Decision

Charity Inquiry: Salvation Proclaimers Ministries Limited

Published 22 August 2024

Applies to England and Wales

The charity

Salvation Proclaimers Ministries Limited (‘the charity’), also known as SPAC Nation, was registered on 22 July 2013. It was governed by a Memorandum and Articles of Association incorporated 10 September 2012.

The charity was removed from the register of charities on 24 June 2022 on the grounds that it did not operate.

The charity’s objects were “the furtherance of the gospel of the Lord Jesus Christ and the general advancement of the Christian faith.” In practice, the charity held religious services at various venues in London and organised other community and outreach events.

Background and issues under investigation

Following receipt of a safeguarding complaint about the charity, the Commission opened a regulatory compliance case and initially wrote to the charity on 8 February 2019. The Commission continued to receive complaints about the charity, and there was also significant negative media coverage concerning the charity, in relation to safeguarding and financial matters.

The Commission met the trustees of the charity on 17 April 2019. On 13 June 2019 the Commission issued the trustees with an Action Plan under section 15(2) of the Charities Act 2011 (‘the Act’) requiring the trustees to make improvements to the charity’s governance, policies and procedures. The charity responded to the Action Plan on 6 November 2019 but did not supply all the information requested and some of the information received raised further concerns.

It appeared that the majority of the charity’s income and expenditure was not going through a bank account, which was a significant risk to the charity’s assets. 

On 12 November 2019 the charity submitted a serious incident report to the Commission alleging that there was “an ongoing smear campaign and allegations against the charity”. On 15 November 2019 the Commission wrote to the charity regarding its serious incident report and the negative media coverage the charity was receiving.

The Commission opened a statutory inquiry (‘inquiry’), under section 46 of the Act, on 5 December 2019. The scope of the inquiry was to examine the charity’s governance, its management and its policies and practices with regard to safeguarding and people protection issues, financial issues and risk management, particularly in relation to:

• whether the charity’s safeguarding practices were adequate and the extent to which the charity’s beneficiaries were being placed at risk
• the extent to which the financial assets of the charity were being placed at risk by the charity’s operating largely outside of its current bank account and previously without a bank account
• the extent to which the trustees were managing the risks, including reputational risks, to the charity caused by recent and ongoing negative publicity in relation to the charity

Findings

Safeguarding and people protection issues including whether the charity’s safeguarding practices were adequate and the extent to which the charity’s beneficiaries were being placed at risk.

In the context of safeguarding issues, the Commission focuses on the conduct of trustees and the steps they take to protect beneficiaries, employees, volunteers, and others coming into contact with their charity. The Commission is not responsible for dealing with or investigating any actual allegations of abuse in a charity.

The inquiry was aware of safeguarding allegations relating to houses (‘the Houses’) where some charity members lived. The trustees confirmed to the inquiry that there were two ‘active’ houses at the time the inquiry opened. On 26 February 2020 in response to the inquiry the trustees described the Houses as being:

“not owned or rented by the charity, but are products of Leadership Initiatives whereby leaders known to the church or members alike have taken up the initiative to provide housing support in their local communities.”

The trustees explained that this was done “in support and furtherance of Biblical Teachings where people live together, some as friends and others voluntarily co-habiting.” The trustees explained that “Biblical Teachings and prayers along with a family culture and spirit is taught in the Houses including giving of vocational or educational and business support to one another under the auspices of the leader of the house.”

The trustees advised they had provided compulsory safeguarding training to the individuals running the Houses. The inquiry found the nature of the relationship between the charity and the Houses was unclear, which damaged the charity’s reputation when there was negative media coverage about the Houses.

As a result of the safeguarding allegations made in public plus the opening of the inquiry, the charity informed the inquiry that compulsory safeguarding training was provided in February 2020 for all leaders, pastors, volunteers, ministers and evangelists connected with the charity. The trustees strengthened their complaints policy and made it more accessible. The inquiry notes that these actions appeared to be reactive rather than proactive.

