Supermodel Naomi Campbell has been barred from being a charity trustee for five years, after an investigation found evidence of financial mismanagement and poor governance at a charity she founded.
The Charity Commission has reported that much of Fashion for Relief’s income – a grant-making charity which was supposed to alleviate poverty and support young people – was instead used by the trustees for personal expenses, including hotels, flights, spas, and personal security. Of the nearly £4.8 million that Fashion for Relief raised between 2016 and 2021, only £389,000, or 8.1%, was used for charitable expenditure.
As well as Campbell, two other Fashion for Relief trustees have been disqualified from holding trustee positions for several years. One of them was paid over £290,000 for unauthorised consultancy work for the charity.
The Charity Commission initially undertook a compliance visit and inspection in September 2020, which it followed up by issuing an action plan in March 2021 to address governance failings at the charity. In light of the trustees’ inadequate response to this action plan, the Commission then opened a statutory inquiry in November 2021. Its findings have resulted in Fashion for Relief being dissolved and removed from the Register of Charities.
Campbell has stated that she believes ‘aspects of the report’ from the Charity Commission’s inquiry are ‘deeply flawed’ and has instructed new advisers to undertake a separate investigation.
The Charity Commission’s assistant director for specialist investigations and standards, Tim Hopkins, 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.”
So, what can charity trustees learn from this?
Trustee’s legal duties and the charity’s constitution
The inquiry found that Fashion for Relief’s trustees had failed to properly exercise their legal duties and to comply with the charity’s constitution. In particular, it highlighted three key areas: inadequate or missing records of trustee decision-making, a failure to manage conflicts of interest, and a failure to submit accounts and annual returns on time.
These missteps highlight just how important it is to get the foundations of good governance right. They could have easily been avoided, if all trustees were familiar with the charity’s governing document, as well as their legal duties and key guidance from the Charity Commission. Properly inducting new trustees so that they understand these fundamentals is essential. CGI has a wealth of guidance on all of the key governance issues for charities, including the role and duties of trustees and managing conflicts of interest.
Financial controls
There were several incidences of financial mismanagement at Relief for Fashion. The Commission found that the trustees “failed to manage the charity’s limited resources appropriately and ensure that there was a sufficient balance to meet the professional fees and charges which the trustees incurred”.
The board did not have access to the charity’s bank account, and instead, solicitors and accountants accessed the account on the charity’s behalf. This meant trustees did not have an accurate or timely picture of the charity’s available funds. At one stage of the investigation, payment requests for legal fees and PR services would have left the charity with a cash balance below £1,000. Appropriate financial controls could have prevented such a situation from arising – and ensured that funds were being used specifically to further the charity’s purposes.
The charity also consistently failed to demonstrate how expenses were “reasonable, appropriate and in the charity’s best interests”. Separately, the Charity Commission is currently working to update its guidance on payments to charity trustees (CC11). This guidance offers a comprehensive look at what is permissible. The updated version, which is more user-friendly and concise than the existing iteration, will be published before the end of the year. This is a good opportunity for trustees to refresh themselves on the rules.
Minute taking
The Commission found that decision-making, board meetings and due diligence were not being adequately recorded. Indeed, until the Commission issued its action plan in March 2021, Fashion for Relief had not recorded any meeting minutes.
Keeping a careful record of how, when and why certain decisions were made is crucial, so that trustees can demonstrate that they are carrying out their roles in the charity’s best interests. CGI has several resources and training courses on minute taking.
Partnership agreements
Finally, Fashion for Relief failed to manage its partnership agreements, and did not always provide the grants that it had agreed to deliver to its partners. In one case, it claimed to be a fundraising partner of UNICEF UK, when in fact, it did not have any relationship with, and never delivered any funds to, UNICEF UK. These behaviours inevitably led to disputes with its charitable partners.
When a charity is are looking to work with another organisation, it must undertake appropriate due diligence to ensure that the organisation is both credible and a good fit. Partnerships should always be guided by what is in the best interests of both charities involved.
The story of Fashion for Relief serves as a warning to charity trustees – and as a reminder of the importance of governance. However, it should not put people off from becoming trustees when they are doing so with the charity’s best interests at heart. As the Charity Commission says: “Trustees are not expected to be perfect - they are expected to do their best to comply with their duties. Charity law generally protects trustees who have acted honestly and reasonably.”
