Two Christian charities have been wound up following an eight-year Charity Commission investigation into accusations of poor governance and trustees acting in their own interests.
In a report published today, the regulator said it had opened its inquiry into Saint Stephen the Great Charitable Trust and Saint Stephen the Great, a charitable company that operated alongside it, after receiving complaints that trustees had acted in their own interests.
The commission said in its report that it estimated that its actions had safeguarded £3.2m of charitable funds.
Its investigation found that in 2007 directors of the charitable company – three of whom were members of the same family – contracted an American company, which was not named in the report, to provide it with management services for £20,000 a month. Some of the trust’s trustees were directors of the American company.
In 2008, the company’s directors also resolved to accept a loan from the American company, the report says.
Prior to this, in 2006, the trust signed a deal with the Society for Promoting Christian Knowledge to transfer 22 shops run by the SPCK to the trust for free. In return, the trust was given five freehold shops, granted leases of six shops on a peppercorn rent and assigned the leaseholds of 11 other shops.
The charitable company then contracted three management companies to run the bookshops – one of the trustees and another family member were also directors of these companies.
The report says: "There were many occasions which raised conflict of interest and loyalty issues.
"The inquiry also identified the potential for trustee benefit and self-dealing by some trust and company trustees... trustees were unable to demonstrate that they were properly managing conflicts of interests and loyalty."
When the inquiry was opened in 2009, the trust and company were facing 30 employment tribunal claims from former bookshop employees and legal action from SPCK, which claimed the trust had breached lease agreements on some of the shops and breached the transfer agreement between the organisations by selling one off.
Since then, charity’s land and property was held by the official custodian for charities for protection under the Charity Commission’s direction and the trust was administered by an interim manager.
The report says: "The interim manager concluded that it would be expensive and risky for the trust to restart managing the shops.
"There was no prospect of new trustees wishing to manage the trust and no evidence that beneficiaries or interested parties wished the trust to continue. It was in the trust’s best interest for it to be wound up."
The company dissolved on 24 June 2013 and the trust was removed from the register on 10 March 2014 as it had ceased to exist.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: "This has been a long investigation that has been hampered by poor record keeping and complicated by the number of claims and connected party companies and transactions."
But she said she was pleased with the result and warned charities should be clear about the roles of different bodies and ensure they had enough unconflicted trustees to scrutinise third party transactions.