Decision

The Garden Bridge project: Charity Commission concluding report

Published 9 April 2019

1. Introduction

The Charity Commission’s purpose is to ensure charity can thrive and inspire trust, so that people can improve lives and strengthen society.

Our statement of strategic intent makes clear that, in order to fulfill that purpose, we must understand the wider context in which charities work and lead thinking about how charities can thrive in a changing world, helping to shape and update the environment in which they operate and the wider debate on their future activities.

In this report, we set out our concluding findings on the management of the Garden Bridge Trust by its trustees, and draw on our particular perspective of this case to suggest the wider lessons that can be learnt for charities, for us as regulator, and for those making public policy decisions that involve charities in this way.

This report is intended to complement our first regulatory report into the Garden Bridge Trust, and sits alongside others – including the review by Rt Hon Dame Margaret Hodge MP (the Dame Margaret Hodge report) and the National Audit Office investigation (NAO) which examined the project with different expertise and from different perspectives.

2. Executive summary

The Garden Bridge project was a high profile and expensive failure; significant sums of public money were spent on a footbridge for London which never materialised. That failure involved a registered charity, the Garden Bridge Trust, under the Charity Commission’s jurisdiction. This has led some to question the Charity Commission’s regulatory oversight of the Garden Bridge Trust.

In section 4 and section 5 of this report we set out our regulatory findings on the Garden Bridge Trust. In summary we remain assured that the trustees fulfilled their legal duties in their decision making regarding the construction of the bridge, and have seen no evidence to suggest the trustees have failed in their duties since publishing our 2017 report, save in relation to the late filing of accounts, as discussed in section 5.

Even though the Commission finds that trustees complied with their legal obligations and that there was no mismanagement, the fact that £50 million of public funds were spent by a charity and produced no demonstrable public benefit or impact represents a failure for charity which risks undermining public trust.

The circumstances that led to the collapse of the Garden Bridge project and the eventual winding up of the charity may be unusual but there are important lessons here for charities, policy makers and for the Commission to reflect on how charities are used to deliver significant infrastructure projects.

For the Commission, the requirement to register organisations that meet the legal test of charitable status does not prevent it from engaging with those seeking to establish a charity to ensure they understand the expectations generated by being responsible for publicly-funded projects of these kinds.

For policy makers who are trying to encourage philanthropic donations and support for infrastructure projects of this kind, consideration should be given to alternative ways of furthering charitable purposes that do not involve exposing charities to operational risk. Nor does handing public money to charities absolve funders from the responsibility to ensure that it is properly spent.

For charities in these situations, transparency and accountability should go beyond complying with basic financial reporting requirements to being able to explain how and why decisions are being made in such a way to best deliver the charity’s purpose.

3. View from the regulator – wider lessons to learn

We believe that we have a duty, in the public interest, to draw on our particular perspective on this case, and others we have dealt with, to suggest the wider lessons that can be learnt for charities, for us as regulator, and for those making public policy decisions that involve charities in this way. We set out these wider lessons in this section.

In setting out these lessons, we do not seek to apportion blame to any organisation or individual for the failure of the project, nor are we making any comment on the specific events of this case or concluding that those involved in the project necessarily failed to take any of the particular steps we identify or recommend.

We are drawing out learning from the circumstances of the case, the surrounding environment and our wider knowledge and experience as a regulator which we believe will be beneficial for stakeholders to draw on in order to meet public expectations of charity.

3.1 Establishing a charity to deliver a project using public funds

Local and national government rely on charities to deliver vital services for the public. This happens directly, through contracted public services on behalf of the state, and indirectly, where charities deliver services that are complementary to public services, or seek to fill gaps in existing public service provision.

Charities are often in a strong position to deliver high quality contracted public services, due to their proximity to the communities they serve, and because of their particular expertise, experience and ethos. As a result, the public is richer, both as a result of the quality of services received and because these services, which are paid for using public funds, can be delivered cost effectively. This should not be discouraged.

