Decision

Charity Inquiry: Fashion for Relief

Published 26 September 2024

Applies to England and Wales

The charity

Fashion for Relief (‘the charity’) was registered on 19 January 2015. It was governed by a constitution.  

The charity’s objects, as set out in its constitution were:

• the prevention or relief of poverty, sickness and distress of persons affected by natural or other kinds of disasters in any part of the world
• the advancement of health or the saving of lives, including without limitation the reduction of maternal and new-born mortality rates in the developing and developed world
• the advancement of education and training in the improvement in conditions of life for the socially and economically disadvantaged generally and young people in particular
• without prejudice to the generality of the foregoing, all other purposes that are exclusively charitable under the law of England and Wales, and such objects shall be achieved in such ways as the charity trustees think fit including but not limited to:
  • the making of grants to charities or other organisations
  • (where it would be more effective) the provision of financial assistance, materials and other suitable resources direct to such persons, bodies, organisations and/or countries affected’

The charity furthered its objects by hosting fundraising events to generate income, which was applied through grants to other charities. These included, as referenced in the charity’s financial accounts – The Save the Children Fund (‘StC’) and the Mayor’s Fund for London (‘MFfL’).

The charity was removed from the Register of Charities on 15 March 2024.

Background Issues under Investigation

The Charity Commission (‘the Commission’) opened a proactive Compliance Visit and Inspection (‘CVI’) case into the charity on 2 September 2020 following a review of information submitted in the charity’s Annual Return for the Financial Year Ending (‘FYE’) 5 April 2018.

As part of that case the Commission identified a range of governance and financial regulatory concerns regarding the charity. The CVI case was closed on 9 March 2021 with the issuing of an Action Plan (‘the Action Plan’) and providing the charity’s trustees with regulatory advice and guidance under section 15(2) of the charities Act (‘the Act’).

The Action Plan set out actions for the trustees to take to address failings in the charity’s governance and management, including recording trustee decision making, to implement partnership agreements, to strengthen the charity’s financial controls, to implement policies on reserves, social media and risk management, and for the trustees to ensure that required annual financial information was submitted on time to the Commission. The deadline for the trustees to respond to all the actions within the Action Plan was 9 September 2021. The trustees only responded to the Action Plan after being prompted to do so by the Commission with a limited response provided on 20 September 2021. The Commission found that the trustees partially complied with the Action Plan.

Following a review of the trustees’ response to the Action Plan, along with other obtained information, the decision was made by the Commission to open a statutory inquiry (‘the Inquiry’) into the charity under section 46 of the Act on 8 November 2021.

The scope of the Inquiry was to examine:

• whether those in control of the charity had properly exercised their legal duties and responsibilities under charity law in the administration of the charity
• the financial management of the charity, including payments made to trustees and the level of charitable expenditure
• the governance and management of the charity by the trustees including the failure to file statutory returns on time
• whether there had been misconduct and/ or mismanagement by those in control of the charity

At the time of the Inquiry, the trustees were recorded as (i) Miss Naomi Campbell (‘Trustee A’) and (ii) Mrs Bianka Hellmich (‘Trustee B’). Prior to the opening of the Inquiry, there was a third trustee, (iii) Mrs Veronica Chou (‘Trustee C’). Trustee C resigned as a trustee on 19 November 2021, following the opening of the Inquiry.

On 8 March 2022, the Inquiry exercised the Commission’s power to appoint Mrs Edwina Turner and Mr Phil Watts of Anthony Collins Solicitors LLP as Interim Managers (‘the IM’) by order under section 76(3)(g) of the Act to the exclusion of the charity’s trustees. The scope of the IM’s appointment – including their findings – is set out in further detail in this report.

Findings

Whether those in control of the charity had properly exercised their legal duties and responsibilities under charity law in the administration of the charity

Failure to comply in full with the Commission’s issued Action Plan

The Inquiry found that the trustees failed to comply in full with an Action Plan issued to them on 9 March 2021, which included certain actions for the trustees to take within a specified period and by no later than 9 September 2021. Some of these actions included evidencing the management of conflicts of interest and providing policies and partnership agreements. The trustees, failed to comply with the Action Plan within the required timeframe. The trustees only responded to the Action Plan after being prompted to do so by the Commission with a limited response provided on 20 September 2021. This response indicated partial compliance by the trustees with the Action Plan.  

On 18 November 2021, the trustees resolved to dissolve the charity upon the conclusion of the Inquiry. The Inquiry found that, given this decision, it would not be proportionate for the trustees to expend time and effort to address the outstanding issues in the Action Plan, particularly as the charity was, in effect not operating at that time. However, the Inquiry found that this decision of the trustees did not displace their failure to fully comply with the Action Plan within the specified timeframes; this failure was mismanagement in the administration of the charity by the trustees.

