Regulator investigates linked charities over financial discrepancies

The Charity Commission is to investigate six charities which share common trustees over serious concerns about potential mismanagement, including financial reporting issues

The class statutory inquiry will look at charities based in Middlesex and Manchester: IPAD, Friends of African Organisations, British Africa Connexions, Hope Direct, Social Action and Poverty Alleviation, and Action for Community Transport. A seventh charity originally included in the investigation, Kono District Development Association UK, was removed from the inquiry.

The Commission identified a series of discrepancies across the charities’ accounts and obtained the charities’ bank statements to examine its concerns further.

After examining IPAD’s annual return, the Commission found discrepancies of over £83,000 income and £39,000 expenditure between information submitted in the charity’s annual return and what was shown in the charity’s bank statements. The issues indicate a potential misapplication of charitable funds and possible personal benefit.

The Commission is also concerned that the trustees have knowingly acted against their legal duty by providing false and misleading information to the Commission.

The accounts held by the Commission for IPAD for FYE 2014 contain identical financial information to three other sets of accounts submitted by two other connected charities included in the class inquiry.

With the exception of one charity there is no evidence of charitable activity which raises concern that there may have been a potential misuse of funds. The Commission has therefore frozen the bank accounts held in the names of six of the charities in order to protect charitable funds.

The inquiry will examine whether the linked charities have been operating for exclusively charitable purposes for public benefit in furtherance of their charitable objects.

It will consider whether the financial controls of the linked charities are adequate and their funds have be properly expended and accounted for, as well as whether the trustees have complied with their legal duties in respect of their administration, governance and management of the charities.

In addition, the inquiry will examine the trustees’ compliance with legal obligations for the content and preparation of the charities accounts and other information or returns is in line with the statutory requirements.

It is the Commission’s policy, after it has concluded an inquiry, to publish a report detailing what issues the inquiry looked at, what actions were undertaken as part of the inquiry and what the outcomes were.

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