6.1 One of the OFT’s concerns has been to consider the extent to which residents can maintain financial independence within the care-home environment and to find out what arrangements exist within homes to assist residents in the management of their money.

6.2 Figures from Laing and Buisson indicate that 72% of care home residents receive some form of assistance with their fees, whether from the local authority or from the Benefits Agency. It therefore seems likely that most people in homes have relatively small amounts of personal monies available, and are below the level at which official guardians of an individual’s finances, such as the Court of Protection would become involved. Where residents need help, they are likely to rely on friends or relatives to assist them in the management of their financial affairs. These arrangements may be formalised in a variety of ways, for example by the resident nominating an agent, appointee, or by drawing up a power of attorney.

6.3 There is no specific requirement within the primary legislation for an inspector to monitor or check an individual’s financial situation, although under regulations for residential care homes - as, for example the Residential Care Homes Regulation 1984 (SI 1988/1192) covering England and Wales - there is a requirement for the registered person to keep a record of money or other valuables deposited by a resident for safe keeping, or received on the resident’s behalf. An inspector has the right to inspect such records. Differing views have been expressed about whether financial records in nursing homes can be, and are, inspected. In Northern Ireland the legislation requires both residential care homes and nursing homes to keep a record of money or valuables deposited by residents for safe keeping.

6.4 One particular anxiety raised by a number of residents and relatives was the way the Personal Expenses Allowance (PEA) was handled. This allowance is a specified amount (currently £14.45 a week) which all residents supported by local authorities retain after their contribution to the care-home fees has been calculated. The intention is that it should be used by individuals to purchase such extras as gifts or personal items. Those providing evidence to the inquiry expressed concern about the allowance being used to top-up fees rather than being available for use by the individual for personal expenses.

6.5 For those residents whose fees are paid under the ‘preserved rights’ system, the PEA is paid directly to them as a component of their income support payments, and there are no official restrictions on such payments being put towards the care-home fees.

6.7 It is not clear how widespread the alleged practice of pooling the PEA is - where carehome owners retain the allowance paid for individuals and then spend it collectively on all the residents. One relative told the inquiry of a home being unable to provide an itemised account of the expenditure for the individual resident when asked to do so. The pooling of residents’ money goes against the principle of allowing residents to retain control over their own money as far as possible. Also of concern is the fact that records of expenditure may not be maintained.

6.8 The OFT survey of residents showed that less than half (43%) of those who took part claimed to receive a personal allowance. The survey sought to find out how much residents knew about the PEA and asked those who received it to state how much it was. Nearly one-third (32%) correctly placed it at between £14 and £14.50 a week, with a further one-third placing it at a lower level. Residents who claimed to have the PEA had a better chance of knowing the correct amount if they were in a local authority residential home (41%), or a voluntary residential home (28%), while only 10% of those in private nursing homes knew the correct amount. The Department of Social Security has commented that, if the residents interviewed included those on ‘preserved rights’, it would not be surprising that most did not know about the PEA which is a component of their income support benefit.

6.9 When asked who had told them how much the PEA was (whatever they believed it to be), nearly half (48%) of the respondents said that they had been informed by a member of staff’ and more than a quarter (27%) by a ‘relative or other person’. Only one in twenty (5%) said that they knew the sum involved from a letter or statement which they had received. Nearly one in five (19%) said they received a regular written statement, although this does not appear to have increased their knowledge o the amount, as 59% of those who received statements did not know how much it was.

6.10 Whether residents who claimed to have the PEA knew the correct amount also depended on their source of information: if they had been told by a member of staff, 59% got the amount right, compared with 46% who picked it up from a written statement, and 20% informed by a relative or other person.

6.11 About four in five (80%) of respondents to the residents’ survey said that they received a state pension, while a minority (20%) said they received a works or occupational pension. Most were paid through a pension book, with around a quarter being paid though a bank, building society, or post office account.

6.13 Most respondents who received a PEA looked after it themselves (70%). Where others did so, in the majority of cases (70%) it was looked after by the matron, manager, or officer in charge of the home, with relatives accounting for another 25% of cases.

6.14 For some care-home owners, looking after a resident’s money can prove to be onerous, as the administrative burdens required to keep track of it are high while the amounts involved can be very small. In addition, the differing funding methods - local authority contributions, preserved rights, and self funders - may each demand that the cash sums are handled in different ways, since some payments go directly to the home, while others have to be collected from the post office. As most homes have a combination of differently funded residents, this requires careful management.

6.15 In general, residents who responded to the OFT survey were satisfied with the arrangements made to look after their money, although some were worried about not being able to keep track of it because they did not receive statements.

6.16 Many of the organisations providing evidence to the inquiry felt strongly that carehome owners should not normally handle residents’ money: they should do so only as a last resort - if there was no available or willing relative, for example. A number of representatives of the care-home industry confirmed that looking after their residents’ money was a task which they would prefer to not have to do, although - where there was no-one else available or willing to take on the responsibility - they felt obliged to do so. Some considered that more advocacy schemes should be available to help those who are alone and need help in managing their finances. One idea put forward by some care-home owners envisaged the establishment of national guidelines on the handling of residents’ money.

6.17 An alternative point of view, put forward by some local authority inspectors, was that there were positive benefits in care-home owners and managers taking responsibility for residents’ money. At least in this way they could use their powers of inspection to ensure that the sums involved were properly managed and accounted for, whereas - were the money to be kept by residents themselves or by their relatives or by some other third party - they had no authority to monitor the situation.

6.18 Others involved in the inspection process, however, commented that, in the short time available during a visit, inspectors might not be able to look at all the financial records and would have to rely on checking a mere sample. It was also pointed out that many inspectors were not trained to deal with financial issues.

6.19 An alternative way of handling residents’ money was demonstrated to the inquiry team by Sheffield Health Authority, which has set up its own financial management system for residents in homes within its area. The scheme is operated by a dedicated unit within the authority, which was primarily set up to ensure that residents were claiming all of the state benefits to which they were entitled, and to provide a means whereby it would be possible to manage residents’ money properly. Participation in the scheme by homes and their residents is voluntary. The system has obvious merits in that the management of residents’ finances is wholly independent of the individual care home and frees the home’s owner from worries about the day-to-day handling of money on a resident’s behalf.

6.20 The practice of separating residents’ private accounts from the home’s own accounts is an important safeguard to ensure that, should the home close for any reason, those sums that properly belong to the residents are not jeopardised or lost. Where the money is kept in the home’s bank account, it would be taken as part of the home’s assets in any insolvency, while the residents would merely be unsecured creditors, which could result in their losing it all. The OFT is aware of one home which went into receivership where all the residents’ monies were found to have been kept in a single account.