Date of decision: 15 April 2026
Summary
A father complained that the Council mishandled his adult disabled daughter’s direct payments, allowing an increase to 2:1 support at one day centre to be funded from her account without proper agreement or care‑plan changes, and reclaiming a large “underspend” without checking planned use.
What happened
The adult disabled woman, Miss Y, lived with her parents, Mr and Mrs X, and her disabled sister, Miss Z; both daughters required support with all aspects of daily life and Miss Y’s care plan provided 100 nights respite a year, plus weekday day‑centre support funded by direct payments paid to Mrs X and managed by a third‑party money management provider, Company B.
One of her three day services, Centre C, contacted the Council in February 2023 about discrepancies in stated session length and ongoing difficulties supporting Miss Y due to spitting, and on 1 March 2023 told a social worker it had been providing 2:1 staffing for her since October 2022, prompting the social worker to say an urgent review was needed, but the Council only formally updated the plan that day to reduce Centre C’s hours from seven to six with support, as was in fact happening, but still recorded as 1:1.
The Council’s Direct Payments Procedure said it would review the direct payments arrangements every 12 months and would automatically apply an annual increase in April.
The Council’s protocol also committed to carrying out financial monitoring of direct payments every year. It acknowledged that the support a person uses can alter, and a build-up of unspent funds might accumulate in the Direct Payment account. It stated that a person could hold up to four weeks’ worth of their regular direct payment money in the account together with any money that was being budgeted towards future care plans, or outstanding invoices. If its monitoring identified that the balance on the account was more than this, it would contact the person to check whether there was future planned spending that had not already been identified. Once the amount of unspent money had been confirmed, the Council would raise an invoice to reclaim this money.
In September 2023 the Council audited Miss Y’s direct payment account for September 2022 to May 2023 and found an underspend of almost £39,000, then completed a Care Act re-assessment in November 2023 which did not change her care but led to a letter on 22 November 2023 telling Mrs X that Miss Y’s weekly direct payment would be reduced to £2,453.74 from 1 March 2023.
In January 2024 Company B (the management company) returned £20,000 of “underspent” direct payments to the Council, and in late May 2024 a Council officer met Mrs X to review Miss Y’s needs; Mrs X said she wanted to change from Centre C and asked if the surplus could fund extra respite, which the Council agreed in July 2024.
Mrs X requested statements from Company B for both daughters’ accounts and discovered extra payments to Centre C for Miss Y that were not mirrored for Miss Z; Company B said Miss Y’s care at Centre C had moved to 2:1 so invoices were doubled, which Mrs X challenged with the Council because the family had not been told or agreed to 2:1 support.
The social worker told her they were unaware of 2:1 care and the support plan stated 1:1, so they would ask Company B to pay only for 1:1 and suggested Mr and Mrs X could make a formal complaint.
On 31 July 2024 Mr X complained formally, saying Centre C had been paid nearly £16,000 more for Miss Y than for Miss Z since March 2023 despite the sisters having the same condition and similar needs, and that they had never been told Miss Y needed 2:1 support or seen this reflected in her plan. He also argued that if 2:1 support was needed, direct payments should have been increased accordingly, and questioned why it was needed only at Centre C but not at the other two day centres she attended each week. He also objected that £20,000 had been reclaimed without consulting them when funds had recently been agreed for additional respite, asking the Council to repay both the £20,000 that had been returned by the management company, and the extra payments to Centre C, back into Miss Y’s account.
The Council repaid £20,000 into Miss Y’s direct payment account in August 2024 and agreed to investigate anomalies, then in its October 2024 complaint response accepted that 2:1 support was never agreed, so Centre C should not have invoiced and Company B should not have paid at that rate, and said any refund must be worked out between Centre C and Company B and put back into Miss Y’s account. It also said in‑depth monitoring had found overspends in both sisters’ accounts and it would alert Company B, but Mr X remained dissatisfied.
Company B later told Mrs X it had asked Centre C for a refund on 20 November 2024 but the provider was contesting this with the Council, and in March 2025 the Council met Mr and Mrs X to discuss concerns, by which time Mr X had also alleged that since September 2021 each daughter’s account had received around £8,000 per year less than the weekly budget set out in their care plans. After the meeting Mr X requested a full audit of both accounts and sent spreadsheets highlighting differences between payments in and out of Miss Y’s and Miss Z’s accounts.
In April 2025 Mr and Mrs X chased the Council for an update, seeking resolution and back payments for the alleged 2:1 care; they followed up again in June 2025. In late June 2025 the Council apologised for delay, saying the complaint had multiple strands, and stated that Centre C had contacted it in May 2023 to request 2:1 support until summer 2024, that it had been told a social worker verbally approved this and that Miss Y’s needs differed from Miss Z’s, and that Mrs X had been involved when Centre C asked for the increase and a referral to the community disabilities team.
