Decision

Charity Inquiry: Jole Rider Friends

Published 10 January 2020

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

The Charity

Jole Rider Friends (the charity) was an unincorporated association governed by a constitution adopted on 9 September 2005. The charity’s objects were;

‘To advance education, in particular by providing or assisting in the provision of facilities and equipment at schools and other educational institutions on the continent of Africa’

The charity was registered with the Commission on 3 February 2006, and it had two trustees, David Swettenham (DS) and Helen King (HK). DS and HK referred to themselves as directors of the charity and were the founders of the charity.

The charity was removed from the register of charities on 13 September 2019 as it no longer exists.

Background

The Charity Commission first contacted the charity on 26 August 2015, in a pro-active enquiry as a result of the charity having only two trustees. In this initial correspondence the charity trustees were asked if the charity had a conflicts of interest policy and whether or not any trustees received remuneration from the charity. On 2 September 2015 DS responded and stated that a formal conflict of interest policy had not been adopted by the charity and that a total of £33,000 had been paid to the trustees as remuneration. Between that date and 30 November 2016, there was frequent correspondence between DS and the Commission.

During the course of this correspondence DS stated that both the trustees had received unauthorised remuneration, from the financial year ended 2008, which contravened the constitution that both trustees voluntarily adopted, at a Special General Meeting, on 9 September 2005.

Accounts for the year ended 29 March 2015 were filed 95 days late with the Commission. The accounts included reference by the Independent Examiner to the making of unauthorised payments to trustees and inadequate stock control.

The accounts for the period from 1 April 2007 to 31 March 2015, disclosed director’s remuneration of £192,500. By the date on which the statutory inquiry into the charity was opened, the trustees had received a total amount of £322,500 which represented 23% of all income received during the life of the charity.

Despite lengthy correspondence between the Commission and the trustees from August 2015, where it was made clear on a number of occasions that the payment of remuneration to trustees should cease, the trustees continued to make unauthorised payments to themselves stating that the charity would be unable to function otherwise. The trustees then refused to make restitution for the amounts that they had received on the basis of it not being in the interests of the charity to do so.

The Commission contacted DS on numerous occasions between 4 November 2015 and 21 September 2016 requesting that the trustees should cease making payments to themselves, but the trustees failed to cooperate. On 21 September 2016, an Action Plan was issued to the charity. As part of the Action Plan the charity’s trustees were given until 21 October 2016 to have all unauthorised remuneration quantified independently and propose a date by which repayment of the amount would take place.

The trustees regularly failed in their duty to submit their financial accounts, Trustees’ Annual Report and Annual return on time. The charity’s accounts for the year ending March 2012, 2015 and 2016 were all submitted late. In addition, on 14 December 2016, a ruling was made against the charity by the Advertising Standards Agency (ASA) relating to misleading information published on the charity’s public website. The ASA requested that the charity ensured that it did not make objective claims about charity operations unless it held sufficient evidence to substantiate them.

On 27 January 2017, three additional trustees were appointed to the charity and all three had resigned by 16 June 2017. DS and HK were the only other trustees of the charity from its registration until 26 January 2017 and from 16 June 2017 until the beginning of the inquiry on 27 September 2017.

Following extensive correspondence with DS, the seriousness of the issues involved, including the failure to engage with the Action Plan, and the trustees’ reluctance to comply with the charity’s constitution, the Commission considered that the matters were so serious as to escalate the case to a Statutory Inquiry. The Statutory Inquiry (inquiry) into the charity was opened on 5 September 2017.

The trustees of the charity were notified of the opening of the inquiry on 27 September 2017, and the service of two Orders on the charity under s76(3)(d) and (f) of the Charities Act 2011 (“the Act”) on the same day, the effect of them being to instruct the charity’s bank not to part with property belonging to the charity and to restrict the use of the charity’s credit card.

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 financial control and management of the charity
• the trustees’ receipts of payment from the charity
• the extent to which the trustees have managed conflicts of interest and transactions with connected parties
• the extent to which the charity operates for public benefit
• the trustees’ failure to comply with the Commission’s action plan and its accounting duties under charity law

Findings

The inquiry found that neither of the two trustees of the charity had grasped the significance and meaning of the statutory inquiry. Their fixation with identifying the “detractors” of the charity diverted their attention from the three matters of concern which were unauthorised remuneration paid to trustees, poor stock control and persistent default of statutory filing obligations. The detractors were those individuals purported by both trustees to have had a negative impact on the charity.

The financial control and management of the charity

Financial Control

The inquiry found that the charity was insolvent, and the trustees were unwilling or unable to supply a list of the charity’s creditors, despite frequent requests to do so.

The charity was significantly in arrears in its payment of rent to the charity’s landlords. When the premises were vacated in early May 2018, a considerable number of bicycles were left behind which the landlords donated to a similar charity. As the charity had not undertaken any form of stock control, it was not possible to value the assets that the trustees had left behind.

