The Regulator for Charities in England and Wales
The Margaret Desmond Charitable Trust
Registered Charity No. 290896
This is a statement of results of an inquiry under section 8 of the Charities Act 1993 as amended by the Charities Act 2006 (“the Act”) and published on 12 March, 2008.
The Charity
1. The Margaret Desmond Charitable Trust (“the charity”) was registered as a charity on 8 February 1985. Its object is to further the charitable purposes of the Parish of St Joan of Arc, Highbury, London N5.
2. When it was established the charity had two trustees. They were the parish priest, now deceased, and a solicitor (“the surviving trustee”).
Source of Concern
3. The Commission received a joint complaint from the current parish priest of the parish of St Joan of Arc and the Roman Catholic Diocese of Westminster who complained that since the death of the previous parish priest, the surviving trustee had been mismanaging the charity by
- not properly managing the charity’s investments
- failing to apply the income of the charity towards its charitable purposes and
- not fulfilling his statutory duty regarding the submission of accounts and annual returns to the Commission.
Commission inquiry
4. The surviving trustee failed to respond fully to the Commission’s requests for information about the up-to-date position regarding the charity’s investments, despite having been given several months to comply.
5. On the 29 March 2007, due to the continuing concern about the management of the charity’s affairs and the potential risk to the charity assets which were worth £127,413 as shown on the balance sheet dated the 5 April 1995 the Commission decided to institute an inquiry in order to examine the issues in greater depth and to consider whether further regulatory action was necessary.
Issues
6. The Commission identified the following key issues as matters of regulatory concern that:
- the surviving trustee had failed to appoint any other trustees on the death of the other serving trustee;
- the surviving trustee had failed in his duty to keep the Commission informed about changes to the registration particulars of the charity.
- the surviving trustee had failed to provide relevant information about the charity’s assets and income to the representatives of the parish of St Joan of Arc;
- the surviving trustee had failed to provide adequate information to the Commission about the charity’s assets and income;
- there was a possibility that charity assets had been misapplied or were at risk.
Timescale of inquiry
7. The Inquiry was opened on the 4 April and closed on 10 September 2007. The Inquiry took five months to complete.
Findings
8. The surviving trustee did not appoint at least one other trustee following the death of the other serving trustee. Although this is not a legal requirement, it is the practice generally recommended in such circumstances. The surviving trustee was unable to provide a satisfactory explanation as to why he had not done so.
9. For a number of years the surviving trustee had failed to keep the Commission informed about changes to the registration particulars of the charity. It is a legal obligation under s3(6)(7) Charities Act 1993 to provide information about changes to its details on the Register. The effect of this failure was also that the Commission held information that was both inaccurate and out of date in respect of the charity’s trusteeship, its income and its expenditure. The surviving trustee stated that he had sent accounts to the Commission at the time, but that they had been lost by the Commission. The Commission has no record of them being received.
10. Annual return information was submitted to the Commission by the surviving trustee after the commencement of the inquiry. However, the Commission has doubts as to the accuracy of this information. For that reason it is unclear whether the charity’s income or expenditure was above the relevant thresholds (see paragraph 24) for the submission of accounts and trustees’ annual reports.
11. Albeit under no legal obligation to do so, the surviving trustee had failed to provide relevant information about the charity’s assets and income to the representatives of the parish of St Joan of Arc, the sole beneficiary of this charity, despite having been asked by the succeeding parish priest and representatives of the Diocese on a number of occasions. It was however confirmed that the surviving trustee had made two distributions of charitable funds to the parish since the death of the other serving trustee.
12. The surviving trustee had failed to provide adequate information to the Commission about the charity’s assets and income, despite being under a statutory obligation to do so.
13. By contacting the registrars of the companies in which the charity held shares the Commission was able to satisfy itself that there had not been any misapplication of charity assets or any actual risk to the charity’s assets.
Conduct of inquiry
14. The Commission Inquiry team interviewed the surviving trustee. At the interview he indicated a willingness to co-operate with the Commission. However he failed to provide the Commission with a definite date by which he was going to be able to resolve the matters highlighted in the findings above, nor did he supply the Commission with sufficient information to show that satisfactory progress was being made in this regard.
