You can also view the full colour PDF version of the the Tom Amos Charity inquiry report.

This is a statement of results of an inquiry under section 8 of the Charities Act 1993 as amended by the Charities Act 2006 (“the Act”) and published on 16 January 2009

The Charity

1. The Tom Amos Charity (“the Charity”) was registered as a charity in May 2000. It is governed by a Declaration of Trust dated 5 November 1999 and a Supplemental Deed dated 5 January 2001. Its objects are: “the benefit of the residents of Little Waltham, Essex and elsewhere, the provision of recreational facilities in Little Waltham and elsewhere, the advancement of education, the relief of poverty, the advancement of religion and other charitable objects that are beneficial to the community.”

2. At the time of the Charity’s registration, the trustees were Tom Amos and David Morgan. Mr Amos died in 2003, and under his will the Charity became the residuary beneficiary of his estate. The Commission estimates that the value of the estate due to the Charity at this time would have been in the region of £1.4 million. The Charity has had no other assets of significant value.

3. At the time the inquiry was instigated no funds of the Charity had been applied since the Charity’s inception and no accounts had been produced.

Source of Concern

4. Although the Charity had not previously been the subject of an inquiry, the Commission had, in 2005/ 06, been in contact with David Morgan, and expressed concern that:

• assets due to the Charity had not yet been transferred from the estate of the late Mr Amos;
• David Morgan was the Charity’s sole trustee following Mr Amos’s death, which was in contravention of the charity’s Declaration of Trust. At the same time, he was also acting as sole executor of the estate of the late Mr Amos, and this created a potential conflict of interest.

5. The Commission told David Morgan:

• It was concerned about the delay in transferring the assets from the estate of the late Mr Amos to the charity, and requested that he should resolve matters as soon as possible in order to protect the assets due to the charity.
• The Commission requested that he appoint a co-trustee and commented that it is good practice to have a minimum of three trustees.

6. David Morgan subsequently informed the Commission that he had appointed a co-trustee and had transferred the main property from Mr Amos’s estate to the charity. The Commission closed this case in October 2006 as it appeared that the concerns were being dealt with.

7. In April 2007, the Commission received a report prepared by the Solicitors Regulatory Authority (“the SRA”). The SRA’s report expressed concern about the way in which David Morgan, who was a solicitor, acted in relation to the Tom Amos Charity in respect of the residual estate.

Commission inquiry

8. This inquiry was opened on 18 May 2007 to examine the issues raised in the SRA’s report more closely.

Issues

9. The Commission identified the following key issues as matters of regulatory concern:

• Whether the potential conflict of interest caused by David Morgan acting as sole executor to Mr Amos’s estate at the same time as he was sole charity trustee had been sufficiently addressed.
• Whether there had been an unreasonable delay in transferring all the property due to the charity from Mr Amos’s estate.
• Whether property due to the charity from Mr Amos’s estate was put at risk as a result of investments made by David Morgan without the benefit of professional advice.
• Whether property of the charity and property due to it was at risk through inadequate accounting.
• Whether there was evidence of any property being applied for charitable purposes or any other charitable activity.

Timescale of inquiry

10. The Commission’s inquiry was closed on 6 October 2008, pending a decision from the SRA’s Adjudication Panel on what action it intended to take as a result of the report of its investigation into David Morgan’s activities. The SRA conveyed its decision to the Commission on 24 October 2008 and authorised the Commission to disclose relevant findings within this statement. The Commission delayed publication of the statement until the SRA gave its formal approval to the disclosure on 5 January 2009.

The Commission’s Findings

11. There was a potential conflict of interest while David Morgan acted as both sole executor of the estate of the late Mr Amos and a trustee of the charity, and the risks this conflict posed to the charity had not been sufficiently addressed. The co-trustee David Morgan had appointed was his son, Richard Morgan. The Inquiry found that in practice David Morgan made all the decisions concerning the charity, and that his co-trustee was content to agree to them. Neither David Morgan nor his co-trustee accepted that there was a potential or actual conflict of interest. Neither of them was willing to appoint any additional trustees specifically to address this issue.

12. Property left to the charity from the estate of Mr Amos was not transferred to it as soon as might have been reasonably expected. Mr Amos died in May 2003 but none of the bank accounts and investments forming part of the residuary estate was transferred to the charity until 2007. David Morgan told the Commission that the delay was caused principally by ongoing repairs and protracted dealings with one of the properties in the estate, Bakery House, in Little Waltham. He said that he considered himself bound by the wishes of the late Mr Amos not to sell this property. However, he had not identified how the objects of the charity were to be promoted by retaining it. The Commission found that there was no evidence that the work generated was in the interests of the charity, and did not excuse the delay in administering the estate. Ordinarily, trustees would be expected to take action to resolve such a delay, but in this case David Morgan was unable, and his co-trustee was unlikely, to take such action, given David Morgan’s role as executor of the estate, and the consequent conflict of interest identified above.

13. Property owned by or due to the Charity was put at risk as a result of investment decisions made by David Morgan while acting as executor. Between November 2004 and August 2006 Mr Morgan invested some £310,000 in companies based overseas without having taken any professional investment advice. In April 2006 David Morgan prepared a valuation of the investments which purported to show that they were worth more than £405,000, but he has not been able to provide the Commission with any credible evidence to substantiate that valuation. Because the investments were unlisted they did not have a quoted value on any stock exchange. In November 2008 the Charity’s stockbroker (who was neither consulted nor involved in the purchase of the unlisted shares) estimated that their current value was in the order of £22,000.

14. Registered charities with gross income in excess of £10,000 per year are required by law to submit their accounts to the Commission annually. The trustees did not file any accounts with the Charity Commission because the failure to transfer cash and investments resulted in the Charity having an income well below the £10,000 threshold.

