Decision

Charity Inquiry: All Nations Community Centre

Published 20 January 2020

This decision was withdrawn on 27 January 2022

This report has been archived as it is over 2 years old.

The charity

All Nations Community Centre was incorporated at Companies House on 16 September 2005 and registered with the Commission on 26 October 2005. It is governed by a Memorandum and Articles (“the governing document”).

The charity’s entry can be found on the register of charities (‘the register’).

The trustees of the charity have changed over the course of the inquiry. Trustees appointed in June 2018 will be referred to as ‘new trustees. Only two trustees that were appointed before June 2018 were still acting as trustees from June 2018 (the ‘continually acting trustees’). These two individuals acting with the new trustees will be referred to as the ‘new trustee board’. The trustees who were in place up to June 2018 (including the continually acting trustees) will be referred to as the ‘former trustees.

The charity operates a community centre for the inhabitants of the city of Gloucester, and in particular the Jamaican and West Indian community. The charitable activities and services were financed by the running of a licensed bar on the charity’s premises.

The Inquiry closed with the publication of this report.

Background

The charity was included in a ‘class inquiry’ under s46 Charities Act 2011 on 20 September 2016 for failing to submit accounts, reports and annual returns for the financial years 2011 – 2015.

The trustees of a charitable company are also its Directors and Companies House Register should mirror the Commission’s register to reflect this. At the time of the class inquiry, our records showed that there were five trustees but only one of them was listed as a Director on Companies House Register.

During the class inquiry, on 31 January 2017 the Commission was told by one of the former trustees that the charity had no money, that there was no charitable activity and the trustees would like to de-register as soon as possible. This raised further regulatory concerns in respect of a property that was in the name of the charity. If a charity that owns property wishes to wind up and dissolve, any remaining assets (including property) can only be transferred to a charity with similar or the same objects.

The Commission took the decision on 21 March 2017 to remove the charity from the class inquiry and place it into an individual statutory inquiry under s46 Charities Act 2011.

Issues under Investigation

The inquiry examined the following charity regulatory issues:

• whether All Nations Community Centre is established as a charity and is operating for the public benefit
• the general administration, governance and management of the charity by the trustees with specific regard to the charity property at Chase Lane, Gloucester
• whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under charity law

Findings

Whether All Nations Community Centre is established as a charity and is operating for the public benefit

Given the comments made by the former trustees during the class inquiry about the de-registration of the charity, as a temporary protective measure, on 12 May 2017 an Order was made under s76 (3) (c) of the Charities Act to vest the charity’s property in the Official Custodian of Charities. The Order was to ensure that the charity could not dispose of the property without the prior approval of the Commission or the court.

The inquiry established that the Jamaican and West Indian Community had raised the money to build the property at Chase Lane, Gloucester in the late 1960’s as a place to socialise. The property was registered with HM Land Registry in the name “The Jamaican Sports and Social Club and Community Centre Ltd (JSSC&CC) registered charity number 1081837 which was registered with the Charity Commission in 2000 and went into liquidation in 2005. Members of the community took advice and raised the money to pay off the debt. All Nations Community Centre was established so that it could receive the charitable assets (i.e. the property) from JSSC&CC. Title to the land was transferred to the charity on 9 March 2007.

The former trustee board who attended a meeting with the Commission on 9 June 2017 did not recognise All Nations Community Centre as being a charity. They were not aware of their trustee duties, including their legal obligation to file accounts with the Commission. They told the inquiry that once All Nations Community Centre was registered with the Commission and had received the assets from JSSC&CC, it continued to operate in much the same way as the former JSSC&CC i.e. as a social club and a place for the community to socialise, and the Jamaican and West Indian community are allowed to use the club to host their own weddings, funerals, birthday parties etc.

The inquiry obtained and analysed the charity’s bank statements for the period 19 September 2013 to 12 October 2016. The exercise identified how the income and expenditure reported in the charity’s annual accounts was overstated when compared to the corresponding period in the bank statements. The former trustee board who attended the meeting on 9 June 2017 admitted to using takings from the bar to make cash payments for the upkeep of the building and to pay utility bills before the rest was banked.

The analysis of the bank statements reinforced the view that All Nations Community Centre was not acting as a charity. There were no transactions that could be identified as furthering a charitable purpose including the purposes for which the Charity was established. The charity’s income related solely to income from the bar sales and its expenditure related to bar expenditure, HMRC and VAT which confirmed that the charity was trading.

