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Probe into advice bureau debt
MYSTERY this week surrounded the closure of the “privatised” Islington Citizens Advice Bureau, which is under investigation after being forced into liquidation owing more than £500,000.
A preliminary report has concluded that inherited debts, loss of contracts, and reductions in funding from Islington council led to the closure of the CAB office in Finsbury Park.
At a private meeting attended by the Tribune liquidators revealed that they will be carrying out an investigation into whether or not there has been serious financial mismanagement.
A member of the liquidator team Kingston Smith and Partners told the meeting on Wednesday that with just £21,000 in estimated assets on the books identified so far there is no guarantee that staff will get back all that they are owed. Islington North MP Jeremy Corbyn said there are now no CAB offices in the borough where once there were three. Residents struggling for advice on bad debt or legal issues are having to seek help from other organisations or contact CAB offices in other boroughs.
He added: ”My office was next door to Finsbury CAB and as far as I could see staff worked extremely hard where as the management may have been rather poor at administrating the massive debts that have accrued.”
Part of the problem it appears is that like so many previously statutory funded organisations the bureau – with its voluntary group of trustees - had been forced into becoming a limited liability company with the added pressure of seeking its own funding.
Mr Corbyn added:” I believe that there should be a statutory funding arrangement for these important advice services. I was there the day the place closed. It was tragic- people turned up for work and were told an hour later that they were being made redundant.
“They put their personal possessions in a plastic bag and that was it.”
But questions were also being asked about how advice staff, who are normally pretty good at giving out essential financial information to others in desperate need, could have allowed themselves to get into such serious debt.
Fourteen staff from the CAB office in Durham Road, including director Anne Femi, were made redundant in March this year. They are owed a total of £158, 615 in combined unpaid wages – some as much as £30,000-£40,000 each – including redundancy pay.
Citizens advice, a lifeline to an increasingly debt ridden society, was once core funded by the local authority. But back in 1999 the branch was forced to become a limited company after Islington council slashed its funding by 75 per cent.
The report states that increased cash flow difficulties began when the local management committee identified a historical deficit and Islington Council cut the grant.
The report goes on: “In 2001 the company was moved to Finsbury Park where rent was four times the level of the previous rent.”
Finances improved in 2002, the report said, but by 2003 a new deficit arose as a direct result of annual inflationary increase to salaries, loss of contracts and an increase in rents that were not matched by an increase in income and grants.
By March 2005 the bureau’s statement of accounts revealed a massive £560,668 deficit. Despite attempts at financial control the debt remained.
An advice worker who attended the meeting but didn’t want to be named said: “We’ve had this debt hanging over us for three years but none of us expected we’d end up losing our jobs because of it.
“The irony is not lost on us advice workers. You always tell clients to recognise bad debt and take immediate steps to deal with it. I don’t know what went wrong – but I suspect it might have something to do with having to beg and borrow rather than having proper funding.”
A Finsbury client Leo Chapman said that it appears that staff wages, rent and other costs rose inexorably while funding was drying up. “I was a satisfied client and while the ICAB was continuing to try to help people there may have been a degree of whistling in the dark while hoping for the best from Islington Council and other providers,” he added.
Among the creditors are the Inland Revenue which is owed £130,282 including £100,000 PAYE and Islington council which is owed £52, 933.
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