In the case of the Garden Bridge Trust, Lord Davies, the charity’s first Chairman, stated that he was approached by Transport for London (TfL) to establish a new charity in order to build the bridge. This approach is unusual, and a distinction should be drawn between this scenario and the more usual instance whereby local and national government contract with existing charities with expertise and experience in the area or issue in question.

The charity remained heavily reliant on continuing financial support from TfL and political support from the Mayor to be able to deliver on its reason for existing and its main charitable objective – to build a Garden Bridge. In other words, the charity held very serious responsibility and carried considerable risk but, having been established specifically to undertake a particular publicly funded project, did not have the usual flexibility and discretion that allows trustees of charities with broader charitable purposes contracting with national or local government to continually assess whether doing so is the best way to deliver on those purposes for the public benefit.

Those responsible for initiating and funding a specific project, and considering setting up or supporting the establishment of a charity to oversee the delivery of such a project, should be absolutely clear on what purpose they believe will be served by doing so, and thought needs to be given to the most appropriate structure.

Where there is the intention to encourage philanthropic donations and support for a certain project, it does not follow that it has to be delivered by a charity, even if the project will further a charitable purpose. Where appropriate, a charity can be established to support such a project and provide grant funding without taking on the risk and responsibility of delivering the project.

Charities are independent in law and must be run in line with their charitable purposes for the public benefit. As a consequence, public authorities or other third parties that set up charities to deliver projects will not have the same control over them as they would have if the projects were run by them directly. The trustees of a charity must, for instance, make decisions in the best interests of the charity and not in the interests of the charity’s funders.

If a charity is to undertake a significant public project then it should have appropriate governance arrangements in place and recruit trustees with the necessary knowledge, skills and experience. The trustees should have full oversight of the project, identify and manage the risks, oversee delivery using project management methods and be prepared to challenge assumptions.

Accountability to all stakeholders and full transparency will be important to maintain the public’s trust and confidence and ensure the charity has on-going support, financial and otherwise, from all stakeholders, over whose decision making the trustees would have limited control.

Those who are called upon or who volunteer to serve on the board of a charity set up to deliver public projects or services should be aware that they will be subject to a ‘double whammy’ of public expectations. They will be expected to demonstrate scrupulous accountability in relation to their use of public funds and assets; they will also be held to the high standards of behaviour and attitude that the public expect of all charities and by the Commission against their charity law duties and responsibilities.

Trustees of such charities should therefore demonstrate transparency, openness and a willingness to engage, and enthusiasm for engaging with the public and stakeholders.

Most charities are subject to operational uncertainty and risks, often outside their control, that could lead to failure if left unmanaged. This will be a particular factor in major capital projects and the trustees of charities undertaking such projects will need to have robust control systems in place to manage the risks faced.

When major risks are identified, the trustees will need to make sure that appropriate action is taken to manage them, consulting with stakeholders and taking professional advice as necessary. This could mean making an informed decision to stop a project or end an activity. In such circumstances, we would expect the trustees to fully document their decision making and be able to explain this to stakeholders.

We would advise policy makers to think very carefully before setting up an entirely new charity to deliver a singular public project or purpose. We consider it unlikely that the public would expect risks that are inherent in a major public infrastructure project to be outsourced to such a charity.

Where the setting up of a new charity is considered in relation to such a project or purpose, public policy makers will be aware that they retain ultimate responsibility for application of funds and should build in appropriate accountability mechanisms, checks and balances.

3.2 Transparency and behaviour

To aid transparency and accountability, we actively encourage trustees to adopt a spirit of full disclosure. An annual report is not just for funders or donors, but also for the wider public who have an interest in what charities do and how they achieve it. The charities statement of recommended practice (SORP) gives a framework for accounting and reporting.

The SORP states that ‘good reporting explains what the charity is set up to do, how it is going about it, and what is achieved as a result of its work. The report should assist the user to make economic decisions in relation to the charity and to assess the charity’s progress against its objectives and to understand its plans in relation to its purposes (Charities SORP FRS 102)’.

