Former trustees of a Christian charity committed serious misconduct and mismanagement when they provided unsecured loans of almost £1m to a property developer, the Charity Commission has found. 

The regulator opened the inquiry in August 2021 into Citygate Christian Outreach Centre, which runs a church in Beckenham, south London.

The charity was placed into the regulator’s double defaulter class inquiry on 22 March 2021 after it failed to submit its annual report on time. 

The charity’s accounts for the financial year ending 31 March 2019 and 31 March 2020 were submitted in March and May 2021 respectively.

Both sets of accounts included qualified opinions from an independent auditor relating to significant unsecured loans to an individual, a property developer, who was not connected to the charity.

In total, £948,450 was loaned to the property developer without security to fund a real estate project in Dubai, the commission found. 

With the property developer having repaid some funds in 2018, the regulator said there was a balance of £915,450 outstanding, not including interest, when the charity entered the double defaulter class inquiry in August 2021.

The regulator raised further concerns about previously submitted charity accounts which listed “significant related party transactions” between the charity, former trustees and connected individuals.

“Accounts also showed that the chair of trustees and his wife were paid for their role as pastors in the church and for which they received significant increases in salary in the financial year ending 31 March 2019,” the regulator said.

At the time of the double defaulter inquiry opening in 2021, the regulator’s records showed the charity had two trustees.

This breached the requirement within the charity’s articles of association which stipulated that there should be a minimum of three trustees.

When the inquiry was opened in March 2021, the charity’s trustees were Alan Samways and Julian Melfi.

Olawale Dada was a trustee between December 2018 and March 2021.

These individuals are no longer trustees of the charity and a new board of trustees has been appointed.

The regulator said: “The inquiry found that the former trustees had demonstrated poor judgement and inadequate decision making in relation to the issuing of loans to the property developer between February 2018 and March 2021 when the loans were first recalled.”

By March 2021, the charity had made more than 80 separate payments to the property developer.

“The property developer did not provide any paperwork to the former trustees about the proposed investment that evidenced how the loans would be used or how the interest would be generated,” the regulator said. 

“Before making each payment, the trustees should have sought updates and evidence from the property developer as to the progress of the proposed development.”

The regulator said trustees should have sought further updates on how the money from the loans was being expended to ensure that it was still in the charity’s best interest.

The regulator said the former trustees failed to make any enquiries even at the “most basic level” to establish how the loans were being used.

In January 2023, the charity, having taken professional legal advice as directed by the inquiry, issued a statutory demand for repayment to the property developer, with a 21-day window for repayment. 

On 3 November, the charity reached a settlement agreement with the property developer for the full return of the original loan value and some recovery of interest costs, the commission said. 

The charity has already recovered more than £500,000 through the settlement agreement.

The inquiry concluded that there was serious misconduct and/or mismanagement by Samways and Melfi and to a lesser extent Dada, in the charity’s administration and management, specifically their conduct in connection with the loans made to the property developer.

On 16 May 2023, the regulator issued notice of its intention to remove Samways and Melfi as trustees.

They were removed on 15 June 2023 and 8 January 2024 respectively.

Dada was disqualified from being a charity trustee for two years on 15 February 2024.

Amy Spiller, head of investigations at the Charity Commission, said: “Following our intervention, and appointment of a new trustee board, the charity is improving how it is run and has already recovered more than half of the loaned funds. 

“We are satisfied all concerns raised as part of the inquiry have been addressed.”