A community organisation in Northumberland designed to pay the wages of parish council clerks has amassed a near £600,000 deficit in payments to a pension pot for local government workers.
Community Action Northumberland (CAN) – which pays the salaries on behalf of the Northumberland Association of Local Councils (NALC) – has built up a shortfall of £596,000 to the pension fund for parish council clerks.
Northumberland County Council which administers the fund has told The Journal it has been in talks with the organisation since last year on how they can fill in the black hole.
CAN was established for general charitable purposes in 1951. It serves as a voluntary and community sector infrastructure body to support and develop community groups, charities and voluntary bodies throughout Northumberland.
On NALC’s behalf, CAN oversees the pay of parish and town council employees in the county and offered them the chance to sign up to the county council’s local government pension fund.
However, it has now emerged that CAN has built up a deficit of £596,000 in relation to those employees who are signed up to the council’s fund. It is not clear whether the council has had to make up any of the shortfall. Information in CAN’s directors’ and trustees’ report and financial statements from earlier this year reveals that the organisation identified a shortfall in the fund in March 2007.
It tells how in 2008/9 CAN stopped offering new parish and town council employees the chance to join up to the pension fund, in order to reduce the future pension liability.
The document further reveals that in October 2011 a limited company was set up in addition to the original CAN, with the two to be known as Old CAN and New CAN respectively and the new body to be the trustee of the old.
And in December 2012, employees, funds, sundry moveable assets and grant aid arrangements were transferred from Old CAN to New CAN.
However, the pension liability was left with Old CAN.
A letter sent by a law firm acting for CAN reveals that the county council has threatened to make up CAN’s pension deficit from New CAN and from trustees of Old CAN.
It furthermore reveals the council was to send an invoice for monthly deficit contributions of £2,258.33 for the period from this April this year, which it alleges are due and unpaid.
The council also threatens to terminate the admission agreement to the pension fund unless an alternative solution is offered.
The law firm’s letter sets out CAN’s view that the deficit is the responsibility of Old CAN only and that Old CAN indemnifies New CAN from expenses incurred as a result of running Old CAN.
The firm states that it is “unclear” how any claims could be made against the former trustees of Old CAN.
It says it regards the council’s threats as “an attempt to place pressure” on New CAN to enter into an “unaffordable and inappropriate” settlement, given New CAN’s duty to ensure its own solvency.
The letter also questions how CAN can have any liabilities from April this year onwards given that it had ceased to have employees in the pension fund before then.
Last night, a council spokesman said: “Prior to August 2012, Community Action Northumberland (CAN) participated in the Northumberland County Council Pension Fund to provide Local Government Pension Scheme rights to its staff and former staff.”
He added: “CAN and Northumberland County Council have been in discussion since 2012 to find a mutually acceptable way for CAN to discharge its debt to the Pension Fund.”
David Francis, director at CAN, declined to comment.