Failure to comply with the charity’s constitution  

The Inquiry found that prior to the Action Plan no formal meeting minutes were recorded. Following the issuing of the Action Plan, the Inquiry noted that steps were taken to ensure a record was kept, which included decisions recorded via emails.  However, these decisions were not formalised in meeting minutes, save for one meeting. This meeting was held shortly after the opening of the Inquiry on 18 November 2021. The minutes of that meeting outlined that it was in the best interests of the charity to dissolve following the conclusion of the Inquiry.

With the exception of the meeting of 18 November 2021, the trustees had not kept meeting minutes as required by Clause 23 of the charity’s constitution. The trustees also failed to comply with clauses 6 (unauthorised payments made to trustees), 7 (failure to manage conflicts of interest) and 24 (failure to submit accounts and annual returns on time) of the charity’s constitution. Further details are included in this report with regard to these breaches. These failures are evidence of misconduct and/or mismanagement in the charity’s administration by its trustees.

The financial management of the charity, including payments made to trustees and the level of charitable expenditure

Low levels of charitable expenditure

The Inquiry found that the charity’s main period of activity was from 2015-2020. This was prior to the opening of the Inquiry and the impact of the Covid-19 pandemic which resulted in the trustees being unable to hold fundraising events and activities as they had previously done.

The Inquiry noted that between the FYEs 5 April 2016 to 31 July 2022 ^{[footnote 1]} the charity reported a total income of almost £4.8 million and expended almost £4.6 million.

Financial Year Ending	Income	Expenditure	Event charges	Other expenditure	Grants given
31 July 2020	£1,893,038	£1,888,218	£1,181,605	£506,013	£200,600
31 July 2019	£1,722,509	£1,795,934	£1,484,242	£306,177	£5,515
5 April 2018	£610,704	£459,470	£88,898	£187,514	£183,058
5 April 2017	£0.00	£0.00	£0.00	£0.00	£0.00
5 April 2016	£553,547	£531,174	£0.00	£531,174	£0.00
Total:	£4,779,789	£4,579,272	£2,754,745	£1,530,878	£389,173

The Commission asked the trustees to provide a detailed breakdown of the proportion of the charity’s income spent on charitable activities, fundraising and/or governance. Trustee B responded on behalf of the trustees outlining the breakdown of costs covering the period from 2015 to the 31 July 2019 as:

1. Governance and operations 18%
2. Event charges 72%
3. Grants awarded 10%

The Inquiry notes that there is no set level for fundraising costs, either in law or in good practice. This is because there are many factors that affect the levels of costs that can be incurred, including the method of fundraising, the popularity of the cause and the size and profile of the charity conducting the fundraising. Charities should secure the best terms for fundraising activities they can for the charity and be open and transparent about these costs. Trustees must also, so as to demonstrate that they are discharging their legal duties, keep fundraising methods and activities under review and be satisfied that such activities are in their charity’s best interests.

The Inquiry did not see any evidence, from the information provided by the trustees, to show that the trustees had reviewed the charity’s operating model and ascertained whether the costs of the fundraising activities were reasonable and continued to be in the charity’s best interests relative to the profits they generated.

The charity’s expenditure

The Inquiry examined the charity’s financial records that it was able to obtain from a variety of sources, including from the charity’s trustees and their advisors. A review of the financial records identified that the trustees expended €14,800 for a flight on 11 May 2018 from London to Nice. The trustees confirmed that a then trustee and one major donor (unnamed) were boarded on the flight which had been booked for the purposes of transferring art and jewellery (in excess of €1.5m) to the charity’s fundraising event in Cannes. The trustees confirmed that the flight was provided and organised by the family office of a donor, to the charity and included a discount although no evidence was provided to demonstrate that a discount was applied to the cost of the flight. It was confirmed to the Inquiry that, to the trustees’ knowledge they did not hold any supporting records.

The trustees further confirmed that Trustee B recalled acquiring a second quote from a separate supplier, though the trustees were unable to provide supporting documentation to evidence this to the Inquiry. The trustees were unable to evidence their decision-making and how incurring this expenditure was reasonable, appropriate and in the charity’s best interests. Whilst the Inquiry accepts that the transportation of high-value items for the charity’s auction would incur costs, this was a significant expenditure incurred by the charity for which the trustees have retained no records (save for the invoice) which demonstrate why this method and cost of transportation was a reasonable expenditure to incur in the best interests of the charity over other possible alternatives.

