The Regulator for Charities in England and Wales
Shema Yisrael Messianic Synagogue
Registered Charity No. 1055784
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 8 May 2008.
The Charity
1. Shema Yisrael Messianic Synagogue (“the Charity”) was registered as a charity on 19 June 1996. It was dissolved on 7 April 2008 and removed from the register on 6 May 2008.
2. The object of the Charity was “The advancement of the gospel of Yeshua (Jesus Christ) the Messiah primarily amongst Jews but also amongst Gentiles in the United Kingdom and elsewhere.”
3. The Charity ran a synagogue and two charity shops.
4. The Charity was based in East Sussex and had an income of £59,328 for the year ending 31 March 2004, and £223,845 for the financial year ended 31 March 2005. The latter amount includes the proceeds of the sale of the synagogue.
Previous Inquiry
5. The Charity was the subject of a previous Inquiry that closed in November 2000 and investigated a number of concerns that:
- Rabbi Philip Sharpe was running the charity single handed and the other trustees were not active in managing the affairs of the charity;
- the personal business of the Rabbi was intermingled with that of the charity;
- the administration procedures and governance of the charity were weak;
- the charity had failed to file accounts; and
- mortgages and loans were in arrears.
At the end of this inquiry we were told that Shema Yisrael Messianic Synagogue would be closed and the assets transferred to another charity, the Chalutzim Ministries. The Commission considered that the issues of concern would be resolved by the closure and therefore no further action on our part was needed. However, it seems after the inquiry was closed it was the Chalutzim Ministries that was dissolved and its assets were transferred to Shema Yisrael Messianic Synagogue.
Source of Concern
6. The Commission received a number of different complaints from members of the public in 2002 and early 2003 alleging:
- financial mismanagement of the Charity;
- unauthorised trustee benefits;
- that one individual, the Rabbi, exerted a dominant influence over the trustee body; and
- that the Charity was no longer run in furtherance of its exclusively charitable object.
Commission inquiry
7. The Commission judged that there were a number of concerns raised in the previous inquiry that had not been addressed by the trustees, and that this, coupled with the issues of concern regarding whether the Charity was being run in furtherance of its charitable object, were serious enough to merit opening a further inquiry.
Issues
8.
- Possibility of misconduct or mismanagement in the administration of the Charity.
- Possibility that the Charity’s property was at risk.
- Possibility that the Charity was not carrying out its charitable objects.
- Possibility that Rabbi Sharpe exerted a dominant influence over the trustees, to the detriment of proper decision-making.
Timescale of inquiry
9. We opened an Inquiry on 21 March 2003.
10. The Inquiry was closed on 13 September 2006.
Findings
Misconduct or mismanagement in the administration of the charity
11. There were poor financial controls and a lack of proper records. For example, there are differences in tax treatments for donated and bought goods, and the charity failed to make this distinction to ensure that its trading was compliant with revenue law.
12. There was evidence of private benefit by the then trustees, including the payment of personal bills and unauthorised salary payments.
13. From time to time, one of the trustees, Rabbi Philip Sharpe, lived rent free in Charity property. Judith Caiden, Rabbi Sharpe’s wife (also known as Judith Sharpe) and Dianne Livermoore, trustees who were directors of one of the commercial companies connected with the charity, Chalutzim Products, privately benefited from the provision of free commercial retail space from the charity.
14. Rabbi Philip Sharpe benefited from goods donated to the Charity and then sold through shops he privately owned.
15. Cash loans were made to the Charity by various businesses owned by Rabbi Philip Sharpe, but there were no formal agreements in place, and there was no evidence that the trustees had given consideration to the terms and conditions of the loans and whether they were in the best interests of the Charity.
The charity’s property was put at risk
16. The lack of proper records and audit trails together with the failure of the then trustees to take action to prevent further private benefit and more generally to implement satisfactory financial controls, put the Charity’s property at risk.
Not all trustees were involved in decision-making and one trustee exercised a dominant influence
17. The trustees appeared to defer completely to the Rabbi. A charity is entitled to the independent and objective judgement of each of its trustees, acting solely in the interests of the charity. Trustees who simply defer to the opinions of a dominant trustee are not carrying out their duty to the charity. A case in which a dominant trustee effectively deprives a charity of the considered judgement of the other trustees is an example of poor governance amounting to mismanagement.
