Charity had building repossessed after spending more than £500,000 on it, regulator finds

A community charity had a temple building repossessed after more than half a million pounds of charitable funds had been spent constructing it, the Charity Commission has found.

The regulator yesterday published a report detailing its statutory inquiry into the Hindu Community Society, which was established in 2010 to support the Tamil community in Coventry and the surrounding area.

The commission became involved with the charity after it repeatedly failed to file its accounts on time, and opened a statutory inquiry in 2017.

It found that Nathan Rahulan, a trustee of the charity, bought a property on behalf of the charity for £160,000, which was to be used as the base for a temple.

The funds came from loans and donations from the community, plus a bridging loan of £100,000 from a commercial finance company.

Rahulan told the commission the charity spent about £500,000 of public donations on constructing and furnishing the temple.

But the interest on the bridging loan was £5,000 a month and after six months the charity owed £209,000 to the company, which resulted in it demanding immediate repayment.

The charity was unable to afford the repayment and defaulted on the loan, so the building was repossessed.

Rahulan told the commission that the decision to take out the bridging loan was made by him alone, without discussion with other trustees, and that no professional financial advice had been taken.

The regulator also found Rahulan had been declared bankrupt while a trustee of the charity and given a 12-month bankruptcy order. This should have meant he resigned as a trustee, because undischarged bankrupts are prevented by law from holding such roles.

The regulator said Rahulan’s wife, Padma, who was also a trustee of the charity, said she had been aware of the loan, but found no evidence to show she had consulted other trustees or sought professional advice on the matter.

Nathan Rahulan then took legal advice about reclaiming the property, at a cost of £46,000, but failed to regain ownership of it.

The inquiry found there was no evidence of any trustee meeting to discuss this use of charity funds.

The regulator said the Rahulans also failed to comply with directions from the commission ordering them to complete tasks including submitting weekly income reports and giving evidence that funds had been put in the charity’s bank account.

The commission concluded the extent of the misconduct and/or mismanagement attributable to the couple meant they should be removed as trustees.

The regulator said it attempted to engage with remaining trustees but with little response and it subsequently concluded that the charity had not been active since about March 2020. It was removed from the register of charities in November last year.

The commission concluded that the actions of the Rahulans “were significantly below that expected from trustees”.

It said: “Mr Rahulan had overcommitted the charity by taking out a bridging loan that the charity would be unable to repay, without consulting the other trustees nor obtaining any professional financial advice prior to this investment, and there is a lack of documents detailing the rationale for entering into the loan.

“The loan was secured against the property thereby exposing the charity to significant risk to its asset.

“Mrs Rahulan had been aware of these events but had not acted to bring this matter to the attention of her fellow trustees or intervene to safeguard the charity’s asset, which was ultimately lost.”

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