Decision

Charity Inquiry: Birmingham Education Trust

Published 17 October 2023

Applies to England and Wales

The charity

Birmingham Education Trust (‘the charity’) was registered on 12 September 1997. It is governed by a Declaration of Trust dated 19 August 1997 (‘the governing document’).

The charity’s objects are:

“The advancement of education of Muslim girls and boys primarily by the establishment and maintenance of a school or schools for this purpose including the promotion of the teaching of the religion of Islam.”

The charity funds and operates a school in Birmingham, which includes the promotion of the teaching of Islam to Muslim girls.

The charity’s entry can be found on the Register of Charities(‘Register’).

In this report, when reference is made to the ‘original trustees’, this is referring to Mr Asif Jawaid and Mrs Samina Jawaid (‘Mr and Mrs Jawaid’) who are husband and wife. The inquiry was informed at a late stage that there had been an additional trustee, Mr Arif Jawaid, who is Mr Asif Jawaid’s brother. The inquiry has not been able to establish when Mr Arif Jawaid resigned as a trustee but found no evidence to indicate that Mr Arif Jawaid had been actively involved in the administration of the charity.

New independent trustees were appointed during the course of this inquiry, trustee C appointed 9 August 2020, trustee D appointed 9 August 2020 and trustee E appointed 27 November 2020. Trustee D resigned as a trustee on 5 November 2020 and trustee E resigned as a trustee on 22 April 2022.

Background and Issues under Investigation

On 24 January 2012 the Commission engaged with the original trustees regarding their failure to submit the charity’s accounts for the financial years ending (‘FYE’) 31 August 2007, 2008, 2009, and 2010. Despite this intervention no accounts were submitted and as a result the Commission opened a compliance case into the charity in March 2019, to examine its repeated failure to comply with its statutory duty to file its accounts and annual returns. The Commission then identified wider concerns, including that it appeared from the Commission’s records that the charity was operating in breach of its governing document in having only two trustees. As the two trustees were husband and wife this also raised concerns about their ability to manage conflicts of interest should they arise.

A formal Action Plan under section 15(2) of the Charities Act 2011 (‘the Act’) was issued to the original trustees on 20 December 2019 to address the regulatory concerns with the various actions to be completed by the 29 February 2020.

On 28 May 2020 and 3 June 2020, the Commission contacted the original trustees to obtain an update as to progress in respect of the Action Plan. No responses were received, and the accounts referred to above were still outstanding.

Issues under Investigation

On 21 July 2020 the Commission opened a statutory inquiry (‘the inquiry’) into the charity under section 46 of the Act.

The inquiry examined:

1. Whether the trustees have properly exercised their duties and responsibilities under charity law in the administration of the charity and in particular the trustees’ compliance with their legal obligations for the content, preparation and submission of the charity’s accounts and other information or returns in line with the statutory requirements.

2. If potential conflicts of interest and connected party transactions have been properly managed.

3. The extent to which the trustees have complied with previously issued regulatory guidance.

4. The extent to which the charity has been operating for exclusively charitable purposes for the public benefit in furtherance of their charitable objects.

The inquiry closed with the publication of this report.

Findings

Whether the trustees have properly exercised their duties and responsibilities under charity law in the administration of the charity and in particular the trustees’ compliance with their legal obligations for the content, preparation and submission of the charity’s accounts and other information or returns in line with the statutory requirements.

The inquiry found that the charity had been managed in a way that fell short of the standard which is expected from charity trustees. There were failings regarding the submission of the charity’s accounts, compliance with the governing document, keeping adequate records and cooperating with the Commission.

The charity was registered in 1997 and at the time the inquiry opened in July 2020 the charity had only submitted an annual return once FYE 31 August 2005.

The inquiry found the original trustees had failed to produce accounts and annual returns despite receiving comprehensive advice and guidance from the Commission about this statutory requirement.

On 22 October 2020 the Commission issued a section 84 direction requiring the trustees to submit fully compliant accounts and annual returns for the FYE 31 August 2015 to 31 August 2020. The accounts were eventually submitted to the Commission on 17 September 2022.

Failure to submit financial information to the Commission on time in line with statutory requirements is a breach of sections 162, 163, 164 and 169 of the Act and constitutes misconduct and/or mismanagement in the administration of the charity. It is also a potential criminal offence under section 173 of the Act.

Trustees have a duty to ensure that their charity is accountable and that they manage the charity’s resources responsibly. It is imperative that adequate financial records are maintained to ensure the charity’s funds can be properly accounted for. The inquiry found that for a prolonged period of time insufficient financial records were maintained by the original trustees. The seriousness and extent of this failing was highlighted by the Independent Examiner’s report in the charity’s accounts for the FYE’s 31 August 2015 to 31 August 2020.

