Charity that paid out £1.25m in trustee-connected loans and grants given warning

The regulator has given an official warning to a grant-giving charity that issued £1.25m in trustee-connected loans and grants.

An inquiry report published by the Charity Commission criticised the charity Combined Funds over a perceived failure to manage conflicts of interest.

The charity was set up to relieve poverty and advance religion in accordance with Orthodox Judaism.

But the commission's inquiry, which began in March 2018, found serious concerns surrounding unmanaged conflicts of interest and unauthorised trustee personal benefit.

The charity gave loans of more than £1m in total to four subsidiary companies, of which a trustee was the sole director, according to the commission. 

Investigators also found that the charity had made a grant to cover £250,000 of private medical care for a person connected to the original trustees. 

The regulator took protective action during the inquiry to restrict access to the charity’s bank account.

The trustees’ connections to each other and the beneficiary meant they were unable to appropriately manage this conflict of interest, or make unconflicted decisions in relation to the charity’s subsidiaries, the commission found. 

Trustees told the inquiry that there were no formal systems in place for assessing applications for grants, and it did not keep a record of requests, or its decision-making process.

There were also serious administration oversights that included a failure to register the charity, and a failure to properly prepare and ensure independent scrutiny of its accounts.

But the regulator said it did not find any evidence of a misappropriation of funds or of any loss to the charity.

Since the investigation, two independent trustees have been appointed to the charity’s board, and the trustees have formalised written investments, grant-making and conflicts of interest policies, according to the regulator. 

They have also confirmed that the loans have all now been repaid to the charity. 

Amy Spiller, head of investigations at the regulator, said: “This case serves as a reminder that good governance is not a bureaucratic detail – it underpins the delivery of a charity’s purposes to the high standards expected by the public and for those it was set up to help. 

“Our intervention has ensured marked improvements at this charity and I expect to see continued progress in line with the action plan we have set.”

The charity remains under statutory supervision and the regulator said it would continue to monitor its progress.

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