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Published 27 August 2021
© Crown copyright 2021
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This publication is available at https://www.gov.uk/government/publications/charity-inquiry-the-retreat-animal-rescue/charity-inquiry-the-retreat-animal-rescue
The Retreat Animal Rescue (‘the charity’) was registered with the Commission on 27 August 2004. It is governed by a trust deed dated 14 April 2004 as amended by a supplemental deed dated 8 August 2004 (‘the governing document’).
The charity’s objects are ‘to relieve the suffering of unwanted, abandoned and neglected animals that are in need of care and treatment, by the provision of a rescue and re-homing service and the accommodation of such animals, and to advance public education in matters concerning animal welfare’.
The charity’s entry can be found on the register of charities.
On 19 November 2018, the charity was placed into the Double Defaulter Class Inquiry (‘the class inquiry’) which investigates charities which have defaulted on their statutory filing obligations with the Commission on two or more occasions in the last 5 years. The charity was included in the class inquiry because it had failed to submit its annual accounts and returns (‘the financial information’) for the years ended 26 August 2016 and 26 August 2017 to the Commission. The financial information was subsequently submitted, but the charity again failed to file the financial information for the year ended 26 August 2018 on time.
Scrutiny carried out as part of the class inquiry additionally identified regulatory concerns including significant related party transactions. Subsequently, the Commission opened a statutory inquiry on 13 November 2019 to examine these concerns.
The inquiry examined the following:
the administration, governance and management of the charity by the trustees with specific regard to the extent to which the trustees have:
responsibly managed the charity’s resources and financial affairs, in particular the adequacy of the charity’s financial controls
operated within the provisions of the charity’s governing document
adequately managed risks to the charity, its property and reputation including risks of misappropriation and misapplication of the charity’s funds
avoided or managed conflicts of interest
the extent to which any failings or weaknesses identified in the administration of the charity during the conduct of the inquiry were a result of misconduct and/or mismanagement by the trustees
The inquiry closed with the publication of this report.
During the course of the inquiry the trustees of the charity changed. The trustees at the opening of the inquiry are referred to as the ‘former trustee board’ which was composed of Trustees A, B, C, and D. Trustees B and D resigned. Three new trustees have since been appointed and together with A and C from the former board will collectively be referred to as the ‘new trustee board’. Trustee A and C are siblings. Trustee A and B are married to each other.
The inquiry found that the charity failed to file annual accounts and annual returns on time for five consecutive years.
This is a breach of clause 22 of the governing document which stipulates that the charity must file its financial information in line with statutory requirements.
Failure to submit financial information to the Commission on time in line with statutory requirements is also a breach of sections 162, 163, 164 and 169 of the Act and constitutes misconduct and/or mismanagement in the administration of the charity. It may also be a criminal offence under section 173 of the Act.
The charity’s financial information for the year ended 31 July 2020 was filed on time.
The inquiry found that the charity had breached its governing document by remunerating a trustee for working at the charity’s café. Payments amounting to £2,925 were made to Trustee B in breach of clause 25 of the governing document which stipulates that no trustee may be remunerated without the Commission’s consent.
Trustee B stated he was unaware of the clauses in the governing document prohibiting any payment to trustees without prior approval from the Commission and has since repaid the monies he received in breach of trust. However, the repayment of the funds does not negate that the payments were unauthorised and should not have been made.
The inquiry found that the charity was without the required number of trustees from 1 September 2015 to 1 April 2020 as it only had four trustees during this period.
This was a breach of clauses 9 and 12 of the governing document. Clause 9 of the charity’s governing document states there must be at least five trustees and clause 12 states that so long as there are fewer than five trustees, none of the powers or discretions conferred by the deed or by law on the trustees shall be exercisable by the remaining trustees except the power to appoint new trustees. Consequently, there are significant doubts about the validity of any decisions which do not relate to the appointment of trustees made between 2015 and 2020.
Avoiding and effectively managing conflicts of interest is an important element of a trustee’s duties. Clause 19 of the charity’s Governing Document stipulates that ‘a trustee must absent himself or herself from any discussions of the trustees in which it is possible that a conflict will arise between his or her duty to act solely in the interests of the charity and any personal interest’.
The charity operates from Brickyard Farm (‘the property’) which comprises a detached house and between 35-40 acres of land. The detached house and garden is not part of the charity and is occupied by Trustees A and B.