The Charity was not carrying out its charitable objects
18. The Commission had concerns that the Charity was not carrying out activities with sufficient public benefit to satisfy its charitable status. For example, it was not clear how many people beyond the household of the Rabbi continued to worship at the synagogue. There was no evidence that anyone beyond the immediate circle of the Rabbi benefited from the activities of the Charity.
19. The shops were run directly by the Charity, and not by a trading subsidiary, and were trading in purchased goods as a commercial concern. This is contrary to charity practice which allows only the sale on of donated goods. It was not clear how the trading activities of the Charity were furthering the Charity’s objects, particularly as the shops’ activities were not capable of directly furthering its purposes, and they did not publicise and promote the Charity as they did not display the Charity’s name. The Commission also established that trading was prohibited by the Charity’s governing document.
Conduct of inquiry
20. In early 2003, the Charity Commission met with some of those who had raised concerns about the Charity, and with the Charity’s trustees.
21. The Commission discovered that one of the Charity’s properties was registered in the name of individual trustees in their personal capacity and not the Charity. We worked with the trustees to rectify this during the summer of 2003.
22. A ‘books and records’ analysis was carried out in February 2004 which supported and further contributed to the Commission’s concerns about misconduct and mismanagement.
23. The Commission liaised with the British Messianic Jewish Alliance in May 2003, initially to learn more about the doctrinal background to the Charity, how its activities related to the doctrine of Messianic Judaism, and the status of the Rabbi of the Charity. We later consulted them in order to find additional trustees to appoint to the Charity.
24. The trustees were planning to sell the synagogue and transfer the Charity’s religious activities to another property which had been used previously as a Charity shop. The shop did not have planning permission for use as a synagogue. It was unclear that the trustees had given full consideration to alternative arrangements for worship or that the synagogue was being opened to the public. The trustees did not provide information as to how they envisaged the Charity fulfilling its objects without the use of a building that was available to be used for worship by the general public.
25. In February 2004 the trustees presented the case for the need to sell the property in order to raise funds to cover the Charity’s debts. The Commission considered this case and, being satisfied the sale was in the interests of the Charity, discharged the previous order of 2 December 2003 (see paragraph 28 below) and allowed the trustees to part with the property. However, we immediately took steps to protect the proceeds of the sale by exercising our statutory powers under Section 18(1)(iv) and 18(1)(vi) of the Act (see paragraph 29 below).
26. We used our regulatory powers to suspend the three trustees named in paragraph 13 and to appoint additional trustees in March 2004 (see paragraph 30 below).
Conclusions
27. Our findings bore out the concerns that none of the trustees were carrying out their duties of care to the Charity. We also concluded that Philip Sharpe, Judith Caiden (also known as Judith Sharpe) and Dianne Livermoore were receiving private benefits. We concluded that the management of the Charity could not continue in its then form. For this reason we appointed additional trustees.
Regulatory action taken
28. On 2 December 2003, the Commission exercised its statutory powers under Section 18(1)(iv) and 18 (1)(vi) of the Act to order all three of the trustees not to part with Charity property without the written approval of the Commission. This explicitly included the exchange of contracts in connection with the property used as a synagogue. We decided to make use of this temporary and protective power because of concerns that the Charity stood to lose the only building at which it was able to fulfil its objects.
29. Because of concerns we had about private benefit to trustees as outlined in paragraphs 11-15 above, and because of the sale of the Charity’s property and the need to protect the proceeds of the sale, we applied further temporary and protective orders. On 18 February 2004, the Commission exercised its powers under Section 18(1)(vi) of the Act to prohibit the trustees from making payments to any of the trustees or members of the Charity without the prior written consent of the Commission. The Commission also froze the Charity’s bank accounts under Section 18 (1)(iv) of the Act.
30. On 25 March 2004 the Commission appointed five additional trustees under Section 18(1)(ii) of the Act, and subsequently suspended the three original trustees under Section 18(1)(i) of the Act, pending consideration of their removal. This was because of the findings listed in paragraphs 11-15 above, the need to protect the Charity’s property, and in order to ensure the proper administration of the Charity.
