Decision

Charity Inquiry: Alternative Housing

Published 31 January 2020

This decision was withdrawn on 2 February 2022

This report has been archived as it is over 2 years old.

The Charity

Alternative Housing (“the charity”) was registered as a charity on 13 June 2013. The charity is a company limited by guarantee governed by a Memorandum and Articles of Association incorporated on 8 January 2013, as amended by special resolution on 11 June 2013 (“the governing document”).

The charity’s entry, as a removed charity can be found on the register of charities (“the register”).

The charity’s objects were the relief of those in need, by reason of youth, age, ill health, disability, financial or other disadvantage in Bristol, in particular but not exclusively, by provision of accommodation and support and care to such persons as the trustees shall determine.

Issues under Investigation

The charity was subject of a national media report on 5 May 2017 titled ‘Bristol housing charity tops list of UK’s most-prosecuted landlords’. The article reported that the charity had received thousands of pounds in housing benefit to support homeless people, but it had been convicted of six breaches of the Management of Houses in Multiple Occupation (England) Regulations 2006 (“the housing convictions”). The breaches were;

• failure to ensure manager’s details were displayed
• failure to ensure firefighting equipment and fire alarms were maintained in good working order
• failure to ensure all parts of the property were maintained in a safe and working condition
• failure to ensure the internal structure of the property was maintained in good repair
• failure to ensure the water supply and drainage system serving the property were maintained in good, clean and working condition
• failure to ensure the front garden was kept in a safe and tidy condition

On 4 July 2017 the Commission opened a statutory inquiry (“the inquiry”) into the charity under section 46 of the Charities Act 2011 (“the Act”) to consider the extent to which the trustees had:

• complied with and fulfilled their duties and responsibilities under charity law
• whether or not there was misconduct or mismanagement by the trustees in the administration of the charity
• whether or not there was significant risk to charity property and/or beneficiaries

The Commission does not itself investigate crime. The local authority is responsible for the administration of housing benefit and in general, the investigation and prosecution of any related offences.

The Commission does not itself deal with or investigate safeguarding or health and safety incidents. This is because lead responsibility rests with other agencies and regulators. The Commission’s role is therefore often part of a wider investigation involving or being led by the other agencies.

The Commission has a very specific regulatory role which is focused on the conduct of the trustees and the steps they take to protect the charity’s beneficiaries and those that come into contact with the charity. The Commission’s aim is to ensure that charities that work with or provide services to beneficiaries take reasonable steps to protect them from harm. It may consider any failure to do so as misconduct and/or mismanagement in the administration of the charity.

The inquiry was closed with the publication of this report.

Findings

Whether the trustees’ complied with and fulfilled their duties and responsibilities under charity law

The legal duty to file accounts with the Commission applies to all registered charities whose gross income exceeds £25,000 per year. The charity did not file accounts because it reported in its Annual Returns to the Commission that its income fell below the £25,000 threshold;

• for the 2014 to 2015 financial year the charity, in its Annual Return, reported its income was £10,000 and spending was £4,697
• for the 2015 to 2016 financial year the charity, in its Annual Return, reported its income was £7,980 and spending was £6,287

However the Commission’s analysis of the charity’s bank statements revealed;

• for the 2014 to 2015 financial year the charity’s income was £234,952 and spending was £228,165
• for the 2015 to 2016 financial year the charity’s income was £268,693 and spending was £277,974
• the charity did not submit accounts or an annual return for the 2016 to 2017 financial year, but its bank statements showed income was £150,457 and spending was £148,624

The trustees’ failure in their duty to file accounts is a criminal offence and is evidence of mismanagement and/or misconduct in the administration of the charity by the trustees.

Whether or not there was misconduct or mismanagement by the trustees in the administration of the charity

Trustees must prevent personal interests from conflicting or appearing to conflict with the interests of the charity.

The inquiry found that the charity had paid a substantial amount of money to two housing companies (“the companies”). The inquiry found both direct and indirect links between the directors and former directors of the companies (“the directors”) and a trustee and former trustees of the charity (“the trustees”).

Documents obtained by the inquiry revealed strong evidence of both direct and indirect links between the trustees and the directors. Some were probably related, were proprietors of the same properties and had interests in the same companies.

The mandate for the charity’s bank account had three signatories. Two of the signatories were former trustees. The third signatory was not a trustee but was the proprietor of an address she shared with former trustees. She was also the sole director of one of the companies, which received £232,000 from the charity.

Another of the charity bank account signatories, who was a former trustee, was the former director of a social housing lettings company. This person is one of the proprietors of the charity’s address. The other proprietor of the address is the sole director of the other company, which received £283,954 from the charity. This director gave the charity address as his company’s correspondence address. In addition, he and another trustee were the directors of another housing company.

The inquiry found the links between the trustees and directors created conflicts of interest which should have been recognised, declared, and managed by the trustees. Failure to manage such conflicts can be evidence of mismanagement and misconduct in the administration of the charity by the trustees.

A statutory inquiry is a legal power which enables the Commission to formally investigate matters of regulatory concern within a charity and helps to identify the extent, if any, of misconduct or mismanagement in the administration of the charity.

