Decision

Cylch Meithrin Trelai

Published 18 April 2017

This decision was withdrawn on 15 October 2019

This inquiry report has been archived because it is over 2 years old.

Applies to England and Wales

• Publication for Northern Ireland
• Publication for Scotland

A statement of the results of the class inquiry into double defaulter charities in particular Cylch Meithrin Trelai (registered charity number 1063165) (‘the charity’).

Published on 18 April 2017.

The class inquiry

On 20 September 2013, the Charity Commission (‘the Commission’) opened a statutory class inquiry (‘the inquiry’) into charities that were in default of their statutory obligations to meet reporting requirements by failing to file their annual documents for 2 or more years in the last 5 years and met certain criteria, including that:

• the charities were recently (or in the case of charities that would become part of it in due course, would be) given final warnings to comply by a specified date
• on the day after the specified date they were still in default (partially or otherwise)

At the point a charity met the criteria they would become part of the inquiry. Charities that have been identified for inclusion in the class inquiry have a last known annual income of at least £150,000.

The charity

Cylch Meithrin Trelai was registered on 1 July 1997. It is an unincorporated association governed by a constitution adopted 31 May 1997.

The charity’s object is to advance the education of pre-school children in Ely through the medium of the Welsh language.

More details about the charity are available on the register of charities (‘the register’).

Issues under investigation

The charity had failed to submit its annual accounts, reports and annual returns to the Commission for the financial years ending 31 March 2014 and 2015 within the statutory deadlines. During the whole period of default, the charity was sent various computer generated reminders from the Commission regarding the submission of their annual accounting documents. Although reminders were sent the charity remained in default of its obligations under the Charities Act 2011 (‘the act’).

In addition, a final warning letter was issued on the 8 August 2016 requesting that the missing documents be provided by 14 September 2016, and warning the charity that if it remained in default it would become part of the inquiry. The charity became part of the inquiry on 15 September 2016 because it failed to supply the outstanding annual accounting information by the deadline.

The inquiry is confined to dealing with the trustees’ mismanagement and misconduct^{[footnote 1]} and remedying the non-compliance in connection with the annual accounting documents.

On 17 October 2016 the trustees submitted the annual accounts and reports for the financial years ending 31 March 2014 and 2015 to the inquiry. However the submitted annual accounts were found by the Commission not to fully comply with the Charities Statement of Recommended Practice 2005 (‘the SORP’), in that the submitted accounts were not prepared in the appropriate accounting format, and Trustees Annual Reports (‘TAR’) were not prepared as required under SORP. The inquiry instructed the trustees to re-submit the annual accounts and reports to correct this issue.

The corrected annual accounts and reports were re-submitted by the trustees on 20 January 2017, which were referred for scrutiny by the Commission’s accountants. No issues were identified following the scrutiny of the re-submitted accounts.

A charity representative informed the Commission that the reason for not complying with their statutory accounting requirements was due to the charity having previously relied on its umbrella body to complete the accounting information on its behalf. After the umbrella body ceased providing the service to the charity, delays were incurred while arrangements were made to appoint a new accountant to complete the work. This does not excuse the failure of the trustees to fulfil their statutory obligations, as they have the overall responsibility for submitting accounting information to the Commission on time.

Conclusions

The charity’s trustees were in default of their legal obligations to file accounting information with the Commission. This was mismanagement and misconduct in the administration of the charity and a breach of their legal duties.

As a result of the inquiry, the Commission ensured the charity complied with its legal obligations to submit their corrected annual accounting information. Two sets of accounts were filed and as a result £415,306 of charitable income is now transparently and publicly accounted for on the register.

The charity ceased to be part of the inquiry when it was no longer in default of its accounting obligations. This happened on 20 January 2017 when the charity filed the last missing documents.

Regulatory action taken

The Commission used its information gathering powers under section 52 of the act to order and obtain bank records and financial information of the charity relating to the missing years accounts. These will be used in connection with the Commission’s scrutiny of the accounts.

On 27 September 2016 the inquiry exercised powers under section 84 of the act to direct the trustees to prepare and complete the relevant missing annual accounts, reports and returns for the charity and provide copies of these to the Commission.

The Commission provided regulatory advice and guidance about the trustees’ duty to file the charity’s annual accounting information.

Issues for the wider sector

Trustees of charities with an income of over £25,000 are under a legal duty as charity trustees to submit annual returns, annual reports and accounting documents to the Commission as the regulator of charities. Even if the charity’s annual income is not greater than £25,000 trustees are under a legal duty to prepare annual accounts and reports and should be able to provide these on request. All charities with an income over £10,000 must submit an annual return.

Failure to submit accounts and accompanying documents to the Commission is a criminal offence. The Commission also regards it as mismanagement and misconduct in the administration of the charity.

Trustees are expected to follow the requirements and recommendations in the relevant Charities SORP^{[footnote 2]} when preparing annual reports and accounts, except where an alternative reporting framework applies to their charity. A charity’s annual report and accounts should not be viewed simply as a statutory requirement or a technical exercise. The report and accounts, when read together, should help users of the information to understand what the charity is set up to do, the resources available to it, how these resources have been used and what has been achieved as a result of its activities.

1. The terms misconduct and mismanagement are taken from section 76 of the act. Misconduct includes any act (or failure to act) in the administration of the charity which the person committing it knew (or ought to have known) was criminal, unlawful or improper. Mismanagement includes any act (or failure to act) in the administration of the charity that may result in significant charitable resources being misused or the people who benefit from the charity being put at risk. A charity’s reputation may be regarded as property of the charity. ↩

2. The SORP provides a framework for charities to report their activities, income and expenditure and financial position in their annual report and accounts. ↩