Decision

Families for Survival UK & Save the Age Ltd

Published 19 July 2018

This decision was withdrawn on 29 November 2022

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

The Charities

Families for Survival UK (“FFS”) was registered with the Commission on 15 April 2010. It was governed by a Memorandum and Articles of Association both dated 30 October 2009. In the course of this inquiry FFS was removed from the Register of Charities (“Register”) on 26 January 2017.

Save the Age Ltd (“STA”) was registered with the Commission on 15 May 2013. It was governed by a Memorandum dated 24 June 2011 and Articles of Association dated 1 August 2011. In the course of this inquiry STA was removed from the Register on 23 June 2016.

The Commission has published the statements of the results of the inquiries into FFS and STA (“the charities”) jointly as they were both operated by the same individuals with the same modus operandi. Both FFS and STA were registered and listed as incorporated companies with Companies House. They were recorded as being dissolved in May 2017.

Sources of concern

In February 2014, the Commission received a complaint from a member of the public reporting that FFS did not have appropriate public fundraising licences and that their fundraisers were reluctant to explain to them about the charity. Whilst engaging with FFS regarding these matters the Commission identified the following regulatory concerns:

• FFS was conducting public street fundraising without the necessary licences
• as a result, FFS was paying its street fundraisers, contrary to the Charitable Collections (Transitional Provisions) Order 1974
• there were potential unauthorised trustee payments
• significant payments to individuals connected to FFS
• lack of evidence of charitable expenditure

As a result of these concerns the Commission opened a monitoring case in February 2014. The Commission provided FFS with regulatory advice and guidance about how it needed to comply with charity law requirements. The trustees subsequently failed to follow that advice or take remedial action to ensure they complied with their legal obligations as charity trustees. In March 2014 the Commission requested a meeting with all trustees, however only one of the trustees, “trustee A”, met with the Commission. Trustee A advised the Commission that the other trustees were not available. Following this meeting, the trustees were requested to provide supporting documentation and further information relating to the Commission’s concerns, however the trustees’ responses failed to address the concerns raised.

During November 2014 to March 2015 the Metropolitan Police (“the police”) requested assistance from the Commission including by way of information requests about FFS. Through this engagement and during this period, the Commission learned that the police, in collaboration with London Borough of Redbridge Council (“Redbridge Council”) and the Department for Work and Pensions (“the DWP”) were investigating a network of charitable and non-charitable organisations, including the charities, for allegations of financial crime, potential money laundering and using fictitious personalities.

The Commission made its own enquiries and carried out its own checks. It identified that FFS was linked to another charity, STA (together now referred to as “the Charities”). The Charities were linked by way of shared former trustees and a shared correspondence address that the Commission identified.

The Commission met with the police and Redbridge Council in May 2015 and was advised that their joint agency investigation (“the joint agency investigation”) involved non-UK residents travelling to the UK and paying personal funds into the bank account of FFS, which would subsequently be paid back to them via the BACS system in the guise of wages. Wage slips were then presented to authorities as proof of employment entitling claimants to housing benefits and other social security benefits from Redbridge Council and the DWP. The joint agency investigation had also identified that a number of the names listed as trustees of FFS and STA (and directors on Companies House records) had been “hijacked” from individuals who did not have any connection to the Charities.

In May 2015 the police arrested two individuals connected to the Charities; trustee A, a trustee of both FFS and STA, and “trustee B” a former trustee and employee of FFS. They are now referred to collectively in this report as “the founding trustees”.

As a result of these developments, the Commission had serious concerns about whether Trustee A and Trustee B were or had acted properly in performing their legal duties and what other issues there may be. At this time the Commission’s concerns about the Charities were are follows:

• serious misuse of the charities for potentially fraudulent or other criminal purposes
• potential unauthorised trustee payments
• lack of evidence of charitable expenditure
• dubious fundraising activities

Issues under investigation

As a result, the Commission opened a statutory inquiry into FFS on 9 November 2015 and a subsequent, separate inquiry was opened into STA on 11 December 2015. The Commission did not take any action prior to this so as not to prejudice the joint agency investigation.

