The commission was alerted to potential problems at CharityGiving in 2011 and discovered in August last year that an independent auditor’s report had declined to confirm that its 2009 financial statements gave "a true and fair view".
But the site was suspended and a public announcement made only on 12 July – more than a month after Pesh Framjee, head of non-profit at the accountancy firm Crowe Clark Whitehill LLP, was installed as interim manager of the Dove Trust to work alongside the trustees.
Framjee, who now has sole control of the charity, took the action after finding a shortfall between the funds donated to charities through CharityGiving and the cash held by the Dove Trust – income intended for one charity was being passed to another in an attempt to balance the books.
Michelle Russell, head of investigations and enforcement at the regulator, says the suspension did not happen until last week because before that the concerns were mainly about cash flow. As soon as Framjee discovered the shortfall, she says, the charity’s bank accounts were frozen and the site suspended.
It was in January 2011 when the commission first received a complaint about a delayed payment to a charity and that the Dove Trust’s accounts had not been submitted since 2006. Russell says a compliance case was opened to examine its governance and financial management.
By August 2011 the commission had opened a statutory inquiry and taken action to ensure the trustees submitted accounts, Russell says. In August 2012, accounts arrived for 2007, 2008 and 2009 – the latter with the warning from the auditor.
It said the accounts "indicate a material uncertainty which may cast significant doubt about the charity’s ability to continue as a going concern". This refers to a debt of £258,197 owed by ABC Financial Advice Centre Ltd and one of £47,884 by Keith Colman FS Ltd. Keith Colman is the charity’s founder and a director and controlling shareholder of both companies.
The trustees’ notes said that, although the debts were "technically due" within 12 months, they were dependent on those companies generating funds to make the repayments. "Until that debt is repaid, the trustees will need to continue to use the funds provided for restricted purposes in order to meet the running costs of the charity," the notes said.
Russell says the qualified accounts were one of the triggers that escalated the inquiry. "We worked with the trustees to make sure they were given time to resolve matters," she says. "As a result, they appointed two new trustees and sought professional assistance from charity lawyers. At that stage, some of the concerns were really about cash-flow issues; it is only recently that the actual shortfall has come to light."
Peter Gotham, charity partner at the accountancy firm MHA MacIntyre Hudson, says: "This is a charity, fundraising for charities, that appears to have been managed casually, if not worse."
The 2009 accounts show the charity made a number of unsecured loans to companies connected to Colman, which appear to have been made from restricted funds, Gotham says. "These are not even general funds – these were trust funds. They have been lending restricted funds, which appears to be a breach of trust."
Under charity law, restricted funds are usually funds or donations with conditions attached, meaning they should be used for a particular purpose. Charities are under a duty to use them only for the purpose for which they are given.
Gotham makes the further point that it looks as though the trustees would be personally liable for any shortfall because the Dove Trust is not a limited company.