Charity lost almost £700,000 through mismanagement or unauthorised trustee payments, regulator finds

A veterans charity that lost almost £700,000 through mismanagement or unauthorised payments to trustees has been wound up by the Charity Commission.

The regulator has published the findings of its long-running inquiry into Afghan Heroes, which found former trustees failed to take reasonable care in managing its finances and gained significant unauthorised private benefit from it.

The commission’s investigation opened in 2013, following complaints from the public and some of the trustees about how the charity was being operated.

The charity was launched in 2009, and included Liam Fox, the former defence secretary, as a patron before he stepped down in 2013.

In 2012 the charity’s trustees decided to set up retreats for homeless veterans that involved the purchase and running of a network of pubs that would financially support its services.

But the regulator said the charity lost about £337,000 through poorly managed financial transactions with its subsidiary company and third parties.

This included £185,000 lost through loans to a trading subsidiary that purchased a lease for a pub that did not prove profitable.

The charity also lost £40,000 in loans to another trading subsidiary to refurbish a pub in Minehead, Somerset.

The report was highly critical of the charity’s failure to seek professional advice that would have identified that this property could not be used to house veterans.

In addition, four former trustees, none of whom are named by the regulator, received about £348,000 in unauthorised remuneration, the majority of which was received by two trustees, according to the report.

This included direct payments to the trustees, as well as transactions with companies in which they had a personal financial interest.

The regulator said trustees also failed to properly manage the charity’s relationship with a fundraising company, Prize Promotions Limited, which raised about £3.5m from the public, but only about 20 per cent of this was passed on to the charity.

The commission concluded that PPL’s fundraising did not comply with fundraising regulations, such as the need to provide donors with information about the amount that the third party fundraiser will retain.

An interim manager was appointed by the regulator in 2014, from which point the operations of the charity were wound down.

The regulator said the manager also unsuccessfully pursued the fundraising company for all the money it raised – an effort that was the primary reason for the inquiry's length.

The charity’s two founding trustees were removed from their positions in 2015, resulting in their permanent disqualification from trusteeship and senior management in any charity.

Both died while the investigation was ongoing, the commission said.

Amy Spiller, head of investigations at the Charity Commission, said: “We understand why those who supported this charity feel angry and let down at the waste and incompetence presided over by the trustees.

“I hope others considering setting up a new charity learn from this case, and ensure they bring on board the expertise and competence required to run a charity lawfully and effectively.”

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