News analysis: What's all this at Charity Logistics?

The support services group has suddenly found itself embroiled in controversy, writes Tania Mason.

The High Court action looming over Charity Logistics is "significant enough to threaten the future of the charity", admits its chair, Richard Fleming. Although he insists Charity Logistics has a strong enough rebuttal to successfully defend the lawsuit now being drawn up by the Corporation of London, the case can only be another headache for an organisation that suddenly seems mired in turmoil.

It was three weeks ago that Third Sector first learned that Charity Logistics' high-profile chief executive, George Cook, was leaving the organisation. Neither Fleming nor Cook would say why, but Cook issued a mysterious statement he said had been agreed with Fleming. "My situation is changing and I will be moving to another organisation," it went. "In future, I will effectively be working for the Government in the form of 'Community Resilience', doing the same thing but for local authorities, NHS trusts, etc."

A few days later, Fleming fired off his own equally obscure missive, announcing that Charity Logistics was involved in a major legal dispute and that "the charity is being restructured to improve its position. All activities are being reviewed, resources refocused on serving existing members and on core projects."

The statement also revealed that Charity Logistics' head office was moving from Maidstone, Kent, into the "now fully let Kensington Charity Centre", the Inland Revenue-owned property in west London that Charity Logistics offers to charities at a discounted rent. And it added that the trustees were "seeking guidance from the Charity Commission" over the legal dispute.

'Serious regulatory issues'

The Charity Commission told a different story. Its spokesman said a number of sources had raised concerns about Charity Logistics, some of which were found to be "serious regulatory issues". He said the commission had conducted an evaluation and was "currently working with the trustees to return the organisation to a proper constitutional and administrative footing".

One of the sources that contacted the commission was the London Borough of Hillingdon, concerned, it turns out, about the same issue that is occupying the Corporation of London. Roy Mills, a spokesman for Hillingdon, explains: "At the end of last year, the council's rating service queried the status of Charity Logistics with the commission. Charity Logistics had been leasing high-value commercial properties in the borough as stand-bys for other charities. Charities are entitled to an 80 per cent discount of business rates on unoccupied premises, as well as occupied premises."

But once the council learned that Charity Logistics was indeed a charity, it allowed it to carry on receiving the discount. Mills adds that, although local authorities are under a legal obligation to maximise their revenues, this does not affect the dispensation available to charities.

The corporation's case hinges on interpretation of the rating law. Charity Logistics insists it is entitled to receive the discount on properties kitted out as disaster fallback space, but the corporation is not so sure.

Its principal legal adviser, Richard Howlett, says that in order for a property to be subject to the discount, one criterion is that it must be likely to be occupied by a charity when next in use. If a charity leases premises purely as somewhere to move to if their usual building becomes uninhabitable, does that constitute "likely to be next occupied by a charity"?

Says Howlett: "We think the answer to that is probably 'no'. Some local authorities might think Charity Logistics is entitled to the discount, but we don't."

If the judge fails to rule in Charity Logistics' favour, it won't be the only charity affected. Charity Logistics' website says its sister organisation, the Charity Disaster Recovery Network, has more than one million square feet of office space in 30 sites on stand-by for charities around the country. A straw poll of the ten biggest charities reveals that one, the RSPCA, arranges its disaster contingency through the network; no doubt many smaller organisations do so too. According to Fleming, risk management has taken on a new urgency since the London bombings. Charity Logistics, he says, has been "inundated with enquiries".

Fleming plainly believes the network provides a valuable service. "We work to get these empty spaces, which are sitting there not doing anybody any good, into a position where charities can use them if they need to, at a rate they can afford," he says.

Whether the High Court will let this continue remains to be seen. But with 3,500 charities counted as beneficiaries of Charity Logistics' services, a lot of eyes will be awaiting the judgement - and watching to see whether it can get the rest of its house back in order.

- See Editorial, page 22.

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