Given the links between FFS and STA the scope of the inquiries was the same. The scope of the inquiry for each was to examine:

1. Whether the trustees (current and former) had operated the Charities in furtherance of their charitable objects and for the public benefit

2. Whether the trustees (current and former) had properly exercised their legal duties and responsibilities under charity law in the administration of the charities

3. The financial management of the charities, including independent examination of the annual accounts

4. Whether there had been any direct/indirect private benefit to trustees (current and former) with regard to the operation of the charities assets

5. Whether there had been any misconduct and/or mismanagement and if so, the extent of it

The inquiry closed on 18 July 2018 with the publication of this report.

Issues not in the inquiry’s remit

The inquiry’s remit was not to investigate or make any determination as to whether the trustees had committed a criminal offence under UK law. The joint agency investigation was dealing with this. The Commission’s role where criminality involving a charity is identified is to support the criminal investigation and consider the implications for the way in which the charity is being run.

The Commission received a number of complaints about the fundraising practices of FFS. The Commission’s regulatory concern is limited to ensuring funds raised for charitable purposes and in the name of the charity have not been misappropriated or are otherwise at risk, and that trustees are carrying out their legal duties and responsibilities regarding fundraising arrangements. Fundraising practices themselves are self-regulated – the Fundraising Regulator set up in 2016 to take over from previous fundraising bodies oversees an independent scheme of fundraising, setting and maintaining high standards for charitable fundraising to help increase public confidence in charitable giving.

Findings

Whether the trustees had operated the Charities in furtherance of their charitable objects and for the public benefit

A charity must be set up with charitable purposes and operate for the benefit of the public. Charities must not be used for unlawful purposes. The use of the charities in this way is entirely unacceptable and contrary to operating a charity for the public benefit. In addition, criminal acts connected to the work or operations of charities or criminal acts by those involved with charities have the potential to do great harm to individual charities as well as damage the public trust and confidence in charities more widely.

At the time the inquiries were opened, the Register recorded the following:

• FFS as having three trustees - trustee A and two other trustees which were determined to be “false identities” by the joint agency investigation. Additionally trustee B had been a former trustee of FFS but at the time of opening the inquiry was an employee. Trustee A and trustee B were known to be the founding trustees of FFS

• STA as having three trustees, all of whom were determined to be “false identities” by the joint agency investigation. Trustee A and trustee B were known to be the former and founding trustees of STA

In March 2016, the founding trustees, were prosecuted by Redbridge Council for, and found guilty of, the following offences ^{[footnote 1]}:

• trustee A was convicted of conspiracy to dishonestly make false representation to make gain for himself or another or to cause loss to another or to expose another to a risk of loss contrary to the Fraud Act 2006 and was given a custodial sentence

• trustee B was convicted of dishonestly producing or furnishing documents or information contrary to the Social Security Administration Act 1992 and was given a custodial sentence

Given the way in which FFS was used, namely funds paid into the bank account of FFS, which would subsequently be paid back via the BACS system in the guise of wages, FFS was clearly used for unlawful and improper purposes.

In order to be a charity, an organisation must satisfy the definition of a charity as stipulated in the act ^{[footnote 2]} and must only have charitable purposes which are for the public benefit ^{[footnote 3]}. As part of its regulatory functions the Commission is responsible for increasing public trust in charities. In this instance, the inquiry found that neither FFS nor STA were carrying out any charitable activity. Charity’s activities must be focussed on carrying out its charitable objects for the public benefit and trustees should be able to explain how all of the charity’s activities are intended to further its purposes. Spending charity funds on the wrong purposes is a serious concern to the Commission.

The charitable objects of FFS and STA and how they said they carried out these objects can be found on the Commission’s register at gov.uk. FFS was established to provide support to disabled people, orphaned children, and others in need and claimed to have provided medical care, food, shelters and education. STA’s objects were to relieve need associated with old age, including the relief of poverty, sickness and social inclusion.

The trustees failed to provide the inquiry with adequate evidence of charitable activity in furtherance of the purposes of FFS and STA. Therefore the inquiry was unable to conclude that the trustees or former trustees had acted in furtherance of the charitable objects of FFS and STA or for the public benefit.

