A Charity Commission inquiry into REDAID, which was set up to provide relief for the victims of natural disasters worldwide, has found that charity failed to carry out its declared aims and had poor financial controls, with irregularities identified in the way that it operated its bank account
REDAID, which was set up in 2005, was first scrutinised by the Commission in 2009 over concerns it was operating outside its objects. The Commission attempted to resolve these issues by issuing the charity with a formal action plan in March 2010. However, the trustees failed to cooperate and as a result the Commission opened a formal inquiry in December 2011.
This has found that the charity was advertising a loan to charity scheme on its website called ‘Re-Give’ which was set up as an industrial and provident society and registered with the Financial Services Authority. It was intended to be an online platform where UK organisations with a social purpose could publicise their activities and invite ‘returnable donations’ or loans directly from the public.
These organisations would register on a website and, although there would be no joining fee, there would be a transaction fee of 3% of the amount of each loan. The inquiry was told the transaction fee was to be used to administer, advertise and expand the Re-Give initiative.
However the inquiry found that any activity in support of Re-Give’s development may not have been exclusively charitable. The chair also told the inquiry that, over the previous two years, the charity had not directly run any projects and current projects had not been progressed.
The inquiry identified failures of governance and management within the charity, with a failure to keep adequate records of the charity’s decision making.
The trustees failed to produce books and records to the inquiry when required to do so. The chair’s explanation was that this was due to records being held on a corrupted laptop computer which was in the possession of a former trustee who was overseas. The chair conceded that books and records had not been properly kept.
In the inquiry’s view there was only one trustee (the chair of the charity) with effective control of the charity. The trustees were not able to show satisfactory evidence of adequate financial controls, with a lack of segregation of charitable funds from personal funds and evidence that personal funds had been paid through the charity’s accounts to enhance the charity’s cash flow when applying for grants.
The inquiry found the trustees did not adequately segregate charitable funds from other funds, for example the chair admitted he had kept about £1,000 of charitable funds in a personal bank account. The inquiry found the trustees were unable to provide invoices to prove legitimate expenditure. In the inquiry’s view, the chair gave unsatisfactory and/or confused reasons for this. For example, he said that many deals were made on the telephone by way of verbal quotes from companies so invoices had not been issued.
In the commission’s view, the information and responses given by the chair of the charity were inadequate, unclear or vague. The other trustees did not provide information to the inquiry and there were strong indications to suggest the chair was in a position of significant influence and control, if not in sole control of the charity.
The Commission removed the charity from the register on the 14 December 2011 as it was not clear that what it had been doing was charitable and more recently that it was not operating.
The Commission had concerns regarding the last set of accounts submitted by the charity, which showed a nil balance. The inquiry exercised its powers to request charity bank statements which revealed a £25,000 deposit followed by four cash withdrawals totalling £14,500. This left the remaining balance at £10,535, and the Commission has used its powers to freeze the accounts and ensure the remaining funds were correctly applied for charitable purposes. The Commission has also referred the case to the police due to concerns about personal funds being used to show case flow when applying for grants and due to the unsatisfactory final accounts. There has been no announcement to date on what action, if any, the police may take.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: ‘Charity trustees have the responsibility and the duty to only act in the best interest of their charity, they must ensure that their own personal interests are not put first. We expect trustees to follow our guidance on financial controls and ensure that there is the correct separation of their personal funds and those of a charity.
Only one of the trustees in this case appeared to be in control of the charity, all trustees have the same collective responsibilities and duties as charity trustees. Where one trustee is dominant and takes sole control of a charity, we often find this leads to poor governance and failure to get even the basics of good governance right.’
