A Lottery-funded military charity exhibited a “fundamental misunderstanding of charity law” that resulted in trustees personally benefitting from charitable funds, a case report published by the Charity Commission said yesterday.

Cornwall-based Surf Action uses surfing to help military veterans with physical and mental wellbeing. It received £363,000 from the Big Lottery Fund in 2013 and a smaller grant of £49,629 in 2010.

Concerns were raised about the charity – formerly known as Combat Surfers – by an employee of the charity who has since moved on.

A Charity Commission investigation found that the charity’s trustees had “poor knowledge of best practice” and that problems resulted from the charity’s change of status from a community interest company (CIC) to a charity.

It said the charity’s "memorandum and articles of association" prevented the directors from receiving remuneration from the charity but a “fundamental misunderstanding of charity law” resulted in the former CIC employees being appointed as directors of the charity.

The regulator said the directors were charity’s legal trustees - a fact they were unaware of - meaning that by drawing a salary from the charity, they were illegally benefitting.

According to the Commission, the individuals concerned had appointed other people to serve as trustees, who by law had no standing.

The Commission said it was “concerned” about the lack of legal understanding at the charity and requested that the directors “immediately cease benefiting privately from their roles in the charity”.

As a result of the regulator's involvement, the directors stood down and the individuals they had previously appointed as trustees took their place. Those individuals subsequently resigned and a new set of trustees was appointed to take the charity forward.

The new trustees have since appointed an operations manager and refocussed the charity’s activities, the Commission said.

The regulator also said it has given the new trustees permission to make changes to the charity’s objectives to better reflect the needs of its beneficiaries.

Surf Action has worked with more than 200 veterans and service personnel since its launch in 2009 and was runner up in the 2011 National Lottery Awards for the best health project.

The charity was approached by Civil Society News for comment but did not respond by the time of going to press.