In addition, the inquiry obtained details of loans made to the charity from Mr Jawaid’s private company totalling £45,460.63. Although the inquiry was able to identify the money being deposited in the charity’s bank account there was no formal loan agreement to demonstrate it was a loan and not a donation. Similarly, there were no minutes of trustee meetings to record the charity’s decision to accept the loan and then make loan repayments. The failure to keep adequate records meant the trustees could not evidence that the charity had a legal obligation to repay the funds to Mr Jawaid’s company.

The original trustees also failed to comply with the charity’s governing document. Clause U of the charity’s governing document states there should be no fewer than two signatories to the charity’s bank account. The inquiry found that the account had only one signatory, Mr Jawaid. Trustee C was added as a signatory in response to the Commission highlighting the issue in October 2020. This failure meant that for a prolonged period of time only one trustee had control of the charity’s bank account, which meant an important safeguard designed to protect charitable funds was not implemented.

If potential conflicts of interest and connected party transactions have been properly managed.

The inquiry was informed during a meeting with Mr Jawaid and trustee C on 5 October 2020 that;

• Mrs Jawaid had previously been the head teacher of the school
• Mrs Jawaid was responsible for appointing their two daughters as teachers at the school
• Mrs Jawaid and her daughters were only paid for part time hours and any other time working for the charity was on a voluntary basis

The inquiry found the salary payments made to Mrs Jawaid were in breach of clause C(viii) of the charity’s governing document which prohibits the employment of trustees. ^{[footnote 1]}

There was a considerable lack of clarity over the dates Mrs Jawaid was employed as the head teacher at the school. Even in the latest submitted accounts for the year ending August 2022 it states that Mrs Jawaid was receiving a salary for the position of head teacher. The Commission issued a direction to Mrs Jawaid for her to provide contracts, details of employment positions held at the charity and dates of these in order to clarify her role with the charity. Mrs Jawaid failed to respond to this direction. However, the inquiry has established that Mrs Jawaid had been the head teacher up until 2017 and that she had been appointed as the head teacher at a time when the only other trustees were either her husband or her husband and her brother-in-law. The Commission also found that the charity had employed two of Mrs Jawaid’s daughters as teachers at the charity. The inquiry was able to establish from information provided by the school’s 2022 Ofsted report that one of Mrs Jawaid’s daughters had held the position of head teacher since September 2017. The trustees were unable to manage the conflicts of interest arising from these appointments because of the lack of independent trustees.

The original trustees were also unable to provide the inquiry with any evidence to indicate that an open and fair recruitment process had taken place, prior to the decision to appoint Mrs Jawaid and her two daughters or that there had been any attempt to manage the conflict of interest at that time. Although it is not a legal requirement to operate an open and fair recruitment process, it is the best way to ensure that the most appropriate candidate is appointed and in doing so ensure any decision is in the best interest of the charity.

There were initially concerns that Mrs Jawaid and her daughters were being remunerated below the National Living Wage. The inquiry conducted an analysis of the charity’s bank statements covering the period 11 September 2014 to 18 August 2020. This showed salary payments totalling £14,678.68 were made to Mrs Jawaid, a salary significantly below the market rate for a head teacher. However, as previously stated, Mrs Jawaid was employed on a part time basis and was therefore not being paid below the National Living Wage. As a result of only being paid for part time hours there was a heavy reliance and expectation on Mrs Jawaid to work voluntarily which is not ideal for what is a significant and crucial role.

The inquiry considered the recovery of the unauthorised benefits obtained by Mrs Jawaid during the course of her employment, but decided it was not proportionate for the Commission to recover funds on behalf of the charity because of the low sums involved and the benefit the charity had received from the work undertaken by Mrs Jawaid.

As a result of the Commission’s intervention, the charity now has an effective conflict of interest policy and new independent trustees have been appointed.

The extent to which the trustees have complied with previously issued regulatory guidance

During a meeting with the original trustees in September 2019 the Commission made them aware of their duty to submit accounting information on time. The inquiry found that the trustees failed to follow this regulatory advice and guidance and defaulted as outlined above on the submission of the accounting information. Regulatory concerns were also discussed during this meeting regarding the charity’s lack of financial controls or policies, the charity’s bank account having only one signatory and the charity operating in breach of its governing document.

The inquiry found that the original trustees had failed to take any action to rectify these regulatory concerns. This is misconduct and/or mismanagement in the administration of the charity by the original trustees.

