A Jewish education charity breached its legal duties after an inquiry into charity bank statements found more than £550,000 was transferred overseas by former employees.

London-based charity Keren Shmuel, whose purpose is the advancement of the Orthodox Jewish religion, failed to submit its annual accounting documents to the Charity Commission for the financial year ending 31 December 2014 and 2015 and also filed late accounts for financial years ending 31 December 2019 and 2021.

Despite several reminders from the regulator, the charity’s former trustees defaulted again on their statutory obligations by failing to submit the required annual accounting documents to the commission by its due date, the commission said.

A statutory inquiry was opened into the charity on 4 April 2023 to consider the administration, governance and management of the charity by the former trustees, the financial controls and management of the charity and conduct of former trustees.

Trustees showed a repetitive failure to comply with their duties and charity law by failing to ensure annual accounts were filed on time, the inquiry found.

“The charity’s accounts for the financial year ending December 2017, 2018, 2019, 2020, 2021 and 2022 are marked as ‘unaudited’,” the regulator said.

The regulator noted that the accounts underwent an independent examination, but an audit is separate to this and is specifically required by the governing document.

“Charity trustees are not able to choose an independent examination if their charity’s governing document, a funder, or the commission requires an audit to be carried out,” the regulator said.

“The former trustees’ failure to comply with this part of the governing document is further evidence of their misconduct or mismanagement in the administration of the charity.”

A regulatory accountant reviewed the accounts submitted and identified that they were “deficient” and did not comply with the requirements of the Statement of Recommended Practice.

On 30 August 2023, the regulator met former trustees to look into the administration, governance and management of the charity, particularly regarding former trustees’ accounting obligations. 

The regulator also conducted a books and records inspection of the charity’s financial and other records.

“At the meeting, the former trustees told the inquiry that the charity moved large amounts of its charitable funds overseas to other entities which aligned/furthered the charity’s purposes,” the regulator said.

“However, when further questioned it became clear to the inquiry that there was a lack of policy and procedure in place with regards to due diligence and monitoring the end use of the charity’s funds.”

The regulator’s review of the charity’s bank statements found between 2018 and 2022 more than £550,000 of charitable funds was transferred overseas by the former trustees. 

“The inquiry is of the view that whilst the former trustees have provided an explanation as to how the funds have been applied, there was insufficient evidence provided to show and explain how the majority of the charity’s funds were expended in furtherance of the purpose for which they were sent overseas,” the regulator said.

“In failing to keep adequate accounting records of how the charity’s funds have been expended, the now former trustees breached their legal obligations under the act (sections 130 and 131).

“This is misconduct or mismanagement in the administration of the charity.”

During the 30 August 2023 meeting, trustees explained that the annual accounts for the financial year ending 31 December 2019 and 2021 had not been submitted on time due to the delegation of all trustee duties being relied on by one trustee.

The former trustees who were responsible for the delayed filings have since left their roles.

“Recognising the failures, one former trustee (who was the charity’s then chair) advised it would be in the charity’s best interests for new trustees to be appointed,” the regulator said.

“Subsequently, the remaining trustees resigned, and new trustees were appointed in July 2023, October 2023, and November 2023.”

Keren Shmuel has been contacted for comment.