Decision

Charity Inquiry: Alauddin Siddiqui Trust

Published 20 October 2021

This decision was withdrawn on 10 November 2023

This report has been archived in line with our policy as it is over 2 years old.

Applies to England and Wales

The charity

Alauddin Siddiqui Trust (‘the charity’) was registered on 10 November 2014. It is governed by a trust deed dated 6 October 2014 as amended on 30 November 2017.

The charity’s previous name was Mohi ul Islam Educational and Welfare Centre, and it has a working name of Jamia Mohi ul Islam Siddiquia. There was also a charitable company of the same name as the charity, company number 10806717 (‘the limited company’).

The charity’s entry can be found on the register of charities.

Issues under Investigation

On 4 June 2019 the Commission opened a compliance case. As a part of the compliance case, the Commission met with the trustees on 9 July 2019. During the compliance case the Commission identified a number of regulatory concerns:

• the charity was not being administered correctly by its trustees and that two separate entities (the charity and the limited company) had become merged to some extent
• an address associated with the Charity - 12 Copster Hill Road, Oldham, OL8 1QB (‘the property’) - appeared to be potentially an asset of the Charity but was not registered as such with the Land Registry, leading to concerns regarding the potential loss of charitable assets
• it appeared that the charity had ‘split’ with the trustees apparently divesting the charity of its activity of providing a place of worship, leading to a bank account that was previously an asset of the charity ceasing to be under the control of the trustees
• humanitarian work being undertaken by the charity may not have been expressly permitted within the scope of the objects of the charity
• the trustees of the charity lacked the skills, knowledge and experience required to ensure that there was sound governance, management and administration under their stewardship

Due to the serious regulatory concerned outlined above, on 31 October 2019 the Commission opened a statutory inquiry (‘the Inquiry’) into the charity under section 46 of the Charities Act 2011 (‘the Act’).

The inquiry closed with the publication of this report.

Scope of the Inquiry

The Inquiry was established to examine the following regulatory issues:

• the governance arrangements within the charity
• whether there had been any loss of charitable assets
• whether there was any ongoing risk to the charity’s assets
• whether there had been misconduct and/or mismanagement within the administration of the charity by its trustees
• whether the charity could be placed on a firmer footing for the future

Findings

The governance arrangements within the charity

The Inquiry found that alongside the charity there was the limited company of the same name, however those two entities had become merged to some extent and were being treated as if they were one because the charity’s then trustees thought this was how they could incorporate an unincorporated charity. During a meeting between the Inquiry and the trustees of 17 February 2020 to explore the concerns present, it was made clear by the trustees that they intended to dissolve the limited company and to secure its funds and assets within the charity’s bank accounts.

In correspondence of 21 May 2021, the charity’s legal representative explained that the limited company was in the process of being dissolved with Companies House, and a total of £508,399.00 was subsequently transferred to the charity’s bank account. The limited company was subsequently dissolved on 3 August 2021. This matter, with the recovery of the funds, has been brought to a satisfactory conclusion.

The charity has the objects to “advance the Islamic religion for the benefit of the public in accordance with the laws dictated in the Quran, the Sunnah of the Holy Prophet Mohammed”. Charity trustees must manage the charity’s resources responsibly and must make sure that the charity’s assets are only used to support or carry out its purposes.

The charity has advanced activities to include international humanitarian relief. While the objects of the charity do not strictly prohibit this, they also do not make it clear that the charity operates in this manner which could ultimately mislead donors and members of the public.

The Inquiry found that in order to act in an open and transparent manner, the trustees should review the objects of the charity. On 17 September 2021 the Inquiry issued the trustees with regulatory guidance in the form of an Action Plan, under section 15(2) of the Act, which includes a requirement to formally consider this point.

Whether there had been any loss of charitable assets

The Inquiry assessed the information made available by the trustees regarding the property. This identified that the property was held in the name of the charity’s spiritual leader and founder. The charity had paid the mortgage payments for the property between 24 May 2010 and 30 December 2019 and was solely responsible for its maintenance, despite a part of the property being occupied on a residential basis by the founder and his family.

The Inquiry was concerned that charitable property was incorrectly registered and represented a loss of charitable assets. Upon raising this with the trustees, they sought professional legal advice before concluding that it was likely the charity had a beneficial interest in the property due to its mortgage contributions of c.£79,000 between 2008 and February 2020. The trustees concluded that it was in the best interests of the Charity to negotiate a settlement with the founder. If the negotiations failed, the trustees indicated to the Inquiry that they would consider taking legal proceedings to recover the amount due to the Charity.

