Official warning over trustees’ mismanagement of founder’s legacy

The Charity Commission closed a three-year inquiry into The Schwarzschild Foundation, issuing an official warning and action plan after finding serious governance failures. The investigation revealed mismanagement of a £5.7m legacy from founder Helga Schwarzschild, including unchecked conflicts of interest and related-party transactions. The inquiry was triggered in 2023 after the National Crime Agency identified £250,000 of the charity’s funds in a trustee’s personal bank account, which the charity failed to detect independently due to inadequate monitoring systems.

The inquiry found two £250,000 grants were awarded to organisations where trustees had unmanaged conflicts of interest, alongside unchecked transactions between the charity and companies it wholly owned. A temporary protective order was imposed in 2023, preventing trustees from making payments or entering transactions without prior Commission approval. Interim managers later confirmed no review had been conducted of a £4m investment property portfolio, exposing the charity to misuse or loss of funds due to absent policies and procedures.

The Commission concluded the charity’s governance failures amounted to misconduct and mismanagement, including a lack of documented decision-making to evidence grant and investment choices. Before closing the inquiry, the regulator issued an official warning for breach of trust or duty and mandated a comprehensive action plan for trustees to implement. The Charity Commission emphasized that robust governance, including proper policies and decision-making, is essential to ensure funds are spent in the charity’s best interests.

Following the National Crime Agency’s detection of the £250,000 irregularity, the sum was returned to the Foundation, and the inquiry forced checks on three additional £250,000 grants. The Commission noted that nearly 80% of charities have incomes of £250,000 or less, making such funds significant to their operations. While the inquiry is closed, the regulator will continue monitoring the charity’s compliance with the action plan to prevent recurrence of misconduct or mismanagement.