Cambs CTOs still breaching rules
An audit of the finances of a community transport scheme has discovered little separation between commercial and ‘not for profit’ operations.
Fenland Association for Community Transport (FACT) and allied CTOs ESACT and HACT was subject to a lengthy legal investigation late last year, which concluded that the organisations may have operated unlawfully in several respects. The investigation led to the CTOs rapidly setting up trading arms running with O licences.
But now, the county council auditor has concluded that the new commercial operations were cross-subsidised with loans from the CT. The five-page report says that no interest is being paid on the loans and no formal loan arrangement was made, crossing the line with HMRC and Charity Commission rules. Among loans made was one for £152,000 to Fenland ACT Trading Ltd, the commercial company to which tendered business was transferred.
The report also says that the costs of shared staff and vehicles are not accounted for, making tax liability uncertain, and the commercial operation may have been liable for business rates. It says that, although the trading arm charged commercial hire rates, there was no evidence that vehicles from the CTO fleet had been charged for.
‘The calculation of the hire charge should be reviewed to ensure that it can be evidenced that this covers the associated costs to the NFPO [not for profit trading organisation],’ says the report. ‘It is recommended that this considers the total cost to FH&E [the three CTOs] of each vehicle including depreciation, maintenance, MOT etc. N.B. from the guidance provided by HMRC, it is not clear that it would be appropriate for such charging to include a profit element . . . and it appears that if the charge set is in excess of the costs incurred by the NFPOs, this may open the organisation to the risk of challenge by HMRC Charities, as this could be viewed as a receipt of trading by the charity, which may not be exempt from tax.’
There was no clarity over ownership and shareholding in the commercial companies, so it was not clear that the CTOs are the major shareholders. Accounts filed by one of the trading companies were incomplete, not showing a loan or any operating income.
Confirming that he has now met new management at the organisations and was hopeful of progress, Dave Humphrey of the Cambridgeshire Bus, Coach and Taxi Association said: “It’s been seven months since PKF’s findings were made public, yet, despite the promise of change, little has altered out on the street.
“Let’s all hope with the promise of a new chairman and the main people responsible removed, the near future includes a FACT focused and motivated by the community rather than an unlawful greed for commercial ambition.”
Since the independent report last summer into FACT, most of the board members including Jo Philpott have left. The county council’s Chief Executive, Gillian Beasley, says that calculations are still being made to decide how much state aid may have to be repaid to the council.