We have reviewed these and identified the key issues that the Commission has been focussing on.
What are the Main Causes of the Charity Commission's Involvement?
The main causes of the recent statutory inquiries are:
- concerns about charities' financial controls and potential unauthorised benefits
- independent examiners reporting anomalies in relation to the charities' annual accounts and the accounts being non-compliant with the Charities SORP (Statement of Recommended Practice)
- concerns about charities' relationships with connected companies and
- potential private benefit to trustees and concerns regarding the use of charitable funds leading to questions as to whether the trustees have managed the charity’s resources responsibly and in the best interest of the charity.
Summary of Recent Inquiries
- Chichester and District Dog Rescue Society: following the charity’s independent examiner reporting anomalies in the charity's financial records, the Commission reviewed these records and identified concerns about the charity's financial controls. The charity had failed to submit its most recent accounts and the previous accounts were not compliant with the SORP and had also not been independently examined. The Commission has frozen the charity's bank accounts whilst it undertakes the inquiry.
- Jole Rider Friends: the charity's trustees had failed to submit the charity’s annual accounts on time for the last two financial years and also remains overdue in submitting its accounts for 2016. The charity’s 2015 accounts prompted concerns by an independent examiner about potentially unauthorised payments and the charity’s stock control, prompting the Commission's inquiry.
- Dream It Believe It Achieve It: the Commission has not published details of the facts leading up to this inquiry, but it will focus on the charity's relationship with connected companies; in particular whether these relationships are in the best interests of the charity, any transactions with them and whether there have been any unauthorised benefits.
- Island Health Trust: concerns have been raised about the charity's use of charitable funds and potential private benefit to one or more trustees following a finding of a trustee's company receiving significant benefits from the charity. The inquiry will examine whether the expenditure of these funds falls wholly within the charity’s objects and whether the trustees have managed the charity’s resources responsibly and in the best interest of the charity.
How Can Trustees Protect Their Charity?
The Charity Commission are opening more inquiries than ever and so it is important in this regulatory climate that charity trustees understand the extent of their duties and have in place robust financial controls to protect their charity's funds and reputation. The recent inquiries show the Commission's focus on issues arising from charity accounts, in particular where an independent examiner has reported concerns. Trustees should pay particular attention to any potential personal benefits to trustees or third parties and ensure that payments are authorised. Trustees should take steps to manage any relationships their charity has with connected companies, in particular ensuring that these are in the best interests of the charity and that any transactions are scrutinised and any benefits properly authorised.
We regularly advise charities and charity trustees on regulatory compliance issues. For more information, please contact Kate Parkinson in our Charity Law team on 0117 314 5460.