Landlord breaches economic standards after failing to understand its funding obligations

The financial information received by the RSH revealed significant liquidity issues in the short term caused by a misunderstanding by Rapport of its funding obligations. 

This resulted in it being unable to implement its proposed strategy of exiting and disposing of its care operations, including its involvement in a long-term lease arrangement, to improve its financial position and maintain its liquidity position.

The business planning and risk management framework failed to ensure that Rapport, once its initial strategy had failed, had alternative options available to secure new funding or manage its costs accordingly to maintain its liquidity.

As a result, the RSH concluded that the landlord had failed to demonstrate that it has an appropriate, robust and prudent risk and control framework in place. 

The regulator said that Rapport has failed to assess, manage and address risks to ensure its long-term viability, including ensuring social assets are protected by carrying out detailed and robust stress-testing.

It also failed to ensure it understands and manages the likely impact on current and future business and regulatory compliance before taking on new liabilities.

This lack of effective board oversight and management of its key risks is a fundamental failure of governance, the RSH said.

The RSH said it will continue to work intensively with the landlord, and it has used its powers to appoint interim officers to the board, to give Rapport additional skills and capacity to address these failings.

Harold Brown, senior assistant director for investigations and enforcement, said: “This is a fundamental failure of governance by Rapport, including ineffective management of its financial risks which led to significant liquidity issues. Rapport needs to address these issues urgently and we are working with the provider intensively to ensure that it does so. 

“As part of this approach we have appointed statutory officers to strengthen Rapport’s board, to help provide the capacity needed to support the management of its financial position, ensure that tenants remain safe, and address weaknesses in its governance.” 

Rapport has been approached for comment.