The inquiry found that the charity operated a bicycle shop from its premises in Tetbury. Shop sales were poorly recorded, the accounting system used by the trustees was ineffective and there was a lack of documentation relating to the considerable number of cash sales that took place. There was no stock control process in place and as a result of this an audit trail of sales was not possible.

The inquiry found that the trustees had not engaged professionally and openly with both Independent Examiners that they had engaged for the years ended 31 March 2013, 31 March 2014, 29 March 2015 in the first case, and 3 April 2016 and 2 April 2017 in the second. The trustees’ failure to disclose significant pieces of information resulted in the resignation and a severing of all ties with the charity, by both Independent Examiners.

The inquiry found that a number of County Court proceedings had been brought against the trustees by third parties for unpaid debts owed by the charity.

General Management

During the course of the inquiry the Commission served a number of Directions under s47 of the Act on both trustees. None of these Directions were complied with sufficiently.

The inquiry found that the charity operated a number of entities including Bikes4Africa, Mpower2Achieve, My Bike Jumble, The Africa Experience, Charity Bike Rides, Jole Rider Trading and Pireaus M3 but no clear role for the entities was established. None of the entities were structured in a corporate or commercial form and the inquiry concluded that they represented brand names.

The charity established a relationship with a third-party charity whereby bicycles were collected from donors and then stockpiled before being transported to Africa. The inquiry found that the trustees had not been transparent in dealing with that third party in relation to the extent of the disharmony between the charity and its main overseas counterparty. A dispute between the two trustees and an individual remunerated by the charity in Africa, resulted in serious accusations being made against the two trustees. When the third party became aware of the disputes within the charity and the charity’s engagement with the Charity Commission, the relationship came to an end.

It was brought to the attention of the inquiry in July 2018, that in response to the continuation of the inquiry, the trustees created a public website giving the details of a number of private individuals who had either previous connections to the charity or were employees of the Charity Commission dealing with matters arising from the inquiry.

This website was found to breach General Data Processing Regulations and a request was made by the Information Commissioner’s Office (ICO) on 16 November 2018, that the trustees remove the offending information. The inquiry found that the website created by the charity trustees was likely to affect public trust and confidence in charities.

The trustees’ receipts of payment from the charity and the extent to which the trustees have managed conflicts of interest and transactions with connected parties

The charity’s constitution had a strict prohibition on the remuneration of trustees.

Specifically, clause 4, sub-clause 4 stated that:

‘No Trustee may be paid or receive any other benefit for being a Trustee’.

However, clause 4, sub-clause 5(b) of the Charity’s constitution stated that trustees:

“may be employed by or receive any remuneration from the charity”

Where authorisation by unconflicted trustees in accordance with the conditions stipulated in Clause 4, sub-clause 6 (b) is undertaken, as follows:

‘(b) In cases covered by sub-clause (5) of this clause, those Trustees who do not stand to receive the proposed benefit must be satisfied that it is in the interests of the Charity to contract with or employ that Trustee rather than with someone who is not a Trustee and they must record the reason for their decision in the minutes. In reaching the decision the Trustees must balance the advantage of contracting with or employing a Trustee against the disadvantage Trustee’s conflict of interest.’

The inquiry found that DS and HK did not adhere to these provisions in the constitution. The trustees sought to rely on the minutes of a meeting held on 27 February 2017 which had been attended by the charity’s five trustees at the time, to justify their continued remuneration by the charity. However, the minutes of the meeting held on 27 February 2017, gave no explanation at all relating to the agreement in authorising remuneration for either DS or HK. Nor did the minutes properly authorise remuneration in the future. The inquiry found that the minutes of the meeting contained the following words relating to this matter:

“It was agreed that the combined salary and benefits should continue but subject to further review at the next Trustees’ meeting and after further review of the Strategic Reorganisation”

Responses to the Directions under s47 of the Act, served on two former trustees and a voluntary disclosure received from the third former trustee, advised the inquiry that the then unconflicted trustees who took the decision, had not received sufficient information to be able to make an informed and proper decision. Further, no record of the reason for this decision is contained within the minutes of the meeting in a manner that is compliant with the reasons set out in Clause 4, sub-clause 6 (b).

The inquiry’s view is that DS and HK relied on an invalid decision in order to continue to receive remuneration. Further, in any event, both conflicted trustees were aware that their remuneration should have been reviewed at the next meeting and should not have continued to receive remuneration indefinitely, which was the approach they took until the Commission froze the charity’s bank account on 27 September 2017. This is evidence of mismanagement in the administration of the charity by DS and HK.

