Radio XL - Charitable Appeal Funds Managed by Radio XL

(Non-charitable Organisation)

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 11 January 2008.

The Organisation

1. Radio XL is a radio station based in Birmingham. Since 1999 it has conducted a number of broadcast fundraising appeals for victims of natural disasters in various parts of Asia. Radio XL’s usual practice is to place funds raised through each appeal into a designated bank account separate from its business accounts. The person in control of these accounts is Radio XL’s Managing Director, Dr Arun Bajaj.

2. Although the appeals were not conducted within the framework of formally constituted (or registered) charities the Commission is satisfied, on the evidence available, that they were charitable appeals which fall within the Commission’s regulatory jurisdiction.

Previous inquiry relating to Radio XL charitable appeals

3. In 2002 the Commission was informed that Radio XL had not released all of the funds raised through several appeals, broadcast in 2001, on behalf of a charity called Divine Onkar Mission (“DOM”). These particular appeals were for victims of cyclones in the Indian state of Orissa, and the funds were to be released in tranches to DOM for relief projects that were being undertaken in phases.

4. An inquiry by the Commission in 2002 found that the funds that Radio XL had released to DOM had been properly applied for the declared purposes of the appeals but that Radio XL had not released almost £30,000. The Managing Director of Radio XL explained that this was due to a misunderstanding, and that the remaining funds would shortly be released.

Source of Concern

5. In 2003 DOM informed the Commission that the remaining funds had not in fact been received from Radio XL. DOM’s trustees maintained that they had provided Radio XL with adequate progress reports on a project to build a school, but Radio XL’s Managing Director told the Commission that in his view the cost estimates for the work had been too high, and consequently he did not consider it prudent to release the funds.

6. DOM continued to negotiate with Radio XL about what evidence of progress should be produced to approve the release of funds, but despite this the situation remained unsatisfactory. In 2005, DOM’s trustees complained to the Commission that Radio XL’s Managing Director had promised on several occasions to release funds but did not in fact do so. On one occasion, it was claimed, Radio XL handed over a “dummy” presentation cheque for £21,000 to DOM at a fundraising event, but that Radio XL did not honour it.  DOM also informed the Commission that Radio XL had broadcast further appeals since 2001, but it had been unable to obtain any information from Radio XL about how the proceeds of those appeals had been spent.

Commission inquiry

7. Radio XL’s Managing Director failed to respond satisfactorily to the Commission’s requests for documents and information and so a second formal inquiry was opened in order to investigate more fully the concerns about the charitable funds.

Issues

8. The issue addressed by the second inquiry was the continued delay in paying over the appeal funds for the charitable purposes for which they were raised.

Timescale of inquiry

9. The second inquiry was opened on 28 February 2006 and closed on 26 October 2007.

Findings of second inquiry

Funds awaiting application

10. The inquiry found that substantial sums of money raised through three of Radio XL’s broadcast appeals remained on deposit at the bank some considerable time after the appeals had closed:

• the unreleased sum of £29,900, raised for the Orissa appeal, had been deposited in October 2002 and by the middle of 2006 interest earned had taken the balance in the account to over £32,000.  In August 2006 Radio XL released £21,000 of the Orissa appeal funds to DOM, leaving a balance of some £11,500 retained by Radio XL;
• proceeds from an appeal in 2001, which the Managing Director explained to be in response to an earthquake disaster in Gujarat, generated more than £84,000.  These funds also remained on deposit at the bank and by September 2007 had risen to some £95,000; and
• some £15,800, more than half of the proceeds of Radio XL’s 2005 Asian Earthquake Appeal, had not been paid over by September 2007.

Co-operation by Radio XL

11. Radio XL’s Managing Director told the Commission that the delays in releasing funds had occurred because of his strong desire to ensure that money is spent wisely and not wasted. He said that, although longstanding agreements were in place for the application of the appeal funds, he needs to be satisfied that projects for which funds were reserved are properly planned and supervised before he is prepared to release appeal funds. However, the Managing Director persistently did not cooperate with the inquiry beyond providing this limited information.  This impeded the Commission’s inquiry.  His lack of co-operation continued until further regulatory action, in the form of an order to transfer the money to another charity, to spend in accordance with the purposes of the appeals, was proposed.

