The Charity Commission has concluded investigations into four of the strictly Orthodox charities that are subject of a wider inquiry into £22 million of cashed cheques.
In April last year, the regulator announced it had opened a statutory inquiry after an HMRC visit to a company in Hackney with which 105 charities had cashed cheques between December 2021 and March 2023.
It named ten charities as part of its initial investigation in May, added another 10 in September and a further 12 in December.
Now it has removed four of them from the inquiry: the ZSV Trust, Forty Limited, Bnois Jerusalem and Friends of Yeshiva Daas Sholem Shotz. The four charities were among those named as under investigation in September.
In a statement on Wednesday, the commission said it had “found evidence that all four charities issued open cheques between December 2021 and March 2023. Over the course of its investigation, the Commission was satisfied that each charity was undertaking charitable activities in line with their charitable purposes.”
However, it added, “the regulator has made a finding of misconduct and/or mismanagement in all four cases as the use of blank or open cheques is high risk and lacks the effective oversight of charitable spending that the regulator would expect from trustees.”
A blank cheque is one that is signed but with the amount and payee not written in. An open cheque is one signed where the amount is filled in but the payee left blank.
Since the opening of the investigation, the four charities had confirmed that blank or open cheques were no longer used.
Before the start of the investigation, Friends of Yeshiva Daas Sholem Shotz appointed new trustees who decided the charity could no longer operate and who were helped by the commission to wind it down.
The commission said it had issued a regulatory action plan to the other three charities to “address governance weaknesses and make improvements to their internal financial controls”. Trustees have also been given guidance to “help them to improve how their charity is run”.
In its report, the commission said evidence from HMRC suggested that ZSV, which supports the relief of poverty and other causes, had issued 48 cheques totalling £76,835 in the period under question.
Trustees explained that they used to give beneficiaries open cheques “so the recipient could decide how to use the funds, in line with the charitable purpose that the grant was awarded”, the report said.
In a limited number of cases, they had issued open cheques where they believed it to be the most appropriate way of providing urgent assistance.
But they told the inquiry that they had taken the decision to stop issuing cheques in this way before they were contacted by the commission.
In the case of Bnois Jerusalem, which supports girls’ schools in the UK, the report cited 15 cheques totalling £80,370.
Open cheques had been issued “most commonly to provide salary payments to the charity’s staff. It was clarified that this would mainly be in situations where the member of staff had a problem with their bank, or that they were overdrawn and they did not want to pay the funds into their bank account,” the report stated.
But the commission said it did “not consider that where an individual has a bank account in overdraft to be a justifiable reason to provide payment to individuals via an open cheque”.
With Forty, whose charitable objectives cover the advancement of religion and poverty relief, the commission looked into 19 cheques totalling £58,800.
The charity said these cheques had been used to support an overseas charity “with the payee section knowingly left blank to allow the recipient to obtain cash in the UK before taking it overseas”.
The trustees said the charity had “no direct relationship with the entity where the cheques were cashed, and it was at the beneficiaries’ discretion how the cheques were cashed to obtain the required funds”.
But they confirmed that the practice had ceased and the charity had not used cheques for several years.
In the case of Friends of Yeshiva Daas Sholem Shotz, 66 cheques totalling £261,330 were the subject of investigation.
The decision to wind up the charity was “due to the administrative challenges which arose as a result of the charity’s former trustees not passing on the charity’s financial and administrative records when the new trustees were appointed,” the commission reported.
Summing up its findings, the watchdog commented: “Charities should not issue blank or open cheques. To do so is misconduct and/or mismanagement in the administration of the charity. In most cases charities should use the regulated banking sector when transferring charitable funds.”
It was, it added, “difficult to see, where regulated banking services are available, how trustees could show they discharged their legal duties if they do not use the regulated banking sector in order to secure or transfer the charity’s funds.”
As part of its inquiry, the commission said it had exchanged information with other government departments.
The broader inquiry, it said, remained ongoing while it continued “to examine the evidence and consider the appropriate action or response”.
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