A charity backed by the boy band One Direction has closed after the regulator found that its trustees could not account for thousands of pounds in donations.
Believe in Magic had enjoyed the support of members of One Direction, who were reported to have helped the charity raise £5m by promoting its work and giving donors the chance to win tickets to their shows.
The charity was established in 2012 to provide seriously ill children and their families with support and gifts.
£150,000 unaccounted for
A statutory inquiry by the Charity Commission, completed this week, found that hundreds of thousands of pounds of the charity’s money had been transferred into the personal bank account of a trustee, with further large cash withdrawals from the charity’s bank account.
Although receipts confirmed “considerable spending within the objects of the charity”, trustees could not provide receipts for nearly £150,000 of spending, the Charity Commission said.
Charity cash moved to personal account
The statutory inquiry was opened after the charity’s trustees did not cooperate with an earlier compliance case in 2017, which was established to investigate potential private benefit to trustees and the late filing of financial accounts.
The Charity Commission acknowledged that one trustee was unwell and another had caring responsibilities, but said that it was reasonable to expect the other two trustees to work together and provide the regulator with the information it requested.
When that did not happen, the Commission froze the charity's bank accounts.
According to a statement, the Charity Commission inquiry “found that the four trustees were closely related and three of them appeared on the charity’s bank account mandate. However, the trustees had elected that only one signature was required to use unlimited charity funds.”
The statement adds that, between December 2015 and May 2016, “£108,786 had been electronically transferred to accounts in the name of a trustee”. There were also cash withdrawals from the charity’s account worth £133,000 in the financial year ending 4 November 2015 and £156,000 in the financial year ending 4 November 2016.
Charity Commission: 'Impossible to establish' how some money was used
The trustees told the inquiry that they needed to use cash because the charity had not been able to obtain a debit card for the type of bank account it held. In addition, because cash payments were not always accepted, they needed to use the bank cards associated with personal accounts for charity business.
The Charity Commission said: “The inquiry found the large cash withdrawals, mixing charity funds with personal funds, and poor record keeping in respect of this, made it impossible to establish whether all of the cash withdrawn and/or transferred had been used within the charity’s objects.”
Members of the boyband One Direction were active in raising money for the charity and promoted its work to their fans on a number of occasions.
Transfer of funds
The regulator found that there had been misconduct or mismanagement in administration of the charity, and ordered it be dissolved. Its remaining funds were transferred to Round Table Children’s Wish in March.
The police undertook a criminal investigation but did not proceed because of insufficient evidence, the regulator said.
The Charity Commission said one trustee voluntarily undertook to not work in a senior position at a charity for the next five years. Another trustee passed away while the inquiry was taking place.