Decision

Charity Inquiry: Foundation for Relief and Reconciliation in the Middle East

Published 17 January 2020

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

The Charity

Foundation for Relief and Reconciliation in the Middle East (‘the charity’) was registered with the Charity Commission (‘the commission’) on 19 January 2010 and is governed by a Memorandum and Articles of Association dated 20 May 2008 as amended on 27 May 2010.

The charity’s objects are:

• to promote national and international conflict resolution and reconciliation for the public benefit with a view to relieving suffering, poverty and distress and building and maintaining social cohesion and trust
• the advancement of the Christian religion through worship, preaching and teaching of Christian doctrine and principles and the encouragement of missionary activities in the United Kingdom and overseas
• the advancement of education on the basis of Christian principles and teachings
• to provide relief to the poor and needy, the sick and aged

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

Issues under Investigation

The commission held a meeting with the charity on 3 May 2016 following the submission of a serious incident report (‘the first report’) to the commission on 15 February 2016.

The first report set out that one of the charity’s then trustees, who was also an employee (‘Trustee A’), had gone against the trustees’ clear instructions and associated themselves with the founder of a foreign organisation (‘the foreign organisation’), that’s aim was to rescue women and children kidnapped by the Islamic State (‘IS’) a proscribed terrorist organisation under the Terrorism Act 2000 (‘TACT’).

The report made specific reference to the then trustees’ knowledge of sections 15 to 17 of TACT which relate to terrorist financing offences.

Both in the first report, and at the meeting of 3 May 2016, Trustee A stated that they were aware of the specific fundraising offences as set out in TACT and gave assurances to the commission that neither the charity, nor any individual associated with the charity, was involved in securing the release of hostages by means of financial transactions or through any other form of negotiation.

On 9 June 2016, the commission received a telephone call from the charity’s legal adviser who made a further serious incident report (‘the second report’), on behalf of the trustees, stating that within the past two days it was suspected that Trustee A had in a personal capacity transferred funds to IS to secure the release of two young female hostages who were at risk of death or becoming sex slaves (this was later not substantiated as set out below).

This was formalised in a written report on 13 June 2016.

The funds used in the alleged attempt to secure the hostages, totalling $17,500, were raised by Trustee A from two institutions in the USA after requesting donations be paid directly to them at a fundraising event for the benefit of the charity’s sister organisation FRRME US. As an employee of the charity, and under terms agreed with the trustees, all offerings and donations raised by Trustee A in the course of their employment were required to be paid to the charity, or when fundraising in the US, FRRME US. There was no suggestion that the charity’s funds had been used to make the alleged payment.

The commission had serious regulatory concerns in respect of Trustee A’s role and conduct within the charity, and considered that there was evidence to suggest that they used their position within the charity to solicit donations to fund the payment, in a personal capacity, of the release of hostages from IS, a proscribed terrorist organisation. The commission reported this information to the Metropolitan Police Service (‘MPS’). The then trustees also separately reported this matter to the MPS.

On 9 June 2016, the commission opened a statutory inquiry into the charity.

The scope of the inquiry was to examine a number of issues including:

• the administration, governance and management of the charity by the trustees
• the conduct of the trustees
• the financial controls and management of the charity
• whether or not the trustees have and continue to comply with and fulfilled their duties and responsibilities as trustees under charity law

Soon after the opening of the inquiry the commission used its power under section 76(3)(a) of the Act to suspend Trustee A as a trustee of the charity on 1 July 2016. Further information is provided under ‘regulatory action taken’.

Separately, the trustees of the charity suspended Trustee A as an employee of the charity on 17 June 2016.

The inquiry was closed with the publication of this report.

Police Investigation

In June 2016 the MPS commenced an investigation into allegations of terrorist financing offences under TACT. The commission was unable to progress the inquiry during the course of the MPS investigation so as not to prejudice any criminal charges.

During the course of the MPS investigation Trustee A was interviewed on a voluntary basis. No other persons were interviewed as suspects during the course of the investigation.

Trustee A was interviewed under caution but later informed that no further action would be taken against them. However, the MPS confirmed to the commission that if more intelligence or evidence comes to light then this investigation will be re-opened after a review.

The commission acknowledges the trustees’ concerns regarding the length of time the inquiry has been open which was in large part due to the criminal investigation by the MPS. The commission also recognises the trustees’ concerns about the reputational impact that the inquiry may have had on the charity.

