Charity Regulator Launches Investigation into £22 Million Cheque Scandal
The Charity Commission, the independent regulator of charities in England and Wales, has launched a statutory class inquiry into a group of charities over concerns about the misuse of cheques. According to the Charity Commission, an unannounced visit by HMRC to a company in Hackney uncovered evidence that 105 charities had cashed cheques with the company to a value of £22 million between December 2021 and March 2023.
The regulator has identified 10 charities that will be initially investigated, including Inspirations, Beis Aharon Charitable Trust Limited, and Mifal Hachesed Vehatzedokoh. These charities have been prioritised due to the number of cheques issued and the total value of cheques cashed. The Charity Commission expects to extend the number of charities under investigation over time.
The inquiry will examine how these charities have transferred funds and investigate how trustees had oversight of what happened to funds exchanged for the cheques. The regulator will also seek to establish how trustees determined that these financial transactions were in their charity’s best interests. As stated by the Charity Commission, “The Commission will determine the facts around how these charities have transferred funds. It will also investigate how trustees had oversight of what happened to funds exchanged for the cheques, and if this cash has been used properly to support what the charities were set up to do.”
The Charity Commission has issued an immediate order to temporarily stop any of the charities under inquiry from issuing cheques without its prior consent. This measure is aimed at preventing further potential misuse of charity funds. The regulator has also stated that the scope of the inquiry may be extended if additional regulatory issues emerge during the investigation.
The Charity Commission has emphasised that it takes allegations of misconduct and mismanagement seriously and will take action to protect charities and their beneficiaries. As noted by the regulator, “The Commission’s ambition is to be an expert regulator that is fair, balanced, and independent so that charity can thrive.” The inquiry is expected to shed light on the practices of these charities and ensure that they are using their funds effectively to support their causes.
In a statement, the Charity Commission said that it has issued a restricted transactions order, which will prohibit the issuing of cheques without the Commission’s written consent. The regulator has also provided guidance on internal financial controls, emphasising that pre-signed blank cheques should be prohibited under charities’ financial control policies. The Charity Commission has urged charities to take steps to protect themselves from fraud and loss.
The Charity Commission’s guidance on internal financial controls can be found on its website, and it makes clear that charities should have robust financial controls in place to prevent such abuses. The regulator’s inquiry is ongoing, and it is expected to publish its findings in due course.
The 10 charities initially under inquiry are:
* Inspirations (1109974)
* Beis Aharon Charitable Trust Limited (1010420)
* Mifal Hachesed Vehatzedokoh (1139320)
* Friend of Beis Soroh Schneirer (1153647)
* One Heart – Lev Echod (1167227)
* Yad Vochessed Association Limited (1112797)
* Friends of Beis Chinuch Lebonos Trust (1153187)
* Chasdei Dov Trust (1181900)
* Friends of Mercaz Hatorah Belz Macnivka (1126075)
* The Rehabilitation Trust (288622)
The Charity Commission has confirmed that it will continue to monitor the situation and take action as necessary to ensure that charities are using their funds effectively and efficiently.
For more information on the Charity Commission’s work and guidance on internal financial controls, visit the Charity Commission’s website.
The Charity Commission is the independent, non-ministerial government department that registers and regulates charities in England and Wales. Its ambition is to be an expert regulator that is fair, balanced, and independent so that charity can thrive.
A statutory inquiry is a legal power enabling the Commission to formally investigate matters of regulatory concern within a charity, or class of charities and to use protective powers for the benefit of the charity and its beneficiaries, assets, or reputation.
Under section 76(3)(f) of the Charities Act 2011, the regulator has issued a restricted transactions order which will prohibit the issuing of cheques without the Commission’s written consent.
The Commission’s guidance on internal financial controls can be found via this link: Internal financial controls for charities: protect your charity from fraud and loss (CC8).
It makes clear that pre-signed blank cheques should be prohibited under charities’ financial control policies.
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