On 30 January, the FRC issued Practice Note 14 The audit of housing associations in the United Kingdom (PN 14). The updated guidance reflects changes to the landscape in which the social housing sector operates. These stem from reductions in grant funding and the availability of other sources of finance following the financial crisis and governmental reforms to the welfare system.
As a result, many housing associations have diversified their activities and include more commercial activities such as care home or student accommodation. They are also taking different approaches to funding which often involve a move away from traditional bank loans towards more complex debt instruments. These changes give rise to a new and different range of audit risks. PN 14 provides guidance to auditors of housing associations on how to identify, assess and respond to these risks of material misstatement in the financial statements of housing associations.