The Charity Commission has removed a humanitarian charity from its register after finding that it spent most of its funds on its properties to increase their market value.
In an inquiry report published today, the Commission said that the charity’s trustees were “responsible for misconduct and/or mismanagement” and failed to cooperate with the regulator at certain times.
The Commission removed Resham Helping Hand from the register on 16 May and directed its liquidated assets of more than £270,000 to an unconnected aid poverty relief charity.
Resham Helping Hand was established in 2007 to relieve poverty in Pakistan.
Misuse of charitable funds
The Commission first engaged with the charity in 2018 as its income and expenditure had fallen below £5,000 over the previous five years.
During a monitoring inspection, the regulator found that a “large proportion of the charity’s expenditure went towards renovating four properties purchased by the charity to improve the market value of the properties”.
The Commission also identified several regulatory concerns relating to the trustees’ management and administration of the charity, including failure to show how funds had been spent in Pakistan.
An action plan was then issued to the trustees who failed to fully comply with it, the Commission said. This prompted the Commission to open a statutory inquiry into the charity on 7 January 2020.
74% spent on properties
The inquiry, which examined regulatory concerns including governance, the conduct of trustees and compliance with legal duties, finds that Resham Helping Hand “was not properly managed and had little to no governance infrastructure in place or policies or controls to assist the trustees to manage the charity”.
The Commission appointed an interim manager on 8 April 2020, after the trustees acknowledged that there had been “weaknesses and shortcomings on their part and that they were not experienced or knowledgeable enough to remain in office without significant training and support”.
The inquiry says that the trustees “had a disregard for, and/or lack of understanding of, the importance of proper financial controls and accountability in respect of the charity’s funds”.
Between 30 April 2015 and 30 April 2019, Resham Helping Hand’s total income was £13,590 while total expenditure was £15,450.
The inquiry found that the “vast majority” of funds was spent on renovating and making improvements to five investment properties owned by the charity.
For instance, the charity declared respective income and expenditure of £2,810 and £2,460 for the financial year ending 31 April 2018 but just £124 (6%) of expenditure was spent on supporting the charity’s objects. Some 74% of expenditure was “expended on costs associated with the properties”.
“Of the £124 that was applied in respect of the charity’s objects, the trustees had no evidence to explain the end use of these funds. This was a further breach of their legal duties and misconduct and/or mismanagement in the administration of the charity,” the inquiry report says.
“For the financial year ending 30 April 2020, the charity’s income had increased significantly from £5,000 in the previous year to £150,000. This was due to the sale of two of the charity’s properties. Given the trustees’ failure at that time to account for the charity’s funds, the Commission was not satisfied that the trustees had the ability to manage the large increase in liquid assets.”
Trustee failings
The report reads: “The inquiry found that there was evidence of misconduct and/or mismanagement in the charity’s administration by the trustees. There was evidence of poor management of, and lack of records relating to the charity’s expenditure.
“There were wider failings in relation to the trustees’ financial management and overall governance of the charity.
“As a result, the inquiry found that the trustees had not complied with or fulfilled their duties and responsibilities as trustees under the law.”
Steve Roake, head of compliance visits and inspections at the Charity Commission, said: “I am glad that our intervention means that Resham Helping Hand’s assets have been transferred to a charity that can put them to good use.
“The governance and conduct of the trustees in this case fell below what the Commission and the public expect. They had no clear plan for how to pursue what the charity was set up to achieve, and mismanaged charitable funds on an unviable business model.
“The Commission’s actions means that over £270,000 is being applied to help those most in need.”
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