Decision

Charity Inquiry: Bristol Sheltered Accommodation & Support Limited

Published 25 September 2019

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

The charity

Bristol Sheltered Accommodation & Support Limited (‘the charity’) was registered with the Charity Commission (‘the Commission’) on 22 June 2010 and is governed by a memorandum and articles of association dated 1 March 2010 as amended by special resolution dated 20 May 2010 (‘the governing document’).

The charity’s objects are the relief of poverty, hardship and distress among the homeless living in Bristol. The charity furthers its objects by the provision of temporary residential accommodation, food, clothing, support and advice. The charity operated a hostel known as ‘Wick House’ until 9 June 2019.

On 9 June 2019 the charity was evicted from Wick House by the landlord because of the non-payment of rent. On the same day a charity known as Selworthy House Addiction Recovery Enterprise, registered charity number 1146319, took over the management of Wick House. An injunction filed by the charity against the eviction was heard on 27 July 2019 and was not granted.

The charity’s second hostel known as ‘Shepherds Hall’ closed in December 2018.

A creditor of the charity petitioned the Court to wind up the charity. This was heard on 15 August 2019 and the charity was ordered to wind up. The charity has been granted an appeal in relation to the winding up order.

Further details about the charity can be found on the register of charities.

Both of the charity’s hostels were granted ‘exempt accommodation’ status by the local council Bristol City Council (‘BCC’). Exempt accommodation is a term used to describe accommodation where special rules apply in relation to the amount of a resident’s rent covered by a benefit award. In exempt accommodation, ‘care, support or supervision’ is provided to residents by a landlord in the social or voluntary sector or by someone on behalf of the landlord.

Usually the housing benefit from the local authority is directly paid to the exempt accommodation (in this case, the charity). Shepherds Hall lost its exempt accommodation status in October 2018 following a review carried out by BCC and the charity decided to close the hostel in December 2018.

The trustees of the charity have changed over the course of the inquiry. Trustees appointed after March 2019 will be referred to as ‘new trustees’. Only two trustees (the ‘continually acting trustees’) that were appointed before March 2019 were still acting as trustees in June 2019. These two individuals acting with the new trustees will be referred to as the ‘new trustee board’.

Trustees that have stepped down since the opening of the inquiry will be referred to as ‘former trustees’.

Background

The Commission has previously engaged with the charity in two compliance cases, opened in 2011 and 2014. In these compliance cases the charity was provided with regulatory advice and guidance on a number of issues including payments to trustees, conflicts of interest and financial controls and governance.

After reviewing further concerns raised with the Commission about the charity it appeared that the charity may not have complied with regulatory advice and guidance given by the Commission in 2011 and reiterated in 2014 and that there may have been mismanagement and/or misconduct in the administration of the charity.

As a result the Commission opened a statutory inquiry (‘the inquiry’) into the charity under section 46 of the Charities Act 2011 (‘the act’) on 1 April 2015. The inquiry closed on 25 September 2019 with the publication of this report.

Issues under investigation

The scope of the inquiry was to examine whether or not:

• the trustees of the charity have discharged their duties and responsibilities as charity trustees;
• there has been unauthorised private benefit arising from the work carried out by the trustees and/ or from any arrangements with any private companies managed or controlled by individuals connected to the charity;
• the trustees have disregarded the Commission’s specific regulatory guidance regarding payments to trustees/ connected persons and/ or to the provisions of the charity’s governing document;
• there are adequate financial controls in place and that those controls are being properly managed by the trustees;
• conflicts of interest were or are being identified and/or adequately managed; and
• to what extent, there has been mismanagement and/or misconduct on the part of the trustees and/or those acting in the administration and management of the charity.

Additionally, after the opening of the inquiry, the inquiry was alerted to a number of safeguarding related serious incidents between 2016 and 2018, including a number of deaths of beneficiaries in the charity’s care. The handling of these incidents by the charity’s trustees was also examined as part of the inquiry in line with its scope to examine if the ‘trustees of the charity have discharged their duties and responsibilities as charity trustees’.

In the context of safeguarding issues, the Commission has a specific regulatory role which is focused on the conduct of trustees and the steps they take to protect beneficiaries and other persons who come into contact with the charity. The Commission needs to be assured that the charity is handling safeguarding incidents appropriately, and where necessary, the trustees are putting in place improved governance and internal controls, in order to protect beneficiaries and those connected with the charity from further harm.

However, the Commission does not itself administer safeguarding legislation or directly investigate incidents of abuse, mistreatment, or deaths, nor can it prosecute or bring criminal proceedings.

Where appropriate, the Commission works with and refers concerns on to lead agencies, such as the police, local authorities and the Disclosure and Barring Service (DBS), as well as to specialist bodies responsible for designated areas, such as education or health and social care.

Findings

Financial controls and administration

The inquiry found that while the charity had a high volume of cash based transactions and cheque payments, the example payments inspected by the inquiry were supported by invoices and could be matched and traced back to the bank statements.

The inquiry found no evidence that charitable funds had been misapplied or misappropriated. However, the inquiry noted that the charity’s controls for the withdrawal and payment of cash were inadequate.

