Funds were misappropriated when a trustee took over sole control of a charity, according to a Charity Commission inquiry.
The inquiry into Cavalier King Charles Spaniel Rescue & Welfare was launched after the Commission received a complaint from the executor of a will concerning a legacy of £382,460 that had been left to the charity in 2005 and had not been recorded in the charity’s accounts.
The inquiry found that while there were three trustees, only one of the trustees (the founder) was in control of the charity’s finances, and that the funds had been misappropriated for personal benefit after the other trustees moved away and the founding trustee effectively took over the sole control of the charity and its affairs.
In fact, two legacies of £382,460 and £44,957 had been placed in several bank accounts held in the name of the founding trustee and a second person who was not a trustee. The inquiry also established that part of the donations were used to invest in properties not owned by the charity.
Under the Charities Act 2011, the Commission froze six bank accounts where the funds had been moved to, which enabled it to protect £378,000 of the money. The other trustees then took steps to recover a substantial amount of the misappropriated funds from the founder, while the inquiry also saw the Commission refer its concerns and evidence to the police.
The regulator found that the actions of the founding trustee amounted to misconduct and mismanagement in the administration of the charity. The other trustees had also failed to adequately and fully discharge their duties as charity trustees.
However, in the report, the Commission acknowledges that the charity is now back on track after the other trustees acted to address its regulatory concerns. The trustees took control of the charity and its finances, recruited additional trustees and sought legal assistance, which enabled them to recover a substantial amount of the misappropriated funds. Around £300,000 has been recovered, with assurances that a further £120,000 has been repaid by the founding trustee.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said:
“All trustees share the same duties and responsibilities and must not let one trustee have sole control of the charity’s funds and activities. This is a shocking case where donors’ legacies were misappropriated and abused for private gain. Our regulatory guidance makes clear that it is trustees who are under a duty wherever possible to recover charity funds that have been misappropriated and this is what happened here.”
The Commission’s policy on restitution and recovery of charitable funds lost to charity in breach of trust is available on its website, along with The Essential Trustee: What you need to know (CC3) which is published on the Commission’s website.