The latest inquiry report from the Commission concerning the Hindu Community Society, provides a salutary warning for charity trustees thinking of purchasing property or borrowing funds. The requirements in the Charities Act 2011 regarding the advice required before borrowing aren't there to annoy you, they are there to ensure you borrow money at the right level of interest and only when it's the right thing to do for your charity. Remember, the charity's assets, including its cash and property, aren't yours - you are in a position of trust and can only use those assets to further the charity's objectives. Be cautious about property purchases and wise about borrowing - and get the advice the Charities Act requires you to! Also, don't let a dominant trustee dominate - you are all responsible for all of the decisions.
In the case of the Hindu Community Society failure to do this led to the property being repossessed, resulting in a loss not only of the money used to purchase the property but also charity funds which were spent on constructing and furnishing the property - the charity had spent approximately £500,000 of public donations on construction. It put the charity in such a difficult financial position that it was forced closed and has now been removed from the register of charities. Two trustees were also removed and permanently disqualified from acting as charity trustees.
The Commission concluded that there was misconduct and/or mismanagement in the charity’s administration. This ultimately caused the charity to suffer significant financial losses, both in terms of the loss of a property and the funds subsequently spent trying to regain it.