Cautionary Catz Club tale
The Charity Commission has concluded its inquiry into Catz Club...
...the charitable company set up to advance education and provide recreation for school-age children. Having received a grant and loan package from Futurebuilders, the organisation expanded rapidly, but got into financial difficulties as a result of low take-up of the clubs and the repayment structure of the loan, amassing a loan deficit of some £10m by the end of September 2008. It observes: ‘This case illustrates the risks associated with ambitious expansion. This can result in unsustainable growth that may put the financial status and long-term viability of a charity at risk.’
The charity had also breached charity law by making a £5,000 donation to the Labour party in 2007 (the donation was included in a delegate fee to attend one of its events, so counted as a donation to a political party). The trustees of Catz Club have told the Commission that they will wind the charity down on a solvent basis and establish a community interest company (see page 7 of this issue).
Pesh Framjee of Horwath Clark Whitehill observes: ‘This has been a long-running saga and although not a typical situation there are many useful pointers for many charities. The need to be realistic about optimistic plans, the need to consider the substance and the form of key relationships avoiding not just actual conflicts of interest but also perceptions of conflicts of interest, and more and better evidence of proper trustee oversight. This case has many of the hallmarks of founder syndrome and trustees need to recognise that it is not just about thinking that good work is being done but that there are rules and requirements that need to be followed.’
With a general election certain before early June 2010, many charities may wish to inform their members and the public about the policies promoted by the political parties and touch upon issues of concern to their beneficiaries or the sector as a whole and could therefore run a risk of getting caught out themselves with the rules on political campaigning.
Luke Fletcher, a solicitor at Bates Wells and Braithwate reminds charities that the Commission’s guidance (CC9) makes it clear that charities do have leeway to campaign and carry out political activity, although it ‘must steer clear of explicitly comparing its views (favourable or otherwise) with those of the political parties or candidates taking part in the election’.
Author: Clarissa Dann
Clarissa Dann is the Editor of Caritas, Charity Funding Report and Codicil.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from
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