Decision

Charity Inquiry: GTC

Published 2 June 2020

This decision was withdrawn on 10 June 2022

This Inquiry has been archived as it is over 2 years old.

The charity

GTC (“the charity”) was registered on 10 February 2015. It was a charitable incorporated organisation (“CIO”) governed by a CIO foundation constitution.

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

The charity was dissolved and removed from the register of charities on 9 April 2020, on the basis that it had ceased to operate.

Issues under investigation

On 12 December 2018 the Commission opened a statutory inquiry into the charity under section 46 of the Charities Act 2011 (the ‘Act’).

The inquiry closed with the publication of this report.

The inquiry was opened as there were serious regulatory concerns that there had been misconduct and/or mismanagement in the administration of the charity, concerns about governance, the charity’s activities and if it was applying its resources to further its charitable purposes. The inquiry examined:

• the extent to which the trustee had complied with the charity’s governing document in respect of the appointment of a full trustee body
• the charity’s accounting and reporting arrangements and the extent to which the trustee had complied with his duty to provide timely and accurate accounts to the Commission
• the extent to which potential conflicts of interest had been adequately managed
• whether the sole trustee was a fit and proper person to act as a charity trustee
• whether charity funds had been misapplied

Findings

It should be noted that Mr Raja as an individual whose conduct is the subject of our investigatory findings and the trustees appointed to wind up the charity were given the opportunity to comment on the facts and findings in this report. The Commission has fully considered representations made by Mr Raja and one former trustee when making its final decision and it is noted that some of the findings and conclusions reflected in this report are not accepted by some of the parties.

The extent to which the trustee had complied with the charity’s governing document in respect of the appointment of a full trustee body

The inquiry found that Clause 9(3) of the charity’s governing document required that “there must be at least three charity trustees.” During the years leading up to the opening of the inquiry and for much of the period during the inquiry, the charity had just one trustee, Mr Ahtiq Raja (‘Mr Raja’). The inquiry found that Mr Raja, as sole trustee, had failed to comply with the charity’s governing document in respect of the minimum number of trustees required. Mr Raja was also unable to show that quorate decisions, in the best interests of the charity were made. This amounts to misconduct and/or mismanagement.

The charity’s accounting and reporting arrangements and the extent to which the trustee had complied with his duty to provide timely and accurate accounts to the Commission

The inquiry found that the accounts for the financial years ending 31 March 2016 and 31 March 2017 were submitted on time, however they lacked clarity and were incomplete. The annual accounts for 31 March 2016 were not compliant with the charities statement of recommended practice (‘SORP’) as they consisted only of a Trustee’s Annual Return (‘TAR’). The accounts for the financial year ending 31 March 2018 were not submitted by the due date of 31 January 2019 and have not been submitted since. Mr Raja failed to comply with his statutory obligation to submit timely and accurate accounts to the Commission, which is also a criminal offence under section 173 of the Act. This amounts to misconduct and/or mismanagement.

The extent to which potential conflicts of interest have been adequately managed

For several years, Mr Raja acted as sole trustee, in breach of the charity’s governing document, and there were no other trustees to oversee and assist in the decision-making process or appropriately manage conflicts of interest. Trustees are required to make decisions which are in the best interests of their charity, which involves identifying, recording and managing conflicts of interest. When a decision or transaction involves a trustee or entity connected to the trustee or a party connected to the trustee that individual should recuse themselves from the decision and are not entitled to vote. If it is not possible to make a quorate decision, then the charity should not proceed with the decision.

The inquiry found that there was a conflict of interest which was not identified, recorded or appropriately managed, as a result of which Mr Raja transferred approximately £240,000 from the charity’s bank account to his private bank account and used these funds to purchase a property which was held in the name of a private company of which he was sole director. Open source research showed that Mr Raja was the sole shareholder of this company and was an individual person with significant control of this entity. This amounts to misconduct and/or mismanagement.

On 31 October 2019, Mr Raja was found guilty of theft at Northampton Crown Court and was sentenced in January 2020 to a 24-month community order. As a result of his conviction, he has been automatically disqualified from acting as a charity trustee and from holding a role with a senior management function in any charity. Mr Raja will remain disqualified until his conviction becomes spent in January 2023.

The inquiry found that the poor governance, in particular the lack of monitoring and oversight of Mr Raja played a key part in the sequence of events that subsequently led to Mr Raja’s conviction for theft.

Whether the sole trustee is a fit and proper person to act as charity trustee

During the inquiry, the Commission issued a direction under section 47 of the Act which required Mr Raja to attend a meeting and provide information to the Commission. Mr Raja failed to comply with the direction on more than one occasion which amounts to misconduct and/or mismanagement.

Whether charity funds have been misapplied

The inquiry found that charitable funds had been transferred by Mr Raja to his private bank account and used to purchase a property that was held by a company of which he was sole director, sole shareholder and an individual person with significant control. The inquiry found that this transfer of funds for non-charitable purposes amounted to a misapplication of charity funds and unauthorised personal benefit.

Conclusions

The Commission concluded that the sole trustee had failed to comply with the charity’s governing document, had failed to submit accounts to the Commission in a timely fashion, had failed to adequately manage conflicts of interest and had misapplied charitable funds, all of which are a breach of duty and amount to misconduct and/or mismanagement in the administration of the charity.

The criminal conviction for theft has resulted in Mr Raja’s automatic disqualification from being a trustee and/or a holding a role with senior management function in any charity.

The charity was dissolved on the basis that it had ceased to operate and removed from the register of charities.

Regulatory action taken

During the inquiry, the Commission used its information gathering powers under section 52 of the Act.

The Commission used its power under section 47 of the Act to direct Mr Raja to attend a meeting and provide information.

The Commission also engaged with another public body during the course of the inquiry, regarding matters which were outside its scope and remit The Commission shared information via the statutory gateway, under section 56 of the Act.

Issues for the wider sector

Trustees must ensure that the charity complies with charity law, and with the requirements of the Commission as regulator; in particular ensuring that the charity prepares Annual Reports and submits accurate and timely accounts as required by law. There are legal requirements for charities, relating to the maintenance and retention of accounting records; the preparation of charity accounts and Annual Reports; the audit or independent examination of accounts; and the submission of these to the Commission. The Commission will not hesitate to exercise its statutory powers to ensure that a charity’s Annual Reports, annual accounts and annual returns are submitted to the Commission within the statutory deadlines where trustees persistently fail to comply with their legal duties.

An effective charity is run by a clearly identifiable board of trustees that has the minimum number of trustees as required by its governing document and whom have the right balance of skills and experience, acts in the best interests of the charity and its beneficiaries, understands its responsibilities and has systems in place to exercise them properly. The board or trustee body should ensure that the charity’s committees have clear and appropriate delegated authority to carry out their designated roles in delivering the charity’s purposes. In the absence of any delegated authority all decisions concerning a charity are taken by the board or all the trustees acting collectively and as a team.

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.

All charities must have an effective trustee body to control and administer the charity in accordance with a charity’s own governing document, charity law and Commission guidance. Public trust and confidence depends on the conduct of trustees and how they safeguard charity funds and undertake the objects and activities of the charity.

All charity trustees must ensure that, unless specific exemptions apply, an annual report and annual return and annual accounts, in respect of each financial year, are submitted to the regulator of charities.