The Charity Commission has removed a religious charity from the register after uncovering a raft of management and governance failures.
This includes a failure to manage conflicts of interest between trustees and a family member involved in the purchase, and subsequent sale, of a £1.3m property by the charity.
It emerged that both the chair and a trustee of Jewish charity the Beth Yosef Foundation were related to a lender, who helped finance the purchase of a property in London and then called in the loan, forcing the charity to sell the building.
Under the terms of a loan the lender was entitled to 80% of the sale proceeds. However even after the sale of the property the charity would have still had debts of around £100,000.
The regulator found that the charity’s chair is the lender’s aunt, while another trustee is his brother-in-law.
In addition, it emerged that trustees were linked to another charity that had been permitted to use the Foundation’s property. It also emerged that another trustee at this charity was also related to the lender.
“The charity did not have a conflicts of interest policy and despite the relationships and connections between the parties, the trustees did not consider a conflict of interest existed” between the other charity and the lender, according to the regulator.
“They did not appear to understand how to identify and manage such conflicts or the importance of doing so, despite having been directed to the Commission’s guidance about conflicts of interest which explains how to take appropriate steps to address the identified deficiencies,” it added.
To finance the original purchase of the property in 2001 the charity had borrowed £667,876 from the lender. After the loan was called in the charity then agreed a private sale price with the lender of £1.3m rather than listing it on the open market.
After the sale a court order was put in place to ensure the charity received any surplus funds. Following the property’s sale £136,034 was held in trust for the charity.
Trustees then informed the regulator that the charity was “effectively dormant and had no income or bank account”.
The regulator’s inquiry found that the bank account had closed in 2016 with a closing balance of just under £7,000. It is not clear where this sum of money went.
An interim manager was appointed by the regulator in 2021 and in June this year the charity was removed from the register.
In concluding there was serious misconduct and/or mismanagement at the charity the Commission said there was evidence of “poor governance and poor financial management of the charity and its affairs”.
Trustees’ lack of financial controls, poor management of conflicts of interest, protection of the charity’s property and failure to file accounts were criticised by the regulator.
The regulator points out that a failure to submit accounts is also a criminal offence.
The Charity Commission warns charities that “conflicts of interest are more likely when there are only a small number of trustees on the board, when trustees are closely related, or when the charity has dealings with organisations in which the trustees have interests”.
It said: “It is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees.
“The trustees should put in place policies and procedures to identify and manage such conflict.”