The inquiry was concerned about the trustees’ oversight of safeguarding, which was not an agenda item on the trustee board minutes provided to the inquiry apart from once where a policy review was listed. It is difficult to see how the trustees could be assured those coming into contact with the charity were adequately protected if safeguarding oversight was not discussed regularly at trustee meetings.

The trustees provided details of one safeguarding complaint that had been brought directly to their attention in March 2018. The trustees investigated the incident and concluded it had nothing to do with the charity. The charity issued a public statement on 21 March 2018 as the matter had been in the public domain.

The trustees confirmed that no other safeguarding complaints had been received directly by the charity in the previous three years. Other allegations had come to the attention of the charity via the media. The charity stated to the inquiry that it was not able to obtain any evidence to substantiate these allegations as it had no direct contact with those who made them. The lack of complaints received directly by the charity, given its beneficiary group and the activities it undertook and the fact that there were complaints and allegations about its activities in the public domain, should have raised questions for the trustees.

The inquiry found the trustees implementation of the charity’s safeguarding policies and procedures were inadequate, for example in relation to trustee oversight and reporting mechanisms, which placed its beneficiaries at risk. This was misconduct and/or mismanagement in the administration of the charity by the trustees. However, the risk was mitigated during the inquiry as the charity stopped holding services and other events in person as a consequence of restrictions placed upon them by the Covid pandemic in 2020 and it also subsequently ceased to operate.

Financial issues including the extent to which the financial assets of the charity have been placed at risk by the charity’s operating largely outside of its current bank account and previously without a bank account.

Operating in cash

In December 2019 the charity stopped collecting donations. The charity’s Pastors, who were not trustees, told the inquiry that, prior to December 2019, either donations were made in cash or individuals paid directly for approved items required by the charity. Donated cash was used immediately or kept by the Pastors on behalf of the charity, bypassing the Charity’s bank account. Other payments made directly by the charity’s supporters also bypassed the banking system. Although the charity was conducting transactions the charity never saw any of the money. There were inadequate records of donations and expenditure; these were not properly recorded in a way that enabled them to be reconciled.

The Pastors were responsible for keeping substantial amounts of cash secure on behalf of the charity. For example, on 31 December 2018 the charity hired a venue, Gracepoint in Islington, paying the cost of £40,000 in cash. However, when the Pastors were asked by the inquiry how they kept cash donations secure, the response from the Pastors was that donations were utilised immediately and not kept, therefore their view was that questions about keeping cash donations securely were not relevant.

On 25 August 2019 the trustees adopted a Financial Controls Policy and Procedures (‘FCPAP’), which stated that the Pastors had been trained to collect cash donations. The bulk of the donations were to be collected no more than one day in advance of the related expenditure to reduce risk.

The FCPAP states: “It is in the interest of the organisation to continue till further notice/re-orientation the current operations whereby individual donors through the designated leaders are the ones paying directly for authorised items of expenditures on the budget. This is to avoid loss of enthusiasm on the Donors part since it has been discovered that they have a sense of fulfilment in handling specific needs and operations of the organisation. This will also reduce the central banking operations of the organisation which in the past was a subject of unusual and unhealthy scrutiny and witch-hunting and almost crippled the organisations activities.”

The FCPAP states that the rules on banking contained within it would be “operated as soon as the banking arrangements are established, tested and given the go ahead by the board of directors to gradually work side by side with the cash policy”.

The FCPAP states that Pastors should send weekly and monthly donor lists to the charity’s accounts office. There is a discrepancy between the FCPAP’s statement that most donations should be collected a day before required and its reference to weekly and monthly donors.  The Pastors told the inquiry donations were collected as required, but the trustees told the inquiry that donor groups made donations monthly, and they supplied records containing names and monthly donations.

On 10 December 2019 the inquiry issued an Order (‘the Order’) under Section 84 of the Act directing the trustees to deposit all the charity’s cash into its bank account and operate the charity’s income and expenditure though that bank account. The charity had one bank account which was opened on 25 June 2019. Between 25 June 2019 and 25 June 2020 receipts of £2,080.35 and payments of £2,080.35 went through the bank account; as at 25 June 2020 the bank account had a zero balance. In contrast, the charity’s accounts as submitted to the Commission show income of £718,398 and expenditure of £728,020 for the financial year ending 31 December 2019 and income of £54,455 and expenditure of £47,630 for the financial year ending 31 December 2020.

