In the 12 months to the end of March this year the Charity Commission launched 72 investigations into charities, up markedly on the 49 inquiries that started the previous year.
Concerns among charities’ links to the Russian regime since its invasion of Ukraine is a major factor in this rise, according to the regulator.
Another is an escalation of investigations into double defaulting charities, which consistently file late accounts with the Commission for two or more of the last five years.
Meanwhile, the regulator is still wrapping up investigations that launched several years ago. Last year it concluded 5,726, up on the 5,324 cases the previous year and indicating the regulator is moving in the right direction in tackling a backlog in investigations, albeit slowly.
Of those ending last year 68 were statutory inquiries, the regulator’s most serious level of investigation. This figure is also up over the last 12 months, with 45 of these probes concluding the previous year, according to its 2023 annual report.
Late accounting concerns, financial irregularities and poor governance are among concerns raised. In some incidents, greed from trustees, accused of siphoning off charity funds for personal gain, is highlighted as an issue.
We’ve published our Annual Report for 2022-23 📄
— Charity Commission (@ChtyCommission) July 10, 2023
Read about our work over the past year: https://t.co/2f7obkmTLe pic.twitter.com/X8LYI6LrxD
In addition, charities failure to spend funds on helping people has become a theme to emerge from some investigations, as poor administration sees them divert resources elsewhere at often considerable cost to the organisation.
Here we look at some of these latest trends behind the figures to give a picture of why increasing action is being taken by the Charity Commission.
Russian links
Since Russia’s invasion of Ukraine last year, the UK government has adopted a policy of “hitting” Russian premier Vladimir Putin’s “inner circle”, through its Russia (Sanctions) Regulation to limit the financial clout of the regime and its backers.
Over the last year the Commission has launched six statutory inquiries into charities affected by sanctions on those with links to the Russian regime.
“In doing so, we have sought to protect almost £100m in charitable funds and have appointed interim managers to five of the charities under inquiry,” says the regulator.
Probes have included a statutory inquiry launched in July 2022 into grant maker the Potanin Foundation, which is run by Russia’s second richest man Vladimir Potanin.
Meanwhile in June last year the regulator appointed interim managers to run two grant making trusts linked to Russian oligarch Dr Viatcheslav Kantor.
Also last year an interim manager was appointed to run Genesis Philanthropy Group, after three of its trustees became subject to financial sanctions by the government relating to Russia’s invasion of Ukraine. A statutory inquiry was opened into the Jewish arts and heritage charity after oligarchs Petr Aven, Mikhail Fridman and German Khan were named as ‘designated persons’ by the government in relation to Russia.
Russia’s invasion of Ukraine has also prompted the regulator to step up its vigilance of cyber-attacks.
“The risks of cyber-attack or major system failure are amongst the most significant we face,” adds the regulator. “In particular, we have been alert to the increased possibility of cyber-attack as a result of heightened tensions with Russia following the invasion of the Ukraine.”
Late filing
The Charity Commission says that probes into double defaulters is a “significant factor” behind the latest escalation in investigations.
Double defaulter probes last year include a statutory inquiry opened in February this year into the Middlesbrough Central Masjid and Community Centre, after repeated failures by the charity to provide the regulator with its financial accounts.
The Centre had been part of the regulator’s double defaulter class inquiry against several charities in 2019 and did eventually file its accounts for that year, albeit around six months late.
But despite being part of this class inquiry it again failed to submit annual returns and accounts for its financial years ending 2020 and 2021 prompting the Commission to open an inquiry.
Another double defaulting charity included in the latest annual report’s statistics is Four Paws Animal Rescue (South Wales).
It failed to file accounts for the last two financial years prompting the regulatory to open a statutory inquiry in November 2022. At the time of writing its accounts are still overdue, by just under 1,000 days.
More recently, and not included in the regulator’s annual report, has been the launch of a statutory inquiry into double defaulting drug and alcohol addiction support charity, Wineskins Charitable Trust, which operates under the name U-Turn Recovery Project.
We've opened a statutory inquiry into New Wineskins Charitable Trust, as a result of serious regulatory concerns regarding the charity’s failure to submit its accounts and annual reports.
