African Aids Action: the changing face of a Charity Commission inquiry

The leaking of a draft report has given a rare glimpse into the internal workings of an inquiry by the regulator. Stephen Cook reports

African Aids Action: early draft has 'no authority', says Charity Commission
African Aids Action: early draft has 'no authority', says Charity Commission

In March this year, Third Sector received what appeared to be a Charity Commission report on its inquiry into the charity African Aids Action: it arrived in a commission envelope and was presented in its standard style. But inquiries to AAA and the commission soon indicated that this was an early draft.

The commission's then chief executive, Andrew Hind, was furious about the leak because the inquiry had already proved difficult and attracted complaints of racial discrimination. Third Sector published a story in general terms and waited for the final report, which was published last month.

A comparison with the draft, taking account of the chronology of the inquiry (see below), affords an unusual insight into the progress of a commission inquiry. In particular, it suggests that the commission's approach changed significantly in July last year, soon after the charity engaged a lawyer.

The draft report, six pages long, is succinct, hard-hitting, opinionated and critical of the charity. It also alleges that the principal trustee of AAA made "a series of offensive and wholly unsubstantiated accusations against the inquiry officer" that were calculated to intimidate him, and asserts that the charity's aims are unrealistically ambitious.

The final report, by contrast, is 24 pages long, exhaustive and expressed in neutral language. It too is critical of the charity, but it is scrupulously fair and balanced, does not mention how the inquiry officer was treated and makes no comment on the charity's ambitions.

The draft report is not dated. But it makes no mention of a key event - an attempt by the commission to wind up the charity in March 2009. So it may have been written before that point.

Lawyer engaged

After the winding-up order was made, the charity engaged its lawyer. Three months later, as the final report makes clear, the commission admitted that its order could not be implemented - it was directed to "the trustees", but should have been directed to "the charity" because AAA is also a limited company and has its own legal personality.

Specialist charity lawyers agree that the law on winding up charities can be tricky. Asked if the commission had made an elementary error, one said that would be unfair; another said it would not - "this is their job, after all".

After the failed order, the commission decided instead to draw up an action plan to address the charity's shortcomings. Its final report does not explain why it decided to switch to this path, beyond saying that the chair of trustees has made "further representations and promises". The charity declined to put Third Sector in touch with its solicitor to discuss this aspect.

Specialist charity lawyers speculate that the change could have been the result of a number of factors: the intervention of a competent solicitor, the reference of the inquiry to a more senior team at the commission, the current shift in the commission towards dealing with cases on the basis of advice and guidance - or some combination of these.

The revised approach to the inquiry did not curtail the commission's difficulties. An appeal to the charity tribunal about its decision to carry out the inquiry and the 'freezing' of the charity's bank account did not succeed, but drew criticism from the judge about the charity having been unjustly prevented from paying for legal advice.

Fresh complaint

Complaints by the charity have already been put through the commission's local resolution procedure and been examined by its customer services manager. The earlier complaints were not upheld, although procedural errors were admitted. Now the commission's Independent Complaints Reviewer is examining another complaint by the charity, which continues to threaten to sue for reasons including defamation and discrimination.

It remains unclear why the draft was leaked. One possibility is that a commission official wanted to draw attention to its statements about the trustees' behaviour and the ambitions of the charity once it was realised that they would be not be included in the final report.

A commission spokeswoman said of the draft: "The information has no provenance, substance or authority and we will not be commenting on it. As the final inquiry report is now published, this represents the commission's position on the case."

TIMELINE

July 2001: African Aids Action registered as a charity. Its object is to help HIV/Aids sufferers, particularly from Africa and the Caribbean. It plans to raise $500m to build a factory in Africa producing retroviral drugs.

May 2008: The Charity Commission receives an allegation that the AAA chair, Eyob Ghebre-Sellassie, is being employed by the charity and its income is being used to benefit his family.

August 2008: The commission opens a statutory inquiry to examine AAA's financial management, including the proper use of and accounting for charitable funds. It makes a 'freezing order', preventing use of the charity's funds without its permission.

October 2008: Commission staff meet trustees of the charity to seek information. A draft report later complains of intimidatory behaviour by a trustee. Trustees complain about the conduct of the inquiry. The commission's 'local resolution' procedure does not uphold the complaint.

March 2009: The commission makes an order requiring the trustees to wind up the charity and transfer its assets to another charity with similar objects. The trustees appoint solicitors who invoke the commission's internal decision review procedure. Ghebre-Sellassie's then MP, James Brokenshire, protests to the commission.

July 2009: The inquiry accepts that the trustees do not have the power to wind up the charity because it is a limited company. It discharges the order and begins to seek an alternative long-term solution. The commission's customer services manager starts to examine the conduct of the investigation after further complaints, including one of racial motivation.

September 2009: Following another decision review, the commission varies the freezing order to allow the charity to pay its internet and phone bills without specific permission.

5 November 2009: AAA lodges an appeal to the charity tribunal against the freezing order and other issues.

9 November 2009: An action plan with regulatory advice and guidance is issued to the trustees.

10 November 2009: The commission discharges the freezing order. The 'substantive phase' of the inquiry is concluded, it says. Reports are normally due within three months.

January 2010: AAA resubmits accounts for the years 2003 to 2008. The commission has since told the charity's accountants that they are still not compliant with the rules.

February 2010: The charity tribunal strikes out the appeal, pointing out that the commission has already discharged the freezing order. Judge Peter Hinchcliffe notes that it was neither fair nor just that the charity had been prevented from paying for legal advice.

February 2010: The commission's customer service review does not uphold the complaints, but does acknowledge two procedural errors: a failure to give a 'statement of reasons' for the freezing order, and the making of the winding-up order that was later discharged.

March 2010: An early draft of the inquiry report is leaked to Third Sector. The charity tribunal gives the charity leave to appeal to the Upper Tribunal, in order to determine whether the commission's action plan constitutes a "decision, order or direction" by the commission and is therefore subject to a right of appeal. The charity has not yet made such an appeal.

May 2010: Ghebre-Sellassie rejects the commission's "derisory" £100 compensation offer.

August 2010: Six months later than required, the inquiry report is published. It says some expenses payments were not legitimate, some expenditure could not be demonstrated to further AAA's charitable purposes, proper accounts were not kept, cheques were signed by one person, not two, and governance was inadequate. It gives AAA six months to implement improvements. Ghebre-Sellassie says these have already been done and that AAA will sue for "deliberate negligence, defamation, discrimination, blackmail and mental torture".

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