On 23 April 2013 the Commission opened an investigation into the charity after receiving a complaint from executor of a will that a legacy of £382,460 had been left to the charity in 2005 and had not been recorded in the charity’s accounts.
The Commission found that there were three trustees but only one of the trustees (the founder) was in control of the charity’s finances. After scrutinising the charity’s banking records the Commission found that two legacies (of £382,460 and £44,957) had been placed in several bank accounts held in the name of the founding trustee and another person who was not a trustee. The inquiry also established that part of the donations were used to invest in properties not owned by the charity, an improper use of charitable funds.
The Commission acted quickly using its powers under the Charities Act 2011 to freeze six bank accounts where charitable funds had been moved to. This action protected £378,000 of charitable funds. The Commission was then able to ensure that the other trustees took steps to recover a substantial amount of the misappropriated funds from the founder. The Commission referred its concerns and evidence to the Police.
The Commission’s inquiry in a report published today concluded that funds had been misappropriated for personal benefit and this happened after the other trustees moved away and the founding trustee effectively took over the sole control of the charity and its affairs. The regulator found that the actions of the founding trustee amounted to misconduct and mismanagement in the administration of the charity. The other trustees had also failed to adequately and fully discharge their duties as charity trustees.
The Commission acknowledged that the other trustees subsequently acted in a responsible way to address the commission’s regulatory concerns after its intervention. They took control of the charity and its finances, recruited additional trustees and sought legal assistance which enabled them to recover a substantial amount of the misappropriated funds. The Commission has seen evidence that around £300,000 has been recovered, and there have been assurances that a further £120,000 was repaid by the founding trustee.
The vigilance of the executor and the intervention of the Commission prevented a substantial permanent loss occurring which would probably have proved fatal to the charity. The subsequent remedial actions have enabled the charity to be placed back on a proper footing and to continue as a going concern.
Michelle Russell, Director of Investigations, Monitoring and Enforcement at the Charity Commission, said:
All trustees share the same duties and responsibilities and must not let one trustee have sole control of the charity’s funds and activities. This is a shocking case where donors’ legacies were misappropriated and abused for private gain.
I am pleased that the Commission has been able to take swift action and make sure through our monitoring and enforcement action the other trustees, without us needing to exercise additional formal powers, pursued restitution to recover 98% of the funds, so that they can be spent as their donors intended on the care and support of animals. Our regulatory guidance makes clear that it is trustees who are under a duty wherever possible to recover charity funds that have been misappropriated and this is what happened here.
For further information on the Commission’s policy on restitution and recovery of charitable funds lost to charity in breach of trust see our restitution policy.
Trustees are expected to be aware of their obligations and responsibilities, our guidance on being a trustee can be found in The Essential Trustee: What you need to know (CC3) which is published on the Commission’s website.
The full report is available on GOV.UK.
Notes to editors
- The Charity Commission is the independent regulator of charities in England and Wales. To find out more about our work, see our annual report.
- Search for charities on our online register.
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