Moonbeams
Encyclopedia
Moonbeams was a children's cancer
charity based in Edinburgh
, Scotland
, which became the subject of a much-publicised local controversy in 2003. Following court action, it emerged that the charity had income of nearly £3 million over a period of four years, but had spent little over £70,000 on its charitable objectives. The Moonbeams collapse was one of a series of incidents which ultimately led to extensive reform of charity regulation in Scotland.
Although there were some irregularities in the charity's affairs, there is no suggestion of substantial fraud. The charity's income was simply consumed by expenses, with little remaining to fund its objectives. Local newspaper Scotland on Sunday
quoted Jean McFadden, a charity law expert from Strathclyde University, saying: "It seemed to me that it simply grew too big for a small group of volunteers to handle and not get out of their depth".
In 1998, Moonbeams set up a parallel trading company - a limited company
under United Kingdom law - which was covenanted to donate its entire profit to the Moonbeams charity. This is a common and legitimate arrangement, which allows the charity effectively to trade commercially without breaking the rules associated with its charitable status.
By 1999, Moonbeams had given some 300 children holidays, days out, or a chance to meet a celebrity. In June 1999 it bought its first holiday home in York
, England
, with the aim of helping more children and their families to enjoy a short break away from home. By the time of Moonbeams' collapse it owned three holiday houses - two in the British Isles
and one in Florida
, USA.
in Edinburgh unexpectedly suspended the directors of the Moonbeams charity, appointing an accountant to run the charity's operations. The action was in response to a petition brought by the Scottish Charities Office (SCO), the precursor to the present Office of the Scottish Charity Regulator
and at that time the regulator of charities in Scotland. It later emerged that the SCO had been investigating Moonbeams for around a year, based on concerns raised by their accounts.
In lodging the petition, the SCO made a number of allegations concerning the running of the Moonbeams charity and trading company. As the directors of the charity did not answer the petition by the court deadline, their responses to these allegations can be surmised only from a small number of interviews given to local media.
of £2.94 million, and a net profit
of £185,000. Although these figures might be reasonable for a normal commercial company, they were received with surprise by Moonbeams supporters, who had purchased the goods in the expectation that a far greater proportion of the selling price would reach the charity.
The petition also revealed that Moonbeams' performance had deteriorated sharply as the trading company's operations expanded. Between July 1998 and March 1999 the company had a turnover of a little less than £100,000, and made a profit of around £40,000. But in the following year to March 2000, while turnover increased to over £550,000, the profit was less than £2,000; and in the year to March 2001 the profit was £2,250 on a turnover of nearly £1 million.
Attention naturally focussed on where the outstanding money had gone. Quoted in Scotland on Sunday
, Bill Cleghorn, a forensic accountant
appointed by the court, said: "There’s nothing we have come across yet that would indicate there’s anything criminal. We have high administration costs, a lot of travel costs and credit card costs."
Reported in local newspaper the Edinburgh Evening News
, Willie Power, the founder of Moonbeams, responded: "Obviously, a mistake has been made somewhere, but it has been an unintentional and honest mistake. We are a group of people whose lives have been touched by cancer and want to help in some way. We are not business professionals." Subsequently quoted in Scotland on Sunday
, he said: "I truly believe we did our best. There were no flash cars. I think the offices are quite nice but it's not all leather seats, it wasn't 'expense no object'."
At least one of the directors of the trading company was subsequently disqualified from acting as a company director, in part due to the failure to honour the Deed of Covenant.
Responding to the allegation, Willie Power accepted that his daughter had used the house but argued that it would otherwise have been empty at the time. He also stated that travel costs had not been met by the charity.
The matter was subsequently referred to Easton's professional body, the Association of Certified Chartered Accountants.
Willie Power, the founder of Moonbeams, was criticized by local media for demanding £3,000 in salary to cover the period immediately prior to the charity's collapse. However, the court-appointed administrator pointed out that he was simply claiming the same rights as any employee. Power had earlier stated that his annual salary from the charity was just £25,000.
