The Charity Commission (“CC”) has concluded a statutory enquiry, finding multiple instances of misconduct and mismanagement at the Fashion for Relief, which raised nearly £5m in income from donations.
As a result, three people have been disqualified from acting as Trustees, including Naomi Campbell for five years.
The governance issue first came to light when the CC opened a compliance visit and inspection case into the charity on 2 September 2020 following a review of information submitted in the charity's annual return for the financial year ending 5 April 2018. At this point the charity was told to take certain actions, but failed to do so fully, triggering the statutory enquiry in September 2021.
While the charity was operating it raised a total of £4.77m over a period of five years, but only gave out a minimum £389,173 in grants. Meanwhile it spent £1.5m on miscellaneous expenses, and £4.57m on other expenditure.
Fashion for Relief had annual income for the year ending 31 July 2020 of £1.89m, but had only given out £200,600 on grants, while the rest of the £1.88m was spent on expenditure, event charges and half a million on 'other expenditure'.
Part of the investigation focussed a fundraising event organised by the charity in Cannes. A review of the financial records identified that the Trustees spent €14,800 for a flight on 11 May 2018 from London to Nice for a Trustee and an unnamed donor. Subsequent expenses claims were made for three nights in a luxury suite in a five star hotel in Cannes for one of the Trustees costing €9,400 and nearly €8,000 of miscellaneous hotel expenses, including spa treatments, room service, and the purchase of cigarettes and hotel products.
The CC warned that 'whilst it is reasonable for a charity to meet travel and subsistence costs on the part of Trustees, staff and volunteers travelling on a charity's behalf, such expenditure must be reasonable'.
The Trustees claimed that donors paid for these costs, but no supporting evidence was provided and the CC stressed that 'if a donation was made to the charity, it could only have been used on activities which furthered its charitable purposes'.
The CC has recovered over £344,000 and protected a further £98,000 of charitable funds. These recovered funds were used to make donations to two other charities and settle the charity's outstanding liabilities.? ?
Fashion for Relief, has been removed from the register of charities. It was set up in January 2015 for the purpose of poverty relief and advancing health and education by making grants to charities or other organisations and by giving resources directly to those affected (it would seem that not many of those got to visit Cannes!)
The enquiry found that between April 2016 and July 2022, just 8.5% of the charity's overall expenditure was on charitable grants. There was no evidence that Trustees had reviewed its operating model to ensure fundraising methods were in the charity's best interest and costs were reasonable relative to income generated.?It also found some of the charity's fundraising expenditure was not reasonable.
Unauthorised payments totalling £290,000 for consultancy services were made to a Trustee, which was also in breach of the charity's constitution.?
Additionally, the enquiry found that the charity's funds were held and used on its behalf by external professional advisers rather than in a dedicated bank account in the charity's name. After the CC investigated transactions made under this arrangement, £54,000 was recovered from one professional advisory firm. These transactions were not identified or challenged by the Trustees at the time. ?
The CC said: 'Trustees are legally required to make decisions that are in their charity's best interests and to comply with their legal duties and responsibilities. Our inquiry has found that the trustees of this charity failed to do so, which has resulted in our action to disqualify them.
There are lessons here for anyone who takes on the responsibility of being a Trustee without recognising the legal responsibilities that go with the appointment.
Peter Nichols
Tax Director - BFN Accounts & Tax Limited