Charities - the biggest scam?

Travelling through the foothills of the spectacular Dolomites with seven of my former Simmons partners, most of them litigators, on our annual skiing trip, I caught the tail end of a conversation. ‘What happens to funds raised for a charity, which is more than it needs – like the funds raised for the victims of the Grenfell Tower disaster?’ I piped up from the front of the bus, not really able to engage fully in the conversation over the drone of the engine – ‘Cy-Pres’.

Of course, the answer is much broader and more worrying than that one word.

Most charitable trust funds are worded so widely, that only a fraction of the funds raised need be spent on the main purpose, such as the victims of the fire and their families. The rest can be distributed to other grant making trusts, a local Council for it to spend on regeneration of the district or on mental health services; if that is what the purpose clause provides.

The doctrine of Cy Pres only kicks in when the purpose of the fund however broadly drafted has been exhausted. If a charity is set up for the relief of a specific disease ‘Xsis’, which is then eradicated, the doctrine of cy-pres allows an application to be made to the court to amend the terms of the charitable trust to follow as closely as possible the original intention of the testator or settlor to prevent the trust from failing. So, if Xsis affects African males living in Uganda, which has been eradicated, the court could change the terms of the trust so that the funds can be used for the relief of ‘Ysis’, as it also affects African males living in Uganda in much the same way as Xsis did.

Although I was not able to follow closely the conversation, what appeared to be the subject of discussion was how little had been distributed and how no-one appeared to be answerable to the complaints of the families who had suffered.

The body to which charities are answerable is the Charity Commission, but this is overburdened and under staffed.

David Holdsworth, the charity registrar in England and Wales, is on record as having said ‘It is unusual for us to be involved in this way as regulator but because of the urgent need of the victims of this tragedy, and because of the great generosity of the public who have given millions to different charities, it was right that we stepped in and helped charities work together in the best interests of those affected’.

By August of last year, the Charity Commission, said that a total of £18.9 million had been raised mainly by three charities; the Red Cross which raised £5.75m, the Kensington & Chelsea Foundation a further £5.75m and the Evening Standard which raised £6.78m. Of this sum only £2.8 million collected had been distributed by August to the victims, less than 15%.

The Red Cross said: ‘Every penny of the £5.75m raised by the Red Cross for the London fire relief fund will go to the surviving victims of the Grenfell Tower disaster and their families’. It said funds it had raised were being distributed on its behalf by the London Emergencies Trust, which had by August handed out £551,000 in grants.

These payments include a £10,000 Fresh Start grant. In addition, survivors who spent more than six hours in hospital can get a payment of £3,500 and those who lost a relative in the fire can get a payment of up to £20,000.

But, what of the remaining £5.25m? What is it being spent on, by whom, and who is making sure it is being spent for the purposes which the donors gave? If the Red Cross has given it to the London Emergencies Trust has it got any responsibility to ensure that it has been spent on the victims of the blaze – no! It is only the Charity Commissioners to whom charities are answerable and it is too busy with its 200,000 odd charities in Britain to keep a close eye on any one of them; and the monies these charities hold are ENORMOUS! In 2015, the top 5,000 charities held between them £17.46 billion – and I thought it was to be spent, - not kept aside for a rainy day.

According to David Craig’s book ‘The Great Charity Scandal’ there are 1,939 charities in Britain for children, 581 for the relief of Cancer, 354 for birds, 255 for animals and 81 for alcohol abuse. The Charity Commission cannot hope to help charities work together for the best interests of those affected, it hardly has the resources to make sure that the funds are being spent for the purposes for which they were raised – if at all.

Is it hardly surprising therefore with so little scrutiny that wealthy individuals seeking to make a difference set up their own  to make sure it is run properly, but this then adds another charity to an already overburdened Commission – and the problems thereby get worse.

From my experience rot sets in where money is allowed to accumulate without proper checks and balances as to who is making the decisions, where the money is going and what for. There are always complaints about how much charities spend on administration and marketing, which can be as high as 50%, but this could be just the tip of a rather stinky iceberg.

I have no solution, maybe you do?