Private Eye, No. 1240

CHARITY SPENDING
Champagne supper Novas

WHILE they were running out of cash to run hostels for the homeless,
bosses at national social care charity the Novas Scarman Group (NSG)
were splashing their funds on decorative woodwork and trips to Paris
Fashion Week.

Nine months after a Housing Corporation inquiry was launched into NSG's
alleged misuse of public funds and financial mismanagement, the group
finally admitted in June that it was indeed in trouble, issuing an
"unreserved apology" for its "failure to manage elements of the
finances".

Novas's founder and chief executive Michael Wake took redundancy in
May, accepting an £80,000 pay-off for his role in the debacle. Wake,
who had been on gardening leave in Malaysia since January, was not the
only one: executive director Mathew Pike swiftly followed with £32,000
redundancy. The entire board of directors has also been replaced since
November, mostly at the insistence of the Housing Corporation's
successor, the Tenant Services Authority (TSA). NSG said the management
had been "restructured" because it was "too complex and top-heavy".

Details of the award-winning charity's fall from grace are still
emerging ahead of the inquiry's final report, expected within weeks.
But to some extent NSG fell victim to its own hype - investing heavily
in iIl-judged commercial enterprises and loss-making art galleries in
pursuit of "releasing enterprise and cultural expression".

Arts director Erwina Aghafar is one of several managers criticised for
taking frequent trips abroad to purchase art for NSG galleries and
"forge cultural links". Ms Aghafar made at least three company trips to
Malaysia in the past two years, spending £60,000 on an "Oriental
kitchen", shipped back for NSG's £13.8m Contemporary Urban Centre in
Liverpool. Thousands were also spent on decorative woodwork for the
centre and a £260,000 Chinese theatre, also in Liverpool, which closed
within months of its 2007 opening due to lack of use.

Rough Sleepers was a "haute-couture boutique with a conscience" in
Camden, London, designed by Japanese artist Sonoko Obuchi to look like
a giant shopping trolley and envisaged to raise money for the socially
disadvantaged. Despite non-existent sales, its managers enjoyed several
jaunts to Paris Fashion Week "for networking purposes" on the company
credit card. It closed in February 2008 with heavy losses.

Around the same time, reports began to emerge of inadequate levels of
care in some Novas hostels. Elderly residents in Arlington House, also
in Camden, complained of being without heating for weeks. NSG denies
this, though it admits staff numbers were cut from 800 to 380 in the
last four years as the group sold off all its 16 hostels, bar one in
Kent that awaits sale.

For years, the true extent of Novas's problems was obscured by the
group's extensive property and social housing portfolio. The group
reported operating losses of £277,700 in the financial year 2006-07 -
before Novas merged with Scarman Trust and Path National and
accumulated their debts in December 2007. The same year, however, it
sold assets worth £2.3m.

Novas Scarman Group has still not filed accounts for 2007-08 but two
subsidiary companies, Novas Social Enterprises and Path National,
revealed losses of £501,914 and £276,365 respectively over that period.
Path National's accounts include a cash loan from NSG of £595,000.

Even when government inspectors were at the door last October, the
charity claimed: "NSG has a robust balance sheet. with assets of over
£40m with no loans against these."