The property was purchased in September 2012 by Trustees A and B and the charity allowed to occupy the adjoining land rent free at that point. The purchase was facilitated by a loan from an individual known to Trustees A and B (‘the individual’). On 19 June 2015 the charity received a donation amounting to £200,000 from another charity. The full amount was credited to the charity’s bank account and on 8 July 2015 the amount of £200,000 was paid to the individual in part payment of the loan.
In September 2017 a 25 year lease (‘the lease’) was carved out of the freehold and granted by the proprietors (trustees A and B) to the charity. The £200,000 that had been paid to the individual was then designated as a pre-payment for the lease from the charity to Trustees A and B for the charity’s use of their land.
At this time, the charity was without the required number of trustees and therefore could not validly decide to enter into the lease. In addition to this both parties to the lease were the same people. The landlords were Trustees A and B and they are also named on the lease as the tenants. As the charity is unincorporated it cannot enter into the lease in its own name so Trustee A and B also signed the lease in their capacity as trustees for the charity. It is not legally possible to enter into a contract with yourself, consequently, the inquiry found that there are significant doubts about whether the lease is legally valid.
No discussions were recorded in relation to the deliberations that were undertaken regarding the donation and subsequent lease. The inquiry did not receive any documentation showing that Trustees A and B recognised that there was a conflict of interest when deciding that the charity should lease land from them and that the £200,000 donation should be used to pay off some of the loan secured on their personal property. Similarly, there is no evidence that this conflict was effectively managed.
The inquiry found that the charity did not manage conflicts of interest appropriately and thereby breached clause 19 of the governing document when entering into the lease. Additionally, at the time of the decision the charity did not have the required minimum number of trustees to act.
The Commission concluded that the former trustee board were responsible for misconduct and/or mismanagement in the administration of the charity and in breach of their trustee duties which are outlined in the Commission’s guidance CC3 – the essential trustee.
As a result of the inquiry the new trustee board is now more aware of its duties, the Commission’s filing requirements in respect of financial information, and the provisions of the charity’s governing document.
The new trustee board has taken steps to implement an Action Plan issued under section 15 of the Act on 31 March 2021. The latest set of financial information was filed on time, monies received in breach of trust were repaid (and no additional unauthorised trustee payments made) and internal financial processes strengthened.
Steps have been taken by the current trustee board to review the lease as stipulated in the Action Plan, and a monitoring case has been opened to ensure the lease is regularised in the best interests of the charity.
The Commission’s information gathering powers under section 47 and 52 of the Act were used.
Notice of the Commission’s intention to issue an Official Warning to Trustee A and B under section 75A was given on 19 November 2020. Subsequently to the Notice, Trustee B resigned and the charity requested a Decision Review. The Decision Review concluded on 24 March 2021 that the Warning should be made. However, as the Commission can only make Official Warnings to current trustees, the Warning was issued to Trustee A only on 31 March 2021.
An Action Plan under section 15 of the Act was issued on 31 March 2021.
The purpose of this section is to highlight the broader issues arising from the Commission’s assessment of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the charity in addition to the findings and conclusions set out in the earlier sections of this report but is included because of their wider applicability and interest to the charity sector.
An effective charity is run by a properly appointed, clearly identifiable board or trustee body with the minimum number of trustees, as required by its governing document.
The law states that trustees cannot receive any benefit from their charity in return for any service they provide to it or enter into any self-dealing transactions unless they have the legal authority to do so. This may come from the charity’s governing document or, if there is no such provision in the governing document, the Commission or the Courts. The Commission’s guidance on Trustee expenses and payments (CC11) is available on GOV.UK.
Trustees of charities with an income of over £25,000 are under a legal duty as charity trustees to submit annual returns, annual reports and accounting documents to the Commission as the regulator of charities. Even if the charity’s annual income is not greater than £25,000 trustees are under a legal duty to prepare annual accounts and reports and should be able to provide these on request.
Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up. The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. The Commission’s guidance on Internal Financial Controls for Charities (CC8) is available on GOV.UK.
Conflicts of interest are more likely when there are only a small number of trustees on the board, when trustees are closely related, or when the charity has dealings with organisations in which the trustees have interests. It is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees. The trustees should put in place policies and procedures to identify and manage such conflict. Further guidance and advice on conflicts of interest can be found on GOV.UK.
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