Charity Commission launches investigation into charity over funds ‘not adequately accounted for’

Posted: 16/09/2024

The Charity Commission has launched a statutory inquiry into Saba Relief & Development Foundation Limited after receiving complaints regarding the end use of charitable funds sent to Yemen. The Charity Commission is concerned that the trustees have not adequately accounted for these funds.

The inquiry will examine:

• The trustees’ compliance with their legal duties, particularly in relation to compliance with the charity’s governing document.
• Concerns over the end use of charitable funds, and the charity’s ability to evidence charitable expenditure in accordance with the trustees’ legal duties.
• The suitability of the charity’s partnerships, including the effectiveness of due diligence checks.

The investigation acts as a reminder for all charities about the importance of accounting for charitable funds, especially when it comes to evidencing where they have been spent. The Charity Commission provides detailed guidance on this point for trustees to take into consideration, which includes:

Protecting a charity’s money

Make sure that the charity’s money is only spent on what is allowed by its governing document and policies. It is imperative to always look at charitable objects before approving any expenditure of charitable funds to make sure that they are aligned; for example, take into consideration any geographical restrictions on where funds can be distributed.

The Charity Commission has produced an internal financial controls checklist to help:

• ensure that the above is being done properly;
• spot the main risks to a charity’s money; and
• plan how to manage them effectively.

Knowing a charity’s financial position

It is important that a charity has a budget which is followed. By checking how much a charity receives and spends against the budget, problems can be identified in good time, and agreement can be reached on what to do about them.

Consider having a reserves policy in place for income not spent, if there is not one already. Ensure that the amount to be reserved is documented, as well as what it will be used for and why this is reasonable.

Keeping accurate financial records

Make sure that the charity keeps records to show all of the money coming in, as well as the money it spends to help it meet its aims. Keep adequate records which show the details of money received and spent by the charity, and its assets and liabilities.

Managing expenses and payments to trustees

All trustees can claim expenses to cover any out-of-pocket expenses such as travel to and from trustee meetings. The charity should have a written policy which sets out what is classed as an expense, and how to claim and approve expenses.

As a trustee, you cannot receive any other payments or benefits from a charity unless the charity’s governing document allows it, or you have the specific authority to do so. If considering making a payment to a trustee, please seek legal advice before doing so as there are specific rules which must be followed before authorising any payment.

Dealing with financial problems quickly

It is important that the charity has enough money to settle bills as they fall due. If there is a significant change in the amount coming into or going out from the charity, then any issues which may arise as a result must be resolved quickly.

If you have any queries about the issues raised above, please contact a member of our charities group, or your usual Penningtons Manches Cooper contact.

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