Whether the trustees (current and former) had properly exercised their legal duties and responsibilities under charity law in the administration of the charities

Trustees must accept ultimate responsibility for directing the affairs of their charity. The Commission’s guidance The essential trustee: what you need to know, what you need to do (CC3) explains the legal duties of trustees. Specifically the inquiry looked into three of these duties:

a. whether the trustees complied with the requirements of the charities’ governing documents and the law b. whether the trustees acted in the charities’ best interests, including managing conflicts of interests c. whether the trustees managed the charities’ resources responsibly

Whether the trustees complied with the requirements of the charities’ governing documents and the law

Trustees have a legal duty to ensure their charity complies with its governing document and other laws which may apply to the charity. This includes who the trustees are and how many trustees there should be in order to ensure that trustee decisions are balanced and above all valid.

The inquiry identified that Article 25 of the governing documents of FFS and STA both state that “the number of directors shall be not less than three” and article 39 states “the quorum shall be two or the number nearest to one-third of the total number of directors, whichever is the greater”.

Historically FFS and STA each had between three and five trustees listed on the Register. At the time of opening the inquiries the Charities each had three trustees listed. The joint agency investigation determined that apart from the founding trustees, all the other named trustees, current and former, were false identities. The individuals whose identities had been hijacked and falsely used by the trustees provided statements to the joint agency investigation confirming that they had no involvement with the Charities and had never elected to be trustees. These statements were shared with the inquiry under the statutory information sharing gateway.

The joint agency investigation indicated that the hijacked trustees’ details had been obtained through identity theft and that the identities had been used by the founding trustees to engage in unlawful activity using the charities and other non-charitable organisations. In addition to this, by submitting this information to the Commission, they had provided false and/or misleading information to the Commission.

In addition, given this, the founding trustees of FFS had operated the charity without a proper board of trustees since at least May 2015, when trustee B had resigned. There were also breaches of articles 25 and 39 of their governing documents.

In the case of STA, all of the listed trustees of STA apart from trustee A were identified as false identities. Similarly, the founding trustees had operated the charity without a proper board of trustees and were in breach of article 25 and 39 of STA’s governing documents.

Whether the trustees acted in the charities’ best interests

In order to act in the best interest of a charity, trustees must only do what will best enable a charity to carry out its purposes. This includes having a quorate group of trustees to make informed and valid decisions in the interests of the charity and furthering its purposes.

Given the involvement of FFS in criminal activities and that all other trustees of FFS and STA, listed on the Register since the Charities were established were false identities and used to facilitate these activities, trustee A and trustee B were clearly not acting in the Charities’ best interests. The inquiry could not identify evidence of any other individuals involved with the management of the Charities and found that the founding trustees acted alone in operating the Charities. The founding trustees therefore failed in their responsibilities to act in the best interest of the Charities.

Conflicts of interest: part of acting in a charity’s best interests is to ensure personal interests which conflict with the best interests of the charity are properly managed to prevent them from interfering in a trustees’ ability to make a decision only in the best interest of the charity. This means trustees must recognise and deal properly with conflicts of interest, when any trustees receiving payment from the charity for goods or services or as an employee or owning a business which enters into a contract with the charity.

The inquiry identified that the founding trustees were also directors of a number of non-charitable organisations that provided chargeable services to the charities. They were directors of accountancy firms that had been instructed to review the charities’ accounts. As they could benefit financially from this arrangement it was self-dealing and gave rise to a direct conflict of interest.

Where trustees have a conflict of interest in their role, they should identify it, follow any provisions in the governing document about how to manage it, prevent it from affecting decisions and record how it was dealt with. If a trustee stands to benefit directly or indirectly, they should withdraw from the discussion and decision making process.

Article 44 of the charities’ governing documents stipulates “a director must declare the nature and extent of any interest, direct or indirect, which he or she has in a proposed transaction or arrangement with the charity…the conflicted director is absent from the discussion of any arrangement or transaction affecting that other organisation…the conflicted director does not vote on any such matter”.

The trustees failed to provide any records to evidence that conflicts of interest had been identified or correctly managed. The inquiry did not identify any such documents in those seized by Redbridge Council. Despite being asked about it and given the chance to prove supporting documentation, the trustees failed to provide any evidence that conflicts were dealt with adequately or at all in accordance with their governing documents and charity law.