Commission guidance advises that when an inquiry is opened, it is important that trustees cooperate by answering its queries honestly, in full and within the timescales specified. Failure to comply with a Commission direction is misconduct and/or mismanagement in the administration of the charity by the trustees.

The inquiry directed the trustees and directors to provide information and/or documents about the charity and the companies under Section 47 of the Act. Only two of the six individuals responded. The two individuals who did respond said they had no knowledge or involvement in the charity and/or companies. One of them told the Commission his name had been recorded as a trustee on the register without his knowledge.

The inquiry was hindered by the lack of information available. This prevented it from examining whether conflicts of interest were properly managed, why funds were paid to the companies and/or whether the trustees and/or directors received inappropriate personal gain.

Whether or not there was significant risk to charity property and/or beneficiaries

Trustees are under a legal duty to safeguard the charity’s money and assets and to manage the charity’s resources responsibly. They must ensure that their charity has adequate financial and administrative controls in place and comply with their statutory obligations to maintain the accounts and records of their charity and make them available on request.

The charity’s bank statements revealed that its main source of income, from 10 July 2013 to 15 February 2017 came from ‘Bristol Housing Benefits’ and during this period this totalled £443,401. During the same period the charity paid £566,462 to the companies.

The local authority advised the inquiry that housing benefit was intended to assist citizens on low incomes pay their rent. At the time the housing benefit rates were £67 or £120 per week depending on the type of accommodation.

The local authority advised the inquiry that, to claim housing benefit, there must be a tenancy agreement in place. When tenants found properties to rent, if they agreed, their housing benefit could be paid directly to an agent. The local authority told the inquiry that the charity had been acting as a managing agent, so tenants’ housing benefit had been paid directly into its bank account.

The authority told the inquiry it had serious concerns over the validity of the housing benefit being requested by the tenants occupying the properties managed by the charity. As a result of these concerns, on 8 September 2017 the local authority told the charity that it would cease to make direct payments to it because it no longer determined the charity to be fit and proper to receive housing benefit payments.

The lack of information and documents available to the inquiry prevented it from examining the trustees’ decision making regarding the charity’s operations and risk management and whether this contributed to the charity’s convictions under the Management of Houses in Multiple Occupation (England) Regulations 2006.

The inquiry found, on balance, due to the housing convictions, the trustees had failed to ensure the charity was capable of delivering suitable accommodation to its beneficiaries and the condition of the properties placed them at significant risk of harm. This is evidence of mismanagement and/or misconduct by the trustees.

Conclusions

The Commission concluded that, due to the charity’s income, the trustees should have submitted accounts. Failure to submit accounts is an offence and resulted in a lack of transparency regarding the charity’s relationship with the companies. This was misconduct and/or mismanagement by the trustees.

The Commission concluded that the trustees’ and directors’ inability or unwillingness to respond to statutory directions to provide information hindered the inquiry. This made it impossible to establish why the charity’s Annual Returns appear to have underreported its income, substantial sums of money had been paid to the companies, whether apparent conflicts of interest had been managed and why properties were allowed to fall into the condition that attracted housing convictions. Failure to provide information was mismanagement and/or misconduct by the trustees.

The Commission concluded that the housing convictions and apparent unmanaged conflicts of interest created a situation where an inference could be drawn that the trustees and directors exploited charitable status, potentially for personal gain at the expense of the charity’s beneficiaries. This together with adverse media reports represented a serious risk to public trust and confidence in the charity.

The Commission concluded the charity failed to ensure its beneficiaries were safe because the trustees failed to take adequate steps to ensure the accommodation the charity was managing was maintained to an adequate standard. Trustees must abide by the law and failure to do so amounted to mismanagement and/or misconduct.

The Commission concluded that the charity had ceased to operate and it was removed from the register on 8 October 2018.

Regulatory Action Taken

The inquiry served Orders under section 52 of the Act on the charity’s bank to obtain account information.

The inquiry served Directions under section 47 of the Act on the charity’s bank to obtain more detailed banking information.

The inquiry served Directions under section 47 of the Act on the trustees and directors to obtain documents and information regarding the companies’ and the charity’s activities.

The Commission removed the charity from the register on the basis that it was no longer operating.

Issues for the wider sector

Certain types of charity are set up to assist or care for those with special needs, perhaps because of their age, physical or mental ability or ill health. Trustees must identify any risks the charity’s activities may present to their beneficiaries and, as a matter of priority, ensure that the charity has adequate measures in place to safeguard people the charity works with. This involves both the production of adequate policies and procedures and actively ensuring they are implemented and monitored in practice.

There are legal requirements for charities relating to the preparation of charity accounts and annual reports, the audit or independent examination of accounts and the submission of these to the Commission. Trustees must familiarise themselves with the appropriate requirements. Registered charities are required by law to provide annual returns and accounts to the Commission.

The duty to file accounts and the trustees’ annual report with the Commission applies to all registered charities whose gross income exceeds £25,000 per year. The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity.

Internal financial controls for charities - CC8 is available on the Commission’s website.

Conflicts of interest are more likely when the charity has dealings with organisations in which the trustees have interests. It is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees. The trustees should put in place policies and procedures to identify and manage such conflict.

Further guidance and advice can be found in Conflicts of interest a guide for charity trustees - CC29.