Where a charity is tasked with delivering a project funded through the public purse, its trustees should be aware that they are likely to face additional scrutiny from the public around their stewardship of those funds. Trustees should embrace that scrutiny, and respond with a commitment to transparency and openness.

Charities that receive public funds to deliver public services or projects should demonstrate scrupulous accountability and a spirit of transparency and openness to the public. The legal minimum set out in the accounting framework should be viewed as just that: a minimum, not an aspiration.

3.3 Accountability

When a project is delivered through a charity, trustees should consider the transparency and accountability of the charity to its stakeholders and the wider public. This means not only providing them with information, but consulting with them and taking their views into consideration where appropriate. This is particularly important where a project might have a negative impact on some individuals or where the trustees need, for instance, to take account of users with particular needs.

This has relevance for both trustees and funders. Funders should build appropriate terms and conditions into funding agreements to ensure the money is spent in line with the original intention and delivers the benefit and impact that is desired.

They may also wish to consider building in accountability and reporting requirements for public money which are more demanding than the general responsibilities for charity trustees, in order to meet public expectations. This will increase transparency of spend and provide protection of the funds. A grant agreement or other appropriate legal arrangement should be in place prior to transferring money to a charity in order to deliver protection of public funds.

Trustees should consider themselves accountable to the charity’s funders, stakeholders and the wider public. Charities should not only provide them with information, but consult with them and take their views into consideration where appropriate.

The regulation of charities by the Commission can provide a basic assurance regarding trustees’ compliance with their charity law duties and responsibilities, but it cannot replace sound and detailed contracting arrangements and controls.

3.4 Lessons for the Charity Commission

Our role in maintaining the register of charities includes assessing applications for charitable status against the legal framework. The law requires us to register organisations that have exclusively charitable objectives for the public benefit, as the Garden Bridge Trust did.

However, we have been clear that our role amounts to more than the exercise of our statutory functions. And so the law that applies to our work in registration does not prevent or preclude us, in appropriate and exceptional circumstances, from engaging with those seeking to register an organisation to ensure they understand the consequences of doing so.

This engagement would not impact on the legal status of the organisation, but it would help ensure that those setting up and running charities are aware of their duties and responsibilities and are equipped to meet public expectations around charity.

We are clear that charities should be accountable to people with an interest in them and their work. With respect to larger charities, the SORP sets out the expectations around transparency, reporting and accounting. A review of the governance of the SORP is currently considering, among other things, whether the SORP process includes the voices of stakeholders effectively, so that the SORP delivers on what people want to know. From our research, we know that the public want to know that charities have spent their money well, have made a difference and live their values.

Accountability and transparency of charities is essential if charities are to inspire trust, and in turn fulfil their potential, and we work to ensure that accounts are submitted on time. We will explore what more could be done to prevent charities failing to submit their accounts on time.

Over the coming months, the Commission will consider how we can better alert trustees of charities established to deliver projects with public funds to the lessons noted in this report. We will not – and cannot, in line with the legal framework – take into account irrelevant factors in our decisions regarding charitable status. However, we will engage with applications in such cases to seek to ensure they understand the expectations generated by being responsible for significant publicly-funded projects.

In future, when we receive applications from charities established, or being established, wholly or mainly to deliver a publicly funded project, we will engage with those seeking to establish the charity to ensure they understand the consequences and responsibilities that follow, including the need to meet the public’s expectations around the transparency and financial stewardship. This will not affect the status of such organisations as charities, which is determined in accordance with the legal test.

4. Our regulatory findings on the Garden Bridge Trust

4.1 Background to the charity

The concept of a Garden Bridge for London predated the existence of the Garden Bridge Trust. In early 2013, TfL issued a tender for a new pedestrian bridge to span the River Thames between the Southbank and Temple underground station. The concept of a ‘Garden Bridge’ was the successful bid.

Lord Davies, the first Chairman of the Garden Bridge Trust is on record as stating that he was approached by TfL to establish a new charity to deliver the bridge.

