The Charity Commission has issued an official warning to Christ Church College in Oxford after it spent £6.6m on a four-year dispute with its former dean.
Christ Church spent the money on legal fees and public relations between 2018 and 2022 after a row between the college and its former boss Martyn Percy spiralled out of control.
The commission said both the costs and the way spending was handled meant the college “failed to manage the charity’s resources responsibly”.
The regulator also criticised the trustees for producing accounts that were potentially misleading about how money was being spent on the dispute.
The commission warned the charity’s trustees that Christ Church could face further regulatory action if it did not show the college was now meeting its financial obligations.
Christ Church said costs had been “a moving target” because Percy refused to reach a settlement with its board.
Percy described the claim as “absurd” and said the commission’s findings were “devastating” for the charity.
The dispute started in 2018 after Christ Church set up an internal tribunal to investigate complaints against Percy. The nature of the complaints was never made public and the tribunal had the power to dismiss the dean, who joined the college in 2014.
He was suspended during the investigation but reinstated a year later after the charity announced that “the charges are not upheld”.
In October 2020, Christ Church started a separate investigation into another complaint.
In February this year, following a mediation process encouraged by the Charity Commission, the college announced that Percy would receive a settlement payment and stand down as dean.
The Charity Commission said today that trustees had been told to keep a “close oversight of costs” as the dispute dragged on but had failed to act on the advice.
The commission said it had requested information from Christ Church last December about both the costs generated by the dispute and how this spending was being managed.
This information was not provided “in a timely manner”, according to the regulator. It later learned that, instead of setting a fixed budget for handling the dispute, payments were agreed retrospectively by the trustee board.
The commission said: “Between August 2018 and late January 2022 the college had spent over £6.6m on legal and public relations fees in various actions related to the former dean, of which over £5.3m appears to have been approved retrospectively.”
The regulator also criticised the way dispute costs had been published in the charity’s annual accounts.
For three years between 2018 and 2021, spending on activities related to Percy was recorded in its financial filings as “other direct costs – teaching, research and residential”.
The commission said: “This has the potential to to mislead the readers of the accounts. The trustees had been advised by the charity’s auditors to consider reporting on actions related to the dispute specifically, and to seek advice on its reporting.”
Christ Church did not respond to specific questions about whether it had ignored its auditor’s advice on how to present charitable spending.
The regulator told the college to ensure that its next set of accounts “comply with the legal requirement to ensure the charity is accountable”.
The college, one of the oldest and biggest at Oxford University, has an annual income of £32m and controls assets worth about £1bn, according to its latest accounts.
Dominic Grieve, the former attorney general, has started an independent review into governance at Christ Church.
A spokesperson for the college said: “Christ Church and individual trustees have repeatedly asked the Charity Commission for help to resolve the disputes with Dr Percy and explained the ways in which Dr Percy was unfit to be a trustee.
“In very complex and constantly changing circumstances, trustees made decisions which, having taken professional advice, they judged to be in the best interests of Christ Church.
“The costs and risks of the series of disputes with the former dean were a moving target as Dr Percy behaved in a way that maximised the costs and other damage to Christ Church.
“Many of the costs were incurred as a result of Dr Percy’s refusal to settle with a governing body which had lost trust and confidence in him. Christ Church had since 2018 consistently proposed mediation in order to settle the disputes as quickly as possible, but in three years of mediation, and up until this year, Dr Percy always resisted a settlement.”
The spokesperson added that no resolution could be reached until the concerns of the individual making the latest allegation against Dr Percy were fully addressed.
They added: “Following the official warning, Christ Church will continue to work closely with the Charity Commission and is pleased to report that the implementation of its recommendation to review Christ Church’s governance is already well under way.”
The charity said Grieve had “made substantial progress” in his review but did not say when they expected his work to be completed.
Christ Church added that it hoped to “reform its procedures so as to enable any future disputes of this nature to be resolved fairly and cost-effectively”.
Percy said in a statement: “This is a devastating finding against a charity that was clearly out of control.
“Detailed concerns were first raised with the Charity Commission in March 2019. We are hugely grateful for its considered, thorough and forensic review of Christ Church, and its conclusions.
“It is absurd to suggest that Christ Church’s governing body properly incurred these costs in a relentless, wasteful and unsuccessful campaign to prosecute me.”
He added: “It is patently clear there was no effective oversight – and that there was a deliberate attempt to hide, and therefore mislead the public and alumni – about the legal and PR costs of the campaign to oust and smear me.
“Alumni and donors will be shocked that £6.6m – money ostensibly earmarked for education – was instead squandered on lawyers and PR agencies.”
Percy said he had “moved on” from the dispute and argued that Christ Church “cannot recover from this episode” until those responsible for mismanagement at the college were “held to account”.
Helen Earner, director of regulatory services at the Charity Commission, said: “These long and protracted disputes risked undermining the reputation of Christ Church and harming wider trust in charities.
“It is not for us as regulator to take sides in disputes. Our role is to ensure that charities are governed effectively and that charitable funds are properly accounted for.
“All trustees must demonstrate sound financial stewardship, regardless of the level of resources available to them.”
She added: “We consider that the actions of the trustees at Christ Church amount to mismanagement and/or misconduct, after they failed to manage the charity’s resources responsibly or ensure that the charity is accountable in the context of a costly dispute.
““The commission welcomes the fact that an independent governance review is now underway at the charity, led by the Rt Hon Dominic Grieve KC, and we expect the trustees to keep us updated on its progress.
“Good governance should be a priority for all trustees, especially those involved in important national institutions such as Christ Church, Oxford.”