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UK-Justice
UK-Justice, Barrister
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Experience:  Called to the Bar in 2007
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This question refers to UK Charity Law bordering on alleged

Customer Question

This question refers to UK Charity Law bordering on alleged potential Fraud.

A UK Charity receives nearly 1 Million GBP based on its desires expressed in the Charity Statutes. These statuted describe a project to start a school for the education in specialist subjects of young people.

The charity is in the name of a famous personality whose wishes the statutes expresses.

A couple of years later, after the death of the personality as well as the major donor (old age) the Foundation is led by one of the trustees on a global fund raising mission worldwide that involves plans for commercial ventures.

These projects, although stated as being eventually to support the education aspects are not directly what is stated in the statutes. Nevertheless the Foundation spends the remaining donated capital, amounting to approx. 700,000 GBP on "fundraising" through various events that fail to bring anything but a few thousand pounds into the organisation.

The Charities Commission is notified on several occasions to this scenario but rejects any action. There are statements in the charity accounts that are misleading and these are drawn to the attention of the Charities Commission and still they refuse to act.

The question is whether a UK Foundation may spend a majority of funds donated for one purpose to support the searching for additional funding leading to a total depletion of funds and also incurring unpaid international debt. The charity has been without funds for some years now occasionally covers open debt from private resources presumed to be loans to the foundation.

The law in some European countries seems to forbid the spending of more than a modest percentage of the capital on anything but the ends stated in the statutes. I am presuming this is not the case in the UK.

Is there any legal direct recourse to put an end to the trustees of this foundation being able to manage such actions again? Is there any action that can be taken against the Charities Commission in order to clarify the reasoning behind their decision.?
Submitted: 4 years ago.
Category: Law
Expert:  UK-Justice replied 4 years ago.
Thanks for your question. Please remember to rate my answer SMILEY FACE OR ABOVE so that I am credited for my time.

In short you want the Charity Commission to take action and they wont - is that right?
Customer: replied 4 years ago.

If that would lead to a closer scrutiny of the accounts and an investigation, as a private person I don't carry much weight apparently. Upon consultation with some learned friends the following answer can't be endorsed, we have no insight into the response from the charity itself to the commission, if any was indeed requested. The response we got from the Foundation itself was inconclusive/patronising. Their attention was drawn to various points, none of which they addressed, this was also reported to the CC. The guidelines set out (and mentioned below) by the Commission are, I believe not legally binding. Placation seems to be a major profession in the UK these days :-)

 

A next step indication would be helpful or as you suggest some way of encouraging the CC to proceed would be good. As I say, as a private person I cannot get anyone there to do anything apart from placate.

 

A question here is whether it is legal for a charity to spend over 70% of its funds on "fundraising" or the development of unrelated projects to those stated in the statutes. Are they bound to the statutes at all if trustees endorse expenditure?

 

Many thanks.

 

From Charities Commission:

 

 

Thank you for your email of 21 March 2011.

 

I have carefully considered the contents of your email, my understanding of your email is that you have concerns regarding

  • The wishes of ***** are not being fulfilled by the trustees.
  • The funds being spent on direct charitable expenditure are low.

 

It may help if I briefly set out how the Commission deals with complaints about charities.

 

When we receive a complaint we first of all assess its seriousness so that we can decide whether we need to intervene. Not every complaint requires our intervention; for example, we will not normally intervene simply because there is disagreement with a decision that the charity’s trustees have lawfully taken, even if it is an unpopular one. The Commission will not take forward complaints where a person disagrees with decisions made by the trustees and those decisions have been properly made within the law and the provisions of the charity’s governing document.

 

The fulfilment of Mr ***** wishes is a matter for the trustees. If you have concerns that Mr ****** wishes are not being fulfilled by the trustees then you should raise these with the trustees.

 

You state that you would be “interested to know what proportion of spending should have been with respect directly to charitable activity”. Each charity is dealt with on its own individual merits. Due to the diversity within the charitable sector it is not possible to issue guidelines on the percentage of funds that should be spent on direct charitable expenditure. The proportion of costs allocated to direct charitable expenditure is for the trustees to determine, in accordance with the guidelines set out in the Charities Statement of Recommended Practice.

 

In view of my comments above, it appear that the Commission cannot intervene in the concerns outlined in your email. I realise that my response will be disappointing for you but I do hope that you can appreciate our position here that we simply cannot become involved.

Kind regards

Miss *****

Assessment Officer

Charity Commission

Expert:  UK-Justice replied 4 years ago.
Thank you.

What you can not do is take action direct against the Charity, unless you personally have been misled and suffered some loss.

I am assuming this is not the case and will proceed on the basis the CC wont do anything.

What you can do is a seek a Judicial Review of their decision.