15. Accordingly, the Commission Inquiry team contacted the registrars of the companies in which the charity held shares to satisfy itself that the information provided by the surviving trustee in relation to the charity’s investment portfolio was correct.
16. The Commission decided to appoint two persons nominated by the Diocese of Westminster to be trustees of the charity to act together with the surviving trustee.
Conclusions
17. The charity had not been managed in an effective manner for a number of years.
18. The charity needed more trustees to ensure that it was properly managed.
19. The initial enquires that we made suggested to us that the charity’s assets had not been misapplied. The records of the charity’s financial affairs need to be scrutinised in order that the charity’s financial position is regularised. Additional trustees have now been appointed to ensure that this is achieved, and the Commission will monitor the charity to ensure that this action is completed.
Regulatory action taken
20. The Commission issued an order under section 9 of the Act for information to be supplied by a company in which the charity held shares to ascertain whether the Commission should take action to protect the charity’s assets.
21. The Commission made an order under section 18 (1) of the Act appointing two representatives of the Diocese of Westminster as additional trustees to act with the surviving trustee.
Impact of Commission intervention
22. The Commission ensured that additional trustees were appointed to put the management and administration of the charity back on to a sound footing. In conducting an inquiry the Commission was able to be satisfied that no assets had been misapplied and any potential risk would be managed by the new trustee body.
Resources applied
23. The Commission adopted a team working approach on this case. The case officer worked closely with one of the Commission’s accountants, and regularly liaised with the Diocese of Westminster.
Actions required of the trustees
24. Once the trustees have ascertained the true financial position of the charity, they will need to ensure that up-to-date accounts are filed with the Commission and that the charity’s income is applied towards its charitable purposes.
Lessons for other charities
25. Trustees are legally required to actively manage and administer the charity that they are responsible for. If they are unable to do so they should discuss this with their fellow trustees as soon as possible, to consider their position and reach a decision which is in the best interests of the charity.
26. Charity trustees have various legal duties regarding accounts and reports. All charities must:
- Prepare and maintain accounting records. These records (cash books, invoices, receipts etc) must be retained for at least six years (at least three years in the case of charitable companies).
- Prepare accounts.
- Make those accounts available to the public on request. This is a vital underpinning to the principle of public accountability, and must be complied with in all cases. It is open to trustees to make a reasonable charge to cover the costs of complying with the request (e.g. photocopying and postage). As a matter of good practice we recommend that a copy of the Trustees’ Annual Report should, wherever possible, be sent with the accounts.
- Charities with income of less than £10,000 should not send us a copy of their Annual Report and accounts unless we ask for them, although they should still be prepared.
27. Charities with over £10,000 annual income or expenditure have a legal obligation to submit accounts to the Commission and to complete and file an Annual Return form within 10 months of the charity’s financial year-end. It is the Commission’s experience that persistent failure to submit such documents on a timely basis often indicates further areas of mismanagement on the part of its trustees.
28.Charity trustees should take seriously their responsibilities to comply with requirements for the submission of accounts and annual returns to the Commission. Transparency and accountability help underpin the confidence of the public in charities and allows funders and supporters to see how their money is being used.
29.Charity trustees are under a statutory duty to cooperate with the Commission1.Whether they do so or not is a relevant factor in assessing whether misconduct or mismanagement may have taken place in a charity and considering whether regulatory action is proportionate.
|
Para |
Issue |
Charity Commission Guidance and relevant legal obligation |
|
6, 17 |
Failure to actively manage the charity’s affairs |
|
|
6,11, 18 |
Failure to provide relevant information to the parish of St Joan of Arc, the charity’s beneficiary |
|
|
2210, 19 |
The questionable accuracy of the financial information supplied to the Commission |
1. Scargill and Cave v Charity Commissioners and HM Attorney General (unreported, reference CH 1997-S-No. 5180 and CH 1998-S-No. 2423.
Date of Publication: 12/03/2008