Charity Commission inquiries and Christian ministry

Background

Part of our work here at Stewardship is working with regulatory issues that affect Christian churches, charities and related ministries. We love to encourage the flow of generosity of the people of God ‘for the work of service’ and want to help the organisations into which it flows to be as good as they can be.

Sadly, we do see at times the flow of generous giving being poured into ‘leaky buckets’ and, in this blog, I wanted to bring wider attention to some learning points from recent Charity Commission inquiries. It is a truth that we learn from mistakes and, as far as possible, I would like us to learn from others’ mistakes rather than from our own!

The Apostle Paul in 2 Corinthians 8 uses this phrase: “For we are taking pains to do what is right, not only in the eyes of the Lord but also in the eyes of man”. Over the recent past, there have been a number of Charity Commission reports on situations with Christian and other religious charities which I hope will act as reminders of what is ‘right in the eyes of man’ so we can be at pains to avoid those mistakes.

Failure of governance and accountability over finance

In March, the Commission published their final report into a South London church which has been removed from the register of charities. https://www.gov.uk/government/publications/charity-inquiry-rhema-church-london

Sadly, there are a number of issues reported that have been common among Christian charities over the years, which continue to seriously impact individual ministries and the reputation of the whole church sector. I want to highlight three of them:

• Lack of trustee meetings and involvement in governance,
• Lack of financial control, especially a lack of accountability over senior leaders’ expenditure,
• Tax investigations draining finance from the ministry.

The inquiry had been initiated as the result of a whistleblowing report to the Commission. The auditor’s report for the year ending 30 September 2013 highlighted insufficient evidence of proper decision making on expenditure and gave a qualified opinion on the accounts, as there was insufficient evidence to evaluate how much of the charity’s £200,000 in credit card spending and £76,000 in petty cash expenditure had been for charitable purposes. Specific concerns were raised about approximately £90,000 spent in the year on overseas development workshops and how much of this expenditure was directly for charitable purposes.

The most immediately serious consequence of the lack of appropriate accountability and administration was a very substantial tax liability to HMRC of over £540,000, which was so significant that the charity was unable to recover.

Those were the outcomes. However, it would appear that the heart of the issue was a general lack of attention to ‘governance’ - the oversight of the way the ministry was operated. At Stewardship, we use the term “AAA” rating, which assesses the extent to which a ministry has good attitudes, accountability and administration around money. Here, it would appear, there were failures in all three of those.

One example of this was the lack of investment by the church in its trustee oversight; the trustees had failed to follow regulatory guidance previously provided by the Commission or even minimum good standards (by having only one meeting a year). There hadn’t been enough thought on financial accountability: it was identified that there was a lack of expenditure authorisation, including in the use of credit cards and petty cash and no evidence that expenditure was properly authorised. There was also a lack of segregation of duties regarding collections, and a lack of security arrangements.

Repeating lack of accountability

If that had been a ‘one off’ it would be sad but understandable. However, that was almost a re-run of the conclusions from another inquiry on another church from 2022. https://www.gov.uk/government/publications/charity-inquiry-the-everlasting-arms-ministries/charity-inquiry-the-everlasting-arms-ministries

There were similar issues: lack of Trustee involvement, senior leaders with little or no financial accountability, little documentation or evidence that the Commission’s guidance on internal financial controls was being followed and, as a consequence, suspicion that funds were used for personal and not charitable aims.

That in turn was a re-run of many other examples where ‘public’ finance was run in many ways like that of a private family.

Multiple failure to produce accounts on time

Another 2023 inquiry on a faith charity focused on another concern that the Commission has with the sector. This time, it was not a ‘Christian’ charity, but we are aware that it could easily have been.

https://www.gov.uk/government/news/inquiry-opened-into-north-london-religious-charity-over-failure-to-submit-annual-accounting-documents

Failure to achieve the legal requirement of filing accounts on time shows the regulators that there is a lack of investment in accountability. This in turn raises the question of what else isn’t being done properly.

Wider conclusions

The conclusion from our discussions with the Charity Commission is that they have the view that the ‘faith sector’ does not take its responsibility seriously in applying good principles over finance; it fails to invest in its ‘AAA rating’ with all the consequent failure and loss of reputation.

Billy Graham publicly made financial accountability an absolutely top priority of his ministry. He was intentional about ‘doing what was right, not only in the eyes of God but also of man’. I believe this was a very major reason why his ministry had such success and longevity.

Let us, as representatives of God, learn from the mistakes of others, taking the pains to demonstrate integrity, accountability and wisdom and intentionally invest in these behind the scenes but very important aspects of ministry.

For further information on this subject, see our briefing paper Raising the standard: transforming the culture of money in the church.