Refugee charity put finances at risk with £340k trustee payments

Refugee charity put finances at risk with £340k trustee payments

Aug 26, 2023

A charity for refugees has been criticised for a lack of financial controls, poor governance and trustee failures by the Charity Commission

The inquiry into Care4Calais by the Charity Commission has found that the former trustees of the charity failed to meet basic governance standards over a number of years, lacked appropriate governance structures, had poor internal financial controls and that its approach to handling complaints was inadequate.

There were serious failings in the charity’s financial management, notably a lack of suitable internal financial controls.

Between October 2017 and August 2020, payments of £340,092 were made to the personal bank account of one of the charity’s now former trustees and founding members, ranging from £2,800 to £20,000. As a result, at the opening of the inquiry the Commission used its powers to restrict financial transactions between the charity and current or former trustees.

The regulator found that these payments were reimbursements for charitable expenditure incurred by the trustee. The trustee in question explained that this arrangement saved the charity around £3,000 per year in foreign exchange fees. However, there appeared to be little transparency about the reasons for the payments with other trustees excluded from oversight of the financials.

From the charity’s annual accounts, the reasons for the payments were unclear and on 21 August 2020 the inquiry issued an order under section 76(3)(f) of the Charities Act to prohibit the making of payments between the charity and the current trustees, former trustees, or parties connected to the current or former trustees without the prior approval of the Commission.

The regulator concluded that while no funds were misused or misappropriated for private benefit, this arrangement was inappropriate, and put the charity’s funds at undue risk.

The use of the trustee’s personal bank account has been discontinued and replaced with a more appropriate payment mechanism, the Commission said. Budgets are now set at trustee meetings and reviewed at appropriate intervals as is the charity’s income and expenditure. The charity’s financial controls policy was also reviewed and updated, and a bookkeeper was hired to support the charity’s financial management.

Between 2020 and 2021, Care4Calais operated with two trustees, failing to maintain the minimum number of trustees stipulated in its governing document. A dispute between board members left them unwilling or unable to resolve their conflict. This was found to be misconduct and/or mismanagement and the regulator resolved this by appointing additional trustees during the inquiry.

The Commission’s inquiry report made clear that the new trustee board, which includes trustees appointed by the regulator, has implemented the 2022 action plan and introduced significant improvements to the charity’s management, governance and operation. An independent CEO was also appointed in April 2023 supported by four trustees.

Care4Calais was registered in 2016 and its work includes providing aid and support for displaced people in Belgium and France and asylum seekers in the UK. The latest annual return showed that the charity raised £2.1m in income for year end 30 September 2022 with expenditure of £1.94m.

Orlando Fraser KC, chair of the Charity Commission, said: ‘Our inquiry found that, over a significant period of time, and following a rapid expansion of its operations, Care4Calais was not managed well. Its funds were put at risk, and there was serious misconduct and/or mismanagement by the former trustees.

‘I am pleased that the Commission’s intervention has led to significant improvements to the charity’s governance, not least thanks to the work of the interim manager and new leadership. The charity is now in a much better position to deliver on its purposes.’