The Council admitted it could find no evidence that the 2:1 change was formally documented in Miss Y’s plan, that neither Centre C nor Company B had written confirmation, and that relevant social workers had since left; it explained that normally a new plan would be created and shared with Company B and the family but this had not happened, causing a lack of clarity and an initially inaccurate investigation response. It said Miss Y’s needs had been met and the extra cost had been covered from unspent funds, stressed that personal budgets cannot accumulate as contingency beyond about four weeks’ funds, apologised for confusion, stress and delay, and offered £300 for Mr and Mrs X’s time and trouble while referring them to Company B and the providers to understand account variances.
Mr and Mrs X rejected this, denying any awareness of a request for 2:1 support and maintaining Miss Y did not need it as she had never had 2:1 support elsewhere, arguing that any such increase required a plan amendment and corresponding uplift in direct payments. They also said they had never agreed to unspent funds being used to cover extra Centre C costs and that Company B had not told them this was happening. As Miss Y’s direct payments were not increased, they were running out of money to pay ongoing needs and there were unpaid invoices caused by unauthorised payments to Centre C.
They further said the Council had expressly allowed them to use underspent money for additional respite days which they had now started to do. They said the additional respite was needed to avoid their daughters entering permanent residential care and would not have agreed to use those funds to finance 2:1 care instead; they asserted the Council’s errors had resulted in almost £35,000 being wrongly taken from Miss Y’s account and should be corrected by reimbursing the increased Centre C costs. The Council told them it would seek legal advice, respond by early September 2025, reassess both daughters’ needs and update care plans.
On 15 September 2025 the Council again acknowledged there was no evidence the family had been consulted about increased care, accepted it was improper to make decisions without family involvement, and outlined actions to prevent recurrence. It argued that if money had not been spent on extra Centre C care, some unspent funds would have been reclaimed, asserted Miss Y’s and Miss Z’s needs were met and that the sums in the account reflected agreed care‑plan budgets, and said unused money could pay Centre C invoices without creating a negative balance, with each account expected to retain only around four weeks’ funds.
The Council said it had discussed matters with Centre C and Company B, accepted care was provided despite informal origins for the authority to do so, and would not refund payments as they were public money for meeting Miss Y’s needs and did not “belong” to her, describing the transactions as historic and settled, separate from current shortfalls. It attributed current deficits to more recent developments. This would be addressed by a back payment, equivalent to two months of respite accrued when a provider closed and there was a delay in transferring to a new provider, and a payment of a shortfall in the uplift costs for one of the day service providers.
Mr X maintained his dissatisfaction, stating that by 15 August 2025 Miss Y’s account had a negative balance exceeding £8,000 plus unpaid invoices, rejecting the Council’s view that £16,000 extra to Centre C did not adversely affect her. Nor did he accept that unused monies would be required to be repaid if not spent on care. He said the unused money had been spent on additional respite as agreed with social services. He obtained full payment records from Company B and calculated that since September 2021, Miss Y had received about £8,200 less than Miss Z in direct payments, and that combined with overpayments to Centre C this created a variance of over £24,000 between their accounts. Mr X asked the Council to rectify the £8,200 underpayment.
In response to Ombudsman enquiries, the Council said extensive investigations meant it could not conclusively prove whether 2:1 support had been agreed, so it honoured all invoiced 2:1 costs from existing surpluses and repeated that, had those sums not been used, large repayments of unspent funds would have been required in any event. It accepted Miss Y did not need 2:1 support but said it was satisfied the care had in fact been provided, and noted it had audited her account three times since 2023, recording an underspend of almost £39,000 in 2023 then overspends of about £9,000 in 2024 and £5,000 in 2025.
By September 2025, the Council said the account had been balanced by backdating annual uplift amounts and provider fee increases, and that increased charges from Centre C and the returned £20,000 had been dealt with in August 2024. It explained Miss Y’s weekly payment had risen to £2,562.11 in April 2023 for an annual uplift, then her plan was revised in November 2023 to reduce the weekly amount to £2,453.74 from March 2023, creating a credit which was only processed in January 2024; it accepted the delay cause was unclear but said it did not disadvantage Miss Y, and noted a further uplift to £2,682.68 from April 2024.
The Council insisted that any current deficits were not due to 2023 errors; Miss Y still had 100 nights of respite per year. This had been deemed satisfactory for her needs. The Council said it reviewed Miss Y’s care needs in February 2025 and declined to approve funding for additional nights respite. However, the family continued to use direct payment monies to purchase more respite days than agreed as necessary in the care plan. Any deficit now arose from overspending on the account.