In November 2007, four years after the collapse of Moonbeams, Gary Easton made a voluntary agreement to repay an undisclosed portion of the £93,000 he had received from the charity in professional fees. The liquidators had argued that the original fees had been excessive.
the charity.
had been similarly suspended by the Court of Session - again following the discovery that only a small fraction of its income had funded charitable objectives.
Much of the blame was laid on the weak Scottish regulatory framework, which was (and remains) entirely separate from the system overseen by the Charity Commission
for England and Wales. At the time there was no requirement for charities to submit annual accounts, or even to register unless they wished to claim tax benefits. Shortly after the Moonbeams directors were suspended, Professor Gordon McVie, former chief executive of Cancer Research UK
, described Scotland as a "soft touch" and said "the reputation that Scotland has got is that there isn't yet a charity commission functioning".
By the time of the incidents, the then Scottish Executive
had already set up a commission
to consider the law relating to Scottish charities. The commission's report recommended the establishment of a new regulator for charities in Scotland and the creation of a register of Scottish charities. Although this report was published in June 2001, it is widely thought that the events of 2003 prompted the Executive to act on it. Quoted in Scotland on Sunday
, the chair of the commission, Jean McFadden, said: "Our report seemed to disappear into a great black hole and nothing much happened ... I think it would still be lying there had it not been for the breast cancer scandal."
A bill
to create the new regulator was placed before the Scottish Parliament
in June 2004, and received broad cross-party support. It received Royal Assent
on 14 July 2005. The Act co-opted the Office of the Scottish Charity Regulator
(OSCR), which had been established in December 2003 as an executive agency
, and placed it under the direct control of the Scottish Parliament
. The OSCR took over key responsibilities from the Inland Revenue
in April 2006.
Note that there is no relationship between the Moonbeams Charity and Moonbeams Limited, a company registered in St. Helena - http://moonbeamsforall.com
Cancer
Cancer , known medically as a malignant neoplasm, is a large group of different diseases, all involving unregulated cell growth. In cancer, cells divide and grow uncontrollably, forming malignant tumors, and invade nearby parts of the body. The cancer may also spread to more distant parts of the...
charity based in Edinburgh
Edinburgh
Edinburgh is the capital city of Scotland, the second largest city in Scotland, and the eighth most populous in the United Kingdom. The City of Edinburgh Council governs one of Scotland's 32 local government council areas. The council area includes urban Edinburgh and a rural area...
, Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
, which became the subject of a much-publicised local controversy in 2003. Following court action, it emerged that the charity had income of nearly £3 million over a period of four years, but had spent little over £70,000 on its charitable objectives. The Moonbeams collapse was one of a series of incidents which ultimately led to extensive reform of charity regulation in Scotland.
Although there were some irregularities in the charity's affairs, there is no suggestion of substantial fraud. The charity's income was simply consumed by expenses, with little remaining to fund its objectives. Local newspaper Scotland on Sunday
Scotland on Sunday
Scotland on Sunday is a Scottish Sunday newspaper, published in Edinburgh by The Scotsman Publications Ltd and consequently assuming the role of Sunday sister to its daily stablemate The Scotsman...
quoted Jean McFadden, a charity law expert from Strathclyde University, saying: "It seemed to me that it simply grew too big for a small group of volunteers to handle and not get out of their depth".
Foundation
The Moonbeams charity was founded in 1992 by former postal worker Willie Power, two years after the death from cancer of his 11-year-old daughter, Gayle. The charity was well-known locally for raising funds by selling sweets, and was dedicated to helping children with cancer and their families.In 1998, Moonbeams set up a parallel trading company - a limited company
Limited company
A limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. And the former of these, a limited company limited by shares, may be...
under United Kingdom law - which was covenanted to donate its entire profit to the Moonbeams charity. This is a common and legitimate arrangement, which allows the charity effectively to trade commercially without breaking the rules associated with its charitable status.
