In a new engagement plan for the association, the Regulator said it engaged with Lochalsh & Skye in September 2022 to clarify the status of its new board members after failings were identified in its compliance with the regulatory standards of governance and financial management.

The failures related to Regulatory Standard 1, appointing board members in compliance with its constitution, and regulatory standard 6, ensuring that any non-executive member seeking re-election after nine years’ continuous service demonstrates continued effectiveness. 

Lochalsh & Skye’s Annual Assurance Statement submitted in October 2022 identified that, while it was not compliant with regulatory standards between May and August 2022, the association considered it was now compliant having addressed the issues regarding its board membership. It confirmed it had developed a Governance Action Plan for improvement and commissioned an independent audit of governance relating to the areas of failure.

In March 2023, Lochalsh & Skye shared the independent audit report with the Regulator which identified further non-compliance with regulatory standards 1 and 6 and areas for improvement including weaknesses in its governance and assurance processes. Lochalsh & Skye confirmed it had accepted the audit findings and recommendations which led SHR to put Lochalsh & Skye’s regulatory status under review.

To allow SHR to complete the review, Lochalsh & Skye was asked to provide further information and assurance on the findings of its governance audit report and its plans to address the findings of the report.

In June 2023, Lochalsh & Skye also notified the Regulator of a serious tenant and resident safety matter relating to the inaccurate reporting of full compliance with electrical safety requirements. This highlighted failures relating to regulatory standard 4, quality of reporting information to the board and risk management, as well as with regulatory requirements to have assurance and evidence it complies with its obligations in relation to tenant and resident safety.

SHR said Lochalsh & Skye is currently progressing inspections to provide Electrical Installation Condition Reports (EICRs) in all its tenants’ homes.

The Regulator is also engaging with Lochalsh & Skye to seek assurance about its approach to independently validating its stock survey information to support its business plan. The information was last independently reviewed in 2005. SHR said Lochalsh & Skye has completed an internal audit of the information and agreed that it will commission an asset management expert to shadow its stock survey process.

The engagement plan added: “Our assessment is therefore that Lochalsh & Skye does not comply with regulatory standards 1, 4 and 6 and with regulatory requirements. We are engaging with Lochalsh & Skye to seek assurance about its compliance with regulatory requirements, including the regulatory standards, and about its capacity to deliver the improvements required.

“Lochalsh & Skye is working openly and constructively with us as it takes forward improvements.

“Lochalsh & Skye provided a revised improvement plan to us in July 2023 setting out how it intends to address the issues identified and achieve compliance with the Regulatory Standards and requirements. Lochalsh and Skye has made progress against this plan.

“Lochalsh & Skye has commissioned an independent review of its compliance with all of the regulatory standards of governance and financial management, with the intention of completing this review prior to the submission of its Annual Assurance Statement in October 2023.

“We will therefore continue to seek further information and assurance from Lochalsh and Skye about its governance, capacity and Governance Action Plan.”

Lochalsh & Skye Housing Association has been contacted for comment.