What can we learn from the Brotherhood of the Cross and Star Inquiry?


There’s no denying that the situation faced by the the Brotherhood of the Cross and Star (the ‘Charity’) is not one which will be faced by many charity trustees.

However, before Liverpool City Council applied to the court to make the Charity insolvent because of an unpaid debt of approximately £385,000, and the charity came to the attention of the Charity Commission for a second time, the Charity had a governance issue which is not as infrequently found as it should be.

How did the Charity wind up almost being wound up?
The Charity first came to the attention of the Commission in 2001/02, when it was alleged that funds were being misused abroad. There was also a conflict between two groups of individuals within the Charity, with each group complaining that it was the true ‘Council of Management’ (i.e. board of charity trustees). The Commission opened an Inquiry, came to the conclusion that the funds of the Charity were safe, and advised the two groups to enter into mediation to find a way to resolve their difference of opinion about the Charity’s management.

When the Commission opened its second inquiry into the Charity, as a result of the threatened court action by Liverpool City Council, it became clear that this issue over the trusteeship of the Charity had not been resolved.

In fact, the confusion over the management of the Charity had resulted in the bank which held the Charity’s cash removing the funds from the reach of both of the purported Councils of Management. This in turn meant that the cash could not be used to settle the debt owed to Liverpool City Council, prompting the council’s bid to wind up the Charity.

So, which group was the true Council of Management?
Neither of them, as it turned out.

The constitution of the Charity stated that the members of the Council of Management should be elected by the members of the Charity. However, this had not happened for many years, and it had become standard practice that members of the Council of Management should be selected and removed by the Brotherhood of the Cross and Star in Nigeria.

A disagreement as to the leadership of the Brotherhood of the Cross and Star in Nigeria brought about the existence of the two purported Councils of Management.

However, no member of either of the purported Councils of Management had been validly appointed and with no valid appointments, no-one at the Charity was legally entitled to manage the assets of the Charity…

What did the Commission do?
It is the Commission’s policy not to involve itself in disputes between trustees of a charity, unless the assets of the charity are at risk. This would explain why, in 2002, once the Commission had ascertained that the assets of the Charity were not being misused, it merely encouraged the members of the two Councils of Management to take part in mediation to resolve the issue of the management of the Charity.

Initially, at the start of the second Inquiry in 2008, the Commission still tried to work with the members of the Councils of Management to deal with the Charity’s problems. It offered to assist with the conduct of a satisfactory electoral process.

However, it became clear that the two Councils of Management could not agree on a way in which a new Council of Management could be appointed and the Commission was finally forced to appoint an Interim Manager (a lawyer specialising in charity law) to deal with the issues threatening the Charity, before the court dealing with the insolvency petition for the Charity lost patience and wound the Charity up.

The Interim Manager was given administrative control of the charity for just over one year. Thankfully, the Interim Manager was able to deal with the bank account issue, and stop the Charity from being made insolvent. He also recommended an administrative restructuring of the Charity, which members of each of the two Councils of Management would be invited to join.

One simple lesson from this tale of two Councils of Management
Every charity should make sure that its trustees are correctly appointed!

First step for appointing a new trustee: check the charity’s constitution for how trustees should be appointed. If it says new trustees are elected by the members at a quorate general meeting, the trustees should make sure this happens. If it says the existing trustees appoint the new trustees by resolution or by deed, then the trustees should do that instead.

They also need to make sure the appointment is documented correctly, as organisations such as banks which hold assets for the charity will need to see evidence that the appointments were made correctly before they will be prepared to update their records.

If trustees are unsure about how trustees should be appointed, or how the appointment should be documented, despite having checked the charity’s constitution, they shouldn’t just guess. Instead, they should seek advice.

Obviously, not all failures to appoint trustees correctly will result in the kind of cataclysmic situation faced by the Charity. However, lesser problems can be encountered – like banks refusing to recognise the authority of new charity trustees, for example. And, as the appointment of a charity trustee can be so straightforward, there seems little reason to get it wrong.

So, what can be learnt from the Inquiry into the Brotherhood of the Cross and Star? The answer may be: more than you might initially have thought.

The full Inquiry can be found here.

Love them or hate them…


Despite my (almost four) years of acting for charities, it still never ceases to amaze me quite how many charities seem to be trying to get along without trustees.

I don’t mean the charities out there without trustees, although they do exist. I mean the charities that, nominally, have trustees, but some or all of those trustees are so disengaged that they may as well not exist.

Charity trustees have many duties and responsibilities, but chiefly their role is to direct the affairs of the charity, and ensure that it acts in pursuance of its Objects, with the aim of delivering these for the public benefit. It is not possible to do this from a distance!

Unfortunately, the nature of voluntary work like charity trusteeship is such that it can easily get squeezed out by other important family or work commitments. If one charity trustee is too busy to be involved for a short period, but others can step in to fill the gap temporarily, a lapse of this sort is likely not to be disastrous. However, it is not something that can be tolerated in the long term.

If a charity trustee is suffering from a prolonged period of ill health, or lack of interest, it can sometimes be best for a fellow trustee to take the absentee trustee to one side and suggest that he or she has a bit of a break from the trusteeship until he or she has the time, energy or inclination involve him or herself more fully in managing the charity.

Charity trustees who feel they may have slipped into bad habits of absenteeism, or charity trustees who have colleagues who may have slipped into such bad habits, may find the information provided by the publication ‘Good Governance – A Code for the Voluntary and Community Sector’ (prepared by The Code Founding Group) helpful. It is on the Charity Commission website here.

Sensibly, the first principle is that an effective board will provide good governance and leadership by understanding their role.

Many charity trustees are aware of their basic legal responsibilities, in terms of providing reports and accounts to the Charity Commission / Companies House / the CIC Regulator / HMRC, and their responsibilities to safeguard the assets of the charity, and to seek to further the Objects of the charity.

However, a considerable number seem to forget that they are also are responsible for setting the vision of the organisation, overseeing its work, and managing and supporting any staff and volunteers.

This last area of managing staff can be a particular minefield. All too frequently, charity trustees can delegate duties and powers to paid staff, and then forget that they retain overall supervision for the exercise of those duties and powers.

Of course, the real problems start when the staff forget that their duties and powers are only delegated and not absolute, and try to run the charity while the trustees take a back seat. This is bad news for all concerned.

The trustees retain their responsibilities, and possibly incur liabilities, while exercising no actual control over the management of the charity. Meanwhile, the staff are quasi-trustees, as they have control of the day-to-day management of the charity, and as such as also are potentially exposing themselves to liabilities, but often believe that the trustees still have ultimate responsibility for actions they, as staff, carry out on behalf of the charity.

A good induction pack and training can help remind trustees of their responsibilities, and I would certainly recommend at least one training session per year for trustees. The cost of training, provided it is reasonable, is a legitimate expense of the charity.

However, a number of organisations offer this kind of training for free – for example, the Cambridge Council for Voluntary Service runs governance workshops which are free to member organisations. In addition, there are now online resources. So, there’s no excuse for charity trustees to plead ignorance of their role!