Council credit checks 'unfairly disadvantage charities'

Local Government Improvement and Development investigates complaint that small organisations are often deemed bad credit risks

Local Government Improvement and Development
Local Government Improvement and Development

Local Government Improvement and Development, the agency that works to improve standards in local government, is examining whether credit checks carried out by councils unfairly disadvantage charities, after a small disability organisation complained.

DABD, which is based in Dagenham, Essex, wrote to Rob Whiteman, managing director of LGID, formerly known as the Improvement and Development Agency (IDeA), and Eric Pickles, the communities secretary, after finding that council credit checks ranked it a bad risk.

DABD said it had discovered this while bidding for a contract and was worried it could affect other organisations.

A spokesman for the Local Government Association, which oversees the LGID, said that Whiteman had received the letter and was looking into the issue.

The Charity Finance Directors’ Group said many of its members faced similar issues, not only when bidding for government contracts but also when negotiating with insurance and pensions suppliers.

Melora Jezierska, policy officer at the CFDG said: "By their very nature, most charities do not hold large amounts of cash in the bank, tend not to take out loans and do not have guaranteed streams of income. 

"This means many are faced with poor credit ratings when using conventional forms of measurement."

She said her organisation’s members had said they were forced to bid in partnership with larger charities or private sector bodies because of their poor credit ratings.

"It’s essential that potential funders look beyond conventional, but inappropriate measures of creditworthiness when assessing the risks associated with charities," she said.

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