UK Charity Commission probe redirects $25 million to NGOs

Millions of dollars of misused charity funds have been distributed to good causes amid a lengthy investigation by the UK Charity Commission.  

The commission’s statutory inquiry into Relief for Distressed Children and Young People concluded last week, resulting in the organisation’s dissolution and removal from the Register of Charities.

The investigation began in 2006, after concerns were raised about the poverty charity’s management and administration.

Trustees were asked about US$6.35 million (A$9 million) in funds which they claimed had been spent on building orphanages in Iraq.     

Investigators soon realised more than US$5 million (A$7 million) had been given to non-charitable organisations or the trustees’ friends and family in Iraq.

In 2007, the commission suspended the trustees and the chair was removed in September that year. The remaining trustees were removed the following year.

The commission then appointed an interim manager to take over the charity and settle any tax liabilities, as well as decide on the charity’s future.

The inquiry eventually found clear misconduct by the former trustees, including providing false and misleading information to the commission, misusing charity assets, and a failure to manage conflicts of interest.

In a bid to remedy the misconduct, between 2011 and 2016 the interim manager awarded £13.8 million (A$25 million) from the charity’s funds – that had been frozen by the commission at the start of the inquiry – in grants to three charities working in Iraq to relieve poverty.

These charities were UNICEF UK, Save the Children Fund, and Christian Aid.

Michelle Russell, the charity commission’s director of investigations, monitoring and enforcement, said the inquiry had relentlessly pursued these funds so that a significant sum could be safeguarded and applied to good causes.

“A series of actions by the former trustees allowed charitable funds to be misapplied and put at risk. Our protective action ensured they put right their mistakes and have been held to account for their actions,” Russell said.

“As regulator, we want to see charity thrive. This case highlights the lengths we will go to address misconduct and/or mismanagement in charities and protect charity property and assets so that the sector can inspire trust.”

After settling any outstanding liabilities, the interim manager distributed the charity’s remaining funds before dissolving it.

Following his removal as trustee, the charity’s former chair has been disqualified from serving as a charity trustee or holding any senior management role in any charity in England and Wales.

In the commission’s published decision, it warned that trustees had a legal duty to ensure their charity’s funds were applied solely and reasonably to further its stated purpose.

It said trustees must keep records and an adequate audit trail to prove the charity’s money had been properly spent.

“Records of both domestic and international transactions must be sufficiently detailed to demonstrate that funds have been spent properly and in a manner consistent with the purpose and objectives of the charity,” the commission said.