Decision

Charity Inquiry: Kogan Academy of Dramatic Arts

Published 14 May 2024

Applies to England and Wales

The Charity

Kogan Academy of Dramatic Arts (‘the charity) was registered with the Charity Commission (‘the Commission’) on 25 September 1992. It was governed by a memorandum and articles of association dated 19 September 1992, amended by certificate of incorporation on 27 July 2013. The objects of the charity were:

1) to advance the education of the public in particular by teaching scientifically based methods of acting and stage television and film directing

2) to advance the education of young people in the arts especially the dramatic arts in particular through the promotion of workshops in schools and other educational establishments including institutions for the mentally handicapped.  

The charity managed a drama school offering acting and directing courses.

The charity no longer operates and was removed from the register of charities on 18 December 2023.

Background and Issues under Investigation

Following a period of engagement with the charity regarding its failure to file its accounting information, the Commission issued the charity with an Official Warning (“OW”) under section 75A of the Act on 13 March 2023. Under the OW, the charity was required to file with the Commission its Annual Return, Trustees’ Annual Report, and Accounts for the financial years ending (“fye”) 31 July 2020 and 31 July 2021 and to ensure that there were at least three trustees. The deadline for these actions to be completed was 15 May 2023, but the Commission received no acknowledgement of the OW or evidence that the trustees had complied with the requirements of the OW by the deadline.

Following the issue of the OW, the charity fell into further default with its accounting requirements for fye 31 July 2022.

On 16 June 2023, the Commission opened a statutory inquiry into the charity under section 46 of the Charities Act 2011 (‘the Act’).  

The inquiry examined the following regulatory issues:

• whether the trustees are complying with their legal duties in respect of their administration, governance and management of the charity with particular regard to their accounting and reporting responsibilities and compliance with the charity’s governing document
• the future of the charity, including the charity’s viability
• the extent to which any failings or weaknesses identified in the administration of the charity during the inquiry were a result of misconduct and/or mismanagement by the trustees

The inquiry closed with the publication of this report.

Findings

Whether the trustees complied with their legal duties in respect of the administration, governance and management of the charity

Accounting and reporting

The inquiry found that the trustees had failed, over several years, to comply with their legal duties to file their accounting information with the Commission.

Charities with an income of over £25,000 must provide the Commission with an annual return, trustees’ annual report and accounts which have been independently scrutinised. Charities with an income between £10,000 and £25,000 must submit an annual return to the Commission and charities with an income of under £10,000 must report the charity’s income and expenditure to the Commission. Regardless of their level of income, all charities must prepare accounts and ensure these are made available on request.

Scrutiny of the charity’s accounts for fye 31 July 2019 demonstrated the charity had an income of over £100,000. However, the inquiry found that the trustees had failed to prepare and provide the Commission with the necessary accounting information for the subsequent years. The trustees did not provide an acceptable explanation for this breach of their legal duties.

Trustees have a legal responsibility to ensure that the proper financial information is prepared and supplied to the Commission. The trustees’ failure to do so over a number of years is misconduct and/or mismanagement in the administration of the charity.

Compliance with Governing Document

The charity’s governing document stated that the minimum number of trustees “shall be three”, as was the minimum number required for a quorum when making decisions. Since January 2020, the charity had been operating with fewer than three trustees, with only one registered with the Commission, and two directors registered with Companies House. Despite this, the inquiry found that the trustees made no demonstrable effort to recruit further trustees.  

Trustees are collectively responsible for a charity’s management, and they should act in accordance with the requirements of their governing document and the general law. The trustee’s failure to comply with the requirements of the governing document is misconduct and/or mismanagement in the administration of the charity.

Compliance with an Official Warning

The charity trustees confirmed to the inquiry that they had received the Official Warning but then failed to respond or take on any of the actions required. The trustees also reported to the inquiry that they had chosen not to prepare or file accounting information as the charity was in the process of closing.

The inquiry found that the trustees did not take any steps to provide the Commission with accounting information or appoint new trustees by the deadlines provided in the OW.

Trustees must comply with Orders (including an OW) of the Commission. It may be a criminal offence (or contempt of court) for a charity or a trustee to not comply with an order or direction of the Commission and in this case is misconduct and/or mismanagement in the administration of the charity.

Trustee acting whilst disqualified

The inquiry found that a trustee had been acting whilst subject to an Individual Voluntary Arrangement (IVA). The inquiry informed the trustee this meant that, under s178 of the Act, they were automatically disqualified from acting as a trustee and would need to resign from their position as to act whilst disqualified is normally a criminal offence and is misconduct and/or mismanagement. They subsequently resigned and were removed from the Register of Charities.

The future of the charity

It was explained to the inquiry that the charity was inactive and had not been operational for some time. The inquiry found that the charity had limited financial activity and was no longer teaching or recruiting students. The lease on the charity’s last registered business address had expired in 2022 after which the charity had no premises from which to operate. The inquiry determined that the charity had ceased to operate but gave the charity an opportunity to present evidence if this was not the case.

The inquiry received no response, so on 18 December 2023, the Commission removed the charity from the Register of Charities under s34(b) of the Act on the grounds that it does not operate.

Conclusions

The Commission found that the trustees were responsible for misconduct and/or mismanagement in the administration of the charity. The trustees repeatedly failed to prepare and submit the necessary financial information and did not comply with the requirements of an Official Warning or follow regulatory advice and guidance. The trustees also failed to operate the charity in line with the Governing Document.

Regulatory action taken

Information gathering powers under s52 of the Act were used on 21 June 2023 to obtain the charity’s bank statements.

On 18 December 2023 the charity was removed from the Register of Charities on the grounds that it does not operate, under s34(b) of the Act. This does not impact the charity’s status as a company registered with Companies House.

Issues for the wider sector

An effective charity is run by a properly appointed, clearly identifiable board or trustee body with the minimum number of trustees, as required by its governing document.

An effective trustee body acts in the best interests of the charity and its beneficiaries, understands its responsibilities and has systems and policies in place to exercise them properly, with clear and robust reporting procedures and lines of accountability.

Trustees of charities with an income of over £25,000 are under a legal duty as charity trustees to submit annual returns, annual reports and accounting documents to the Commission as the regulator of charities. Even if the charity’s annual income is not greater than £25,000 trustees are under a legal duty to prepare annual accounts and reports and should be able to provide these on request.

Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up. The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. The Commission’s guidance on Internal Financial Controls for Charities (CC8) is available on GOV.UK.