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Care charity loaned over £173,000 to staff member to buy house

Governance | Niki May Young | 4 Apr 2011

The Charity Commission has concluded its report into Broad View Care Ltd after its second statutory investigation which revealed the charity had loaned over £173,000 to its director of nursing to buy a house.

Broad View Care was previously a private company owned by its director of nursing care (DNC) and director of finance (FD), before registering as a charity and submitting its first accounts in 2005. But, the Commission advised, it registered “without fully considering the legal roles and responsibilities that came with charitable registration”.

The charity subsequently became the subject of two statutory inquiries by the Commission which looked into concerns over the governance of the charity, including a lack of properly-appointed trustees, and the use of charity funds.

The first inquiry concluded with the appointment of new trustees and the sale of the charity’s care homes in Coventry, ceasing its operations in the area in January 2007, and with the resignation of the DNC and FD.

However, as the Commission underwent its assessment of the charity’s progress in implementing a new governance structure ten months later, it was made aware that both employees had returned to the charity, being paid £36,000 per annum each, without the charity having operated an open recruitment process or advertising the positions. The Commission concluded that there were now “serious concerns that the charity’s assets were at risk”.

A second statutory inquiry was then launched revealing that £100,000 of the charity’s funds had been used to settle debts and to cover redundancy payments to its staff. It was also revealed that the charity paid for the relocation of the DNC to Devon after the charity decided to provide services in this region. This included three months of rent-free accommodation while he arranged his move, £550 per month towards housing costs when he moved to temporary accommodation from August 2007 to April 2008, and a loan of £173,936.47 to purchase a property in Devon.

The inquiry also found that charity funds had been used by the FD to purchase a car, on the basis that the charity owed him money for unpaid wages, and that the charity had loaned him money in advance of his wages. More than £5,700 was found to be owed to the charity by the FD when the second inquiry launched.

The charity’s income in the year ending 2008 was just £3,839 while its expenditure was £82,160 and in the subsequent year its income was just £320 with an expenditure of £45,295.

In both inquiries the Commission had found the trustees negligent in their actions, failing to respond in a timely manner to the Commission, failing to address the shortfalls in their business plan and failing to adhere to the Commission’s advice to seek legal advice on the legality of the FD’s ongoing employment among its concerns over the charity’s financial management. The charity was “heading towards a moribund state”, the Commission said.

However the Commission has concluded its report satisfied that the charity had been “restored” by its intervention and that “ultimately the trustees had taken sufficient measures to improve the governance of the charity and ensure that they comply with their legal duties and responsibilities in the future”.  

By the conclusion of the report both the DNC and the FD had ceased their employment with the charity, following an interim period where the FD helped improve the business plan before his full-time role was deemed no longer necessary. The funds used by the DNC and FD were recovered and the charity’s objects are currently being re-written to reflect the purpose of a holiday home purchased for use by the charity’s beneficiaries.  

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