The charity, which was registered in 1995, operates a horse sanctuary for sick and ill-treated horses in East Sussex. The charity also offers training in the care and welfare of horses and runs a riding and pony club for disadvantaged children and adults.
The Charity Commission opened a statutory inquiry in 2011 to investigate the administration and management of the charity, including the management of a loan made from the charity to a commercial entity connected to two of its trustees. The inquiry also investigated the financial controls of the charity and the charity’s record keeping. The charity was repeatedly in default of its legal requirements to submit annual accounts and other information.
The inquiry found that what had appeared in the charity’s accounts as a loan made to the commercial entity, also a horse stable, was in fact backdated accounting for payments which the charity had made to the company for the use of its horses. The inquiry also found that two trustees, who are related, had been signing off each other’s expenses, which gave rise to an unmanaged conflict of interest.
The inquiry concluded that the charity’s trustees had been in default of their legal obligations to file accounts, amounting to misconduct or mismanagement, despite the Commission having provided repeated regulatory advice and guidance on the issue. The inquiry was not closed until the outstanding accounts were filed.
At the start of the inquiry, the charity’s financial records were not in good order, especially in relation to the commercial entity. However, it also recognised that during the inquiry the trustees have since taken steps to improve practices at the charity including taking professional advice and appointing new accountants. This has resulted in the charity updating its financial records and subsequently providing up-to-date annual accounts to the Commission. The trustees also took steps to manage conflicts of interest more robustly, including ensuring that an independent trustee is nominated to authorise another trustee’s expense claims.
The Commission says the trustees cooperated with the inquiry but that there were delays in progressing the inquiry in part on the Commission’s side due to changes of case officers and in part due to the delays and problems the trustees had in locating financial information and documentation.
Michelle Russell, Head of Investigations and Enforcement, said:
This case is a reminder to trustees to ensure they keep adequate records about the finances of the charity, put robust financial management and conflicts of interest processes in place and comply with the core legal requirements to prepare and where appropriate file annual accounts with the Commission.
I hope other trustees read the report, learn the lessons and take the opportunity to remind themselves of the basics by reading our guidance on Conflicts of interest and Internal financial controls for charities.
The inquiry concluded with the publication of the inquiry report. The full report is available on the Charity Commission’s website.
Notes to Editors
- The Charity Commission is the independent regulator of charities in England and Wales.
- Our mission is to be the independent registrar and regulator of charities in England and Wales, acting in the public’s interest, to ensure that:
- charities know what they have to do
- the public know what charities do
- charities are held to account