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Knights Institute of Sports/ Knights Millennium Foyer Limited

Registered Charity Nos. 1047619/ 1098164 (respectively)


1. This report is the statement of the results of Inquiries under Section 8 of the Charities Act 1993.

2. Knights Institute of Sports (‘KIS’) was registered as a charity on 29 June 1995. Knights Millennium Foyer Limited (‘KMF’) was registered as a charity on 23 June 2003.

3. The objects of KIS are, “to provide, or assist in the provision of, facilities for recreation or other leisure time occupation for young persons who through their social and economic circumstances are in need with the object of improving their conditions of life and that they may participate as adults in the social, civic and economic life of the communities in which they live.”

4. The objects of KMF are, “the relief of poverty, the advancement of education and the promotion of other charitable purposes beneficial to the community, in particular for young persons of and above 16 years of age in Upper Norwood and the London geographic area who are socially or economically disadvantaged”. In furtherance of its objects KMF acquired Ranulph Bacon House, a 100 bed former police hostel with the aid of a grant from the Millennium Commission in the region of £2,000,000, to provide short-term housing for young persons in need of such accommodation.

5. KIS is based in South London and had an income of £252,000 in 2000. KMF is also based in South London and had an income of £600,000 in 2001, according to figures provided to Companies House.


6. The Commission received a complaint about the activities of KIS in October 2002 which alleged that the trustees did not meet to discuss its affairs, that public funds had been misused, that cheques were signed by only one signatory, that the Chief Executive of KMF operated a private company that benefited to the detriment of that Charity, that a substantial grant from the Millennium Commission was in danger of being misapplied and that a large number of inappropriate cash transactions had taken place.

7. Following an evaluation of this information, an Inquiry was opened into KIS on 6 November 2002 with the aims of:

8. It was established that KIS was intrinsically linked to KMF; the trustees of the two Charities were the same and it was KIS that originally applied for the Millennium Commission funding that was subsequently used by KMF to purchase Ranulph Bacon House. There was concern that KMF had received a substantial grant on the basis that it was holding itself out to be a registered charity when it was not and therefore an Inquiry was opened into KMF on 30 May 2003 with the aims of:


9. The Commission revealed evidence of misconduct and mismanagement. The Chief Executive of KMF also held himself out to be Chief Executive of KIS, which is an unincorporated association. In excess of £345,000 had been taken out in cheques from the bank accounts of KMF and KIS, made payable to cash and signed by the Chief Executive of KMF and KIS as sole signatory, without documentation to evidence the use to which these funds were put. The trustees put forward the explanation that the building had been decorated and items such as food and clothing materials had been paid for in cash.

10. The Commission found that KMF had entered into a Memorandum of Understanding (‘the Memorandum’) on 18 December 2000 with Knights Corporation Limited (‘KCL’), a private company whose sole director was the Chief Executive of KMF, to pay £9,050 a week in cash to KCL for services. There were no minutes recording the trustees’ decision to enter into the agreement. A copy of the Memorandum was provided to the Commission but there was no record of professional advice having been taken with regard to its terms. The Commission formed the view that the terms of the Memorandum were unfavourable to KMF and, furthermore, that KCL was fulfilling only a fraction of its duties to KMF under the terms.

11. The Chief Executive was a director of KMF, until he resigned as director on 5 August 2003. The Chief Executive was paid a salary out of the £9,050 a week payment from KMF to his private company, KCL. He was, therefore, in breach of clause 5 of KMF’s governing document, which states that, “no trustee shall be appointed to any office of the charity paid by salary”.

12. The Commission found that KMF had received a loan of £600,000 from South London Family Housing Association Ltd (‘SLFHA’) in September 2002 with repayments deferred until September 2003. The trustees were not able to make the first scheduled monthly payment of £5,000 to SLFHA and were therefore in default of the terms of the loan agreement. As security for the loan to KMF, SLFHA had placed a charge over Ranulph Bacon House and default by the trustees placed the property at risk.

13. The Commission found that the canteen services at KMF’s property, Ranulph Bacon House, were provided by one of the trustees through a private business.

14. The Commission found that inadequate records were kept relating to the occupation of KMF’s property. It was not clear that all of the residents at Ranulph Bacon House met the criteria to qualify as beneficiaries of the Charity. Contrary to the objects of KMF, a number of residents appeared to be over the age of 25, some had lived there for 3 years or more and some did not appear to be in charitable need. In addition, the Chief Executive occupied a detached house on the premises and declined to indicate the terms of his occupation. No paperwork could be found in relation to this and the Chief Executive paid no rent to KMF.

15. The local Council’s Supporting People grant to KMF had been suspended for two main reasons. Firstly, because of serious concerns about the health and safety of the residents and secondly, because the Council received evidence that at least 50% of the residents were over the age of 25 and not eligible to receive the support service. Following a Council investigation into overpayment of housing benefit, the Council estimated that a sum in the region of £900,000 had been overpaid as they had been led to believe that KMF was a registered charity. KMF was incorporated as a company on 15 November 2000 and used the charity registration number of KIS in correspondence with the Council (and the Millennium Commission). In their capacity as trustees of KIS, the trustees should not have allowed its charity registration number to be used in this way. KMF failed to seek registration as a charity until 3 years later and was not registered as a charity until 23 June 2003. The Commission found that KMF had held itself out as a registered charity, when it was not. The Commission formed the view that this may have misled the Council.

16. In breach of the conditions of the Millennium Commission grant, KMF had failed to apply for charitable status by 31 December 2002 and the Millennium Commission had threatened the trustees with default action in respect of its grant. The Commission found that this mismanagement by the trustees had put KMF’s future at risk.

