Decision

Charity Inquiry: Kenya Community Support Network

Published 16 November 2020

This decision was withdrawn on 29 November 2022

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

Applies to England and Wales

The charity

Kenya Community Support Network (‘the charity’) was registered with the Commission on 27 May 2004 and it was governed by a memorandum and articles of association dated 12 February 1999.

The charity was removed from the register of charities on the 2 November 2020 on the basis that it had ceased to exist. The charity’s entry can be found on the register of charities.

Background

In August 2016, the Commission received information from the grant funder Comic Relief (an operating name of the charity known as Charity Projects- registered charity 326568) which raised serious concerns about the use of Comic Relief funds that had been given to the charity.

The allegation, in summary form, was that the charity was being abused by those in control of it, principally its founder Mr Samson Ochieng (‘Mr Ochieng’)- once a trustee but now a volunteer- with funds not being spent in furtherance of the charity’s objects but instead diverted to Mr Ochieng, or entities connected to him. Comic Relief explained that, as a result of its concerns about the charity it had suspended all its grants from being paid to the charity.

The Commission opened a Regulatory Compliance case and undertook a Compliance Visit and Inspection at the charity’s offices on 26 October 2017.

Issues under investigation

Having met with the trustees to explore the concerns raised and being dis-satisfied with the responses received, a formal statutory inquiry (‘the inquiry’) under section 46 of the Charities Act 2011 (‘the Act’) was opened on 22 January 2018.

In order to address the concerns raised, the inquiry examined:

• the financial management of the charity, in particular with regard to its expenditure
• whether there had been any private benefit to the trustees of the charity
• whether the trustees had operated the charity in furtherance of its charitable objects for the public benefit
• whether the trustees had properly exercised their legal duties and responsibilities under charity law in the administration of the charity
• whether there had been misconduct and/ or mismanagement by the trustees

The inquiry closed with the publication of this report.

Findings

The financial management of the charity, in particular with regard to its expenditure

Prior to the opening of the inquiry, Comic Relief instructed a separate charity called Mango (now known as Humentum UK- registered charity 1081406) to conduct an investigation as a result of the concerns it had regarding the charity. Mango provide management accounting for NGOs and states that its mission is ‘to strengthen the financial management and accountability of development and humanitarian NGOs and their partners’. Mango are well placed to assess the financial bona-fides of charities spending funds overseas.

The inquiry found that there was evidence from the work undertaken by Comic Relief and Mango to indicate that there were significant concerns about the charity’s ability to account for its expenditure.

In addition, having obtained the charity’s bank statements under its powers in the Act and having conducted a books and records inspection to test the charity’s record-keeping, bank statement analysis revealed payments to Mr Ochieng and numerous other payments that were inconsistent with what the Commission would expect to see in a charity’s bank account- for example, numerous withdrawals from cash machines and significant expenditure in restaurants.

The Commission sought explanation from the charity and records to demonstrate the same at the Compliance Visit and Inspection undertaken on 26 October 2017. As a result, the Commission’s accountant was able to trace 79% of payments to invoices, although most of this was in relation to marketing activities undertaken by the charity- see further below with regard to the regulatory concerns connected to this.

Payments examined revealed expenditure of £39,500 paid in respect of Mr Ochieng, his wife and his daughter. Mr Ochieng said many of the payments to himself were the reimbursement of expenses he had paid on behalf of the charity when the trustees did not have access to the charity’s bank account on account of the ill-health of its treasurer. However, these reimbursements were generally not supported by third party evidence (such as invoices) that the expenditure had been incurred (or incurred properly). Mr Ochieng advised that he would be able to prove that he had incurred expenditure on behalf of the charity via his personal bank account statements. However, he did not provide this evidence to the inquiry.

In two instances, payments were made from the charity to Mr and Mrs Ochieng’s mortgage account: £6,000 on 18 May 2016 and £2,400 on 25 May 2017. The charity’s trustees and Mr Ochieng were unable to provide a reasonable explanation of why the payments were made to his mortgage account rather than his current account as with other payments.

