The Charity Commission has criticised trustees of Afghan Heroes, which received only 20% of £3.5m donated by the public through a commercial partner.
An inquiry report published yesterday found that the two founding trustees, who have both now died, mismanaged the charity and that its fundraising activity was not compliant with regulations.
The military charity was wound-up and removed from the register in 2020 after a six-year investigation.
The Commission opened a statutory inquiry in November 2013 after concerns about unmanaged conflicts of interest, unauthorised trustee benefits and financial mismanagement. Trustees were removed in 2015 and an interim manager was appointed.
Conservative MP and former international trade secretary Liam Fox was a patron until December 2013. He stood down citing a “breakdown in trust” after the charity failed to inform him that it was being investigated by the Commission.
The Commission criticised the charity’s relationship with Prize Promotions Limited (PPL), which raised about £3.5m for the charity from the public, but only passed on 20%.
It said there were no written agreements between the two organisations and that the company did not tell donors how much would go to the charity so it “did not comply with fundraising regulations”.
In 2012, Afghan Heroes decided to set up a network of pubs to fund its work as well as provide support to veterans. But it lost significant sums of money in loans to trading subsidiaries and did not seek appropriate advice.
Partnership with Prize Promotions
In 2012, Afghan Heroes started working with PPL which operated a prize draw in the charity’s name with a percentage of the proceeds given to the charity.
The Commission’s report says that it considers the company to be a “professional fundraiser” and therefore needed to have a written agreement in place, but that the company said it was acting as a “fundraising consultant”.
The report criticised trustees for not properly overseeing PPL’s activities. It concludes: “The trustees were unable to demonstrate to the inquiry that they actively managed the reputational risks arising from the fundraising activities or that they ensured that the charity complied with relevant laws applicable to fundraising.”
When the interim manager was appointed, they ended the relationship with PPL. PPL then went into administration.
The interim manager had tried to recover £2.9m from PPL but “was ultimately not successful”.
Retreats for veterans
Afghan Heroes launched in 2009. In 2012, trustees decided to offer retreats for veterans and trustees aimed to fund the retreats by running a network of pubs.
The pubs in its network were also expected to provide support to veterans.
However, the Commission is concerned that the trustees had not taken enough advice, or properly thought through their model.
“The inquiry questions the efficacy of the care and support provided to the charity’s beneficiaries,” the report says. “Whilst appearing to be well meaning, the inquiry found that the trustees gave insufficient regard to the complexity of providing successful support to veterans and the risks associated with providing such facilities in close proximity to the supply of alcohol.”
By setting up trading subsidiaries to manage the pub network the trustees also created a complex financial arrangements and lost money when things did not work out.
The charity lost around £337,000 through poorly managed financial transactions with its subsidiary company and third parties. This included £185,000 lost through loans to a trading subsidiary that purchased a lease for a pub in Ashcott that did not prove profitable.
The charity also lost £40,000 in loans to another trading subsidiary to refurbish a pub in Minehead, in which the charity had no legal interest. It later transpired that the premises could not be used to house veterans.
Trustees also received unauthorised benefits from their involvement. Unmanaged conflicts of interest meant that companies run by trustees were carrying out professional services for the charity.
The Commission estimates that unauthorised remuneration was nearly £350,000.
‘Lack of understanding led to significant loss of charity funds’
The Commission concluded that it was a lack of understanding about how to run the charity that led to its problems.
Amy Spiller, head of investigations at the Charity Commission, said: “Afghan Heroes launched with significant support and the goodwill of people in Somerset and around the country.
“Unfortunately, the trustees lacked the understanding or expertise required to run a charity effectively. They mismanaged the charity, including by receiving personal benefits they were not entitled to. They effectively caused the loss of very significant amounts of charitable funds that should have been spent to support veterans with complex needs.”
The report highlights how PPL’s approach had let to complaints from members of the public.
Spiller added: “We understand why those who supported this charity feel angry and let down at the waste and incompetence presided over by the trustees.
“I hope others considering setting up a new charity learn from this case, and ensure they bring on board the expertise and competence required to run a charity lawfully and effectively.”