Newham Foursquare Church

Registered Charity No. 1072013

This is a statement of results of an inquiry under section 8 of the Charities Act 1993 as amended by the Charities Act 2006 (“the Act”) and published on 1 February, 2008.

The Charity

1. Newham Foursquare Church (‘the Church’) was registered as a charity in October 1998. Its purposes are:

• The advancement of the Christian faith in accordance with the Church’s Statement of Faith
• The relief of the poor, aged, sick and those in conditions of hardship or distress
• Such other charitable purposes as the trustees may from time to time determine.

2. It is based in Plaistow, East London and draws its congregation from the surrounding area. Its income in the financial year ending December 2006 was £90,089.

Source of Concern

3. In July 2006, the Commission received complaints regarding the governance of the charity from members and former members. In particular, it was alleged that one trustee was dominant and manipulated the Church for her own benefit and the benefit of her family. It was alleged that the trustee and her husband (who was not a trustee) were in sole control of the Church’s bank account for one year and that this lack of independent scrutiny made it easier for the trustee to manipulate the Church for her own benefit;

4. At a meeting to probe these allegations, the trustees informed the Commission that the husband of one of the trustees was not a signatory to the Church’s bank account. The Commission obtained information from the bank that he was a signatory to one account. The Commission was concerned that the trustees had provided false and misleading information.

Commission inquiry

5. The Commission opened an inquiry under Section 8 of the Act on 23 May 2007 with the aim of establishing to what extent the concerns were substantiated and deciding whether any regulatory action was required.

Issues

6. The inquiry was opened to look at the following issues:

• Weak financial controls and record keeping
• Possible dominance of one trustee to the exclusion of the others
• Possible trustee related benefits and conflicts of interest that were not being properly managed

Provision of misleading information to the Commission

Timescale of inquiry

7. The inquiry was closed on 19 July 2007 having taken eight weeks to complete. Publication of this report was delayed by the need to consider information supplied by the Charity post the conclusion of the inquiry and by resource issues.

Findings

8. Weak financial and administrative record keeping. The Commission found weaknesses in the Church’s financial and administrative record keeping. For example, analysis of the Church’s bank accounts and the Church’s cash book indicated that there was a difference between the incoming funds banked and the figures given for incoming funds which appeared in the cash book. The Church’s administrative records did not include key decisions such as the appointment of trustees.

9. Possible dominance of one trustee to the exclusion of the others. The Commission investigated the allegation that one trustee and her husband had been in sole control of the Church’s bank accounts between May 2005 and 2006 and that they had excluded other senior members of the Church from oversight of the Church’s finances, whereas in a well-run charity, the trustees should be jointly responsible for the management and finances. The Commission obtained evidence from the bank which showed that there was another trustee who was responsible for operating the Church’s bank account during the period in question. This trustee is not related to the trustee against whom allegations of dominance have been made. Beyond this, the Commission was unable to conclude whether or not there had been dominance. There was a clear perception that one trustee had exerted too much control, but the lack of proper administrative record keeping meant that it was impossible to prove or disprove this concern.

10. Possible trustee related benefits and conflicts of interest that were not being properly managed. The Commission found that the current trustees of the Church were not related to each other. In the past, however, three members of one family had been trustees at the same time which raised concerns about how interests and conflicts of interest were managed. They stated that the other non-related trustees had approved of their appointments but there was no documentary evidence such as minutes of a meeting, to prove this had been the case. While there is nothing in law or in this Church’s Declaration of Trust that requires the trustees to be independent of each other provided that they properly manage any potential conflicts of interest, this situation led to concern and distrust amongst a proportion of the Church’s membership.

11. Provision of false or misleading information to the Commission. The Church had a number of different bank accounts. At the time of the meeting where incorrect information was provided to the Commission, the trustee’s husband was a signatory to only one of them. The trustees explained that they had asked the bank to remove him as a signatory from all the accounts, but the bank had delayed in carrying out their request. The Commission accepted this explanation.

Conduct of inquiry

12. The Commission met and corresponded with the trustees to:

• investigate the alleged dominance of one trustee
• to establish whether there was evidence of inadequate financial controls and record keeping
• investigate the apparent provision of false information to the Commission.

13. The Commission obtained the Church’s bank statements from its bank and Commission accountants analysed this information in conjunction with information provided by the trustees and concerned ex-members of the Church.

Conclusions

14. It was clear from our findings that the trustees needed to pay more attention to the proper recording of their decisions and to the Church’s financial record keeping. The Commission is pleased to see that the Charity now has a number of independent trustees

Regulatory action taken

15. The Commission served an Order under Section 9 of the Act on the Church’s bank in order to obtain information from it about the Church’s finances.

Impact of Commission intervention

16. The Commission provided advice to the trustees about financial record keeping and the preparation of the Church’s annual accounts. The Commission has seen copies of the Church’s more recent financial records and there has been a significant improvement.

17. The Commission advised the trustees about the potential dangers in having a trustee body where the majority of members are related to each other. The potential dangers are:-

• that the trustees will not be able to properly manage any conflicts of interest that arise

• that there will be a perception by the Church’s congregation that there is a lack of independence on the trustee body.

18. The trustees will record their decisions more fully in future. They appreciate that this will lead to greater transparency and may help to avoid a similar breakdown of trust from happening again in the future.

Resources applied

19. The Commission’s Inquiry team based within its Compliance & Support division worked in close co-operation with its internal accountancy and legal advisors.

Actions required of the trustees

20. The trustees will pay more attention to proper financial and administrative record keeping.

Lessons for other charities

21. As charity trustees have a fundamental duty to protect their charity’s property and to ensure its proper use, it is essential that they adhere to appropriate financial and administrative controls.

22. The Commission strongly recommends that if members of a trustee body are related to each other, they should take the appropriate steps to manage any conflict of loyalty.

23. A charity is entitled to the independent and objective judgement of each of its trustees, acting solely in the interests of the charity. A case in which a dominant trustee effectively deprives a charity of the benefit of the considered judgement of the other trustees is an example of poor governance amounting to mismanagement.

24. Trustees should bear in mind that when they are dealing with the business of the charity, their overriding duty is to act in the best interests of the charity. If conflicts of interest and loyalty are not properly managed, they can cause damage to a charity’s reputation. The key aspect of minimising the damaging effect of conflicts of interest is to be open and transparent about such situations when they arise.

Para	Issue	Charity Commission guidance and relevant legal obligation
9	Financial & administrative record keeping	CC8 – Internal Financial Controls for Charities
10	Possible dominance of one trustee	CC3 – The Essential Trustee:  What You Need to Know
11	Possible unmanaged conflicts of interest	A Guide to Conflicts of Interest for Charity Trustees