The National Audit Office has criticised the length of terms given to trustees at the disability charity Motability in a damning report that has also prompted the chief executive of the charity’s connected company to step down.
Motability, which runs a government-backed scheme to provide cars to disabled people, invited the NAO to investigate it in March when MPs on the Treasury and Work and Pensions committees raised concerns about high executive pay and reserves at its connected company, Motability Operations Ltd.
The NAO’s report, published today, says that the charity struggled to influence executive pay at the company and the average tenure of a trustee or governor at the Motability charity before September was 18 years.
"The Charity Governance Code recommends a tenure limit for governors of nine years," the report says.
It acknowledges that, after a governance review was carried out in July, three trustees resigned and five new ones were appointed in September.
But it says: "Following these changes, there are now four governors who continue to significantly exceed the recommended tenure limit of nine years, having each served for at least 16 years.
"While there is collective expertise in financial and automotive services, as well as personal and professional experience of disability, there are no black and minority ethnic governors, and only one female governor."
A spokeswoman for the charity said this issue would be addressed in due course.
The report says that Mike Betts, the chief executive of Motability Operations, was due to receive £1.6m more in bonuses than had previously been disclosed, bringing his total long-term bonus package to £1.86m, on top of a £1.7m remuneration package of salary bonuses and other benefits.
In a statement published today, Betts said he planned to step down from the role no later than May 2020, as soon as a suitable replacement could be found.
The NAO report says: "While, following a review, total executive remuneration at Motability Operations will now fall, Motability has had difficulty over a long period of time influencing Motability Operations to set executive pay at the levels the charity considers appropriate."
The report says that, between 2008 and 2017, Motability Operations generated a profit of £2.19bn – £1.05bn more than was expected – because of inaccurate forecasting of the value of vehicles. This, it says, led to customers being charged £390m more than was required in their lease agreements to cover the costs of depreciation.
And it says the company was hanging on to reserves of £2.62bn as of March.
But the report adds that the company provides "excellent" customer service, with 99 per cent customer satisfaction, and leases cars at prices that are 44 per cent lower than competitors.
Lord Sterling, chair and co-founder of Motability, said the idea that customers were being charged more than was necessary was "open to further debate", but the charity accepted the NAO’s recommendations that it should develop a long-term strategy for how to put the income from Motability Operations to best use, address the findings of the governance review and review its reserves and performance framework.
In a statement, Motability Operations said it had already invested £183m in supporting lower pricing and donated £400m from "windfall profits" to the charity.
A statement from the Charity Commission, which opened a compliance case on Motability earlier in the year, said: "Charities that have close relationships with non-charitable organisations need to carefully manage those relationships. It is vital that the public can understand when they are dealing with a charity and can have confidence that those running the charity are doing so independently and exclusively in the interests of their beneficiaries and the public."
The commission said it would publish new guidance on connected companies in the new year.