The Veterans Charity was originally set up in 2008 to establish memorials to D-Day veterans, and also worked to support former members of the armed services.

The Charity Commission opened a formal inquiry in April 2015 after three individuals connected to the charity, including the chief executive, were arrested by British Transport Police over concerns about the charity’s fundraising practices.

A subsequent trial of the charity’s chief executive for charges of theft and fraud by abuse of position ended when the judge ordered the jury to find him not guilty due to a lack of evidence.

During the early stages of the inquiry, the Commission identified a number of shortcomings in the charity’s administration, including that the charity’s finances were under the sole control of the chief executive, with limited oversight by the trustees.

For a significant period of time the chief executive had sole control of the charity’s bank accounts, including its cheque book, debit card and online banking facility.

The inquiry found that nearly £38,000 of the charity’s expenditure had been withdrawn as cash during the period between January 2010 and May 2015, equating to over £500 each month.

The charity told investigators that the invoices for expenditure before 2013 were lost as a result of an office move, and that the cash withdrawals were used to repay subsistence claims for expenditure on charity business including accommodation, fuel, event costs such as the purchase of stocks, and support for beneficiaries. The Commission said there was very little supporting documentary evidence to confirm how these charitable funds had been applied.

In its report, the regulator concluded that the trustees of the charity at the time the inquiry opened were responsible for mismanagement in the administration of the charity, after failing to properly oversee the charity’s chief executive or implement effective financial controls or maintain adequate financial records, although there was no suggestion of deliberate wrongdoing.

A number of issues were highlighted in the inquiry report, including the finding that the chief executive said paying bank cash into his personal account was necessary due to the unavailability of local branches of the charity’s bank. The inquiry found the charity’s fundraising processes posed significant risks to the charity’s funds and found no evidence that the trustees had considered or taken action to address this.

There were also regulatory concerns in relation to the counting of cash by a single individual, meaning there was no independent verification of cash counting or recording.

In addition, one trustee paid ‘volunteers’ collecting money for the charity at a daily rate of £40 to cover their expenses. These funds were paid out of the trustee’s personal finances and then subsequently claimed for and reimbursed by the charity.

The inquiry was unable to conclude that the individuals collecting on behalf of the charity were volunteers, given that they received a day rate from the charity rather than reimbursement of reasonable expenses incurred.

The inquiry did not accept the trustees’ explanation that, because those individuals collecting for the charity were veterans themselves, that the payments benefited these individuals in furtherance of the charity’s purposes. It found that the trustees had given insufficient consideration to the potential tax implications of this practice, as well as insufficient consideration to fundraising regulations relating to the payment of fundraisers.

The Commission concluded that there was mismanagement in the administration of the charity prior to its reconstruction because of evidence of both poor governance and poor financial management of the charity and its affairs. The standard of the charity’s record-keeping was very poor, and the charity had not retained its financial records for the required period, while the original trustees failed to exercise reasonable care and prudence in relation to some of the charity’s fundraising activities which exposed the charity to undue risks, including misappropriation of its funds.

Notwithstanding these concerns, the inquiry was satisfied as a result of its investigative work that the charity was undertaking work to provide urgent short-term support for veterans in need. It therefore sought volunteers from the charity sector to assist in the charity’s reconstruction. Three people, including a lawyer with expertise in the sector and the head of another military charity, stepped forward to help.

The Commission has now revoked its protective measures following the strengthening of the charity’s governance and financial controls. The regulator said it is satisfied that its original regulatory concerns have been addressed following a further inspection of records and meeting with the trustees.

Harvey Grenville, head of investigations and enforcement at the Charity Commission, said: ‘This charity has undertaken valuable work to support veterans in urgent short-term need, and our report acknowledges the new trustees’ contribution to the reconstruction of this charity.

‘This is a collaborative model with sector professionals which we would like to see further developed to assist the reconstruction of certain charities which are in difficulty.

‘The charity’s work prior to this reconstruction was undermined by poor management on the part of the charity’s trustees at the time. This was a charity without adequate systems and controls in place, and limited oversight of the chief executive by the trustees. This is unacceptable, and we are critical of the trustees at that time for their failings.’

Charity Inquiry: The Veterans Charity is here

Report by Pat Sweet