Decision

Charity inquiry: The Cowesby Trust

Published 11 July 2023

Applies to England and Wales

The charity

The Cowesby Trust (‘the charity’) was registered with the Commission on 12 August 1963.

The objects of the charity are: to relieve either generally or individually persons resident in the parish of Cowesby or in any neighbouring parish who are in conditions of need, hardship or distress.

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

Background

On 3 February 2016, the Commission received a report from North Yorkshire Police relating to suspicious activity in the charity’s bank account. At this time the Commission’s records indicated the charity had only one trustee, Mr Morgan-Williams. The Commission used its information gathering powers to obtain information relating to the charity’s bank account that indicated:

• several payments totalling £48,000 had been transferred from the charity’s bank account to an account which appeared to be linked to Mr Morgan-Williams between 23 May 2014 and 19 February 2016
• payment of £69,500 to a company specialising in the sale of antique clocks

The Commission opened a statutory inquiry (‘the Inquiry’) into the charity, under section 46 of the Charities Act 2011 (‘the Act’) on 20 October 2016.

The Inquiry was closed with the publication of this report.

Issues under investigation

The Inquiry examined:

• the financial controls, management and application of charitable funds, property and assets belonging to the charity
• whether the charity’s objects were being met and the charity was operating for the public benefit
• the administration, governance, management and administration of the Charity by the trustees, particularly whether the trustees have acted prudently and exercised reasonable care in respect of the day-to-day running of the Charity and whether there has been any misconduct and/or mismanagement by the trustees in the administration of the charity

Findings

The financial controls, management and application of charitable funds, property and assets belonging to the charity

The Inquiry met with Mr Morgan-Williams on 24 March 2017 (‘the meeting’) and queried why he had received payments from the charity. He explained that the renovation of a cottage that he owned had been funded by three ‘loans’ from the charity totalling £110,000.

The Inquiry found no evidence to demonstrate that anyone aside from Mr Morgan-Williams was involved in the decision to make loan payments to Mr Morgan-Williams or how this unsecured investment was in the best interests of the charity.

The Inquiry found that in total, Mr Morgan-Williams received £121,718 from the charity during the period 30 March 2012 to 19 May 2016.

There was no evidence in the charity’s records, in particular in the form of trustee meeting minutes, of loans being made to Mr Morgan-Williams. During a books and records inspection conducted on 20 June 2017 (‘the inspection’), Mr Morgan-Williams provided a copy of an agreement from June 2009, detailing that money would be lent to him and that he would underwrite the investment. However, this document did not explain the amount of money to be invested, what the repayment schedule would be, nor the interest rate. Furthermore, it did not explain why the investment would be in the charity’s best interests. At the time of the inspection, there was no evidence of any loan repayments being made by Mr Morgan-Williams. However, reference to loan payments were documented in the charity’s accounts which were subsequently provided to the Inquiry. Due to the charity’s income falling below the threshold for accounts submission there was no legal requirement for them to be submitted annually to the Commission.

Mr Morgan-Williams advised at the meeting that his property had been put up for sale, which would enable him to repay the ‘loan’ to the charity with interest.

In addition, the Inquiry found that Mr Morgan-Williams had used £69,500 of the charity’s funds to purchase two antique Mulberry longcase clocks (‘the clocks’). During the inspection, the Inquiry found that the clocks were in use at Mr Morgan-Williams’ residential address. The Inquiry established that the clocks had not been insured by the charity but instead had been listed on Mr Morgan-Williams personal home contents insurance policy.

Mr Morgan-Williams stated that he had purchased the clocks as an investment for the charity. Whilst the investments did appear in the Charity’s accounts that were first provided to the Commission at the Inspection, the Inquiry saw no documentation during the Inspection that recorded the decision to purchase the clocks or any independent expert advice which confirmed the purchase was a good investment for the charity to enter into. In response to an order made under s84 of the Act, the newly appointed independent trustees who were in post at the time, were ordered to take custody of the clocks, removing them from Mr Morgan-Williams’ residence on 8 February 2018. The trustees then made the decision to dispose of the clocks at auction. They were subsequently sold on 17 March 2018 for a total of £26,000, representing a loss of £43,500 to the charity.