The inquiry found that the founding trustees failed to manage their conflicts of interest in relation to their directorships of the connected non-charitable organisations. By not managing these conflicts of interest, the founding trustees failed to ensure that they were acting in the best interests of the charities. The inquiry found that the founding trustees operated the charities in furtherance of their own personal interests, by allowing the charities to become part of a network of organisations in which the founding trustees had a number of personal interests.

Whether the trustees managed the charities resources responsibly

Trustees have a legal duty to protect their charity’s assets from risk and manage the funds and keep them safe. Funds given to charity are impressed with charitable trusts: they must only be used in furtherance of the charity’s purposes and not for any other purpose.

The inquiry scrutinised the annual accounts of FFS and STA to determine how the funds were spent. The figures in the annual accounts of FFS and STA recorded that annually nearly all of the Charities’ income were expended on charitable activities.

FFS

Year	Income	Expenditure
2014	£316,532	£312,494
2013	£60,678	£58,370
2012	£32,501	£29,730

STA

Year	Income	Expenditure
2014	£18,608	£22,549
2013	£45,219	£38,418

Trustee A told the inquiry that FFS carried out its charitable purposes by visiting local nursing/residential homes to socialise with those suffering with dementia. The activities of STA were to campaign for changes in legislation, policy and practice to improve the lives of elderly people.

When the inquiry reviewed the Charities’ records held by Redbridge Council, no supporting documents were found to corroborate the trustees’ assertions that charitable activity had taken place in either FFS or STA.

A review of the Charities’ bank records by the inquiry indicated that FFS and STA received and made regular payments to a number of individuals which were identified by the joint agency investigation as being part of the unlawful operation run by the founding trustees. FFS and STA wholly spent their annual incomes. The trustees failed to provide the inquiry with any evidence that those funds had been spent on charitable activity.

The information shared with the inquiry by the joint agency investigation determined that the charities were being used as a vehicle to operate an unlawful operation by the founding trustees. Based on the information from the joint agency investigation and the trustees’ failure to demonstrate any charitable activity, the inquiry found that the trustees failed in their legal duties under charity law.

The financial management of the charities

Trustees have a legal duty under charity law to protect the funds and property of their charity so that it can be applied for its intended beneficiaries in order that the charity can fulfil its aims. Trustees must ensure that their charity’s assets are properly used, its funds are spent effectively and its financial affairs are well managed.

In the case of FFS and STA the trustees failed to demonstrate to the inquiry that there was any financial management of the Charities’ affairs, or that funds had been spent in furtherance of the charitable purposes. The inquiry found that the trustees failed in their charity law duties to manage the charities’ resources responsibly and assets by mismanaging the charities’ finances in order to facilitate unlawful activity.

The Independent Examination of the Accounts: to maintain public confidence in the work of charities, charity law requires most charities to have external scrutiny of their accounts. An independent examination provides an external check on the accounts and is carried out by a person with the relevant ability and experience. The examiner’s role is important as it public assurance about a charity’s accounts, expenditure and income. This assurance is relied on by the public when the accounts are published on the Register of Charities.

The inquiry confirmed that FFS and STA used the same accounting company but different independent examiners to review its accounts. The joint agency investigation identified that the name of the independent examiner who reviewed the accounts for FFS was in fact an alias for trustee A and that trustee A was a founding and former director of the accounting company.

Further checks carried out by the inquiry also failed to trace identities for either of the individual independent examiners in the UK. Given that the independent examiner for FFS was an alias for trustee A and that the independent examiner for STA could not be traced, trustee A and trustee B submitted annual accounts containing false information to the Commission and failed to lawfully manage the finances of the charities.

Whether there had been any direct/indirect private benefit to trustees (current and former) with regard to the operation of the charities assets.

Charity trustees hold those funds on trust for the charity and are under a legal obligation to ensure they are used properly. It is a breach of trust if charity trustees divert charitable funds to be used for their own benefit.

Trusteeships are also normally unpaid, although trustees are entitled to have their reasonable expenses met if they have incurred them in their duties as a trustee of the charity. As a matter of best practice a charity would normally have a written policy setting out what was accepted as an expense and how to claim/approve an expense.