31. The order suspending the three original trustees named in paragraph 13 expired on 25 March 2005. The trustees were no longer in position where they could administer the charity. We decided not to formally remove them as trustees. They played no subsequent part in the administration of the charity and posed no further risk to this charity and its funds. We have recently published our risk and proportionality framework for compliance and our current approach is that maladministration or serious mismanagement would now be more likely to lead to removal of trustees.
32. The Commission did not press the trustees to take legal proceedings against the three trustees for restitution in respect of private benefit. We adopted a strictly practical approach to the question of restitution. We concluded that, although there was a strong case to demonstrate liability, quantifying the sum for which each of the trustees was liable would be problematic and the prospects of successfully enforcing judgement were poor. In addition, the charity was dissolved on the 7 April 2008.
Impact of Commission intervention
33. The Commission’s intervention and use of its powers to appoint additional trustees ensured the proper management of the Charity and prevented any further issues of private benefit by the trustees.
34. The use of our temporary and protective powers to protect the proceeds of the sale of the synagogue ensured that the proceeds of the sale which amounted to £218,794, were used in furtherance of the Charity’s objects.
35. The misconduct and mismanagement of the Charity raised the risk to the Charity’s reputation and the reputation of charity in general. The intervention of the Commission ensured that the property of the Charity was used in furtherance of its charitable purposes and prevented certain individuals gaining further private benefit from the Charity.
Resources applied
36. Several staff from a number of different sections in the Commission managed the case, with significant input from the legal team.
Actions required of the trustees
37. The trustees agreed at the Charity’s Annual General Meeting on 3 January 2007 to dissolve the Charity. Since then, they have disbursed the remaining funds of the charity to other charities with similar objects in accordance with its governing document. The charity was dissolved on 7 April 2008 and the charity was removed from the register on the 6 May 2008.
Lessons for other charities
38. Trustees are responsible for the proper conduct and management of their Charity’s affairs. They have a duty to ensure that adequate financial controls are in place to mitigate any risks to the Charity.
39. Trustees are responsible for the overall management of the administration of their charity. All decisions by the trustees concerning a charity should be taken by all the trustees, acting collectively and as a team. A charity is entitled to the independent and objective judgement of each of its trustees, acting solely in the interests of the charity. Trustees who simply defer to the opinions of a dominant trustee are not carrying out their duty to the charity. A case in which a dominant trustee effectively deprives a charity of the considered judgement of the other trustees is an example of poor governance amounting to mismanagement.
40. Trustees are responsible for ensuring that the charity carries out activities that are in furtherance of its objects.
41. Guidance on the issues in paragraphs 38 to 40 above can be found in CC3 – The Essential Trustee: What you need to know on our website.
42. No trustee or former trustee should benefit from their position without authority which would come from the charity’s governing document or, if there is no such provision in the governing document, the Courts or the Commission. This includes benefits to those who share the income of trustees or former trustees. Further information is available from CC11 – Payment of Charity Trustees, which can be found on our website.
43. Trustees are responsible for ensuring that the charity’s trading is compliant with revenue law. More information can be found in our publication CC35 - Trustees, trading and tax on our website.
There is also information on HM Revenue and Customs website: http://www.hmrc.gov.uk.
Table of guidance
44.
|
|
Issue |
Legal obligation |
Guidance |
|
1 |
Misconduct or mismanagement in the administration of the charity |
Duty of Care |
|
|
2 |
Risk to the Charity’s property |
Duty of Prudence |
|
|
3 |
One trustee exercising a dominant influence |
Duty to participate in the management of the charity |
|
|
4 |
Charitable objectives |
Duty to ensure that the charity carries out activities that are in furtherance of its objects |
|
|
5 |
Private benefit of trustees |
No trustee or former trustee should benefit from their position without authority |
|
|
6 |
Charity trading |
Trustees are responsible for ensuring that the charity’s trading is compliant with revenue law |
CC35 - Trustees, trading and tax www.hmrc.gov.uk/charities/guidance-notes/annex4/sectiona.htm |
Date of Publication: 08/05/2008