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1. About the charity
The charity, Surrey Canal Sports Foundation Limited was registered with the Commission on the 10 May 2011. The charity was set up to build and run a £40M, 15,000 square metre state-of-the-art indoor sports centre (‘Energize’) in Inner London. Energize is part of the larger New Bermondsey regeneration, led by developers Renewal, in the London Borough of Lewisham.
The charity’s objects are for the promotion of community participation in healthy recreation in particular by the provision of facilities for the playing of cricket, basketball, netball, hockey, badminton, table tennis, boxing, football and gymnastics amongst other sports. The charity currently operates the temporary sports facility the ‘Thunderdome’ situated within the New Bermondsey development site.
2. Why the Charity Commission got involved
We were contacted by a member of the public with the following concerns about the charity in early January 2017. The individual was concerned that:
- the charity was a vehicle for money laundering and/or tax avoidance
- there were conflicts of interest in the charity’s decision making, and links between the charity, a developer and local officials
- the charity’s income was low, while its expenditure was high
- that the charity had failed to achieve its stated aims
Following receipt of those initial concerns, we were contacted by a media organisation, which asked about an “inaccurate claim [by the charity] of a £2m funding agreement with Sport England”.
3. The action we took
Due to the significant risks regarding the charity’s accounts, and allegations that the charity was involved with money laundering and tax avoidance, we immediately assessed these concerns against data we held via the charity’s accounts. This assessment identified a need for further information.
We opened a case to look at the regulatory concerns we had identified and contacted the charity’s trustees to ask them to:
- explain the relationship to Renewal and how the charity’s independence is maintained given that Renewal is the charity’s main funder
- respond to the allegation that the charity has claimed that Sport England had agreed to give a grant to the charity
- explain how the trustees see the future of the charity if the proposed compulsory purchase order process required for the wider scheme does not go ahead
We also contacted Sport England.
4. What we found
The charity was the subject of reports in the media, which focused on its role in the development scheme, its independence and how the project would be funded. We examined the media coverage as part of our case. We spoke to the charity’s trustees and also reviewed their formal response to our questions.
Whether the charity was a vehicle for money laundering and/or tax avoidance
Following an in-depth analysis of accounts and records we found no evidence of money laundering or tax avoidance. We also reviewed the charity’s accounts against the charity accounting standards and found them to be compliant.
Whether there were conflicts of interest in the charity’s decision making, and links between the charity, a developer and local officials
The planned sports centre that the charity is seeking to operate is part of a planned major 30 acre development of 2400 homes (formerly called Surrey Canal and now called New Bermondsey), located in the Borough of Lewisham. It will be necessary for the council to use compulsory purchase powers, to ensure the development goes ahead which may make the development controversial.
The charity explained the background to the creation of the charity, and the role the charity played in the overall development. The charity explained that one of the charity’s trustees was employed by the development company Renewal but that none of the other trustees had any connection to the developer; all were therefore independent of the development company. The charity recognised that the support from the developer Renewal was important for the successful delivery of the project, but once the development is completed the sports centre will be operated by the charity. We did not identify any concerns with the way the charity was managing conflicts of interest.
Whether the allegation that the charity was being misleading regarding a funding agreement with Sport England was correct
The charity confirmed to us that it had not made representations that there was a funding agreement with Sport England in place, and that it was fully acknowledged that the support of Sport England was subject to the satisfaction of numerous conditions before it would become a binding funding agreement. The charity acknowledged that the commitment of Sport England had been referred to as a pledge, but explained that this was done in good faith without any intention to mislead, and the terminology reflected that used by Lewisham Council, which had also made a commitment of £500,000 towards the construction of Energize, which was equally subject to conditions.
The Commission received differing accounts as to the nature of the financial support from Sport England and the charity.
However, it accepts that the charity’s statements about Sport England’s support were made in good faith and did not have the intention to mislead.
The low income/high expenditure of the charity and that the charity had failed to achieve its stated aims of operating the sports centre
Our assessment identified that the sports centre being built is reliant upon the development going ahead and the support from Renewal. In the meantime, the charity is encouraging growing sports participation in the Borough of Lewisham, including supporting London Thunder Basketball Club and Fusion Table Tennis Club, operating from the Thunderdome facilities. It has no income.
The trustees are aware of the charity’s reliance on the development going ahead to realise the charity’s plans. They stated that they are confident that the planned development would go ahead in some form.
The trustees explained that, although the charity was funded through debt, the loans are interest-free and will be repaid solely at the discretion of the trustees when the charity has surplus funds. It has been operating this since it was founded using funds loaned to the charity from the developer Renewal.
5. Our conclusions
We considered that the charity had addressed our regulatory concerns and demonstrated that it was acting independently, we had no ongoing concerns about the funding of the charity. We closed our case in March 2017.
6. The impact of our involvement
Our case has focused on those issues raised that are within our regulatory remit.
We have not examined the merits of the development scheme that fall outside of our regulatory remit; such as the merits of the development scheme and the relationship between the development and the local authority.
The Commission is able to provide public assurance that that the charity is operating in compliance with charity law.
We have ensured the trustees are clear that they need to continue to ensure that the charity is independent and that any decisions are made in the best interests of the charity.
7. Lessons for other charities
The trustees in this case cooperated fully with the regulator. Charities can attract considerable public scrutiny where they are involved with decisions that are unpopular or controversial.
The public expect that charities and trustees should be as open and transparent as possible regarding the decisions they make. It is especially important where there may be an impression that individuals have conflicts of loyalty that trustees always act in the best interests of their charity. They must identify, avoid or manage, and account for conflicts of interest as set out in our guidance Conflicts of interest: a guide for charity trustees (CC29).
The key to making the right decisions (and being able to defend them) as a trustee is knowing your role and responsibilities. Our guidance ‘The essential trustee’ breaks these down into 6 areas:
- ensure your charity is carrying out its purposes for the public benefit
- comply with your charity’s governing document and the law
- act in your charity’s best interests
- manage your charity’s resources responsibly
- act with reasonable care and skill
- ensure your charity is accountable
More information is available in our guidance: The essential trustee: what you need to know, what you need to do (CC3).