A Jewish charity was given an official warning by the UK’s aid watchdog after it gave a trustee £1 million ($1.32m) in loans.
Combined Funds Limited, which helps members of the Jewish Orthodox faith who are facing poverty, also paid £250,000 for personal medical care for a person linked to one of its trustees.
The Charity Commission conducted a two-year inquiry into the charity and found it guilty of misconduct because of its trustees’ conflicts of interests.
The charity’s last accounts revealed it had £8.2m. It was founded by family members Ephraim Stolzberg, now 80, and Helen, Ben and Mordechai Stolzberg in 1981. Last year Mordechai Stolzberg, 65, stepped down from the charity.
The inquiry found that the charity gave loans of more than £1m in total to four subsidiary companies, of which a trustee was the sole director.
It found that the decision to issue the loans, which have been paid back in full, should not have been made because there was a conflict of interest.
In another case, a grant was issued to cover private medical care costing £250,000 for a person connected to the trustees.
“The trustees’ connection to each other and the beneficiary meant they were unable to appropriately manage this conflict of interest,” the inquiry found.
The current trustees said the medical payments were in line with the charity’s objectives because the beneficiary was in poverty and required treatment that was not available on the NHS.
However, the watchdog upheld its criticism, stating that a retrospective consideration is “not an appropriate way” to manage conflicts of interest and the original trustees’ failure to appropriately manage them at the time was mismanagement in the administration of the charity.
The trustees told the inquiry that there were no formal systems in place for assessing applications for grants and the charity did not keep a record of requests, or its decision-making process.
There were also serious failures in the administration of the charity – the original trustees failed to register it, despite being legally required to do so, and they failed to properly prepare and ensure independent scrutiny of the charity’s accounts.
During the inquiry, investigators took protective action to restrict access to the charity’s bank account.
“Our inquiry uncovered a number of poor governance arrangements that were not serving this charity well,” said Amy Spiller, head of investigations at the Charity Commission.
“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.
“While this charity receives its funding from a trustee and the trading subsidiaries they control, charity law expects all charities’ governance to meet high standards, regardless of their income source, given the special status charities enjoy in the public mind and the privileges that charitable status brings.
“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.”
Since the inquiry, two new independent trustees have been appointed and the commission will continue to monitor the charity’s activities.
