Sheffaid, which provides care homes for old people, needs to spend ?xA3;15 million building six new homes and adapting two others to comply with new national care standards that come into force in 2007. Instead of receiving running costs from the council of £5 million over the next nine years, Sheffaid asked for the money sooner, accepting a cut in the total funding. It will now receive £4.6 million over the next five years.
Under Sheffaid's present funding arrangement, it has to share any surpluses with the council. In 2007, this link will be broken allowing the charity to reinvest its profits in expanding the business.
Chief executive Mike Vickers said: "The critical part of the negotiation is to be freed from the council. We will be free to develop into other services such as nursing care and move the business outside Sheffield."