Decision

Charity Inquiry: CAWRM Ltd

Published 23 October 2020

This decision was withdrawn on 1 November 2022

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

Applies to England and Wales

The charity

CAWRM LTD (‘the charity’) was incorporated with Companies House on 28 July 2017 and was registered with the Charity Commission for England and Wales (‘the Commission’) on 1 May 2018. It is governed by a memorandum and articles of association dated 28 July 2017. It is a charitable company limited by guarantee.

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

There have been changes in trusteeship during the inquiry:

• Trustee A was appointed on 17/10/2017
• Trustee B was appointed on 05/10/2017 and resigned on 21/02/2019
• Trustee C was appointed on 17/10/2017 and resigned on 07/09/2018
• Trustee D was appointed on 28/03/2019
• Trustee E was appointed on 07/09/2018

For the purposes of this report trustees A, B and C are together referred to as ‘the founding trustees’ and trustees A, D and E are referred to as ‘the current trustees’.

Issues under Investigation

The Commission opened a compliance case into the charity on 8 June 2018 because it:

• was newly registered and operated in Jordan, Israel and Palestine which were considered high risk areas by the Commission
• was strongly linked on social media to Canon Andrew White^{[footnote 1]} (‘Canon White’) who had been a trustee of a separate charity the Foundation for Relief and Reconciliation in the Middle East (1133576) (‘FRRME’), into which the Commission had serious regulatory concerns and had opened a statutory inquiry. The Commission has closed the statutory inquiry into FRRME with the publication of an inquiry report^{[footnote 2]}

The Commission wanted to ensure that the trustees had full control of the management and administration of the charity. This included that its relationship with Canon White was being properly managed, given the concerns arising from the FRRME inquiry and due to Canon White acting as the charity’s ambassador, with the charity’s name standing for ‘Canon Andrew White Reconciliation Ministries’.

The Commission met with the charity’s then trustees on 10 August 2018 for a compliance visit. The compliance visit highlighted numerous instances of poor governance and financial controls. It also indicated that the relationship between Canon White and the charity did not appear to be being managed adequately.

As a result of the regulatory concerns identified, the Commission opened a statutory inquiry on 28 November 2018 under section 46 of the Charities Act 2011 (‘the inquiry’).

The scope of the inquiry was to examine a number of issues including;

• the administration, governance and management of the charity by the trustees
• the financial controls and management of the charity and whether its funds have been properly expended solely for exclusively charitable purposes and can be accounted for
• whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under charity law

The inquiry closed with the publication of this report.

Findings

The administration, governance and management of the charity by the trustees

The charity’s relationship with Ace White Gold Ltd

During the compliance visit the founding trustees explained that a third-party limited company Ace White Gold Ltd (company number 11123866) (‘the company’) was providing PAYE services to the charity. During the inquiry it was established that Canon White was the sole shareholder of the company.

During the compliance visit the founding trustees explained that the company was set up to trade in commodities, mainly focusing on oil deals within the Middle East centred around the contacts Canon White has established during his time in the Middle East. The founding trustees were of the understanding the company would donate a sum of its profits back to the charity. However, the inquiry found that no written agreement was in place to confirm this arrangement, and as of the closure of the inquiry, no evidence has been identified of any donations having been made from the company to the charity to date.

The founding trustees explained to the inquiry that they made the decision to use the company to run the charity’s PAYE because this approach mitigated the risks associated with the charity employing its own staff. When questioned on what these risks were, the trustees were unable to provide a meaningful response.

The inquiry was concerned whether or not the relationship between the charity and the company: (i) had been created properly, (ii) was in the best interests of the charity, and (iii) successfully managed the conflicts of interest and personal benefits that arose from this relationship.

The inquiry found that subsequent to the compliance visit the charity entered into a written service agreement with the company, dated 1 September 2018, backdated to be effective from 1 January 2018. The inquiry found that the charity had paid £14,006.56 to the company in October 2018. The inquiry was concerned that at the time of the charity entering into the service agreement with the company the following conflicts of interest were present:

• trustee A was the accountant for the company and the charity, they had assisted in the formation of the company
• trustee B was (and is) connected to Canon White the sole shareholder and director of the company
• trustee C’s renumeration was determined by the service agreement and they were also a trustee

The inquiry explored: the contractual relationship between the charity and the company; the founding trustees’ decision making when entering into this contractual relationship with the company; whether the contractual relationship was entered into properly; and, whether it should continue. Despite meeting the founding trustees on 10 August 2019 and requesting information from both the founding and current trustees, the inquiry was unable to fully understand the trustees’ reasoning for this decision.

