What happens when charities don't spend their money on the things they're intended for?

Supermodel Naomi Campbell was disqualified Banned from acting as a charity trustee for five years by the UK regulator after finding serious mismanagement Fashion for relief. Campbell founded the charity in 2005; Two other trustees, Bianka Hellmich and Veronica Chou, were disqualified for nine and 4 years, respectively.

Although the charity was founded to support humanitarian causes worldwide, this appears to be largely the case the cash collected was spent on, amongst other things, a luxury hotel, a spa, a security service and cigarettes for Campbell. A mere 8.5% of his expenses was involved in charitable work between 2016 and 2022. Campbell has since stated that she did so “not under control” the charity and investigate what went improper.

Misuse of charity funds may end up from many aspects, including charity trustees' inability to keep up technical compliance or failure to separate the trustees' personal funds from those of the charity.

But regardless of the motivation, using charitable donations for private purposes is against centuries-old English and Welsh laws. The trustees' focus must be on the general public good.

The people harmed by the misappropriation of charity funds are obviously the people and causes that might have been supported by the charity's charitable objectives. However, the damage could also be greater and more damaging, impacting the very concept of charity.

Unfortunately, charity scandals are nothing recent. In addition to the case involving Campbell's fashion charity, there’s an ongoing matter legal investigation into it The Captain Tom Foundation and connected Family business by the Charity Commission, which began in June 2022.

Like Campbell, there have been already two trustees (including Captain Tom's daughter Hannah Ingram-Moore). disqualified from acting as a trustee for charities.

But these high-profile cases are only the tip of the iceberg.

In May 2022, the Charities Tribunal upheld a call to disqualify charity trustee Preston Lennox for 15 years. Judge Damien McMahon ruled that Lennox was properly disqualified in relation to the allegations Misconduct and mismanagement within the administration of the charity Thrift Urban Housing Ltd. Lennox had allegedly used the charity's funds He must spend £350,000 over nine years on his medical expenses, his personal costs including his mortgage and a Range Rover. Due to his disqualification, Lennox cannot function a charity trustee until 2037.

In July 2022, the Charity Commission criticized A community organizationa charity supporting disadvantaged young people. Payments totaling over £280,000 were made to the chairman of the board of trustees, Delroy Wilson, who later said that this was the case “No fraudulent activity” and the payments arose since the charity's own checking account didn’t have a debit card. There was no evidence of where £100,000 of this money had gone.

The Charity Commission's statutory investigation ultimately found that there had been misconduct and mismanagement within the trustees' administration of the charity, but Wilson was not banned on this case.

And in 2022, the commission found mismanagement at Support For Heroes — a veterans charity that had paid a big portion of its charitable funds to a non-public company, Targeted Management Ltd. The investigation found that the corporate was entitled to it 67% of gross proceeds The money was raised by the general public, but between 2015 and 2017 £223,000 from £1,318,039 in donations was used for charity. This represented roughly 17% of gross income within the reporting period Service personnel and their familieswho urgently needed help, had lost useful support.

Public profit, not private abuse

Charities are established and have a legal obligation to supply “public benefit” – a technical legal term. Providing public advantages signifies that charities receive, amongst other things, tax relief.

Trustees should focus their efforts and their charity's resources on public profit. They shouldn’t use the shape, structure and assets of the charity for their very own profit. This variety of activity is prohibited by laws based on trustees' fiduciary duties – meaning they have to put the charity's interests ahead of their very own. Essentially, they need to behave ethically.

As Campbell and Hannah Ingram-Moore have discovered, the Charity Commission has the ability to disqualify charity trustees. Compensation orders might also follow, requiring the trustees to return money to the charity. But these are rare. Charitable trustees can be prosecuted for breaches of their fiduciary duties to the charity. This is a civil treatment that may return money to the charity.

And then in fact there’s the general public outrage after a disqualification.

However, this doesn’t necessarily solve the underlying problem, which is human behavior. As long as some charity trustees cross the road, regulators can be forced to carry these individuals to account in the general public interest.

In a value of living crisis, those most in danger need charity where government assistance is unavailable – charities provide invaluable help to tens of millions of individuals.

The overwhelming majority of charities are well run and the Charity Commission is a committed and proactive regulator. It stays very useful Public Register of Charities – a resource for potential donors that gives details on governance structures, accounts and expenses. But like many other government departments, the Charity Commission is under-resourced.

There will all the time be bad apples within the charity sector. But if we would like to be sure that as much of the cash donated goes to those it is meant to assist, we must be sure that the Charity Commission is sufficiently funded to do its vital work.