A Christian charity has been strongly criticised for serious mismanagement and misconduct by the Charity Commission.
An inquiry published today into the Saint Stephen the Great Charitable Trust - whose main purpose was to acquire Church of England churches for use by Orthodox Christians - began when the charity filed for bankruptcy in the US in 2008.
It found conflicts of interest linked to the trust's administration, along with poor record keeping and governance.
The trust's problems reportedly began when, in November 2006, it agreed with the Society for Promoting Christian Knowledge (SPCK) that SPCK would transfer 22 Christian bookshops to the trust.
The Charity Commission received complaints about the administration of the company and trust and opened a statutory inquiry into Saint Stephen the Great Charitable Trust and the Saint Stephen the Great companyin September 2008.
The Commission appointed an interim manager to take over the management of the trust and consider its future viability. It took on the handling of 34 redundancy claims and reached an agreement with SPCK, who said the trust had breached the terms of their agreement.
The Commission says that trust assets of £3,226,100 were safeguarded from exposure to significant liabilities; multiple complex claims totalling £4,171,710 were managed and £1,928,853 was disbursed in settlement of claims; the trust's charitable objectives were also furthered as sale proceeds of £144,486 from the trust's church at Bradford were passed to Orthodox communities; and the trust's church at Poole in Dorset was transferred to another charity so that it could continue to be applied for charitable purposes.
The inquiry, based on the interim manager's findings, found that "there were unmanaged conflicts of interest intrinsically linked to the trust's administration and transactions committing charitable funds to connected entities appeared to constitute self-dealing".
It found that after the company had filed for bankruptcy "both charities were exposed to substantial financial liabilities as a result of redundancy claims and other issues" and "the trust could manage the churches' ongoing operational costs but could not meet the claims from SPCK, ex-shop employees and others".
The report also found that "the trust had failed to keep proper records since 2008 and there was a failure on the part of the trustees to undertake due diligence before entering into the agreement with SPCK".
Further, it found that "there was poor governance, lack of due diligence and inadequate record keeping on the part of the trust's trustees and the company's directors".
The inquiry concluded that "there had been serious mismanagement and misconduct of the trust's and company's trustees".
The interim manager concluded that it was in the trust's best interest for it to be wound up with surplus assets transferred to charities with similar objectives. The trust was subsequently removed from the register in March 2014.
Michelle Russell, the Director of Investigations, Monitoring and Enforcement at the Charity Commission, said: "This has been a long investigation that has been hampered by poor record keeping and complicated by the number of claims and connected party companies and transactions. However, we are pleased to be able to conclude this investigation and ensure that significant charitable funds that were at risk can be used for their original purposes. This case is a clear reminder for charities of how difficult it can be to manage its business and deal with conflicts of interest properly where there are number of different companies involved in running different aspects of the charity's activities and there are a number of related and/or conflicted trustees."
She added: "Charities should be clear about which body has what role - especially when contractual liabilities are created. Trustee boards should ensure that there are an adequate number of un-conflicted trustees who properly scrutinise third party transactions and appropriate policies and procedures which are followed to actively manage any potential situations in which their personal interests could conflict with their duties as trustees."
Sam Richardson, the chief executive of SPCK, said that SPCK regrets the fact that the bookshops were mismanaged by the trust.
"The people in charge of SPCK at the time did all the due diligence you would expect but obviously - as the Charity Commission has found - the shops were badly mismanaged by the subsequent owners, and SPCK regrets that a lot," he said. "SPCK was among those who alerted the Charity Commission to this mismanagement, and worked closely with the Charity Commission on the recovery of charitable assets and the best possible settlements for former staff. SPCK could not have kept the bookshops going as they were, because the losses were unsustainable. We are sorry for the impact it had on the former staff and the wider trade but if the SPCK had retained the bookshops then SPCK as a whole would not be around now. SPCK has since refocused on its publishing work, and has grown to be the UK's leading publisher of Christian books."