Charity Commission Inquiries – Warning to Charity Trustees

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On the 20th September last year, the Charity Commission, the independent regulator of charities in England and Wales, opened a statutory class inquiry into charities that were in default of their statutory obligations to meet reporting requirements (including those who failed to file their annual documents for two or more years in the previous 5 years).

The Commission has experienced links between reporting failures and wider problems, particularly with regard to poor governance within the charity. Full financial accountability both to the Commission as regulator and to the wider public is key and by being more forceful in enforcing these requirements the Commission wants to enhance the accountability of charities to the general public.

Last month the Commission published four inquiry reports relating to charities that were under investigation; namely Haringey Education Business Partnership, First Asian Support Trust Limited, Sheffield Reclamation Limited and Newcastle Central Mosque Masjid Al-Tawhid. All four charities had failed to submit annual accounts and reports to the Commission for financial years ending 2012 and 2013, and in the case of Sheffield Reclamation Limited this extended back to 2009.

The inquiry reports concluded in all four cases that the charities’ trustees were in default of their legal obligations to file accounting information and that this was mismanagement and misconduct in the management of the charity. The Commission exercised its statutory powers to direct the charity trustees to prepare and submit the missing information for scrutiny from its accountants. Excuses from the trustees included staff holidays, public holidays and awaiting further information.

The reporting responsibilities are legal duty of the charity trustees even when passed to professional advisors and failing to submit accounts on time is a criminal offence.

As a result of the statutory class inquiries the Commission has received 64 sets of accounts resulting in over £42m of charitable funds being accounted for on the public register of charities.

Michelle Russell, Head of Investigations and Enforcement at the Charity Commission said “It is difficult to understand why some charities take the duty to file with Companies House more seriously, though this may be explained by the fact that Companies House can issue fines for late filing in some cases. But these charities in default should remember that there were just under 300,000 views of the Register of Charities in May 2014 alone. Members of the public are making checks on the charities they donate to, meaning that not only does non-compliance reflect badly on trustees; it may put people off donating.”

The Charities Group at Forbes Solicitors regularly advises on all aspects of charity law, including the legal duties of charity trustees.  For advice and assistance on your duties as a trustee or assistance with the governance of your charity, contact Forbes Solicitors on 0800 321 3258 or use our enquiry form.

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