The Social Investment Business has insisted that it carried out full due diligence on the £300,000 loan to AT Care CIC, despite having to write off the loan when the company went into liquidation just nine months later.

The Social Investment Business (SIB) has also declared that it takes its approach to managing conflicts of interest very seriously. Its approach is “embedded in our governance and throughout our investment processes” and is “independently audited and reported on in our accounts”.

Greg Aitken, chief executive of Hull and East Yorkshire Mind, demanded answers from SIB this week about its management of conflicts of interest after civilsociety.co.uk ran two stories reporting the various "related party transactions" detailed in SIB’s newly-published accounts.

These transactions included the granting of a £300,000 loan to AT Care, where SIB board member Kevin Carey was a consultant. Further investigation by civilsociety.co.uk revealed that the company went into liquidation just a few months after drawing down the last of the funds. None of the loan was repaid and SIB had to write off the loan earlier this year.

Aitken, responding to the story on Monday, said: “We need a clear statement from SIB board and Kevin Carey regarding due diligence, conflict of interest declarations and how they managed conflict of interest.”

Buying of Acevo services

Other transactions included the purchase by SIB of £115,000 worth of Acevo services over the last three years. Sir Stephen Bubb (pictured) is both chair of SIB and chief executive of Acevo.

Aitken wrote:  “We are members of Acevo…why can't Steven (sic) Bubb follow the training on leadership and governance Acevo give to their members through publications and training events?”

A SIB spokeswoman pointed out that decisions made about the governance of the organisation are quite separate to decisions made by its investment committees.

Full due diligence on AT Care

She told civilsociety.co.uk: “On AT Care, SIB carried out the full due diligence for the investment and presented a detailed investment proposal to the fund’s investment committee who then took the decision to invest in line with the fund’s investment priorities.

“Kevin Carey does not sit and has never sat on that committee and has no influence over its decisions. His interest in AT Care is declared in the register of interests.

“To be clear we are satisfied with the due diligence carried out in this case.”

Christine Asbury, who was chief executive of  AT Care, has not responded to enquiries about why the company took out the loan so close to its collapse.

Sir Stephen declares Acevo post at each meeting

Regarding the buying of services from Acevo, the SIB spokeswoman stressed that none of the funds managed by SIB have ever invested in Acevo and that Sir Stephen’s position at Acevo is declared in the register of interests and clearly stated at the start of each board meeting.

“Transactions with Acevo are therefore clearly with a related party and are approved by the remuneration committee on which the chair does not sit and therefore has no influence on its decisions. These transactions are then reported in our accounts.”

Conflicts are inevitable

The spokeswoman added that it would be almost impossible for SIB to get the right people onto its board and committees without conflicts arising from time to time.

“What matters is how we manage those conflicts, and I trust that you can assure your readers from this description that those processes are more than comprehensive.

“The fact you have read about these transactions being voluntarily declared in our annual report and accounts is testament to these processes and the transparency which surrounds these decisions.”

Framework for managing conflicts

The key elements of SIB’s framework for managing conflicts are as follows:

• All members of the board, executive directors and members of the investment committees declare any interests which may give rise to a conflict in a register of interests which is updated at least every six months.
• In addition to this, at the start of every meeting any further conflicts which directly or indirectly relate to the items being discussed are raised and fully documented in the minutes.
• Conflicts are deemed to either be disqualifying or non-disqualifying depending on the nature of the association. If there is a disqualifying conflict then that individual will leave the room and not take part in any way in the decision making process.
• Issues relating to individual trustees, such as their remuneration or transactions with related parties, are dealt with through the board’s remuneration committee which is overseen by an independently chaired committee of our parent charity.
• Each investment committee has independent members, for whom an element of their role is to provide that additional scrutiny to the investment process.
• Conflicts are also managed through our financial authorisation controls where no individual can authorise or influence a transaction to a related party or to an organisation where a conflict might arise.