The Charity Commission has concluded that trustees of a Birmingham-based charity were negligent after almost £1m of undeclared income passed through its bank account.
The commission also found apparent unauthorised private benefit to trustees of the Bietec Learning and Development Training Centre and was not satisfied that all the accounts it was shown were accurate, according to a report on its statutory inquiry into the charity, which was published today.
In a case opened in June 2013, the commission found that £969,320 of undeclared income and £719,837 of undeclared expenditure had passed through the charity’s bank account between 2009 and 2013.
The commission also had serious concerns about the charity’s relationship with a private education company called the Birmingham Institute of Education Training and Technology, which operated from the same premises and was controlled by two of the charity’s three trustees.
It opened a statutory inquiry into the charity, which has objects to advance education, in July 2014.
In the report, the regulator concludes that, although none of the money had been misappropriated by trustees, their failure to solve the problem could be considered mismanagement.
Trustees told the inquiry that the funds had been paid to the charity by adult students of the connected company after the charity’s bank account details were wrongly printed instead of the company’s own promotional material for the company’s course, the report says.
The inquiry verified the claims, but the report expresses concern that the issue had continued for three years and says there was an inadequate level of separation between the two organisations’ finances.
"The inquiry established that it was negligent of the trustees to allow the problem to persist," the report says.
The commission also found there had been a failed attempt to minimise the tax liability of the company by transferring money to the charity.
Although this money was never transferred, it was entered into the charity’s accounts, resulting in what appeared to be a write-off of £279,000.
The report says: "While the charity did not appear to suffer a material or actual financial loss, as had first been indicated, the commission is not satisfied that the accounts presented to the commission presented an accurate position of the charity’s financial affairs during that period."
The charity also rented two floors of office space from a company called EMRDA, of which two of the charity’s trustees were directors and shareholders, during a year in which the charity did not deliver educational programmes to the public, but instead was funding aid overseas.
The trustees could not explain why the charity had needed the space and had not addressed conflicts of interest, the report says. They agreed to repay £2,895 of the £10,350 the charity had paid to EMRDA.
The inquiry also established that the charity had applied about £14,000 of its funding on poverty relief in Pakistan, outside its educational charitable purposes, and was unable to adequately account for how the money had been spent.
The report concludes there was mismanagement and significant weaknesses in the charity’s governance and management, creating a risk of misappropriation or misapplication and allowing authorised private benefit.
The commission has ordered the charity to improve administration and governance, including a review of the trustee board and trustee training needs, and take steps to review governance policies and record keeping.
The charity is also seeking to appoint additional independent trustees, according to the report.
Nobody from the charity responded to a request for comment from Third Sector on Tuesday morning.