Regulator winds up educational charity over ‘reckless’ spending

An educational charity has been wound up by the regulator after an investigation revealed trustees had been ‘reckless’ with funds, including spending some charitable donations on fast food purchases

The Charity Commission’s inquiry into Grove Mountain found that the  charity, supporting education in Jamaica, has failed to show how charitable funds were spent.

Claims by the trustees that they were building a bathroom and installing IT suites at Jamaican schools could not be proven.

The regulator found two trustees – named in the report as Aaron Hanson and Chimezie Emenike – responsible for serious misconduct and mismanagement in the administration of the charity, and they have been permanently removed from being trustees, while a third trustee has also been sanctioned.

The Commission opened an inquiry into the charity in 2017, after a third party raised concerns about its financial arrangements. Money was gifted to the charity via collection boxes and donations from the public.

For the year ending February 2017, the charity  recorded a total income of £92,261 of which £85,188 was recorded as being withdrawn in cash.

The regulator found that the majority of the charity’s income for the year was withdrawn in cash and that there was a pattern of large cash withdrawals being made shortly after donations of identical amounts had been deposited.

The charity’s website claimed that it shipped books for libraries and computer equipment for primary schools to Jamaica. This claim was repeated in its annual report. The charity’s Facebook page also claimed the charity was building a bathroom facility and an ICT suite for an unnamed school, or schools, in Jamaica.

However, the Commission’s inquiry found the trustees had no records of any beneficiaries of the charity and no evidence any of the activities stated online by the charity had actually taken place, despite considerable expenditure of the charity’s funds in cash transactions. While computer equipment had been purchased, none had actually delivered to beneficiaries.

The Commission found that the charity’s financial controls were inadequate, with much of the spending in cash and undocumented, The inquiry also found evidence that a small proportion of the charity’s funds had been spent in fast food chains and high street clothing retailers in the UK.

One of the trustees told the inquiry that a large proportion of cash funds donated by the public in this way were not deposited into the charity’s bank accounts and were instead spent in cash transactions by the trustees. The inquiry found that the trustees exposed the charity’s property to undue risk by failing to deposit cash donations into the charity’s bank account and by expending such a large quantity of the charity’s income in cash.

In addition, the trustees did not submit an annual return, accounts or an annual report to the Commission for the financial year ending April 2017, in breach of their legal obligations.

One of the trustees requested that the inquiry authorise the payment of rent arrears from one of the charity’s bank accounts that had been frozen by the order. The inquiry took steps to verify the information the trustee had provided in relation to this request and established that the rent arrears in question were his personal liability. The inquiry refused to authorise this payment because it would have constituted an improper application of the charity’s funds and conferred a personal benefit.

The inquiry also found that during the period between 16 May 2016 and 9 October 2017 the trustees paid an individual a total of £110,015 in cash. The charity’s records stated that this expenditure was for the purchase of second-hand computer equipment. The invoices lacked details regarding whom the charity had purchased the equipment from. They contained the name of an individual and a mobile phone number but lacked an address for the seller and did not name the charity as the purchaser.

Due to the lack of proper record keeping by the trustees in relation to these transactions the inquiry was unable to verify that these charitable funds were expended for the purposes recorded in the invoice and applied for the purpose of achieving the objects of the charity. A subsequent examination of a number of items of used computer equipment held in storage by the charity established that they had no value.

The Commission installed  Adam Stephens of Smith & Williamson as an interim manager to Grove Mountain in October 2018, who wound up the charity and distributed the remaining funds to a charity operating to support children’s education in Jamaica.

Amy Spiller, head of the investigations team, at the Charity Commission said: ‘When the public generously give to a cause they care about, they expect their money to be carefully managed to ensure it reaches the people who need it most.

‘Instead, some of the trustees of Grove Mountain were reckless with these funds, acting against Commission guidance by spending cash on undocumented purchases and using money donated through collection boxes as their own. This was a gross misuse of charity.’

Charity Inquiry: Grove Mountain

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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