Findings

Allegations of terrorist financing

Trustees must be vigilant to ensure that a charity’s premises, assets, staff, volunteers and other resources cannot be used for activities that may, or appear to, support terrorist activities. Trustees must not engage in conduct or activities which would lead a reasonable member of the public to conclude that the charity or its trustees are associated with a proscribed organisation or terrorism generally.

The Commission has not identified any evidence of charitable funds being used to secure the release of hostages held by IS. Despite this, the inquiry identified a number of documents written by Trustee A that the Commission considers indicate Trustee A’s intent to pay funds – either directly or indirectly – to IS. These include:

• in an email sent to the then trustees dated 6 June 2016, Trustee A stated that “all of these donations were used specifically for the issue of buying back the women who had been taken as sex slaves by ISIS. This money we were specifically told it could not go through the [charity] and we did not want to do it via [the foreign organisation]…”
• in a further email from Trustee A to the then trustees, dated 7 June 2016, they state “as you know the problem with the money situation was that this is for buying back the “sex slaves” which we can not legally do through the [Charity]. Would it be acceptable if I got the money passed through you and you then forwarded it to me…”
• in an undated letter from Trustee A to the charity’s then trustees, Trustee A states “…I did not want to take money from [the foreign organisation] so I gave the money to [Person 1] myself from the money I had been given in the US. I have been told specifically that no money given to deal with the sex slaves could go through the [charity], so I dealt with the issue myself.”
• an email sent by Trustee A sent to at least one, and possibly more, recipients dated 26 June 2016. The email, which is titled “WHY BUY SEX SLAVES BACK” acknowledges that under “British law it is not acceptable for any registered British [charity] to be involved in buying back slaves.” Specific reference is made, in the email, to IS. Trustee A explains that any support must be given directly and provides personal bank details. Having reviewed the evidence the Commission considers that:
• on the balance of probabilities it appeared that Trustee A intended to secure the release of individuals captured by IS
• despite Trustee A’s intent, it has not seen any evidence that this occurred, or that if it did, it was financed with charitable funds
• as a result of Trustee A’s conduct, the charity’s work and reputation was put at risk during the subsequent investigations that took place

Management of Trustee A

Trustees are collectively responsible for their charity and ultimately accountable for everything done by the charity and those representing the charity. Trustees must actively understand the risks to their charity and make sure those risks are properly managed; the higher the risk, the greater the expectation and the more oversight is needed. In a large and complex charity it is normal for the executive to have significant decision making authority – but the trustees must still be willing and able to hold the executive to account.

The inquiry identified that while the trustees at the time generally had sufficient oversight of the charity’s activities and staff, with appropriate record keeping in place, this was not the case for the work of Trustee A as an employee, where policies were not followed. The trustees did not have effective control of Trustee A’s actions until Trustee A was suspended as an employee on 17 June 2016 by the trustees at the time, and then resigned from the charity on 28 October 2016. Over time the trustees put in place a number of measures to manage Trustee A including: making trustee A an employee and trustee having initially been President, assigning staff to travel with Trustee A, instructing venues attended by Trustee A that funds raised at events should be paid to the charity, reminding Trustee A of the correct procedures, requiring new projects and recruitment to be approved by the trustees and directly telling Trustee A to cease contact with the foreign organisation.

However, these additional controls were often implemented in response to Trustee A’s failure to comply with an existing control, without addressing the cumulative, repeated, behaviour of Trustee A directly. This lack of effective control created the opportunity for Trustee A’s conduct which resulted in the allegations of terrorist financing involving the charity, set out above, to occur and represents a collective failure by the trustees at the time.

There was insufficient control by the trustees at the time regarding Trustee A’s use of the charity’s finances for a number of years (as set out in further detail below). In addition the inquiry has identified a number of instances where Trustee A acted without the required authorisation from the then trustees, for example when attempting to hire staff or initiate projects in 2015/2016. While the trustees at the time took steps to review these decisions and remind Trustee A of the proper processes, the number of times such instances occurred indicates that Trustee A’s actions, in their capacity as an employee of the charity, was not being effectively overseen by the trustees at the time. The inquiry has also identified further poor practice in the management of Trustee A, including failing to have a job description or signed contract in place with Trustee A. Taken as a whole this is misconduct and/or mismanagement in the administration of the charity by the trustees.