A charity’s activities must further their exclusively charitable objects for the public benefit, in this case operating a community centre for the inhabitants of Gloucester. Whilst there was some evidence of charitable activity in that community groups, children and the elderly use the centre free of charge for various community events, its main activity and source of income was the bar/social club, the running of which is not by itself a charitable activity.

The inquiry found that the former trustee board were running a social club/bar which was not separated from the charity, and which was not ancillary to the charity carrying out its charitable purposes which exposed the charity to risks. The inquiry considers this to be misconduct and/or mismanagement in the administration of the charity.

Throughout the inquiry the former trustees and the new trustee board were given advice and guidance about setting up a trading subsidiary. On 28 June 2019 the inquiry directed the new trustee board by way of a section 84 Order to seek their own legal advice regarding setting up a trading subsidiary for the operation of the bar.

The general administration, governance and management of the charity by the trustees with specific regard to the Charity property at Chase Lane

The inquiry found that the charity had received adverse publicity in 2015 relating to alleged criminal activity and the death of a young man who was fatally wounded near the charity’s premises after a social event that had been held there. This was not reported as a serious incident to the Commission at the time. Protecting the assets, reputation and beneficiaries of the charity (and those coming into contact with the charity) are essential trustee responsibilities. When this event occurred, the former trustees did not recognise All Nations Community Centre as being a charity and therefore may not have understood that they were required to report the incident to the Commission. The matter was brought to the attention of the former trustees who attended the meeting on 9 June 2017.

On 15 November 2017, Gloucester police notified the Commission about a serious incident on the weekend 11/12 November 2017, involving a double stabbing and firearm discharge in the early hours of the morning, near the charity’s premises following an event that was connected to the bar. As a result of this incident, a temporary partial closure order was placed on the charity in relation to the bar. This affected the operation of the charity because it relied solely on bar sales to generate its income.

When the inquiry contacted the charity about the matter on 28 November 2017 one of the former trustees told the inquiry that the incident happened away from the premises after the charity had closed and they therefore had nothing to report.

The incident that occurred on the weekend of 11/12 November caused significant risk to the charity’s reputation because it had attracted adverse publicity for the charity, resulted in the partial closure of the bar which affected the charity’s income and a subsequent police investigation. The former trustees failed to recognise the implications that this incident had (or was likely to have) on the charity’s reputation and ongoing financial viability and did not report the incident to the Commission. The inquiry considers this to be misconduct and/or mismanagement in the administration of the charity.

The inquiry found that throughout the partial closure the charity continued to offer the premises to community groups and the former trustees worked closely with Gloucester constabulary to resolve issues and obtained the licensing hours back on 1 March 2018.

Whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under charity law

After the meeting on 9 June 2017, the inquiry agreed in this instance to accept the accounts that had already been submitted to Companies House for the years 2011 – 2015, though not compliant with charities SORP (Statement of Recommended Practice). This was on the condition that the former trustees submitted to the Commission the missing Annual Returns for the years 2011 – 2015, and took steps to ensure that all future accounts, reports and annual returns were submitted to the Commission on time and in compliance with the Charities SORP. The former trustees co-operated with the inquiry and by the end of September 2017 accounts and Annual Returns for 2011 – 2016 had been submitted and the charity is no longer in default with the provision of its accounting information.

Following the partial closure order served on the charity, on 29 January 2018 the inquiry provided an Action Plan under s15 of the Charites Act for the former trustees to carry out a full review of the charity’s finances, its solvency, and its viability for the future. In April 2018, the former trustees confirmed that the charity was financially solvent and produced a business plan for 2018/19 which included the former trustees’ intention to establish a separate trading subsidiary to run the bar.

A books and records review carried out on 10 May 2018 found no evidence that funds had been misapplied or misappropriated. However, the inquiry noted that the charity’s financial controls were still inadequate. This was due in part to the trading activities of the bar which had still not been separated from the charity and the practice of paying for the upkeep of the building and utility bills in cash directly from the takings at the bar and then banking what was left.

