Decision

Charity Inquiry: Quba Trust

Published 19 December 2024

Applies to England and Wales

The Charity

Quba Trust (the ‘charity’) is a charitable company limited by guarantee, incorporated on 24 January 2014. It was entered onto the Register of Charities (the ‘Register’) on 10 December 2014. The charity is governed by its memorandum and articles of association dated 24 January 2014, as amended on 20 July 2015.

The charity has purposes to (i) relieve poverty or financial hardship and suffering among victims of natural or other kinds of disaster, and (ii) to advance the Islamic religion.

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

Background and Issues under Investigation

In 2015, the Charity Commission for England and Wales (the ‘Commission’) proactively carried out a monitoring inspection of the charity due to its international operations in a high-risk area. Charities which operate internationally can be more vulnerable to abuse or harm as a result of where and how they operate.

The monitoring inspection sought to review the charity’s policies and financial records, and to ensure the trustees were complying with their legal obligations in exercising control and management over the administration of the charity and its activities overseas.

As a result of the monitoring inspection, the Commission identified several areas for improvement in relation to the trustees’ overall administration and management of the charity. Consequently, the Commission issued the charity’s then trustees with regulatory advice and guidance under section 15(2) of the Charities Act 2011 (the ‘Act’).

In November 2021, the Commission re-engaged with the charity to assess whether the trustees had acted upon the Commission’s previous regulatory advice and guidance.

Following a compliance meeting with some of the charity’s then trustees, and an inspection of the charity’s records, the Commission identified serious regulatory concerns regarding the financial management of the charity. These concerns included that the trustees were unable demonstrate that payments made to some of the then trustees were managed effectively and in line with the requirements of the charity’s governing document and internal financial controls.

On 5 May 2022, the Commission took the decision to open a statutory inquiry (the ‘inquiry’) into the charity under section 46 of the Act; the opening of the inquiry was publicly announced on 16 June 2022.

The scope of the inquiry, in broad terms, considered:

• the administration, management, and governance of the charity, which included its financial management and controls; and
• the conduct of the trustees

At the time of the inquiry’s opening, the trustees of the charity were recorded as (i) Mr Dawood Masood (‘Trustee A’), (ii) Mrs Affaf Amir (‘Trustee B’), and (iii) Mr Masood Akthar Hazarvi (‘Trustee C’).

Another individual was also recorded as a trustee of the charity, however, that trustee had only joined the charity in April 2022, just before the Commission opened the statutory inquiry into the charity.

According to the Commission’s records Trustee A served as a trustee from 21 July 2014 to 15 June 2022, and then again from 3 March 2023 to 26 September 2023. Trustee B served as a trustee from 6 February 2019 until her suspension, followed by her disqualification by the Commission in July 2024. Trustee C was initially a trustee from 24 January 2014 to 21 July 2014, and then again from 7 July 2017 to 1 December 2021.

Findings

The administration, management, and governance of the charity

The inquiry found that the charity was poorly managed and not properly administered by its former trustees as they were at the relevant times.

Failure to comply with the charity’s governing document

The inquiry found that the charity’s then trustees – which included Trustees A, B, and C – failed to demonstrate that they were acting in accordance with the charity’s governing document, including failing to keep adequate accounting records to explain how the charity’s funds were being spent, and failing to ensure that the charity was being properly managed and administered.

Additionally, the charity’s then trustees failed to comply with article 10 (proceeding of trustees) of the charity’s governing document, which requires the trustees to hold at least four meetings each year. The inquiry ascertained that between 2019 and 2021, the Charity’s then trustees did not meet this requirement.

The trustees also failed to comply with articles 5 (benefits to members and trustees), 9 (duty of care and extent of liability), and 12 (recordings and accounts). Further details are included in this report with regard to these breaches. The trustees’ failure to adhere to and follow the charity’s governing document is a breach of trust and is misconduct and/ or mismanagement in the administration of the charity.

Overall, the inquiry saw insufficient evidence that the charity’s then trustees – which included Trustees A, B, and C – were able or willing to discharge their legal duties, and responsibilities, and act in the best interests of the charity. The inability or unwillingness of the trustees in this regard is misconduct and/ or mismanagement in the administration of the charity.

Financial management and controls

The inquiry found a serious disregard for, or lack of understanding of, the importance of proper financial management and controls within the charity. This was particularly concerning given the prior regulatory advice and guidance issued by the Commission in 2015 on this matter, which should have prompted improvements in the charity’s financial practices.