The Garden Bridge Trust was incorporated as a company in October 2013 and registered as a charity in January 2014. It was established principally to fundraise for, oversee the construction of, and ensure the subsequent maintenance of the Garden Bridge.

Public funding for the bridge came from the Department for Transport (DfT) and TfL, which, combined, committed to make a contribution to the charity of £60m, £20m of which was to be treated as a loan repayable to TfL. Non-public funding was donated to the charity by grant-making charities, corporations and individuals. As is common, some donations were made subject to a restriction requiring their return in the event of the project not proceeding.

A condition of the bridge’s planning approvals was a Mayoral guarantee to underwrite the maintenance of the bridge, should the charity delivering the project fail. This meant the charity was reliant on Mayoral agreement to provide financial assurances on the future maintenance of the bridge in order to be able to deliver a bridge.

The Dame Margaret Hodge report notes that approval for such guarantees was given, in principle, by the Mayor in a letter from the Greater London Authority (GLA) to the Trust’s Executive Director dated 18 February 2015. The report goes on to note that these guarantees were given substance through two Mayoral Decisions in June 2015 and April 2016.

Following a change in administration, and the findings of the Dame Margaret Hodge MP’s review of the project, the charity was informed that the necessary guarantees would not be provided. Without the guarantees, the charity was unable to secure planning permission, and consequently unable to fulfil its function to build the bridge.

As a result, the charity announced its decision to terminate the project in August 2017, and is now in the process of winding up. The charity’s final expenditure on the project is estimated to be £53.5 million.

4.2 The Charity Commission’s role and remit in this case

The Commission’s purpose is to ensure charity can thrive and inspire trust so that people can improve lives and strengthen society. Our statutory objectives are set by Parliament.

Our role in registering charities is to maintain an accurate and up to date register of charities, which involves determining whether or not organisations are charities within the legal framework.

The Garden Bridge Trust met the requirements set out in the Charities Act 2011 and none of the exemptions in law from registration applied. The Commission therefore registered the Garden Bridge Trust as a charity, as required by law.

Our role in scrutinising the Garden Bridge Trust was to investigate whether the trustees were meeting their duties and complying with charity law. It is not within the Commission’s regulatory remit to consider wider questions about the use of public funds or value for money when using public funds, or whether delivering public projects through a charity is appropriate.

A report by the NAO considered value for money of the DfT £30m grant. It is for the relevant bodies in government and Parliament, such as the NAO and relevant Committees, to consider whether taxpayers received value for money through this grant funding.

4.3 Our oversight of the Garden Bridge Trust

The Commission received a complaint about the governance of the Garden Bridge Trust in 2016. Since then, the Commission has continued to monitor the charity due to the nature and profile of the project, aware of the risk to public trust and confidence in charities as a result.

Key milestones of the Commission’s involvement are noted below:

• 8 January 2014: the Garden Bridge Trust is registered with the Commission
• 18 August 2016: the Commission meets with the charity and its legal advisers regarding a complaint made about an anonymous donation and the capabilities of the charity to oversee building a bridge
• 31 August 2016: the Commission visits the charity to review the approach to both the contracting and the budgeting for the project
• 17 April 2018: the Commission visits the charity to explore reasons for the charity’s continued default on their filing obligations
• 4 May 2018: a meeting is called to address persistent non-filing of accounts

5. Our conclusions on the compliance by the trustees of Garden Bridge Trust with their duties

In February 2017, we reported on our regulatory review of the charity up to that point. That work involved an inspection of the charity’s approach to awarding contracts and budget setting and interviews with trustees and staff, and focused in particular on the funding, structure and governance of the charity. It considered the awarding of contracts - whether a large donation was an inducement to award the design and build contract to a certain party; enquiring whether the trustees had the requisite skills and knowledge; whether the trustees were taking appropriate professional and technical advice and whether they had proper oversight and infrastructure in place.

