The Challenge facing claims of almost £8m

The youth charity The Challenge faces potential claims of almost £8m from creditors after its collapse into administration last year.

A report from the charity’s administrators, published on the Companies House website last week, says The Challenge owed £7.9m to unsecured creditors and has so far received claims of £4.2m.

The charity also owes £1.3m in redundancy fees to staff due to leave by 30 November, but who were unable to receive their payments after the charity went into administration on 25 November.

The Challenge collapsed after losing a £60m contract in August to deliver parts of the National Citizen Service, which was approximately 95 per cent of its total income.

The administrator's report says that in March 2019 The Challenge was provisionally awarded NCS contracts for 2020 to 2023, only for the offer to be withdrawn in July 2019.

The two organisations dispute the reasons for the withdrawal of the contract offer.

The Challenge submitted a legal claim against the NCS Trust – which runs the NCS – in October.

That legal claim centred on alleged problems with the NCS computer system, which The Challenge was told to move to between April 2018 and May 2019.

The administrator's latest report says that the value of The Challenge’s legal claim against the NCS Trust is valued at £26m, but legal proceedings were put on hold until 31 January to allow the administrator “time to review the claimant’s position and to consider legal advice as to the next steps”.

A court order on 9 December confirmed the delay to proceedings requested by the administrator.

The administrator’s report says £3.3m in further funds is available to creditors from cash in the charity’s bank accounts, making a total of £29m should the legal claim against the NCS Trust be successful.

The report says there were 209 staff on the day of the administration, with 89 already set to leave on 30 November 2019.

A team of 50 has been retained by the administrator, including members of the senior leadership team, finance, HR, payroll and IT.

The administrator’s report says The Challenge’s successful Headstart Core programme – which was developed with the Mayor of London and prepared school-leavers for the world of work – has been sold to an as yet unnamed company.

T Levels, a programme designed as a technical alternative to A Levels and which was delivered by The Challenge through a contract with the Department for Education, has been transferred to the Association of Colleges along with all of the programme’s staff, the report says.

Other work run by The Challenge, such as the secretariat for the All-Party Parliamentary Group for Social Integration, the British Integration Survey and numerous research and policy programmes, has been handed to other organisations.

The administrator is taking legal advice on the future of Real Challenge Action funds, which were raised by young people for selected social action projects. The funds were kept in the same bank accounts as the charity’s funds, rather than in a separate ring-fenced account, the report says.

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