The charity’s financial controls policy requires all payments to be processed through a Bank Transfer Request (‘BTR’) process, with each BTR form requiring signatures from three authorised individuals before the payment can be made. However, the trustees at the time, which included Trustees A, B, and C, failed to ensure that the BTR forms were completed for numerous payments made through trustee personal and connected company bank accounts, and did not adequately discuss these transactions. This failure to comply with the charity’s financial controls policy represents a collective breach by the then trustees and constitutes misconduct and/ or mismanagement in the administration of the charity.

Furthermore, article 9 of the charity’s governing document requires trustees to exercise a duty of care in administering and managing the charity. Based on the issues set out in this report, the inquiry found that the charity’s trustees – which included Trustees A, B, and C, failed to exercise the necessary level of care and skill that is expected in such circumstances. As a result, they not only contributed to, but also facilitated, the misconduct and/ or mismanagement in the administration of the charity.

Failure to evidence end use of charitable funds transferred overseas

The inquiry assessed a substantial volume of the charity’s records. Between 1 February 2020 and 13 July 2021, the charity expended a total of £781,125. However, the trustees were only able to provide receipts and invoices for payments amounting to £521,742.

The inquiry found that the documentation provided did not establish a satisfactory financial audit trail for the £521,742. Nevertheless, after careful consideration, the inquiry accepted that those funds, on balance, were applied for charitable purposes.

However, a sum of £259,383 remains unaccounted for, with no supporting documentation provided, despite repeated opportunities for the trustees to supply this material to the inquiry.

Charity trustees have a legal duty to manage their charity’s resources responsibly and to account for the end use of its funds. Additionally, article 12 of the charity’s governing document requires trustees to keep financial records, annual reports and statements of account relating to the charity for at least the previous six years. By failing to record or provide evidence for the use of £259,383 (expended between February 2020 and July 2021), Trustees A, B, and C not only breached their legal duties but acted in contravention of the governing document. This constitutes a breach of trust and is misconduct and/ or mismanagement in the administration of the charity.

In April 2024, as part of an Action Plan issued to the current trustees, the inquiry required them to seek legal advice regarding potential recovery of the £259,383 from the relevant trustees. Details of this action can be found in the ‘Regulatory Action Taken’ section below.

In July 2024, responding to the Action Plan, the current trustees informed the inquiry that they had located receipts and other supporting documents totalling £249,019, with an additional £14,549 being matched against other records held by the charity.

These records were not available to the inquiry during its inspection of the charity’s books and records, nor were they provided despite multiple use of the Commission’s information-gathering powers to compel the production of certain material. The inquiry is therefore critical of the late discovery of these documents, which had not been made accessible earlier. Due to the time that has passed and discrepancies with previously available records, the inquiry is unable to verify the authenticity of these newly found documents.

Poor record keeping and payments to trustee personal and connected company accounts

Using the Commission’s information-gathering powers, transactional data from Money Service Bureaus (MSBs) used by Trustee A showed the appearance of a connection between the recipients and Trustee A. For example, three transfers totalling £3,000 in October 2018 were referenced as “family support”, while transactions amounting to £6,914 in January 2021 were marked as “friend”. Due to the lack of proper documentation and an explanation from the trustees, the Commission concluded that these funds were sent to Trustee A’s family and friends – transactions that did not further the charity’s purposes. This constitutes misconduct and/ or mismanagement, for which Trustees A, B, and C are collectively responsible.

Another concerning instance was a £4,000 transaction in May 2018 to Trustee A’s personal bank account, described as “expenses for pilgrimage to raise funds for the charity.” However, Trustees A and C were unable to provide any supporting evidence for this expenditure, further demonstrating a failure to maintain adequate records. This, too, is misconduct and/ or mismanagement.

The trustees also failed to discuss and document transactions of the charity’s funds to personal and connected company bank accounts in their meeting minutes from 2017 to 2022. The meeting minutes lacked proper summaries, decision-making details and voting records. This failure to maintain adequate meeting records, contrary to the Commission’s published guidance which was issued to the charity in 2015, prevents the trustees, as they were at the relevant times, from demonstrating that they acted in good faith and in the charity’s best interests in making the decisions to send the funds in this way. While Trustee B was not on the board of trustees when the guidance was issued to the charity (in 2015), she was still expected to fulfil her trustee duties and ensure proper record keeping.

