Regulator agrees confidential settlement after charity gave away fostering service 'worth £1.5m'

A report by the Charity Commission says the Greenfinch Charitable Trust, now defunct, transferred the service for free and received only £24k for its tangible assets

Charity Commission
Charity Commission

The Charity Commission agreed a financial settlement with two people involved with a now defunct charity after it transferred a fostering service worth an estimated £1.5m to a connected private company for free.

A statutory inquiry report published by the regulator today says it agreed a confidential settlement with two people connected to the Greenfinch Charitable Trust, which went into liquidation in 2010.

The commission’s report says that after a long running investigation, which began as a compliance case in 2009 before being escalated to a statutory inquiry, the regulator had concluded there had been "several breaches of trust which had led to the charity losing a significant amount of money" and action for recovery of that loss should be taken.

The report says the charity’s main activity between 1998 and 2004 was the operation of a fostering agency, which had originally been gifted to the charity by the charity’s manager.

By 2004 it was managing the placement of about 50 children and its accounts for the year to the end of May 2004 showed an income from the agency of £2.1m, the report says.

But in that year, the report adds, the charity decided that changes to social services policy would make providing the service more risky. It decided to stop fostering work and transferred the agency to a private company called Next Step Fostering Services.

NSFS was owned by two companies, one of which was owned by the husband of the charity’s manager and the other by the manager’s daughter and the charity’s service director, the regulator discovered.

The commission found that the charity had transferred the agency for free and received only £24,519 for its tangible assets.

It also found that the charity had not obtained an independent valuation of the fostering agency and the trustees’ decision-making process for the transfer was flawed.

"The meeting at which the decision was taken was not quorate, the various conflicts of interest were not managed and the trustees failed to consider relevant factors such as alternative ways of protecting the charity from the alleged increased volatility of fostering as a business and failed to consider alternative buyers or a charitable company to take over the fostering agency," the regulator’s report says.

An independent valuation of the fostering agency, commissioned by the regulator, estimated that the fostering agency was worth £1.5m at the date of transfer.

The regulator’s report says that the charity contested the accuracy of this sum and estimated that the agency had nil value at the time of transfer.

But the commission’s report says the charity does accept that the transfer was not dealt with properly.

The report also says the charity incurred costs totalling about £318,000 between 2007 and 2008 as a result of an outsourcing arrangement to a company part-owned by the service manager of the charity, who has since left.

The report says the regulator issued proceedings in the High Court in April 2013 against four unnamed individuals in relation to lost funds resulting from the outsourcing arrangements.

It says two defendants attended mediation in May 2014 and, after further negotiations, a settlement agreement was reached in respect of claims against all defendants.

This was accepted by the High Court in November 2014 and the regulator discontinued its claims against the other two defendants.

The report says that the terms of the settlement agreement are confidential, but the liquidator was able to use the money to pay all the creditors in full plus the costs of liquidation.

The liquidator was able to pass a further £181,081 to other charities with similar objects from the funds, the report says.

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