On 5 December 2022, the Charity Commission released the results of its statutory inquiry into Beth Yosef Foundation (the 'Foundation').
The Foundation was removed from the Commission's Register of Charities on 21 June 2022.
The Foundation's primary objects were:
- to advance the orthodox Jewish religion, in particular as practised by Sephardi Jews in any part of the world;
- to further education, including religious learning, in accordance with the orthodox Jewish religion, in particular as practised by Sephardi Jews, in any part of the world;
- to relieve Jewish people, in particular Sephardi Jews, in any part of the world in cases of need, hardship or distress; and
- to further any charitable purposes for the general benefit of Jewish people, in particular Sephardi Jews, in any part of the world.
The Commission's Regulatory Compliance Team opened a case into the Foundation in September 2016 due to its persistent failure to submit annual returns and accounts to the Commission.
In November 2016, the Commission met with one of the Foundation's trustees and identified a number of serious regulatory concerns in relation to the administration and financial management of the Foundation.
Facts and Issues
In December 2016, the Commission launched a statutory inquiry into the Foundation. The scope of the inquiry was to examine:
- whether the existing trustees were properly appointed and whether decisions made by the trustees regarding the administration and management of the charity had been validly made, in particular in relation to the disposal of charity property;
- whether any potential conflicts of interest had been identified and correctly managed by the trustees;
- the financial management of the charity and application of charitable funds, in particular relating to rental income received from a property the Foundation intended to dispose of and how rental income had been applied;
- whether or not the trustees had complied with their duties and responsibilities under charity law; and
- whether there had been any misconduct and/or mismanagement by the trustees.
Findings
The Foundation's governing document stipulated that there must be a minimum of three trustees, and that additional or replacement trustees may be appointed by the charity's Founder. The Foundation's three trustees throughout the inquiry were unable to provide any evidence that their appointments as trustees were made in accordance with the Foundation's constitution.
In relation to the property the Foundation intended to dispose of, the Foundation had already received finance from the prospective purchaser in the form of a loan. In addition, two of the three trustees were connected to the lender. The Foundation did not have a conflicts of interest policy, and despite the connections between the trustees and lender, the trustees did not believe a conflict of interest existed. The inquiry found that the trustees failed to properly identify and manage conflicts of interest when administering and managing the Foundation.
The inquiry found repeated failings by the Foundation to meet their statutory reporting requirements to file accounts and a Trustees Annual Report within the prescribed time limits. The inquiry considered this failure to comply with statutory duties demonstrated an unwillingness or inability by the Foundation's trustees to act with reasonable care and skill.
The Commission concluded that there was serious misconduct and/or mismanagement in the charity's administration and management. The inquiry concluded that the trustees had not complied with or fulfilled their duties as trustees under charity law.
In February 2021, the Charity Commission used its powers to appoint an Interim Manager of the charity who established that the Foundation was not financially viable in terms of its continued operation. The Interim Manager was able to identify a charity both willing and able to apply the Foundation's remaining funds in line with the Foundation's objects, and so the funds were transferred.
Key lessons for charity trustees
The Commission identified a number of key issues for trustees:
- Governance – this inquiry highlights the need for charities to have an effective trustee body to control and administer a charity. Holding the position of trustee in name but failing to understand and fulfil legal duties of a trustee may amount to misconduct and mismanagement in the administration of a charity.
- Trustee decision-making – charity trustees should follow the seven principles of decision making. Trustees must: act within their powers; act in good faith and only in the interests of the charity; make sure they are sufficiently informed; take account of all relevant factors; ignore irrelevant factors; manage conflicts of interest and make decisions that are within the range of decisions that a reasonable trustee body could make. Trustees must also follow the specific requirements of their governing documents when making decisions.
- Managing conflicts of interest and loyalty – charity trustees must actively manage conflicts as they arise and following the Commission's recommended four stage checklist (declare, remove, manage and record the conflict). Conflicts are expected to arise, it is the management of these conflicts by charity trustees that the Commission is primarily concerned with.
- Managing finances –charity trustees need to have a good knowledge and understanding of their charity and its finances. The Commission expects trustees to discharge these duties by regularly assessing and monitoring the overall financial position of their charity. Financial activities of a charity must be recorded.
- Disposal of charity property – charity trustees must be aware that when disposing of charity property, there are key legal requirements to be fulfilled including the need to consider a written report from a qualified surveyor.
- Charity accounting requirements – charity trustees must familiarise themselves with accounting and reporting requirements. Failure to submit accounts and accompanying documents to the Commission is a criminal offence, and the Commission also regards it as mismanagement and misconduct in the administration of the charity.
For the full inquiry report, see here.
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