The Charity Commission has issued a warning to the Schwarzschild Foundation after a three-year investigation found “serious failings” in the organisation’s governance.
These related to a range of issues, including how the foundation had managed a £5.7m legacy from its founder, as well as how it had dealt with conflicts of interest and related-party transactions.
The Schwarzschild Foundation was established for the education and the relief of poverty for women and girls in the orthodox Jewish faith and was registered as a charitable trust in 2014.
After the death in 2020 of its founder, Helga Schwarzschild, the charity became entitled to her estate, which included proceeds from the sale of her property and a property portfolio, the value of which was approximately £5.7m.
A statutory inquiry was first opened in 2023 after the National Crime Agency identified £250,000 of the charity’s funds in a personal bank account under a trustee’s control.
The charity’s lack of monitoring and verification of the end use of funds meant it would not have detected or recovered the funds independently, the regulator said.
Its trustees only verified the use of three other £250,000 grants after the Charity Commission became involved.
The regulator’s inquiry found two grants of £250,000 each had been awarded to organisations in which at least one trustee had unmanaged conflicts of interest.
The investigation also uncovered unmanaged conflicts of interest between the charity and companies for which it was sole shareholder, and in trustees’ businesses providing professional services to the Schwarzschild Foundation.
Interim managers previously appointed as part of inquiry
During the inquiry, the commission put in place a temporary, protective order preventing the charity’s trustees from entering into any transactions or making payments for the charity without the regulator’s prior written approval.
It also appointed interim managers to review the charity’s governance, who subsequently confirmed there had been “no meaningful review” of a £4m investment portfolio of properties held on the charity’s behalf.
The inquiry judged that as a result of its lack of proper policies, procedures and monitoring, the Schwarzschild Foundation was exposed to a serious risk of misuse, misapplication or loss of funds.
It also found trustees had failed to record their decision-making appropriately, and so could not prove that decisions made in respect of grants and investments were in the charity’s best interests.
Prior to closing the inquiry, the Charity Commission issued an official warning to the Schwarzschild Foundation and set out an action plan, the implementation of which will be monitored by the regulator.
‘Robust checks should have been in place’
Brian Wilson, the Charity Commission’s head of high-risk compliance, said: “The serious gaps in governance at the Schwarzschild Foundation left it vulnerable and amounted to misconduct and/or mismanagement of the charity.”
Wilson said the £250,000 that had previously been paid to a trustee’s bank account had since been returned to the foundation, with the inquiry having forced checks on three more grants of the same amount.
He added: “Robust checks should have been in place, not least as almost 80% of charities have an income of £250,000 or less – so these funds could represent a significant boost to a charity’s income.”
A spokesperson from the Schwarzschild Foundation told Civil Society: “The foundation is pleased the Charity Commission has concluded its inquiry, and is looking forward to starting the functions of the charity again.”
Related articles