Between January 2017 and July 2021, Trustees A, B, and C authorised payments from the charity’s funds, totalling £206,041.78, to their personal bank accounts and the accounts of companies connected to them. These payments were for expenses such as tickets, taxis, hotels, freelance staff salaries and transfers to overseas partners via MSBs. The trustees claimed that these transfers were primarily to fund the construction of a girls’ school in Pakistan. However, they were unable to account for five payments totalling £1,690 made between December 2019 and January 2020 to Trustee A’s personal bank account and the account of a company where Trustee A is the sole director. This inability to account for these funds further aggravates the misconduct and/ or mismanagement in relation to financial management and controls of the charity.
Additionally, the inquiry found that the trustees were unable to form a quorum of unconflicted trustees to authorise payments to personal and connected accounts. This is because two out of the then three trustees were personally connected, this is therefore a breach of articles 5.7 (benefits to members and trustees) and 10.2 (proceeding of trustees) of the charity’s governing document and is further evidence of misconduct and/ or mismanagement in the administration of the charity.

While the Commission recognises that trustees’ personal or connected accounts may occasionally be used to transfer charitable funds, such situations must be rare, fully documented, and subject to heightened scrutiny. Trustees must be able to demonstrate that the funds were applied for charitable purposes and that no personal benefit was derived. That was not the case here.

Payments to a consultant and Trustee A’s trip to Morocco

The inquiry ascertained that in July 2022, the charity’s then trustees appointed a consultant who was paid a total of £36,160 from September 2022 to September 2023. This period coincided with the charity being largely inactive and under investigation by the Commission.

The inquiry sought to understand the trustees’ rationale for this appointment. However, no supporting documentation or adequate explanation was provided to justify the decision, define the consultant’s role, or demonstrate any tangible outcomes from their work.

An appointment letter dated 1 July 2022 was eventually submitted to the inquiry by the current trustees, but it is only two sentences long and raises concerns given it was signed by a trustee who did not join the charity until September 2023, some fourteen months after the consultant’s appointment. No explanation has been offered to address this discrepancy.

In the absence of a clear explanation and with limited supporting documentation, the Commission concludes that the consultant’s appointment and remuneration, totalling over £36,000, were not in the charity’s best interests and constitutes misconduct and/ or mismanagement in the administration of the charity.

Further, the inquiry directed (in November 2023) the charity’s trustees, along with Trustees A and B, to provide information and copy documents regarding a trip Trustee A took to Morocco on behalf of the charity following his resignation. The inquiry also questioned a payment of £525 from the charity’s bank account, invoiced to a non-charitable company of which Trustee A is the sole director.

Both Trustee A and B, along with the charity’s trustees, failed to fully comply with both the direction and an enforcement order made under section 335(1) of the Act. No information was provided by either Trustees A or B in relation to the consultant, Trustee A’s trip to Morocco, or the £525 payment to Trustee A’s company.

The current trustees ultimately provided responses but only after being required to do so by an Action Plan, with which they were judged to have mainly complied with – see ‘Regulatory Action Taken’ below for further information.

Late filings of annual accounting documentation

The inquiry found that the trustees filed the charity’s Annual Return, Trustee Annual Report, and accounts (‘annual accounting documents’) with the Commission late contrary to article 12 of the charity’s articles of association and sections 162, 163, 164 and 169 of the Act for the:

• Financial Year Ending (‘FYE’) 24 January 2017 (the annual accounting documents were filed 10 days late)
• FYE 24 January 2018 (the annual accounting documents were filed 86 days late)
• FYE 24 January 2022 (the annual accounting documents were filed up to 228 days late)

It is a criminal offence under section 173 of the Act to fail to file a charity’s annual accounting documents within the statutory 10-month deadline. The failure to file the required documents on time is misconduct and/ or mismanagement by the trustees (as they were at the relevant times). It is the trustees’ legal duty and responsibility to ensure that the charity’s annual accounting documents are filed on time in accordance with the Act and the articles of association. The trustees repeatedly failed to comply with this legal duty.

Separate to the late filing, the charity’s accounts for the FYE 24 January 2022 were not compliant with the Charities Statement of Recommended Practice as they did not record related party transactions, i.e., charitable funds paid to some of the charity’s trustees.

The conduct of the trustees

The Commission and the courts expect trustees to cooperate with it as the regulator and during its investigation into charities, it is difficult to see why a prudent body of trustees would not cooperate with the Commission. The public would expect trustees to act reasonably and responsibly and that the Commission will intervene to take action against those who do not, particularly where there is additional evidence of failings on the part of those trustees.

Both serving and former trustees of the charity failed to comply with directions and orders of the Commission, issued by the inquiry, to obtain information and copy documents relating to the management and administration of the charity. Their failure to fully comply is mismanagement and/ or misconduct.

The inquiry found that the overall conduct of Trustees A, B, and C fell below the standard that the Commission expects of trustees, resulting in misconduct and/ or mismanagement in the administration of the charity.

