Decision

City of Worcester Gymnastics: case report

Published 19 February 2018

This decision was withdrawn on 18 January 2022

This report has been archived as it is over 2 years old.

1. About the charity

City of Worcester Gymnastics Club has been registered as a charity since February 2009. The charity’s aims include fostering and promoting community participation in healthy recreation through gymnastics facilities and coaching.

2. Why the Charity Commission got involved

In early 2016, the Commission was made aware of concerns about the charity’s governance and financial management, suggesting that the charity had not held an AGM for a number of years and had failed to publish or make available its accounts to members, or elect officers in line with the process described in its constitution. The charity had recruited a trustee to the role of General Manager without advertising the post and had lost around £10,000 cash following a burglary.

3. The action we took

We opened a regulatory compliance case to establish who the current trustees were, if the charity had a conflicts of interest policy in place and whether any of the trustees were currently paid. We also sought an explanation of the charity’s governance arrangements from former trustees and checked whether the current trustees had properly exercised their legal duties and complied with our guidance when making recruitment decisions. We wanted to know whether they had discharged their duties properly in reporting and managing any loss of charity funds.

4. What we found

The charity confirmed that a named trustee had resigned upon taking up a paid role as the General Manager. This individual was connected to another trustee by virtue of a long term relationship, and it was clear that the conflicted trustee had been involved in the appointment process, including setting remuneration and bonus arrangements for the role. The charity did not have a conflicts of interest policy in place, and had failed to report the loss of £10,000 cash in 2011. The trustees had also provided inaccurate information on annual returns and did not have sufficient trustees on its board to make decisions in line with their governing document.

Following further information gathering and enquiries we met with the charity in October 2016. We established that a burglary at the home of the General Manager and connected Trustee had resulted in the loss of the £10,000 after cash had been taken home. We found that the General Manager and the trustee had failed to take any action to reimburse the loss to the charity.

The charity’s record keeping was generally poor, with little evidence of trustee meetings being held or records of decisions taken. We established that the charity had little in the way of financial controls, with evidence of large related party transactions and cash expenditure, and significant missing financial records.

The charity was unable to provide any evidence of trustee decision making around the creation and recruitment of the General Manager role. The former trustee was appointed to the role within weeks of leaving another job, which was subject to a confidentiality agreement in settlement of an Employment Appeal Tribunal claim. The individual had also offered to leave their previous job and take a pay cut to take on the General Manager role with the Gymnastics Club.

The charity had also entered into a lease agreement for a £44,000 motor vehicle. There was no record of trustee decision making around the lease agreement for the motor vehicle, whether this vehicle was required, and whether it was in the best interests of or in furtherance of the objects of the charity.

5. The impact of our involvement

In February 2017 we used our formal powers under the Charities Act 2011 to issue the charity with formal advice in an action plan. That plan made clear that:

• the trustees were required to recruit additional un-conflicted trustees and arrange an AGM
• once appointed, the un-conflicted trustees should decide if the charity still required a General Manager and if so, re-advertise the post under an open and fair recruitment process
• a formal repayment plan must be put in place to allow the conflicted trustee and General Manager to make good the £10,000 losses incurred as a consequence of their actions
• the trustees should decide whether there was a legitimate need for the charity to continue to lease the motor vehicle, and consider alternative arrangements
• the charity should instigate a review of its meetings and governance arrangements, as well as its internal policies

We took follow up action in May 2017 to check that the charity had complied with the specific requirements contained within our action plan. The charity responded in August 2017 with evidence and assurance that satisfied us that it had.

6. Wider Lessons

6.1 Protecting your charity’s assets

Charity trustees are under a legal duty to manage their charity’s resources responsibly and avoid undertaking activities that might place their charity’s assets or reputation at risk.

In this case the charity did not have sufficiently robust policies on controlling its resources and failed to exercise due care. It has now taken steps to improve this.

Further detail can be found in Charity finances: trustee essentials (CC25).

6.2 Recruiting new trustees

Trustees must be appointed in accordance with a charity’s Governing Document. A failure to do so can throw doubt on the validity of the appointments and the decisions taken by them.

Advice and guidance on the recruitment, appointment and induction process for new charity trustees and how to set a framework for recruitment is available in CC30- finding new trustees.

6.3 Conflicts of interests

Trustees must be careful not to be influenced by personal relationships or rely too heavily on trust, rather than proper professional advice.

Advice on the legal and regulatory requirements relating to conflicts of interest and how trustees can identify and manage them is available in Conflicts of interest: a guide for charity trustees (CC29).

6.4 Internal financial controls

Internal financial controls are essential checks and procedures that help trustees meet their legal duties to safeguard the charity’s assets and administer the charity’s finances and assets in a way that identifies and manages risk. They also ensure the quality of financial reporting, by keeping adequate accounting records and preparing timely and relevant financial information.

Further detail about how to ensure that internal financial controls are adequate can be found in internal financial controls for charities (CC8).

Trustees can use the Commission’s checklist to review their controls.