By 1999, Moonbeams had given some 300 children holidays, days out, or a chance to meet a celebrity. In June 1999 it bought its first holiday home in York
York
York is a walled city, situated at the confluence of the Rivers Ouse and Foss in North Yorkshire, England. The city has a rich heritage and has provided the backdrop to major political events throughout much of its two millennia of existence...
, England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
, with the aim of helping more children and their families to enjoy a short break away from home. By the time of Moonbeams' collapse it owned three holiday houses - two in the British Isles
British Isles
The British Isles are a group of islands off the northwest coast of continental Europe that include the islands of Great Britain and Ireland and over six thousand smaller isles. There are two sovereign states located on the islands: the United Kingdom of Great Britain and Northern Ireland and...
and one in Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
, USA.
Suspension
On 14 October 2003, the Court of SessionCourt of Session
The Court of Session is the supreme civil court of Scotland, and constitutes part of the College of Justice. It sits in Parliament House in Edinburgh and is both a court of first instance and a court of appeal....
in Edinburgh unexpectedly suspended the directors of the Moonbeams charity, appointing an accountant to run the charity's operations. The action was in response to a petition brought by the Scottish Charities Office (SCO), the precursor to the present Office of the Scottish Charity Regulator
Office of the Scottish Charity Regulator
The Office of the Scottish Charity Regulator is a non-ministerial department of the Scottish Government, with responsibility for the regulation of charities in Scotland...
and at that time the regulator of charities in Scotland. It later emerged that the SCO had been investigating Moonbeams for around a year, based on concerns raised by their accounts.
In lodging the petition, the SCO made a number of allegations concerning the running of the Moonbeams charity and trading company. As the directors of the charity did not answer the petition by the court deadline, their responses to these allegations can be surmised only from a small number of interviews given to local media.
Expenditure of the trading company
The first complaint against Moonbeams concerned the performance of its trading company. Over four years of operation, the trading company had achieved a turnoverRevenue
In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. In many countries, such as the United Kingdom, revenue is referred to as turnover....
of £2.94 million, and a net profit
Net profit
Net profit or net revenue is a measure of the profitability of a venture after accounting for all costs. In a survey of nearly 200 senior marketing managers, 91 percent responded that they found the "net profit" metric very useful...
of £185,000. Although these figures might be reasonable for a normal commercial company, they were received with surprise by Moonbeams supporters, who had purchased the goods in the expectation that a far greater proportion of the selling price would reach the charity.
The petition also revealed that Moonbeams' performance had deteriorated sharply as the trading company's operations expanded. Between July 1998 and March 1999 the company had a turnover of a little less than £100,000, and made a profit of around £40,000. But in the following year to March 2000, while turnover increased to over £550,000, the profit was less than £2,000; and in the year to March 2001 the profit was £2,250 on a turnover of nearly £1 million.
Attention naturally focussed on where the outstanding money had gone. Quoted in Scotland on Sunday
Scotland on Sunday
Scotland on Sunday is a Scottish Sunday newspaper, published in Edinburgh by The Scotsman Publications Ltd and consequently assuming the role of Sunday sister to its daily stablemate The Scotsman...
, Bill Cleghorn, a forensic accountant
Forensic accountant
Forensic accountants are experienced auditors, accountants, and investigators of legal and financial documents that are hired to look into possible suspicions of fraudulent activity within a company; or are hired by a company who may just want to prevent fraudulent activities from occurring...
appointed by the court, said: "There’s nothing we have come across yet that would indicate there’s anything criminal. We have high administration costs, a lot of travel costs and credit card costs."
Reported in local newspaper the Edinburgh Evening News
Edinburgh Evening News
The Edinburgh Evening News is a local newspaper based in Edinburgh, Scotland. It is published daily . It has a circulation of 68,000 and is owned by Johnston Press, which also owns The Scotsman and many regional titles throughout the UK.Much of the copy contained in the Evening News concerns local...
