The Charity Commission is considering taking legal action in two cases of money loaned by a charity to trustees, in order to get back the funds.
Both organisations, which the Commission will not name, are under a statutory inquiry. The cases were mentioned by Michelle Russell, head of investigations and compliance at the Charity Commission, yesterday at its open board meeting in Bristol.
She complained of seeing conflict-of-issues in charities where loans were made to trustees and the charity did not have an adequate audit trail.
“The charity trustee minutes while discussing the loan do not exist, or meetings went ahead without even discussing the loan,” she said. “A record of trustee decision-making is key.”
She added that trustees should get independent advice, as though it was not a legal requirement, it was good practice.
“In my experience loans given by charities to trustees are often for long periods, not reviewed, there is no written loan agreement to protect the charity’s position, it’s all on trust. Sometimes they are unsecured loans. There can also be tax implications.”
Russell said HMRC was telling them about instances where loans were made to trustees, and there were tax implications.
She added that the Commission had two live inquiries where it was trying to get trustees to repay money from charity loans due to conflict-of-interest issues, and it would take legal action if necessary.
The Charity Commission’s open board meeting had a dedicated session to conflicts of interest, where Nick Mott, head of policy development guidance and review, announced that the regulator would be releasing new guidance on the issue in the spring.
Russell also warned the audience that the Commission’s next wave of class inquiries is to start very soon – the Commission is currently opening inquiries into charities which have not filed accounts for the last two years.
Commission 'will review more accounts'
Also speaking at the meeting, Sam Younger, chief executive of the Charity Commission, reiterated that the Commission will be taking a tougher stance, and have more of a focus on its core regulatory activity.
Younger pledged that the regulator will significantly increase the number of charities whose accounts it reviews and use data it collects to better target its enforcement work.
In 2012/13, the Commission reviewed accounts representing 1.7 per cent of charities on its register and 6.5 per cent of total income.
Younger also warned that the Commission would likely make job cuts as a result of further budget cuts, and suggested that the Commission’s statutory remit would have to be narrowed to cope with fewer resources.
As well as new guidance on conflicts of interest in the spring, the Charity Commission will be releasing new guidance on consents for the transfer of non-financial assets on incorporation, in the summer.
