Introduction to Scheme Approval

Scheme Approval assessment

All Schemes - The purpose of a Scheme Approval assessment is:

• To evaluate the scheme proposals in terms of housing need, value for money and financial viability; and
• To establish whether the NIHE (DPG) is prepared to approve the proposed scheme and related costs in full or in part.

The following guidance and associated DfC Guidance for Housing Associations, details the generic conditions attached to the award of grant as referred to in the Housing Association Grant for Eligible Housing Activities General (NI) Determination 1992.

Scheme specific conditions may also be applied to an individual scheme approval and will normally be communicated by way of an Annex of conditions attached to the Scheme Approval NT2/TA2 form issued to the Association.

Acquisition Issues - For guidance on a variety of land and acquisition related matters see Acquisition Issues. This includes issues around association investment decisions; acquisitions completed prior to the current programme year (Historic Market Value); donated land; land/ property available from government departments and non-departmental public bodies (NDPB); disposal of land held for planning purposes; compulsory acquisition of land/ property for association schemes; and land/property acquired from another association.

Economic Appraisal

Housing Associations are required to prepare economic appraisals to an acceptable standard for all schemes seeking grant funding. Appraisal must be based on an assessment of projected figures over a three year period. These should be completed on the agreed template which is available from DPG.

In addition, Housing Associations are expected to carry out their own financial viability assessment to ensure that the lifetime costs over the economic life of the project (35 years minimum) have been taken into account. This assessment must be made available on request for consideration by Department of Finance/Department for Communities as required.

For all schemes regardless of scale, economic appraisals must be submitted for assessment, electronically, to NIHE (DPG).

Proportionality - Associations should be aware that the principle of commensurate effort applies in undertaking any economic appraisal i.e. the resources to be devoted to appraisal should be in proportion to the scale or importance of the objectives and resource consequences. As a rule, no more than 2% of the total scheme cost is to be expended on the preparation of an economic appraisal. (There are likely to be many cases where an economic appraisal will cost substantially less than 2% of the total scheme costs e.g., where the objectives are obvious and options are very limited). Existing Satisfactory Purchases (ESP), Off the Shelf (OTS) purchases, Rehabilitation and Re-Improvement schemes can be grouped together and submitted as a single approval application by individual Associations for assessment to accelerate processes (subject to scale). Housing Associations should discuss with DPG prior to submitting any grouped application. This will streamline the process to be more proportionate and negate unnecessary appraisal.

Value for Money - Economic Appraisal is a key tool for achieving value for money (VFM) and satisfying public accountability requirements. It is a systematic process for examining alternative uses of resources, focusing on assessment of needs, objectives, options, costs, benefits, risks, funding, affordability and other factors relevant to decisions. Failure to demonstrate that a particular scheme represents a VFM investment may delay or prevent approval of any scheme.

The Economic Appraisal is the tool by which the Association is required to assess a project’s Value for Money (VFM) and affordability. The TCI allowance is split into three elements; acquisition; works, and on-costs. See the TCI Summary for more information. Each element is considered by NIHE (DPG) against the TCI allowances to assess if each element falls within the TCI allowances. A key part of this assessment for all schemes over TCI is the Association’s provision of the reasons for exceeding TCI. This needs to be a considered argument demonstrating that the scheme as presented by the Association is VFM compared to alternative options, including a cost analysis with detailed cost breakdowns in support where applicable.

Discount - Associations preparing Economic Appraisals in accordance with this Annex should note that a new discount rate of 3.5% must be incorporated.(Ref: The NI Guide to Expenditure Appraisal and Evaluation Para 2.8.3).

• Table 1: Economic Appraisal - Discount Factors for Discount rate of 3.5%

Exemptions - Associations may request exemption from the normal NIHE (DPG) requirements for economic appraisal if a scheme falls into one of the following categories:

• A competent authority (such as the NIHE or a Health and Social Services Trust) has undertaken a recent approved economic appraisal for housing development on the site; or
• Where the scheme is one phase of a bigger project for which an overall economic appraisal has already been undertaken and approved.

Such requests for exemption must be discussed with the NIHE (DPG) at the earliest possible stage.

Economic Appraisal Approval - All appraisals must be accompanied by a completed Economic Appraisal cover sheet. Both the economic appraisal cover sheet and the body of the appraisal must be signed off, dated by the author, and approved by an officer or member of the Association authorised by the Management Committee.

Standard Conditions of Approval - NIHE (DPG) are responsible for the approval of Economic Appraisals as part of the scheme approval process

For more information see The Standard Conditions of NIHE (DPG) Approval

All schemes must be submitted to NIHE (DPG) for Approval. Approval is subject to the following limits:

• Associations should note that Department for Communities (DfC) approval is also required for schemes with grant fundings that are in excess of £7.5m; and
• Department of Finance approval is also required for schemes with grant fundings that are in excess of £12m.

In the case of Supported Housing schemes, Associations must include a Memorandum of Understanding* from either Department of Health or a Health Trust that recognises the level of commitment over the lifetime of the scheme and gives a commitment of support.– The Memorandum of Understanding must also include specific funding details.

*The provision of a Memorandum of Understanding remains the first choice to support the scheme submission. However, a letter of support from the sponsoring agency and confirmation that a Joint Management Agreement has been entered into may be accepted as an alternative.

