Charity issues

Derventio Housing’s housing benefit ‘cash machine’ now funds 3 Directors on nearly £100k salary each.

Derventio Housing is not a charity, it is a Community Interest Company (CIC). Its purpose is to generate a surplus which can then be used to support the community it was established to serve.  It is not a vehicle for paying large salaries.

“If the Regulator becomes aware of potentially excessive director remuneration, the Regulator is likely to wish to discuss the matter further with the CIC concerned. If the conditions for the exercise of the Regulator’s supervisory powers are met, the Regulator may also wish to exercise the Regulator’s formal powers of investigation or audit, and if it appears that the level of remuneration being awarded to a director is legally unjustifiable, the Regulator will consider taking one or more of the forms of enforcement action which are open to the Regulator (including bringing proceedings in the name of the company against a director for breach of duty, or ordering the removal of a director)”

Office of the Regulator of Community Interest Companies: Information and guidance notes, Chapter 9

The recently published 2019 accounts raises more questions.

The surplus generated in 2019 was £116k on income of £6.2m. The 6 Senior Management Board are jointly paid £685k ( a 29% increase on 2018), of which 3 are earning a basic salary of between £90k and £100k?

Unusual changes in reporting

The 2019 accounts state that 3 people received a salary of between £90,000 and £99,999.99 in both 2019 and 2018.

Interestingly, the 2018 accounts state a different picture for 2018.This discrepancy is unexplained.

In 2018, the highest paid director received £100,000

Somewhat bizarrely in the 2019 accounts this has been reduced by 4p, so it is shown in the lower banding

How does Derventio make money?

At its simplest level, Derventio rents houses from private landlords, and then uses them as shared/support housing.  The income it receives is from enhanced housing benefit (public money)– “enhanced” as Derventio provides additional support services to the tenants; most of the tenants are vulnerable and will need on-going help.

This is not an unusual business model and is easily scaleable.

The principal costs are lease charges, support staff, maintenance and service charges…management and admin.

Since 2015, there has been a 29% increase in the number of properties let, resulting in a 53% increase in total housing benefit.  This has been achieved as the benefit per property has increased by 20%, the number of properties each employee is supporting has also increased by 20%

£2.3m extra turnover, 132 more properties ( to 594)…and only 3 more support staff. A significant dilution of the support provided.

The surplus has only increased from £54k in 2015 to £116k in 2019, after the near doubling (£320k) of salaries paid to senior management…and an unexplained £500k increase in “Other costs” in 2019.

This surplus is also after the £1m paid to Homes 2 Opportunities Ltd– an independent company owned, solely, by Sarah Hernandez, the Managing Director of Derventio Housing with the salary of £99,999.96.

Comment

No doubt the 594 houses are a great asset to the social housing stock. However, as a CIC, the trading surplus should be used for community purposes and not to fund excessive salaries for senior management.  That is not in the spirit of the CIC regulations.

Siphoning off £1m to the MD’s personal company, which made £200k profit and which is not then part of the CIC obligation also sounds questionable.

Perhaps this organisation should be investigated to ensure that the Housing Benefit it receives is entirely justified and whether the directors remuneration is “legally justifiable”

Categories: Charity issues

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