The Regulator for Charities in England and Wales
Help For All
Registered Charity No.1105786
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 19 March 2008.
The Charity
1. Help For All (“the Charity”) was established as a company on 25 May 2004, and placed on the register of charities on 8 September 2004. The object of the Charity was to provide recreational holidays for children (especially those with disabilities or special needs) from disadvantaged areas of the United Kingdom.
2. The Charity was set up by Paul Johnson and Donna Siddaway, who became two of its four trustees and were the signatories to its bank account. The other two trustees were Katherine Johnson (Paul Johnson’s wife), and Newton Ashley (Katherine Johnson’s father). The Charity’s registered correspondent was Mary Johnson, who is the mother of Paul Johnson and Donna Siddaway. Mary Johnson also declared, at the time of registration, that she was an adviser to the Charity.
3. At the time of registration, the trustees estimated that the Charity’s annual income would be between £35,000 and £50,000. However, no accounts were ever lodged either with the Charity Commission or Companies House.
Source of Concern
4. Within two months of the Charity becoming registered, the Commission began to receive reports, both from West Mercia police and from members of the public, of suspicious fundraising activities being carried out on behalf of the Charity. The main method of collecting was by placing cold calls to businesses, asking them to make donations for emotive appeals such as ‘Christmas Cancer Appeal’ or ‘Children’s Cancer Appeal’. Couriers would then be dispatched to the business addresses to collect the cheques.
5. Information already held by the Commission, as well as that provided by complainants, revealed the following links between those running the Charity and a number of fundraising organisations based at the same address.
|
Organisation |
Directors/Co Secretary |
Employees |
Notes |
|
Drawtreat Ltd |
Mary Johnson |
Owns a database of businesses that are willing to donate to charitable causes. Rents out the database information to professional fundraisers in consideration for a percentage fee based on gross collection proceeds | |
|
Fernchester Ltd (in liquidation) |
Mary Johnson |
Came to the Commission’s attention during an inquiry into a charity called Freedom For Children Foundation. The inquiry was opened because of serious concerns about unlawful fundraising. As a result of the Commission’s intervention FFCF ceased to operate in 2003 and was removed from the register of charities. | |
| Nationwide Fundraisers Ltd | Paul Johnson Donna Siddaway |
The principal fundraiser of Help For All. Used Drawtreat’s database to target businesses and solicit donations. | |
|
UK Fundraisers 2004 Ltd |
|
Paul Johnson Donna Siddaway |
A fundraising company |
6. The Commission was also aware that Mary Johnson, Paul Johnson and Donna Siddaway were employees of a charity called Care and Action Trust for Children with Handicaps (“CATCH”), into which the Commission had conducted several inquiries. The latest of these had been concluded in 2002, and the Commission had reported its findings to the Inland Revenue (now HMRC). As a result, the Inland Revenue instigated its own investigation and Mary Johnson, Paul Johnson and Donna Siddaway were subsequently prosecuted for offences involving tax fraud.
Commission inquiry
7. As a result of the reports and complaints received the Commission decided, on 11 January 2005, to open a formal inquiry.
Issues
- Allegations of inappropriate and possibly unlawful fundraising activities.
- Conflicts of interest due to the involvement of the Charity’s trustees in fundraising companies believed to be operating on behalf of the Charity.
- Trustees obtaining benefit at cost to the Charity whilst being its managers.
- Connections with a fundraising organisation previously found to have been operating unlawfully.
Timescale of inquiry
8. Virtually all of the Commission’s evidence gathering and regulatory action was completed by November 2006, and the inquiry was closed. However, the Commission continued to liaise with the Official Receiver (who had been appointed by the Court in October 2006, to wind-up the Charity following an investigation by The Insolvency Service), in order to provide any ongoing support or intervention that he might request. The publication of this statement has been delayed pending the outcome of the prosecutions mentioned in paragraph 6 above.
Findings
Unlawful fundraising
9. The inquiry found that there was no professional fundraising agreement in place between the Charity and Nationwide Fundraisers Ltd (“Nationwide”), contrary to the requirements of section 59 of the Charities Act 1992. The trustees admitted that when employees of Nationwide made cold calls to potential donors they claimed to be working for the Charity and did not disclose the fact that part of the donation would be retained by Nationwide.
10. The Commission’s accountancy specialists examined the Charity’s records and discovered that between September 2004 and January 2005, when the inquiry was opened, Nationwide had raised at least £300,000 in the Charity’s name. Some two-thirds of this had either been retained by Nationwide or been returned to it by the Charity in payment of invoices for fundraising services. Only £40,000 appeared to have been applied to charitable causes, and this was of serious concern to the Commission.
Conflicts of interest
11. The trustees had not taken any steps to avoid or manage the conflicts between their duty as trustees and their personal interests in Nationwide, in respect of which they received payment.
Trustee benefit
12. The income of Nationwide was derived from services provided, purportedly under contract, to the Charity. The trustees abused their positions by entering into these contracts, because they knew or ought to have known that their duties conflicted with their personal interests as directors of Nationwide.
Connections with fundraisers
13. No evidence was found of any contractual relationship between the Charity and Fernchester Ltd, Drawtreat Ltd or UK Fundraisers 2004 Ltd. At the time the Commission’s inquiry was opened, Fernchester Ltd was in liquidation.
