Rowan Dartington: Where the financial black hole came from

The £1.4 million black hole in Rowan Dartington accounts which halted its parent's acquisition of Hoodless Brennan relates to a one off settlement problem dating back to 2008, Citywire can reveal.

The management of the company believes the money is recoverable but it may take up to nine months for the problem to be solved.

Earlier this week, Rowan Dartington parent company Astaire announced it was suspending its shares from trading on the Aim market after accountants were unable to locate £1.4 million from its debtor balances. The announcement also put its acquisition of Hoodless Brennan into doubt with those who had already accepted the offer allowed to withdraw their acceptances.

Yesterday, Citywire revealed a number of key personnel within Rowan Dartington have either left the company or resigned from the board, including the wealth manager's head of private clients Sarah Tobey.

The problems in relation to its missing £1.4 million occurred in 2008 when Rowan Dartington changed its settlement system.

During this transition period, certain items were misposted and carried forward as a debtor in the 2008 accounts, which were signed off by Deloitte in London.

When Rowan Dartington came to do the 2009 accounts, it tried to look up the debtor but neither the company nor the accountants could understand the basis under which it was held.

However, a source close to the matter said: 'That does not mean it's not a good debtor. But we just don't understand the basis on which it was backed.'

It appears the management believes the debtor will be 'recoverable' but it will take up to nine months of manual processing of track down where it came from. That is one of the reasons the £1.4 million sum has not been written off. In fact, it is understood the auditors believe the money must be recoverable.

One of the reasons the issue has not come up sooner is that there is always cash trapped in the settlement system.