An audit firm and two accountants have been ordered to pay a total of £390,000 in fines and legal costs by the Financial Reporting Council because of their actions relating to the tax-avoidance charity the Cup Trust.
The charity has also been wound up and its remaining assets transferred to another charity, the Cup Trust’s former interim managers have confirmed.
The Cup Trust has been the subject of a long-running Charity Commission statutory inquiry after it emerged in 2013 that it had raised £176.5m in private donations over two years but spent only £55,000 on good causes.
The charity had tried to claim £46m in Gift Aid, and donors might have been entitled to claim another £55m in tax relief.
The FRC announced yesterday that it had banned John Mehigan from the auditing profession for 10 years and fined him £70,000 for his conduct as a director of Mountstar PTC, the British Virgin Islands-based firm that was the former corporate trustee of the charity.
Mehigan was also told to pay £80,000 towards the legal costs accrued by the executive counsel to the FRC.
The audit firm Hillier Hopkins was fined £100,000, ordered to contribute £100,000 to the FRC’s legal costs and given a reprimand for its role in auditing the Cup Trust in 2010 and 2011.
Philip Collins, an auditor at Hillier Hopkins, was also reprimanded, fined £20,000 and ordered to contribute £20,000 to the FRC’s legal costs for his involvement in those two audits.
Hillier Hopkins, Collins and Mehigan accepted that their conduct breached the Institute of Chartered Accountants in England and Wales publication Fundamental Principles of Professional Competence and Due Care.
Jonathan Burchfield and Ann Phillips of the law firm Stone King were appointed interim managers of the Cup Trust.
A spokesman for Stone King said in a statement today: "Jonathan and Ann wound up the charity in May 2017, following a transfer to another charity of its remaining funds, and were discharged from their role as interim managers of the Cup Trust by an order of the Charity Commission made on 26 May.
"The charity was removed from the register of charities on the same day."
Neither the commission nor Stone King were able to confirm how much money was transferred from the Cup Trust to another charity or the identity of the charity that received the funds.
In a statement accompanying the Financial Reporting Council’s decision, Gareth Rees QC, executive counsel to the FRC, said: "The administration of charities and the operation of tax-avoidance schemes are both matters where professional accountants should be aware of the heightened level of public interest in their work and consequently the importance of complying scrupulously with ethical and competence standards.
"The lengthy period of exclusion for Mr Mehigan reflects the seriousness of his failure to exercise independent judgement when making key decisions on behalf of the charity. The admissions made by Mr Mehigan, Hillier Hopkins and Mr Collins have resulted in a significant saving in time and costs which has been taken into account in the agreed sanctions."
A statement from Hillier Hopkins said: "Hillier Hopkins has fully cooperated with the FRC’s investigation into the 2010 and 2011 audits of a registered charity, the Cup Trust. Our engagement with the Cup Trust was solely to act as independent auditor of its financial statements for the above years. We had no involvement in either the design or the marketing of the activities of the Cup Trust.
"We regret, and accept, the FRC findings that the audit evidence collected in three specific areas fell below our usual high standards. We are pleased that the FRC concluded (as intimated by the nature and level of the sanction imposed against us) that this is not reflective of our compliance history, that our principals and staff were not engaged in behaviour that was dishonest, deliberate or reckless and nor did our audit cause any party any financial loss."
A spokeswoman for the Charity Commission said today that its inquiry into the charity was continuing.