It accepted there had been failures to follow processes and statutory duties in a timely way and said, to prevent repetition, it was revising practice guidance for all staff and would specify the need for individuals, their families and other appropriate people to be consulted as part of the review process; that it had developed a new process for capturing information from contacts and referrals and ensuring it was processed appropriately, was reviewing its framework for money management providers and setting quality standards.
Company B would be removed from the current framework as a money manager, and would communicate with providers and reiterate the need for any proposed increases in care plans to have written agreement from the Council before any change was implemented.
Notwithstanding the errors in this case, the Council did not consider there was any injustice to Miss Y that had not already been remedied. It said her assessed needs were met at all times, and no harm was caused to her. However, it acknowledged significant confusion caused by third parties and a lack of clarity around uplifts in direct payments which have had to be backdated. It had also taken a long time to resolve the complaint which would have caused Mr and Mrs X distress and anxiety. The Council increased its offer from £300 to £1,000 to address the anxiety and stress caused by its handling of the complaint and the delay in applying the change in care plan in 2023 to the direct payment money.
What was found
The Ombudsman found serious failings in the Council’s oversight and financial management of her care plan and direct payments, which caused her parents significant anxiety, confusion and avoidable time and trouble, and the Council agreed to apologise and pay them £1,000.
The Ombudsman found fault particularly with its failure properly to consider and formally approve Centre C’s move to 2:1 support, the lack of consultation or documentation, and its failure to follow its own direct payment monitoring procedure before reclaiming £20,000. There was also fault in the length of time taken to investigate and respond to Mr X’s complaints, and in the general lack of clarity and oversight of payments, uplifts, backdating and the role of Company B.
The Ombudsman recognised that the Council agreed Mr and Mrs X could use underspent monies to pay for additional respite, but said this clearly should not go beyond the funds available/required for the agreed provision. They requested a statement to confirm the balance in Miss Y’s direct payment account in July 2024. They were actually aware there was not a significant underspend on Miss Y’s account at this stage which could be used to fund additional respite.
The documentation did not support Mr X’s view that Miss Y had been underpaid by £8,200. The Council had returned the £20,000 unspent money reclaimed and also made back payments to the account to reconcile annual uplift amounts and provider fee increases in July 2024. Payments to Miss Y’s direct payments account were in line with the personal budget in the care plan and should have been sufficient to cover the agreed provision.
The Ombudsman concluded that the identified faults did not cause Miss Y a significant injustice or entitlement to restoration of all sums used for 2:1 staffing. However, the disorganised processes, poor communication and delay caused substantial injustice to Mr and Mrs X in the form of prolonged anxiety, frustration and unnecessary effort, so it was appropriate for the Council to apologise and pay them £1,000 in recognition of this.
The Ombudsman accepted the Council’s planned service improvements, including tighter practice guidance, better recording of referrals and reviews, strengthened oversight and quality standards for money‑management providers, and formal requirements for written agreement before changes in care packages are implemented, as sufficient systemic remedies; no additional recommendations were required.
Points to note for councils, professionals, people using services and their carers, advocacy groups and members of the public
The Council’s failure to record and formally approve a move from 1:1 to 2:1 support, and to share an updated care plan with the family and money‑management provider, shows the importance of written decisions and clear documentation whenever needs or services change – and failure to have any regard at all to s27 of the Care Act regarding reviews and revisions.
Community care law emphasises that once an adult has been assessed as eligible, the authority must keep clear, evidence‑based records of the needs it is meeting and of any change, and must justify cuts or shifts in provision with an intelligible rationale grounded in statutory criteria and wellbeing outcomes, not simply in provider requests or internal assumptions.
Here, the Ombudsman criticises the lack of documentation but does not fully engage with the public law test that a decision to alter the way need is met must be rational, properly reasoned and procedurally fair, particularly where it effectively diverts a personal budget from respite to enhanced day‑centre staffing without explicit, consultative review. It must be LEGAL, and that requires following s27.
Its decision to reclaim £20,000 as “underspend” without checking planned use or properly following monitoring procedures illustrates the risks of treating direct payment balances as surplus before testing whether they are committed against the current plan, and highlights the need for transparent audits and timely communication with families. An underspend should trigger a review so that everyone is clear how it has come about. It might mean it wasn’t needed; or it might mean it wasn’t enough to do what had been planned. Or something in between….