Being a trustee is a position of trust, where beneficiaries, donors, and the public rely on individuals to fulfil their legal duties. Given the extent of the failings, the Commission determined that the misconduct and/ or mismanagement committed by Trustees A, B, and C made them unfit to act as a charity trustee or trustee for a charity generally. This conclusion led to the Commission taking regulatory action against them (see ‘Regulatory Action Taken’ below).

Conclusions

Where misconduct and/ or mismanagement occurs within a charity, the Commission will ensure that those responsible are held accountable for their actions. Where necessary, the Commission will take robust regulatory action to address the situation.

In this case, the Commission concluded that Trustees A, B and C failed to discharge their legal duties and responsibilities, leading to misconduct and/ or mismanagement within the charity.

The Commission’s intervention in opening the inquiry and taking regulatory action was essential to restore proper governance and administration to the charity.

Since the Commission’s involvement, the current trustees have taken a number of steps to address the failures and weaknesses in the charity’s governance – see ‘Regulatory Action Taken’ for more information.

Regulatory Action Taken

The inquiry exercised the Commission’s information gathering powers under section 47 of the Act on multiple occasions both to obtain documents and answers to questions.

In November 2023, the inquiry exercised the Commission’s power under section 47(2)(a) and (b) of the Act which directed Trustees A and B, and the charity’s then trustees to provide information, copies of documents and answers to questions in relation to the financial activity of the charity. Both the then trustees and Trustees A and B failed to respond to the direction.

As a result, in January 2024, the inquiry exercised the Commission’s power under section 335(1) of the Act and served an order on the trustees and Trustees A and B which directed them to secure the default referred to above (in respect of failing to comply with the section 47 direction) was made good. The charity’s trustees (as they were at that time), along with Trustees A and B, failed to respond to the Commission’s order.

Disqualification of Trustees A, B, and C

On 15 April 2024, the inquiry gave formal notification of its intention to disqualify Trustees A, B and C under section 181A of the Act. The proposed disqualification would prevent them from being a charity trustee or trustee for a charity and holding an office or employment with senior management functions in any charity in England and Wales throughout the period of their disqualification.

At the time of giving its notice to disqualify, Trustee B was a serving trustee of the charity; Trustee A and C had resigned from their trustee positions at the charity in September 2023 and December 2021 respectively. Immediately following notice being given, the inquiry exercised the Commission’s power under section 181B(4) of the Act to suspend Trustee B from her trustee position whilst consideration was being given to her disqualification.

On 20 May 2024, the inquiry proceeded with the disqualification orders under section 181A of the Act, as it had not received representations from Trustees A, B, or C regarding the notice of intention to disqualify them.

On 1 July 2024, orders to disqualify Trustees A, B and C took legal effect. Trustee A was disqualified for a period of 10 years; Trustee B was disqualified for a period of 7.5 years, and Trustee C was disqualified for a period of 5.1 years.

Trustee A is a practicing accountant, who performs independent examinations for a number of registered charities in England and Wales. He is also a charity sector expert, providing guidance and support to faith-based organisations on governance, financial management and safeguarding. As such, the Commission takes the view he should have known and been sufficiently diligent to the legal and regulatory framework in which the charity operates, including maintaining sufficient records to evidence the end use of the charity’s funds and submitting accounting information on time. By virtue of his professional qualifications (as a practicing accountant), the Commission considers that Trustee A should have demonstrated a greater level of knowledge and met higher standards than other trustees. He is therefore culpable to a greater degree than his fellow trustees for the misconduct and/ or mismanagement that has occurred within the charity’s administration and this was therefore reflected in the length of his disqualification.

In accordance with its obligations under section 182 of the Act, the names of Trustees A, B, and C were entered onto the Register of Removed Trustees.

Action Plan

On 15 April 2024, the inquiry issued an Action Plan (the ‘Action Plan’) to the current trustees of the charity under section 15(2) of the Act. The purpose of the Action Plan was to strengthen the administration and management of the charity in order to place it on a proper footing. The Action Plan required the current trustees to complete the following actions:

• action 1 – review and, if necessary, update the charity’s memorandum and articles of association
• action 2 – appoint additional trustees
• action 3 – review and establish adequate financial controls
• action 4 – comply with a direction issued as part of the inquiry, in April 2024, under section 47 of the Act
• action 5 – consider seeking restitution of lost or unaccounted funds from the charity’s current and former trustees
• action 6 – assess the charity’s future viability

The inquiry reviewed the trustees’ written responses and documentation to determine their compliance. The inquiry found full compliance with Actions 1, 2, and 6, and judged Action 4 to be “mainly” complied with. Actions 3 and 5 were only partially complied with. Overall, the Commission found that some improvements had been made, leading to an assessment of “mainly” compliant with the Action Plan.