In 2009/2010 the commission conducted an inquiry into the now removed charity the Naaman Trust (charity 277409) (‘the trust’). The trust effectively became the charity when it incorporated, taking on its assets and liabilities and its charitable work between 2010 and trust’s winding up in 2012. The two charities had a majority of trustees in common at the time of the charity’s creation, and Trustee A was heavily involved in both charities. The conclusions of the trust inquiry were not made public at the time due to concerns that detailing the trust’s operations would have had an adverse impact on the safety of its staff in the Middle East. The findings of that inquiry include similar issues to those that led to the opening of the current inquiry into the charity, namely in broad terms:

• weaknesses in the trust’s financial controls
• poor governance practices, including regarding the management of Trustee A

This inquiry was followed up with a monitoring case to the trust in 2011/2012. This case identified that improvements had been made, particularly with the trust’s financial controls, but that the advice and guidance given during the trust inquiry had not been fully implemented, particularly with regarding to managing Trustee A. The inquiry therefore considers that the mismanagement of Trustee A by the trustees of the charity is compounded by the fact that the trustees who were trustees of both charities had advice and guidance from the commission on this subject over a number of years, and had ample opportunity to address this weakness as identified in the inquiry into the trust.

While the inquiry notes that the charity’s policies and procedures have improved in the intervening time, the underlying issue of the management of Trustee A, including in relation to Trustee A’s association with the charity’s finances and governance, were not fully resolved and were repeated in the events leading to the opening of this inquiry.

The Charity’s financial controls

Trustees have a legal duty to ensure that their charity’s funds are applied solely and reasonably in furtherance of its objects. In order to show that they are complying with their legal duties, trustees must keep records to form an adequate audit trail showing that their charity’s money has been properly spent on furthering its purposes for the public benefit. Trustees should not only ensure that financial controls 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.

The inquiry identified that the quality of the charity’s accounting records and of the internal financial controls has improved between the inquiry into the trust and the current inquiry, and have been further strengthened during the course of the inquiry. However, the inquiry established that the financial controls were not consistently applied robustly, in particular with regard to Trustee A. Financial controls are obsolete if they are not adhered to. The inquiry considered that this point was particularly serious given that both financial controls and the role of Trustee A were addressed in the commission’s inquiry into the trust as detailed above. While the Commission acknowledges that the circumstances in the regions where Trustee A operated were difficult, Trustee A repeatedly failed to abide by the financial controls put in place by the trustees which is misconduct and/or mismanagement on the part of Trustee A. The Inquiry also finds that there has been misconduct and/or mismanagement on the part of the charity’s trustees at the time for failing to ensure that Trustee A complied with the charity’s financial controls, and that this failure contributed to or otherwise facilitated Trustee A’s misconduct and/or mismanagement.

Evidence of this included:

• Trustee A, and sometimes Trustee A’s assistant, used a charity credit card in Trustee A’s name for charity work, but statements obtained by the inquiry identify frequent personal expenditure by Trustee A on this credit card. The trustees recovered this personal expenditure on a monthly basis when it was identified, but failed to address the repeated pattern of behaviour, which was in breach of the charity’s financial practices, until close to the time Trustee A resigned from the charity on 28 October 2016
• the inquiry’s review of Trustee A’s charity credit card use for the period January to October 2016 identified that only 5% (£1,942) of the total charitable expenditure (£38,521) could be supported by evidence. This is unacceptable and is in marked contrast to the use of charity credit cards by other staff of which 100% of transactions (totalling £12,083) were supported by evidence and charity bank payments of which 95% of the payments tested by the Commission were evidenced between 2016 and 2018 (£419,025 of a total £442,911)
• the purchase of a car by Trustee A in Israel for $70,000 in April 2015, which was registered to the charity’s Israeli consultant rather than to the charity. Trustee A advised that this arrangement was authorised by the trustees at the time. The Commission has not been able to evidence this claim - while trustee decision documents do show that the trustees at the time authorised the purchase of a car for up to $70,000, it was not authorised to be registered to the Israeli consultant. Although Trustee A was able to use the car in Israel for some time, the trustees were unable to recover the car for the charity and the asset was eventually written off in 2018
• the inquiry reviewed internal charity correspondence which presented an inconsistent reporting method for Trustee A’s overseas expenditure, with UK based staff repeatedly seeking documentary evidence such as invoices or receipts to evidence the expenditure of funds requested by, and sent to, Trustee A for the charity’s overseas work, rather than the charity’s financial controls being followed from the start. When responses were provided by Trustee A they were often of an insufficient standard to effectively evidence the end use of the funds
• Trustee A repeatedly attempting to commit to payments or liabilities (such as staff hiring) without seeking authorisation from the trustees at the time
• as set out in the Issues under Investigation section above, Trustee A requested donations totalling $17,500 from two institutions in the USA be paid directly to them at a charity fundraising event, rather than to the charity or FRRME US. The trustees had to take steps to seek the repayment of the misappropriated funds, and these were recovered in due course