17. The Commission found that the trustees had allowed the Chief Executive to dominate the administration of the Charities, often making decisions seemingly without the trustees’ knowledge. The Commission also found that the trustees had mismanaged the Charities by failing to maintain proper records of the expenditure of the Charities’ funds. The Charities’ financial controls were inadequate and staff salaries had been paid in cash, without PAYE, tax and national insurance deductions being made.

18. KIS was granted a series of licences from Southwark Council, over the Orchards Sports Field, in William Booth Road, London SE20, for sports and recreational use in accordance with its objects. However, as KIS failed to make use of the sports field, the Council did not renew the licence.

Outcome of the Inquiries

19. In view of the fact that the trustees were unable to provide documentary evidence or receipts relating to the expenditure of in excess of £345,000 in cash, the Commission formed the view that there had been mismanagement of the Charities and it was necessary to act to protect the property of the Charities. An Order restricting transactions on the Charities’ bank accounts without the prior authority of the Commission was therefore issued on 3 July 2003.

20. The trustees were unable to satisfy the Commission that the £9,050 cash payment a week to KCL was in the best interests of KMF and the Commission refused to sanction further payments to KCL until further evidence of the services provided by KCL was given to the Commission. The trustees failed to provide this evidence. Shortly after this, the trustees purported to suspend the Chief Executive and to terminate the Memorandum with KCL.

21. The trustees failed to provide detailed records as to the exact number of beneficiaries housed at KMF’s property.

22. Having formed the view that there had been misconduct and mismanagement and that it was necessary to protect the property of the Charities, on 8 March 2004, the Commission exercised its powers by Order under section 18(1)(vii) of the Charities Act 1993, to appoint Martin James Woodward (‘the Receiver and Manager’) of Cobbetts Lee Crowder as Receiver and Manager for the Charities. In the Order, the Receiver and Manager was given all the powers and duties of the trustees to the exclusion of the trustees themselves.

23. The Receiver and Manager carried out a review of the affairs of the Charities and produced a report containing a brief assessment of the services offered by KMF, its funding position, financial position and long-term viability. The Receiver and Manager concluded that KMF had large debts of which the trustees were seemingly unaware. The immediate short-term funding difficulties were of grave concern, although KMF was thought potentially to have a financially viable long-term future. The Receiver and Manager concluded that KIS had little or no assets.

24. In view of the poor financial management by the trustees, discussions were held with prospective new trustees to be appointed to the Charities.

25. The Commission suspended the existing trustees of the Charities, appointed South London YMCA (Registered Charity No. 1099051) as sole corporate trustee of the Charities and discharged the Receiver and Manager by Order on 9 July 2004. The trustees were suspended pending consideration being given to their removal as charity trustees. After detailed consideration, the trustees were removed as trustees of KMF. As a consequence of their removal as trustees of KMF, the trustees are automatically disqualified, pursuant to Section 72(1)(d) of the Charities Act 1993, for acting as trustees of KIS or of any other charity, unless they obtain from the Commission a waiver of their disqualification. The trustees removed by Order were Abdul Hafiz Bhatti, Kass Harris, Beverley Lindo, Georgina Nwabuzo and Stephen Sam.

26. South London YMCA has worked to rectify the previous poor administration of KMF and to ensure that its charitable activities are undertaken. KMF’s finances have improved and the number of resident beneficiaries has increased to 80. The occupancy rights of all residents have been reviewed. Consideration is being given to the protection of the property that the ex Chief Executive was living in on the site. Internal financial controls are now in place and accounts will shortly be submitted to the Commission.

27. KIS would appear to have no remaining identifiable assets and as it has ceased to operate, consideration is being given to its removal from the Central Register of Charities in accordance with Section 3(4) of the Charities Act 1993.

28. The Inquiries into KIS and KMF were closed on18 May 2005.

Financial Outcomes

29. During his appointment the Receiver and Manager carried out the following principal tasks:

30. The appointment of the Receiver and Manager to the Charities was intended to be for a period of one month from 8 March 2004 to 8 April 2004 for a capped fee of £18,500 for the provisional stage. It was necessary for the Receiver and Manager to remain in place for a further period of three months until 9 July 2004, for which the additional sum of £21,058 was paid. The benefits of the appointment have been substantial and during that period the Receiver and Manager worked closely with the South London YMCA, the Council, Millennium Commission and SLFHA to achieve the following achievements:

31. During the period the Receiver and Manager was in place, significant assets were secured and protected for the continued charitable purposes of KMF. These included the protection of the freehold property at Ranulph Bacon House, the £2,000,000 Millennium Commission grant and the £600,000 loan from SLFHA.

32. The South London YMCA, since its appointment as trustee, has continued the work begun by the Receiver and Manager in ensuring the proper administration of the Charities.

Wider Lessons

33. A charity is entitled to the objective judgement of its trustees, exercised solely in the interests of the charity and unaffected by the prospect of any personal advantage to themselves. The law requires charity trustees not to place themselves in a position where their duty to the charity might conflict with their own interests, that is, where they may have an incentive to neglect their duties as trustees. Moreover, a charity trustee is not permitted to profit from that position (unless he or she is expressly authorised to do so). A trustee who benefits from a position of trust without the necessary authority may be liable to repay the benefit which he or she has received.

34. Trustees are responsible for the overall management and administration of the charity. It is an important and general rule that trustees act in person and decisions concerning the charity are taken by the trustees acting together.

35. It is the fundamental duty of all charity trustees to protect the property of their charity and to ensure that it is used to further the objects of the charity. In order to discharge this duty it is essential there are adequate internal financial and administrative controls over the charity’s assets and their use.

36. Where there has been any misconduct or mismanagement in the administration of a charity and it is necessary or desirable to act for the purpose of protecting the property of the charity, the Commissioners may by order suspend, appoint or remove trustees or appoint a Receiver and Manager in respect of the property and affairs of the charity.