The founding trustee of a dog rescue charity misappropriated more than £400,000 of charitable funds according to a Charity Commission statutory inquiry report.
The report, published yesterday, found that basic failures of governance at the Lincolnshire-based Cavalier King Charles Spaniel Rescue and Welfare had allowed one of the three trustees, who has since died, to exercise sole control of the charity’s finances and to redirect funds for personal gain.
The commission opened a compliance case in April 2013 after the executor of a will that left £382,000 to the charity complained the money had not shown up in the charity’s annual accounts.
The commission found that the money, and a further legacy of £45,000, had been placed in several bank accounts held in the name of the founding trustee and another person who was not a trustee - and that some of the money had been invested in properties in the other person’s name.
The founding trustee, who is not named in the report, lived on site at the kennels used to shelter and rehome rescued dogs in Essex.
The charity's two other trustees, husband and wife David and Andrea Sedgbeer, told the commission this meant the founding trustee had been heavily involved in the day-to-day running of the charity, and in practice had been in sole control of the charity’s finances.
There is no suggestion the Sedgbeers did anything illegal.
The commission opened a statutory inquiry in March 2014 and froze six bank accounts where there was evidence that charitable funds had been moved or held, and helped the two trustees to recover £300,000 misappropriated funds.
A further £120,000 was repaid by the founding trustee.
The commission reported its findings to the police, which launched a criminal investigation, but this was halted due to insufficient evidence when the founding trustee died.
The report concludes: "The lack of effective collective oversight by the trustees and poor financial controls in the charity created an environment which enabled an individual with significant control and influence to take control of the charity and where substantial charitable funds could be transferred to or deposited in personal bank accounts without the other trustees’ knowledge.
"The commission concluded the actions of the founding trustee amounted to mismanagement and misconduct in the charity and that the actions and omissions of other trustees meant they also failed to adequately and fully discharge their duties as charity trustees."
But it acknowledged that the other two trustees had acted responsibly in dealing with the commission’s concerns and had since recruited additional trustees.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said the case was shocking.
David Sedgbeer, the chair of the charity, told Third Sector the charity agreed with everything in the commission’s report and that the charity was functioning well and operating from their kennels in Lincolnshire.
Regulator opens inquiry into poverty relief charity
The commission also announced today that it had opened a statutory inquiry into poverty relief charity One Nation on 16 November.
The inquiry will examine trustees’ decision-making, compliance with charity law, and their management of the charity’s relationships with other organisations and individuals, as well as the charity’s financial controls, the commission said.