, Willie Power, the founder of Moonbeams, responded: "Obviously, a mistake has been made somewhere, but it has been an unintentional and honest mistake. We are a group of people whose lives have been touched by cancer and want to help in some way. We are not business professionals." Subsequently quoted in Scotland on Sunday
Scotland on Sunday
Scotland on Sunday is a Scottish Sunday newspaper, published in Edinburgh by The Scotsman Publications Ltd and consequently assuming the role of Sunday sister to its daily stablemate The Scotsman...
, he said: "I truly believe we did our best. There were no flash cars. I think the offices are quite nice but it's not all leather seats, it wasn't 'expense no object'."
Failure to transfer funds from trading company to charity
Under a Deed of Covenant, Moonbeams' trading company was obliged to transfer almost all its profits to the Moonbeams charity, so that it could be spent on charitable objectives. But the SCO stated in their petition to court that, of the £185,461 net profit raised by the trading company over four years of operation, £101,006 had remained in the trading company's accounts. This is the origin of the often-quoted figure of around £70,000 which finally made its way to the charity.At least one of the directors of the trading company was subsequently disqualified from acting as a company director, in part due to the failure to honour the Deed of Covenant.
Use of property in Florida
The SCO's petition also stated that, on a single occasion, Katherine Power - the daughter of the charity's founder - had been allowed to use the charity's house in Florida. The SCO argued that this was contrary to the objects of the charity, as it deprived a family of a child with cancer of the opportunity to use the house.Responding to the allegation, Willie Power accepted that his daughter had used the house but argued that it would otherwise have been empty at the time. He also stated that travel costs had not been met by the charity.
Auditing
The SCO's petition further stated that one of Moonbeams' former directors, Gary Easton, had acted as auditor for the charity while also a director, in breach of professional rules. Easton was not, however, a director of either the charity or the trading company at the time of the petition.The matter was subsequently referred to Easton's professional body, the Association of Certified Chartered Accountants.
Payments to directors
Although not referred to in the original petition, two queries concerning payments to directors arose after the court action.Willie Power, the founder of Moonbeams, was criticized by local media for demanding £3,000 in salary to cover the period immediately prior to the charity's collapse. However, the court-appointed administrator pointed out that he was simply claiming the same rights as any employee. Power had earlier stated that his annual salary from the charity was just £25,000.
In November 2007, four years after the collapse of Moonbeams, Gary Easton made a voluntary agreement to repay an undisclosed portion of the £93,000 he had received from the charity in professional fees. The liquidators had argued that the original fees had been excessive.
Liquidation
On 9 December 2003, the Court of Session made permanent the removal of the directors and trustees of Moonbeams . In April 2004, the court-appointed administrator began the process of liquidatingLiquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
the charity.
Regulatory reform
The Moonbeams incident was one of a series affecting Scottish charities in and around 2003. Most notably, earlier in 2003, the directors and trustees of Breast Cancer Research (Scotland)Breast Cancer Research (Scotland)
A defunct cancer charity that was based in Paisley and Glasgow, Scotland. It had its assets frozen in 2003 after a probe found that only £1.5m of the £13m it had raised was donated to charity. The group’s fundraiser, Tony Freeman, of Glasgow, was paid about 60 per cent - some £8 million - of the...
had been similarly suspended by the Court of Session - again following the discovery that only a small fraction of its income had funded charitable objectives.
Much of the blame was laid on the weak Scottish regulatory framework, which was (and remains) entirely separate from the system overseen by the Charity Commission
Charity Commission
The Charity Commission for England and Wales is the non-ministerial government department that regulates registered charities in England and Wales....
for England and Wales. At the time there was no requirement for charities to submit annual accounts, or even to register unless they wished to claim tax benefits. Shortly after the Moonbeams directors were suspended, Professor Gordon McVie, former chief executive of Cancer Research UK
Cancer Research UK
Cancer Research UK is a cancer research and awareness charity in the United Kingdom, formed on 4 February 2002 by the merger of The Cancer Research Campaign and the Imperial Cancer Research Fund. Its aim is to reduce the number of deaths from cancer. As the world's largest independent cancer...
