The Regulator for Charities in England and Wales
Care and Action Trust for Children with Handicaps (CATCH)
Registered Charity No 501833 (removed)
This is a statement of results of an inquiry under section 8 of the Charities Act 1993 as amended by the Charities Act 2006 (“the Act”) and published on 19 March 2008
The Charity
1. The charity was registered on 29 August 1972 and was governed by a constitution adopted on 7 June 1972. As far as the Commission is aware, the charity was largely dormant until the mid-1990’s. Its object was “the relief of children suffering from brain damage by treatment aimed at the Central Nervous System”.
2. At the time of the Commission’s inquiry the charity was based at Swansea.
3. The last full accounts received, for year ending 31 December 2000, show an income of £1,033,990.
Source of Concern
4. For several years the Commission had a number of concerns regarding the management and governance of the charity. It had carried out previous inquiries to examine those concerns and to provide guidance to the trustees as to how to improve the governance of the charity. The Commission made provision to monitor the charity to ensure that progress had been made with guidance being followed. The monitoring process revealed continued failure.
Commission inquiry
5. This inquiry was opened on 1 December 1998 prompted by the failure of the trustees to address the previous concerns.
Issues
6. The Commission identified the following key issues as matters of regulatory concern:
- The governance of the charity by the trustees, particularly their failure to address adequately the Commission’s previous concerns regarding the management and governance of the charity.
- Low levels of expenditure on charitable activities;
- High levels of expenditure on management, administration and fund-raising;
- The questionable accuracy of the accounts with particular regard to the stated amount of direct charitable expenditure;
- Whether the charity’s activities were capable of furthering its objects. For example, there was a research project carried out by the charity on brain-injured children. It was not known whether it had any scientific value or whether the relevant ethical protocols had been put in place.
Timescale of inquiry
7. The inquiry took just under four years to complete and was closed on 21 November 2002. The publication of this statement was delayed pending the outcome of a prosecution of people associated with the charity. See paragraph 18 below
Findings
8. Governance of the charity by the trustees
The trustees failed to take control so that they were neither administering nor managing the charity, leaving this to the employees. The employees awarded themselves substantial remuneration packages without the full knowledge of the trustees. The trustees did not act in accordance with their charity’s constitution in that they failed to meet twice a year as required and there was inadequate recording of discussion, decisions and reasons.
9. Levels of direct charitable expenditure and the questionable accuracy of the charity’s accounts
The method of fund-raising used, cold calling small businesses by telephone was very costly, and the level of direct charitable expenditure was unacceptably low. Despite the charity’s income increasing from £820,174 (1997) to £1,033,990 (2000), the charity’s direct charitable expenditure remained below 20%. The Inquiry also found there had been inappropriate costs allocations, for example salary costs of administrative staff had been inappropriately allocated to direct charitable expenditure. The inquiry also found the charity’s subsidiary trading company, through which some of the charitable funds were generated, had been operating whilst insolvent.
10. Charitable activities
The Commission accepted that work being carried out by two nurses employed by the charity to give guidance to families with children who had brain damage was of real value. However, the trustees had represented for a number of years in the charity’s annual report and on its website that it had been carrying out research into the use of Hyperbaric Oxygen Tanks in the treatment of brain injured children. The trustees were unable to demonstrate that the results of the research provided or could lead to an effective treatment. This research was considered by an independent professional appointed by the Commission to be ‘worthless’. Also it had been conducted without approval from the Local Research Ethics Committee. The Commission found that this was a serious failure by the trustees. By this omission, and their lack of control generally, they had also placed the charity at risk of legal action brought on behalf of the children concerned.
11. Mismanagement
The Commission found that the extent of the mismanagement was sufficiently serious that it decided to appoint an Interim Manager to take control of the charity to the exclusion of the trustees
Conduct of inquiry
12. The Commission inquiry team interviewed all the trustees and employees and carried out a full examination of the charity’s management and financial records. A Commission accountant assisted in this process and also reviewed the charity’s audit papers.
13 In addition, the Commission appointed an independent medical research expert to evaluate the research work being carried out by the charity.
Conclusions
14 The Commission was satisfied that there was very little charitable activity being conducted in relation to the money being donated by the public.
Regulatory action taken
15. On 5 February 2002 the Commission appointed an interim manager under section 18 of the Charities Act 1993 to manage the charity to the exclusion of the trustees. The interim manager confirmed that the charity had been very poorly managed. He also raised concerns that the charity had been claiming Gift Aid from the Inland Revenue to which it was not entitled. He estimated that there had been an over-claim of approximately £680,000. Other outstanding creditors included HM Customs & Excise (VAT). The amount of debt effectively made both the charity and its subsidiary trading company insolvent and they were wound up in the High Court in March 2002.
16. The Commission reported its concerns regarding Gift Aid to the Inland Revenue, now HM Revenue & Customs, which concluded its own investigation. The investigation inevitably took some time to complete. It resulted in a number of successful prosecutions.
Impact of Commission intervention
17. The Commission prevented a continuing abuse of the public’s trust in this charity by appointing an interim manager who concluded that the charity was insolvent and closed it down.
18. On the 7 June 2007 at Manchester Crown Court, having been convicted variously of a number of offences including Gift Aid fraud, income tax (PAYE) offences and theft of cash donations that together totalled approximately £900,000, the following sentences were imposed:
- Trevor England the charity’s chief executive and founder – six years imprisonment
- *Mary Johnson the charity’s fundraising manager – seven years imprisonment
- Andrea Glancy the charity’s administration manager – two years imprisonment
- *Paul Johnson a member of the fundraising staff – one year’s imprisonment
- *Donna Siddaway a member of the fundraising staff – 200 hours community service
(*see Help for All Inquiry report on Help For All Registered Charity Number 1105786 re connected people)
Resources applied
19. The inquiry team was supported by a Commission accountant who carried out an examination of the charity’s financial records. The Commission’s legal officers advised on the strength of the evidence to support the appointment of an interim manager. The inquiry team worked in close co-operation with interim manager.
20. The costs of the Interim Manager were £54,975 plus disbursements of £1,186.88. The above sums are inclusive of VAT.
21. The inquiry team also liaised with other regulators including HMRC.
Lessons for other charities
22. The Commission has a policy of zero tolerance against those persons committing misconduct through fraud and theft against charities and their assets. In such cases it cooperates fully with police and other regulatory organisations. The Commission itself will respond proportionately with regard to the charity and its property
23. Where there has been any misconduct or mismanagement in the administration of a charity or it is necessary or desirable to act for the purpose of protecting the property of the charity, the Commission may by Order appoint an Interim Manager to manage the property and affairs of the charity.
24. Trustees should consider carefully how much fundraising efforts will cost when developing their fundraising strategy. They need to satisfy themselves that spending charitable assets on fundraising will be justified in terms of a realistic return to the charity.
25. Trustees should take care to endure that neither their charities nor any trading subsidiaries are trading whilst insolvent.
|
Paragraph |
Issue |
Charity Commission Guidance and relevant legal obligation |
|
8 and 21 |
Governance |
|
|
9 and 22 |
Fundraising costs |
Date of publication 19/03/2008