The Inquiry questioned the costs of travel and accommodation incurred by the charity relating to its May 2018 fundraising event in Cannes, France. The Inquiry explored with the trustees their decision to pay for Trustee A’s junior suite accommodation at a five-star hotel (‘the hotel’) as recorded in invoices from a firm which the charity used to secure travel arrangements on its behalf. Records obtained by the Inquiry record €9,400 being paid from the charity’s funds for three nights’ accommodation, for Trustee A, at the hotel in May 2018. The Inquiry queried the reasonableness of this level of expenditure – particularly where accommodation secured for the charity’s other trustees and volunteers on this trip was significantly less costly – and the factors taken into consideration when the trustees made their decision and the evidence in support of this decision.

The trustees outlined to the Inquiry that their rationale for choosing the hotel was largely due to the availability of other hotels during the Cannes Film Festival and to mitigate the security costs which the charity would otherwise incur owing to Trustee A’s public profile. The costs of Trustee A’s personal security were referenced as being between €4,000-5,000 for three days of the event, press-conference and follow-up. No quotes or other supporting evidence was provided by the trustees in their response in relation to these asserted costs. The trustees asserted that Trustee A’s stay at the hotel was therefore a more cost-effective choice.

The trustees advised the Inquiry that the usual cost of a junior suite at the hotel was higher than the price paid by the charity. However, no evidence was provided by the trustees in support of this. Similarly, the trustees’ response stated that other guests at the charity’s event were staying at the hotel and therefore this provided Trustee A with an opportunity to meet with those individuals. Lastly, the trustees stated that they were satisfied that a value for money comparison exercise was always undertaken when booking hotels and that the travel company they used always found the best prices and deals available. No records were provided by the trustees to evidence this value for money comparison exercise.

The trustees advised that the hotel costs were typically covered by a donor to the charity (‘the Donor’), who paid to the charity the amount for Trustee A’s hotel stay for the event such that the trustees consider that this was not in practice a cost to the charity. No evidence was provided by the trustees to evidence such payments by the Donor and no corresponding credits to the charity, from the Donor, were identified from the Inquiry’s review of the charity’s financial records. If a donation was made to the charity, it could only have been used on activities which furthered its charitable purposes.

Whilst the Inquiry accepted that the issue of the charity covering the costs of Trustee A’s security is arguable, the trustees have failed to show how these were cost-effective and an appropriate use of the charity’s resources. The Inquiry found this to have been misconduct and/or mismanagement by the charity’s trustees.

Financial controls and management

At the time of the opening of the Inquiry, the charity was inactive and its ability to operate was impacted by the Covid-19 pandemic.

In September 2021, the Inquiry understood the balance of funds held in the name of the charity to be £106,691.74. On 13 January 2022, the Commission authorised a payment of £8,640.00, thereby reducing the known balance to £98,051.74. Various payment requests were subsequently submitted for the Commission to authorise – including for professional (legal) fees and PR services.

The Inquiry found that if these payment requests were authorised, it would have left the charity with a small cash balance (under £1,000). Authorising such payment requests would not have been appropriate given the Inquiry’s concerns that the charity’s liabilities were greater than its available cash balance.  

On 8 November 2021, the Inquiry exercised the Commission’s powers to protect the charity’s known assets (cash balance) from being applied without its prior consent. These orders were revoked on 25 March 2022 and 27 April 2022, following the appointment of the IM.  Further information is provided in relation to this under the ‘Regulatory Action Taken’ section of this report.

The Inquiry found that the trustees failed to manage the charity’s limited resources appropriately and to ensure that there was a sufficient balance to meet the professional fees and charges which the trustees incurred. The Inquiry probed how such professional services were sourced and whether a value for money exercise was undertaken. The trustees confirmed that such exercises had not been undertaken and that the speed with which such services were required was a factor in their decision-making; this has been confirmed in writing to the Inquiry but was not documented at the time by the trustees.

The Inquiry found that the charity’s trustees, did not manage the charity’s finances as they were legally required to, which left it in a position where it was not able to meet its liabilities. The charity also incurred further costs, and the IM had to expend time and resource investigating this matter and in response to a pre-action letter from one of the charity’s creditors seeking repayment for funds that it was owed by the charity.

The charity’s bank account

The Inquiry found that the trustees experienced difficulties in opening and operating a bank account in the charity’s name since it was registered on 19 January 2015. The Inquiry found that one bank account was opened on behalf of the trustees but was never used. As a result of this the trustees did not have direct access to the charity’s funds which put the charity’s assets at risk.

