Overseas ministries, governance and the Charity Commission

In July 2023, the Charity Commission launched inquiries into The Telz Talmudical Academy and Talmud Torah Trust and The Gevurath Ari Torah Academy Trust. The regulator’s concerns related to financial management and controls within the charities, including the use of signed blank cheques. Whilst this inquiry is about charities which raise funds for Jewish faith institutes in Israel, it echoes concerns that the Commission reported on in 2022 on Christian churches and ministries.

In this recent case, the regulator was concerned about the charities’ financial management after discovering that one trustee, who lives in Israel, was in possession of the charities’ cheque books containing several blank cheques, pre-signed by the trustees who live in the UK.  Also that the charities operate heavily in cash (which the Commission advises against) and did not maintain adequate records on its use. The trustees could not provide adequate evidence on how they were monitoring or verifying the end use of the charities’ funds overseas.

The Commission then exercised its powers under the Charities Act 2011 and made an order to restrict the trustees from undertaking certain transactions, especially withdrawing funds in cash and pre-signing cheques.

This is an important reminder for all charities working or giving overseas, that they need to take extra care to ensure, and document, that the money is used properly at the far end. The cost of not doing this can be very significant.

It is also a reminder that ‘cash’ is rarely a good mechanism for payment. In the words of one regulator, “No decent organisation uses cash a lot”. If it is thought to be the right way to operate, the Trustees should document why that is, together with risk assessments of how to protect against its obvious dangers.

The governance weaknesses in these inquiries were similar to those the Commission reported on in 2022 in respect of two London-based churches.  In those cases, the Commission commented on the following:

1. Lack of Trustee involvement (time, thought, initiative, challenge), which led on to:
2. Little evidence that financial controls were being seriously designed and applied, which led on to:
3. Lack of culture of responsibility or challenge in governance, which led on to:
4. The dominance in all decisions (financial or otherwise) by a small group of leaders, which led on to:
5. Senior leaders with little or no financial accountability, and
6. Suspicion that funds were used for personal and not charitable aims: ‘public’ finance was run like that of a private family.

In both churches, the impact of these weaknesses was not just the negative comments from the regulators, but significant reputational damage in the church and also in the wider community and, ultimately in the case of one of them, ending in bankruptcy because of the tax impact of their uncontrolled expenditure.

For more on these issues you can read the following briefing papers and blogs on our website

https://www.stewardship.org.uk/resource/guide-churches-making-payments-overseas

https://www.stewardship.org.uk/resource/do-you-know-how-your-church-or-charitys-grants-are-being-used

https://www.stewardship.org.uk/resource/financial-controls-churches-and-small-charities

https://www.stewardship.org.uk/blogs/cc8-internal-financial-controls-charities-updated

https://www.stewardship.org.uk/blogs/charity-commission-inquiries-and-christian-ministry

Also key regulators guidance:

Charity Commission

https://www.gov.uk/government/publications/internal-financial-controls-for-charities-cc8

https://www.gov.uk/government/publications/faith-based-charities

https://www.gov.uk/guidance/charities-how-to-manage-risks-when-working-internationally

HMRC – in relation to making payments overseas (see section 9)

https://www.gov.uk/government/publications/charities-detailed-guidance-notes/annex-ii-non-charitable-expenditure