The Charity Commission has published a report into its investigation of the Greenfinch Charitable Trust, which found the charity had suffered significant financial losses as a result of breaches of trust, culminating in a High Court case to recover monies
The charity had objects to advance the education of children in local authority care. In practice, it ran a fostering service to recruit foster carers between 1998 and 2004; after that time, it ran a supervised contact centre and a service providing court assessments for families subject to care proceedings.
The charity went into liquidation in 2010 and is still in liquidation and has not yet dissolved. The Commission had been investigating Greenfinch as part of a regulatory compliance case since 2009, before opening a formal inquiry in January 2013.
The Commission had concerns about the identity of the charity trustees; unauthorised trustee remuneration; the transfer of the charity’s fostering agency to a private company connected to one of the directors; and the outsourcing of the charity’s administration to a company owned by connected persons.
The Commission concluded that there had been unauthorised private benefit arising from salaries paid to one of the charity’s directors and, via a company owned by that director, to two trustees.
The manager was paid a salary of approximately £70,000 per annum between 1998 and 2005 falling after that because she started to work part time. The manager was a director of the company and the inquiry found that a director must be a member of the council of management and therefore she had received substantial unauthorised remuneration.
Two members of the council of management worked at the charity providing accounts and administration services. They were employed by a company called Faircourt Properties Ltd (Faircourt). The charity paid Faircourt for administration services and Faircourt paid the two trustees a salary. Faircourt was a company set up and owned by the charity’s manager. The inquiry found that the two trustees and the manager received unauthorised trustee benefits.
The inquiry also established that the charity paid contributions to the manager’s pension totalling £139,106, and made ‘material’ contributions to her husband’s pension which were a further example of unauthorised trustee benefit.
The charity maintained that directors of the charity were not also trustees under charity law. But the Commission concluded they were trustees and that any benefits should have been authorised in accordance with the provisions in the charity’s governing document or by the Commission, neither of which was the case.
The Commission also examined the transfer of the charity’s fostering agency to a private company connected to one of the charity’s directors. The charity transferred the agency for nil consideration and the regulator concluded that that was a breach of the trustees’ duties, including their duty to avoid conflicts of interest and act in the best interest of the charity, as it valued the transfer at £1.5m. The Commission also concluded that the decision was voidable under statute, as it was not approved by the Commission or the company’s members.
Separately, the Commission examined the decision in 2007 to outsource the charity’s administration to a company owned jointly by a staff member of the charity and the husband of a director. The Commission concluded that the charity incurred costs of over £300,000 that it would not have incurred had the administration remained in the charity.
The commission concluded that there had been several breaches of trust which had led to the charity losing a significant amount of money and that action for recovery of that loss should be taken.
In April 2013, the Commission issued proceedings in the High Court against four individuals in relation to the outsourcing arrangement. The charity’s liquidator confirmed that she was considering legal action in connection with the transfer of the fostering agency and the unauthorised remuneration.
A settlement agreement was accepted by the High Court on 24 November 2014. The details are confidential, but the Commission has confirmed that the liquidator was able to pay all the charity’s creditors in full plus the costs of the liquidation. In addition she was able to pass £181,081 to another charity with similar objects.