Instead, the charity’s funds were held and applied by regulated professional advisors (solicitors and accountants) on behalf of the charity. There are additional risks to a charity’s funds if they are held and under the control of a third party; consequently, in such situations a charity’s trustees need to ensure that such transactions are sufficiently scrutinised to ensure that their charity’s funds are being used solely on activities which further the charity’s purposes and can be accounted for. The Inquiry obtained information, from one such firm that was instructed by the charity which relates to various transactions made on behalf of the charity until March 2016. As a result of the Inquiry’s information request to the firm, a credit of £50,021.76 was identified as being misapplied and an equivalent amount was subsequently paid by that firm to the IM.  During the Inquiry, further funds of £4,219.39 were identified by the firm and paid to the IM, in total £54,236.15 was identified and recovered for the charity’s benefit.

The Inquiry questioned the trustees about a number of these historic transactions, and they confirmed that they were unable to recall what these specific transactions related to. The trustees confirmed that they held no written records to show how transactions were approved by the firm on behalf of the charity. They added that if such records ever existed or if they still exist (owing to the elapsed time) they would be held by the firm.

The trustees confirmed that they did not recall that any funds were owed or remained outstanding following the closure of the charity’s account with the firm.

The Inquiry found that the trustees could not have been sufficiently diligent in the management of the charity’s financial affairs and transactions at the time that the firm’s services were retained by the charity. This was because the transactions subsequently identified by the firm were not identified or challenged by the trustees at the time.

The Inquiry found this to be misconduct and/or mismanagement by the charity’s trustees.  The repayment of equivalent funds to the charity arising from funds being incorrectly paid from or charged to the charity’s funds held by the firm, only occurred because of the Inquiry’s investigation into payments and transactions undertaken in the name of the charity. Had the Inquiry not reviewed and queried the charity’s historic transactions, the outstanding amount owed to the charity would not have been identified which would have been a loss of funds to the charity. This is particularly relevant given the wider financial mismanagement on the part of the trustees and their failure to manage the charity’s finances to pay the charity’s creditors.

Payments to Trustees

Clause 6.2 of the charity’s constitution relates to benefits and payments to charity trustees and connected persons. It states that no trustee or connected person may (amongst other things) sell goods, services, or any interest in land to the charity or be employed by, or receive any remuneration from, the charity, unless the payment or benefit is permitted by the charity’s constitution or authorised by the court or the Commission.

The Inquiry found from the charity’s accounts that between 31 July 2018 and 31 July 2020, Trustee B received £290,572 ^{[footnote 2]} in consultancy fees (excluding expenses). These payments were not authorised by the Commission, by the Act, the court or otherwise in accordance with the charity’s constitution. Consequently, all such payments were unauthorised and made in breach of trust.

The Inquiry was told that the decision to remunerate Trustee B for provision of services to the charity (as a consultant) was made in 2015 at the time the charity was set up.  Trustees A and B also stated that the trustees had taken professional advice on this issue and had confidence that their professional advisors would inform them of any authorisation or legal issues in relation to payments – none were identified by the professional advisors.

It is the Inquiry’s view that the trustees ought to have been aware of the rules of the charity (as set out in the constitution) as they acknowledged them when signing the trustee declaration form whilst applying to register the charity. Therefore, the trustees were aware of their duty in this regard and ought to have complied with clause 6 of the charity’s constitution. 

Additionally, Trustee B is legally qualified and was being remunerated by the charity, in part, due to her legal experience. As a result, Trustee B ought to have been sufficiently diligent to the legal and regulatory framework in which the charity operated, including the identification and management of conflicts of interest.

On 15 June 2021, the Commission requested information regarding the payments to Trustee B.  In August 2021, the trustees provided a letter dated 27 January 2021. The letter was signed by Trustee A to Trustee B authorising her remuneration from the charity’s funds. The Inquiry found that, in accordance with the charity’s constitution, such payments could not be authorised by the trustees themselves and not retrospectively. The Commission, prior to the opening of the Inquiry, raised with the trustees the issue of Trustee B’s remuneration. The terms of Trustee B’s remuneration – as set out in the letter – were that she “receives remuneration of £150,000 per annum with a 10% of annul (sic) commission of all sponsorships received”. Trustee A’s actions, after the fact, do not address her and the charity’s other trustees’ failings to comply with the charity’s constitution and to act in compliance with their legal duties as trustees.