Correspondence on behalf of the charity dated 21 May 2021 confirmed that a settlement had been agreed and signed with the founder. The agreement was that the ongoing mortgage would now be paid by the founder, with a below market rental fee agreed for the charity to rent a section of the building. The settlement agreement included the requirement for the founder to pay the charity £44,220.80 which has now occurred. The Inquiry considers this a satisfactory resolution.

Whether there was any ongoing risk to the charity’s assets

During the meeting of 9 July 2019, the then trustees explained that the charity had split into two separate organisations. It was initially described by the then trustees that the charity was an International Aid organisation, and the place of worship a separate entity under the control of other people.

The Inquiry was concerned that there had been a loss of charitable assets with an unclear explanation of what had happened to the place of worship and how legally this had occurred.

The trustees provided further evidence about this matter in a letter to the Inquiry dated 2 January 2020 advising that the trustees had not explained the situation properly and that each element of the charity was in fact under supervision of the trustees, following the removal of a former trustee as a signatory on a charity bank account. Further to this, the Inquiry established that control of the bank account has been amended to ensure only the current trustees can act as signatories with no charitable funds misspent.

Whether there had been misconduct and/or mismanagement in the administration of the charity by the trustees

There was evidence of misconduct and/or mismanagement in the administration of the charity by the trustees at the time, particularly regarding the property, where the arrangement was only resolved to the charity’s benefit following the Inquiry’s intervention.

As set out above, the trustees have made a number of improvements to the governance and operations of the Charity to place it on a firmer footing for the future.

Conclusions

There was evidence of misconduct and/or mismanagement in the administration of the charity by the trustees at the time.

The trustees, following intervention from the Inquiry, have made and continue to make improvements to the charity’s governance. The trustees recovered a significant sum of money as a part of the negotiated property settlement. The trustees also resolved the confusion between the charity and the limited company, resulting in a more transparent governance structure.

Regulatory advice and guidance has been provided to the current trustees by the Inquiry to assist them in the discharge of their duties, and the Commission will monitor compliance over the coming months as part of its routine monitoring work.

Regulatory Action Taken

On 17 September 2021 the Inquiry issued the trustees with regulatory advice and guidance in the form of an Action Plan, under section 15(2) of the Act, to ensure the trustees comply with their legal duties and responsibilities to act in the best interests to the charity and to facilitate and encourage the better administration of the charity.

The Inquiry used its information gathering powers under section 47 of the Act on multiple occasions to obtain information and copy documents from various sources, including from the trustees.

Issues for the wider sector

Governance

Trustees are representatives of the charity they govern or the charitable funds they are responsible for, in the charity sector. Trustees must be aware of and act in accordance with their legal duties. The conduct of trustees can be a key driver of public trust and confidence in the charity sector. When the conduct of trustees falls below the standards expected there can be damage to the reputation of individual trustees, the charity and possibly the wider charity sector.

Principles of Trustee Decision Making

Charity trustees are responsible for governing their charity and making decisions about how it should be run. Making decisions is one of the most important parts of the trustees’ role. Trustees can be confident about decision making if they understand their role and responsibilities, know how to make decisions effectively, are ready to be accountable to people with an interest in their charity, and follow the 7 principles that the courts have developed for reviewing decisions made by trustees.

Trustees must:

• act within their powers
• act in good faith and only in the interests of the charity
• make sure they are sufficiently informed
• take account of all relevant factors
• ignore any irrelevant factors
• manage conflicts of interest
• make decisions that are within the range of decisions that a reasonable trustee body could make

It is important that charity trustees apply these 7 principles when making significant or strategic decisions, such as those affecting the charity’s beneficiaries, assets or future direction.

Further information can be found in the Commission’s guidance:

The essential trustee: what you need to know, what you need to do (CC3)

It’s your decision: charity trustees and decision making (CC27)

Conflicts of Interest Policy

Charity trustees should ensure that they have a conflicts of interest policy in place to ensure that they are fully aware of their responsibilities and that any conflicts that do arise are appropriately managed.

Where a charity trustee has a conflict of interest they should follow the basic checklist set out in the Commission publication Conflicts of interest: a guide for charity trustees (CC29) and where necessary or appropriate take professional advice.

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. Further information is available from Trustee expenses and payments (CC11).

Trustees who receive an unauthorised payment or benefit from their charity have a duty to account for (i.e. repay) it. The Commission cannot relieve trustees from this duty.