A DAMNING report into a Greatham charity has revealed serious flaws in its running which left it out of pocket.

The report, published by the Charity Commission, comes after a six-month investigation by the commission, which owns Greatham Village Hall and Playing Fields.

The commission was alerted in May last year after concerns by the charityÕs sub-committee, appointed to look into the circumstances surrounding the granting of leases in 1993 and 1998.

The leases, which were granted to a commercial nursery school operating out of the village hallÕs annex, were granted at a low rent to then charity trustee, Sandra Allan.

The concerns had come to light after Mrs Allan, who has resigned, had attempted to sell her nursery school business with the benefit of the lease for £150,000.

Following the sub-committeeÕs concerns, commission inquiry officers met with representatives of the sub-committee and also visited the village hall and playing fields, in Petersfield Road.

Fourteen past and present committee members and two former employees of the nursery school were interviewed by officers, and Mrs Allan was also interviewed on a separate occasion in the presence of her solicitor.

The report has found that there were Òserious irregularitiesÓ associated with the granting of the two leases to Mrs Allan, and because of this the leases were void.

ÒThe commission found that there were serious irregularities associated with the granting of the 1993 and 1998 leases to the former trustee who ran the nursery school,Ó the report states.

ÒPrimarily the leases were granted without the consent of the Charity Commission as required by section 36 of the Charities Act 1993. The written consent of the commission was required because the nursery school business owner was at all relevant times a Ôconnected personÕ. . . In the absence of such consent the leases were void.

ÒThe former trustee in entering into the lease had acted where a conflict of interest existed contrary to her duty as a trustee, albeit that she says she did so unknowingly and with the benefit of legal advice. Nevertheless, as a result it appears she benefited from the arrangements and a duty to account arises.Ó

And the report also found that the charity was ÒdisadvantagedÓ by the low rent paid by Mrs Allan for the use of the annex.

ÒThere was no discussion of, or decision taken by, the full committee to grant either lease,Ó the report states.

ÒA small minority of committee members who signed the lease did so without telling the full committee. No independent professional advice was taken by those individual committee members who agreed to the granting of either lease.

ÒThe rent payable under the leases was between £1,280 and £2,160 a year. On the basis of evidence produced by the current trustees that an open market rent is currently in the region of £25,000 a year, the commission concludes that the charity was disadvantaged by the arrangement.

ÒThose trustees who agreed to the granting of the leases failed to have regard to the requirements of paragraph 5 of the First Schedule to the charityÕs governing document, a conveyance dated April, 13 1949, in that they held no public meeting at which local residents could have voted upon the proposal.

ÒAs the charity is not an incorporated body, such as a limited company, the leases should have been signed by all of the committee or by two or more of them acting under a formal authority from the committee. As it was, both leases were signed by individual trustees without the committeeÕs authority.Ó

The report recognised that Mrs Allan had worked hard to provide a ÒvaluableÓ facility for the village and surrounding area, and fundraising conducted by herself and others had provided an Òimportant enhancement to the village hall facilityÓ.

However, when the premises were inspected the commission officers found that the village hall was in need of maintenance and redecoration.

ÒThe commission concludes, and the current trustees agree, that had there been business-like arrangement in operation between the commercial nursery school and the charity, money would have been available to maintain the hall for the benefit of Greatham and its residents,Ó the report states.

While the investigation by the Charity Commission was being conducted, and having taken legal advice that the leases were void, the trustees changed the locks to the charityÕs property to gain access and, after further advice, reclaimed possession of the property for the charity.

Following the closure of Mrs AllanÕs nursery school in September last year, the trustees decided that it would be beneficial to the community if the hall continued to be used for a nursery school.

Therefore the trustees found a local qualified person who, in conjunction with the education authorities and Ofsted, opened a new nursery school on the premises.

The new nursery school will continue to operate out of the building for the current academic year.

ÒThe income generated will enable the charity to fully maintain and repair the hall and playing fields for the benefit of the community,Ó the report states.

Five trustees resigned as a result of the sub-committeeÕs initial investigation and were replaced by fresh management.