Decision

Bethel United Church of Jesus Christ Apostolic UK

Published 3 April 2019

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

A statement of the results of an Inquiry onto Bethel United Church of Jesus Christ Apostolic UK.

The charity

Bethel United Church of Jesus Christ Apostolic UK (‘the charity’) was registered with the Charity Commission (‘the Commission’) on 4 July 1995. It is governed by a constitution adopted 29 May 1995, as amended by resolutions dated 29 July 2004 and 16 December 2017.

The charity’s object is to advance the Christian religion. The charity furthers its object by the provision of facilities for prayers and worship; the holding of church services; engagement in missionary work and the training of missionary workers; the planting of churches; and the operation of the Bethel Convention Centre in West Bromwich.

Further details about the charity can be found on the register of charities.

Background and issues under investigation

Prior to this statutory inquiry the Commission has engaged previously with the charity. The charity was the subject of a compliance case after a significant amount of funds were misappropriated by a then trustee. The case report of the findings, published on 12 November 2014, can be viewed on GOV.UK.

In addition the charity did not file annual accounts, reports or annual returns on time with the Commission for more than five consecutive financial years. As a result, in 2016 the charity was included in the Commission’s class inquiry into charities that had failed to file their annual documents for two or more years in a five year period (‘the class inquiry’).

On 24 February 2017 the Commission published a statement of the results of the class inquiry in regard to the charity which can be also be viewed on GOV.UK.

The Commission continued to monitor the charity following the conclusion of the class inquiry and identified that the charity was again in default of its accounting requirements. The trustees had not submitted accounts, a report or annual return for financial year ending (FYE) 31 March 2016. This was despite the regulatory advice and guidance the Commission had previously given to the trustees as part of the class inquiry. This was a serious regulatory concern for the Commission.

Of further concern was the fact that the charity’s accounts for FYE 31 March 2014 and FYE 31 March 2015 included a ‘disclaimer of opinion’ from the charity’s auditor.

The charity’s accounts for FYE 31 March 2014 recorded that there had been transactions of £27,052 between the charity and a bakery. During the period when the transactions took place one of the trustees of the charity owned a 60% stake in the bakery. At the end of FYE 31 March 2014 the bakery owed £23,332 to the charity.

Having identified serious regulatory concerns, the Commission opened a statutory inquiry into the charity (‘the inquiry’) under section 46 of the Charities Act 2011 (‘the act’) on 22 March 2017 to examine:

• the extent to which the trustees are complying with their legal duties in respect of their administration, governance and management of the charity and, in particular, their compliance with legal obligations for the preparation and filing of the charity’s accounts and other information or returns

• the charity’s financial management, including its financial controls and the extent to which the charity’s interests and property have been adequately protected
• the extent to which the trustees have complied with previously issued regulatory guidance
• related party transactions

The inquiry was closed with the publication of this report.

Findings

The extent to which the trustees are complying with their legal duties in respect of their governance of the charity and, in particular, their compliance with legal obligations for the preparation and filing of the charity’s accounts and other information

The deadline for the trustees to submit the charity’s annual return, annual report and accounts with the Commission for FYE 31 March 2016 was 31 January 2017. Ahead of this deadline the Commission issued the trustees with two separate reminders by email.

On 23 February 2017 the Commission sent a notice of default to the trustees. The inquiry opened on 22 March 2017. The trustees wrote to the inquiry on 27 April 2017 and provided accounts for FYE 31 March 2016. However, these accounts were in draft format. On 3 May 2017 the inquiry used its remedial powers to direct the trustees to submit the charity’s outstanding financial information.

The finalised accounts were submitted on 9 May 2017 and were 98 days late. The final accounts included a disclaimer of opinion because the financial records relating to some of the charity’s church branches were not made available for audit.

The inquiry found that the trustees who were in post during this period failed to comply with their statutory duties under Part 8 of the act to file the charity’s annual return, annual report and accounts with the Commission by the due date. The inquiry found that insufficient financial information had been obtained from branch churches and this led to incomplete accounts being made available for audit.

On 6 June 2017 the inquiry met with the charity’s accountants and established that a process of decentralisation had commenced, whereby of a number of the charity’s branch churches separated from the charity and registered independently or closed. The accounts and associated reports for FYE 31 March 2017 and FYE 31 March 2018 were submitted to the Commission on time.

