Charities monthly round-up September 2024

In this month’s newsletter, we explore the Commission’s activities including updated guidance on charity trustee decision-making and several investigations into a variety of charities.

Updated guidance on charity trustee decision-making published by the Charity Commission

The Commission has recently updated its guidance on decision-making by charity trustees, known as CC27. The updated guidance aims to be more accessible and easier to read as well as highlighting the importance of fulfilling trustee duties correctly. Originally published in 2013, the new version is designed to be read in half the time of the original!

The refreshed CC27 highlights areas where charities commonly face challenges, such as the importance of making decisions collectively and recording them. As legal practitioners, we regularly emphasise the importance of minute-taking and following the correct decision-making process. The Commission’s updated guidance should serve as a reminder that well-documented decision-making processes supported by comprehensive minute-taking protect trustees. Suppose a charity faces challenges or legal scrutiny – in that case, accurate minutes serve as evidence that trustees followed appropriate steps, avoided individual trustees taking disproportionate control, managed conflicts of interest and made informed decisions.

The updated version also has a greater emphasis on the need for trustees to consult stakeholders on important decisions. Previously suggesting that consultation ‘might be helpful,’ the new guidance advises that trustees ‘should usually consult’ stakeholders when decisions will significantly impact them. However, it remains clear that trustees ultimately hold the final decision-making responsibility.

Additionally, trustees are reminded they may seek formal advice from the Charity Commission in ‘complex and/or high-risk’ situations under section 110 of the Charities Act 2011. Though this addition helps trustees focus on serious matters, the underlying statutory provision still allows charity trustees to seek the Commission’s ‘opinion or advice about the performance of any of their duties or the proper administration of their charity’.

If you would like advice on matters relating to trustee decision-making, please contact Edwina Turner or Sarah Tomlinson.

Charity Commission issues first-ever official warning to local authority

Earlier this month, the Commission announced that it had issued an official warning to Calderdale Metropolitan Borough Council (the council). This was due to the council failing to fulfil its duties as a trustee of 13 charities!

The council had not filed annual returns and accounts for all 13 of the charities for several years despite the Commission issuing an action plan to the council in 2023.

This case highlights broader concerns about local authorities failing to comply with their legal duties when acting as trustees for charities. The Charity Commission issued a regulatory alert to all local authorities in England and Wales urging them to meet their responsibilities as trustees. This was accompanied by refreshed guidance for local authorities and councillors, emphasising the need for accountability when managing charitable assets.

The Commission’s actions and warnings serve as a reminder to local authorities of the importance of clearly identifying the charitable assets they hold and ensuring that they comply with their legal obligations as corporate trustees. Failure to do so may result in further regulatory scrutiny and potential penalties.

For further information please contact Catherine Gibbons.

Charity Commission launches second investigation into gymnastics club

The Charity Commission has launched a statutory inquiry into Flic-Flac Gymnastics Club in Lancashire. This is over concerns regarding payments made to trustees and a potential conflict of interest.

The investigation, which began on 3 September, will focus on whether the trustees are fulfilling their legal responsibilities, including a review of governance, accounting and reporting. It will also examine the trustees’ adherence to the charity’s governing document and investigate any unauthorised personal benefits received by trustees.

The Commission’s website indicates that the Gymnastics Club’s latest accounts are over 200 days overdue and financial reports for the previous three years were also submitted more than 200 days late. The charity is currently operating with only two trustees according to the regulator’s records.

The second investigation comes after the Commission’s ‘double defaulter’ class inquiry on 25 July 2022. This classification applies to charities that have failed to meet their accounting deadlines for two or more years. The club has missed its deadlines for the past four consecutive years.

This should sit as a reminder of the importance of submitting accounts and reports to the Commission on time to ensure the proper administration of their charities.

If you require any further information or guidance on these issues please contact Catherine Gibbons.

Charity Commission disqualifies former trustee of the Mahfouz Foundation

The Commission’s report on its inquiry into the Mahfouz Foundation concluded that the charity’s trustees were responsible for serious mismanagement and misconduct. Former trustee Michael Wynne-Parker was found particularly culpable and has been disqualified from serving as a trustee in any charity for 12 years.

The primary concern addressed by the inquiry was whether the funds donated to the Mahfouz Foundation were used following donor intentions. The investigation revealed that the charity’s bank account was being misused as a conduit for transferring funds on behalf of third parties, rather than furthering the charity’s intended goals.

The Commission’s report demonstrates how the trustees allowed the charity to be misused, failing to uphold their duties to ensure that its funds were used appropriately.

The report emphasises that trustees are jointly responsible for ensuring that a charity’s bank account and funds are used solely for its charitable purposes. 

For further information, please contact Esther Campsall.

Charity Commission disqualifies former trustees of genealogy charity

The Commission launched its inquiry in February 2022 following concerns raised during the investigation into The Mahfouz Foundation, which had ties to Burke’s Peerage Foundation. The inquiry focused on whether the charity’s trustees were fulfilling their legal obligations, particularly regarding the filing of annual accounts and returns – much like the Flic-Flac Gymnastic Club!

The inquiry concluded that there were conflicts of interest between the two groups of trustees resulting in improper actions. There was also misapplication of charity funds as they were used to purchase items unrelated to the charity’s objectives, an example being a bookcase costing £16,000 which was found in a trustee’s home. Furthermore, the trustees also failed to provide accurate annual returns to the Commission.

It is important to note the Commission’s official statement which emphasised the seriousness of the findings. It is noted that throughout the inquiry, the trustees provided contradictory statements and failed to act in the best interests of the charity, leading to serious misconduct and mismanagement.

For further information, please contact Phil Watts.

Controversial church charity wound up in the public interest

The Commission has released a press statement and report regarding its statutory inquiry into Salvation Proclaimers Ministries Limited (SPML).

The inquiry found that SPML’s trustees were guilty of serious misconduct and mismanagement. Key issues included inadequate safeguarding practices and financial failures. The charity operated on a cash-only basis, meaning most of its income and expenses did not pass through a bank account. Additionally, the trustees failed to oversee and report safeguarding concerns, putting beneficiaries at risk.

Throughout the investigation, the trustees failed to act with due care and skill and did not address the Commission’s regulatory concerns. In 2022, the Commission removed SPML from the charities register after it ceased operating.

Due to its severe mismanagement, the Insolvency Service (IS) intervened and successfully petitioned the High Court to wind up the charity in the public interest. SPML was found to have operated without transparency, submitted ‘suspicious and incorrect’ accounts to Companies House and the Commission and failed to cooperate with the IS’s investigation.

For further information, please contact Edwina Turner.

For more information or advice on the topics raised in this month’s newsletter or if you require further information about the services which Anthony Collins can provide to your charity please contact Phil Watts. Phil is a senior associate in our governance team and has advised charities on a wide range of matters for over thirty years. Phil also provides governance advice to our Multi-Academy Trust clients.

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