'Welfare to out-of-work' - Colleen Baldwin on the fall of Eco-Actif

Colleen Baldwin shares with us her ClearlySo blog on what lessons can be learnt from the recent liquidation of Eco-Actif.

Friday the 13th proved its reputation as unlucky to the 14 staff at community interest company (CIC) Eco-Actif Services when they reported for work on that date in July to be told the firm was bankrupt and they were out of a job.

A bitter blow for a team who, as part of the government Work Programme, had been successfully finding employment for society's most difficult-to-help jobless, including ex-prisoners, the long-term unemployed and people recovering from alcohol and substance misuse.

They had achieved excellent results, helping over 5,000 people in the last six years, transforming lives and creating active citizens in the community.

Operating as a subcontractor in a regional supply chain headed by the welfare to work company A4e, Eco-Actif Services had £1m worth of advance orders on its books when it went into liquidation, their turnover was  £700,000 and they were actively helping 500 people.

So what went wrong with a CIC company that should have been a standard bearer for David Cameron's Big Society and give a boost to his plans for charities and social enterprises to take a bigger role in the provision of public services? What are the lessons to learn here?

It was no random misfortune that had brought Eco-Actif, based in Sutton, Surrey, to its knees, according to its bosses, but rather a lack of sufficient working capital to tide them over while they waited up to 18 months under the government payment-by-results (PBR) scheme.

And Eco-Actif was unable to raise the needed bridging funds, because when it approached banks and other established and social finance providers, potential investors turned them down giving three grounds: the government's Work Programme is too high risk; the prime contractors are not passing sufficient funds to the ultimate delivery organisations to make sufficient surplus to finance any loan; their association with A4e is a matter of great concern.

Eco-Actif managing director Anna Burke, who personally lost £20,000 invested savings because of the closure, gave me her insights. She believes the media attention given to the A4e row has distracted the public from the real issue:

‘We as a nation have voted for successive governments that have transferred services wholesale from the public, voluntary and SME sectors into the hands of a very small number of mainly multinational enterprises," she says adding that she believes A4e has not broken the law, even if a small number of their employees have allegedly done so.

‘There seems to be no evidence that they are any worse (or better) than their competitiors,’ she continues. ‘I understand that there are cost savings to the tax payer in outsourcing services in this way, but perhaps there needs to be more transparency and a better understanding of how much organisations “top slice” contracts,’ she advises, adding: ‘This information is mainly secret at the moment, which is another disincentive for potential investors in social enterprises like Eco-Actif.

‘I would like to ask the government to force a great deal more transparency, but I don't think there is much appetite for this.’

Surprisingly, given her financial loss, she says of the £8.6 million dividend paid to A4e's Emma Harrison: ‘Again, I feel this is a red herring - she was perfectly entitled to this money - we, as a “Big Society” need to think about whether it is acceptable in the future to allow individuals to make large bonuses out of unemployment whilst small organisations go to the wall.’

Eco-Actif had worked only as a sub-sub contractor to A4e, and all its day-to-day communication was with 3SC. "We only communicated with very junior A4e staff and have had no communication with them whatsoever since our closure.

‘My impression was that communication between us and A4e, and indeed between us and other sub-contractors, was actively discouraged,’ continues Anna.

While these last comments may raise as many questions as answers, there were solid recommendations that Anna and colleague Amanda Palmer-Roye, the Eco-Actif chief executive, were able to make to the government.

‘We do have an alternative to the Work Programme that we presented to DWP and to ministers,’ says Anna. ‘This uses a partial payments-by-results model that we feel would be highly feasible.’

Asked about the red tape which had held up referrals under the new conditions introduced last year, Anna explains: ‘As I understand it, some of the delay was caused by the length of time it takes for DWP staff to be security cleared to work in prisons and the numbers are now picking up for Work Programme providers. I think our main point here is that Eco-Actif was a specialist on offender work but the randomisation of Work Programme customers does not allow for people with any special needs, e.g. offenders, disabled people etc., to be matched with their specialist providers.’

Prior to the advent of the Work Programme, approximately 500 ex-offenders were receiving help from Eco-Actif, mainly under the DWP Progress2Work programme --- this was cut down to approximately 50 referrals since P2W's closure.

Asked what advice she could give to other social enterprises implementing the Work Programme, her answer is not encouraging: ‘I would like to say avoid PBR but that isn't really possible in this climate - also, PBR is potentially a good thing if sensibly paid and properly financed. When we applied to run the Work Programme in early 2011, it was the only show in town and we would have been forced to close last year if we had not been able to secure a sub-contract. At the very least, we have been able to help several hundred more people than would otherwise have been possible without this programme.’

She does not see a bright future for other organisations facing similar problems: ‘On reflection, and sadly, I think the investors may have been right. It appears to me that the Work Programme model is fatally flawed and can therefore render any organisation that is running one uninvestable.’

She ends her comments on an even sadder note: "I would like to add that the real losers in all this are our clients, people with multiple disadvantages who have received consistent, non-judgemental and expert support over the years.

‘Chris Grayling makes the perfectly valid observation that the Work Programme does not exist to prop up social enterprises or charities - however, the social enterprises and charities do exist to prop up disadvantaged people and to empower them to take part in society.’

Original blog from the ClearlySo website

Indus Delta's original story on the liquidation of Eco-Actif

Comments

A sad story and, I'm afraid to say, one that is likely to be repeated.

The Work Programme is utterly flawed, the evidence of which is eloquently stated in this article. All providers, particularly those who never intended to make a profit from it, are faced with banks who are utterly unprepared to underwrite what they consider to be high risk loans.Some of the bigger players do have backing from multinationals and development capitalists but for them there will come a point when they say "enough is enough".

In all of this good companies and their staff are or will be lost to the sector while their clients are left high and dry, or low and wet if you like.