Conduct of inquiry
14. The Commission’s inquiry team interviewed the trustees, who claimed to be unaware of the specific duty to avoid conflicts of interest, and of their general duties as trustees. They also claimed to be unaware of the law which regulates charitable fundraising. The Commission does not accept this claim because the trustees had for several years promoted themselves as charity fundraising specialists. As a consequence the Commission believed that they had acquired special knowledge and experience in that field from their work with other charities.
15. Using its powers under section 9 of the Act, the Commission obtained information from the Charity’s bank.
16. Throughout the inquiry, the Commission liaised closely with The Insolvency Service, who were investigating the activities of Drawtreat Ltd and Fernchester Ltd.
Conclusions
17. The Commission is satisfied, in light of the events, facts and circumstances outlined in the findings of the inquiry, that the trustees’ actions amounted to misconduct in the administration of the Charity.
Regulatory action taken
18. On 22 February 2005 the Commission made Orders, under section 9 of the Act, to compel the trustees to hand over all of the Charity’s books of account and other documents.
19. On 24 February 2005 further Orders were made, under section 18 of the Act, the effect of which was to ‘freeze’ the Charity’s bank account and to prevent the trustees from entering into any further transactions or carry out any further fundraising.
|
Date |
Orders made |
Particulars |
|
22 February 2005 |
Section 9(1)(b) |
Newton Ashley, Katherine Johnson, Paul Johnson and Donna Siddaway to transmit all accounting records and documents to the Commission. |
|
24 February 2005 |
Section 18(1)(vi) |
Newton Ashley, Katherine Johnson, Paul Johnson, Donna Siddaway not to enter into any transaction the effect of which is to make or cause to be made an appeal for goods or money for the Charity. |
|
24 February 2005 |
Section 18(1)(iv) |
Barclays Bank not to part with any funds held by the Charity. |
Impact of Commission intervention
20. The freezing of the Charity’s bank account protected more than £54,000 of charitable funds, which are in the hands of the Official Receiver pending distribution. The restraining of the trustees prevented further unlawful fundraising from being undertaken. Nationwide ceased trading and subsequently went into liquidation.
Resources applied
21. The inquiry was conducted by a senior case officer, supported by his manager and specialists from the Commission’s legal and accountancy divisions. The inquiry team liaised with several other regulators, including West Mercia police, The Insolvency Service and HM Revenue and Customs.
Actions required of the trustees
22. The trustees purported to resign on 24 February 2005, the day after they had been restrained by Order and the bank account frozen. However, no evidence has been produced to show that their resignations were properly effected in accordance with company law. The Commission invited the trustees to nominate one or more charities to which the Charity’s funds could be transferred, but after a period of several months no suitable nomination had been received.
23. The Commission considered appointing new trustees to distribute the funds and wind up the Charity, but this was overtaken by the intervention of The Insolvency Service and subsequent appointment of the Official Receiver as liquidator on 30 October 2006. The Commission will continue to liaise with the Official Receiver in relation to the distribution of the charitable funds.
Post-inquiry events
24. As a result of an investigation by The Insolvency Service both Drawtreat Ltd and Nationwide were wound up by the Official Receiver in late 2006.
25. In April 2007 Mary Johnson, Paul Johnson and Donna Siddaway were convicted at Manchester Crown Court, with others, of cheating the Revenue of approximately £900,000 and stealing thousands of pounds in cash from the charity CATCH. In June 2007 the following sentences were handed down by the court:
- Mary Johnson - seven years imprisonment
- Paul Johnson - twelve months imprisonment
- Donna Siddaway - 200 hours of community service.
26. As a consequence of their convictions, under section 72 of the Act all three are disqualified for being charity trustees. The statement of results for the CATCH inquiry can be seen here.
Lessons for other charities
27. Charity trustees need to be alert to the possibility that their charity might be abused by others who will try to use its name and reputation in order to raise money for their own benefit. If trustees suspect that this is happening, they should report the matter to the Commission. If there is evidence of criminal intent, or if the Commission advises them to do so, they should also report their concerns to the police.
28. Charity trustees who employ professional fundraisers must ensure that for each fundraising activity there is an agreement in place that conforms to the requirements of the Charitable Institutions (Fund-Raising) Regulations 1994. Unless the agreement between the charity and the fundraiser conforms to those requirements and expressly authorises the fundraiser’s expenses and remuneration, the professional fundraiser is not entitled to any part of the donations received on behalf of the charity. Trustees must also ensure that they obtain the best terms possible for their charity, and that there are arrangements in place that will enable them to monitor the performance of the fundraiser and to inspect the fundraiser’s records.
29. When soliciting donations, professional fundraisers must tell donors the name of the charity on whose behalf they are collecting. They must not make any statement that leads the donor to believe that the collection is being conducted by the charity itself, and they must explain to donors in general terms the method by which payment for their fundraising services is to be determined.
|
Paragraph |
Issue |
Charity Commission Guidance and relevant legal obligation |
|
10 |
Requirement for agreement between charity and professional fundraiser |
Leaflet CC20 – Charities and Fundraising |
|
11 |
Conflicts of interest |
Charity Commission Guide to Conflicts of Interest for Charity Trustees |
|
14 |
Requirement for trustees to exercise duty of care having regard to special knowledge or experience acquired in the course of a business or profession |
Sections 1 and 2 and schedule 1 paragraph 3 Trustee Act 2000 |
Date of publication 19/03/2008