You can read the full statement of the result of the inquiry on GOV.UK.
The charity, which was registered in October 1997, has objects to advance the Christian faith, and education in accordance with Christian principles, and to help those who are elderly, sick or in need.
The commission opened an operational compliance case after receiving a complaint from a member of the public in February 2012, alleging that trustees of the charity were personally benefitting from the charity’s funds. After the trustees failed to address the commission’s questions regarding the complaint, the regulator opened a statutory inquiry into the charity on 2 October 2012 (see endnote 1). The inquiry was opened to examine potential unauthorised trustee benefits, the management of conflicts of interest and the sale of charity property to a trustee.
Through inspecting the charity’s records, the inquiry found that initial concerns that a property was gifted to the charity and subsequently sold to a trustee in breach of charity law requirements was not substantiated, and the charity was not a party of the transaction. However, the inquiry advised the trustees to consider obtaining independent professional advice as to whether gift aid was properly claimed by the charity on a donation made to the charity by the purchasers of the property, which they did. The trustees have stated that they “are willing to repay the gift aid, on condition it is found to be the legal requirement. However, the trustees remain to be convinced of this, as the [individual] concerned in this private arrangement agreed for the gift aid to be paid to the charity”.
The inquiry was not satisfied that evidence had been provided that payments made to two trustees, who were husband and wife, were properly made nor authorised. As a result of the regulator’s intervention, the funds amounting to £100,000 were repaid to the charity.
The inquiry’s conclusions were that the trustees did not understand, identify or properly manage the conflicts of interest, [although the trustees disagree with this]. The charity did not have proper financial controls in place, such as policies on expenses, and was relying on credit and loans to operate. Charity funds were also being banked in personal accounts. As a result, the commission exercised its powers to direct the trustees to take action (see endnote 2).
The commission continued to engage with the trustees and on 11 June 2014 held a further meeting with them, to ensure they fully understood the order and directions issued, and to ensure and assess the progress made by the trustees. The regulator is now satisfied that charitable funds are held within bank accounts under the charity’s control. The trustees have also sought independent professional advice and introduced new financial procedures. The trustees also confirmed that the charity has no credit card debt, outstanding trustee loans or any other creditors.
The charity has been placed in monitoring and the commission will follow up and ensure progress and compliance by the trustees.
Michelle Russell, Director of Investigations, Monitoring and Enforcement at the Charity Commission, said:
This case is a reminder to all charities about how important it is that trustees actively manage a charity’s finances and any conflicts of interests that may arise. Charities must ensure any payments and transactions to trustees are properly authorised and dealt with and there are clear audit trails to show this.
Conflicts of interest are more likely when there are only a small number of trustees on the board, when trustees are closely related, or when the charity is involved with businesses in which the trustees have interests. It’s really important that trustees put clear policies and procedures in place to identify and manage conflicts when they arise. In this case the charity has acted now to appoint additional trustees – this action will help ensure conflicts are capable of being appropriately managed going forward.
This case is also an example of the new more robust and sharper approach the commission is taking. We issued the order in April, and although it extended the length of the inquiry, we kept it open to ensure the trustees understood what they needed to do and verify trustee assurances of progress being made.
The inquiry closed on 14 November 2014.
Notes to editors
- The Charity Commission is the independent regulator of charities in England and Wales.
- Our mission is to be the independent registrar and regulator of charities in England and Wales, acting in the public’s interest, to ensure that:
- charities know what they have to do
- the public know what charities do
- charities are held to account
- Section 46 of the Charities Act 2011 gives the Charity Commission the power to institute inquiries. The opening of an inquiry gives the commission access to a range of protective and remedial powers.
- The commission opened a statutory inquiry under the then section 8 of the Charities Act 1993, now section 46 of the Charities Act 2011.
- On 24 April 2014 the Inquiry issued an order under section 47(2)(a) and (b) of the Charities Act 2011 directing the charity to provide certain information relating to the diversion of funds from the charity’s bank account to a private company. On 24 April 2014 the Inquiry also issued an order under section 84 of the Charities Act 2011 directing four actions by the trustees expedient in the interests of the charity, to:
- seek repayment of the charity’s funds held in any bank accounts not in the name of or belonging to the charity
- review the financial controls in place at the charity and ensure they are fit for purpose
- review any loans currently outstanding and ensure they are suitable documented
- review all credit arrangements the charity has in place
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