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".
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 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.
Suspension
On 14 October 2003, as a result of a complaint from a competing charity, the Court of Session in Edinburgh 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.
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 turnover 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 reason for this was that the lawyers, Lindsays, recommended setting up the trading arm to absorb all the costs of the charity, including the salaries of all employees. This meant that 100% of any donations made to the charity would go to the charity and it could be advertised as such. The trading arm, Moonbeams UK, would pay all the bills.
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." Moonbeams did indeed sign up for some bad deals but in the opinion of those who worked there, it was better getting more money and helping more families in need than not doing anything.