Mr Morgan-Williams personally benefitted from the ‘loan’ to renovate his property, that he received from the charity. In addition, the purchase of the clocks represented a material benefit as he had sole use and enjoyment of these valuable clocks at his home. This was misconduct and/or mismanagement in the administration of the charity.

On 16 April 2020, the charity received £136,039.79 from Mr Morgan-Williams in full and final settlement of the sums he owed to the charity.

Whether the charity’s objects are being met and the charity is operating for the public benefit

The Inquiry examined the charity’s accounts from 2009 to 2016. These accounts reflect that throughout this period the charity did not expend any funds in furtherance of its objects, and there was no evidence that the charity had operated for the public benefit. The charity’s only expenditure during this period benefited Mr Morgan-Williams. This was misconduct and/or mismanagement in the administration of the charity as trustees are under a legal duty to ensure that their charity’s funds are applied in furtherance of its objects.

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

At the meeting, Mr Morgan-Williams confirmed that he had acted as sole trustee of the charity since 2008, despite the charity’s governing document requiring three trustees. This was misconduct and/or mismanagement in the administration of the charity as trustees must comply with the requirements of the charity’s governing document. In the absence of the minimum number of trustees, Mr Morgan-Williams was unable to make quorate decisions or manage conflicts of interest, therefore the payments to renovate his property and the purchase of antique clocks from charitable funds were made in breach of trust.

After the Inquiry was opened, two trustees were appointed on 4 April 2017, they have since resigned. On 11 October 2018 further trustees were appointed and these individuals are now responsible for the management and administration of the charity. The charity now has the minimum number of trustees required by its governing document.

Conclusions

The Commission concluded that Mr Morgan-Williams had been acting as sole trustee in contravention of the charity’s governing document for a period of at least 9 years. This enabled him to act unilaterally and without scrutiny. During this period there was no evidence of charitable activity and the only person to benefit from the charity was Mr Morgan-Williams. His decisions to use over £100,000 to renovate his personal property and to use the charity’s funds to purchase antique clocks which he subsequently had sole use and enjoyment of was in breach of trust and not in the charity’s best interests. Mr Morgan-Williams was responsible for serious misconduct and/or mismanagement in the administration of the charity. The Commission subsequently disqualified him from acting as a trustee of any charity and from holding an office or employment with senior management functions in charities generally for 10 years, from 31 August 2018.

Regulatory action taken

On 27 October 2016, the Inquiry made orders under section 76(3)(d) of the Act, to the charity’s two banks, not to part with the charity’s property without the approval of the Commission. These orders were revoked on 8 June 2018 and 8 May 2019.

The Inquiry used its information gathering powers under section 47 and section 52 of the Act to various organisations and individuals.

On 13 July 2017, the Inquiry directed the then trustees of the charity, by making an order under section 84 of the Act, to take action to address the risks to the charity’s property, particularly with regards to the purported loan and antique clocks.

On 30 June 2017, the Inquiry used its temporary and protective powers under section 76(3)(a) of the Act to suspend Mr Morgan-Williams from being a trustee. This order was revoked on 24 May 2018 following Mr Morgan-Williams’ resignation from the charity.

On 31 August 2018, the Inquiry used its discretionary disqualification powers, under section 181A of the Act, to disqualify Mr Morgan-Williams from being a charity trustee or a trustee of a charity and/or holding an office or employment with senior management functions in charities generally for 10 years.

Issues for the wider sector

All charities must have an effective trustee body to control and administer the charity in accordance with a charity’s own governing document, charity law and Commission guidance. An effective charity is run by a properly appointed, clearly identifiable board or trustee body with the minimum number of trustees, as required by its governing document.

Trustees have a legal duty to act only in the best interests of their charity and for ensuring its funds are used properly for legitimate charitable purposes. If there is a decision to be made where a trustee has a personal or other interest, there is a conflict of interest and trustees won’t be able to comply with their duty unless certain steps are followed. Trustees must actively manage any conflicts of interest, and it is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees.

Charity trustees have a general duty to manage their charity’s resources responsibly, reasonably and honestly. This means not exposing their charity’s assets or reputation to undue risk. It is about exercising sound judgement and then taking decisions that a reasonable body of trustees would do. Trustees must put appropriate policies, procedures and safeguards in place and take all reasonable steps to ensure that these are followed.

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. 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.