15. The accounts for the estate of the late Mr Amos are incomplete.

16. No property had been applied for charitable purposes, and there was no charitable activity, since the charity’s creation in 1999, despite property of approximately £1.4m being available to it from 2003 onwards. David Morgan and Richard Morgan were unable to satisfy the Commission that there was likely to be any charitable activity in the near future.

17. David Morgan and Richard Morgan were unlikely to resolve the concerns above if they continued to act as the only trustees of the charity. They were unwilling to make appointments of trustees themselves that would resolve these concerns.

Conduct of inquiry

18. The Commission corresponded with David Morgan and Richard Morgan to explore the concerns it had identified.

19. The Commission inquiry team interviewed David Morgan and Richard Morgan separately.

20. The Commission liaised with the SRA.

21. Given its findings that David Morgan and Richard Morgan were unwilling to appoint new trustees who would resolve the concerns identified above, the Commission looked into the use of its statutory powers to appoint three additional independent trustees. The Commission identified three well-qualified individuals who were prepared to be appointed. The Commission discussed with these individuals the causes for concern and the steps that would be necessary to put the management and administration of the charity on a proper footing. On 21 April 2008, the Commission exercised its powers under section 18(1)(ii) of the Act to appoint these individuals as additional trustees.

Conclusions

22. There was a potential conflict of interest while David Morgan acted as both sole executor of the estate of the late Mr Amos and a trustee of the charity, and insufficient steps were taken to mitigate the risks this posed to the charity.

23. Property due to the charity from the estate of the late Mr Amos had not been transferred as quickly as it should have been. It was only after the Commission had expressed its serious concern to David Morgan that he arranged for the transfers to take place.

24. Property due to the charity of approximately £310,000 was put at risk as a result of investment decisions David Morgan made while acting as executor.

25. Failure to transfer property due to the charity in a timely manner gave a distorted impression of the charity’s income.

26. No property had been applied for charitable purposes, and there was no evidence of any charitable activity having been undertaken since the charity’s creation.

27. The Commission appointed three additional trustees to enable the charity to be administered properly.

The SRA’s findings

28. The SRA found that David Morgan had failed to keep proper accounting records in respect of his dealing with the Charity’s funds. Furthermore, it was not clear to the SRA that David Morgan had any knowledge of the overseas markets in which he had invested, and his choice of investments was significantly detrimental to the Charity.

Regulatory action taken

29. On 6 August 2007, the Commission used its powers under section 18(iv) and 18(vi) of the Act to prevent the trustees from parting with any further property of the charity and from entering into transactions in the administration of the charity without the Commission’s approval, including any further investments.

30. On 31 October 2007, the Commission used its powers under section 8(3)(c) of the Act to direct Richard Morgan to attend the Commission’s offices to give evidence about his duties and the extent of his involvement in the charity’s management and administration.

31. On 21 April 2008, the Commission used its powers under section 18(1)(ii) of the Act to appoint three additional trustees to serve alongside David Morgan and Richard Morgan.

Impact of Commission intervention

32. Significant charitable assets have been secured and protected.

33. The appointment of additional trustees has enabled the charity to address the risks posed to it by the potential conflict of interest created by David Morgan’s roles as trustee and as executor of the estate of the late Mr Amos, and the other concerns, in particular by:

• Regularising the charity’s governance.
• Taking steps to ensure that the charity receives all the property due to it from the estate of the late Mr Amos.
• Ascertaining the value of investments made in overseas companies, and what action may be required in that regard.
• Taking action to produce accounts for the charity.
• Considering the charity’s future activities.

Resources applied

34. The Commission adopted a multi-disciplinary team-working approach on this case which involved extensive legal advice and support from the Commission’s intelligence officers.

Lessons for other charities

35. A charity is entitled to the independent and objective judgment of each of its trustees,acting solely in the interests of the charity.

36. Trustees have and must accept ultimate responsibility for directing the affairs of a charity, and ensuring that it is solvent, well-run, and delivering the charitable outcomes for the benefit of the public for which it has been set up. Trustees’ duties include the following:

• They must ensure that the charity complies with charity law, and with the requirements of the Charity Commission as regulator; in particular ensure that the charity prepares reports on what it has achieved and Annual Returns and accounts as required by law.
• They must ensure that the charity does not breach any of the requirements or rules set out in its governing document and that it remains true to the charitable purpose and objects set out there.
• They must act with integrity, and avoid any personal conflicts of interest or misuse of charity funds or assets. Trustees should bear in mind that when they are dealing with the business of the charity, their overriding duty is to act in the best interests of the charity. If conflicts of interest are not properly managed, they are failing in their responsibility to the charity.
• They take special care when investing the funds of the charity, or borrowing funds for the charity to use.
• They must use reasonable care and skill in their work as trustees, using their personal skills and experience as needed to ensure that the charity is well-run and efficient.
• They must consider getting external professional advice on all matters where there may be material risk to the charity, or where the trustees may be in breach of their duties.

37. The Charity Commission offers information and advice to charities on both legal requirements and best practice to help them operate as effectively as possible and to prevent problems arising. In the few cases where serious problems have occurred we have wide powers to look into them and put things right. Trustees may also be personally liable for any debts or losses that the charity faces as a result. This will depend on the circumstances and the type of governing document for the charity.

38. Where there has been any misconduct or mismanagement in the administration of a charity or it is necessary or desirable to act for the purpose of protecting the property of the charity or its proper application, the Commission may use its powers to protect the interests of the charity, including appointing such number of additional trustees as it considers necessary for the proper administration of the charity.

Date of Publication: 16/01/2009