The former trustees at the Retreat Animal Rescue charity breached their trustee duties, after failing to manage conflicts of interest, the charity regulator found.
The Charity Commission opened a statutory inquiry on 13 November 2019 to examine related party transactions and published its findings last week.
Retreat Animal Rescue lists its charitable objects as being “to relieve the suffering of unwanted, abandoned and neglected animals”.
In November 2018, the charity was placed into the “double defaulter class inquiry”, which looks into those charities which have defaulted on their statutory filing obligations with the Commission on two or more occasions in the last five years.
Retreat Animal Rescue had failed to submit its annual accounts and returns for the years ended August 2016 and August 2017.
This inquiry identified further regulatory concerns “including significant related party transactions” leading the Commission to open a statutory inquiry.
Unauthorised payments to trustee
It found that the charity failed to file on time for five consecutive years.
The regulator also found that the charity had breached its governing document by paying a trustee nearly £3,000 for working at the charity’s café.
The trustee told the Commission that he was unaware of the clauses in the governing document prohibiting any payment to trustees without prior approval from the Commission and has since repaid the money.
“The repayment of the funds does not negate that the payments were unauthorised and should not have been made,” the Commission’s inquiry report says.
There were not enough trustees at the charity and that it failed to manage conflicts of interest, the Commission says.
The charity operated out of two of the trustees' home, which was not charity property.
This property was purchased in September 2012 by two of the trustees and the charity was allowed to occupy the adjoining land rent-free at that point.
To buy the property an individual known to the trustees loaned the money. Three years later the charity received a £200,000 donation from another charity.
The full amount was credited to the charity’s bank account and the amount of £200,000 was then paid to the individual in part payment of the loan.
In September 2017, a 25-year lease was created out of the freehold and granted by those trustees to the charity. The £200,000 that had been paid to the individual was then designated as a pre-payment for the lease from the charity to those trustees for the charity’s use of their land.
The charity was, at the time, without the required number of trustees and therefore could not validly decide to enter into the lease.
The regulator states that it did not receive any documentation showing that those two trustees recognised that there was a conflict of interest when deciding that the charity should lease land from them and that the £200,000 donation should be used to pay off some of the loan secured on their personal property.
“Similarly, there is no evidence that this conflict was effectively managed,” its report states.
The Commission told the trustees that it planned to issue them with an official warning.
One of the trustees then resigned and the charity asked for a review of the Commission's decision. This review concluded that the warning should be made, but it can only be made to current trustees.
There are now five trustees for the charity and the Commission has issued the charity with an action plan to help trustees review the lease arrangement.
The Commission has an open monitoring case to ensure that the charity complies with its instructions.