Regulator slams charity for failing to justify £100,000 payment to trustee
The Charity Commission has slammed a charity where more than £100,000 remains “not found” after the money was transferred to a trustee’s private bank account.
The commission said Birmingham-based One Community Organisation, which was set up to help disadvantaged young people in the city, was guilty of misconduct and/or mismanagement after concluding an 18-month statutory investigation.
His investigation report also says the charity paid over £1,000 to a trustee‘s account without contacting the regulator, even after the commission ordered that no payments could be made by the charity to board members without the commission‘authorization.
Delroy Wilson, chairman of the charity’s trustees, said Third sector the investigation had found no evidence of fraud, but acknowledged that the trustees had to “let’s raise our hands” to poor accounting.
The commission began investigating the charity after it reported a burglary at its offices and the home of a trustee in 2019. Financial details subsequently provided by the charity “were not consistent with commission records,” the regulator said in a statement, and it opened an investigation in 2020.
When the commission reviewed the accounts of One Community Organisation, it identified a total of £280,000 paid by the charity to the chairman of the trustees between 2017 and 2021.
The trustee told investigators that as the charity’s account did not have a bank card, he purchased items for the charity from his own account and was reimbursed by the charity . But a community organization was unable to provide supporting documentation for more than £100,000 of those expenses, which trustees said had been ‘miscellaneous expenses’.
The commission concluded that the directors had failed to demonstrate that the charity’s funds “were used for exclusively charitable purposes.” It was misconduct and/or mismanagement in the administration of the charity and a breach of the duties of the trustee.
Initial inquiries also revealed that a community organization sometimes worked outside of Birmingham and that governance decisions were made without the full involvement of trustees. The commission said “the vast majority of decisions are made by the chairman and then relayed to the other directors individually, often over the phone.”
In December 2020, the commission issued an order that the charity would need permission from the regulator before money could be transferred to a trustee or related party. Despite this, the investigation identified six payments made to the chairman of the trustees in December 2020 and January 2021, worth a total of £1,100.
The charity told the commission it was “during an overlap” between closing and opening accounts.
The investigation report stated: ‘Directors of charities must comply with the orders and directions of the commission. Failure to do so may be a criminal offense and in this case it is misconduct and/or mismanagement in the administration of the charity.
The commission also criticized the lack of any written agreement between the charity and a private company run by the chairman of the trustees, which received purchases worth around £3,000 paid from the funds of the ‘charity. The regulator said it saw evidence the company had helped advertise and promote donations to One Community Organization, but argued directors should have “formalized a written agreement” about the relationship.
Delroy Wilson confirmed he had spoken to the commission since the report was released and said: ‘The main thing we want to emphasize is that there has been no fraudulent activity there, which is Very important.”
He argued that some problems arose because the charity started responding to demand from local people rather than waiting to organize formal programs.
The inability to get a separate bank card for the charity was “the main thing we got wrong, the main thing that, in hindsight, we could have done better,” Wilson said.
He added that the unaccounted money was for paper receipts for gasoline and other charitable expenses “that got lost in the mix”, and said that while the regulator accepted online documents, ” we have a basket full of paper receipts but they just didn’t accept that so it went up to £100,000 over three years.
“Every penny counts because it’s people’s donations, we understand that. But it’s the paper receipts that they wouldn’t accept that have piled up so much.
Wilson stressed there was no deliberate wrongdoing, but acknowledged that the money flowing through a personal account “doesn’t look very professional, let’s just say that.”
He said the charity would continue its work and argued that the report “does not show that there was fraud or anything of that nature. It showed poor accounts and auditing, which we got our hands on because it was something we got involved in [but] I didn’t plan it as a project, we just got started.
Amy Spiller, Head of Investigations at the Charity Commission, said: ‘The administrators’ failures in this case have resulted in large sums of charitable money disappearing. This is unacceptable and amounts to misconduct and/or mismanagement.
“I hope the commission’s intervention in this matter means the charity is now able to achieve its charitable aims and improve the lives of the people it was set up to support.”