In addition the charity had significant failings and weakness in its governance and financial controls which led to the accounts for the financial years ending (FYE) 31 March 2014 and 2015 being qualified, despite earlier regulatory advice and guidance on these issues.

Further to a formal Action Plan issued under section 84 of the Act on 26 October 2016 (‘Action Plan’) the charity made substantial improvements to its financial controls and governance. Its accounts for FYE 31 March 2016, 2017 and 2018 have been submitted to the Commission on time and in line with legal requirements.

The accounts have also been audited and have not been qualified.

The former and continuing trustees’ failure to comply with regulatory advice and guidance together with the poor financial controls, prior to the Action Plan, is considered to be mismanagement and/or misconduct in the administration of the charity.

Unauthorised trustee benefit

The governing document prohibits a trustee or connected person being employed by or receiving remuneration from the charity unless sub-clause 6(4B) is complied with (which does not apply to employment) or in relation to employment, the Commission approves beforehand (clause 6(4A)).

The inquiry noted that on 11 April 2012 the charity had been told that going forward no trustee or connected person must receive remuneration for employment without the written consent of the Commission and furthermore the charity responded on 19 April 2012 that “no trustee or person connected to them is in receipt of any remuneration” and that “we now fully understand that no one connected to the trustees may receive remuneration without the prior written consent of the Charity Commission”.

However the inquiry found that unauthorised payments had been made to a former trustee and one of the continually acting trustees amounting to £48,325.04 between the closure of the first compliance case in April 2012 and the opening of the inquiry in April 2015. These payments relate to salary payments and were in breach of the governing document.

On 9 March 2016 one of the continually acting trustees explained that prior to making the payments, the charity was verbally advised by its previous accountant that they were permitted. However, this advice was not recorded and when contacted, the accountant confirmed that they had previously advised the charity to seek permission from the Commission in relation to related party transactions but could not corroborate if verbal advice was given to the extent the charity alleges.

Whilst the charity maintains that it sought advice from its accountant prior to making the payments, the trustees should have also considered the advice given by the Commission and been aware of the relevant requirements of the governing document. The inquiry found that in making these payments the former trustees and one of the continually acting trustees did not sufficiently consider the advice and guidance given by the Commission in the earlier compliance cases.

The trustees could not satisfy the inquiry that they had carried out their trustee duties as set out in CC3 The Essential Trustee with sufficient care. Together this constitutes mismanagement and/or misconduct in the administration of the charity.

According to the charity’s bank statements, following the Action Plan, no more unauthorised trustee payments have been made.

Safeguarding and reporting serious incidents

The inquiry found that the charity had appropriate written safeguarding policies and procedures as well as house rules for the hostels’ residents. These documents were initially drawn up by a consultant and are regularly reviewed and subject to approval by the board of trustees.

The inquiry found that all current and prospective staff, volunteers and trustees are fully vetted, which includes conducting DBS checks.

At a meeting on 7 June 2016 the continually acting trustees were unable to provide records of trustee meetings to demonstrate that safeguarding related incidents were being discussed. They informed the inquiry that such records existed but were misplaced and subsequently lost by the charity’s previous accountant. The requirement to ensure that the trustees had sufficient oversight and management of all safeguarding matters was included in the Action Plan where it stipulated that the charity must ‘record all serious incidents in the future, including safeguarding related incidents, and ensure that such incidents are promptly reported to the Commission’.

In January 2017, BCC started to undertake a review of the ‘provision of care, support or supervision’ at Wick House to ensure that the hostel continued to be eligible to hold exempt accommodation status. In addition the inquiry became aware of a serious safeguarding incident that took place on 29 November 2016 at Wick House. The incident was not recorded in the trustee meeting minutes and was not reported to the Commission in breach of the Action Plan. As a result the inquiry remained open to assess regulatory concerns in relation to the council’s review and the serious incident the charity failed to report.

While BCC’s review of Wick House concluded in October 2017 with Wick House retaining its exempt accommodation status, another serious safeguarding incident occurred at the charity’s premises on 16 October 2017 which the charity again, failed to report. The inquiry was concerned that the charity had now failed to report two serious incidents and appeared to be in breach of the Action Plan. The inquiry was also concerned that the charity again appeared to be giving little consideration to advice issued by the Commission.

In September 2018, the charity was informed by its landlord that Shepherds Hall had been sold and that the charity had 6 months to vacate the premises. In December 2018, the charity decided to close the hostel. The trustees again did not consider this to be a serious incident and failed to report this matter.

Detailed advice and guidance on reporting serious incidents was provided to the charity during a meeting on 7 June 2016 and several times thereafter in addition to which relevant materials can be found on the Commission’s website. The inquiry therefore found that there was a failure to report serious incidents which was a breach of the Action Plan made in 2016 by four of the former trustees and the continually acting trustees and considered this to be mismanagement and/or misconduct in the administration of the charity.

The new trustee board has demonstrated that it has understood and is now complying with the guidance by making a number of serious incident reports in line with the Commission’s regulatory advice.

