Commission inquiry finds several breaches of trust.
The Charity Commission has today published a report of its investigation into Greenfinch Charitable Trust. The investigation has concluded that there were several breaches of trust, which resulted in significant financial losses to the charity. The charity went into liquidation in 2010 and is still in liquidation and has not yet dissolved.
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 Commission had been investigating the charity as part of a regulatory compliance case since 2009, before opening a formal inquiry in January 2013.
The issues under investigation included:
- 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
- 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 2 trustees. 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. 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 determined that action should be taken to recover the loss. In April 2013, the Commission issued proceedings in the High Court against 4 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 Commission cannot disclose the details of this settlement, which are confidential. However the Commission can confirm that the Liquidator was able to pass £181,081.11 to another charity with similar objects. (See notes to editors). The inquiry closed on 8 December 2016 with the publication of the report.
Notes to editors
The terms of the settlement agreement are confidential. The settlement sum was paid to the liquidator. 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 £181,081.11 to another charity with similar objects. Further details of the liquidation are listed in the full report.
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Published: 8 December 2016
From: The Charity Commission