Calls for Independent Accountants' Review to Clarify Worrying Changes to Charity’s Annual Accounts
17 February 2015
Many voting members of the Camphill Village Trust charity have been awaiting clarification of the questions raised during a stormy AGM last December about CVT’s latest set of accounts which included financial re-statements for the previous year.
On behalf of CVT, Company Secretary and Finance Director Mark Barnish promised that they would address the assorted costs questions raised by concerned stakeholders separately after the AGM in order to keep agenda items moving on the day.
No response has been received to date clarifying the questions raised, and campaigners now say they have no option but to call for independent accountants to review these accounts for proper clarification. What’s more, at the AGM members again raised the two year old promise by CVT to provide in depth analysis and comparison of Co-worker vs. paid employee costs which have not been supplied.
The key questions raised at the AGM were derived from a detailed analysis of CVT’s publicly available accounts by top forensic accountants Forths. The queries over the accounts are extensive and include:
- A substantial increase in running costs by 85% to nearly £6M during a time that the business itself actually shrank as two Scottish sites (of the original eleven) demerged from the charity, when costs ought naturally to have reduced. For example between 2010 and 2014, ‘Management and Administration’ expenses have (more than) doubled from £1.1M to £2.9M.
- Changes to the previous year’s accounts were made with no explanation, that, according to Forths specifically do require proper explanation in order to comply with FRS3 requirements. Examples include re-statement in both costs and earnings to some centres which, without comment, is not normal practice. These are notable as they appear possibly to distribute head office costs across other cost centres, making it difficult to determine the true position.
- An unexplained shift in the way that volunteer Co-worker costs are calculated. These particular costs had been very clear previously but now have increased through the addition of a blanket ’Allocated Expenses’ of nearly £800K. In 2014 additional sums of nearly £8,000 on average per Co-worker were added without explanation.
The report by Forths states “It is clear that a major re-statement of co-workers costs as reported in CVT’s ARFS 2013 has been carried out, so as to show prior year figures for 2013 in the 2014 Financial Statements. Whilst there would appear to have been an attempt to provide a more detailed analysis of co-worker costs in 2014 (and re-stated prior year) FS, based on these alone, a meaningful comparison of previous years’ co-workers costs cannot be made and such analysis of these costs could be deemed to be misleading”
Because many retrograde changes are not explained in the accounts, it is impossible to know what precisely has been reallocated and if these changes are valid.
“The charity controls many millions in assets and has a huge turnover, and the lives of hundreds of people, many extremely vulnerable, depend upon it being run in a fit and proper manner. If a deliberate attempt had been made to mislead with its last annual accounts, CVT could not have done much better. The accounting criteria have been altered so that comparisons with previous years are virtually impossible.” says Neil Davidson, chair of campaign group Action for Botton. “Members tried to get this issue addressed through a motion at the Annual General Meeting but this was sidestepped and now eight weeks later we still have no response to the questions raised. It is now time that the issues are addressed by an independent professional forensic accountant.”
Questions about these accounts come at a time when CVT is already under scrutiny with claims of harassment being made to local Police from one site at least, pending actions for compensation by ex-community members who claim to have been bullied out of their roles and a lawsuit pending over human rights abuses. In addition, a letter before action from campaigners, including parents from one community now devoid of Co-workers, has now been issued over potential breaches of the charity’s articles and a form of manipulation of membership before last year’s AGM.
To see the full accountant's report click the following link: http://bit.ly/17j4dqc
Highlights from this raise many questions about CVT's accounts that include but are not limited to the following:
Evaluation of the Financial Statements (extracts) - Income and Expenditure Accounts
Differences have been noted between the contemporaneously prepared 2013 Financial Statements (FS) and the prior year figures for 2013, as shown in the 2014 FS. No note explaining the reason for this prior year adjustment has been found, nor do the prior year figures in the 2014 FS clearly show they have been restated.
Paragraphs 29 and 60 of FRS 3 of the Accounting Standards Board 1992 refers. A note explaining the reasons for the prior year adjustments to both income from charitable activities and resources expended should have been included in the 2014 ARFS for CVT, detailing fully whether the adjustment has arisen from either a change in accounting policy or the correction of a fundamental error.
There are prior year adjustments to ‘Farm and Land Production’ and ‘Workshop and General Produce’ again without statement as to why reduction to both income and expenditure have been made. The Financial Statements record a switch from Farm and Land Production having generated an excess of income over expenditure in the years ended 31 March 2010 and 31 March 2011, but since that since the year ended 31 March 2012, this charitable activity has been loss making. The same switch applies to ‘Workshop and General Produce’.
There are further restatement issues identified in the report.
Staff and Co-Worker Expenditure – unexplained increases in spite of reduction in charity size
Wages and salaries costs have increased; year on year, since the year ended 31 March 2010, rising to a high of almost £5.5m in the year ended 31 March 2014.
For each year ending 31 March, wages and salary costs have risen: 2011, 4.3%; 2012, 31.4%; 2013, 23.3%; 2014, 9%.
The above annual wage and salary cost increases in the years ended 31 March 2013 and 31 March 2014 have occurred after the two Scottish Communities were demerged in September 2012, in the year ended 31 March 2013.
Total staff numbers have increased year on year in the period 2010-2014.
Of note is why, following the demerger of the Scottish communities, did an increase in staff numbers in the same year of approximately 25% ((268-215)/215 x 100) occur?
There are contradictions between the 2014 AFRS and 2013 AFRS on the number of staff enjoying categorised emoluments: 2014’s Note 17 clearly contradicts that shown in 2013 FS Note 17 regarding the number of individuals’ earnings between £60k and £70k (of 3 as opposed to 1) and the pension contributions made (£4k as opposed to nil). Detailed explanation of the inconsistency should be sought.
There are further issues identified on Staff Expenditure.
Payments and Benefits relating to Co-Workers
At Note 12 in the ARFS’ of 2010-2013 and Note 13 of ARFS 2014, there is an analysis of expenses of co-workers, helpers and dependent children.
Note 12 of AFRS 2010-2013 states “the following community expenses, in addition to living accommodation and other daily essentials” that is, such costs are excluded. However from ARFS 2014 Note 13, it is clear that a significant shift in reporting these costs has occurred.
It is clear that a major re-statement of co-workers costs as reported in CVT’s ARFS 2013 has been carried out, so as to show prior year figures for 2013 in the 2014 Financial Statements. Whilst there would appear to have been an attempt to provide a more detailed analysis of co-worker costs in 2014 (and re-stated prior year) FS, based on these alone, a meaningful comparison of previous years’ co-workers costs cannot be made and such analysis of these costs could be deemed to be misleading.
There are considerable further issues identified on Co-worker Payments and Benefits.