Decision

Charity Inquiry: Capricorn Animal Rescue and Sanctuary (inc. Aston, Hawarden Animal Aid)

Published 21 March 2022

This decision was withdrawn on 22 March 2024

This has been archived in line with our policy as it is over 2 years old.

Applies to England and Wales

The charity

Capricorn Animal Rescue and Sanctuary (Inc. Aston, Hawarden Animal Aid) (“the charity”) registered with the Commission on 9 August 1995. It was governed by a constitution adopted 24 May 1995, as amended 18 December 1999, 26 June 2010 and 1 October 2017 (the “governing document”).

The charity was removed from the Commission’s register of charities on 9 September 2021 and is recorded as a removed charity.

The charity’s objects were stated to be:

1. to relieve the suffering of animals and birds who are in need of care and attention and in particular to provide resource centres and other facilities for the reception and care of such animals
2. to advance the education of the public in the preservation, improvement and protection of the habitat and environment of sick animals and birds

Background and issues under investigation

The charity was founded in 1983 and operated from premises in Mold, North Wales, comprising an animal sanctuary and residential accommodation occupied by the trustee Sheila Stewart and her son, who was also employed by the charity. In addition, the charity owned a residential property in Buckley which had been bequeathed to it in the will of a former trustee. It also owned shop premises in Wrexham and leased shop premises in Mold.

The Commission opened a regulatory compliance case into the charity in January 2016 following complaints from members of the public, unfavourable coverage by local press and regional television, and parliamentary interest. In the course of that case the Commission identified serious regulatory concerns in respect of ineffective procedures for protection of charity funds and it provided regulatory advice and guidance to the then trustees on how to improve the charity’s governance.

The Commission monitored the charity’s compliance with the guidance it had provided. It established that there were on-going serious regulatory issues relating to the administration of the charity by the trustees, and on 9 February 2017 the Commission opened a statutory inquiry into the charity under s.46 of the Charities Act 2011 (“the Act”).

The inquiry examined the following regulatory issues:

• the administration, governance and management of the charity including the trustees’ oversight and control of:
  • the day-to-day activities of the charity
  • non primary purpose trading conducted by or on behalf of the charity
  • the financial management of the charity
• whether there has been any unauthorised benefit to the trustees of the charity
• whether the trustees have properly exercised their duties and responsibilities under charity law in the administration of the charity and in particular their duty to account for the charity’s fund
• whether, and to what extent, there has been misconduct or mismanagement in the administration of the charity by the trustees

At the time the inquiry opened (on 9 February 2017) there were four trustees in post, including Sheila Stewart, who was a founding trustee and the driving force behind the charity throughout the period it was active until her resignation on 2 September 2018. The charity had had several other trustees prior to the opening of the inquiry, and a further five trustees were appointed and resigned on various dates between the opening of the statutory inquiry and the charity’s AGM on 2 September 2018.

The inquiry closed with the publication of this report.

Findings

On 30 July 2018 the Commission appointed an interim manager to the charity, to the exclusion of the trustees. The interim manager was charged with taking over the management and administration of the charity and its property and, amongst other matters, with considering the future governance arrangements of the charity.

The administration, governance and management of the charity

The inquiry found that the charity was not properly managed or administered by the trustees at the relevant times.

The inquiry found failures to protect the charity’s property:

• at the time the inquiry opened the charity had no written financial controls despite the Commission having previously provided regulatory advice about the need for such controls
• the charity operated inappropriate banking and cash handling procedures. Cheques, including cheques made out to cash, were signed only by Sheila Stewart when two signatures were required, and cheques signed by Sheila Stewart were issued to her son. Cash income from the charity’s shops was collected by Sheila Stewart’s son and subsequently counted and banked solely by Shelia Stewart. Charity shop takings were banked as infrequently as once per month, leaving cash stored (often insecurely) on the charity premises for excessive periods of time, and cash was deducted from the shop takings prior to banking. The charity’s collection boxes in the local area were emptied infrequently and records of cash collected from the boxes were inadequate
• an agreement to lease premises in Mold for use as a charity shop was renewed when the terms of the lease were not in the best interests of the charity. The annual cost to the charity more than doubled between the initial signing in February 2010 (£20,000) and March 2018 (£45,615.16), when an analysis by the Commission revealed the shop’s declared income for the previous 12 months to be less than 57% of the rent and service charges. In earlier years the income generated by the Mold shop was consistently lower than the cost to the charity of maintaining the lease upon the premises
• the trustees allowed significant arrears of rent and service charges to accrue in respect of the charity’s shop at Mold for two periods in 2017, leading to the charity incurring additional costs when the arrears were recovered through debt collection in April and July of that year
• the trustees failed to manage and maintain a property bequeathed to the charity and let out for residential use (the Buckley property). This hindered the charity’s interim manager in his efforts to secure a sale of the property at best value as part of his realisation of the charity’s assets

Between January 2015 and January 2017, there was a failure to manage the animal sanctuary effectively and in accordance with animal welfare legislation to the extent that RSPCA inspections, undertaken in response to complaints from the public, highlighted concerns about the management of the sanctuary potentially giving rise to animal welfare issues. The effect of this failure was to damage or likely damage public trust and confidence in the charity.