The prolonged investigation, inconsistent explanations about underspends and overspends, and reliance on missing records and departed staff underline how weak record‑keeping and unclear lines of accountability can compound distress, even where core support continues; councils should make sure complaints about finances and care planning are investigated promptly, with clear written reasons and a single point of contact for families.
The Ombudsman’s reasoning focuses mainly on muddled processes and poor communication, but community care law suggests that at least two further legal issues arise more sharply than the analysis acknowledges.
The second issue is the treatment of direct payments and personal budgets as if unspent balances are essentially the Council’s money to be swept back whenever an audit shows an underspend, instead of starting from the statutory scheme that once a personal budget is set and paid as a direct payment, those funds are ring‑fenced for meeting identified eligible needs in ways agreed with the person or their representative.
Community care laws stresses that budgets must be adequate and sufficient to meet eligible needs, that reasons for their level and use must be given, and that public bodies must not run rigid, undisclosed policies that fetter discretion, such as a blanket approach that any credit over roughly four weeks can be reclaimed regardless of what has been planned or agreed. In this case, the Council’s line that personal budgets “cannot accumulate” beyond about four weeks’ provision looks very like a fixed rule, yet the facts show that it had returned the money and expressly agreed that underspends could fund additional respite to prevent breakdown of the home‑care situation, although the amount returned had then been overspent by the parents; the Ombudsman accepts this as background but does not fully test whether treating the same pot of money as both pre‑agreed respite funding and a reclaimable “underspend” is consistent with lawful, rational and fair administration of the personal budget.
The outcome concentrates on confusion and delay, rather than asking whether the approach to reclaiming and reallocating sums complied with the statutory duty to meet eligible needs through a transparent, personalised budget whose purpose is understood by all involved.
The investigator is clearly unaware of the Dunn v Lancashire CC litigation in which Ms Dunn secured a public settlement statement from the Council acknowledging that due process is required for a reclaim and cannot be automatic.
The third legal issue is the interaction between carers’ rights and the Council’s reliance on the family’s flexibility in absorbing the consequences of its financial and commissioning decisions, especially around respite and ongoing oversight of the accounts. The factual narrative shows two daughters with high levels of need living at home, with parents providing day‑to‑day care and actively managing complex direct payments and disputes over invoices.
Community care law stresses that informal care is always voluntary, that carers have their own entitlement to assessment where there is a risk of significant impact, and that strengths‑based practice cannot assume a relative’s willingness or capacity to expand their caring role indefinitely to compensate for gaps, uncertainty or errors in the Council’s arrangements. The Ombudsman recognises the parents’ anxiety and “time and trouble”, but stops at a modest financial remedy and process improvements, without analysing whether the pattern of relying on them to track discrepancies, chase audits and tolerate prolonged uncertainty about respite and deficits engaged carers’ assessment duties or wider public law principles about fairness and proportionality in the way a council deals with people whose whole family life is structured around substantial unpaid caring.
Our reading of the report suggests that Mr and Mrs X felt in need of additional respite. They said that this was needed to avoid their daughters going into permanent residential care. We think this ought to have caused the Council to be concerned that this caring arrangement was not sustainable in its current form but a Carers Assessment was apparently not offered or suggested. The Care and Support Statutory Guidance says that the local authority should record in the care plan which needs are being met by a carer, and should consider putting in place plans to respond to any breakdown in the caring relationship, but this does not seem to have happened in this case.
The most obvious omission from the report is commentary on the position and apparent incompetence of Company B, the third party management company. The 2:1 support appears to have been implemented by Centre C without the Council’s express approval and was paid for by Company B, again without express approval from the Council, as was the reclaim payment which was then demanded. The Council and Mr and Mrs X were not aware of the change and the associated increase in cost for over a year as the charges were met from an underspend in the direct payment account.
We are not told the full facts here beyond the consequence that company B would be dropped from the Council’s Framework – but such companies are often commissioned by the Council itself, or grant funded, to support the Council in its ambitions to get Direct Payment numbers up. This masks that the third party company is often obliged to be “NOMINATED” to help by the direct payment client, or the Authorised Person, because it is the ONLY one the Council is willing to pay for. But the trouble is that that nomination makes the company accountable to THE CLIENT or Authorised Person, and not to the Council, on ordinary agency law principles.
We think that masses of problems emanate from the blurring of the lines between the teams involved here: there’s the finance team and the charging team, the direct payment support team and a separate management company. The investigator says nothing about who was responsible for what, here.
Please use the following link if you want to read the original Local Government and Social Care Ombudsman’s Sheffield City Council (25 005 511) report. If you are affected by the issues in this report, please consider asking a free, one-off question, anonymously, at a level of principle, here. Our experts’ response will give you an opinion which may then help you and the broader community, when posted.
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