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High Court closes children's charity after Charity Commission investigation

Governance | Vibeka Mair | 12 Jan 2012

The Charity Commission has published an inquiry report into the Needy Children International Foundation, which was forced to wind up last year, after Vince Cable called a trial requesting the High Court to close the charity as a result of the Commission’s investigation.

The Charity Commission opened a statutory inquiry into the Needy Children International Foundation in 2007. The charity’s accounts from 2007/08 revealed that only 21 per cent of income was attributed to charitable activities, and more than 63 per cent of that figure was spent on the administrative costs of sending clothing overseas to Africa and Asia.

The Charity Commission was concerned that the charity’s website said it was raising funds to assist youngsters with basic necessities, such as housing, and rehabilitation of ex-offenders, yet less than 8 per cent of the charity’s income was spent on these activities.

During its enquiry, the Charity Commission also received a number of complaints from businesses which had donated to the charity thinking the money would be used for the benefit of young children in the local area, and then discovered that its primary object was for the benefit of young offenders.

The charity’s website featured photographs of young children, which the Commission said could mislead the public as to where the funds went. The trustees said they felt pictures of young offenders would dissuade people from donating.

Further, the Commission’s inquiry found the charity’s trading subsidiary, which carried out its fundraising activities, was using a database of donor businesses that had been purchased from a fundraising company whose director had been convicted of tax fraud in relation to the charity's fundraising activities and its donor database. This database had been impounded by Courts, and the Commission suspected, but was unable to determine whether the Foundation was using the impounded database.

The Commission concluded that there were serious concerns about charity’s fundraising activities and worked with the trustees on implementing a plan of action to improve the charity’s governance.

It also referred its concerns about the charity’s fundraising activities to the Insolvency Service. This resulted in a public interest winding-up petition, under the Insolvency Act 1986, being presented against the charity in the High Court, by Vince Cable, Secretary of State for Business, Innovation and Skills.

The grounds of the petition included that the charity had been operating contrary to the public interest in that its activities had been conducted in a manner likely to mislead prospective donors.

At the hearing, in May of last year, the High Court ordered that the charity be wound up. As a consequence the Commission removed the charity from its register.

A Commission spokeswoman said: “The report highlights a number of issues for the wider sector, particularly the need for trustees to manage and control fundraising effectively, efficiently and economically.

"Although charities using professional fundraisers are legally required to enter into a fundraising agreement, this requirement does not extend to fundraising by another charity or a company connected to a charity.

"Nevertheless, the Charity Commission recommends as a matter of good practice that charities in this position do enter into an agreement and adopt these requirements.”

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