The Needy Children International Foundation, a Wolverhampton-based charity that supported young offenders and relieved poverty overseas, has been forced to wind up after an investigation by the Insolvency Service found its activities were likely to mislead potential donors.
The investigation was opened after the Charity Commission, which had opened a statutory inquiry into allegations of wrongdoing by the charity, referred concerns to the organisation.
A report published today by the commission says Fundraising and Marketing Services, the trading subsidiary that carried out the charity’s fundraising activities, was using a database of donor businesses that was purchased from a firm whose director had been convicted of tax fraud involving charity fundraising and a database of donor businesses.
It says the commission could not reach a "conclusive finding" about whether the NCIF was using a copy of the same database, which had been impounded by the court.
However, it says, "the evidence suggested that the database used by the company may at least have had its origins" in the impounded database.
It says Fundraising and Marketing Services employed a person against whom a restraining order had been made in relation to the database, and this person "had a significant role in handling funds raised on behalf of the charity".
The report says the charity, which had an income of more than £260,000 in 2009/10 and whose trustees were a solicitor, a barrister and a retired solicitor, attributed only 21 per cent of its 2007/08 income to charitable activities and spent 63 per cent of that money on the administrative costs of sending clothing overseas to Africa and Asia.
Less than 8 per cent of the charity’s income was spent on helping young offenders, which was listed as its main charitable purpose, the report says.
Fifteen per cent of the charity’s 2008/09 income and 13 per cent of its 2009/10 income were attributed to charitable activities, it says.
During the inquiry, says the report, the commission received complaints from a number of businesses that had made donations to the charity on the understanding that the funds would be used for the benefit of young children in the local area and had realised after checking the regulator’s website that the charity’s primary object was for the benefit of young offenders.
It says the charity’s trustees had failed to ensure that legal requirements relating to local authority licensing were observed, or that statements made by telephone fundraisers complied with the law.
The commission’s report says the charity was ordered to wind up in May 2011 after the Secretary of State for Business, Innovation and Skills, the department that partners with the Insolvency Service, presented a winding-up petition against it. It says the grounds for this petition included that the charity’s activities were likely to mislead prospective donors and that the script used by its telephone fundraisers was inaccurate.
Before this, says the report, trustees had made some positive changes, including terminating the employment of the man who had been the subject of the restraining order in relation to the database.
The report says the charity was removed from the commission’s register in June 2011.
It says the investigation, which began in 2007, was delayed because the charity’s trustees complained about the conduct of the commission’s inquiry. The report does not say what the grounds for complaint were, but it says they were "substantially dismissed".