— Charity Commission (@ChtyCommission) July 3, 2023
Read more: https://t.co/qHUTBj11iJ pic.twitter.com/KuPF5ewSpY
This probe launched earlier this month after it failed to submit its accounts for 2020 and 2021 on time. After eventually filing its financial records, the regulator found “the accounts did not meet all the accounting requirements”. In addition, the charity filed its accounts for the year ending March 2022 late by 140 days.
Greedy Trustees
Most trustees work tirelessly for their charity, to ensure communities are supported through the smooth running of its operation.
But sadly, a minority look to use their position and charity funds for personal gain.
Earlier in July this year the Charity Commission revealed details of its probe into Morgan Williams, the sole trustee of North Yorkshire based Cowesby Trust.
While the charity’s funds are meant to improve the housing needs of its local community, Williams was found to have spent £110,000 renovating his cottage and a further £69,500 on two antique clocks.
Despite claiming the clocks were an investment for the charity, they sat in his home and “there was no evidence provided to justify the decision” to buy them “was in the interests of the charity”, added the regulator. They were eventually sold for just £26,000, costing the charity dearly.
A final settlement of more than £136,000 was received from Williams of the money he owed the charity, and he was banned from holding senior roles with charities for a decade.
“We expect all trustees to act only in the best interests of their charity and to do otherwise is a clear breach of trust. The Commission will intervene if we find charity funds are being misused,” said the Charity Commission’s head of investigations Amy Spiller.
We’ve concluded our inquiry into The Cowesby Trust helping to secure the return of over £130,000 of charitable funds.
— Charity Commission (@ChtyCommission) July 11, 2023
Read more: https://t.co/fuKJt1gspt pic.twitter.com/nTpnuu1Dxx
In April last year the regulator revealed how two trustees of the charity Dream It, Believe It, Achieve It siphoned off just under £1m raised through scratch card lotteries.
The money should have been used to promote sport among young people with disabilities but instead went into the bank accounts of the trustees, former Paralympian Matthew Dimbylow and his wife Emma.
The regulator initially raised concerns about the running of their charity Dream It, Believe It, Achieve It, which promotes sport among young people with disabilities, eight years ago amid complaints from the public around its fundraising.
The regulator’s investigation found that the charity raised more than £6m via a series of scratch card lotteries run through a commercial lottery provider, which received around 70% of the donated funds.
But just £300,000 of the proceeds, equivalent to 5%, went to the charity, the regulator found and a further £975,800 was made in payments to companies run by Matthew and Emma Dimbylow.
After finding that the couple mismanaged and misapplied the charity’s funds and are responsible for serious mismanagement, the regulator permanently banned Matthew Dimblylow from sitting on the board of any charity. In addition, His wife has signed a voluntary agreement not to be a trustee again.
The regulator has also reached a settlement with the couple to recover the fund, after issuing a High Court claim in 2019.
“The public expects trustees to ensure charitable funds are always carefully managed in the best interests of their charity and the cause they serve, in this case supporting children and disabled people with sport,” said Spiller.
“Instead, the Dimbylows abused the trust that was placed in them as trustees.
“It is right that we took action to recover misapplied charitable funds that went to the former trustees’ own companies and acted to ensure those responsible cannot become trustees again.
“We hope this sends a powerful message to others who may be tempted to use charity in this way.”
Beneficiaries missing out
A failure to spend charity money on the people it was set up to help is a wider concern raised across investigations.
In June this year the Charity Commission revealed details of its investigation into small charity Resham Helping Hand, which spent just £124 out of its £2,460 spending in the year ending April 2018 on supporting those in poverty impacted by natural disasters in Pakistan. Instead, it spent money on renovating investment properties it owned.
“Donors to charity are entitled to have confidence that their money is going to legitimate causes and reaches the places that it is intended to, this is key to ensuring public trust and confidence in charities,” said the Commission.
Commission chief executive Helen Stephenson added that the regulator is “mindful of the importance of continuing to regulate robustly during times of financial strain, ensuring donors and the public give to charity, and funders continue to make grants to and contract with charities, confident that that any wrongdoing will be identified and addressed”.
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