The Charity Commission has published its inquiry into Christian charity The Everlasting Arms Ministries (the 'Charity') on 14 June 2022.
Facts and issues
The key issues under investigation included possible charity law issues with a sale of a property on Old Kent Road, payments to trustees and connected people and companies, expenditure of funds on business class travel and five-star hotels, and general concerns with financial management and governance (including conflicts of interest or loyalty).
Regarding the disposal of the property on Old Kent Road, the inquiry was concerned that the requirements of ss 117 – 121 of the Charities Act had not been complied with. The Charity sold the Old Kent Road property for £8million in 2016 but remained in occupation of the property. The inquiry noted that £2million was withheld by the purchaser in consideration for the Charity being granted a 999-year lease to occupy the property: however, this was not reflected in the Charity's accounts, and the purchase price was incorrectly recorded at £6million. In addition, although legal advice was sought by the Charity in relation to the property sale, the valuation report was not compliant with the requirements of the Charities Act. The Charity acted upon the requirements of the inquiry's Action Plan and has since improved the quality of the accounts.
In general, the inquiry found that the Charity's financial management, planning, and budgeting was poor, a result of a lack of financial expertise in the Charity's administration, poor record keeping, and a lack of internal financial controls. The Charity could not adequately prove that all of its funds had been spent on exclusively charitable purposes: the risk that this posed was significant and consequently the Commission froze the Charity's bank accounts in February 2020, resulting in all outgoing payments requiring Commission authorisation.
Another area of concern was the high amount of spending on "international outreach" which involved business class travel and five-star hotels as well as payments to partners in India and China. Regarding the travel and expenses, there was insufficient support in charity documents for this approach (with a short reference to the need for directors/trustees travelling to the "mission field" to be comfortable) with minimal discussion in trustee meeting minutes and no travel policy in place. Similarly, the payments to overseas partners were not property accounted for and there was insufficient record keeping on the motivation for the payments and oversight on how the funds were then spent: this amounted to misconduct on the part of the trustees and mismanagement in the administration of the Charity.
One of the trustees was also an employee of the Charity (as Senior Pastor) and was paid a salary, which the inquiry acknowledged was permitted under the Charity's governing document. However, the salaries of both the Senior Pastor and the Deputy Senior Pastor (who were a married couple) increased significantly in 2016, and increased more than the salaries of other employees and "far more than would normally be expected" in line with inflation. No documentation exists to suggest what the justification for this was, including no evidence of any research to support the amounts of remuneration for these positions (for example, a benchmarking exercise) which was a concern for the inquiry.
In general regarding conflicts of interest and loyalty, the inquiry found that decisions were made with insufficient regard for the Charity's governing document, including decisions to appoint trustees and staff members at meetings that were not quorate or where some people present were not trustees of the Charity and not entitled to vote. In addition to the salaries paid to the Senior Pastor and Deputy Senior Pastor, there were other payments made that were insufficiently documented or justified to (a) a company of which the Deputy Senior Pastor was a director and (b) to one of the trustees for 'IT services'. While the trustees demonstrated that, where a conflict existed, relevant trustees absented themselves from meetings the inquiry considered the record keeping in relation to conflicts to be inadequate as the Charity had no conflicts of interest policy nor a conflicts register. In line with the Action Plan, salaries of all employees (including the Senior Pastor and Deputy Senior Pastor) were significantly reduced.
Overall, the inquiry has found that there was significant mismanagement and/or misconduct in the administration of the Charity by the (now replaced) trustees. The inquiry found that the trustees lacked the necessary skills to manage the Charity and were also largely unaware of relevant Commission guidance and best practice (in particular regarding governance and financial matters).
However, both the previous trustees and the new trustees fully cooperated with the inquiry and have worked hard to implement the inquiry's recommendations and the Action Plan. The Charity is still subject to monitoring by the Commission.
Lessons for trustees
- Trustee decision making must meet the requirements of charity law and the charity's governing document. Importantly, this includes (a) trustees making decisions jointly and ensuring that all trustees have the opportunity to participate and (b) ensuring that all decisions are properly recorded, stating what was decided and why.
- Trustees are under a legal duty to ensure funds are used only in furtherance of their charity's purposes and are legally responsible and accountable for their proper use. In order to demonstrate this, trustees should ensure that relevant policies and controls are in place and are followed. Proper financial records must also be kept.
- Trustees must consider value for money when requiring trustees or employees to travel: this includes the overarching requirements to ensure that charity funds are spent in furtherance of the charity's objects and in the best interest of the charity. Where significant travel is part of the charity's activities, a robust policy on travel and expenses should be in place, followed, and reviewed regularly. The Commission also expects that formal records in relation to trustee decisions should show that the trustees actively considered factors relevant to the decision on travel and expenses such as affordability, reputational risks, and public perception.
- When working with partners aboard, appropriate accounting and oversight procedures must be put in place, as well as considering the importance of record keeping (including records of meetings or phone call relating to such partnerships). The inquiry also highlighted the importance of Anti-Bribery and Anti-Money-Laundering policies.
- The use of a trustee or director's personal credit or debit card for charity expenditure is not considered to be best practice, as it blurs the line between what is charitable and what is private expenditure: when proper records are not kept in relation to spending (as was the case here) it results in no clear audit trail of how the charity's funds have been expended, which is a legal requirement.
- All trustees should be made aware of the Commission's guidance and best practice, which is freely available on the internet.
For the full report, see here.
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