The Charity Commission has published a report on the Royal Institution of Great Britain on how it mishandled its finances two years ago.

The charity’s main activities are promoting science in England and Wales.

The report covered two significant issues addressed during the course of the Commission’s engagement with the charity.

The first issue arose when, in December 2008, the charity’s accountants informed the Commission that over £3million of the funds used to refurbish its buildings had been spent in breach of the terms upon which they were held.

These funds were held on particular terms and were generally not available to meet the costs of the refurbishment.

The charity had not sought the authorisation of the Commission to spend the funds in this way.

The Commission requested that the Charity undertake a full analysis of the funds that had been expended and the basis on which they were held.

The review was completed by May 2009 and revealed that £3,202,748 of such funds had been applied to fund part of the redevelopment programme.

The Commission was then made aware of a second issue, in January 2010, that a company managed by a member of the charity’s trustee body had been granted a lease for space in the charity’s premises.

The lease had not been authorised by the Commission and the charity had therefore failed to properly manage the conflict of interest of granting the lease to a connected person.

The Commission noted that a charity cannot dispose of charity land to a connected person without an order from the Commission or the Court as required by Section 36(1) of the Charities Act 1993.

This statutory requirement helps charity trustees ensure that the conflicts of interest that arise from the disposal of charity land to a connected person are appropriately managed and obtain the assurance that the disposal is in the best interests of the charity.

In making this disposal, observed the Commission, the Council did not comply with the charity law requirements under Section 36 of the Charities Act 1993 as they did not obtain an order from the Commission prior to granting the lease to the company.

The Council also failed to comply with the requirements of Section 37(1) and 37(2) of the Charities Act 1993 as regards the lease documentation.

The conflict of interest could have been managed if the charity had sought authorisation from the Commission, noted the regulator.

The Commission added the charity did not have a conflicts of interest policy in place and the Council failed to properly manage conflicts of interest.

The Commission has since provided the charity with clear advice and guidance on both issues of concern and the trustees are putting in place policies and procedures to ensure such matters are appropriately managed in future.

As a result, a new chair of council was appointed in March 2009 and a new CEO was appointed in April 2009.

The Commission noted council members and staff within the Charity co-operated fully throughout.

The issues raised in the report, both the need for robust financial controls and appropriate management of conflicts of interest, are also relevant to the wider sector, noted the Commission.

If charity trustees wish to use funds in a way that does not comply with the terms upon which they are held, they should obtain the appropriate authorisation to do so, added the Commission.

Equally, charity trustees must ensure that any disposal of property to a connected person is also properly authorised and reported in the charity’s accounts.

The Commission made a final point that charity trustees should also have a conflicts of interest policy to make certain that they are fully aware of their responsibilities.

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