Decision

Charity Inquiry: Mohiuddin Trust

Published 18 March 2021

This decision was withdrawn on 21 March 2023

This report has been archived in line our policy as it is over 2 years old.

Applies to England and Wales

The Charity

Mohiuddin Trust (‘the charity’) was registered with the Charity Commission (‘the Commission’) on 23 August 2004 and is governed by a Memorandum and Articles of Association dated 8 March 2004 as amended on 25 November 2009 and 29 October 2013 (‘the Governing Document’).

The charity’s objects are:

• to advance education and training for the public benefit anywhere in the world
• to relieve poverty anywhere in the world
• to establish or secure the establishment of schools, colleges or other institutions in particular for the purposes of education and health improvement and to maintain and manage them (whether alone or in co-operation with any other person or body) in furtherance of these objects anywhere in the world
• to promote any other purpose which is charitable according to the laws of England and Wales

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

Issues under Investigation

Background

The Commission identified potential regulatory concerns at the charity following a review of its accounts and the statements made in the auditor’s report for the financial year ending 31 March 2016, which indicated a financial risk to the charity.

In light of the Commission’s previous regulatory interest in the charity, which had included a statutory inquiry (ended June 2010) and a monitoring visit in 2014, it was decided there were grounds to re-engage with the charity, and its then trustees, to consider the potential regulatory concerns that arose from the statements in the audit report. The Commission was also keen to review the substantive issues that had been at the heart of the previous statutory inquiry and also to assess the then trustees’ compliance with an Action Plan that had been issued in 2014 at the end of the monitoring visit case.

Regulatory concerns

The Commission wrote to the charity in August 2017 to arrange a meeting with the charity’s then trustees to discuss these concerns. It quickly became apparent that the charity had become the subject of an internal dispute with two competing groups claiming to be its trustees following the death of the founder and spiritual leader of the charity, Alauddin Siddiqui, in February 2017.

The Commission met separately with representatives of the two groups claiming to be the charity’s trustees on the 24 October 2017 and 14 November 2017. Having considered the representations put forward in these meetings, and also in written correspondence, the Commission set out its findings to those claiming to be the charity’s trustees in a letter dated 25 January 2018. In summary, these were:

• the Commission did not have the power to determine who the trustees of the charity were
• based on the information provided, there was a lack of certainty that individuals had been correctly appointed as trustees and, equally, that individuals had been correctly removed from their positions previously held
• there was a lack of certainty as to whether the charity had any validly appointed trustees
• the parties to the current dispute were required to mediate or engage in dispute resolution with each other to address the substantive issues in the dispute, should the parties not be able to resolve the issues amongst themselves

The Commission also advised that the parties in dispute should discuss, agree and then confirm to the Commission how, within a reasonable timescale, they would ensure they filled the vacant trustee positions, in accordance with the charity’s Governing Document and the wider law. The Commission made it clear that should the parties not make sufficient progress to address the issues in dispute, the Commission would need to consider further regulatory action.

On 28 June 2018, the Commission opened a follow-up case to check on the progress made by the parties to the dispute and whether they had complied with the regulatory advice and guidance provided by the Commission in its letter of 25 January 2018.

Upon doing so, the Commission determined that there had been a lack of substantive progress made by the competing parties to resolving the dispute. Given this and additional concerns being raised in connection with the day-to-day management of the charity, the Commission decided that the most appropriate regulatory response was to open a statutory inquiry.

On 5 December 2018 the Commission opened a statutory inquiry into the charity under section 46 of the Charities Act 2011 (‘the Act’).

Inquiry

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

• the ongoing dispute and how to regularise the concern that the charity had no validly appointed trustees
• whether those in control of the charity had properly exercised their legal duties and responsibilities under charity law in the administration of the charity
• the financial management of the charity
• whether there had been misconduct and/or mismanagement by those in control of the charity

Soon after the opening of the inquiry the Commission used its power under section 76(3)(d) of the Act to freeze the charity’s bank account on 24 January 2019. Further information is provided under ‘regulatory action taken’.

The inquiry was closed with the publication of this report.

