Trustees misused charity assets reveals Charity Commission
Greenfinch Charitable Trust
The Charity Commission has issued its inquiry report* into the financial affairs of Greenfinch Charitable Trust (“Greenfinch”) specifically in respect of payments/benefits in excess of £2million made by Greenfinch prior to it entering into liquidation.
Greenfinch was a registered charity based in Kent which ran fostering services until 2004 and later provided support to families who were subject to care proceedings.
The Commission pursued recoupment monies from the charity trustees having contacted the liquidator to ensure that she was taking legal advice regarding the payments/benefits received by the charity trustees and any individuals and companies connected to them.
The investigation focussed on:-
- unauthorised trustee remuneration;
- unauthorised pension payments;
- the transfer of the charity’s fostering agency to a private company; and
- outsourcing of the charity’s administration to a company owned by connected persons.
In this case the Commission found that the charity trustees had benefitted from unauthorised remuneration, transferred assets belonging to Greenfinch to connected parties for nil consideration and had acted in breach of their fiduciary duties. To avoid legal proceedings the charity trustees entered into a settlement with the Commission. In her latest report the liquidator has reported a “settlement with trustees” of £700,000 and a payment in excess of £52,000 in respect of the Charity Commission’s legal fees.
Identity of charity trustees
A first step in the investigation was identifying the charity trustees of Greenfinch. As Greenfinch was a company limited by guarantee, the Commission confirmed that the directors were the charity trustees; we are aware from our own experience that this is not always understood or, as in this case, accepted.
Whatever legal form a charity takes, it is essential that the charity trustees are identified. If the charity trustees are not properly identified, there is a real risk of a charity inadvertently making unauthorised payments to charity trustees and those connected to them, that conflicts of interest will not be identified and managed and that the charity trustees will not fulfil their obligations, for example in relation to delegation and supervision.
In addition, should a charity become insolvent it is essential that its professional advisors and any appointed office holder can identify the charity trustees in order to ensure they have fulfilled their professional obligations.
With that in mind, taking each of the most common forms of charity in turn, the following pointers may be helpful:-
- charitable company limited by guarantee – as reported here, the directors are the charity trustees; they may be called by another name in the articles of association such as board member or governor;
- charitable incorporated organisation – usually established using Commission precedents which make positions clear by describing the charity trustees as “charity trustees”;
- charitable trust or charitable unincorporated association – may have both property holding trustees and charity trustees; whilst it is usually possible to identify the property holding trustees, it is not always easy to determine whether or not they are also charity trustees or to identify any non-property holding charity trustees.
Titles which are not necessarily conclusive either way include Council, General Committee, Executive Board, Leadership Team, Deacon and Elder.
It is essential that a charity and its professional advisors know the identity of the charity’s charity trustees and that each person involved in the running of the charity understands their status and responsibilities. If you would like any assistance with this please contact Jenny Smith at firstname.lastname@example.org who will be delighted to advise and recommend next steps.
*The Commission’s inquiry report can be found here https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/575372/greenfinch_charitable_trust.pdf