There were 132 payments, totalling £15,991.07 and 21% of all expenditure (covering financial years 2016/17 and 2017/18), that were not supported by invoices. Many of these payments appeared, from the narrative on the bank statement, to consist of payments to Mr Ochieng, cash withdrawals from the bank and lifestyle spending (shops, restaurants, fuel, mobile phones).

The inquiry issued a section 47 Direction to the trustees on 13 February 2018 to obtain clarity on a range of the remaining transactions. In their response the trustees attempted to account for the charity’s expenditure across 59 transactions but the inquiry found that the trustees were not able to do so in accordance with their legal duties under section 386 of the Companies Act 2006 ^{[footnote 1]}.

Records provided by the charity in response to the section 47 Direction to demonstrate expenditure that could not be evidenced at the 26 October 2017 visit amounted to no more than petty cash counterfoils that could have been completed at any time and gave the inquiry no confidence that the cash they related to was spent in furtherance of the charity’s objects.

Whether there had been any private benefit to the trustees of the charity

Whether the trustees had operated the charity in furtherance of its charitable objects for the public benefit

As set out above, £39,500 of charitable funds had been paid to Mr Ochieng, his wife and daughter. Payments to Mr Ochieng’s wife were explained by the trustees as being paid as part of the delivery of work in connection with some funding from the County Government of Bomet in Kenya which his wife carried out as a consultant on behalf of the charity. It was explained that she was an expert in the area of work and the best person to carry it out (the work being training to farmers in Kenya and marketing services to enable Kenyan grown products such as sweet potatoes to be sold in UK/ EU markets).

Documents provided to the inquiry showed that Mr Ochieng developed this proposal through his contacts in Kenya. Charity trustee meeting minutes did indicate that a declaration of a conflict of interest was made by him before the charity decided to appoint his wife as the consultant for the project. However, no evidence was provided of a genuine and proper open recruitment process to identify the most suitable person to deliver the project on the charity’s behalf.

The inquiry found that Mr Ochieng had treated the charity as a private business, with cash withdrawn as if it were his own, with minimal regard by the trustees to their legal duties and with the charity providing significant financial benefits to him and his family.

In addition, the inquiry found that since Comic Relief stopped funding the charity due to concerns about how funds had been applied, the charity had struggled to have a clearly defined purpose.

At the meeting with the Commission on 26 October 2017, the charity’s attendees explained that the charity was involved in a number of marketing activities on behalf of Kenyan commercial companies operating in the UK. The explanation provided was that these companies were trying to target the Kenyan diaspora in the UK with various products and using the charity’s range of contacts in order to do so. Examples of such companies provided were Western Union, who were using the charity to encourage Kenyans in the UK to send funds ‘back home’ to their families in Kenya.

The charity’s attendees explained that they believed that this activity, and other similar activities, were in furtherance of the charity’s objects, because they encouraged Kenyans in the UK to send money to Kenya, which boosted the Kenyan economy and helped achieve the charity’s objects ‘to relieve poverty, sickness and distress in Kenya’.

However, the trustees had no way to assess this and did not keep any records to demonstrate the tangible benefits that resulted from such work undertaken by the charity. The Commission expressed its concern that such activity appeared to be primarily providing a private benefit to a commercial company with any charitable benefits being incidental, indirect and hard to quantify.

It was also explained that, having found companies with which to enter into marketing ventures, Mr Ochieng was also paid a fee. In the context of the other concerns about payments being made to Mr Ochieng and his family, this added to the inquiry’s overall level of concern about the charity, what it did, and how its trustees, and others, administered the organisation.

Given that it was Mr Ochieng that was driving the charity’s activities forward, the inquiry found that it was he who was directly responsible for the charity undertaking activities that were not in furtherance of the charity’s objects. The inquiry found that no proper consideration had been made to furthering the charity’s objects in anything other an indirect and vague way in the period since Comic Relief ceased its funding. The inquiry found that these activities continued in an attempt to generate an income which was then diverted to key personnel, namely Mr Ochieng and his family.