As a result, the Commission appointed an interim manager (‘IM’), Gordon Reid of Barlow Robbins on 14 January 2020 to establish the facts with regard to the relationship between the charity and the company and to:

• review the contractual relationship between the charity and the company, as outlined in the Service Agreement dated 1 January 2018
• determine if the contractual relationship was entered into properly and in the best interests of the charity
• determine if the contractual relationship between the charity and the company should continue
• assess the viability of the charity to operate for the public benefit

The IM in concluding his appointment found “legal advice was not sought at any point in relation to the incorporation and registration of the charity, the framework of the relationship between the charity and the company or, for that matter, in relation to the affairs of the company”. The IM also found that trustee A “would have been expected to understand that legal advice was required, given that he is a professional with a higher duty of care”.

The IM’s conclusion was “I do not consider that the agreement in this form was in the best interests of the charity. There is a lack of clarity regarding the services to be provided and remuneration to be paid. There is no provision within the agreement which obliges the company to pay any money at all to the charity and although the trustees of the charity had the expectation that funds would always be paid to the charity there is nothing here they could enforce in that regard.” The IM’s independent findings supported the regulatory concerns of the Commission.

The inquiry found that the relationship between the charity and the company was not in the best interests of the charity for the reasons outlined above.

The inquiry also found that the decision to enter into the service agreement made by the founding trustees was inquorate and invalid as they failed to appropriately manage conflicts of interest. Clause 13(2) of the charity’s governing document provides that ‘the quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two and unless otherwise fixed it is two’. The founding trustees should have recused themselves from voting on account of their conflicts and, consequently, the charity did not make a valid, quorate decision to enter into this agreement.

The charity’s governance

At the time the inquiry was opened, the charity had no written policies or controls in place. Based on the type of work the charity undertakes which is in high risk areas with vulnerable beneficiaries, the inquiry found that the founding and current trustees failed in their duties by not having appropriate written policies in place to protect the charity and its beneficiaries from harm. The current trustees have since implemented safeguarding, GDPR and expenses policies.

However, given the regulatory concerns present, the inquiry served the current trustees with a section 84 order to implement further policies to improve the management of the charity including a personal benefit policy and a conflict of interest policy and register. The inquiry found that the current trustees also need to review the current expenses policy to determine whether it is appropriate and in the best interest of the charity to allow trustees and employees to claim generous expenses.

The inquiry reviewed the charity’s trustee meeting minutes between July 2017 and May 2018 and found that they were limited in frequency and detail and did not effectively evidence the decisions made by the trustees and the reasons for the decisions. The inquiry found that the current trustees must improve the meeting minutes to allow the trustees to satisfy their legal duties.

Furthermore, during the compliance visit the Commission was told by the founding trustees that Canon White has written a number of books which the charity has previously funded the publishing of. It was explained that Canon White when attending events as the ambassador for the charity, promotes and sells these books. The proceeds of sales from the books goes direct to Canon White as the author of the books. Whilst the trustees understood that Canon White would automatically donate funds raised from the book sales to the charity, there was no written agreement in place to ensure this happened. The inquiry has not been shown any evidence to support that even without the written agreement, Canon White has been donating funds raised from the book sales to the charity. The inquiry found that the founding trustees had not considered or managed the personal benefit which Canon White receives by attending charity events and selling his books and whether this arrangement was in the best interests of the charity. The inquiry, by way of a section 84 order, has ordered the current trustees to consider the recovery of any personal benefit to Canon White and formalising this relationship.

The financial controls and management of the charity and whether its funds have been properly expended solely for exclusively charitable purposes and can be accounted for

Trustee salary

During the compliance visit it was identified that trustee C, who was a trustee at the time of the compliance visit, was in receipt of a wage for their role within the charity. Following the opening of the inquiry, and in response to section 47 directions, it was explained that between January 2018 and July 2018 trustee C received £15,160 in wages. Following the compliance visit trustee C resigned as a trustee, although they continued to provide paid services to the charity through their employment with the company. The payments made to trustee C while they were a trustee were made in breach of the charity’s governing document, which expressly prohibits payments to trustees. The inquiry has directed the current trustees to seek legal advice to consider whether they should seek to recover funds (restitution) from trustee C for the remuneration they received in breach of the charity’s governing document.