The inquiry found during the course of Tribunal appeal hearing proceedings that DS and HK incorrectly believed that they could be remunerated for their roles as trustees. On 6 November 2017, DS exercised his right to appeal against the two Orders served on the trustees of the charity on 27 September 2017. Details of this appeal hearing are listed below.

A list of Director’s Duties supplied in the document “Directors’ Reward Justification”, which was sent to the Commission as part of the Tribunal appeal proceedings, listed “Acting as trustees to the Charity” as the first remunerated role. Clause 4 sub-clause 5(b) of the Charity’s governing document prohibits trustees from receiving benefits.

Clause 20 of the constitution states that no decision can be made by a meeting of the trustees unless a quorum is present which is two or a number nearest to one third of the total number of trustees, whichever is greater. DS and HK were the only registered trustees of the charity from registration in February 2006, until 27 January 2017 when the three other trustees were appointed. On 7 March 2017, one trustee resigned, and on 15 June a second trustee resigned. On 16 June a third trustee resigned.

The inquiry found therefore, that no quorate decisions relating to remuneration could have been made prior to 27 January 2017, or after 16 June 2017 when DS and HK were the only trustees of the charity.

The inquiry found that between 3 February 2006 and 27 September 2017, the trustees made payments to themselves in the amount £322,500. Despite contending that as trustees they were not employees of the charity, both trustees drew money on a regular basis from the charity, ignoring the provision within the charity’s constitution, which called for a majority decision of a quorum of unconflicted trustees to authorise the giving of any benefit from the charity to recipient or conflicted trustees.

The receipt of unauthorised remuneration by both DS and HK, which had not been properly authorised in accordance with the charity’s own constitution, is evidence of mismanagement and/or misconduct in the administration of the charity by DS and HK.

The extent to which the charity operates for public benefit

The inquiry found that the charity claimed that it had sent 13,697 bicycles to Africa. When asked for evidence of this, the charity was unable to supply any documents to show that charity funds were used in this endeavour. The only information passed to the inquiry, by the trustees, was an invoice documenting the sale of bicycles to an individual, for cash, that the trustees believed were being sent to Ghana. The inquiry was unable to trace this individual.

The Commission has seen some evidence of the funding of bicycles, being transported to locations in Africa by third parties known to the charity, however there has been no documentation at all supplied to the inquiry that show the funds of the charity itself being used to transport bicycles to Africa.

The trustees’ failure to comply with the Commission’s action plan and its accounting duties under charity law.

The inquiry found that the trustees failed to comply with the Action Plan served on the charity on 21 September 2016, prior to the opening of the inquiry. The trustees’ failure to respond to (or engage with) or take any steps to comply with the Action Plan is evidence of misconduct and/or mismanagement in the administration of the charity. This finding is also supported by the Tribunal (paragraph 66 of the appeal hearing decision, dated 10 January 2008). In coming to this conclusion, the Tribunal did not accept DS’s assertion that the Action Plan had not been received and the contradictory statements made in this regard in relation to receipt of the Action Plan, where it had been filed by the charity and the efforts that had been made to understand its contents.

The charity was in default of obligations under s163(1), s164(1) and s169(3) of the Act regarding the filing of accounts and reports to the Commission for 2015 and 2016, constituting both misconduct and/or mismanagement in the administration of a charity. Further, a failure to file a charity’s accounting information is an offence under s173 of the Act.

The trustees’ failure to engage with the Commission

The Commission found the trustees unwilling to cooperate with the inquiry and were unwilling to respond meaningfully to requests for information. Both DS and HK were interviewed by the inquiry on 12 July 2018 and were unable answer questions about the administration and financial management of the charity. As a result, both interviews were terminated prematurely. It was agreed that the questions would be written down and sent to HK for a written response. The written response was incomplete.

First-Tier Tribunal (Charity) (FTT) Appeal Proceedings

On 6 November 2017, DS exercised the right to appeal against the two Orders served on the trustees of the charity on 27 September 2017.

In upholding the Commission’s Orders served on the charity and dismissing the appeal, the judge concluded that there had been misconduct and mismanagement in the administration of the charity and that the two Orders served on the trustees of the charity should remain in place.

Read the full First-Tier Tribunal appeal decision.

On 8 February 2019, both trustees exercised their right to appeal against the following Orders:

• an Order under section 181B(4) of the Act, served on DS suspending him from being a charity trustee or trustee for a charity, dated 2 January 2019
• an Order under section 181B(4) of the Act, served on HK suspending her from being a charity trustee or trustee for a charity, dated 2 January 2019

On 20 March 2019, both trustees exercised their right to appeal against the following Orders:

• an Order under section 181A of the Act, served on DS disqualifying him as a charity trustee and trustee for a charity, on 6 February 2019
• an Order under section 181A of the Act, served on HK disqualifying her as a charity trustee and trustee for a charity, on 6 February 2019

Both trustees withdrew the appeals on 27 August 2019. The FTT consented to the withdrawal of the appeals on 28 August 2019.

