UK Charity Commission Inquiry into the Retreat Animal Rescue

Article 25 November 2021 Experience: Charities and non-profit

In 2019, the Charity Commission launched an inquiry into the Retreat Animal Rescue. This followed the charity being placed in a class inquiry due to failures to file financial information on time. The class inquiry unearthed other failings, including unauthorised trustee remuneration, an insufficient number of trustees and a failure to manage conflicts of interest.

Facts and Issues

The Retreat Animal Rescue’s objects are ‘to relieve the suffering of unwanted, abandoned and neglected animals that are in need of care and treatment, by the provision of a rescue and re-homing service and the accommodation of such animals, and to advance public education in matters concerning animal welfare.’

The inquiry covered:

  • the administration, governance and management of the charity by the trustees with specific regard to management of financial affairs, compliance with the charity’s governing document, risk management and conflicts of interest
  • the extent to which the administrative failings identified were due to misconduct and/or mismanagement by the trustees

Findings

During the course of the inquiry, two of the charity’s existing trustees resigned and were replaced by three new trustees.

The Commission found that the charity had failed to file annual accounts and returns on time for five consecutive years. This was in breach not only of the charity’s governing document but also statutory requirements and constituted mismanagement.

Additionally, one of the trustees had received unauthorised remuneration for work in the charity’s café. This was in breach of the charity’s governing document which required the Commission’s consent for trustee remuneration. Although the trustee had been unaware of this provision and eventually repaid the money, the Commission noted that this did not negate that these payments should never have been made.

The inquiry found that between September 2015 and April 2020, the charity was without the required number of trustees. The charity’s governing document required a minimum of five trustees, but only four were appointed. As a result, there are significant doubts about the validity of any trustee decisions made in this period, other than those relating to the appointment of trustees.

Finally, the inquiry found that the charity had failed properly to manage conflicts of interest. The charity operates from a farm, comprising a detached house and a parcel of land. Two of the trustees, a married couple, purchased the farm in 2012 with the aid of a loan from an acquaintance. They lived in the house and allowed the charity to occupy the land rent-free from 2012 to 2017.

In 2015, the charity received a £200,000 donation from another charity, which it paid to the acquaintance in part payment of the loan to the trustees. In 2017, a 25-year lease was granted by the married trustees to the charity. The £200,000 already paid to the acquaintance was designated a pre-payment for this lease.

The inquiry raised the following objections:

  • At the time, the charity did not have the required number of trustees and therefore could not validly enter into a lease
  • The married trustees were named on the lease both as lessors (in their personal capacities) and lessees (as trustees for the charity). It is not legally possible to enter into a contract with yourself
  • There was no record of deliberations regarding the lease from trustees or use of charity funds to pay off a private loan, nor was there any documentation recognising that the married trustees had a conflict of interest

The Commission concluded that the former trustee board was responsible for misconduct and/or mismanagement. The new board has taken steps to implement an Action Plan for its future dealings and will also review and monitor the lease.

The Commission issued an Official Warning, but as these can only be made to current trustees it was made only to the original trustee who had not resigned.

Key lessons for charity trustees

The Commission highlighted the importance of preparation of the correct financial information, as well as ensuring that charities have adequate financial and administrative controls and do not allow self-dealing transactions to occur without legal authority.

It also noted that conflicts of interest are more likely to occur where there are a small number of trustees, trustees are closely related, or the charity deals with organisations in which the trustees have interests (all of which were features of this case).

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