The report can be accessed here.
What Were the Facts and Issues in This Inquiry?
Following the Charity's disposal of land, the Commission engaged with the Charity, reporting that its interest was in whether the disposal complied with the Charities Act 2011 and whether it had been properly recorded in the Charity's accounts.
The key issues investigated included:
- possible charity law issues with a sale of a property
- payments to trustees and connected people and companies
- expenditure of funds on business class travel and five-star hotels
- general concerns with financial management and governance
Key Takeaways
Overall, the inquiry found that there was significant mismanagement and / or misconduct in the administration of the Charity by the trustees. However, there are particular findings and comments, that trustees should note, which are:
- The content of reports and accounts is important. The Commission frames its initial interest around a large transaction and its reporting in the Charity's accounts. Its subsequent engagement as reported however covers a much wider range of issues, including the way the charity worked with and monitored partners, its support of expenses by records, senior salaries, and conflicts of interest.
- The Commission inspected the Charity's records. It is worth noting that this was before an inquiry was opened. The Commission's information powers means it does not need to open an inquiry in order to inspect records.
- This is the first occasion we have seen the Commission report on its inspection of and expectations for an up-to-date fixed asset register.
- The inquiry was prepared to make qualitative findings about the Charity's financial management, its financial expertise and planning.
- The Commission sets out its expectations for a robust policy on travel related expenses for trustees and employees. It expects records of decisions about travel to show consideration of relevant factors which in its view include affordability, reputational risks and public perception. The Commission's treatment of business class travel appears to imply that it may be misconduct or mismanagement to permit use of anything but the most economical fares without robust justification in the interests of the Charity.
- The use of a trustees or managers personal credit card or debit card for charity expenditure is not considered to be best practice, as when proper records are not kept in relation to spending, it results in no clear audit trial of how the charity's funds have been spent, which is a legal requirement. Trustees should be able to demonstrate sufficient oversight and control in relation to payments made from charity funds, adopting a clear policy on reimbursements if necessary.
- Whilst the Commission accepted in this case that the setting of the remuneration for senior employees was in the discretion of trustees, it nevertheless examined the process, noting that no documentation could be provided to show that a benchmarking exercise had been carried out, concluding the decision wasn't properly documented.
Follow up Actions
Trustees and senior staff and managers, responsible for managing charity finances should be made aware of the findings of this inquiry. Actions to consider, if they have not already:
- Charity's should maintain a fixed asset register and keep it up-to-date.
- Travel and expenses policies may need to be prepared or reviewed:
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- All travel and expenses should be demonstrably in the interests of the charity.
- Expenses should only be reimbursed with evidence of expenditure and records of that evidence kept.
- Any policy permitting use of first class or business class travel, or premium accommodation or other premium options should be supported by a record of robust evidence and analysis that it is in the interests of the charity. this should expressly include consideration of affordability, reputational risks and public perception.
Conclusion
Generally the Commission's approach remains that it is for the charity trustees to positively demonstrate that any decision of regulatory interest to the Commission has been properly taken, is justified by evidence and analysis and that all of this is recorded. A books and records visit is a routine compliance tool and any area or decision not covered to the Commission's satisfaction by records is vulnerable to subsequent regulatory consideration.
Generally themes from the report highlight the need for good quality financial controls and strategic planning - and the importance of updating these in the event of changes, like the disposal or acquisition of major assets.
If you have any concerns or questions about your charity's policies or general governance, please contact Chloe Price on 0117 314 5469 or your usual contact in the Charities team. Alternatively, please complete the form below.