While the personal expenditure was repaid to the charity by Trustee A, Trustee A repeatedly failed to adhere to the charity’s financial controls. This led to the failure to account for a minimum of £36,579 of charitable funds expended by Trustee A which was not supported by financial records, and the loss of an asset purchased for $70,000 (although the charity did receive benefit from this asset). There is no evidence that the repeated misuse in this manner was properly addressed with Trustee A by the trustees during their trusteeship. This is misconduct and/or mismanagement by Trustee A, and mismanagement by the charity’s trustees at the time.

During the inquiry the trustees have advised the commission that Trustee A’s inappropriate financial conduct was not known about until just before their resignation in 2016 and therefore it was not possible for the trustees at the time to address it effectively. However, trustee meeting minutes from 2013 and witness statements provided to the MPS by charity staff during the criminal investigation both indicate concerns about Trustee A’s financial conduct from at least 2013/2014. In addition the commission’s inquiry and subsequent monitoring case regarding the trust highlighted the financial control weaknesses. The Inquiry does not therefore accept the trustees’ account on this point. It is not clear why more robust action was not taken to address Trustee A’s behaviour in this period and is a collective failing by the then trustees.

The charity previously used cash couriering as a method to transfer funds to the Middle East but ceased this practice in 2017. The charity now transfers funds overseas through the formal banking system. The commission’s guidance makes clear that payments in cash should be kept to a minimum due to the greater risk that handling cash presents and difficulties that can arise in establishing correctness and control over significant cash transactions. Where payments are made in cash they should only be for small amounts, supporting documentation for the cash payment should be authorised by someone other than the person making the payment, and cash withdrawals should be reviewed for authorisation and correctness by someone other than the person who withdrew the cash.

Of the seven international trips taken on behalf of the charity in 2016, the inquiry found that evidence existed to show how 67 percent of the expenditure (£194,000 of £290,000) was expended, and within this there was no evidence to support the donations made by the charity to various churches in Jordan and Iraq to support beneficiaries.

Generally the trustees approved payments the charity sent overseas, and the cash withdrawn to be taken overseas, with records showing that the charity received reconciliations showing how the money had been spent, which trips had taken place and reconciliations detailing payments made on the trips. However, there was a lack of primary evidence regarding cash expenditure, with for example notes to the effect that a certain amount of cash was given to a particular needy family in Iraq, without any supporting documentation (such as receipts) or an associated needs assessment explaining why a certain individual or family had been selected as a beneficiary.

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 the Commission’s website.

There is also a self-check-list for trustees which has been produced to enable trustees to evaluate their charity’s performance against the legal requirements and good practice recommendations set out in the guidance.

In this case the trustees of the charity were aware of the guidance, and used the checklist to implement improved financial controls, but failed to ensure Trustee A complied with them.

Trustee Conduct

The trustees of the charity, including Trustee A, complied with the Orders and Directions issued by the commission during the inquiry to obtain information.

When the then trustees of the charity became aware of the allegations regarding Trustee A set out above, they took prompt action including reporting the matter to the MPS and the commission and the suspension of Trustee A’s employment on full pay on 17 June 2016, before they later decided to resign on 28 October 2016.

One of the conditions of Trustee A’s suspension as an employee was to not discuss it publicly. However on 23 June 2016 Trustee A made statements on their personal Facebook page which advised the public of their suspension and solicited funds for their own personal expenses. This was despite Trustee A continuing to receive full pay from the charity.

Based on the information reviewed, the inquiry notes that some of Trustee A’s conduct and behaviour could have been related to their ill health. Such health matters may have made it harder for the trustees at the time to anticipate and manage Trustee A’s conduct. However, the inquiry does not consider that this point negates the inquiry’s findings in relation to either Trustee A, or the then trustees as a whole, set out elsewhere in this report.

