The Charity Commission’s investigation into the running and work of the charity found that it was principally set up to fund a software project; the principal trustee ran the charity unfettered; loans were made to parties connected to the trustees; and it failed to maintain adequate accounting records.

The compliance case was opened against The Catalyst Trust by the Charity Commission in October 2013, after a complaint had been made by a member of the public. The complainant had alleged that they were renting a property from the charity, but rental payments were being made to a third party.

Among its key findings, the Commission found that of £71,000 in income between 2009 and 2013, it recorded £2,217 of expenditure – of which £2,050 was paid to a private company, supposedly towards a software project.

‘Based on the limited information available about the project’s business model, the Commission could not be satisfied that the charity would gain any real benefit from the project and that charitable funds applied to the project were a misapplication of the charity’s funds,’ it stated in its report.

It also became aware of loans and investments entered into with connected parties, with conflicts of interest inadequately managed. The charity invested funds in a number of different companies in which the principal trustee had either an interest or a personal connection, including directorships and shareholdings.

The Catalyst Trust entered into a loan arrangement with a private individual in February 2013. This loan was arranged by the principal trustee and was secured against the charity’s property. The inquiry established that the private individual was an associate of the principal trustee and that they had understood they were making the loan personally to the principal trustee, rather than to the charity.

Trustees failed to prepare annual statements of account for each of the financial years from 2008 to 2012. Although the charity’s annual income in each of these years fell below the threshold (£25,000) required to submit accounts to the commission, the trustees remained under a duty to prepare accounts irrespective of whether the charity’s income fell below this threshold.

‘Whilst each of the trustees are jointly responsible for ensuring that a charity complies with its accounting duties, the commission concluded that the principal trustee was primarily responsible for the day to day administration of the charity and its practical accounting processes’ the report stated.

‘The commission found that the other trustees depended on the principal trustee to manage the charity’s activities and relied on his judgment when making financial and investment decisions. Based on these factors, the commission removed the principal trustee from the charity using its permanent proactive powers. As a result of the commission’s action the principal trustee is disqualified from serving as a charity trustee.’

After the principal trustee was removed, it was deemed between the Commission and the remaining trustees that the charity should either be ‘regularised’, or wound up. The trustees decided to take the latter course of action.

Report by Kevin Reed