The trustees and Pastors said the charity did not collect any donations after the Order was issued, although some major expenditure items had been settled ahead.

On 26 February 2020 the trustees told the inquiry compulsory training had been provided for Pastors, volunteers and donors covering donations, cash handling, policies and business relationships between members.

There was a lack of segregation of duties between the Pastors and the trustees and the charity was operating with a lack of transparency, as the designated leaders were collecting and spending funds, with very poor records and controls and oversight by the trustees. There was also a lack of accountability; the trustees could not comply with their duty to account for the charity’s funds. The assets of the charity were not held centrally, so the trustees did not have oversight and control of the charity’s assets, and these were exposed to the risk of misapplication and/or misappropriation. There is no evidence of how the trustees were monitoring and recording transactions being undertaken on behalf of the charity by donor groups and individuals which exposed the charity’s assets to further risk.

The inquiry found significant risks associated with the charity operating in cash. These included risks of loss, theft or cash being used for purposes outside the charity’s objects and/or personal benefit. Any misuse of cash would be unlikely to be detected quickly or at all. Collecting funds no more than a day before they were needed might have gone some way to mitigating the risks of storing cash, but in the inquiry’s view this is not an efficient or safe way to operate.

The trustees claimed the charity did not hold cash, as transactions were undertaken by donor groups and individuals. Congregation members sponsored events and made payments directly to suppliers. However, charity representatives collected cash on the charity’s behalf to further its objects, meaning there were risks to its operations and reputation. Bills were settled without funds coming into the charity and the charity was not accounting adequately for this income and expenditure.

The trustees operated the charity in such a way that its funds were put at risk and good governance practices were not followed. This is misconduct and/or mismanagement in the administration of the charity by the trustees.

Decision to cease collecting donations

After the Commission issued the Order on 10 December 2019 directing the charity to bank all its cash, the trustees told the Commission they had decided to stop collecting donations. They explained they did not expect to resume collections until January or February 2020. On 11 May 2020 the trustees confirmed that donations had not resumed, and a few events had been sponsored by a couple of church leaders. In fact, the trustees never reversed the decision to stop collecting donations.

The trustees explained to the inquiry why they believed ceasing to collect donations was in the charity’s best interests. They stated that it was done:

“to prove our willingness to co-operate with third parties as well as our commitment to assessment and training which can not be done simultaneously. Moreover, we needed to put necessary precautions in place and help the donors and volunteers alike to handle certain emerging challenges such as personal business relationships. …We needed to continuously build confidence in our systems and empower donors.”

The trustees also provided minutes of trustee meetings at which the matter had been discussed.

Trustees are responsible for their charity’s financial security and should have plans for generating and spending income. Before December 2019 the charity received significant cash donations from its congregation. The charity’s accounts show that for the financial year ending 31 December 2018 it collected £980,761 in ‘tithes and offerings’ and for the financial year ending 31 December 2019 it collected £718,761. It is difficult to see how discontinuing the collection of donations could be in the best interests of the charity and its beneficiaries and in the inquiry’s view the trustees failed to provide convincing reasons as to why this was the case. Failure to act in the best interests of the charity and its beneficiaries is misconduct and/or mismanagement by the trustees.

Unsatisfactory financial record keeping

As part of their charitable activities the charity provided financial support to beneficiaries, for example in relation to transport, rent, food, education and paying off debts owed to local gangs. The trustees failed to provide satisfactory records to the inquiry relating to amounts paid to beneficiaries. The records provided lacked detail, showing only beneficiaries’ first names and amounts paid. In addition, they did not show what the payments were for, the decision-making process, how associated risks including reputational risks were considered or the authorisation process. The trustees should have taken more care given the risk of reputational damage associated with some of the payments, including those intended to be used by beneficiaries to make payments to pay off known drug dealers.

