The Charity Commission has issued three trustees with an official warning for placing a charity at risk by borrowing £1.9m via inadequately documented loans.
It has concluded its inquiry into the Bersam Trust, whose objects include “providing Jewish children with a strictly orthodox Jewish religious education”.
In practice, the charity, which is based in Salford, leases a building to an independent Orthodox Jewish faith school and also meets some of the support costs of the school such as funding security at the school building.
The Commission opened an inquiry into the charity in January 2019, due to ongoing concerns about its financial arrangements and governance.
During financial years ending 31 March 2014 to 31 March 2018, in addition to loans from a bank, the charity received 56 loans totalling £2.4m.
The inquiry found that 49 of those loans were not documented within a loan agreement. Those 49 loans accounted for £1.9m of borrowing by the trustees on behalf of the charity and they were taken from various sources such as individuals and other charities.
Many were only agreed orally and “whilst there is no evidence money was lost by the charity in this way”, the Commission says the trustees exposed the charity to “significant and unnecessary risk by their actions”.
“Borrowing £1.9m without any written agreements documenting the loans, were serious failings which exposed the charity’s assets to undue risk and meant the trustees could not evidence why the charity had an obligation to make the repayments,” the report states.
The Commission also found the charity was administrated in a way that failed to reflect that the school and charity were separate organisations.
For example, one loan was secured on the basis that the school achieved a satisfactory Ofsted rating, a matter the charity had no control over and which could have led to significant financial loss to the charity were the school to perform poorly.
The inquiry concluded that the failures in relation to these loans amount to misconduct and/or mismanagement by three of the charity’s trustees.
Other actions that led to the warnings include their failure to manage conflicts of interest appropriately during meetings and follow an agreed action plan to address earlier failings identified by the Commission.
'Good governance is not a bureaucratic detail'
Amy Spiller, head of investigations at the Commission, said: “Good governance is not a bureaucratic detail, it’s essential in ensuring a charity delivers on its charitable purpose and isn’t exposed to unnecessary risk.
“The trustees of The Bersam Trust failed to ensure this and instead, through their lack of financial management and basic governance, agreed a significant number of undocumented loans that risked their charity’s future.
“Our inquiry has exposed these failures and it’s right the trustees have been issued with an official warning requiring them to act to protect their charity. We expect the trustees to comply with these actions.”