In correspondence from the trustees both individually and via the charity’s solicitors (since December 2021), there is acknowledgment and recognition that all such payments to Trustee B were unauthorised. The trustees maintain that the services provided by Trustee B were in the charity’s best interests as at that time she was a legal advisor (not acting in the UK) and was responsible for sourcing donations and sponsorships from larger organisations within the fashion industry.

Trustee B outlined that her fees reflected the fact that she had spent a considerable time working for the charity, spent a significant time travelling and was the primary individual dealing with all negotiations. Trustee B further outlined that for the period 2017 to date the amount of expenses and reimbursements was an average of £26,000 per year, which was predominantly travel related.

No evidence was provided by the trustees to demonstrate, that at the time the decision was taken to remunerate Trustee B for services provided to the charity, that a value for money exercise was undertaken or that the services to be provided were documented and articulated.

The Inquiry found that although Trustee B proactively proposed to repay the unauthorised funds (by email on 18 February 2022), it was the IM that finalised this process. The IM, as part of their appointment, negotiated the terms of a restitution agreement and a repayment plan that would be made to the charity by Trustee B, for the unauthorised payments they received. The trustees failed to manage the charity’s finances appropriately and incurred costs and expenditure which exceeded the balance of funds held by the charity. This resulted in the charity not being able to settle its liabilities prior to the repayment of the unauthorised fees.

The Inquiry found that although an agreement was reached by the IM with the trustees for restitution, the repayment plan dates had not been honoured and costs were incurred by the IM to manage the charity’s finances. This included liaising with the charity’s creditors pending sufficient repayment being made to settle the charity’s debts. The Inquiry found that if the trustees had managed the affairs of the charity appropriately, this situation could have been avoided and the charity’s resources better used on activities which furthered its charitable purposes for the public benefit. The Inquiry found that although the trustees failed to repay sums within the specified dates, the full amount was eventually repaid by Trustee B to the charity in April 2023.

The Inquiry found that payments received by Trustee B for the provision of goods and services were unauthorised and made in breach of trust. The Inquiry found this to be further evidence of misconduct and/or mismanagement in the charity’s administration.

Trustee Expenses

The Inquiry identified expenses incurred by Trustee A relating to an event held in the name of the charity in Cannes on 13 May 2018. This included (in addition to the hotel stay) various additional charges incurred by Trustee A, totalling €7,939.75, that were paid for by the charity. These costs included spa treatments, room service, and the purchase of cigarettes and hotel products.  

Clause 5.1.1 of the charity’s constitution states that: “A charity trustee is entitled to be reimbursed from the property of the CIO or may pay out of such property reasonable expenses properly incurred by him or her when acting on behalf of the CIO”.

The Inquiry found that not all of the expenses incurred during Trustee A’s stay were reasonable expenses to be paid for from the charity’s property. Whilst it is reasonable for a charity to meet travel and subsistence costs on the part of trustees, staff and volunteers travelling on a charity’s behalf, such expenditure must be reasonable.

The Inquiry found that not all of Trustee A’s expenses which were paid for on behalf of the charity in May 2018 were reasonable. The Inquiry obtained an invoice for hotel costs, which related to Trustee A’s stay between the 15 May - 25 May 2018. These dates followed the charity’s fundraising gala, held on 13 May 2018.  The Inquiry found that the trustees breached their legal duties (both to comply with the charity’s constitution and their duty of prudence) in respect of these payments, which constitutes misconduct and/or mismanagement in the charity’s administration by the trustees.

The Commission used its information gathering powers to request further explanation and information from the trustees regarding the hotel costs. The trustees provided a copy of the underlying invoice relating to Trustee A’s stay at the hotel. The trustees noted that, to the best of their recollection and understanding, two of the six nights of accommodation recorded in the underlying invoice were considered attributable to the charity’s event with the remaining four nights’ accommodation attributable to other engagements. The trustees explained that hotel costs were typically covered by the Donor, who paid to the charity the amount for Trustee A’s hotel stay for the event, such that the trustees consider that this was not, in practice, a cost to the charity. The trustees provided a copy of an email, dated 27 July 2023, from the travel company used by the charity to book the hotel for Trustee A’s May 2018 stay. In that email, the travel company states that “I can confirm that the hotel rate obtained for FFR during the Cannes event had 20% discount to standard hotel rates at this period…” This email was provided five years after the 2018 Cannes event and provides no information as to what other options were available for the trustees to consider prior to booking the junior suite at the hotel. The invoice from the hotel where the charges for spa treatments, room service, cigarettes and hotel products totalled €7,939.75. This formed part of other financial records from a travel firm, relating to the charity’s 2018 event in Cannes, France. Financial records for the charity showed a corresponding debit (18 June 2018) from the charity’s funds in payment of the travel firm’s invoice. The Inquiry reviewed the charity’s records and was unable to identify a corresponding credit, from the Donor, for these costs.

