The Charity Commission's recent regulatory case reports and statutory enquiries draw out some important lessons in governance & compliance for charity trustees. The reports usually arise from either complaints made to the Commission or from negative publicity in the media, and can result in penalties, guidance or advice for the individual charity as well as recommendations to charities more generally.
The Royal Institution of Great Britain
The Royal Institution was under investigation for leasing part of its premises to a company managed by a trustee, as well as for using money to pay for the refurbishment of its premises from a variety of funds that were held on particular terms and in breach of those terms. The funds used were restricted funds, expendable endowments, and permanent endowments held under a variety of different terms.
The Commission decided not to impose penalties on the charity in relation to the lease because it was at a commercial rate and disclosed in the charity's accounts.
In relation to the use of the charity's restricted funds, the Commission required the charity to put a repayment schedule in place to ensure the funds will be reinstated and to establish a Management Advisory Committee to rebuild reserves.
The report highlights the need for charities to have in place robust financial controls to ensure that restricted funds are applied in accordance with the terms on which they are held.
It also serves as a reminder that trustees are legally obliged to authorise any disposal of property to a connected person and report it as a related party transaction in the charity's accounts.
Multiple Sclerosis Society
The report into the MS Society raised issues for any charity which operates across the different regulatory regimes in the UK.
The MS Society, an unincorporated association registered as a charity in England ran into difficulties over the management of the 'National Council' in Scotland. The constitution of the English charity' established National Councils for operations throughout Great Britain and the Scottish National Council had its own constitution. Opinion within the charity was divided as to whether the Scottish National Council was a separate charitable entity or a constituent part of the English charity. Trustees of the charity suspended and withdrew the powers of the Scottish National Council, even though it was not clear whether they had the power to do so. There were several internal grievances and...