, who are experiencing financial difficulty, by payment to tenants, of amounts up to $25 per week. The number of recipients of assistance for the year to 30 June 2002 was 3 463 (5 054), reflecting an ongoing reduction in the number of beneficiaries following changes to policy which limit entitlement to rent relief.
The PRAP assists people to establish themselves in privately owned rental accommodation by providing a counselling service to help locate suitable accommodation; financial assistance to tenants with respect to security bonds and rent in advance; and short term emergency accommodation in Trust houses.
The Trust, in recent years, has sought to reduce its debt funding with an emphasis on repayment of debt which was not advanced at concessional rates. In 1999-2000 the Trust repaid the last of its non-concessional debt.
The following graph demonstrates the ongoing reduction in Trust indebtedness over the past five years, the significant level of concessional loans received by the Trust in the past, and the impact of reduced indebtedness upon the Trust’s interest expense. The base year for calculation of the percentage trend is 1996-97.
Indebtedness and Interest Expense of the Trust
*includes Treasurer’s Guarantee Fee
The Trust has responded to changes in demand for housing, the need to quit housing stock which is of inappropriate amenity or involves high levels of maintenance by establishing annual targets for house sales. The following graph depicts the level of house sales and the offsetting acquisitions of houses, over the past five years to demonstrate the net impact of house sales on the level of Trust housing stock.
In addition to house sales the Trust transfers houses to the Aboriginal Housing Authority and the South Australian Community Housing Authority. The ongoing program of house transfers is additional to the transfers of 1 790 properties to the Aboriginal Housing Authority in 2000 on its establishment.
As a consequence of adopting the house sales and house transfer programs the Trust’s housing stocks have fallen from 62 322 dwellings at 30 June 1994 to 50 459 dwellings at 30 June 2002.
