A dodgy donation and a 'confidential' loan

A misguided political donation by childcare charity Catz Club led to a lengthy quest for the facts about its £1.3m loan from Futurebuilders. John Plummer reports

Catz Club after-school care
Catz Club after-school care

On 29 August, Greg Clark, the Conservative Party's shadow charities minister at the time, was browsing through the Electoral Commission's register of donations to political parties when he noticed that a charity called Catz Club had given £7,500 to the Labour Party.

He informed the Charity Commission, which wrote to Catz Club explaining that charities are strictly forbidden from making political donations.

On 1 September, the commission heard back from Catz Club, which provides after-school childcare under the trading name Schoolfriendetc, and two days later Labour returned the money. On 5 September, the commission published a regulatory report in which it said Catz Club had "misapplied" funds; had Labour not returned the money, the trustees could have been asked to reimburse it. Andrew Hind, chief executive of the commission, said: "This was of serious concern to us."

The donation attracted considerable media coverage, with Clark describing it as "a new low in Labour's donations history". But it turned out to be just the start of a saga involving Catz Club that included concerns about its wider links with the Labour Party, its funding relationship with the government loan fund Futurebuilders England and confidentiality deals about the use of public money. Here's how the story has developed.


Clark urges the Charity Commission to investigate Catz Club, saying there is "something very wrong with the judgement of trustees" for allowing the donation to Labour and for paying £7,500 to attend a fundraising event held by the party. A Catz Club spokeswoman says attending the event was "an alternative way for us to meet people who take a keen interest in the work that we do".


It emerges that the commission has been informally looking into Catz Club since September 2007. A statement by the regulator says its concerns relate to "internal financial controls and overdue accounts". The charity's accounts for the year ending September 2006 show income of £851,000, expenditure of £4.25m and liabilities exceeding assets by £4.26m. The bulk of its income - £600,759 - was from childcare fees.

The majority of expenditure went on the running costs of after-school clubs, which totalled £2,249,848. Administrative expenses included £97,397 on staff recruitment, £95,227 on printing, postage and stationery and £7,474 on credit card charges. Auditors Finniston & Co acknowledged that the financial situation "might cast doubt about the company's ability to continue as a going concern. However, we are satisfied that the company will continue to receive financial support from the chairman."

Tony Mitchell, Catz Club chairman, gave it a £1.79m loan in 2006 to help build new clubs, and the charity also received considerable funding from Futurebuilders, which gave it a £1.8m loan facility and a £200,000 grant facility in 2005 for infrastructure costs. The charity's most recent accounts have yet to be filed, almost 100 days after the due date.


The spotlight turns on Futurebuilders as questions are asked about its £2m award to Catz Club. The scrutiny intensifies when Clark discovers the government loan fund has recently removed all references to Catz Club from its website. A press release published on 26 May 2005 by the fund hailing its investment in Catz Club has been amended and the charity's name removed from a list of Futurebuilders investees. Clark asks chief executive Jonathan Lewis for an explanation, saying it seems that someone has "doctored a historical press release".


Stephen Bubb, chair of Futurebuilders, and Harriett Baldwin, chair of its investment committee, seek a full briefing on Catz Club in preparation for a meeting with Clark. The management of Futurebuilders transferred to the Adventure Capital Fund, also chaired by Bubb, in April, a month after the organisation ended its relationship with Catz Club on confidential terms. Richard Gutch, chief executive of the previous Futurebuilders management, says the current management should answer questions about Catz Club. The new management say it is constrained by the confidentiality clause imposed by its predecessors.


Clark meets Bubb and Baldwin but they are unable to tell him how much of the £1.8m Futurebuilders loan has been repaid because of the confidentiality agreement. Clark is not happy. "When you are using public money, you have a duty to be accountable and transparent about its use," he says. He is also frustrated that the Charity Commission inquiry into Catz Club is dragging into a 13th month. "The commission has had this complaint a year now and has indicated to me it is not going to be reporting any time soon," he says. "It has the power to disclose the truth here and we are all reliant on it."


Bubb and Lewis of Futurebuilders say confidentiality agreements will be reviewed. "When I started at Futurebuilders, I committed to being open and transparent," says Lewis. "These things should not be confidential." Meanwhile, he insists he is still bound by the terms of the agreement signed by his predecessors.


Catz Club's links with the Labour Party are raised in the House of Commons when Cabinet Office minister Liam Byrne is asked by his Tory shadow Francis Maude what role Baroness Margaret McDonagh and Amanda Delew played in the funding by Futurebuilders. McDonagh, a former trustee of Catz Club, used to be Labour's general secretary and Delew, a fundraising consultant for Catz Club, is a former party fundraiser. Byrne promises to reply. Catz Club has other Labour connections: former trustee John Rafferty was chief adviser to Scotland's inaugural First Minister Donald Dewar. Maude later tells Third Sector he is concerned about the apparent money-go-round between Futurebuilders and Catz Club.


Lewis apologises for the 'doctored' press release, which he says was amended by a temporary member of staff while he was on holiday. "It was wrong and we definitely should not have done it," he says. The original release has, however, not been put back on the website. Clark welcomes the apology but says: "It does touch on the transparency of Futurebuilders." He says there is a need to "get to the bottom" of what's going on at Catz Club.


It emerges that part of the £1.8m Futurebuilders loan to Catz Club remained unpaid when the secret termination agreement was signed in March. Futurebuilders' 2007/08 accounts show £1.2m as "provision against underperforming investments". A spokeswoman for Futurebuilders says the figure relates to loans to five organisations, including Catz Club, and that the Catz Club component of it has since been written off.


Futurebuilders and Catz Club finally agree to end confidentiality about the figures. A Catz Club statement says it drew down £1.3m of the £1.8m loan facility and received £153,600 of the £200,000 grant. The charity paid back £732,740 of the loan, meaning £567,260 was written off. It says McDonagh, Rafferty and Delew were not involved in getting or terminating the loan, but does not say why the sum was not repaid or answer in detail about its finances.



The largest voluntary sector provider of childcare, it runs 100 Ofsted-registered breakfast, after-school and holiday clubs for 25,000 children, in association with local authorities. Former trustees include Baroness Margaret McDonagh, former general secretary of the Labour Party, and John Rafferty, former chief adviser to Labour's Donald Dewar, Scotland's First Minister from 1999 until his death the following year. Its former fundraising consultant, Amanda Delew, is a former Labour fundraiser.


A £215m fund set up by the Government in 2004 to invest in voluntary organisations that want to deliver public services, mainly through loans. Management of the fund transferred to the Adventure Capital Fund in April, one month after the old management terminated its relationship with Catz Club.

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