On 18 February 2021 the trustees told the inquiry:

“We do not tag anyone specially with the title of what we support them for. Therefore, you will see the general headings of beneficiaries, you will see their names and the amounts but the detailed purposes for the financial support is deliberately left out of the written records but known to the presiding officers.”  

The Pastors, who made the payments, confirmed to the inquiry they did not keep records of what payments were for. The standard of record keeping was inadequate and lacked transparency, exposing the charity’s assets to risk and the charity to reputational damage. This is misconduct and/or mismanagement in the administration of the charity by the trustees.

Donations made directly to beneficiaries by individuals were later accounted for as charitable expenditure, despite their being no written policy clearly setting out the charity’s approach to its treatment of income and expenditure. This was further misconduct and/or mismanagement in the administration of the charity by the trustees.

Winding up order

The Secretary of State can present a winding-up petition for a company on the grounds that it is in the public interest that it be wound up. The Court only allows the presentation of a winding-up petition if it thinks it is just and equitable to do so.

On 18 January 2022 the Insolvency Service applied for a petition for a public interest winding up order (‘the petition’), under Section 124A of the Insolvency Act 1986, to wind up the charity. The charity is a charitable company and is referred to as ‘the company’ in this section of the inquiry report to reflect the Insolvency Service’s terminology.

On 15 June 2022 the High Court accepted the petition and issued a winding up order. An Official Receiver was appointed and the winding up process is still ongoing.

The grounds of the petition included the following:

• the company failed to cooperate with the Insolvency Service’s investigation and deliver adequate accounting records to its investigator
• there were discrepancies in the information provided to the Insolvency Service and the Commission compared to that provided to the company’s accountant
• the company had operated without transparency, filed “suspicious and incorrect” accounts at Companies House and with the Commission, and was balance sheet insolvent on a substantial scale

The Insolvency Service stated at the hearing that “Companies with a hopeless deficiency of assets against liabilities should be wound up.”

The trustees also failed to submit evidence relating to the application for the public interest winding up, resulting in a breach of the Courts undertaking.

The trustees compiled accounts for the financial year ending 31 December 2021 without the input, consultation or knowledge of the Official Receiver after the issuing of the winding up order. Once a winding up order has been granted responsibility for the management of the company passes to the Official Receiver and the directors of the company are no longer able to act. The 2021 accounts record that the trustees had met to approve the accounts without consulting the liquidator.

The action taken by the Insolvency Service, the decision of the Court, the trustees’ failure to comply with the Court’s requirements and the trustees continuing to act after the issuing of the winding up order are further evidence of misconduct and/or mismanagement.

Risk management issues, including the extent to which the trustees are managing the risks, including reputational risks, to the charity caused by recent and ongoing negative publicity in relation to the charity.

The trustees informed the inquiry that they had an online complaints form but did not receive any complaints for several years “until the social media noise by disgruntled elements”.

There was significant negative coverage in the media in relation to safeguarding and financial matters associated with the charity which risked its reputation. The trustees issued press releases in response to the public allegations made. For example, the charity issued a public notice on 13 November 2019 “to debunk many of the stories making the rounds, reiterate our commitment to discipline and order whilst also welcoming every meaningful investigation into the alleged matters.” The charity also took part in several media interviews asking anyone with genuine claims to come forward.

The charity made a serious incident report to the Commission regarding the on-going negative press coverage. The trustees took legal advice on how to respond to the allegations and went on to write to media outlets to express dissatisfaction with the way in which stories had been reported.

The trustees also set up a panel (‘the panel’) to look into the allegations in the public domain, in an attempt to establish the truth and bring to account anyone found culpable of any misdemeanour. The panel comprised five individuals who had connections to the charity but were not trustees.

The panel wrote to those claiming to have received complaints and allegations about the charity, asking them to supply information and evidence. However, no information was provided on the grounds of confidentiality.

The panel did however speak to some individuals against whom allegations had been made, where these individuals were still connected with the charity, and reviewed correspondence.

The panel’s report, dated 26 February 2020, concluded that most of the allegations were not in relation to the charity and its activities but arose due to disputes over personal matters between friends. The panel concluded that it “could therefore not find any substantial accusation to hold any individual within the organisation culpable.”