The trustees have reported to the inquiry that they are reviewing processes, with particular focus on the creation of a new reporting framework for the charity’s remaining church branches.

On 25 July 2018 the inquiry issued regulatory advice and guidance to the new trustee board in the form of an action plan (‘the action plan’) to ensure the trustees deal with outstanding regulatory issues relating to the governance of the charity and compliance with financial reporting requirements. The action plan requires that the trustees implement procedures which ensure sufficient accounts information is available for audit.

The Commission expects the trustees to ensure that the charity’s accounts for FYE 31 March 2020 do not require an accompanying disclaimer of opinion from the charity’s auditor.

The charity’s financial management including its financial controls and the extent to which the charity’s interests and property have been adequately protected

The inquiry found that the charity had experienced financial difficulties and had problems servicing its debts. The accounts for FYE 31 March 2016 contained an ‘emphasis of matter’ paragraph relating to the charity’s ability to continue as a going concern. The charity had substantial deficits and liabilities. At that time its debt to the bank was in the region of £1.2 million and in January 2017 it defaulted on its repayments.

The lending bank assigned the services of an adviser when it became apparent the charity was experiencing difficulties in meeting its commitments in regard to its debt. The new trustees that were appointed in December 2017 recognised the seriousness of the charity’s financial circumstances. The trustees are in the process of agreeing a refinancing agreement with the charity’s bank to ensure the charity meets its commitments in relation to its debt to the bank.

The action plan requires that the trustees review the charity’s financial planning arrangements, if necessary with advice from an appropriately qualified external advisor, to satisfy themselves that the charity will be able to meet its financial commitments and remain a going concern. The trustees have engaged with the inquiry to provide an update of ongoing restructuring work to date to improve financial management of the charity.

The extent to which the trustees have complied with previously issued regulatory guidance

During previous engagement with the then trustees of the charity, as part of the class inquiry, the Commission issued regulatory advice and guidance about their duty to file the charity’s annual accounting information. The inquiry found that, by failing to submit accounts and other required information to the Commission on time for FYE 31 March 2016, the trustees in office at that time failed to follow the regulatory advice and guidance of the Commission.

The current trustee board has demonstrated an intention to follow the regulatory advice and guidance of the Commission and to address the regulatory concerns that led to the inquiry being opened. The Commission will monitor the charity for compliance with the action plan.

Related party transactions

The former trustees of the charity failed to identify and appropriately manage a conflict of interest which arose in relation to transactions it entered into with a bakery of which, at the time of the transactions, one of the then trustees was a significant owner.

At the conclusion of FYE 31 March 2014 the bakery owed £23,332 to the charity. By the end of the following financial year these funds had been repaid. Over the course of financial years ending 2015 to 2017, the charity continued to enter into transactions with the bakery and the bakery accrued debts with the charity.

This trustee resigned during the course of the inquiry.

The action plan requires that the trustees implement a conflicts of interest policy to ensure all future conflicts of interest are identified and appropriately managed. The current trustees have implemented a conflicts of interest policy and made this policy available to the inquiry. The inquiry issued further regulatory advice and guidance on the content of the policy.

The Commission will monitor compliance with this regulatory advice and guidance.

The extent to which the trustees are complying with their legal duties in respect of their administration, governance and management of the charity

As of September 2017, the charity had three trustees. The charity’s governing document requires there to be a minimum of five. As such, the charity was not being managed in accordance with its governing document.

The inquiry found that there were inadequacies in the administration, governance and management of the charity and made an order under section 84 of the act which directed the then trustees to take specific actions which the inquiry considered to be in the interests of the charity. This included the appointment of additional trustees to ensure a quorate trustee board.

Following the death of a trustee, and the resignations of the remaining members of the trustee board, an entirely new trustee board was appointed on 16 December 2017.

The trustees’ annual report for FYE 31 March 2017 indicated that the trustees were reviewing processes, procedures and the management of risk in regard to the charity. The action plan set out the steps which the inquiry considered to be necessary for the trustees to take to resolve issues of concern about the charity’s management and administration and to ensure the trustees comply with their legal duties and responsibilities.