Article 6 of the charities’ governing documents states “a director is entitled to be reimbursed for reasonable expenses properly incurred when acting on behalf of the charity”. It also states “no director or connected person may be employed by, or receive any remuneration from the charity…or receive any other financial benefit from the charity”.

The inquiry reviewed the financial records of FFS and found records that showed that from June 2010 to September 2015, a total of £8,262.00 had been paid to trustee A during their time as trustee. Trustee B advised that these payments were in relation to expenses regularly incurred in trustee A’s duty as trustee. The trustees could not produce records to evidence these were expenses incurred by trustee A or for any services provided to FFS by trustee A to quantify the payments totalling £8,262.00.

The inquiry identified that a total of £10,267.00 was paid by trustee A back into the bank account of FFS during their time as a trustee. Although these sums were paid by trustee A to FFS, as the original expense payments could not be substantiated with records, the inquiry still found that the £8,262 of payments were not for legitimate charitable expenditure and unless evidence to the contrary could be produced, trustee A received an unauthorised private benefit.

The inquiry also analysed payments from FFS made to trustee B totalling £6,457.17. Trustee B told the inquiry that these sums were incurred in relation to expenses on behalf of FFS. From the documents held by Redbridge Council, the inquiry was able to identify financial records accounting for payments made to trustee B, however as the trustees could not produce records to evidence that these expenses were incurred by trustee B for services provided to FFS, the inquiry finds that there was insufficient evidence to demonstrate that the £6,457.17 of payments were for legitimate charitable expenditure and unless evidence to the contrary could be produced, trustee B received an unauthorised private benefit.

According to the records inspected, there were no trustee payments made from the bank account of STA to its trustees.

All expense claims should be supported with receipts and a record should be kept for the claim and the payment to the individual. Failure to produce supporting documents calls into question the legitimacy of the expense claims and whether they were incurred in furtherance of the charity’s purposes. The trustees of FFS failed to demonstrate or provide records to the inquiry which indicated that there were processes in place to deal with expense claims or that any evidence of the claims had been maintained in FFS. As such the inquiry found that the trustees failed in their duties.

Whether there had been any misconduct and/or mismanagement by the trustees.

The inquiry found that there was serious misconduct and mismanagement in the administration of FFS and STA by the founding trustees.

The founding trustees used false identities to operate the Charities. The founding trustees failed to protect the assets of the charities by allowing them and the Charities to be used to facilitate unlawful activity.

The inquiry found there was no evidence of any charitable activity conducted. The founding trustees used the Charities for their own personal motives, abused the status and name of charity and failed to follow the basic requirements of charity law and expended funds that were not in furtherance of the Charities’ purposes.

Conclusions

The Commission concluded that FFS was used for unlawful and improper purposes, given the way in which FFS was used by trustee A and trustee B, and the offences for which they were subsequently convicted.

The Commission also concluded there had been serious misconduct and/or mismanagement in the administration of both FFS and STA by both trustee A and trustee B, in particular:

• there was no evidence of activities conducted in furtherance of the charitable objects of FFS and STA

• the Charities had not been and were not operating for the public benefit

• the founding trustees abused their position of responsibility by using the charities as vehicles for unlawful activity as identified by the joint agency investigation, including knowingly creating and using false trustee identities

• the founding trustees did not discharge their legal duties as trustees under charity law – they failed to act in the best interests of the charities, failed to manage their conflicts of interest in relation to their directorships of the connected non-charitable organisations

• the founding trustees operated the Charities in furtherance of their own personal interests, by allowing the Charities to become part of a network of organisations in which the founding trustees had a number of personal interests

• the founding trustees abused the Charities finances – failed to provide the inquiry with any evidence that those funds had been spent on charitable activity and there was unauthorised private benefit to trustees A and trustee B

• the founding trustees submitted annual returns and annual accounts containing false information to the Commission. By virtue of their convictions, the founding trustees are disqualified from acting as trustees of other charities.

During the inquiry, a new trustee board took over the management of FFS. The new trustees decided to dissolve FFS. It was removed from the Register of Charities on 26 January 2017.

