Trustees at a charity-run community centre did not understand their roles and had not fulfilled their legal duties to act in the best interests of the charity, an inquiry has found.

Dudgeon Park Community Centre based in Brora, in the Scottish Highlands, was established in 2001 for the purposes of advancing the community development of Brora residents through recreational activities and facility access.

The Office of the Scottish Charity Regulator opened an inquiry after concerns were raised in 2022 when the charity had applied for consent to dissolve.

Although this request was initially approved, concerns were raised that the application was submitted by a sole trustee without the knowledge of the other trustees, the inquiry report says. 

During its initial inquiries, the OSCR said it became aware that the charity transferred cash to Brora Rangers Football Club and the regulator directed DPCC not to transfer any further assets to the football club and not to wind up or dissolve the charity pending further inquiries.

The inquiry looked into issues around the DPCC’s activities in furtherance of its charitable purposes, management of the community centre, use of charity assets and possible conflicts of interest.

“While they were keen to assist OSCR with their inquiries, [trustees] were unable to provide information on the activities of the charity prior to them becoming trustees or provide any information about why cash was transferred by the charity to the football club," the regulator said. 

“They were also unable to provide any historic financial records or minutes of meetings recording any decisions taken by the former trustees.”

The trustees were able to confirm that the only current activity of the charity was the operation of a social club licensed to sell alcohol on premises owned by the football club, the regulator said.

The trustees decided to cease operating DPCC’s social club with BRFC taking over and reapplied for consent to wind up the charity in 2023.

The regulator discovered that DPCC’s cash assets had “significantly reduced” because trustees could not take control of the charity’s bank account.

The account continued to make payments relating to the social club’s operation for a “significant period” after responsibility for the club had been transferred to BRFC.

“Once this had been brought to OSCR’s attention, we issued a new direction to the new charity trustees not to wind up or dissolve the charity until they had identified and recovered these payments from the football club,” the regulator said.

“Once they had done this, OSCR revoked the direction on 9 May 2023.”

The regulator also discovered that DPCC transferred “substantial sums” of money to the BRFC in 2020 during the Covid-19 pandemic.

“Conflicting reasons were given by two of the former charity trustees who were actively managing the activities of the charity as to the reason these sums were transferred to the football club,” the regulator said.

“These included costs of repair and refurbishment of the premises following flood damage and payment for rent arrears.

“None of the annual accounts submitted by the charity to OSCR detail rent as expenditure for the charity.”

The inquiry found that former trustees did not understand they were trustees and became involved in the social club as a result of their support for the football club.

It also found trustees had not fulfilled their legal duties to act in the interests of the charity with an expected level of care and diligence.

“The operation of a social club licensed to serve alcohol is not a charitable activity and there is no evidence of any other activities in furtherance of the charity’s charitable purposes.” the regulator said.

“In addition, no consideration appears to have been given to operating the social club through a trading subsidiary company.”

The trustees have decided to cease operation of the social club and have plans to wind up and dissolve the charity, the regulator said.

“OSCR has concluded that it is neither necessary nor proportionate to take formal enforcement action in relation to the failure of the former charity trustees to meet their charity trustee duties,” the regulator said.

A letter has been sent to trustees explaining the regulator’s expectation that former trustees would undertake some training before considering any other appointments in the role.