Post Project Evaluations (PPE) - Associations must undertake monitoring and Post Project Evaluation (PPE) for all publicly funded schemes, including DPF funded schemes. Each Housing Association should produce just one PPE per financial year that evaluates all their social housing schemes completed in that year. The PPE must be carried out 12 months after practical completion. This annual aggregated PPE replaces the need to produce individual PPEs for each scheme, although information required to complete this aggregate PPE will still be similar to previous information provided.

Development Programme Group, NIHE will issue a PPE template to be completed by Housing Associations and set dates for return. PPEs examine actual outcomes against expected outcomes and seek to ensure that any lessons learned are fed back into the decision-making process. Over time, this review process should enable all partners to refine procedures and practices to ensure effective project management and implementation and may be used to inform policy.

Evaluations should be conducted in the same manner as appraisals with the focus on a cost benefit analysis (but based on actual data). PPEs, by their nature, are scheme specific assessments compiled into one PPE form rather than a formulaic evaluation approach.

In order to prepare the ground for an evaluation it is usually helpful to produce an outline plan setting out the boundaries of the proposed evaluation, including:

• Questions which the PPE seeks to answer;
• Staff resources available;
• Provisional timing and cost; and
• Who should be consulted?

As a rule the PPE process should:

• Establish what is to be evaluated and how outturns can be measured;
• Define the counterfactuals – compare outturns with what would have happened if the scheme had not been developed;
• Compare the outturn with the target outturn and counterfactuals;
• Present the results and recommendations (i.e. lessons learnt); and
• Disseminate and use the results.

The outcome of an evaluation should contain:

• A record and assessment of what actually happened;
• A comparison with the target outcome/outturn;
• A comparative assessment of what would have happened if the scheme had not been delivered (or alternative decisions had been made);
• An assessment of how successful the project has been in achieving its objectives or why objectives were not achieved;
• The cost effectiveness of the project; and
• What the results mean for future projects.

Associations are required, on completion, to submit post-project evaluations (PPE) to NIHE (DPG) for consideration.

Scheme Signage - DfC Branding Requirements

Scheme Signage - DfC Branding Requirements - The provision of signage is mandatory for ALL new build schemes. Where it is being erected for schemes in receipt of funding provided by NIHE from DfC, Associations must comply with DfC’s signage requirements. See DfC Branding Requirements for further guidance on the requirements for the use and application of branding.

Required Actions

Making an application for Project Approval - when an Association has identified a suitable site/property that can be economically developed, taking account of the cost criteria, grant rates and design and procurement requirements specified in this Guide, an application for Project Approval must be made to the NIHE (DPG).

Scheme Approval is the key assessment stage and normally takes place prior to acquisition of the site/property selected for development. It is at this point that the NIHE (DPG) will examine the Association’s proposals in detail and confirm the grant percentage rate that will apply to the scheme, the total amount of grant to be made available, any Public Subsidy deduction and the amount to be paid in each Tranche to the Association.

See Public sector Land and Public Subsidy for more information

It is therefore essential that the Association’s development proposals are formulated as accurately as possible at this stage and the conditions for award of grant are met.

Explanation of ‘Banding System for scheme assessment - Scheme submission requirements are defined according to the band or scheme type e.g. Existing Satisfactory Purchase, Off the Shelf etc. Guidance identifying the characteristics of each of the 5 bands or scheme types can be accessed using the link: Scheme Types.

Having identified the appropriate band or scheme type, further guidance for each scheme type or band is provided in relation to:

• Development Milestones/Pre-qualifications;
• Scheme Feasibility and Design;
• Scheme Submission Documentation;
• Calculating Grant;
• Claiming Payment;

Individual band or scheme type guidance can be accessed using the following links:

• Band 1 – Existing Satisfactory Purchases (ESPs)
• Band 2 – Off the Shelf Schemes (OTS)
• Band 3 – Other Schemes; New Build/ Re-improvement/ Rehabilitation/ Supported Housing/ Works Only
• Band 4 - Advance Land Purchase (ALP)
• Band 5 - Social Housing Delivered as Social Housing via Planning Gain (SHPG)

Pre-qualification or Development Milestones – These are the scheme development steps that an Association must comply with in order to meet the agreed Social Housing Development Programme (SHDP) timetable and the DfC project approval criteria. Although not exhaustive, the Development Milestones will assist in ensuring the quality of scheme submission. Associations should note, that it is unlikely that a scheme would be acceptable for a tranche payment at scheme approval, acquisition, start on site or completion unless the appropriate Development Milestones have been achieved.

Design Standards – The detailed design standards to be applied to social housing according to scheme type and client group are identified in the Design Standards section of the Development Guide. Associations are required to ensure compliance with the Design Standards section of the Development Guide prior to submission to NIHE Development Programme Group.

Calculating Grant – The Calculating Grant section of the Development Guide provides guidance on the assessment of Housing Association Grant through the application of:

• Total Cost Indicators (TCI);
• TCI Groups;
• Scheme Multipliers;
• On-Cost Multipliers; and
• Grant Rates.

It is noted that access to the TCI tables is restricted to user organisations only

Claiming Payment - The Claiming Payment section provides guidance according to scheme type on the applicable tranches and requirements for tranche payments.