Charity Commission de-registers charity after spending failings
The Charity Commission recently reported on its investigation into a registered charity called the Aid and Peace Trust.
The Charity Commission identified a number of failings at the charity, one of which was that its funds appeared to have been spent on projects that did not further its charitable objects, which were:
‘To advance education in Bangladesh for young people who are socially or economically disadvantaged by providing or supporting practical and vocational training.’
The Charity Commission found that resources had been used to organise a fundraising appeal to benefit Burmese Rohingya Muslims, and that funds had been transferred to a hospital close to a building collapse in Bangladesh. Whilst these may have been worthwhile causes, they were deemed not to further the charity’s objects, which related to education.
The inquiry found that the charity had spent a total of £68,442.48 on what appeared to be charitable works that were not within the charity’s objects.
This was identified as mismanagement and/or misconduct and the charity, which had already been dissolved, was removed from the Register of Charities.
Learning points for other charities
Charity trustees have a duty to ensure that their charity’s funds are applied exclusively to further its charitable objects, as set out in its governing document.
Even if trustees spend funds on a good and worthy cause, if it is not within the charity’s objects, it will be a breach of trust, and the Charity Commission may intervene.
If a charity’s trustees feel that its objects have become unsuitable, out of date or impractical for any reason, they must consider updating them. The Charity Commission confirms this in its guidance, as follows:
‘Founders aim to ensure that a governing document serves the charity well for the foreseeable future, and allows for changing circumstances. However it is likely that, with the passage of time, new needs and unforeseen eventualities will develop and that the governing document may need updating to reflect these changes.
In these circumstances it is the duty of trustees to seek to change the governing document in order to ensure the charity’s continuing effectiveness.’ (Charity Commission guidance CC36: Changing your charity’s governing document)
The way in which a charity’s objects may be updated depends on the charity in question and its legal structure; the terms of its governing document; and its level of income. In most cases the Charity Commission’s authorisation will be required, in which case the appropriate legal basis for the update will need to be put to the Charity Commission.
If you would like advice on changing a charity’s objects, or updating a governing document more generally, please get in touch.
Liz Gifford is a solicitor specialising in charities law in the business services department at Barker Gotelee Solicitors in Ipswich.