Rumours and regulators

This week, a report on the finances and management of a prominent UK homelessness charity, Novas Scarman, will be released. The auditors BDO Stoy Haward have been investigating the organisation—which was formed from the merger of Novas Group, Scarman Trust and PATH in 2008—for the past nine months. According to the Telegraph, the draft report raised concerns of ‘cronyism, nepotism, bullying and mismanagement at the heart of Novas, and questioned Mr Wake's [the founder and chief executive’s] professional relationship with three female executives at the charity’.

NPC researched the homelessness charity sector a couple of years ago. Our judgement was that the charities working in this difficult field are, as a whole, well-run. They care about important issues such as results-measurement, increasing people’s independence and user-involvement. They invest a lot of time and effort into ensuring that they are delivering high quality services for vulnerable people. They take governance seriously.

However, our judgement does not tell the whole picture: we only had time to see 40 or so charities, so we concentrated on those that appeared to be particularly effective or innovative. We did not look at Novas (as it was then), because we’d already seen lots of large London homelessness charities.

But even then, back in 2007, we’d been hearing concerns about Novas from some of the experts and charities that we’d consulted as part of our research. Without knowing the organisation, and before the report has been released, we cannot say whether those rumours (which did not imply anything as serious as is being alleged now and did not concern financial impropriety) were correct. But should they have prompted us to ask questions? Or were we right to treat them as irrelevant gossip? And what about the other charities who knew Novas well? As Jeremy Swain, Chief Executive of another UK homelessness charity Thames Reach, asks in a guest article in our newsletter, do charities have a collective responsibility for underperforming organisations? (I must note that Jeremy is discussing the issue in general, and is not referring to Novas in his article.)

Novas is not a registered charity, it is a housing association (like some of the other charities mentioned in our report). Its regulator is the Tenants Services Authority (formerly the Housing Corporation), who ordered the inquiry. We’re not saying that the TSA acted late, and we recognise that regulators have a difficult job to do. But it’s likely that other players in the field—funders, local authorities, charities—have inside knowledge that can take a while to reach the regulators. Should we be using this knowledge more forcefully?