STA was removed from the Register of Charities at the Commission’s instigation on 23 June 2016 in accordance with its legal obligation to do so as the Charity was no longer operating, had minimal funds and ceased to exist.

Regulatory action taken

FFS sought a review of the Commission’s decision to open an inquiry. This was dealt with under the Commission’s published review procedures and on 6 April 2016 the Commission issued a public statement confirming that following a review of the objections made by the charity, and information submitted with the request for a review, it concluded that the decision to open the inquiry was a reasonable, proportionate and lawful decision, taken properly.

On 18 December 2015 the inquiry exercised its legal powers and made an order under section 76 of the Act to the bank of STA not to part with the property that it held on behalf of the charity without the approval of the Commission.

On 11 January 2016 the inquiry exercised its legal powers under section 76 of the Act to suspend trustee A from the exercise of their trusteeship of FFS pending consideration of their removal on the ground that it was necessary or desirable to protect the charity’s property.

On 11 March 2016 trustee A and trustee B were found guilty of the charges brought against them by Redbridge Council. As the offences involved dishonesty, trustee A and trustee B were automatically disqualified by law from being trustees of any charity under section 178 of the Act. This removed the need for the Commission to proceed with action against trustee A.

During the inquiry, various information was exchanged with the DWP and Redbridge Council under the statutory information sharing gateways in sections 54-56 of the Act.

The inquiry issued various orders under section 52 of the Act to obtain the bank statements of FFS and STA. The inquiry also issued directions under section 47 of the Act to the Charities’ trustees in order to obtain written statements and documents relating to the Charities.

Following the suspension of trustee A from their role in FFS, a new board of trustees (‘the new trustees’) took up their posts in April 2016. The new trustees intended to re-establish the Charity, fundraise and carry out activities in furtherance of its objects. The inquiry provided regulatory advice and guidance to the trustees in relation to their duties, decision making, end use of funds and financial management. In July 2016 the new trustees submitted an application to dissolve FFS and it was subsequently removed from the register on 26 January 2017.

In June 2016, the inquiry determined that STA was not an active or operating charity. The inquiry identified that the four trustees recorded on the Register were not connected to the charity and were false identities used by the others. The inquiry reviewed STA’s bank account using statements obtained using its powers. These showed a minimal balance and that the account had been inactive since January 2016.

Under section 34 of the Act the Commission has an obligation to remove any charities which have ceased to exist or operate. Accordingly in June 2016, the Commission removed STA from the Register. The inquiry notified the bank holding the then bank account of STA.

Issues for the wider sector

The purpose of this section is to highlight the broader issues, arising from the Commission’s inquiries, which may have relevance for other charities. It is not intended as further comment on the charities in addition to the findings and conclusions set out in the earlier sections of this report, but is included because of their wider application and interest to the charity sector.

Criminality

The abuse of charities for unlawful purposes is absolutely unacceptable. In instances where the Commission uncovers or has evidence to suggest that a civil or criminal offence may have been committed we will share this information, through our statutory gateway, with the police and other law enforcement agencies.

Charities can be attractive to criminals to disguise unlawful activities. The Commission will seek and support prosecution where they believe that criminal activity relating to maladministration or fraud occurs in respect of a charity.

Public Benefit

To be a charity an organisation must have exclusively charitable purposes and be established and operating for the public benefit. The registered objects of the charity were used as a cover for the trustees to use public donations for their own benefit. This case is a clear example that the Commission will act to disrupt the abuse of charitable status and, where we have concerns about criminal activity, we will refer these onto relevant partner authorities.

Commission as Regulator

A decision to remove an institution from the Register on the grounds that it no longer appears to be operating as a charity is not a decision reached lightly. However, the Commission also has a statutory obligation under section 34 of the Charities Act 2011 to remove from the Register any institution which it no longer considers is a charity and any charity which has ceased to exist or does not operate.

Trustee A was convicted and received a custodial sentence of 66 months imprisonment in relation to this offence and Trustee B was convicted and received a custodial sentence of 42 months imprisonment in relation to this offence

1. The court records show that on 11 March 2016: ↩

2. Section 1 of the Charities Act 2011 ↩

3. Section 2 & 3 of the Charities Act 2011 ↩