Trustees A and B told the Inquiry that it was their “firm recollection” that the costs of this trip which did not relate to the charity’s events were met by the Donor. However, they were unable to produce any material to support this assertion. The Inquiry found that the trustees’ failed to provide any evidence in regard to how certain expenditure, incurred by the charity, was part of the 2018 Cannes event and was cost-effective and an appropriate use of the charity’s resources. The Inquiry finds the above failures to be evidence of mismanagement and/or misconduct in the administration of the charity by the trustees.

The governance and management of the charity by the trustees including the failure to file statutory returns on time

The charity’s governance

The Inquiry found that there was significant poor governance within the charity’s management and operation including insufficient due diligence and monitoring for charity partners, lack of evidence of involvement of all trustees in the administration of the charity, and lack of evidence regarding collective trustee decision making.

The Inquiry found that the trustees failed to keep records to record their decision making: this included invoices, receipts, partnership agreements, due diligence checks and meeting minutes. Due to the trustees’ poor record keeping, the Inquiry was required to extensively use its information gathering powers to obtain information from third parties to better understand the decisions made by the trustees. This further highlighted the charity’s poor governance.

The filing of accounts and monitoring

The Inquiry found that the trustees filed the charity’s accounts and annual returns with the Commission late contrary to clause 24.1 of the charity’s constitution and sections 163 and 169 of the Act for the:

• FYE 31 July 2020 (the accounts, trustees annual report (‘TAR’) and annual return were filed up to 235 days late)
• FYE 5 April 2018 (the accounts, TAR and annual return were filed 62 days late)
• FYE 5 April 2017 (the accounts, TAR and annual return were filed 6 days late)
• FYE 5 April 2016 (the accounts, TAR and annual return were filed 121 days late)

It is a criminal offence under section 173 of the Act to fail to file a charity’s annual accounts, annual return or trustees’ annual report within the statutory 10-month deadline. The failure to file the required documents on time is misconduct and/or mismanagement by the trustees. It is the trustees’ legal duty and responsibility to file the charity’s statutory returns on time in accordance with the Act and the constitution. The trustees repeatedly failed to comply with this legal duty.

The charity’s accounts for FYE 31 July 2021 were submitted on time and were uploaded directly by the Commission.  Trustees A and B maintain that they took action to secure the timely filing of the charity’s accounts with the Commission in accordance with their legal duties, but they stated that they encountered a number of problems in their efforts to do so. However, the Inquiry found that the trustees failed to take sufficient action and were ultimately responsible for the late filing of the charity’s accounts.

The IM submitted the charity’s accounts and annual returns to the Commission for the FYE 31 July 2022.

Whether there had been misconduct and/ or mismanagement by those in control of the charity.

As set out in previous sections of this report, the Inquiry has made several findings of misconduct and/or mismanagement in the administration of the charity by its trustees.

Failure to manage partnership arrangements

The charity held fashion gala fundraising events in Cannes on 21 May 2017 and 13 May 2018 where funds were raised for StC. StC received the following payments from the charity:

• $55,000 (£42,323.98) received from a third party on 29 March 2017
• €200,000(£183,037.11) on or about 19 October 2017
• £100,000 on 17 September 2019

The charity held an event at the British Museum on 14 September 2019 where funds were raised for the MFfL. The charity also ran a pop-event at Westfield London from 27 November-8 December 2019 where Trustee A’s clothes were sold, and donations were raised for the MFfL.

MFfL received the following payments from the charity:  

• £50,000 on 29 January 2020
• £14,994 on 22 April 2020
• £35,000 on 4 May 2020

The Inquiry also identified that a one-off donation of £5,514.92 was made to the Italian branch of Unicef on 13 August 2018.

The Inquiry found that the trustees failed to appropriately manage its partnership arrangements. Following the opening of the Inquiry, both StC and MFfL made complaints to the Commission regarding the charity. These complaints were on the basis that the requirements of StC and MFfL partnership arrangements/agreements had not been met. The Inquiry obtained copies of formal and informal partnership arrangements from both StC and MFfL with the charity.

The charity had two partnership arrangements in place with StC – one in 2017 and one in 2018. The charity did not comply with the 2017 agreement with StC, as they failed to provide StC with a statement of income raised from the event within 7 days in accordance with clause 2.2 of Annex A of the 2017 fundraising agreement between the charity and StC.