To address the charity’s past failings to report serious incidents, the charity was issued with an Official Warning on 14 August 2019. The Warning stipulates that the charity is to ensure that all serious incidents, including safeguarding related incidents, are promptly reported to the Commission.

Conflicts of interest and/or loyalty

The inquiry became aware that one of the former trustees (who is connected to another former trustee) was a director of a company that purchased the property of the charity’s hostel Shepherds Hall on 14 July 2015. The former trustee was both a director of the company that purchased Shepherds Hall and a trustee of the charity between 14 July 2015 and 1 September 2015 and for that period was also the charity’s landlord. An individual connected to both these former trustees was a second director at the company.

The inquiry found that the conflict was not appropriately managed which therefore constitutes a breach of trustee duties and was misconduct and/or mismanagement in the administration of the charity by four of the former trustees and the continually acting trustees.

The new trustee board assured the inquiry that such a conflict would be recognised in the future and that the former connected trustees would no longer be involved in the charity and its decision making going forward. The new trustees also stated that there was no relationship with the companies that have or were letting properties to the charity other than one of tenant and landlord.

On 17 May 2019, two of the charity’s former connected trustees signed voluntary undertakings offered to them by the inquiry not to act as trustees of a charity for a period of four and five years.

While the inquiry has not seen any evidence to suggest that private benefit arose from the work carried out by any of the trustees and/or from any arrangements with any private companies managed or controlled by individuals connected to the charity, four of the former trustees and the continually acting trustees failed to recognise and manage the potential for conflicts of interest and/or loyalty.

The inquiry considers this to be mismanagement and/or misconduct in the administration of the charity.

Conclusions

The inquiry concluded that the trustees, except for the new trustees appointed after March 2019, had failed to comply with their legal duties in respect of the administration, governance and management of the charity and this amounted to serious misconduct and/or mismanagement in the administration of the charity.

The charity now has a new trustee board which has positively engaged with the inquiry. Only one of the trustees appointed before the opening of the inquiry remains acting. Two of the former trustees signed voluntary undertakings offered to them by the inquiry and have undertaken not to act as trustees of a charity for periods of four and five years.

Regulatory Action Taken

The inquiry obtained the charity’s bank statements under section 52 of the act on various occasions during the inquiry.

On 26 October 2016, the Commission issued the charity with an Action Plan under section 84 of the act directing the charity to take specified actions.

On 28 March 2019, the Commission issued the charity with an order under section 47 of the act to answer questions and/ or provide copy documents.

On 14 August 2019 the Commission issued the charity with an Official Warning with regards to the non-reporting of serious incidents and the failure to manage conflicts of interest and/or loyalty and stipulated that the charity had to:

• ensure that all decisions are made in accordance with the charity’s governing document and in the best interests of the charity only, and are properly and adequately recorded; and
• ensure that payments to trustees and/or connected persons are made lawfully and in line with the provisions of the charity’s governing document, and that any appropriate consent from the Commission is obtained accordingly before making such payments; and
• ensure conflicts of interest and/or loyalty are recognised, adequately recorded and managed appropriately; and
• ensure that all serious incidents, including safeguarding related incidents, are promptly reported to the Commission

Issues for the wider sector

The Charity Commission requires charities to report serious incidents. If a serious incident takes place within a charity, it is important that there is prompt, full and frank disclosure to the Commission.

A serious incident is an adverse event, whether actual or alleged, which results in or risks significant:

• harm to a charity’s beneficiaries, staff, volunteers or others who come into contact with a charity through its work
• loss of a charity’s money or assets
• damage to a charity’s property
• harm to a charity’s work or reputation

The responsibility for reporting serious incidents rests with the charity’s trustees. In practice, this may be delegated to someone else within the charity, such as an employee or the charity’s professional advisers.

However, all trustees bear ultimate responsibility for ensuring their charity makes a report, and does so in a timely manner. If the trustees decide not to make a report about something serious that has happened in their charity and the Commission later becomes involved, the trustees will need to be able to explain why they decided not to report it at the time.

A conflict of interest is any situation in which a trustee’s actual or perceived personal interest or loyalty could, or could be seen to, prevent them from making a decision in the best interests of the charity. Trustees should avoid conflicts of interest or conflicts of loyalty or in circumstances in which they cannot be avoided, declare, record and appropriately manage the conflicts in the best interests of their charity. Trustees must prevent any conflict of interest or loyalty from affecting the decision making.

Trustees must actively manage any conflicts of interest and conflicts of loyalty. They should step back from or avoid any situation where a conflict exists or is likely to arise. If it is clear the conflict cannot be adequately managed, even if this means, for example, that additional disinterested trustees are appointed or that the affected trustees resign. It is vital that trustees avoid becoming involved in situations in which their personal interests or loyalties may be seen to conflict with their duties as trustees.

The Commission recognises that it is inevitable that conflicts of interest and conflicts of loyalty will occur. The issue is not the integrity of the trustee concerned, but the management of any potential to profit from a person’s position as a trustee, or for a trustee to be influenced by conflicting loyalties. Even the appearance of a conflict of interest or loyalty can damage the public’s trust and confidence in a charity, so conflicts need to be managed carefully.