, described Scotland as a "soft touch" and said "the reputation that Scotland has got is that there isn't yet a charity commission functioning".
By the time of the incidents, the then Scottish Executive
Scottish Executive
The Scottish Government is the executive arm of the devolved government of Scotland. It was established in 1999 as the Scottish Executive, from the extant Scottish Office, and the term Scottish Executive remains its legal name under the Scotland Act 1998...
had already set up a commission
Government agency
A government or state agency is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an intelligence agency. There is a notable variety of agency types...
to consider the law relating to Scottish charities. The commission's report recommended the establishment of a new regulator for charities in Scotland and the creation of a register of Scottish charities. Although this report was published in June 2001, it is widely thought that the events of 2003 prompted the Executive to act on it. Quoted in Scotland on Sunday
Scotland on Sunday
Scotland on Sunday is a Scottish Sunday newspaper, published in Edinburgh by The Scotsman Publications Ltd and consequently assuming the role of Sunday sister to its daily stablemate The Scotsman...
, the chair of the commission, Jean McFadden, said: "Our report seemed to disappear into a great black hole and nothing much happened ... I think it would still be lying there had it not been for the breast cancer scandal."
A bill
Bill (proposed law)
A bill is a proposed law under consideration by a legislature. A bill does not become law until it is passed by the legislature and, in most cases, approved by the executive. Once a bill has been enacted into law, it is called an act or a statute....
to create the new regulator was placed before the Scottish Parliament
Scottish Parliament
The Scottish Parliament is the devolved national, unicameral legislature of Scotland, located in the Holyrood area of the capital, Edinburgh. The Parliament, informally referred to as "Holyrood", is a democratically elected body comprising 129 members known as Members of the Scottish Parliament...
in June 2004, and received broad cross-party support. It received Royal Assent
Royal Assent
The granting of royal assent refers to the method by which any constitutional monarch formally approves and promulgates an act of his or her nation's parliament, thus making it a law...
on 14 July 2005. The Act co-opted the Office of the Scottish Charity Regulator
Office of the Scottish Charity Regulator
The Office of the Scottish Charity Regulator is a non-ministerial department of the Scottish Government, with responsibility for the regulation of charities in Scotland...
(OSCR), which had been established in December 2003 as an executive agency
Executive agency
An executive agency, also known as a next-step agency, is a part of a government department that is treated as managerially and budgetarily separate in order to carry out some part of the executive functions of the United Kingdom government, Scottish Government, Welsh Assembly or Northern Ireland...
, and placed it under the direct control of the Scottish Parliament
Scottish Parliament
The Scottish Parliament is the devolved national, unicameral legislature of Scotland, located in the Holyrood area of the capital, Edinburgh. The Parliament, informally referred to as "Holyrood", is a democratically elected body comprising 129 members known as Members of the Scottish Parliament...
. The OSCR took over key responsibilities from the Inland Revenue
Inland Revenue
The Inland Revenue was, until April 2005, a department of the British Government responsible for the collection of direct taxation, including income tax, national insurance contributions, capital gains tax, inheritance tax, corporation tax, petroleum revenue tax and stamp duty...
in April 2006.
See also
- Breast Cancer Research (Scotland)Breast Cancer Research (Scotland)A defunct cancer charity that was based in Paisley and Glasgow, Scotland. It had its assets frozen in 2003 after a probe found that only £1.5m of the £13m it had raised was donated to charity. The group’s fundraiser, Tony Freeman, of Glasgow, was paid about 60 per cent - some £8 million - of the...
, another charity which collapsed in 2003. - The Office of the Scottish Charity RegulatorOffice of the Scottish Charity RegulatorThe Office of the Scottish Charity Regulator is a non-ministerial department of the Scottish Government, with responsibility for the regulation of charities in Scotland...
.
Note that there is no relationship between the Moonbeams Charity and Moonbeams Limited, a company registered in St. Helena - http://moonbeamsforall.com