Accrue funds with care, says regulator
The Charity Commission has warned charities against overly complicated financial arrangements after an investigation into a West Midlands charity that received donations from 57 companies operating out of only nine addresses.
Concerns about transparency and conflicts of interest were also investigated because some of the 57 companies that donated to the charity were owned or controlled by various trustees. Many of the corporate donors could not be contacted because the organisations had been dissolved.
The commission’s inquiry found that the trustees had always acted in the charity’s best interests. It discovered that they had limited expenditure because they wanted to accrue money to fund an education centre.
It also found that some of the donations had come from a vocational training company, owned by one of the trustees, which had been obliged by tendering regulations to set up individual sub-companies to bid for contracts at a local college. The commission was concerned about this particular trustee’s habit of making his donations in lump sums, which meant there was no adequate audit trail.
In a report based on the investigation, the commission gives the foundation’s trustees “advice and guidance on the need to ensure that the charity’s books and records accurately record all transactions.”
The report also reminds the trustees that they have a legal duty to spend a charity’s income on its objects within a reasonable time. “Although trustees can accumulate income for a specific project, they must ensure that they are not accumulating for accumulations sake,” it says.
The report urges trustees to remember that their charities’ accounts are open to public inspection and, therefore, to report the origins of their funds in an open and transparent way. “Very complex arrangements may give the appearance of impropriety where none is present,” it concludes.
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