19 March 2019 - Article
The Charity Commission last month released the findings of an investigation begun in July 2012 into concerns over Mayfair Charities Limited’s financial accounts, and in particular a complex network of property-related financial arrangements between the charity, its trading subsidiaries and companies connected to the trustees.
The charity, established in 1968, works to support charitable Jewish organisations in the UK and abroad, with a focus on education and the relief of poverty. Prior to the investigation, income of around £12.5m was declared, with expenditure of around £4m.
The Commission concluded that where the charity rented out residential and commercial properties it owned at market rate and used the income to make grants to charitable causes, this was ultimately of benefit to the charity. It also looked at various financial transactions, including a loan between the charity and a subsidiary and a separate loan between a company connected to the trustees and a subsidiary. The Commission decided that in the first instance, the trustees were remiss in not periodically reviewing the terms and circumstances of the loan, nor considering whether full or partial repayment should be made. For the second loan, it was determined that it was difficult to see how the transaction could have been negotiated or supervised at arm’s length, given the conflicting interests involved.
As a result of the inquiry, the trustees have agreed to appoint at least one independent trustee and the Commission has made clear that there is a requirement to periodically review relationships with subsidiaries and connected companies.
The case is a timely reminder to charities to be alive to, and deal with, situations involving potential or actual conflicts of interest to help ensure decisions are made in the charity’s best interests.