That is their decision is considered by the Courts to see if it is legal and reasonable.

A Court can affirm, quash or change the decision. A Judge will see if they failed to take into account relevant factors or took into account irrelevant factors.

But you would need a Solicitor to draft proceedings and present your argument in Court. This is because there are certain pre-action protocols that need to be taken.

I realise that this may not be the answer you want and it is frustrating but based on what you have told me, this is the legal position.

Good luck with this as I realise it is frustrating.

I hope this helps.


Please remember to click *** OK SERVICE *** or above so that I am credited for my time. The question does not close and you can ask follow ups.

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Customer: replied 4 years ago.

Thank you, XXXXX XXXXX exactly vocabulary like "Judicial Review" which I am missing.


 


Would it be possible to get a yes/no answer to the question as to whether it is legal for a large percentage of funds to be allocated to whatever Trustees see as fitting. Taking that CC recommendations are not legally binding but non-adherance thereto may just result in the charity being struck off the register after the fact, without recourse?


 


If the answer to that (as I fear) may be a yes. Then there will be no point in criticising any charity as goodness knows public ridicule doesn't even count for anything these days.


 


I will look forward to your answer and as a result either look for pro-bono UK lawyers who may do something to help prevent this kind of thing, or, go away and form a charity to help feed the poor and invite you all out for dinner with the donations? :-)

Expert:  UK-Justice replied 4 years ago.
I can only give you a maybe answer.

It depends on what it says in the trusts constitution, that you need to check......



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Customer: replied 4 years ago.
The statutes clearly state the establishment of a school (in Italy actually) and the education therein of young gifted students. There is nothing regarding the establishing of associated commercial ventures or specialised methodologies of teaching, nor extensive foreign gravel and presentations (parties) in the name of fundraising. Thus the questioning of the spending. If it can reasonably be seen that a). The statutes have not been adhered to and b). work has not been reasonably attempted to justify the intentions of the donations, would it then be legal to redict funds into largely other areas? I presume the establishment of the above as not merely my opinion by a legal entity is advised. Would that be a Barrister's opinion? If that is then established as having been against the statutes, is there then some law dealing with such expenditure?

Many thanks.
Expert:  UK-Justice replied 4 years ago.
That would not be a legal route no.

If the Trust constitution and articles say they must do X then they can not ignore it and do Y.

You may need a Barristers opinion, however I would still consider a Judicial Review.

It would always be the case it would be for the CC to prosecute, as an individual you can't.

This is an enforcement issue and as such if the CC refuse to prosecute then you can Judicially Review that decision.

That is the way forward.

I hope this assists you.



Please remember to click *** OK SERVICE *** or above so that I am credited for my time. The question does not close and you can ask follow ups.

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Customer: replied 4 years ago.
Thank you for your reply.

I think we agree that it would not be a legal route for the charity to act in a manner not described in the statutes.

The CC could be encouraged to prosecute by a legal review of this but I am really looking for under which law the trustees could be prosecuted. All the CC does is strike them off a charities register, there is as far as I can see no legal recourse so they can technically only remove them from charitable status and tell them off for not following guidelines to which they are not legally bound. Those who would be directly damaged in this case are deceased i.e. the donors. I need to know for example, if this is potentially "fraud" then please which law prohibits such action.

I am not disputing your suggestion but the course of action here may well lead to nowhere as I cannot find a law to cite that has been broken by not adhering to a statute of a charity. Do you please know of one?

Many thanks.
Expert:  UK-Justice replied 4 years ago.
If they have not been using funds correctly then it could be fraud by misrepresentation (funds) or by abuse of trust.

Also they could be in breach of the Charity Act.




Please remember to click *** OK SERVICE *** or above so that I am credited for my time. The question does not close and you can ask follow ups.

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Customer: replied 4 years ago.

Sorry for delay (I have a day job) :-)


I spent some time reading the Charities act and presume that the complaint would be against Chapter 4 where funds have not been applied to public benefit.


 


Procedure as follows:


 


Collect correspondence with charity outlining my concerns and the responses which do not address them.


 


Collect complaints to Charities Commission and their responses.


 


Find a barrister/solicitor who will file a Judicial Review of the decision of the Charities Commission and ask for a deeper enquiry into the destination of the spending.


 


If you are fine with this I am happy and glad to have made some progress formulating a way forwards?


 


Many thanks!

Expert:  UK-Justice replied 4 years ago.
You are correct.

But Judicial Review is what you need to do..............



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UK-Justice, Barrister
Category: Law
Satisfied Customers: 16193
Experience: Called to the Bar in 2007
UK-Justice and 2 other Law Specialists are ready to help you
Customer: replied 4 years ago.

Thank you very much indeed!

Expert:  UK-Justice replied 4 years ago.
Welcome.

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