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

From the evidence reviewed, the inquiry found that Mr Ochieng had been in effective control of the charity since he founded it, including the period he was not a trustee. All decisions made appeared to relate to activities undertaken by Mr Ochieng or his family members. At the Commission’s meeting with the charity, it was apparent that it was Mr Ochieng that was in control of the charity rather than its trustees- he answered the vast majority of questions and provided the charity’s explanations for the decisions made.

It also become apparent that the registered trustees had either (i) not satisfactorily discharged their duties to challenge Mr Ochieng and call his activities to account leading him to effectively manage the charity as a de facto trustee or (ii) had only ever been trustees in name only and had not acted.

The inquiry found that the registered trustees had not properly exercised their legal duties and responsibilities under charity law.

Conclusions

Whether there had been misconduct and/ or mismanagement by the trustees

The Commission concluded that there had been misconduct and/ or mismanagement in the administration of the charity by the trustees, including Mr Ochieng. Primarily, the Commission concluded that this misconduct and/ or mismanagement was due to the conduct of Mr Ochieng, for the reasons explained in this report.

Due to the misconduct and/ or mismanagement by Mr Ochieng the inquiry took regulatory action by disqualifying him from being a trustee or holding any office or employment with senior management functions in any charity for a period of eight years (see below).

The Commission concluded that the wider trustee board’s conduct also amounted to misconduct and/ or mismanagement in the administration of the charity by way of omission and failure to monitor the activities of Mr Ochieng. The other trustees have been warned by the inquiry that any involvement by them in other charities in the future will be closely scrutinised by the Commission.

The other trustees concluded that, in light of the inquiry and its findings, the charity had no viable future and they decided to dissolve it in accordance with its governing document and company law.

However, they were slow to do so and the inquiry instead issued upon them notice of its intention to wind the charity up under section 84B of the Act. Before the notice period was completed, Companies House struck the charitable company from its register of companies on 27 October 2020 due to the trustees failing to file the company’s statutory returns. The charity was removed from the register of charities on 2 November 2020 meaning the public are no longer exposed to a poorly- managed charity.

Regulatory Action Taken

The inquiry exercised its information gathering powers under section 47 of the Act to obtain information from the charity’s bank and from its trustees.

On 12 February 2018, the inquiry froze the charity’s bank account under section 76(3)(d) to protect the charity’s funds- and future funds coming to the charity- from any further abuse or misapplication.

On 13 February 2019, the inquiry issued an Order disqualifying Mr Ochieng under the provisions of section 181A of the Act for a period of eight years with effect from 27 March 2019, subject to appeal.

On 20 March 2019 Mr Ochieng exercised his right to appeal this decision and the First Tier Tribunal (Charity) heard his appeal on 16 December 2019 and 31 January 2020.

On 24 March 2020 the Tribunal published its judgement, upholding the inquiry’s decision to disqualify Mr Ochieng for misconduct and/ or mismanagement in the administration of the charity.

Mr Ochieng was disqualified from being a charity trustee and/ or a trustee for any charity and disqualified from holding any office or employment with senior management functions in any charities from 20 March 2020 for a period of eight years.

On 21 September 2020, the inquiry issued upon the charity’s trustees notice of its intention to wind the charity up under section 84B of the Act. Before the notice period was completed, the charitable company was dissolved at Companies House.

Issues for the wider sector

Every charity needs an effective trustee body which has control over the administration of the charity and acts as a whole, especially because all trustees are equal in responsibility.

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.

The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. Internal Financial Controls for Charities (CC8) is available on the Commission’s website. 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.

Every charity’s accounting records must be sufficient to show and explain its transactions and disclose with reasonable accuracy its financial position.

Trustees have a legal duty to ensure that their charity’s funds are applied solely and reasonably in furtherance of its objects. Therefore, in order to show that they are complying with their legal duties, trustees must keep records and an adequate audit trail to show that the charity’s money has been properly spent on furthering the charity’s purposes for the public benefit.

1. Section 386 of the Companies Act 2006 states: ‘(1) Every company must keep adequate accounting records (2) Adequate accounting records means records that are sufficient (a) to show and explain the company’s transactions (b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time and (c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act’. ↩