Correspondence from the charity to StC confirmed that €450,000 were raised at the 2017 event to benefit StC. StC correctly disputed with the charity whether all the proceeds of this event were paid to it in accordance with the agreement. StC confirmed to the Inquiry that it received £183,037.11 (equivalent to €200,000) and a further payment from another organisation of £42,323.98 – totalling £225,361.09. The IM as part of their work identified that StC was a creditor of the charity, and that it was owed £147,000 from funds raised for its benefit but which were not paid to it in 2017. This payment was made by the IM from the charity’s funds on 27 January 2023. The trustees had not complied with the agreement that the charity entered into with StC and failed to address a significant liability of the charity. This matter was only addressed because of the Inquiry and the work of the IM.

Information obtained by the Inquiry from MFfL indicated that it considered it was owed £50,000 by the charity for previous fundraising events held by the charity in September and November 2019 where it was the partner/recipient organisation of the charity. The charity did not have a formal partnership arrangement in place with MFfL which the Inquiry finds contributed to the dispute between it and the charity.

Failing to protect the charity’s work and reputation through formalised partnership arrangements is misconduct and/or mismanagement by trustees. The Inquiry found that the trustees did not comply with the (2017) agreement they entered into with Stc and failed to address a significant liability of the charity. This matter was only eventually resolved because of the Inquiry and the work of the IM. This failure constitutes misconduct and/or mismanagement in the charity’s administration by the trustees.

The IM has, as part of their role, expended resource to determine whether MFfL was a creditor of the charity: this had been necessary because of the failings of trustees to manage the charity’s relationships with charities with which it partners and to maintain records relating to these relationships. A charity’s reputation is an asset and forms part of its property. This failure constitutes mismanagement in the charity’s administration by the trustees.

The IM, through its analysis, determined that there was no contractual obligation to pay MFfL £50,000 but considered that the charity was under a moral obligation to do so based on the expectations of donors to the charity’s events between September – November 2019 in support of MFfL. The IM made donations of £47,111.87 to STC (on 24 October 2023) and £50,000 to MFfL (on 5 October 2023) which constituted the charity’s remaining assets before the charity was dissolved.

Conclusions

The Commission concluded that there had been serious misconduct and/or mismanagement in the administration of the charity by its trustees since it was established.

The charity was poorly governed and managed – included management of its finances. The trustees’ lack of record keeping compounded these issues and required extensive use of the Commission’s information gathering powers to establish facts and obtain records relating to the charity to be able to reach the findings set out in this report.

Regulatory Action Taken

The Inquiry exercised the Commission’s information gathering powers on a number of occasions both to obtain documents and answers to questions from the charity’s trustees and a number of third parties. During the Inquiry information was exchanged with other public authorities under sections 54 to 56 of the Act.

On 8 November 2021, at the time of opening of the Inquiry, an Order was made under section 76(3)(f) of the Act, directing that the trustees should not enter into particular types of financial transactions or payments without the written approval of the Commission. This included any payments to any of the trustees and any transaction which would result in all, or part of the charity’s funds being transferred out of the United Kingdom.

On the same date, an Order was made under section 76(3)(d) of the Act, directing that funds held in name of the charity should not be spent without the prior written approval of the Commission.

On 4 February 2022, an Order was made under section 105 of the Act, authorising the trustees to amend Clause 9.3 of the charity’s constitution to reduce the minimum number of trustees required from three to two. This followed the resignation of one of the charity’s founding trustees.

Interim Manager

On 8 March 2022, Mrs Edwina Turner and Mr Phil Watts, of Anthony Collins Solicitors, were appointed by Order under section 76(3)(g) of the Act to act as the IM of the charity to the exclusion of the trustees. The scope of the IM appointment included taking over the management and administration of the charity which included control of funds held in the charity’s name.  

The IM was discharged on 15 December 2023 under section 337(6) of the Act.  In total, the costs of the IM appointment were £38,256.00 (£31,800 plus VAT).  

Part of the scope of the IM’s appointment was to determine whether expenditure incurred in the name of the charity had been properly incurred and solely for its benefit and to determine whether the charity had sufficient funds to settle its liabilities or was balance-sheet insolvent. The trustees refuted that there was a solvency issue and that the charity’s funds were mismanaged. The IM identified that StC was a creditor of the charity and was owed £145,000-£147,000. The IM confirmed to the Commission on 27 June 2022 that the charity had outstanding liabilities of £155,775 with a cash balance of £98,182.52 leaving a shortfall of £58,000 (this figure excludes the liability to StC from 2017).

Once the charity’s remaining funds were transferred to the IM, the Commission’s orders under 76(3)(d) and 76(3)(f) were no longer needed and were discharged on 25 March 2022 and 27 April 2022.

