Society Network Foundation used part of a restricted government grant to help it reduce the historical £180,000 deficit run up by its trading subsidiary, Big Society Network, without obtaining the necessary authority to do so.
And a claim by Big Society Network’s chief executive Steve Moore that it was given permission to do so by the funder, has been denied by the grant administrator Social Investment Business (SIB).
Now both the Cabinet Office and the Charity Commission are looking into the matter.
Moore told Civil Society News this week that the charity was authorised by the funder to transfer part of the unspent element of a £199,900 Social Action Fund (SAF) project grant into unrestricted general funds, which it then used to cut its historical deficit.
Asked why it allowed this, the Cabinet Office said it was still looking into the claim but that any variation in the use of restricted funds would have had to have been agreed in writing at the time between the charity and SIB.
But SIB’s head of marketing and communications, Chris Gibson, told Civil Society News this morning that: “In this case, we can confirm that no variation has been agreed with Society Network Foundation.”
Society Network Foundation (SNF) was registered as a charity in 2011 to “inspire and support people, communities and businesses to become more engaged in society”. It effectively brought the activities of the Big Society Network (BSN) into a charitable entity, by taking over its projects. BSN, which did not have charitable status, was set up in 2010 immediately after the election with the backing of David Cameron, to promote volunteering and community action.
Last month SNF filed its first full set of audited accounts, for the year ended 31 March 2013, with the Charity Commission and Companies House.
They show that the charity started the year with a deficit of £180,716, which was consolidated into its accounts from the 2012 accounts of Big Society Network.
By the year-end this deficit had been cut to £50,973.
Almost 80 per cent of the charity’s income came from the Cabinet Office. Grant funding totalling £549,900 was made up of £350,000 to run the Big Society Awards and £199,900 from the Social Action Fund to run a childhood sports project called Get In.
However, as Civil Society News revealed last year, Get In never launched.
SNF’s accounts show that while it received £199,900 for Get In, just £134,466 of the grant was spent on the project before it was put on hold.
Steve Moore told Civil Society News this week that after Get In was abandoned, SNF asked “the funder” if it could keep the remaining grant monies. He did not specify whether the funder was SIB or the Cabinet Office.
The funder agreed, Moore said, and the charity duly allocated £26,026 to another of its projects, Spring Giving, and transferred the remaining £39,408 into unrestricted funds.
Overall, SNF reduced its deficit by around £130,000 in the year. This was achieved by the £39,408 transfer from restricted funds, combined with a general fund surplus for the year of £90,335.
Moore told Civil Society News that it is “standard sector practice when a grant is terminated for the funded body to ask if the balance of the funds can be applied to unrestricted purposes”.
He added: “In this case the request was made and granted by the funder as is set out in our accounts.”
However, the accounts do not contain any statement that the Cabinet Office or Social Investment Business gave authority for the money to be reallocated to general funds.
As a result, the Charity Commission has confirmed to Civil Society News that it is to “carry out some further scrutiny of the accounts regarding what appears to be the transfer of restricted funds to unrestricted funds. We are yet to establish whether, and what, regulatory steps may be taken.”
Cabinet Office responds
The Cabinet Office said it was still looking into the matter yesterday but issued the following statement: “As part of our standard grants management process we routinely request and review annual accounts when they become available to ensure that expenditure has been used and accounted for correctly.
“Any variations to the intended use of any grant on Social Action Fund should be agreed in writing between the recipient and our grants manager, in this case, Social Investment Business.
“As the accounts for BSN/SNF have recently been published, these will be reviewed and acted upon if appropriate, in accordance with our standard procedures.”
Bubb investigated complaint about SAF grant last year
Social Investment Business chair Sir Stephen Bubb already investigated a complaint last year about the decision to award the Social Action Fund grant to BSN/SNF. The complaint centred on concerns that the grant was made despite BSN/SNF not meeting a number of the published criteria; that the grant was omitted from the list of winning bidders on the SIB website; that SIB refused to name the members of the grant recommendation panel, and that neither the applicant, SIB or the Cabinet Office had been able to say what the money was spent on.
But Sir Stephen found no evidence of impropriety in the grant decision.
Consultancy fees of £76k paid to directors
Society Network Foundation’s staff costs for the year amounted to £161,183, for an average of seven full-time staff. During the period, Big Society Network also paid a total of £76,100 in consultancy fees to its directors Steve Moore and Lucy Windmill and to Martyn Rose, chair of the charity.
SNF board: 'Highest standards of financial conduct'
SNF’s trustees – Martyn Rose, Jonathan Brinsden, Randi Jo Weaver and Giles Gibbons - issued a statement through Steve Moore earlier this week which said: “As a trustee board we are committed to the highest standards in relation to financial conduct and good governance.
“We want to be clear. We have not at any stage used restricted funds to reduce the size of the Big Society Network Ltd (sic).
“The surplus in Society Network Foundation used to reduce the Big Society Network Ltd deficit was unallocated unrestricted grants and its deployment was made at the discretion of trustees.
“We are satisfied that the financial conduct of the Society Network Foundation is consistent with the high standards of governance we have committed to.”
SNF received another £150k from Cabinet Office this year
Minister for civil society Nick Hurd confirmed in answer to a Parliamentary question last summer that the Cabinet Office has also paid £150,000 to Society Network Foundation in the current financial year, though the Cabinet Office refused to say what the grant was for.
A £1m Big Lottery Fund grant to Society Network Foundation for an Olympic legacy project called Britain’s Personal Best is currently under review by BIG after targets were missed.
BSN was set up in 2010 as a private company limited by guarantee and said at the outset that it would not seek government funding, but nevertheless has received £1.2m in various grants from the government and £1.8m from the Big Lottery Fund.