Findings

The ongoing dispute and how to regularise the concern that the charity had no validly appointed trustees

Following the opening of the inquiry the competing parties still failed to seek mediation with each other as the Commission had advised. As a result, the inquiry determined that it should use its power under section 76(3)(g) of the Act to appoint an Interim Manager. On 25 March 2019 the inquiry appointed Emma Moody of Womble Bond Dickinson LLP as the Interim Manager of the charity, to have all the powers and duties of the trustees of the charity to the exclusion of anyone purporting to be a trustee of the charity.

The Interim Manager was given specific tasks to restore the charity to effective standards of governance, management and administration and was tasked in particular with finding new trustees to be appointed to the charity to take it forward once the term of her appointment had been completed and she had been discharged.

The Interim Manager completed the work in respect of this task having:

• first tried to engage with the competing parties and their representatives where it became clear that neither group had the necessary skills, expertise, and strategic vision to be the trustees of the charity going forward
• conducted research and engagement with potential stakeholders
• advertised widely the trustee positions and sought applications
• short-listed the applications on the basis of the skills and expertise
• conducted interviews to assess the suitability of potential candidates
• completed background due diligence checks on the selected individuals to confirm their suitability for the role

Each of the six selected individuals signed an undertaking that there were no legal reasons that prevented them from being a trustee and all confirmed that they would comply with their responsibilities as a trustee.

The Interim Manager conducted induction training with the new trustees which was attended by the inquiry. The inquiry met with the new trustees to be sure that they understood the difficulties in the charity and that they were capable and able to discharge their duties as trustees and to work effectively with each other.

On 1 July 2020, the inquiry exercised its powers under section 80(2) of the Act to formally appoint the six individuals identified by the Interim Manager to be the new trustees of the charity (‘the new trustees’). It also varied the terms of the Interim Manager’s appointment on the same date so that she was appointed alongside the new trustees to jointly administer the charity in a ‘transition’ period to support the new trustees in discharging their duties as charity trustees in what was acknowledged to be difficult circumstances caused by the worldwide coronavirus pandemic.

Having been appointed on a temporary and protective basis, the Interim Manager was subsequently discharged on 2 December 2020 with the inquiry satisfied that the new trustees were capable of taking full control of the charity from the Interim Manager.

On 3 December 2020, the inquiry issued the new trustees with regulatory advice and guidance under section 15(2) of the Act to assist them in the discharge of their duties moving forward. The Commission will monitor the new trustees’ compliance with the advice and guidance as part of its routine monitoring work.

Whether those in control of the charity had properly exercised their legal duties and responsibilities under charity law in the administration of the charity

The inquiry found that prior to the appointment of the Interim Manager in March 2019, there was a lack of certainty as to whether any of the decisions taken by those purporting to be the trustees of the charity in the period since the dispute emerged (shortly after the death of Alauddin Siddiqui in February 2017), had been properly made. This was because there was a lack of certainty as to whether the charity had any validly appointed trustees in this period.

The inquiry found that the collective conduct of those who were purporting to be the trustees of the charity in the period of the internal dispute fell below the standards expected from charity trustees. Collectively, the competing groups claiming to be the trustees did not respond appropriately to the Commission’s regulatory advice and guidance and frustrated the Commission’s attempts to make progress by refusing to engage effectively with those with whom they were in dispute and with the Commission. This ultimately led to the statutory inquiry and the appointment of the Interim Manager to regularise the concerns.

The collective conduct of those in control of the charity at the time of the dispute resulted in the emergence of a number of regulatory concerns, including:

• the late submission of statutory returns to the Commission (the charity’s annual return for the financial year ending 31 March 2017 was submitted 666 days late and its accounts were 133 days late and its annual return and accounts for the financial year ending 31 March 2018 were submitted 306 days late)
• the charity’s auditors qualifying the charity’s accounts for the financial years ending 31 March 2016, 31 March 2017 and 31 March 2018 which raised concerns about the charity’s financial transactions in the period prior to the inquiry being opened
• inadequate financial controls being in place meaning concerns that charitable funds could not be fully accounted for that had been transferred to Pakistan
• the architects for the building of the new mosque being unclear who to take instructions from because of the ongoing dispute
• uncertainty as to who was legitimately able to authorise expenditure
• a lack of insurance being in place for some of the charity’s properties
• allegations that a charity property had been disposed of without following the requirements set out in the Act
• an employment tribunal claim being lodged against the charity

The Interim Manager was able to address these various concerns over the period of her appointment to the extent that the concerns are no longer present, and processes have been put in place to reduce the likelihood of these issues recurring in the future. Having considered what was in the best interests of the charity, the new trustees have decided to retain the Interim Manager as a paid legal advisor to the charity to assist them in the discharge of their duties moving forward.

