Decision

Charity Inquiry: Fadak Media Broadcasts

Published 13 March 2020

This decision was withdrawn on 16 March 2022

This Inquiry has been archived as it is over 2 years old.

The Charity

Fadak Media Broadcasts (‘the charity’) was registered with the Commission on 12 January 2016 and is an incorporated charity governed by a memorandum and articles of association dated 2 June 2010 as amended on 2 December 2015. The charity was originally called Fadak TV (name changed on 7 November 2014).

The charity’s stated objectives are:

• to advance the Islamic religion and in particular the faith of the rejecters
• to advance the education of the public in the Islamic religion and in particular the faith of the rejecters
• to promote religious harmony by promoting knowledge and mutual understanding and respect of the benefits and practices of different religions

The charity describes its activities as including, the advancement of the Rafida sect, promoting the Rafida sect, and bringing its peaceful messages to millions of people. It achieves this primarily through broadcasting religious programmes.

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

Issues under Investigation

On 4 August 2017 the Commission received a Serious Incident Report (‘RSI’) from the trustees of the charity which reported a number of incidents, including unauthorised transfers from the charity’s bank and PayPal accounts. It was also alleged that a trustee’s signature may have been forged in order to transfer ownership of the charity’s trading subsidiary, SWT Films Ltd (formerly SAWT Alitra productions Ltd), to the former Chief Executive Officer (‘CEO’), who remained in charge of the day to day running of the charity.

The Commission obtained information from the charity’s bank using its information gathering powers under section 52 of the Charities Act 2011 (‘the Act’). This showed that the CEO had opened the bank account (originally in the name of Fadak TV) on 6 January 2014, and that they remained as sole signatory of the account until 18 May 2016, when they were removed and replaced by a trustee.

On 24 August 2017 the Commission opened a statutory inquiry into the charity under section 46 of the Act.

The inquiry closed with the publication of this report.

Scope of the Statutory Inquiry

The inquiry examined the following regulatory issues:

• whether the trustees exercised sufficient oversight and control of the charity’s assets and whether there was an ongoing risk to charitable assets
• whether the trustees had sufficient oversight of the charity’s former CEO
• whether the trustees were capable of discharging their legal duties and responsibilities in relation to the financial and general governance of the charity
• whether there had been any misappropriation of the charity’s assets and if so whether it was in the interest of the charity to pursue restitution

Findings

Governance

The inquiry found that according to the Commission and Companies House records, at the time of the opening of the inquiry, there were only two trustees’, and this had been the situation since September 2016. According to clause 26.7 of the charity’s governing document, the minimum number of trustees required to form a quorum was three. Therefore, as a result of the trustees’ governance failings’ quorate decisions could not be made at the time.

The inquiry found that at the time of the opening of the inquiry, records were insufficient and did not show and explain all the charity’s transactions. They also contained little evidence of the details of income or expenditure. The inquiry found the trustees were not meeting their legal obligation under charity law to maintain adequate records.

With regards to the original allegations raised by the trustees in the RSI, the inquiry noted that these had been investigated by the Police on two separate occasions and found to be unsubstantiated due to a lack of evidence available, therefore no further action was taken. The inquiry found that if adequate records had been kept and financial control policies were in place the trustees may have been better able to demonstrate whether the charity had suffered a loss.

Following the opening of the inquiry the charity appointed three new trustees and the inquiry is satisfied that due consideration has been given to the suitability of the trustees. The inquiry found the CEO is no longer involved in the administration of the charity.

The inquiry has concluded that, although the governance and management of the charity was not fit for purpose at the time of the opening of the inquiry, the current trustees have demonstrated they have acted upon the Commission’s regulatory advice and guidance to improve and strengthen the charity’s policies and governance.

Financial controls

The inquiry found that the trustees had failed to ensure that the charity’s bank account was under their control and this raised serious regulatory concerns that they had not had sufficient control of the finances of the charity. The Commission obtained information from the charity’s bank which showed that the CEO had opened the account, and that they remained as sole signatory of the account until 18 May 2016 when they were removed and replaced by a trustee. This bank account has since been closed and replaced by an account with a different bank, and two trustees as signatories.

Whilst there is no specific clause or reference in the governing document to the number of signatories required on the charity’s bank account, it is best practice for there to be at least two signatories for bank accounts. A key feature of internal financial controls is to ensure that no single individual has sole responsibility for any single transaction from authorisation to completion and review. The trustees have taken action to rectify this and the charity’s bank account now has two trustees as signatories.

