Decision

Charity Inquiry: Avicenna Global

Published 8 November 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This decision was withdrawn on 10 November 2023

This report has been archived in line with our policy as it is over 2 years old.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

Avicenna Global (‘the charity’) was registered as a charity on 25 June 2013. It was governed by a CIO Foundation Constitution dated 16 July 2013. There were four trustees when the charity was registered (Trustees A, B, C and D).

The charity’s objects were:

• the advancement of education for the public benefit in the UK and in other parts of the world by providing and assisting in the provision of facilities for education and by such other means as trustees may determine, with a particular focus on the works of herbalist, scholar and philosopher, Avicenna
• the relief of poverty in the UK and in other parts of the world by such means as the trustees may determine

The charity’s stated activities were:

To provide independent education for primary and secondary school children. To facilitate fundraising for the school. To support members of the community with social, spiritual and psychological support. To fund students who cannot financially support their own studies. To fund raise for projects that maybe undertaken abroad.

The Charity Commission gave public notice of intention to remove the charity on 5 May 2021. The charity was removed by the Commission from the Register on 3 September 2021 having not received any objections.

Background and Issues under Investigation

The Commission opened a Regulatory Compliance case into the charity on 27 September 2017 after concerns were raised about the charity. During that case the Commission conducted a books and records inspection and analysed the charity’s bank statements. The Commission identified regulatory concerns about the management of the charity and in particular its links to Avicenna Academy School (‘the school’), unauthorised trustee benefits and misappropriation of charitable funds.

On 3 June 2019 a decision was made to open a statutory inquiry into the charity under section 46 of the Charities Act 2011 (‘the Act’) (‘the inquiry’).

The scope of the inquiry was set to examine the following regulatory issues:

• to determine whether the school was ever owned and operated by the charity
• if the school was but is no longer part of the charity, to determine whether the decision to transfer the school to a third party was made lawfully, in accordance with the charity’s governing document and in the best interests of the charity
• to establish whether there has been any unauthorised trustee benefit
• to establish whether the trustees have exercised their duties as trustees in the governance of the Charity, and in particular their duty to account for the charity’s funds and the management of conflicts of interest

When the inquiry was opened on 3 June 2019 the charity had four trustees named on the Register (Trustees A, E, F and G). Trustees B, C and D had resigned from their positions before the inquiry was opened.

The inquiry closed with the publication of this report.

Findings

Whether the Avicenna Academy School was ever owned and operated by the Charity

The inquiry found that the school was operated and owned by the charity when the school was opened in September 2013.

The trustees informed the inquiry that the school was transferred from the charity to a private partnership which was formed in November 2015 by two of the trustees at that time (Trustee A and Trustee B).

The trustees confirmed to the inquiry that they had not satisfactorily separated the finances of the private partnership, the school and the charity until September 2017. Bank statements reviewed by the inquiry showed payments made for school fees continued to be deposited into the charity account’s bank accounts after the transfer had taken place in November 2015.

The school’s proprietorship was further transferred from the private partnership to Trustee A in September 2017 and a new bank account was opened in September 2017 for the school’s operation. Ofsted records for the school showed the transfer of the school’s proprietorship to Trustee A in November 2018. There was no record by Ofsted of the transfer of the school from the charity to the private partnership in November 2015.

The inquiry found that following the transfer to the private partnership in 2015 the charity’s bank accounts continued to be used in the operation of the school. This has now stopped as the charity has not operated since 2019.

Was the decision to transfer the school made in accordance with the charity’s governing document and in the best interests of the charity?

The inquiry met with the trustees and former trustees who had been in office at the time of the transfer of the school from the charity to the private partnership. They were unable to provide documents in the form of meeting minutes or financial documents to evidence the decision making from the period in late November 2015.

The inquiry found the trustees could not demonstrate that the transfer of the school to the partnership had been made lawfully or in the best interests of the charity.

The inquiry conducted a financial assessment to consider whether the charity had suffered a financial loss from the transfer of the school to the partnership. This assessment confirmed that the school was not operating at a profit at the time of the transfer and pupil fees appeared to only just cover the running costs of the school. Consequently, the inquiry found that the decision to transfer the school did not result in a financial loss for the charity.

The transfer of the school was not made in accordance with the charity’s governing document which does not allow for the transfer of income or property of the charity to any of its members by way of profit.

The inquiry noted that any continuation of support for the school after the transfer to the partnership would have been in furtherance of the charity’s objects.

Unauthorised trustee benefit

The inquiry found that when the school was under the control and ownership of the charity, Trustee A and B had (since the school opened) employed their family members. These payments were in breach of the governing document and were unauthorised trustee benefit.