The extent to which the charity has been operating for exclusively charitable purposes for the public benefit in furtherance of their charitable objects

The inquiry found that the charity was fulfilling its charitable objects by operating a girls’ school in Birmingham which is an exclusively charitable purpose. However, the inquiry also found that there were some personal benefit received by the trustees, including salary payments to the head teacher, which were made in breach of trust. Because the salary payments were below the market average and so benefited the charity no action was taken to recover these funds.

Conclusions

The Commission concluded that the original trustees had failed in their duty to submit accounts to the Commission on time. The charity had poor financial controls and record keeping systems which meant the original trustees were unable to fully account for all of the charity’s expenditure making it impossible to determine if funds have been misapplied and or misappropriated.

The Commission concluded that the original trustees did not manage conflicts of interest and the charity did not have sufficient independent trustees to enable it to properly manage any conflicts that arose. Mrs Jawaid’s appointment as head teacher was in breach of the governing document, but the rate of her remuneration fell below that of the market average.

The Commission also concluded that the conduct of the original trustees in governing and managing the charity prior to the Commission’s intervention was significantly below the standard that the Commission expects from trustees, and they were both removed as trustees of the charity by an Order made under section 79(4) of the Act on 2 August 2022. As a consequence of this Order the trustees are disqualified from acting as a charity trustee or a trustee for any other charity under section 178 of the Act.

Regulatory Action Taken

On numerous occasions, the Commission used its information gathering powers under section 47 of the Act to direct the original trustees and the charity’s bank to provide information and various documents.

On 22 October 2020 the inquiry issued an Order under section 84 of the Act directing the original trustees, trustees C and D to submit the outstanding accounts for FYE 31 August 2015 to 31 August 2019; to amend the signatories on the charity’s bank mandate by adding a second signatory in accordance with Clause U of the Governing Document; and directing the trustees to submit details of the charity’s financial policies.

On 29 March 2022 the inquiry issued an Order under section 84 of the Act directing trustees C and E to take certain actions including to review the trustee board’s current skill set and appoint at least two additional trustees; to review whether any current or former trustees have been employed by the charity and consider the implications of Clause C (viii) of the charity’s Governing Document, determine whether any such employments are/were validly made and take necessary action; and to ensure that all employees are remunerated in line with the national minimum wage or national living wage.

On 29 March 2022, the Commission exercised its power under section 76(3)(a) of the Act to suspend both Mr and Mrs Jawaid from acting as trustees, officers and/or agents of the charity.

On 29 March 2022 the Commission issued notice of its intention to remove Mr and Mrs Jawaid from acting as trustees, officers and/or agents of the charity under section 79(4) of the Act.

On 25 April 2022, representations were submitted regarding the proposed removal of Mr Jawaid. These representations were considered by an independent reviewer as part of the Commission’s decision review procedure. The outcome of the decision review on 22 July 2022 concluded that the removal of Mr Jawaid was necessary and proportionate and that the Commission should proceed to make the Removal Order.

On 2 August 2022, the Commission made Orders under s79(4) of the Act to remove Mr and Mrs Jawaid as trustees, charity trustees, officers and/or agents of the charity.

On 12 September 2022 Mr and Mrs Jawaid lodged an appeal with the First Tier Tribunal (Charity) against the orders removing them as trustees. Mr and Mrs Jawaid withdrew their appeal on 17 April 2023. However, Mr and Mrs Jawaid subsequently had their appeal reinstated on 5 May 2023. Mr and Mrs Jawaid again then withdrew their appeal on 4 September 2023.

Issues for the wider sector

Trustees of charities with an income of over £25,000 are under a legal duty as charity trustees to submit annual returns, annual reports and accounting documents to the Commission as the regulator of charities. Even if the charity’s annual income is not greater than £25,000 trustees are under a legal duty to prepare annual accounts and reports and should be able to provide these on request.

Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up. The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. The Commission’s guidance on Internal Financial Controls for Charities (CC8) is available on GOV.UK.

Conflicts of interest are more likely when there are only a small number of trustees on the board, when trustees are closely related, or when the charity has dealings with organisations in which the trustees have interests. It is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees. The trustees should put in place policies and procedures to identify and manage such conflict. Further guidance and advice on conflicts of interest can be found on GOV.UK.

The law states that trustees cannot receive any benefit from their charity in return for any service they provide to it or enter into any self-dealing transactions unless they have the legal authority to do so. This may come from the charity’s governing document or, if there is no such provision in the governing document, the Commission or the Courts. The Commission’s guidance on Trustee expenses and payments (CC11) is available on GOV.UK.

1. In accordance with clause C(viii) of the governing document, it is not permitted to employ any staff who are trustees. The position of Headmistress would not fall under the exception outlined in clause V (2) of the Declaration of Trust in respect of professional services. ↩