The inquiry found the trustees used overseas representatives to collect cash donations on behalf of the charity, from anonymous donors, who travelled to the UK to hand over the cash. The trustees were unable to show they had considered and took appropriate steps to manage the risks associated with anonymous donations and cash couriering and failed to keep appropriate records. The inquiry found that the trustees placed the charity’s property at risk by not having an adequate overseas cash handling policy in place and exposing it to a risk of seizure and the potential loss of charity property.

SWT Films Ltd

SWT Films Ltd (‘SWT’) was set up as trading subsidiary of the charity by the CEO on 6 May 2016, to produce a cinematic film, ‘The Day of Torture’. There were only 2 shares which were owned by the charity, according to Companies House records. The charity provided the finances to SWT to produce the film which would promote its objects. The finances were raised via donations raised following an appeal in March 2016.

The inquiry obtained the bank account opening and signatory information from SWT’s bank which showed that the CEO had opened the account on 7 June 2016, and as with the charity’s bank account, that they remained the sole signatory of the account until it’s closure on 21 July 2017. The inquiry found the trustees had entrusted the management of SWT to the CEO and that it was evident there had later been a falling out between the CEO and the trustees of the charity.

The inquiry found it was clear that charitable funds were expended on the production of the film that was never finalised. It has been noted by the inquiry that film making is a high-risk venture and it is not uncommon for media projects such as this to fail. This was not an investment but an attempt to deliver the charity’s purposes and as such the decision to finance the film fell within the range of reasonable decisions that it was open to the trustees to make.

There was a dispute regarding the ownership of SWT between the charity and the CEO. On 20 May 2016 it appears SWT issued an additional 98 shares. The inquiry considered a copy of the share transfer agreement dated 14 June 2016, which purported to transfer the ownership of SWT to the CEO, prior to the unauthorised transfer of the charity’s funds to SWT. The veracity of the share transfer agreement was in dispute (raised in the RSI dated 4 August 2017 by the trustees) as it had been signed by a trustee, who was removed from the Commission’s records on 9 June 2016. This matter was investigated by the Police, but no further action was taken. The inquiry decided that it was not a proportionate use of resources to investigate the allegations concerning the alleged change in ownership of SWT as the company had been dissolved on 20 June 2017.

Conclusions

The inquiry concluded that there was evidence of misconduct and/or mismanagement in the administration of the charity due to the poor financial management and governance in the charity. In particular the trustees at the time the inquiry opened had not had adequate oversight and control of the charity, had failed to account for the charity’s finances or have adequate policies and procedures in place. The Commission concluded that these failings exposed the charity’s assets to unnecessary risk and meant it was not possible to determine whether the charity had suffered a loss.

The Commission acknowledges that the trustees co-operated with the inquiry throughout, as they are expected to. During a Books and Records visit on 12 December 2018, the inquiry provided regulatory advice and guidance in regard to certain areas of governance that the charity needed to improve upon. The trustees have responded and demonstrated a willingness to bring the charity onto a proper footing.

Regulatory Action Taken

On 13 October 2017, 20 July 2018 and 7 November 2018 the inquiry made directions under sections 47(2)(b) of the Act, to the charity’s and SWT’s banks to obtain bank statements.

On 27 June 2019 the inquiry made a direction under sections 47(2)(a) of the Act to the trustees for further information regarding to their appointments as trustees of the charity.

Issues for the wider sector

There should be a clear audit trail of where bank accounts are held, what they are held for and who has access to them. Proper financial controls are a necessary feature of any well-run organisation and trustees should not only ensure that they are put in place but also that sufficient information is reported back at trustee meetings to satisfy them that the controls are being property observed. Such systems help prevent financial crime and ensure the charity is reporting accurately to the public and help protect the charity’s reputation.

It is legitimate for trustees to delegate the day to day management of a charity to staff and others. However, charity trustees should always retain the ultimate responsibility for running the charity and should ensure that robust reporting procedures are in place to enable them to make reasonable decisions. Responsibility for ensuring they have sufficient information and are adequately informed in order to make decisions rests with the charity trustees.

The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. Internal Financial Controls for Charities (CC8) is available on GOV.UK.