Support for Heroes (“the charity”) was a charity set up “to support and to promote the assistance of persons currently serving or who have served in the armed forces and their dependents”.
Following receipt of complaints from members of the public about the charity’s operation and fundraising practice, the Charity Commission identified serious concerns about a fundraising arrangement with a company named Targeted Management Limited (TML).
The commission was not satisfied that the trustees had taken adequate steps to manage the risks to the charity’s reputation arising from these public concerns. On 10 November 2016, the commission opened a statutory inquiry into the charity. They published the findings of the statutory inquiry on 13 July 2022.
Regulatory issues considered in the inquiry
The inquiry was established to examine the following regulatory issues:
Whether the trustees ensured that conflicts of interest in the charity and its subsidiary had been adequately avoided or managed
The inquiry found that there were conflicts of interest within the charity due to the familial relationship between two of the trustees who were in post from the charity’s beginning until the inquiry was opened.
In addition, they identified that the chair of trustees was the long-term partner of the father of the sole director of TML.
It also established that TML were significantly involved in the formation of the charity, for example through attendance at meetings, use of letterhead paper and assistance in setting up the charity’s website.
Whether the trustees acted in the charity’s best interests and in accordance with their legal duties
The inquiry examined the minutes of the charity’s meetings but found no evidence that the trustees undertook any due diligence on TML before entering the agreement – and there was no oversight by independent trustees at the time.
Evidence obtained during the inquiry indicated that only limited steps were taken to review other fundraising options for the charity and no other firm quotes were obtained by the trustees.
Whether the trustees responsibly managed the charity’s resources and acted with reasonable care and skill in respect of its fundraising agreement with TML and associated risks to the charity’s property
In the financial years ending 31 March 2015, 2016 and 2017, the inquiry found that the charity donated £223,000 out of a total £1,318,039. This represents approximately 17% of the gross income over this period.
The inquiry considered this to be a low rate of return to the charity when considering the gross income raised. The inquiry found that the trustees did not take adequate steps to address the reputational risks and issues arising from the consistently low proportion of funds applied directly for charitable purposes.
Whether the trustees adequately protected the charity’s reputation and managed significant risks to public trust and confidence, especially with regards to the conduct and reporting of fundraising activities conducted by the charity or on its behalf
At the time the inquiry was opened, the charity’s activities had raised concerns from the public – both directed at the charity and commission – and had featured in a BBC investigative programme and in national newspapers which significantly damaged the brand of the charity.
The inquiry found that the trustees failed to protect the charity’s reputation and manage significant risks to public trust and confidence in the charity and the public’s wider perception of military charities, arising from public concerns and the risks associated with entering into the agreement with TML.
Conclusion of inquiry
The inquiry concluded that there had been misconduct and/or mismanagement in the administration of the charity by the trustees, most notably:
- Their failures in governance
- Failures to protect the charity’s interests and its reputation
- Lack of transparency around the charity’s arrangements with TML
- Failure to adequately manage conflicts of interest.
As a result, the Charity Commission took regulatory action by protecting the charity’s funds and then expediting the appointment of an Interim Manager to take full control of the charity. The charity was wound up and placed into voluntary liquidation.
What can charities learn from this?
Partnering with a specialist individual or business to raise money for a charity can bring benefits. However, to meet their legal duties, trustees must ensure that:
- These arrangements comply with the specific legal requirements that apply to them
- They can show that the arrangements, including the costs, are set and monitored in the best interests of the charity, protecting it from undue risks to its reputation and other assets
- Money raised is always used in an effective and efficient way to advance the objects of the charity and support beneficiaries.
Trustees should be satisfied that:
- There is strong management of the people and organisations the charity works with
- They can explain fundraising costs, being transparent about how the charity benefits
Charity trustees should ensure that they have a conflicts of interest policy in place to ensure that they are fully aware of their responsibilities and that any conflicts that do arise are appropriately managed.