The Charity Commission has strongly criticised the former trustees of a poverty relief charity that transferred millions of pounds of charitable funds into a company owned by one of them. 

The regulator has published its report detailing its inquiry into the Knightland Foundation, which also highlights concerns about unmanaged conflicts of interests. 

The charity, which has objects including making grants to people in need and advancing the Orthodox Jewish religion, was registered in 2011. 

The commission said in 2021 that it had opened an inquiry into the charity because of concerns including insufficiently documented loan agreements and transactions to connected companies.

The regulator’s report, published on Friday, heavily criticises four former trustees, referred to only as A, B, C and D, for serious mismanagement of the charity over an extended period of time. 

The regulator concluded there had been a “substantial failure” by the former trustees to manage a conflict of interest between the charity and trustee A around a developer fee of almost £1m to a company he owned. 

The commission found trustee A spoke at a meeting to determine whether the fee should be paid and left the meeting while the other former trustees made a decision.

But the regulator said there was no contemporaneous note of the meeting and the minutes had been prepared in advance by lawyers instructed by trustee A.

The commission also said it was “highly significant” that the charity’s ledgers showed a payment of £975,000 in respect of the developer fee that was made “several weeks” before the meeting to agree the fee was held. 

The regulator said that when the charity needed to make large payments, the funds were routinely transferred to a private company owned by trustee A.

“This was done to take advantage of that company’s banking arrangements, which offered cheaper rates for transfer of funds,” the commission said. 

“However, this placed charitable funds at considerable risk as they were not under the control of the former trustees.”

It found that in February 2020, trustee A transferred £2.5m from the charity’s subsidiary Bellview Land to Bellview Estates, which trustee A owned, to use as proof of available funds for that company to acquire property on behalf of the charity.

“Whilst the funds were returned to the charity on the next working day, they were at risk whilst out of the former trustees’ control and there was neither evidence of any action to address that risk nor of agreement from the other former trustees that trustee A could undertake the transfer to a company under his control,” the regulator said. 

The commission also found the charity made unsecured, interest-free loans to each of its subsidiary companies without proper records being made. 

The regulator said: “The commission found multiple instances of serious mismanagement arising from the former trustees’ repeated failure to comply with their legal duties and responsibilities, the consequence of which was that the charity’s funds were placed at considerable risk, albeit for short periods, and with no ultimate loss to the charity.”

The regulator said: “There had been a lack of transparency and openness in the way the charity was operated, particularly with regard to decision-making underlying the transactions involving substantial sums of charity funds. 

“Trustee A largely drove the operation of the charity and to that extent he bears substantial responsibility for its mismanagement. 

“However, trustee A’s fellow trustees failed to offer any challenge or to exert governance and their failure to do so enabled the identified mismanagement to take place.

Later that year, the charity tribunal rejected an appeal by the then-trustees of the charity against the commission’s decision to appoint two interim managers to the organisation. 

Five new trustees were appointed to the charity on 26 April 2023 and trustee A was suspended.

He resigned in November and agreed not to seek reappointment as a trustee for a period of two years from the date of his suspension.

The commission said there had been no misapplication of funds by trustee A or by any of the former trustees, although funds had been placed at unnecessary risk when they were transferred outside the control of the charity. 

It said it also noted the finding of the charity tribunal that trustee A believed he had at all times acted in the best interests of the charity.

The Knightland Foundation has been contacted for comment.