Financial controls (action 3)

The Action Plan required the trustees to evaluate the adequacy of the charity’s financial controls. Although some changes were made, including prohibiting payments through personal bank accounts, the inquiry found that the updated financial controls were not sufficiently strengthened. However, the inquiry found that if these internal controls are followed, which was not the case previously, they should offer an adequate level of financial protection.

Compliance with the direction dated 2 November 2023 (action 4)

On 2 November 2023, the inquiry exercised the Commission’s power under section 47 of the Act to direct the former and then trustees of the charity to provide written answers and copies of certain documents. In particular, and as set out above, the direction sought to understand the then trustees’ decision-making around the appointment of an external consultant who was paid £36,160 between September 2022 and September 2023, a period during which the charity was largely dormant.

Both the then serving and former trustees failed to fully comply with the direction. The failure to comply with an order or direction of the Commission constitutes misconduct and/ or mismanagement.

As part of the Action Plan, the current trustees failed to provide sufficient evidence of full compliance, submitting only a copy of the consultant’s appointment letter dated 1 July 2022. The letter, however, was signed by a trustee who did not join the charity until September 2023, 14 months after the appointment. No meeting minutes or records have been provided to explain this decision, and the trustees stated that the consultant was unwilling to have his contact information shared with the inquiry.

Separate to the above, the November 2023 direction also required the former and then serving trustees to provide information and copy documents in relation to Trustee A’s trip to Morocco on the charity’s behalf following his resignation. While a written response was provided offering an explanation as to the charity’s work in this regard, it was not supported by documentary evidence.

Restitution of funds (action 5)

This action concerned the inability to account for £259,383 expended between February 2020 and July 2021. The Commission set out in the Action Plan that it considers the former trustees collectively liable for the repayment of these funds to the charity, and it is primarily the responsibility of the current trustees to recover any property lost to the charity. The Action Plan required the current trustees to seek appropriate legal advice to assess the viability of recovering the charity’s funds from the former trustees.

In July 20024, the current trustees informed the inquiry that they have located MSB receipts and BTR Forms totalling £249,019. They also stated that they identified an additional 10 transactions totalling £14,549, for which they were seeking further clarity. The trustees were of the view that these funds were transferred to partners, as the amount aligns with unallocated MSB receipts for the same total.

The inquiry is critical of the discovery and provision of documents that were not available during the inquiry’s books and records inspection, or when the inquiry exercised the Commission’s information gathering powers to obtain them. Given the time that has elapsed and inconsistencies with previously available records, the Commission cannot verify the authenticity of these documents.

As a result of these compliance issues, the current trustees’ adherence to the Action Plan was judged to be only “mainly” compliant. Consequently, the current trustees were provided with further regulatory advice and guidance which they are expected to take into consideration and adhere to.

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.

Governance

Trustees are representatives of the charity they govern or the charitable funds they are responsible for, in the charity sector. Trustees must be aware of and act in accordance with their legal duties. The conduct of trustees can be a key driver of public trust and confidence in the charity sector. When the conduct of trustees falls below the standards expected there can be damage to the reputation of individual trustees, the charity and possibly the wider charity sector.

All charities should have appropriately tailored internal policy documents which address the specific risks associated with the kind of activities that are undertaken. A failure to implement internal policies (and follow them) can put assets, beneficiaries, and a charity’s reputation at risk.

Trustees’ accounting and financial duties

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.

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-checklist 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.

Due diligence, monitoring, and verification

Charity trustees are legally responsible for ensuring charitable funds are used properly for legitimate charitable purposes and not misused for financial crime, terrorist, or other criminal purposes. Trustees are publicly accountable and have duties and responsibilities under charity law to safeguard their charity, its funds, property and beneficiaries.

Due diligence is an important part of trustee duties and is essential in order to be assured of the provenance of charitable funds and confident that they know the people and organisations the charity works with and can identify and manage associated risks. It is vital that trustees have robust due diligence processes and ensure that these are consistently implemented.

Monitoring is a vital step in ensuring that a charity’s funds or property reach their proper destination and are used how the charity intended. The type and depth of monitoring may vary depending on the type of project, the location and the sums of money involved. It is vital that trustees have robust monitoring process in place including documentation (reports, receipts invoices) in addition to photographs and video.

The Commission has published guidance for trustees in respect of due diligence, monitoring and verifying the end use of charitable funds.