Both trustees have now been disqualified, for a period of twelve years, from 28 August 2019 until 27 August 2031.

Involvement and Conclusions of the Interim Manager

As a result of the suspension and intention to disqualify both trustees from the charity an Interim Manager (IM) was appointed to the charity on 4 January 2019 on a pro bono basis. The appointment was made to the exclusion of the trustees, to discharge the following functions:

• to consider winding up the charity and, if necessary, wind up the charity in accordance with the charity’s governing document
• to make payments to outstanding creditors – to be authorised by the inquiry
• to close the charity’s bank account
• to initiate the procedure to remove the charity from the Register of Charities of England and Wales

No expenses or disbursements were incurred by the IM during the appointment.

Following a review of the charity’s activities and finances, the IM concluded that the charity should be wound up and removed from the Register of Charities. The IM then wound up the charity and it was removed from the Register on 13 September 2019.

Conclusions

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

1. Failure to engage with the Action Plan, issued by the Commission to the charity, on 21 September 2016.

2. The charity was in default of obligations under s163(1), s164(1) and s169(3) of the Act regarding the filing of accounts and reports to the Commission for 2015 and 2016, constituting both misconduct and/or mismanagement in the administration of a charity. Further, a failure to file a charity’s accounting information is an offence under s173 of the Act.

3. The inquiry concluded that both DS and HK consistently breached the charity’s own constitution. Both DS and HK had paid themselves and/or received unauthorised remuneration of £322,500 and would have continued to do so, despite knowing it was unlawful, had the Commission not served a freezing Order on the charity’s bank account. Restitution was considered by the inquiry but in the circumstances, it was not considered proportionate.

4. The trustees failed to comply, in full or at all, with Directions served on them under s47 of the Act. 76(1).

5. The making of contradictory statements relating to receipt of the Action Plan dated 21 September 2016.

Regulatory Action Taken

On 27 September 2017 an Order under section 76(3)(d) of the Act was served on the charity’s bank ordering it not to part with property in its bank accounts.

On 27 September 2017 an Order under section 76(3)(f) of the Act was served on the charity trustees to restrict their use of the charity Barclaycard.

On 8 December 2017 an Order under section 76(3)(f) of the Act in exercise of the power in section 337(6) Charities Act 2011 was served on the charity trustees.

On 2 January 2019 an Order under section 181(B)(4) of the Act was served on DS suspending his role as a trustee of the charity and trustee for a charity.

On 2 January 2019 an Order under section 181(B)(4) of the Act was served on HK suspending her role as a trustee of the charity and trustee for a charity.

On 4 January 2019 an Order under section 76(3)(g) of the Act was served on the charity to appoint an interim manager.

On 6 February 2019 an Order under section 181A of the Act was served on DS disqualifying him as a trustee of the charity and trustee for a charity.

On 6 February 2019 an Order under section 181A of the Act was served on HK disqualifying her as a trustee of the charity and trustee for a charity.

On 3 May 2019 an Order under section 76(3)(d) of the Act in exercise of the power in section 337(6) Charities Act 2011 was served on the charity’s bank revoking the Order not to part.

On 3 May 2019 an Order under section 76(3)(f) of the Act in exercise of the power in section 337(6) of the Act was served on the charity revoking the restricting Order.

On 13 September 2019 Order under section 76(3)(g) of the Act in exercise of the power in section 337(6) of the Act was served on the charity to discharge the appointment of the interim manager.

Directions under s47 of Act and Orders under s52 of the Act were also used to gather information relating to the issues of concern to the inquiry.

Issues for the Wider Sector

A charity must never lose sight of why it exists and must demonstrate how charitable purpose drives everything that it does. Trustees of a charity must always respond when things go wrong and engage with the Commission appropriately.

Charity trustees are under a legal duty to co-operate with the Commission particularly where the Commission has opened a statutory inquiry, and the courts have been very clear about this. Whether they do so or not may be a relevant factor in assessing whether misconduct or mismanagement may have taken place in a charity and considering whether any regulatory action is proportionate.

Charity trustees must act with honesty and integrity, with an understanding of the seriousness and consequences of a breach of trust. Trustees must act with reasonable care and skill. Trustees must act in the best interests of their charity including its reputation.

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 depend on 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.

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.

Every charity needs an effective trustee body which has control over the administration of the charity and acts as a whole, especially because all trustees are equal in responsibility. Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up.

Conflicts of interest and/or loyalty are more likely when there are only a small number of trustees on the board, when trustees are closely related, or when the charity has dealings with organisations in which the trustees have interests. It is vital that trustees avoid becoming involved in situations in which their personal interests and/or loyalties may be seen to conflict with their duties as trustees. The trustees should put in place policies and procedures to identify and manage such conflict.