The panel made some recommendations which the trustees implemented, including establishing a membership policy, providing more training, and making the complaints procedure clearer. 

The charity did undertake some actions to address its negative portrayal in the media. However, the way in which the charity operated had an impact on its reputation and on public trust and confidence in the wider charitable sector. For example, there was historically a lack of clarity as to whether actions were undertaken by the charity or by individuals connected to the charity acting on their own initiative and outside the control of the charity. In addition, the charity conducting its financial transactions on a cash basis was a significant risk to the charity’s reputation.

Conclusions

The Commission concluded that there had been serious misconduct and/or mismanagement in the administration of the charity which was sustained over a substantial period of time. The trustees failed to act with reasonable care and skill, including while the statutory inquiry was open. The trustees repeatedly failed to address the Commission’s regulatory concerns, in particular in relation to its operating in cash. 

The charity’s safeguarding practices were inadequate – for example there was a lack of trustee oversight and reporting – which placed the charity’s beneficiaries at risk. The charity did investigate the one safeguarding complaint it received directly and attempted unsuccessfully to engage with those making allegations in the media. However, particularly given the nature of concerns raised in the media, the trustees should have considered if they could do more to strengthen the charity’s safeguarding practices and compliance with its policies and procedures.

The way in which the charity operated was highly unusual and placed its charitable assets, including its reputation, at considerable risk. The charity’s financial record keeping was inadequate, including for payments that could have posed a reputational risk to the charity.

The trustees failed to discharge their trustee duties under charity law and their director duties under company law which resulted in the Insolvency Service applying for a petition for a public interest winding up, which was granted. The charity had been mismanaged to such an extent that another regulator had to take steps to wind it up.

The trustees failed to adequately monitor or engage with issues that were a risk to its reputation, mainly reacting to issues and complaints in the public domain. There was a failure to fully engage with the issue of why complaints were not made directly to the charity or clarify sufficiently relationships between the charity and individuals connected with the charity.

Regulatory action taken

On 10 December 2019 the inquiry issued an Order under Section 84 of the Act directing the trustees to ensure that all cash belonging to the charity was deposited in a bank account under the control of the charity and that the charity’s income and expenditure was operated though a bank account under the control of the charity.

On 16 February 2021 the inquiry issued an Order under Section 84 of the Act requiring the trustees to select a qualified accountant with relevant experience who was independent of the charity to review the charity’s financial controls, policies, practices and procedures. Before appointing the reviewer, the trustees had to provide their details to the Commission.

On 24 June 2022 the Commission removed the charity from its Register of Charities on the grounds that it has ceased to operate under Section 34(1)(b) of the Act.

On 24 November 2023 three current trustees were disqualified from being a charity trustee and from holding any office or employment with senior management functions in a charity for a period of 12 years each and a former trustee for 10 years. These Orders took effect from 5 January 2024.

During the inquiry the Commission issued directions under section 47 of the Act to the trustees and the charity’s Pastors for the purpose of obtaining information and copies of documents.

Issues for the wider sector

It is a fundamental duty of charity trustees to protect the property of their charity and manage its resources responsibly and reasonably. This means not exposing their charity’s assets, beneficiaries or reputation to undue risk.

Every trustee should have clear oversight of how safeguarding and protecting people from harm are managed within their charity. This means trustees need to monitor their performance in this area, not just using statistics, but with supporting information, such as qualitative reports. This will help trustees to understand common themes and identify risks and gaps so they can ensure that these are addressed.

Trustees must ensure that their charity has adequate financial controls and policies in place. Proper financial controls play an essential part in helping to show potential donors and beneficiaries that a charity’s property is safeguarded, and that its management is efficient. It is important that the financial activities of charities are properly recorded, and their financial governance is transparent.

Payments in cash should be kept to an absolute minimum due to the greater risk that handling cash presents and difficulties that can arise in establishing correctness and control over significant cash transactions.

Trustees must always bear in mind their over-riding duty to take decisions that are in the best interests of the charity and act with reasonable care and skill.