Our findings, in summary, were that the trustees were meeting their duties and acting in compliance with charity law and that the trustees provided strategic leadership and direction to the charity, understood their duties and responsibilities as trustees, and had evidenced robust and informed decision making.

This included the way the trustees managed conflicts of interest and awarded contracts. We identified areas in which the trustees could have made improvements, such as in their annual reporting, but based on the information available to the trustees and the Commission at the time, we found no grounds for concerns about the conduct of the trustees or their decision making. We found no evidence of funds being applied in breach of trust.

In response to public concern about the trustees’ decision making relating to the letting of the design and build contract, we have carefully reviewed our 2017 regulatory conclusions. We have sought additional information from the charity to test whether we can remain assured that the trustees fulfilled their legal duties in their decision making.

We have also have taken additional, exceptional steps in our scrutiny of the trustees’ conduct and management of the Garden Bridge Trust. These steps included a direct approach to the Commissioner of TfL, to ascertain if TfL, as the one of the main public funders of the project, had any concerns about the charity’s use of TfL funds. We received confirmation that TfL had no such concerns.

The result of this review is that we remain assured that the trustees fulfilled their legal duties in their decision making.

We have seen no evidence to suggest the trustees have failed in their duties since publishing our 2017 report, save in relation to the late filing of accounts, as discussed in this report below.

5.1 The decision to let the contract for the construction of the bridge

The Commission is aware of particular concern about the charity’s decision to enter into a contract for construction of the bridge in February 2016. At the time, the charity had not secured all of the necessary rights to use the land required for the bridge or all of the funding.

Further, the charity had not secured an operation and maintenance guarantee from the Mayor of London as required by the Port of London Authority and planning approvals from the London Borough of Lambeth and Westminster City Council.

As part of its assurance work, the Commission reviewed this decision to ensure the trustees followed the principles developed by the courts for the making of decisions by trustees. These principles are set out in our guidance on decision making to assist trustees in meeting their legal obligations.

To put the decision in context, the following timeline details key milestones in the awarding of the contract.

• April 2015: following a staged process to select an appropriate partner and achieve value for money, the charity entered into a joint venture between Bouygues Travaux Publics and Cimolai (the joint venture) as the main contractor to build the bridge and entered into a Pre-Construction Services Agreement to enable the detailed design to be prepared
• April to September 2015: the joint venture worked with Arup, the charity’s project manager, to finalise the detailed design required to begin construction
• December 2015: the trustees agreed to proceed to place the main construction contract with the joint venture, subject to the finalisation of a small number of outstanding matters. In the meantime, the Pre-Construction Services Agreement was extended until the end of January
• January 2016: the trustees again considered the decision to place the main construction contract, providing an opportunity for any trustees who had questions or concerns to raise them. The trustees gave delegated authority to the vice-chair to execute the construction contract
• February 2016: the main ‘design & build’ construction contract was awarded to the joint venture
• March 2016: the charity issued a press release confirming the execution of the contract
• July 2016: the charity put the joint venture on standby to allow the land negotiations to be concluded and Mayoral guarantee to be obtained before further commitments to the construction were made

We were informed that, in making these decisions, the trustees received professional and technical advice from a number of sources. A number of trustees had professional knowledge and others had specific business experience relevant to the decision.

The Commission understands that the principal consideration that determined the charity’s decision to place the contract, before all of the necessary approvals were in place, was the benefit of securing a fixed price for the contract within the budget as it then stood. Without this type of design and build contract, the contractor could not be held to a commitment as to the contract price.

The Commission saw evidence that, as well as identifying risks in proceeding to enter into the contract the trustees also considered the risks around proceeding more cautiously. The trustees considered that doing so presented a considerable risk to the prospects of being able to construct the bridge at all.

The judgement exercised by the trustees was that it was in the best interests of the charity to enter into the contract and proceed with the project, given the charity’s primary charitable objective to build and maintain the bridge.