None of the other trustees had employed any family members before the transfer of the school to the private partnership in 2015.

The inquiry found that Trustees A, B and C received regular ‘wage’ payments in 2014 and 2015 from a bank account opened in 2013 by the trustees for a ‘project’ of the charity. The trustees confirmed to the inquiry that when the charity was registered, they were aware that the trustees could not be paid by the charity. The trustees stated that this ‘project’ account was not used by the charity from 2014, but for private business purposes. However, the trustees were unable to provide any records to demonstrate the decision to change the purpose of this account, or that during this period charity funds and funds for non-charitable private projects were kept distinct.

Trustee A informed the inquiry that the trustee board realised around the summer of 2015 that salary payments related parties was not permitted under the charity’s governing document. They further explained that trustees needed to be paid as they had left fulltime employment to support the teaching activities of the school. The decision to transfer ownership of the school to the partnership which had been created by the two trustees was to allow payment to trustees of the charity for services provided to the school.

The inquiry conducted an assessment of the unauthorised benefits received by the trustees and related parties during the period the charity had operated the school between September 2013 and November 2015. This exercise found the services that had been supplied to the charity to support the school by these parties including the trustees were at sums well below the market rate.

The inquiry considered restitution of the unauthorised benefits but decided it was not proportionate for the Commission to recover funds on behalf of the charity because the likelihood of successful recovery was low.

Whether the trustees exercised their duties as trustees in the governance of the charity, and in particular their duty to account for the charity’s funds and the management of conflicts of interest.

The inquiry found the trustees had not fully understood the charity’s governing document or their responsibilities in meeting their obligations as a trustee of a charity.

The trustees also failed to show how they were making decisions in the best interests of the charity.

The trustees were unable to provide the inquiry with documents that provided a record or details of the decisions made with regards the management of the charity including decisions to employ family members and transfer the school to the partnership.

The trustees failed to adequately separate the finances of the private partnership, the school and the charity between 2013 (when the charity was registered) until September 2017.

The payment of trustees and related parties by the charity in relation to salaries were made in breach of the charity’s governing document and were unauthorised trustee benefit. There was no evidence provided that conflicts of interest were identified, managed or recorded by the trustees.

Payments to the school post the transfer of the school’s proprietorship would have been in furtherance of objectives, but the inquiry found these involved conflicts of interest which were not identified or managed by the trustees.

Conclusions

The Commission concluded that the school was transferred to a private partnership created by two trustees in November 2015 following a realisation by the then trustees that they were acting in breach of trust by making payments to their family members for their work at the school. Even though payments to the trustees and family members were below market rate, they were an unauthorised trustee benefit.

There was no evidence to show that conflicts of interest were identified, managed or recorded at the time of the transfer. The Commission further concluded that after the transfer of the school to the private partnership the trustees failed to ensure the activities, or the finances of the charity were sufficiently separated from the school.

Despite the above failings the Commission concluded that although the trustees could not demonstrate that the transfer of the school to the partnership had been made lawfully or in the best interests of the charity, it did not appear to have suffered a financial loss from the transfer.

The charity stopped operating in 2019 and the trustees commenced the process of winding up the CIO in March 2020. Due to ongoing liabilities, the trustees were unable to finalise the winding up of the charity and so withdrew their notice of intention to wind up the charity in August 2020. The Commission issued a section 84 order to the trustees on 18 December 2020 to order them to implement their decision to wind up the charity upon conclusion of any outstanding liabilities. The trustees complied with the order and public notice was again given of the intended dissolution of the CIO on 5 May 2021. No representations were received in the three-month notice period to 5 August 2021. The Charity was removed from the Register on 3 September 2021.

Regulatory Action Taken

On 14 June 2019, the Commission issued an Order under Section 84 of the Act to direct the trustees to submit the charity’s annual reports and accounts for the financial years ending 2017 and 2018. The trustees complied with this Order; all outstanding reports were submitted by 18 July 2019.

The Commission issued a number of Directions under Section 47 of the Act to obtain information from the trustees, former trustees and banks.

Issues for the wider sector

Every charity needs an effective trustee body which has control over the administration of the charity and acts as a whole, especially because all trustees are equal in responsibility.

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.

Trustees have a legal duty to act only in the best interests of their charity. If there is a decision to be made where a trustee has a personal or other interest, this is a conflict of interest and you will not be able to comply with your duty unless you follow certain steps.

Trustees must prevent any conflict of interest from affecting the decision making.

Trustees must follow the 7 principles that the courts have developed for reviewing decisions made by trustees. The 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)