Charity Commission Inquiries of Interest
The results of recent Charity Commission (the Commission) inquiries provide valuable insights into regulatory pitfalls that charity trustees should be alert to.
In this article, we take a look at the key lessons to be learned from some of the Commission's recent inquiries.
The Ashley Foundation (TAF)
The Commission's inquiry concluded that there had been serious financial mismanagement, evidence of the receipt of significant personal benefit and failures to properly manage conflicts of interest. During its investigation, the Commission used its powers to obtain information from a range of third parties, including the working papers of a solicitor appointed by the charity to advise on the transactions it had entered into, and it has also referred concerns of potential criminality to the police.
The former CEO and a former trustee of TAF have been disqualified from charity trusteeships and senior management for 15 years, whilst the other charity trustee (the Chair) has been disqualified for 10 years. The Commission praised a trustee appointed in 2019 who took action to address the wrongdoing, including obtaining an injunction against the former CEO and charity trustees to prevent them from engaging in TAF's affairs.
Beth Yosef Foundation (BYF)
In its inquiry, the Commission explored issues including trustee appointment, managing conflicts and financial management. The Commission found there to be misconduct and/or mismanagement in the administration of the BYF, in particular on the following bases:
- The Commission treated a trustee who was the aunt of a third party and a trustee who was a brother-in-law of a third party as having a conflict of interest as a result of their respective relationships, and as such the trustees had failed to correctly identify and manage conflicts.
- The trustees failed to keep and maintain proper financial records, including records of their arrangements for unsecured loans and rental income and failed to comply with their statutory duties to file accounts and accompanying documents.
The inquiry reiterates the Commission's developing view that there is a duty on charity trustees of sound decision making, including acting responsibly, reasonably and honestly. The Commission highlighted themes of trustees having sufficient control and oversight of their charity's financial affairs, including regular monitoring and appropriate record-keeping for audit trail purposes.
Support the Heroes (StH)
The Commission's inquiry looked into StH's fundraising arrangement with Targeted Management Limited, following complaints from members of the public regarding the charity's operation and fundraising practice. The Commission considered whether the decision to enter into the arrangement was adequately informed, whether it properly considered risks to assets and reputation and even expressed a view about the commercial terms of the agreement.
The inquiry found numerous examples of misconduct and / or mismanagement by the trustees, including that the trustees had failed to avoid or adequately manage conflicts of interest and no evidence that the trustees undertook any due diligence before entering into the agreement. As such, the trustees failed to ensure that the contract was lawful, appropriate and that the terms of the agreement were in the best interests of StH. Due to this, the Commission took regulatory action by protecting the charity's funds and appointing an interim manager to take full control of the charity.
The Everlasting Arms Ministries (TEAM)
The Commission opened an inquiry into the TEAM following concerns that a disposal of charity land (its main asset) hadn't complied with the Charities Act 2011 and its reporting in the TEAM's accounts. The subsequent engagement however covered a much wider range of issues, including how the charity worked with partners, as well as record keeping, conflicts of interest and senior salaries. The Commission found the previous board of trustees responsible for misconduct or mismanagement, having failed to put in place appropriate financial controls to manage a substantial increase in funds.
The inquiry reminds us that the Commission's information powers means it does not need to open an inquiry in order for it to inspect a charity's records. The Commission was also prepared to make qualitative findings about the charity's financial management, financial expertise and planning and set out its expectations for a robust policy on travel-related expenses. The inquiry issued an Action Plan which was fully implemented by the current trustees as supported by an independent financial advisor and monitored by the Commission.
Darul-Uloom School London (DUSL)
The Commission opened its inquiry following a serious incident report of an alteration on the School's premises, which required police intervention. The Commission found the trustees were responsible for serious mismanagement and misconduct in the administration of DUSL which placed its funds, property and beneficiaries at significant risk.
The report highlights the need for all charities to have in place appropriately tailored internal policies that address the specific risks associated with the activities they undertake, which are implemented and reviewed at appropriate junctures.
Islamic Research Foundation International (IRFI)
The inquiry was opened to examine a number of issues, in particular, the trustees' decision to continue to fund 'Peace TV' despite several breaches of the Ofcom Broadcasting Code and conflicts of interest.
During the course of its inquiry, the Commission disqualified a trustee on the statutory ground that "any other past or conducting conduct [by the person], whether or not in relation to a charity, is damaging or likely to be damaging to public trust and confidence in charities." This demonstrated that the Commission can disqualify an individual for conduct outside of their duties within IRFI.
Humanity Torbay (HT)
The Commission instructed the HT's trustees to remove inappropriate political campaigning posted by its founder/ former CEO at the time, to the Facebook page used in its name. In its inquiry, it found that the trustees' failure to control and prevent inappropriate material being posted on its social media pages in the name of the charity was evidence of misconduct and/or mismanagement.
The Commission highlighted the need for trustees to have control and effective oversight of communications and publications in the charity's name. This is reflected in the Commission's draft social media guidance for charities which is currently is going through a consultation.