Editorial: Smile Train as a cautionary tale

Closer attention to the details of governance might have averted some of the charity's recent difficulties, says Stephen Cook

Charity governance might be tedious, but it is not a game, writes Stephen Cook
Charity governance might be tedious, but it is not a game, writes Stephen Cook

When charities hit problems it's nearly always because of poor governance, and the story of Smile Train UK is a case in point. The charity recently won a High Court case against a former trustee, Brian Mullaney, who was ordered to repay more than £633,000 plus costs.

There was no suggestion that Mullaney, who was also the chief executive of the US parent charity Smile Train Inc, was intending anything fraudulent: witnesses indicated that both Smile Train boards knew and approved of the payments to him over four years. The apparent understanding was that part of his salary as chief executive in the US, which at $750,000 (£451,000) was rather large by our standards, should come from the considerable income generated in the UK.

The only problem was that the arrangement was never recorded in writing or checked against the charity's governing documents, which do not permit payment to trustees. The boards didn't spot it, the lawyers didn't spot it and the auditors didn't spot it; the payments were even recorded and signed off in the accounts.

The mistake might never have been put right but for a falling out between Mullaney and the man with whom he co-founded Smile Train in 1999, the computer multi-millionaire Charles Wang. For reasons that are complex and contested, a feud seems to have broken out between the two. This has mainly been played out in the US courts, but once the gloves were off the discovery that the UK payments were unauthorised apparently proved irresistible to those now running Smile Train. The downside of the ensuing court case, however, has been the publicity and potential damage to the charity's reputation.

As the new Smile Train Inc chief executive, Susannah Schaefer, tries to divert the conversation to the future, other charities might wish to see the episode as a cautionary tale. Charity governance might be tedious, but it is not a game and your friends might one day be your enemies. Due care and attention at every stage could save you from a train crash some time in the future.

- Read our analysis on how Smile Train UK ended up in court

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