The use of Canon White’s personal bank account

The inquiry found that prior to 10 July 2018, the founding trustees were unable to open a bank account in the name of the charity. However, as the charity was fundraising and overseas trips were being undertaken, as a temporary measure, the charity used the personal bank account of its ambassador Canon White to hold charitable funds.

The inquiry found that there was no formal consideration and decision making by the founding trustees to use the personal bank account of Canon White. There were also no safeguards or arrangements in place to ringfence the charitable funds which were mixed with Canon White’s personal funds and spending. This was of greater concern to the Commission given the issues that arose as part of the FRRME inquiry. The founding trustees confirmed that Canon White owed the charity money as a result of confusion between personal and charitable funds but were unable to confirm to the inquiry how much Canon White owes the charity as they failed to keep adequate records. The inquiry sought to ensure that the charity identifies the sum owed by Canon White to the charity and arranged for this to be repaid. However, during the inquiry no evidence was provided by the founding and current trustees that this has happened. The inquiry has made a section 84 Order to direct the current trustees to complete a full reconciliation of Canon White’s personal bank account statements for the period it was being used to hold charitable funds to establish the total owed to the charity. If charitable funds have not been repaid the current trustees must seek legal advice in relation to their responsibilities and options for the funds to be repaid.

Financial management

During the compliance visit the Commission identified that the founding trustees were putting the charity’s funds at risk by couriering significant amounts of cash out of the UK. It was explained that charity’s representatives transported around £15,000 in cash out of the UK in May 2018, £7,000 in June 2018 and around £20,000 earlier in 2018. All these trips were to Jordan and/or Israel.

At the compliance visit the Commission alerted the founding trustees to the significant concerns that this practice raises, including the risks to the charitable funds and to the personal safety of those carrying the cash. However, during the compliance visit and in correspondence afterwards, there were no assurances given by the founding trustees that they would stop cash couriering as a means to transfer charitable funds. The Commission served a section 76(3)(f) order on the founding trustees to restrict the use of cash couriering. Since this order was served the founding and current trustees have ensured that all future overseas transactions were made by bank transfer or money service business.

The inquiry has reviewed the charity’s management accounts and other financial records provided by the founding trustees during and following the compliance visit which covered the period January 2018 to October 2018 The inquiry found that:

• the financial records were unclear and did not account for the true picture of the financial position of the charity
• there was a lack of sufficient record keeping to adequately account for the end use of the charity’s funds
• the charity does not have an internal financial controls policy, which would help to mitigate any risk to charitable funds
• the accounts for the financial year ending 30 April 2019 were not compliant with the accounting framework known as the charities Statement of Recommended Practice (‘SORP’) and were submitted nineteen days late

The inquiry found that significant improvements needed to be made to the charity’s financial record keeping and that the charity must implement financial policies to assist with the charity’s financial management.

The inquiry established that the charity submitted dormant accounts to Companies House on 18 July 2018 for the period 28 July 2017 to 30 April 2018, despite the charity generating fundraising income and expending charitable funds during overseas trips in this period. Therefore, the charity’s failure to account for these transactions meant the accounts submitted to Companies House for the period ended 30 April 2018 were materially incorrect.

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

The charity’s relationship with consultants

The inquiry found that the charity paid a consultant $3000 per month for work on its behalf in Israel and Jordan, however, the consultant did not always provide receipts. There was no job description or clarity about what work is to be completed to earn the remuneration provided. The charity also paid £4000 - £5000 per month to a school in Jordan, but there was no justification for why this specific amount was required, no records of expenditure, and no breakdown of what the requested funds were to be used for.

The inquiry found that the agreements predated the creation of the charity and were set up by Canon White. On formation of the charity the founding trustees continued the agreements without assessing whether the terms of payment to the consultant were justified for the role they provided, or whether the school was using the funds given in an effective manner.

Following the opening of the inquiry, the founding trustees reviewed and decided to end the relationship with the consultant, however, they have continued to fund the school in Jordan. The inquiry is critical of the founding trustees in their decision not to review the relationship with the consultant earlier, given that at the compliance visit the trustees themselves raised concerns regarding the consultant and their receipt keeping.