The inquiry undertook meetings with the then trustees and in May 2017 visited the charity’s animal sanctuary and shop premises in Mold and viewed the charity’s shop premises in Wrexham and the residential property in Buckley.

The inquiry also conducted interviews and engaged in correspondence with several former trustees, and noted recurring themes:

• infrequent trustee meetings, with minutes taken by Sheila Stewart not subsequently provided to the trustees, despite specific requests for the minutes to be distributed
• a failure by Sheila Stewart to provide information to her fellow trustees, including accounts and paperwork relating to income and expenditure and a failure to consult her fellow trustees before taking decisions regarding the operation of the charity
• a refusal by Sheila Stewart to deal with concerns raised by other trustees regarding specific decisions taken in respect of the charity’s operation, and a failure to respond to recommendations for change made by the trustees

The inquiry noted that the consequences of this failure to work collaboratively included trustee resignations (trustee turnover was such that there were 18 different trustees between 2015 and 2018), with the effect that the charity was frequently inquorate and lacked an effective management structure.

Whether there has been any unauthorised benefit to the trustees of the charity

Sheila Stewart lived in accommodation attached to the sanctuary premises which she occupied from 2010 under a licence from the charity on favourable terms. When required to do so by the Commission neither Mrs Stewart nor the remaining trustees were able to provide records confirming all her rent payments had been made, although the inadequacy of the records made it impossible to accurately quantify any non-payment. Occupation of the property on favourable terms is itself a benefit and any unpaid rent would amount to a further unauthorised benefit to a charity trustee.

Whether the trustees have properly exercised their duties and responsibilities under charity law in the administration of the charity and in particular their duty to account for the charity’s funds

The inquiry found that trustees at the relevant times failed to file the charity’s annual accounts, trustees’ annual reports and annual returns with the Commission on time, to the extent that the charity’s accounts were filed late for every one of the financial years ending December 2007 to December 2015.

The inquiry compared the charity’s income and expenditure as determined by an analysis of the bank statements with the figure provided in the accounts submitted by the charity to the Commission tor the financial years ended 31 December 2014, 2015 and 2016, and found discrepancies in both income and expenditure.

Comparison of income and expenditure as stated in accounts and from analysis of bank statements

Income (£) FYE	Accounts	Bank Statements	Difference
31/12/16	249,778	276,654	28,876
31/12/15	248,457	261,542	13,085
31/12/14	219,049	231,854	12,805

Expenditure (£) FYE	Accounts	Bank Statements	Difference
31/12/16	262,724	252,280	-10,443
31/12/15	266,797	264,931	-1,865
31/12/14	254,902	293,295	38,393

This misleading statement of the charity’s financial position by the trustees at the relevant times is a further failure to properly account for the charity’s funds.

The inquiry noted that the charity’s governing document specifies that a full record should be taken of all meetings of the Executive Committee of the charity (comprised of the charity trustees). Minutes requested by the inquiry were in many cases missing entirely and in other cases inadequate in terms of their content, and this represents a failure on the part of the trustees at the relevant times to comply with their charity’s governing document.

The trustees failed to fully implement the requirements of an Order giving directions for the protection of charity property pursuant to s.84 of the Act made by the Commission on 24 February 2017. The Order required the development and implementation of a written policy for cash handling and banking procedures and thereafter weekly reporting to the Commission of income received in the previous week. Whilst such a policy was developed by the charity the reporting of income was frequently late and when audited by the Commission the actual income was found to differ from that declared in the reports. In addition, volunteers’ expenses and an employee’s wages for working in the charity’s shops, were paid directly from shop takings, in contravention of the cash handling policies which were put in place when the s.84 Order was issued.

Whether, and to what extent, there has been misconduct or mismanagement in the administration of the charity by the trustees

As set out above the inquiry found that there had been significant failings in the governance and management of the charity. The trustees of the charity at the relevant times failed to manage the charity’s resources responsibly, exposing its assets and reputation to unnecessary risk through inappropriate banking and cash handling practices, poor decision making over the leased shop premises in Mold and inadequate management of the Buckley rental property. In addition, the welfare issues at the animal sanctuary further exposed the charity’s reputation to unnecessary risk.

The trustees who were appointed at the relevant time, repeatedly allowed cheques bearing a single signature to be issued, including on occasion cheques signed by Sheila Stewart that were payable to her son – a failure to manage conflicts of interest and/or loyalty. The trustees at the relevant times failed to keep adequate minutes of all meetings and failed to properly account for income and expenditure, failing to comply with the terms of the charity’s governing document and charity law.

