Decision

Cymmer Workmen's Hall and Institute

Published 18 July 2019

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

The Charity

Cymmer Workmen’s Hall and Institute (“the Charity) was registered on 8th October 1971. It was governed by a trust deed dated 15 February 1899, and conveyance of 22 January 1962, as amended by a scheme dated 16 October 2007. On 18 December 2018, these documents were replaced by a Fully Regulated Scheme.

The Charity’s entry can be found on the register of charities.

The Charity’s objects are:

• to advance the education of the public; and
• to provide or assist in the provision of facilities in the interests of social welfare for recreation or other leisure time occupation of individuals:
  • to advance the education of persons resident in the area of benefit; and
  • to provide (or assist in the provision of) facilities in the interests of social welfare for recreation or other leisure time occupation of individuals who:
    • have need of such facilities by reason of their youth, age, infirmity or disability, financial hardship or social circumstances; and
    • are resident in the area of benefit;

with the object of improving their conditions of life.

Background

The Charity operates a community centre, for the inhabitants of Porth and Cymmer, in South Wales. The charitable activities and services are financed by the running of a licensed bar on the Charity’s premises.

In January 2006, the Commission gave advice to the then trustees of the Charity with regard to running the bar to make them aware that the running of a bar was not a charitable activity. Advice and guidance was provided to the trustees by the Commission and the Coal Industry Social Welfare Organisation, in order to deal with this matter.

The Charity was included in a ‘class inquiry’ under s46 Charities Act 2011, on 11 November 2013, for failing to submit accounts, reports and annual returns for the financial years ending 31 December 2010, 2011 and 2012. The Charity was removed from the class inquiry on 12 March 2014, after submitting the outstanding accounts and returns.

The Commission issued a number of reminders prior to the due date, for the submission of accounting information for the financial years ending 31 December 2014 and 2015, but the Charity fell into default again and became part of a class inquiry again under s46 Charities Act 2011, on 15 February 2017.

During the course of this inquiry, the Commission became aware that the advice given regarding the running of the bar had not been taken. The bar remained in the Charity.

During the preliminary stages of the class inquiry, the Charity submitted late accounts for the years ending 31 December 2014 and 2015 that were not SORP compliant. The 2014 accounts did not contain a Trustees’ Annual Report and the 2015 accounts were not produced on a receipts and payments or accruals account format.

Despite further requests, the trustees persistently failed to provide SORP compliant accounts, and to file accounting and returns information on time, in accordance with their legal obligations.

The Commission took the decision on 7 September 2017 to remove the Charity from the class inquiry and place it into an individual statutory inquiry under s46 Charities Act 2011.

Issues under investigation

The inquiry examined the following charity regulatory issues:

• the administration, governance and management of the Charity by the trustees with specific regard to the extent to which the trustees had responsibly managed the Charity’s resources and financial affairs, to ensure that:
  • any trading carried out by the Charity was compliant with current legislation
  • the Charity had adequate control systems in place to enable the timely preparation and submission of accounting and returns information which complied with statutory requirements
  • the Charity was administered in accordance with the provisions of its governing document
  • risks to the Charity, its property and reputation had been adequately managed, including the extent to which the trustees had acted on previous regulatory advice from the Commission, to avoid the risk of incurring tax liabilities and adverse publicity
• the extent to which any failings or weaknesses identified in the management and administration of the Charity, during the conduct of the inquiry, were a result of misconduct and/or mismanagement by the trustees
• the extent to which the Charity was able to operate on a proper footing and whether steps needed to be undertaken to modify the operating structure and governing document framework of the Charity and social activities associated with the Charity’s property

Findings

On 16 January 2018 and 7 September 2018 the inquiry team visited the Charity.

The administration, governance and management of the Charity

The Charity’s governing document stated that a minimum of three trustees were required for a quorum. The inquiry found that the Charity was inquorate because only two individuals, Trustee A and Trustee B were registered as trustees of the charity. Further to this, Trustee B’s name was removed from the register after it was made clear to the Commission that he undertook no role in the management of the Charity.

Despite there being only one functioning trustee, a committee, comprising a number of members of the Charity, had been convened to undertake the day to day management of the Charity and ensure that it continued to function.

The committee met every two weeks and oversaw the work of the sub committees dealing with finance, entertainment and bingo. Trustee A oversaw the running of the Charity but did not have access to an email which had resulted in previous problems in making contact with the Commission.