The inquiry found that the charity’s trustees have not always acted independently of Canon White when making decisions regarding the charity. This has resulted in decisions being made which have not been in the best interests of the charity.

Trustee conduct

Whilst the charity trustees complied with the various directions issued during the inquiry to obtain information, the responses provided were often cursory and incomplete which made it difficult to understand the trustees’ decision making. The inquiry is critical of the trustees in this respect.

Conclusions

The inquiry concluded that certain actions of the trustees at the time have constituted misconduct and/or mismanagement. In particular;

• the founding trustees failed to act in the best interest of the charity when entering into the agreement with the company by not identifying, recording or managing the conflicts of interest. The inquiry concluded that this breached the governing document resulting in an inquorate decision to enter into an agreement with the company
• the founding trustees failed, in their legal duty, to abide by the charity’s governing document by authorising payments to trustee C
• the charity had a significant lack of financial accounting, reporting and controls to safeguard charitable funds which has resulted in charitable funds being placed at risk
• the charity’s trustees did not have full control of the management and administration of the charity and have not properly managed the relationship between the charity and Canon White

In order to address the misconduct and/or mismanagement and the shortfalls in the charity’s administration, governance and management, the Commission issued the trustees with a section 84 Order and directed action to be taken to address these failings. The Commission will follow up with the charity to assess the current trustees’ compliance with the section 84 order.

Regulatory Action Taken

During the inquiry, five section 47 Directions were issued the trustees at the time to obtain information in the form of copy documents and answers to questions.

On 29 November 2018 the inquiry made an Order under section 76(3)(f) of the Act to restrict the trustees at the time from entering into any transactions which would result in all or part of the charity’s funds being; transferred out of the United Kingdom in cash, including by cash courier; or transferred to the company.

On 14 January 2020 the inquiry made an Order under section 76(3)(g) of the Act to appoint Gordon Reid of Barlow Robbins Solicitors as IM to undertake the specific actions as outlined above.

The IM appointment cost £9,600 inclusive of VAT and was indemnified by the Commission. The IM was discharged on 30 March 2020. Prior to discharge the IM provided a report detailing his findings regarding the specific actions.

On 27 May 2020 the inquiry issued the trustees with a section 84 Order to take actions specified to improve the charity’s governance and financial controls.

Issues for the wider sector

Cash couriering and moving charitable funds

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.

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 is available on the Commission’s website.

There is also a self-check-list for trustees which has been produced to enable trustees to evaluate their charity’s performance against the legal requirements and good practice recommendations set out in the guidance.

The Commission strongly advises charities against the use of cash couriering as a method to transfer charitable funds due to the risks involved. The risks are set out in the Commission’s regulatory alert on the use of cash couriers published in February 2017.

The Commission considers it difficult to see, where regulated banking services are available, how trustees could show that they have discharged their legal duties if they do not use the regulated banking sector.

Conflicts of interest

Trustees are jointly and severally liable for charity decisions and they must act as a collective to make decisions which are in the best interest of the charity. Conflicts of interest or loyalty can lead to decisions being made which are not in the best interests of the charity. Trustees must, therefore, recognise and manage any conflicts of interest or loyalty. Trustees must be mindful of mixing their role with the charity and their private business affairs, particularly when a benefit may be inferred to that business or the trustee directly.

Charity trustees should ensure that they have a conflicts of interest policy in place to ensure that they are fully aware of their responsibilities and that any conflicts that do arise are appropriately managed.

Where a charity trustee has a conflict of interest they should follow the basic checklist set out in the Commission publication Conflicts of interest: a guide for charity trustees (CC29) and where necessary or appropriate take professional advice.

The law states that trustees cannot receive any benefit from their charity in return for any service they provide to it or enter into any self-dealing transactions unless they have the legal authority to do so. This may come from the charity’s governing document or, if there is no such provision in the governing document, the Commission or the Courts.

Further information is available from Trustee expenses and payments (CC11).

Trustees who receive an unauthorised payment or benefit from their charity have a duty to account for (i.e. repay) it. The Commission cannot relieve trustees from this duty.

1. On 30 July 2020 Canon Andrew White was disqualified from acting as a trustee and/or holding any office or employment with a senior management function in all charities for a period of 12 years. ↩

2. The Commission has closed the inquiry into FRRME with the publication of an inquiry report ↩