As evidenced by the findings above, Trustee A’s conduct amounts to misconduct and/or mismanagement in the administration of the charity. Trustee A’s conduct regarding the allegations of terrorist financing and regarding their adherence to the financial controls of the charity fell well below that expected and required of a trustee. These failing were compounded by the fact that Trustee A was also the senior employee of the charity, thereby receiving significant charitable funds for their work.

During the inquiry the trustees have advised the commission of a number of positive improvements to their management of the charity including:

• the appointment of three new skilled trustees (including a new chair) with others being recruited
• the use of board sub-committees to allow closer oversight
• a shift in the charity’s strategy from supporting trustee A and their work, to supporting those in need directly, based on evidence, including new initiatives and new fundraising
• risk management processes updated
• improved financial controls including evidence by invoices and receipts
• updates to policies and new policies including safeguarding and whistleblowing
• all staff have job descriptions and contracts and annual performance management
• needs assessments completed for beneficiaries, with all partner organisations having an agreement or contract with reporting requirements
• the appointment of an experienced charity sector CEO

Conclusions

The commission concluded that Trustee A’s actions constituted serious misconduct and/or mismanagement. Trustee A’s actions have likely caused significant damage to the charity’s income and reputation.

Additionally, the charity was mismanaged by the trustees at the time, specifically that there were failings to effectively manage and oversee the charity and in particular Trustee A. This was despite advice and guidance being provided by the commission over a number of years to those trustees who were trustees of both charities at the relevant times. The inquiry considers this contributed to or facilitated the misconduct and/or mismanagement by Trustee A.

However, the commission recognises that the previous and current trustees have taken a number of steps to address the failures in the charity’s governance and financial controls, both before and during the inquiry, which puts the charity in a much stronger position going forward.

The commission acknowledges that the trustees co-operated with the inquiry throughout, as they are expected to. They responded responsibly to the commission’s regulatory concerns and its criticism of them.

Regulatory Action Taken

Various orders and directions were issued to obtain information in the form of copy documents and answers to questions under sections 47 and 52 of the act.

During the inquiry, information was exchanged with the police and law enforcement agencies under section 54 to 56 of the act.

On 1 July 2016, the commission made an Order under section 76(3)(a) of the act suspending Trustee A from acting as a charity trustee, pending the commission’s consideration of the removal of Trustee A as a trustee. Trustee A resigned from their position as a trustee of the charity on 28 October 2016; consequently, the commission was not able to further consider removing them by subsequent Order.

The Charities (Protection and Social Investment) Act 2016 amended the Charities Act 2011 so that the Commission can proceed with its consideration of removing trustees, after issuing notice of intention to remove, who have already resigned from their office under s79(4) of the Charities Act 2011.

Issues for the Wider Sector

The purpose of this section is to highlight the broader issues arising from the commission’s assessment of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the charity in addition to the findings and conclusions set out in the earlier sections of this report, but is included because of their wider applicability and interest to the charity sector.

Trustees are custodians of their charities. They are publicly accountable, and have a responsibility and duty of care to their charity which will include taking the necessary steps to safeguard their charity and its beneficiaries from harm of all kinds, including from terrorist abuse.

Trustees must therefore not engage in, or otherwise allow, conduct or activities which would lead a reasonable member of the public to conclude or infer that the charity or its trustees are associated with or otherwise support a proscribed organisation or terrorism generally. This includes allowing a charity’s premises to be used to facilitate or commit terrorist or other criminal offences.

Links between a charity and terrorist activity corrode public confidence in the integrity of charity. Links include, but are not limited to, fundraising, financial support or provision of facilities and formal or informal links to proscribed organisations or support of them.

Trustees must ensure that their charity has adequate financial controls in place, It is important that the financial activities of charities are properly recorded, and their financial governance is transparent. Charities are accountable to their donors, beneficiaries and the public. Donors to charity are entitled to have confidence that their money is going to legitimate causes and reaches the places that it is intended to, this is key to ensuring public trust and confidence in charities.

Trustees are jointly and equally responsible for the management of their charity. To be effective and to meet their statutory duties as charity trustees they must contribute to the management of the charity and ensure that it is managed in accordance with its governing document and general law. All charities should have appropriately tailored internal policy documents which address the specific risks associated with the kind of activities that are undertaken.

Trustees should ensure that these policies are implemented and reviewed at appropriate junctures. A failure to implement internal policy documents could be evidence of mismanagement in the administration of the charity and can put assets, beneficiaries and a charity’s reputation at risk.