The financial management of the charity

At the peak of the internal dispute, the inquiry received reports that attempts had been made by individuals in the competing groups to change the authorised signatories on the charity’s bank mandate. This led to concerns about the safety of the funds held in the account, which the inquiry was advised were intended to be used for the rebuilding of the charity’s mosque in Birmingham.

As a result, on 24 January 2019, the inquiry exercised its powers under section 76(3)(d) of the Act by issuing an Order to prevent the bank from parting with the property it held on behalf of the charity as a temporary and protective measure to protect the charity’s funds from any potential risk of misapplication or abuse.

This Order was discharged on 2 May 2019 when the Interim Manager confirmed she had taken control of the charity’s bank account. The Interim Manager has since taken steps to improve the financial record-keeping and the internal financial controls of the charity and the new trustees have had training in this regard.

Concerns raised by the charity’s auditor about the charity’s ability to satisfactorily account for some of its overseas expenditure in Pakistan were addressed by the charity ceasing this aspect of its activities, pending further consideration of this matter by the new trustees as part of their business planning.

Conclusions

Whether there had been misconduct and/ or mismanagement by those in control of the charity

The inquiry concluded that there had been misconduct and/ or mismanagement in the administration of the charity by those who had been collectively acting as the trustees of the charity during the period of the internal dispute.

The inquiry was not able to determine individual responsibility for the misconduct and/or mismanagement that occurred during the period of the internal dispute.

Due to the misconduct and/or mismanagement identified, the inquiry took regulatory action by first protecting the charity’s funds and then appointing an Interim Manager to take full control of the charity.

The Interim Manager has restored the charity to appropriate levels of governance and new trustees have been recruited by the Interim Manager and appointed by the inquiry to manage the charity.

Regulatory advice and guidance has been provided to the new 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 24 January 2019, the inquiry froze the charity’s bank account under section 76(3)(d) of the Act to protect the charity’s funds from any potential risk of misapplication or abuse.

On 25 March 2019, the inquiry appointed Emma Moody as Interim Manager of the charity under section 76(3)(g) of the Act with all the powers and duties of the trustees of the charity and to the exclusion of the trustees of the charity or anyone purporting to be trustees of the charity.

On 2 May 2019, the inquiry discharged its Order under section 76(3)(d) of the Act having been satisfied that the Interim Manager had full control of the charity’s funds.

On 1 July 2020, the inquiry appointed six individuals under section 80(2) of the Act to be the new trustees of the charity and amended the terms of the ongoing Interim Manager appointment.

On 4 September 2020, the inquiry received notification from HM Courts and Tribunals Service that an appeal had been lodged to the First Tier Tribunal regarding the use of the section 80(2) power. The hearing date for this appeal is awaited.

On 2 December 2020, the inquiry discharged the Interim Manager after her work was completed and her report was submitted to the inquiry. The cost of the Interim Manager appointment was £67,536.10 including VAT and disbursements.

On 3 December 2020, the inquiry issued regulatory advice and guidance to the new trustees on a range of issues under section 15(2) of the Act so that they could effectively discharge their duties to the charity in the future.

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 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 and apply appropriately tailored internal policy documents which address the specific risks associated with the kind of activities that are undertaken.

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.

Conflicts of interest are more likely when there are only a small number of trustees on the board, when trustees are closely related, or when the charity has dealings with organisations in which the trustees have interests. It is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees. The trustees should put in place policies and procedures to identify and manage such conflict. Further guidance and advice on conflicts of interest can be found on GOV.UK.

There are legal requirements for charities relating to the preparation of charity accounts and annual reports, the audit or independent examination of accounts and the submission of these to the Commission. Trustees must familiarise themselves with the appropriate requirements. Registered charities are required by law to provide annual returns and accounts to the Commission.

The duty to file accounts and the trustees’ annual report with the Commission applies to all registered charities whose gross income exceeds £25,000 per year. The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity.