The Charity Commission (‘the Commission’) today published a report of its inquiry into the Bangladeshi Parents and Carers Association (registered charity number 1082770) (‘the charity’).
The Commission received a serious incident report from the charity in April 2012 which said the charity had been the victim of financial mismanagement and alleged fraud. In February 2012, Tower Hamlets Council, a major funder of the charity, commissioned an investigation into the charity as regards its funding and the charity conducted an independent review of its own. This established that there had been unauthorised expenditure of £104,296 with no evidence of an audit trail and that the charity’s reserve account had reduced from £812,486 to £80,933 with no evidence to explain why.
The Commission escalated its engagement and opened the inquiry on 9 May 2012 to examine the administration, governance and management of the charity by the trustees, including its financial management.
The Commission concluded that there had been gross financial mismanagement at the charity between 2009 and 2011 and there appeared to have been one or more occasions of fraud that took place. The trustees acted responsibly by reporting the concerns to the police. When they were made aware of it, the trustees took professional advice, and took steps to prevent potential further loss of funds by carrying out an independent audit and seeking help from the council who assisted them in improving and strengthening their financial control systems.
The Commission ensured the trustees considered the possibility of recovering the misappropriated funds. The trustees sought legal advice but were informed that it would not be feasible to seek recovery as the person involved now lives abroad. The police investigated the matter but informed the Commission that they would be unable to take further action at this stage. The Commission ensured the necessary actions were taken and continued to monitor the charity, liaising with the charity’s major funder Tower Hamlets Council who have provided ongoing governance support to the charity.
Michelle Russell, Director of Investigations, Monitoring and Enforcement at the Charity Commission, said:
“This report highlights what can happen in a charity where there are poor financial controls. In this instance, the charity was able to continue operating and the trustees have worked with the Commission and the main funder of the charity to learn from the experience and implement a number of recommendations to strengthen its financial controls and governance.
“This case is a reminder to charities about the importance of good financial controls and procedures and of trustees ensuring they receive and scrutinise financial reports and updates at trustee meetings. Our publication CC8 Internal financial controls for charities provides guidance and help for trustees on this. There is also an easy checklist for trustees to use to evaluate their charity’s performance.
“Charity trustees have a duty to manage the charity’s resources responsibly. Trustees have a responsibility to recover charity funds that have been misappropriated, which is particularly important where significant sums of money are involved. However, in discharging this duty, they should consider whether there is a reasonable prospect of success in pursuing an action through the courts, to justify the further spend of charity money to do so. It will not always be cost effective to pursue a loss, and so trustees should take legal advice before deciding to embark on litigation.”
Further help for trustees on restitution and recovery of charitable funds misappropriated or lost to charity in breach of trust, is in our restitution policy on our website.
The full report is available on GOV.UK.
Notes to Editors
The Charity Commission is the independent regulator of charities in England and Wales. To find out more about our work, see our Annual Report.
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Details of how the Commission reports on its regulatory work can be found on GOV.UK.