(Immediate Release 20 March 2012)

The Charity Commission, the regulator of charities in England and Wales, has today published a report on its inquiry into Brotherhood of the Cross and Star Limited (registered charity no.270034), a religious charity set up to advance Christianity.

Most of the issues the inquiry looked into stemmed from an internal conflict that meant the charity had been operating without properly appointed trustees. The Commission’s full findings are set out in the report, published on its website today.

In December 2008 the Commission learned that Liverpool City Council was seeking to wind up the charity because it had not paid a £385,000 debt, owed for repairs to one of its places of worship. The charity had not paid the debt because the bulk of its funds were held in an account which the bank had blocked because it could not ascertain who the trustees of the charity were.

After meeting with two conflicting groups claiming to be the charity’s trustees, the Commission came to the view that the charity had been operating without any validly appointed trustees. In January 2009 the Commission intervened to protect the charity’s property and opened a statutory inquiry. It appointed to the charity an Interim Manager, who was given all the powers of a trustee and took control of all of the charity’s bank accounts, including the main, blocked account.

As a result of the Commission’s intervention the Interim Manager settled the debt to the Council, avoiding the winding up order and allowing the charity to continue to operate. He also regularised the charity’s banking arrangements, releasing over £600,000 of charitable funds, and began the process of disposing of the Liverpool property altogether, after determining this was in the best interests of the charity. The long-term impact of the Commission’s intervention is that 20 charity trustees were successfully elected in December 2009, in accordance with the charity’s governing document. The Commission has also provided the charity with an action plan to correct its accounts, which were found not to have been properly prepared.

The Commission has concluded that the group of individuals with day to day control over the charity prior to the inquiry, although not properly appointed trustees, nevertheless had responsibility for the charity’s assets. They had not met their responsibilities for many years, failing to address the upkeep of the charity’s buildings or the proper access to its funds. This led to the potential winding-up order and to the charity eventually paying more in interest to the Council.

This report highlights issues for other charities, particularly the importance of having a clearly identifiable board or trustee body appointed in accordance with the charity’s governing document. If an internal conflict in a charity is left unresolved, this can lead to a breakdown in its effective governance. The Commission expects trustees to resolve such conflicts themselves and will only become involved in limited circumstances.

Every charity must have access to formal banking facilities in order to operate effectively and transparently. The Commission would have serious concerns if a charity was not able to operate because of a lack of banking services. Trustees must also ensure that a charity has adequate financial and administrative controls in place.

If a charity owns land or buildings, trustees must know on a continuing basis what condition it is in, that it is being properly used and that adequate insurance is in place.

For further information on this story please contact the press office.

PR 05/12

For a glossary of terms, see the Good Governance Jargon Buster.

Notes to Editors

1. The Charity Commission is the independent regulator of charities in England and Wales. See www.charitycommission.gov.uk for further information.
2. Our mission is: to ensure charities’ legal compliance, enhance charities’ accountability, encourage charities’ effectiveness and impact and to promote the public interest in charity.
3. The Charity Commission Media Information Centre, available on the Commission’s website, provides useful and relevant background information specifically for journalists, particularly in relation to issues that regularly attract press interest.
4. There are over 180,000 registered charities, some of which have similar names or working names. To avoid confusion, each registered charity can be identified by its individual registration number, which can be checked on the Register of Charities.