The pastor of an evangelical church that used to stage its services in Croydon’s Fairfield Halls has been banned from acting as a charity trustee for 10 years after an official investigation found ‘serious misconduct and mismanagement, including misuse of funds and other assets’
Banned: Rhema Church’s founder, Martin Phelps
The Charity Commission has today published its findings following an eight-year inquiry into a Croydon-based evangelical church, having discovered that the charity’s trustees had spent its funds on gym memberships, vets’ bills, cosmetic surgery and other personal expenses, including more than £95,000 on overseas trips.
South African-born Martin and Sandy Phelps established the Rhema Church in Croydon in 1991. By 2013, Rhema Church London had an annual income of £1million, their large congregation meeting each Sunday at the Fairfield Halls, paying hire fees of £1,000 per week.
According to the church’s own website, “The hand of God has been the force behind the success of this church as it grows from strength to strength.”
But by 2015, members of the congregation were beginning to ask just whose hand was on the church’s credit cards, as questions were raised about payments for cosmetic surgery, vets’ bills and luxury holidays.
The church and the Phelpses were placed under investigation by the Charity Commission, the tax man and the police. In 2017, Her Majesty’s Revenue and Customs began looking into around £370,000 of unpaid tax bills. In December that year, it was announced that Martin Phelps had been dismissed from the Rhema Church for “gross misconduct”.
Long gone: the Rhema Church’s final social media posting, in 2017
In 2018, Charity Commission officials conducting their inquiries reported being subject to “considerable harassment, intimidation and threats”.
But it was not until June 2022 that Rhema Church London was removed from the register of charities.
In the findings published today, the Charity Commission concluded that Rhema Church’s trustees had failed to fulfil their duties to protect the charity and its assets, and “failed to demonstrate any effective oversight of senior staff leading to the serious misconduct and mismanagement, including misuse of funds and other assets”.
During the inquiry, the regulator found evidence that the charity spent approximately £95,000 on trips overseas without any authorisation or clear charitable purpose. The trips, to locations including Italy, Greece and Austria, were led by former pastor, Martin Phelps.
The inquiry also uncovered that day-to-day living expenses such as food, domestic purchases, medical bills, vets’ bills and gym memberships, “all of which appeared to be of a personal nature”, the Commission said, were claimed and paid out by the charity in the absence of any expense policy or clear financial controls. It was also discovered that Sandy Phelps had a gardener and cleaner at her home paid for by the church.
Early in the inquiry it was discovered that in one year alone, of £290,000 spent on the church credit card, only £57,000 was used on church-related activities. Yet when the Charity Commission arranged a meeting to discuss the issues with the church leaders, the Phelpses opted to go to dinner at The Shard instead.
In one preliminary report, the Charity Commission investigator noted that there had been issues arising with West Croydon Baptist Church, which Rhema had leased as a venue for its services. “The Pastor of West Croydon Baptist Church had been in touch with the interim manager and… raised a number of serious concerns. This resulted in action being taken against an individual who had tried to have the lease transferred to a new church.”
The Commission froze the Rhema Church London’s bank accounts in November 2015 to secure its assets.
The inquiry found that cheques totalling £300,000 had been paid to the charity’s former pastor between 2014 and 2015. Of that, £225,000 had been transferred out of the charity’s account and placed into a personal account to reduce monthly mortgage interest payments before being transferred back to the charity.
The regulator discovered that “no guarantee had been obtained or security measures put in place prior to transferring the significant sum, placing the funds at considerable risk”.
Preaching: Rhema’s Sandy Phelps
The regulator’s investigation also found that most of the charity’s spending was incorrectly categorised and lacked sufficient information to prove it was for charitable purposes. This failure resulted in the charity being liable to pay £543,285.82 in additional taxes. The charity also failed to submit accounts to the Commission on time for five consecutive years.
In 2015, the regulator appointed interim managers to address issues uncovered by the inquiry and review the charity’s day-to-day governance, as well as consider its future.
The Commission disqualified the charity’s former pastor, Martin Phelps, from being a trustee or holding any office or employment with senior management functions at any charity for 10 years.
The regulator also used its powers to make an Order under section 76(3)(c)(i) of the Charities Act 2011 to sell three properties owned by the charity as part of efforts to settle the charity’s accounts.
“Trustees must use their charity’s funds to further the charity’s purposes and ensure there are robust financial controls in place to stop the abuse of these funds,” said Amy Spiller, the Charity Commission’s head of investigations.
“From our investigation it was clear that trustees at Rhema Church London had failed to meet this obligation, leading to significant misuse of funds by a former senior employee. These expenses did not appear to serve any charitable purpose or benefit to the charity’s beneficiaries.”
The Commission’s interim managers recovered £136,760, which Spiller said “could be put to good use at charities with similar purposes”. The money was distributed to three nearby charities which all held similar charitable purposes.
Read more: Unholy row as church leaders run up massive tax debts
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