Conduct of inquiry

12. The Commission’s aim in opening the inquiry was to work constructively with Radio XL so as to ensure that the appeal funds were applied for the charitable purposes for which they were raised.  However, it proved to be necessary for the Commission to take regulatory action, and to plan further regulatory action, in order to achieve that outcome.  In addition to securing a degree of communication with Radio XL’s Managing Director, the Commission had regular contact with the bank at which bank accounts for the appeal funds were held, in order to monitor transactions and to ensure that only appropriate payments were made out of the accounts, and contacted a number of charities about the possibility of their receiving the appeal funds.

Conclusions

13. The inquiry concluded that Radio XL and its Managing Director had failed, without reasonable excuse, (i) to apply some of the appeal funds promptly for the purposes for which they were given; (ii) to comply with the Commission’s reasonable requests for information, including to obey a Direction under the Act; and (iii) to provide proper accounts of the appeals funds. This constituted mismanagement in the administration of the appeal funds.

14. The Commission was satisfied that no questions arose about misuse of any appeal funds or how they were spent.  They had been spent in accordance with the declared purposes of the appeals. However, the Commission concluded that the failure to release funds constituted a form of mismanagement, and the Managing Director’s reluctance to provide firm proposals within a clear timescale for the release of the remaining funds justified the taking of protective action under the 1993 Act to safeguard the funds.

Regulatory action taken

15. On 14 June 2006 the Commission issued a Direction, under section 8 of the 1993 Act, requiring the Radio XL Managing Director to produce the information and relevant documents.

16. On 1 December 2006 the Commission made an Order, under section 18(1) (iv) of the 1993 Act, the effect of which was to ‘freeze’ the bank accounts in which the remaining appeal funds, then totalling some £120,000, were held.

17. The inquiry concluded that a proper application of the funds would best be achieved by their transfer by an order, using powers in section 18 (2) (ii) of the 1993 Act, to a registered charity having the operational infrastructure to provide the kind of relief for which the funds were donated, unless they were applied by Radio XL before the scheme was established. The Commission consulted a number of potential recipient charities.  Although agreement for the transfer of the appeal funds was reached with a particular registered charity, the Radio XL Managing Director finally applied the funds for the purposes for which they were originally raised. 

18. In August 2007 the remaining Orissa appeal funds of some £11,700 were paid over to Divine Onkar Mission.  In October 2007 the other appeal funds, totalling nearly £111,000, were paid over to the Ayra Samaj Gandhidham Charitable Trust, based in India, to be applied towards the cost of construction of two orphanages, one located in an area affected by the Gujarat earthquake disaster and the other located in an area affected by the Tsunami.

Impact of Commission intervention

19. As a consequence of the Commission’s intervention funds totalling nearly £123,000 were finally applied for the charitable purposes for which they were originally raised.

20. The Commission has given advice to the Managing Director on how to structure and manage any further charitable appeals.  The Commission has every reason to expect that this will be followed.

Resources applied

21. The Commission has instituted two separate inquiries, and its inquiry team, in conducting those inquiries, worked in close co-operation with the Commission’s internal legal team.

Lessons for other charitable appeals

22. Funds raised for charitable purposes, even if not raised by a charity, come under the Commission’s regulatory jurisdiction. People who manage and are responsible for such appeals are in the position of trustees and this means that they have legal duties and responsibilities of trustees.  Normally, where those funds are paid over almost immediately there is no need for registration with the Commission.  However, if funds are not paid over swiftly, trustees should form a charity and register it with the Commission.  Where the purpose of the appeal is simply to raise money for other charities then the money should be passed over swiftly, and failure to do so constitutes mismanagement of the funds. 

23. If an organisation is intending to raise funds through a broadcast appeal it should take particular care to explain clearly the objectives.

Para	Issue	Charity Commission guidance and relevant legal obligation
2,22,23	Operation of appeals	CC40 Disaster Appeals: A G Guidelines
11,17	Preparation of s 18 (2) Order	OG1