OSCR recently published its inquiry report into Wick Academy Development Fund, a Scottish registered charity set up in 2002 to benefit the inhabitants of Wick and its environs. The charity had been raising funds by selling lottery tickets within the local community. This activity ceased on 28 April 2009, having raised £140,000 for the charity.
After receiving various complaints regarding the charity’s failure to apply these funds in accordance with its charitable purposes, OSCR began to investigate the charity’s affairs in September 2010. OSCR had repeatedly tried to engage with the charity since that date in an attempt to assist the trustees to resolve the situation.
OSCR finally took the view that there was no realistic prospect of the trustees ever undertaking any activity to apply these funds. They were failing to meet their statutory duties of care and responsibility as charity trustees by failing to provide public benefit. The OSCR inquiry report notes that the charity didn’t carry out any activities in support of its charitable purposes after it stopped selling the tickets. The trustees did make some enquiries during this time about how they could apply the funds with the local authority in connection with some free land that could potentially be used to benefit Wick High School. These discussions were ultimately unsuccessful however and did not progress any further. This inactivity meant that the charity was at risk of being removed from the Scottish Charity Register, putting the accumulated funds at risk. OSCR took the view that “there was no realistic prospect of activities being undertaken by the charity trustees in furtherance of the charity’s objects. The charity is not providing public benefit”.
OSCR viewed these concerns so seriously that on 13 October 2020 they took the step of preventing the trustees from dealing with the charity’s funds without their consent, in order to protect the charity’s assets.
All OSCR’s further attempts to engage with the trustees were unsuccessful. OSCR was also unable to consent to the proposal made by some of the trustees to wind up the charity. The specific reasons for this weren’t disclosed in the report.
OSCR therefore took the step of applying to the Court of Session to appoint a judicial factor to manage the charity’s affairs. This appointment was made on 7 January 2021. The judicial factor carried out an investigation into the charity’s financial affairs and identified three local charities to receive these accumulated funds. The proposed distribution of funds was approved by the Court of Session on 25 November 2021, allowing the judicial factor to proceed with the distributions and thereafter dissolve the charity.
Although this is a small charity, there are some important lessons we can draw from this case:
The trustee’s actions irreparably damaged the reputation of the charity, angering the local community they were set up to assist and from whom the funds were raised. This has wider reputational implications for the charity sector as a whole. Although the trustees were not formally disqualified from acting as charity trustees in future, this case could still potentially affect any other personal positions that they hold now or in the future.
If you have questions, or need advice relating to a similar situation, our charity law experts are here to help.
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