The trustees’ (at the relevant times) also failed to comply or sufficiently comply with the section 84 Order directing them to take certain actions which were in the best interests of the charity.

The inquiry considers these failings to be serious misconduct and/or mismanagement in the administration of the charity by the trustees who were in post at the relevant times.

Conclusions

The Commission concluded that there was serious misconduct and/or mismanagement, and other failures, in the administration of the charity. Despite the charity having been provided with extensive regulatory advice and guidance by the Commission prior to and in the early stages of the inquiry the identified governance issues were not addressed. The failures had a significant impact upon the charity and its property, placing the charity in a position from which it was unable to recover financially, and leading directly to the appointment of the interim manager, and ultimately to the winding down and closure of the charity, with approximately 140 animals rehomed with the support of the RSPCA.

The Commission noted that Sheila Stewart held a dominant position amongst the trustees and was a significant driving force in the operation of the charity, and a result she was disqualified from acting as a trustee under section 181A of the Act for a period of 15 years. However, the Commission further concluded that the failings detailed in this report may not have occurred had those other trustees in post over the period of the charity’s operation effectively fulfilled their statutory duties and been actively involved in the administration of the charity.

Regulatory action taken and outcomes

Whilst the inquiry was ongoing the Commission took temporary and protective action under section 76(3) of the Act to protect the charity’s funds by restricting the operation of its bank accounts, prohibiting payments being made from those accounts without the Commission’s prior written approval; by similarly restricting the trustees’ use of the charity’s Virgin Money Giving and PayPal accounts, and by restricting the trustees from entering into or renewing leases without the prior written authority of the Commission.

The inquiry used its remedial powers under section 84 of the Act on 24 February 2017 to direct the then trustees to implement a cash handling and banking policy, and to report to the Commission on a weekly basis the funds banked in the charity’s account.

The inquiry used information gathering powers under section 47 of the Act on several occasions: to direct the in-post trustees, former trustees and the charity’s accountants to provide information and relevant documents. The inquiry used its powers under section 52 of the Act to obtain financial information about the charity from its bank.

On 2 December 2021 the Commission, exercising its powers under section 181A of the Act, disqualified Sheila Stewart from being a charity trustee or trustee for a charity, in relation to any charity in England and Wales, for a period of 15 years from 14 January 2022. As a result, Sheila Stewart is also disqualified from holding an office or employment with senior management functions. Her name has been entered upon the Commission’s register of removed trustees.

Appointment of Interim Manager

On 30 July 2018 the inquiry used its temporary protective power, under section 76(3)(g) of the Act, to appoint Guy Hollander, a chartered accountant and insolvency practitioner, as interim manager (“IM”) to the exclusion of the trustees. Mr Hollander was tasked to conduct a review of the charity’s past governance and to determine whether the charity had a viable future, and thereafter to undertake either the restructuring or the winding up of the charity. The IM concluded that closure of the charity was necessary and in November 2018 the sanctuary operated by the charity was closed and approximately 140 animals rehomed with the support of the RSPCA. After closure of the charity’s operations the IM concentrated on realising the charity’s assets in order to wind down its affairs in an orderly manner. The IM was discharged by the inquiry on 10 September 2021.

The costs of the IM’s appointment were met in part by the Commission and in part out of the charity’s funds. The total cost of the IM appointment was £119,152 plus VAT. Of this amount, the IM’s fee for the work was £90,510, and disbursements were £28,642. The Commission contributed £35,000 to the IM’s fee and the balance was met from the charity’s funds. The IM’s actual time costs for the appointment totalled £245,468; however, costs in excess of the fee approved by the Commission were written-off by the IM.

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the Commission’s assessment of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the charity in addition to the findings and conclusions set out in the earlier sections of this report but is included because of their wider applicability and interest to the charity sector.

Trustees are representatives of the charity they govern or the charitable funds they are responsible for, in the charity sector. Trustees must be aware of and act in accordance with their legal duties. The conduct of trustees can be a key driver of public trust and confidence in the charity sector. When the conduct of trustees falls below the standards expected there can be damage to the reputation of individual trustees, the charity and possibly the wider charity sector.

Trustees must ensure that their charity has adequate financial controls in place. It is important that the financial activities of charities are properly recorded, and their financial governance is transparent. Charities are accountable to their donors, beneficiaries and the public. Donors to charity are entitled to have confidence that their money is going to legitimate causes and reaches the places that it is intended to, this is key to ensuring public trust and confidence in charities.

Charity trustees must comply with Orders and Directions of the Commission. In some circumstances it may be a criminal offence (or contempt of court) for a charity or a trustee to not comply with an order or direction of the Commission.