The Charity Commission (‘the Commission’) today published a report of its inquiry into BIETEC Learning and Development Training Centre (registered number 1108129). The investigation has concluded that there was mismanagement of the charity by its trustees.
After receiving information in June 2013, the Commission opened a case which identified serious concerns regarding the charity’s governance. This included relationships between the charity and a private company called BIETTEC, which was owned and operated by 2 of the charity’s trustees. It also identified significant discrepancies between the income and expenditure recorded in the charity’s publicly available accounts and what had actually flowed through their bank accounts.
Following a period of non-compliance by the trustees with the Commission’s attempts to address the concerns raised, the Commission opened a statutory inquiry on 8 July 2014.
The issues under investigation included:
- the administration and financial management of the charity by the trustees
- the potential risks to significant charitable funds
- whether the charity was being used for private benefit
- the transactions between the charity and private company
The Commission identified that between 2009 and 2013 £969,319.91 of income and £719,836.65 of expenditure had passed through the charity’s bank account but had not been declared. The trustees explained that these were funds intended for the private company BIETTEC that had been ‘misbanked’ and which were then redirected to the private company. The inquiry was satisfied that there was no misapplication of these funds, but found that the trustees were negligent as they failed to address this problem for over 3 years.
The Commission found that there was a lack of separation between the private company BIETTEC and the charity. The Commission also had a material concern that the charity was used to obtain a more favourable tax position for the private company, in which 2 of the trustees had a beneficial interest.
The inquiry also identified apparent unauthorised benefits to 2 of the trustees in an arrangement with another private company, of which the 2 trustees were also directors and shareholders. The charity had rented office space from the company, a decision the inquiry could find no adequate explanation for and in which the trustees had a conflict of interest. As a consequence of the inquiry’s engagement 2 of the trustees have voluntarily repaid a proportion of the funds spent by the charity on this arrangement (£2,895) to the charity.
The Commission also concluded that there were significant and inherent weaknesses in the charity’s governance and management that subjected the charity’s funds to undue risk of misappropriation or misapplication. The inquiry found that the charity had for some time been applying its funds outside of its charitable purposes by directing funds to Pakistan for the purpose of relieving poverty. The charity were unable to adequately account for payments made to Pakistan.
The Commission concluded that there was mismanagement of the charity by the trustees as they did not have sufficient oversight or control over the charity’s finances. There was also an environment in which a lack of separation between the trustee’s personal, commercial and charitable interests allowed conflicts of interest to go unchecked and unmanaged, resulting in unauthorised private benefits.
As a result, the Commission has issued an order directing the charity to take steps to improve its administration and governance. This includes a review of the trustee board and trustee training needs, as well as steps to review its governance policies and record keeping. The Commission will monitor the progress made by the trustees to ensure full compliance with the order (see Notes to editors).
Carl Mehta, Head of Investigations and Enforcement, at the Charity Commission, said:
An overriding principle of charity law is that trustees must act in the charity’s best interest at all times. Where decisions need to be made in which a trustee has a personal or other interest, this is a conflict of interest and must be identified and managed appropriately in order to comply with the legal duties of trustees.
It is important that trustees fully understand their duties and cooperate with the Commission where concerns are raised. Failure to comply with the Commission’s request to produce information or documents by the times specified, as was the case here, may be taken as evidence of misconduct or mismanagement in the administration of the charity.
Trustees are expected to be aware of their obligations and responsibilities, our guidance sets these out: The essential trustee: What you need to know, what you need to do (CC3), The hallmarks of an effective charity (CC10) and Manage a conflict of interest in your charity.
The full report is available on GOV.UK.
Notes to editors
- The Commission made an Order on 29 April 2016 under section 84 of the Charities Act 2011. This Order requires the charity to implement a range of actions within a specified timeframe in respect of the charity’s governance and administration, thereby addressing risks identified to the charity’s property or property coming to the charity in the future. The Order requires, amongst other matters, that the trustees review the charity’s governance policies and charitable objects and take appropriate steps to put these onto a proper footing and consistent with the requirements of charity law.
- The Charity Commission is the independent regulator of charities in England and Wales. To find out more about our work, see our annual report.
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- Details of how the Commission reports on its regulatory work can be found on GOV.UK.