The report concluded that there had been misconduct or mismanagement on the part of the original trustees (see endnote 1) and issued an order requiring the current trustees to take professional advice on the merits of seeking recovery of funds. The commission has also issued an action plan detailing steps that it requires the current trustees to take to improve the charity’s governance. You can read the full report on GOV.UK.
The charity was established to relieve poverty, advance education and promote the good health of individuals in need, in particular, but not exclusively, members of the Muslim community.
The commission opened a statutory inquiry into the charity in February 2014 following engagement with the charity trustees and examination of the charity’s financial information which indicated the trustees’ failure to adequately account for the charity’s finances and its use of funds. The statutory inquiry was to investigate and resolve the following regulatory concerns:
- whether the trustees had properly managed conflicts of interest including related party transactions and could properly account for expenditure of funds including payments made to connected parties linked to the trustees
- the administration, governance and management of the charity by the trustees; whether, and to what extent, the trustees had complied with and fulfilled their duties and responsibilities as trustees, including consideration of recovery of funds
The inquiry found that the charity’s accounting records were incomplete. For the period between July 2010 and April 2011 there were significant gaps, with a large discrepancy between income and expenditure on the charity’s submitted annual return and the charity’s bank statements. One of the original trustees had allowed the charity’s bank account to be used inappropriately as a banking facility for an external project; and around £130,000 of income is unaccounted for, for the financial year ended April 2011.
On 31 March 2015 the commission issued an order under section 84 of the Charities Act 2011, requiring the current trustees to take professional advice on the merits of seeking recovery of funds from the former trustee and report back to the commission by 30 September 2015.
The commission also requires the current trustees to implement an action plan to deal with conflicts of interest and related party transactions identified during the inquiry. The commission recognises that the current trustees have taken steps to improve the governance and accountability of the charity and will monitor their compliance with the order and the progress of the action plan.
Steve Law, Head of Investigations at the Charity Commission said:
This case clearly shows the charity’s failure to keep accurate accounting records. Trustees have a legal duty to ensure that a charity’s funds are used solely and reasonably in furtherance of its objects, and they must be able to demonstrate that this is the case.
All trustees must take an active role and responsibility for ensuring charity funds are spent properly. It is absolutely vital that robust financial controls and procedures are in place and implemented. This includes ensuring there are audit trails for decisions, keeping accounting and financial records for both the receipt and use of funds, and that payments to trustees are well documented, under transparent procedures that deal with conflicts of interest.
The commission’s guidance for trustees, The essential trustee: what you need to know (CC3), sets out what is required of a charity trustee, including responsibilities to their charity.
The inquiry closed on 30 June 2015 with the publication of the report.
Notes to editors
The Charity Commission is the independent regulator of charities in England and Wales, acting in the public’s interest, to ensure that:
* charities know what they have to do
* the public know what charities do
* charities are held to account
- None of the three original trustees are still trustees of the charity.