The Charity Commission has criticised a group of former trustees for their running of a religious charity where charitable funds were being put at risk by being moved across the bank accounts of firms and subsidiaries.

Its investigation found particular concerns over the transfer of millions of pounds of charitable funds into the accounts of subsidiary companies, partly and wholly owned by one of the trustees.

The probe was launched after the Charity Commission initially became involved with its running nine years ago when the charity failed to submit its accounts for the year ending January 2015.

The charity, Knightland Foundation, works to advance the Jewish faith, relieve financial hardship among those in the Jewish community and to support the religious education of children.

Its investments include several residential and commercial properties in London and Hartlepool.

It also has four trading subsidiaries, including one called Rowe Lane Estates, which is half owned by one of the trustees.

But the regulator found “multiple instances of serious mismanagement arising from the trustees’ repeated failure to comply with their legal duties and responsibilities”.

It found that on several occasions charity finds were placed “at considerable risk” by being “routinely transferred” to Bellview Estates, a private company owned one of the trustees, including shares held on trust for another of the charity’s former board members.

“This was done to take advantage of that company’s banking arrangements, which offered cheaper rates for transfer of funds” and was only for short periods and with no ultimate loss to the charity”, said the regulator.

“However, this placed charitable funds at considerable risk as they were not under the control of the former trustees,” it added.

“The former trustees had not taken advice as to whether the transfer to the private company was in the charity’s best interests or how to address the risk to the charity’s funds.”

On another occasion £2.5m was transferred from the charity’s subsidiary Bellview Land to Bellview Estates. While this was returned within a day this also put the charity’s money at risk.

In addition, unsecured interest free loans were made to subsidiary companies but were not formalised, and no records of trustees’ decisions around these loans could be found.

Mismanagement

Despite finding mismanagement the Commission notes that the trustees believed that they were acting in the best interests of the charity by moving its funds across different accounts to take advantage of banking arrangements.

The former trustees are no longer in post, with three resigning and one was suspended before they too quit last year. Another, the wife of the suspended trustee, only served between 2011 and 2017.

Five new trustees were appointed in April last year to work with interim managers appointed by the Commission to run the charity.

“Trustees have a legal duty to act only in the best interests of their charity and for ensuring its funds are used properly for legitimate charitable purposes,” said the Commission.

“Conflicts of interest should be clearly identified and recorded in the charity’s records. Trustees should have in place policies and procedures to identify and manage any such conflicts of interest.”

It added: “Trustees must ensure that their charity has adequate financial and administrative controls in place, and that charitable funds are applied in line with their charity’s objects.”

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