The charity’s governing document states that an Annual General Meeting (AGM) shall be held every year. The inquiry found that the charity had not had an AGM for several years. Not acting in accordance with the governing document in terms of holding an Annual General Meeting every 15 months is considered to be misconduct and/or mismanagement in the administration of the charity.

In June 2018 an AGM was held. Three former trustees resigned, and five new trustees were appointed as trustees of the charity. The inquiry met with the new trustee board on 7 November 2018 to ensure that they all understood their trustee duties, had read and understood the charity’s governing document and to discuss various issues relating to the future of the charity, including their own roles and that of volunteers, financial controls and banking procedures and forming a trading subsidiary.

Following this meeting, the Commission was satisfied that the charity’s property was not at risk and on 29 January 2019 the Order under s76 (3)(c) to vest the property with the Official Custodian was discharged.

On 28 June 2019 an Action Plan under s84 of the Act was provided to the new trustee board to take further action by a given time to address the outstanding concerns identified which include:

• taking independent legal advice on setting up a separate trading company to the charity in relation to the bar
• review the financial controls to establish new written financial control procedures
• hold an AGM by 30 November 2019 to elect/re-elect trustees
• ensure any serious incidents that affect the operation and reputation of the charity are reported to the Commission

Conclusions

The inquiry concluded that because of a lack of professional advice and relevant knowledge the former trustees had failed to comply with their legal duties with sufficient care in respect of the administration, governance and management of the charity which amounted to misconduct and or mismanagement with regard to the following:

• failing to submit accounting information on time. Following meetings with the former trustees and the new trustee board, all accounts, reports and annual returns have now been submitted and the charity is up to date with its accounting information
• failing to separate the non-charitable arm of its activities (i.e. the bar) into a suitable trading vehicle. Following meetings with the former trustees and the new trustee board, and a s84 Action Plan, a trading subsidiary has been established which will now operate the bar
• failing to report a serious incident to the Commission
• not acting in accordance with the governing document in terms of holding an Annual General Meeting every 15 months. Since the inquiry opened the charity has held two AGM’s and new trustees have been appointed

The Commission will monitor the progress of the charity with a follow up visit in six-nine months.

Regulatory action taken

On 12 May 2017 an Order was made under s76(3)(c) of the Charities Act to vest the charity’s property in the Official Custodian of Charities. This Order was discharged on 29 January 2019.

On 19 May 2017 the inquiry issued an Order under s52 of the Charities Act to the charity’s bank to obtain bank statements.

On 29 January 2018 the inquiry provided an Action Plan under s15 of the Charites Act for the trustees to carry out a full review of the charity’s finances, its solvency, and its viability for the future.

On 28 June 2019 an Order was made under s84 of the Charities Act to direct the trustees to take further action by a given time to address the outstanding concerns identified.

Issues for the wider sector

All charity trustees must ensure that, unless specific exemptions apply, an annual report and annual return and annual accounts, in respect of each financial year, are submitted to the regulator of charities.

All charities must have an effective trustee body to control and administer the charity in accordance with a charity’s own governing document, charity law and Commission guidance. Public trust and confidence depends of the conduct of trustees and how they safeguard charity funds and undertake the objects and activities of the charity.

A serious incident is an adverse event, whether actual or alleged, which results in or risks significant: - harm to your charity’s beneficiaries, staff, volunteers or others who come into contact with your charity through its work (who are collectively referred to throughout this guidance as people who come into contact with your charity through its work) - loss of your charity’s money or assets - damage to your charity’s property -harm to your charity’s work or reputation

It is good practice to report a serious incident to us promptly, find out more about reporting a serious incident.

Charities need to use a trading subsidiary if they carry out commercial (non-charitable) trading which exceeds the threshold for paying income or corporation tax or involves significant risk.

A trading subsidiary is a separate company controlled by the charity. The charity can raise money from trade without exposing its assets to risk or being liable for income or corporation tax. There are, however, risks which trustees need to be aware of and manage:

• the charity exists for charitable purposes, but the trading subsidiary exists to generate income; their aims and interests are different; charity trustees need to distinguish between them
• if the trading subsidiary starts to fail, the charity must not bail it out; this would be putting the charity’s funds at risk
• charity trustees who are also directors of the subsidiary have a conflict of interest and/or loyalty
• if a charity trustee is also a director of the trading subsidiary, the restrictions on payments and benefits to trustees also apply to any payments or benefits as a director