Conclusions

The Commission concluded that the trustees who were in office at the time the inquiry was opened were in default of their legal obligations to file accounting information with the Commission. In doing so, those trustees failed to ensure the charity was accountable or demonstrate that the charity was complying with the law, well run and effective. This was mismanagement and/or misconduct^{[footnote 1]} in the administration of the charity.

The Commission further concluded that the failure of the former trustees to comply with the Commission’s regulatory advice and guidance also amounted misconduct and/or mismanagement in the administration of the charity. The Commission considered and discounted removal or disqualification of the former trustees because of mitigating factors in this particular case.

The trustees submitted outstanding annual accounting information to the inquiry. As a result, £1.2 million of charitable income has been accounted for with the Commission.

As a result of the inquiry, the trustees implemented a conflicts of interest policy. The inquiry issued further regulatory advice and guidance in relation to improvements to the policy.

The Commission will monitor the charity for compliance. In regard to the conflict of interest which arose in relation to transactions the charity entered into with a bakery, where one of the then trustees was a significant owner, the £23,332 owed to the charity by the bakery at the conclusion of FYE 31 March 2014 was repaid during FYE 31 March 2015.

Following the conclusion of FYE 31 March 2017 there were no further related party transactions. The trustee in question resigned during the course of the inquiry.

The Commission concluded that the current trustee board has engaged positively with the Commission and demonstrated an intent to address the regulatory concerns that led to the inquiry being opened. The action plan requires the trustees to address the remaining regulatory concerns.

The Commission always monitors compliance with an action plan. The Commission will review the trustees’ compliance with the action plan in early April 2019.

If the trustees fail to comply with the Action Plan the Commission will consider whether or not further regulatory action is necessary in regard to the charity.

Regulatory action taken

The inquiry used information gathering powers under section 47 of the act to direct the charity’s accountants to provide copies of documents and to meet with the inquiry in order that additional information could be obtained. The inquiry used its remedial powers under section 84 of the act to direct the trustees to complete specific actions that were in the interests of the charity. This included directing the trustees to submit the charity’s outstanding financial information to the Commission and to ensure the composition of the trustee board is compliant with the requirements of the charity’s governing document.

The inquiry used information gathering powers under section 52 of the act to obtain financial information about the charity from its bank.

The inquiry issued regulatory advice and guidance to the trustees in the form of an action plan under section 15(2) of the act to ensure the trustees deal with outstanding regulatory issues relating to the governance and financial management of the charity.

Issues for the wider sector

Trustees of charities with an income of over £25,000 have a legal duty to submit annual returns, annual reports and accounting documents to the Commission. Even if the charity’s annual income is not greater than £25,000, trustees have a legal duty to prepare annual accounts and reports and should be able to provide these on request. All charities with an income over £10,000 must submit a full annual return.

Failure to submit accounts and accompanying documents to the Commission may be a criminal offence. The Commission also regards it as mismanagement and/or misconduct in the administration of the charity.

Providing timely, accurate and informative financial information that will help funders, donors, beneficiaries and others to understand your charity and its work will encourage trust and confidence in it.

Charities that default in regard to submission of accounts and accompanying documents are highlighted on the Charity Register which may make the charity the focus of public scrutiny.

Trustees have a legal duty to act in their charity’s best interests. It is vital that trustees deal with conflicts of interest.

Failure to comply with the lawful advice of a regulator may be considered misconduct and/or mismanagement.

Charity trustees are legally responsible for managing, controlling and directing the affairs of their charity. They must ensure that it is solvent and well-run. This applies to each of the charity trustees as individuals. They cannot avoid or hand over this responsibility. If you are a charity trustee is therefore important that you take an active role in the charity and ensure you perform your duties to a sufficient standard.

Trustees must make sure that the charity complies with its governing document and the law.

The Commission’s guidance The essential trustee: what you need to know, what you need to do (CC3) explains the key legal duties of charity trustees. This, along with other publications and guidance, are available from the Commission’s website.

1. The terms misconduct and mismanagement are taken from the act. According to the Commission’s guidance, misconduct includes any act (or failure to act) in the administration of the charity which the person committing it knew (or ought to have known) was criminal, unlawful or improper. Mismanagement includes any act (or failure to act) in the administration of the charity that may result in significant charitable resources being misused or the people who benefit from the charity being put at risk. The Commission considers that a charity’s reputation may be regarded as property of the charity. ↩