Age Concern Birmingham has been criticised for an £80,000 loan given to its chief executive who earns up to £110,000 a year for her role.

The charity agreed to loan £84,000 to its chief executive Shirley Goode for a “property problem”. The personal loan, which was approved by the Charity Commission, was taken out in 2010 and agreed with the charity’s trustees.

John Hemming, Liberal Democrat MP for Birmingham Yardley, has criticised the charity’s decision to make the loan and suggested Goode should pay it back.

He told civilsociety.co.uk: “When people give money to charities they expect it to be used for charitable purposes not to make substantial loans to employees of the charity.”

Hemming added that although a loan of up to one month’s salary is not unreasonable as a salary advance, it does not fit in with the charitable objectives.

In a statement from Age Concern Birmingham, Shirley Goode said: “I am unhappy that the charity I love and where the staff all work so hard is being represented unfairly.

“My personal loan was taken out at 4 per cent - a rate considerably higher than bank interest and I stand by the fact that I prefer Age Concern Birmingham to make a profit from my loan.”

The charity has said that the loan was taken from reserves. It will be concluded in March 2017 and currently stands at £26,000. It added that the 4 per cent interest is based on HMRC’s official rate of interest.

However Hemming said: “Reading between the lines of the public statements of the charity the interest rate may be higher than a bank would pay the charity, but is less than it would cost the employee on the open market.  

“Such decisions would need a completely independent decision-making process as there is a clear conflict of interest.”

A spokesperson from the charity said: “Age Concern Birmingham has a policy of lending to its staff from its reserves where it is deemed appropriate and has made several small loans to staff members. These are small amounts, repaid quickly and therefore do not appear in the annual accounts.”

In a letter from the charity’s trustees to the Charity Commission regarding the loan, they wrote: “Shirley is a longstanding and trusted employee who has been with the charity in her current position since 1998. Shirley requested a loan due to some unexpected issues she was experiencing in relation to property.”

It went on to say: “Given the fact of the interest rate, the charity has gained on this loan in terms of the repayments, there has been no detrimental effect on the charity.”

According to the charity’s accounts for the year ending March 2013, one member of staff has a salary of between £100,001 and £110,000. This is assumed to be the charity’s chief executive, Shirley Goode. The income of the charity for that year was £2.1m.

A blog called ‘Charity Watch UK’ questioned the loan and chief executive’s pay in October last year. It wrote: “Around 1/20th of the charity’s income goes to one employee!!! Is that good value? Is that fair?”

The blog went on to question whether Age Concern Birmingham is a cause for concern.

At the end of last year NCVO launched its Executive Pay Inquiry which is to draw up guidelines for charity trustees when deciding on pay levels for senior executives.

Regarding Age Concern Birmingham’s loan, an NCVO spokesman told civilsociety.co.uk: "There is now significant public interest in how charities are operated and governed.

“For the sake of both their own charity and the wider sector, trustees must always think about how their decisions could be perceived by supporters, beneficiaries and the public.”

A spokeswoman from the Charity Commission confirmed that it had approved the loan.

She said: “Concerns relating to a loan to a member of staff at Age Concern Birmingham were raised with the Commission and we wrote to the trustees of the charity to ask them to explain how they made the decision that those terms and conditions are in the best interests of the charity.

“The charity has confirmed it has an established and documented loans policy in place which we are satisfied was followed in relation to this loan. As a result, there is no regulatory role for the Commission in this instance.”