On 3 June 2016 the Charity Commission launched an inquiry into Manor Building Preservation Trust Limited. The inquiry unearthed serious misapplication of funds and conflicts of interest by the charity’s trustees. The report highlights the importance of proper application of charity funds and reveals problems that may arise from having trustees who are family members.
Facts and issues
The Manor Building Preservation Trust was established in 1999. Its objects were ‘to preserve for the benefit of the Nation, the historical, architectural and constructional heritage that may exist in buildings …of particular beauty or historical, architectural or constructional interest’.
When the inquiry was opened the charity had four trustees, of whom three were family members: a father, son and daughter-in-law. The fourth trustee was appointed shortly before the inquiry and had never been involved actively in the charity’s administration.
The inquiry was prompted by concerns raised by one of the trustees, including unauthorised trustee remuneration, private benefit and occupation by the trustees of a charity-owned property.
The Commission’s inquiry covered a range of issues, including:
- whether the charity’s objects were being met;
- the application and management of the charity’s assets;
- the trustees’ administration of the charity; and
- whether the trustees had fulfilled their duties.
The charity purchased Goldington Hall in 2010 as a renovation project and investment. The three related trustees, with other family members, lived in this property rent-free from 2010 until action was taken by the interim manager (appointed by the inquiry) to evict them. Their household costs were paid by the charity.
The inquiry found that there was no legitimate reason for the trustees to have occupied the property beyond 2014, when the renovations were completed. The trustees contended that their occupation served as a security service. The inquiry found that alternative security arrangements would have allowed the property to be opened to the public, but that the trustees had not considered this. Moreover, the benefit to the charity was outweighed by the private benefit to the trustees, who treated the property as their family home. This was not in the charity’s best interests and did not meet its objects.
Significant charity funds were used to purchase expensive cars for the trustees’ private use, and to reimburse entertaining, travel and subsistence costs. The charity also granted a loan to one of the trustees. The charity did not have a procedure for claiming expenses.
Charity funds were used to make a planning application for land owned by one of the trustees. Although minutes of a meeting suggested that the trustee had gifted the land to the charity, there was no legal documentation of this. The charity’s expenditure should have been secured by a charge over the land. This was not done. This constituted inappropriate use of funds and did not further the charity’s objects.
The trustees had used charity funds in an abortive effort to purchase property in Spain, and to purchase two properties in the Ukraine (sold at a loss in 2017). The purchase of overseas property did not further the charity’s objects, which related only to domestic buildings. If the properties were purchased as investments, there was no evidence that the trustees had considered their suitability.
Two trustees had received salaries for their work in relation to Goldington Hall. The role of a trustee is generally voluntary. There was no evidence to suggest that the limited circumstances in which the charity’s governing document permitted trustee remuneration were applicable. The salaries received by the trustees were out of proportion to the work undertaken, especially since the trustees lived in the property rent-free.
The inquiry concluded that there was serious misconduct and/or mismanagement, the trustees were receiving significant personal benefit, the charity was not carrying out its purposes for the public benefit, and the trustees had not managed conflicts of interest properly.
The three related trustees were removed as trustees, and the charity was closed and its assets transferred to the Landmark Trust, being a charity with similar objects.
Key lessons for charity trustees to take from this inquiry
The report reminds trustees of their duty to ensure that charity funds are applied solely and reasonably for the furtherance of the charity’s objects. Trustees should keep adequate records to document that they have fulfilled this obligation. It also reminds trustees that they cannot receive any benefit from the charity without legal authority.
The report also emphasises trustees’ obligation to act in the charity’s best interests when making decisions. Where a trustee has a personal interest in a decision, they must follow specific steps, or they will not be able to comply with this duty. This inquiry highlights the particular issues involving conflicts where trustees are related, as this means that the trustees related to the trustee with a personal interest may also have a conflict.