The trustees considered that there was a good prospect of all of the hurdles that still stood in the way of progress being cleared and that the benefit of entering into the full design and build contract outweighed the risks and in respect of which risks, effective mitigation measures were in place. In addition, we were informed by the trustees that risk protection measures were written into the contract such as the ability to suspend work if that should be necessary at any time and for any reason.

The trustees have been clear that City Hall and TfL were informed on the letting of the construction contract. This was confirmed by the Dame Margaret Hodge report. The trustees reported that there was no indication that the maintenance guarantees, required by the planning agreements, would not be signed by the Mayor, and that the DfT was also informed of the Trust’s intention to let the contract. The Dame Margaret Hodge report confirms this.

The trustees state that specific provisions were incorporated into the contract to manage the risk of termination including the ability to terminate the contract at any time, upon payment of costs properly incurred to date by the contractor, and the costs of demobilising.

The trustees benefitted from knowing that there was a penalty-free exit arrangement in the event of the project having to be halted. As a consequence, when the contract was terminated, no termination payment was made to the contractor that represented a penalty, payment for loss of profit or opportunity, or other compensation that went beyond costs incurred. This had the effect of limiting the charity’s potential exposure to resulting costs.

It is important that the Commission’s role is understood. Charities are independent and trustees alone are responsible for governing a charity and making decisions about how it should be run. Our guidance on decision making sets out the principles that trustees must apply in making decisions.

The Commission cannot say whether a decision is “right” or “wrong” – for the Commission to have such power would compromise the independence of charities – but only, in this context, whether the decision was within the range of decisions that a reasonable trustee body could make.

It is therefore not for the Commission to decide with hindsight whether the trustees of the Garden Bridge Trust made the right decisions but whether the trustees adhered to the requirements of charity law. We concluded in respect of the decision to let the contract for the construction of the bridge that:

• the trustees had power to make the decision
• the trustees followed the principles of decision making referred to above
• the decision was within the range of decisions that a reasonable body of trustees could have made

5.2 Expectations of accountability and transparency

As the regulator of charities, it is one of the responsibilities of the Commission to ensure that charities offer accurate, up-to-date and relevant information about themselves. This information should be easy to access and use. It should allow charities to demonstrate how effective and efficient they are and the difference they are making.

As regards to the charity’s accounts for the year ending March 2016, our 2017 report states that the trustees could have provided more detail in their annual report about the expenditure incurred, the challenges addressed, and how it would meet its liabilities in the event of closure - all in the interests of greater transparency.

The charity’s accounts for year ending March 2017 were filed 143 days late, in late June 2018. The charity informed us that the trustees were following professional advice that it was not appropriate for the trustees to sign off audited accounts at that stage.

However, we made clear that whatever the trustees’ reasons for making the decision not to submit audited accounts, they were in default of reporting requirements and were therefore failing in their legal duties.

Although the 2017 accounts are compliant with the reporting framework (the Charities SORP), we have made clear to the trustees that the charity has not displayed the level of transparency and accountability that we would expect, given the nature and profile of its work. We do not consider mere compliance with the SORP to be sufficient in the circumstances.

Trustees should embrace external scrutiny, and respond with a commitment to transparency and openness. In this case, we do not think that trustees embraced external scrutiny sufficiently, and could have better explained how and why decisions were being made in such a way as to best deliver on the charity’s purpose and the task it was set up to fulfill.

The Charity confirmed to us in September 2018 that it had resolved to publish an itemised summary of costs incurred since the inception of the project and since then it has confirmed that this cost breakdown, already in the public domain, will be attached to its final accounts when submitted to Companies House and the Commission.

The further financial information about the project, published by TfL in February 2019, included in it the charity’s full analysis of project costs to November 2018. TfL also confirmed that it would be making a payment in response to the charity’s application to draw down funds from the DfT – a funded underwriting facility put in place for the Garden Bridge project.

We secured a greater degree of accountability by requesting that Companies House did not automatically strike off the company for late filing. Whilst we cannot ourselves comment on value for money of the project, this enabled important questions to be asked by supporters and funders on the value for money of certain activities and use of public funds.