On 4 April 2022 the trustees via their solicitors, requested an internal review of the decision to make an Order under section 76(3)(g) of the Act to appoint the IM of the charity.  The application included several representations.

These representations were considered by an independent reviewer (‘the Reviewer’) as part of the Commission’s decision review procedure. On 5 August 2022 the Reviewer concluded that the Commission’s decision to make the Order under section 76(3)(g) of the Act was reasonable, proportionate and lawful. The Reviewer concluded that the section 76(3)(g) Order should remain in force without modification unless or until varied or discharged by the Commission (or the Tribunal). This decision represented the final decision of the Commission.

In November-December 2023, the IM prepared a written resolution that the trustees signed, confirming that the charity should be dissolved and authorising the IM to begin the dissolution process. The charity was dissolved and subsequently removed from the Register by application on 15 March 2024.

The Inquiry recovered £344,736.15 and protected a further £98,057.45 of the charity’s funds. 

Donations were made by the IM of £47,111.87 to StC (on 24 October 2023) and £50,000 to MFfL (on 5 October 2023) which constituted the charity’s remaining assets before the charity was dissolved. This is in addition to a payment of £147,000 to StC to settle the outstanding balance the charity owed to it following the 2017 event.

On 28 June 2023 the Inquiry gave formal notification of its intention to disqualify Trustee A and Trustee B under section 181A of the Act. The proposed disqualifications would prevent the trustees from being a charity trustee or trustee for a charity and holding an office or employment with senior management functions in any charity in England and Wales throughout the period of their disqualification.

Written representations were made on behalf of Trustee A and Trustee B via their solicitors on 15 August 2023. Oral representations were made by Trustee B on 1 December 2023. These representations – in addition to other written evidence and representations provided - were considered by an independent reviewer as part of the Commission’s decision review procedure. The outcome of the decision review on 17 April 2024 concluded that the disqualifications of Trustee A and Trustee B were lawful, reasonable and proportionate and that the decision represented the final decision of the Commission.

On 29 May 2024 Orders to disqualify Trustees A and B took effect. Trustee A was disqualified for a period of 5 years; Trustee B was disqualified for a period of 9 years. On 12 August 2024 an Order to disqualify Trustee C took effect. Trustee C was disqualified for a period of 4 years. In accordance with its obligations under section 182 of the Act, the names of Trustees A, B and C were entered onto the Register of Removed Trustees.

Issues for the Wider Sector

Financial Controls:

Trustees must use their charity’s funds and assets in furtherance of the charity’s purposes. This means ensuring the charity funds are used in accordance with the terms of the charity’s governing document and in accordance with the requirements of any contractual obligations.

Every charity needs an effective trustee body which has control over the administration of the charity. Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up.

Proper financial controls are a necessary feature of any well-run organisation. Because of the special characteristics of the charitable sector, they play an essential part in helping to show potential donors and beneficiaries that a charity’s property is safeguarded, and that its management is efficient. Trustees are equally responsible for the overall management and administration of the charity.

Conflicts:

Trustees have a legal duty to act in their charity’s best interests when making decisions as a trustee. If there’s a decision to be made where a trustee has a personal or other interest, this is a conflict of interest, and a trustee won’t be able to comply with their duty unless following certain steps. Conflicts of interest are common in charities – having a conflict of interest doesn’t mean trustees have done something wrong. But trustees need to act to prevent them from interfering with the ability to make a decision only in the best interests of their charity.

A ‘personal benefit’ means a benefit that someone receives from a charity. That ‘someone’ might be an individual or an organisation. Financial benefits might be in the form of cash, grants or other payments. Non-financial benefits or payments in kind might be benefits in the form of goods or services rather than in cash, for example the provision of free accommodation, meals or transport. The law states that trustees cannot receive any benefit from their charity including in return for any service they provide to it unless they have legal authority to do so.

Accounts and trustee compliance:

Trustees of charities are under a legal duty as charity trustees to submit annual updates, returns, annual reports and accounting documents to the Commission as the regulator of charities depending upon the level of the charity’s income. Failure to do so is a criminal offence.

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 are jointly and severally liable for the decision they make. Trustees must act collectively. Trustees who simply defer to the opinions and decisions of others are not fulfilling their duties.

1. The trustees requested, in line with our guidance, that the charity’s Financial Year End date was updated from 5 April to 31 July. This request was accepted by the Commission. ↩

2. FYE 31 July 2020 - £106,572, FYE 31 July 2020 - £77,000, FYE 5 April 2018 - £107,000 ↩