The inquiry was informed by Trustee A that the Charity’s history of statutory inquiries and problems with other regulatory matters had discouraged other members of the Charity from becoming trustees and Trustee A had been unable to increase the Trustee Board.

Following the inquiry’s meeting on 7 September 2017, with Trustee A and the committee, three further trustees were appointed to the Charity. The Charity has functioned as a quorate entity since 12 September 2018.

The Charity employed a full time and experienced bar manager to oversee the running of the bar and the Charity also employed part time employees to undertake the cleaning of the premises. The inquiry found that all employees were paid through an employment services provider and it was run in keeping with obligations imposed on it by the Local Authority and Her Majesty’s Revenue and Customs.

Although the sole trustee and committee recognised that the running of a bar was not a charitable activity, the inquiry found that no action had been taken by the Charity to separate the bar activities from the Charity. A charity must run a bar through a separate trading subsidiary which then gifts any profits to the charity which it can then apply towards its objects.

During the inquiry the Charity instructed an accountant to act on the Charity’s behalf and retains this accountant. A separate trading company has been formed and the bar now operates from this entity.

The inquiry found that there had been no risk to Charity funds. The Charity’s financial control procedures ensured that all takings were kept in a locked safe and banked frequently by the bar manager. Bank statements were received by the sole trustee and reconciled to the bar takings.

The inquiry found that there were no written records of meetings kept by the Charity. Following regulatory advice and guidance from the Commission meetings notes and decisions are now formally recorded.

The inquiry found that the Charity offered and continues to offer a range of free activities in order to further the Charity’s objects including:

• social events
• martial arts classes for accompanied children
• warm and comfortable venue for those who are unable to afford to heat their own homes

The inquiry did not find any evidence of misconduct and/or mismanagement with regard to the activities undertaken in the fulfilment of the Charity’s objects and activities.

The Charity has remained fully functioning throughout the inquiry and the administrative burden placed on the trustees, as a result of the inquiry, has not diminished the impact that the Charity has on its locality.

The inquiry found that the sole trustee made every effort to ensure that the modified Charity objects, as stated in the scheme dated 16 October 2007, were complied with but had limited understanding of the significance of the trust deed and conveyance. For these reasons the inquiry suggested to the trustees that a Fully Regulated Scheme should replace these three documents. The Scheme came into effect of 18 December 2018.

Conclusions

The Commission concluded there had been misconduct and/or mismanagement with regard to the following:

• despite being given extensive regulatory advice, the lack of a full board of trustees had compromised the Charity’s Governance and the Charity had not complied with its filing obligations for five out of a period of six years
• a lack of professional advice and relevant knowledge had led to the sole trustee being unable to carry out the functions incumbent upon all trustees and, as a consequence of this, had failed to act in accordance with his legal duties
• the Charity had failed to relocate the non-charitable arm of its activities into a suitable trading vehicle. Following meetings with the sole trustee and committee, arrangements have since been made to transfer the bar into the limited company which has been recently formed specifically for this purpose

Regulatory action taken

As part of this inquiry, on 12 December 2017, the Charity Commission issued an Order under s84 Charities Act 2011, to the sole trustee, to prepare, complete and submit all outstanding accounts, reports and annual returns by 6 March 2018. The Order was fully complied with.

On 18 December 2018, the Charity Commission issued a Fully Regulated Scheme under s69 Charities Act 2011. The Scheme created a new governing document to replace all other documents previously used by the Charity.

Issues for the wider sector

All charities must have an effective trustee body to control and administer the charity in accordance with a charity’s own governing document, charity law and Commission guidance. Public trust and confidence depends of the conduct of trustees and how they safeguard charity funds and undertake the objects and activities of the charity.

Where trustees are unable to undertake functions and obligations themselves, they must ensure that appropriate advice is taken and followed. In doing this, they must act within their powers, act in good faith and only in the interests of the charity, make sure they are sufficiently informed, take account of all relevant factors, ignore irrelevant factors, manage conflicts of interest and make decisions that are within the range of decisions that a reasonable trustee body could make. Meetings and decisions should be recorded.

All charity trustees must ensure that, unless specific exemptions apply, an annual report and annual return and annual accounts, in respect of each financial year, are submitted to the regulator of charities.