Decision

Charity Inquiry: Islamic Education Centre and Mosque

Published 24 April 2024

Applies to England and Wales

The Charity

Islamic Education Centre and Mosque (‘the charity’) was registered with the Commission on 15 February 2013. It is governed by a constitution adopted 1 April 2004, as amended on 13 January 2013.  

The charity’s objects are the advancement of the Islamic faith by the provision of facilities for worship and religious education. The charity operates a mosque in Sunderland.

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

Background and Issues under Investigation

On 19 November 2018, because the charity had failed to submit trustees’ annual reports, accounts and annual returns (‘accounting information’) to the Commission for the financial years ending (FYE) 31 March 2016 and 31 March 2017 the Commission placed the charity into the Double Defaulter Class Inquiry (‘DDCI’). The DDCI is for those charities that are in default of their legal duty to file accounting information for two or more years in the last five years.

The charity was removed from the double defaulters’ inquiry on 21 November 2019 following the submission of its outstanding accounting information. The trustees in position at that time were provided with regulatory advice and guidance on preparing a trustee annual report (‘TAR’) and submitting accounting information on time in future.

On 24 June 2020 the charity was again placed into the DDCI having again failed to submit accounting information for the FYE 31 March 2018 and 31 March 2019.

This was despite engagement with the charity regarding the overdue accounts and the trustees being given several deadlines to file the charity’s outstanding accounting information.

On 30 June 2020 the Commission issued an Order under section 84 of the Charities Act 2011 (“the Act”) directing the trustees in position at that time to prepare and submit the outstanding accounting information to the Commission by 24 July 2020. The charity failed to submit the required accounting information within the deadlines set in the section 84 order. As a consequence, the Commission issued an Official Warning to the trustees under section 75A of the Act on 23 February 2021 which required the trustees to submit the accounting information for FYE 31 March 2018 and 2019 and ensure accounting information was submitted on time in future. The Commission then closed its DDCI case and opened a monitoring case to check the charity’s compliance with the rectifying actions within the Official Warning.

Following the trustees’ failure to engage with the Commission’s monitoring case or demonstrate they were taking adequate steps to address the Commission’s concerns; the Commission opened a statutory inquiry under section 46 of the Act into the Charity on 10 December 2021 (‘the Inquiry’) to examine:

• failure to comply with their statutory reporting duties including the timely submission of the charity’s annual reports and accounts to the Commission

• the extent to which the trustees are complying with their legal duties in respect of their administration, governance, and management of the charity

• the extent to which any failings or weaknesses identified in the administration of the charity during the inquiry were a result of misconduct and/or mismanagement by the trustees;                        

• failure to comply with an order of the Commission under section 84

The Inquiry closed with the publication of this report.

Findings

The Trustees

The inquiry found there was a lack of clarity as to which individuals were the functioning trustees of the charity. The charity was provided with advice on this matter and complied with this by formalising their trustee board and updating the records held on the register of charities. 

The extent of the trustee’s failure to comply with statutory reporting duties including the submission of the charity’s accounting information to the Commission

The inquiry found that the trustees had not complied with or fulfilled their duties as trustees under charity law. There was a failure to file annual accounting information in accordance with their statutory obligations repeatedly over several years:

• FYE 31 March 2023 was 15 days late
• FYE 31 March 2022 was 132 days late
• FYE 31 March 2021 was 213 days late
• FYE 31 March 2020 was 324 days late
• FYE 31 March 2019 was 690 days late
• FYE 31 March 2018 was 1055 days late
• FYE 31 March 2017 was 621 days late
• FYE 31 March 2016 was 986 days late

This is a prolonged pattern of behaviour which demonstrates serious failings by the trustees to ensure that their charity is accountable, transparent and that they comply with their legal reporting obligations.

Trustees have a legal responsibility to ensure that the appropriate accounting information for the charity is prepared and supplied to the Commission on time in line with statutory requirements. The trustees in place at the relevant times failed to do so over a number of years which is misconduct and/or mismanagement in the administration of the charity.

A meeting was held with the trustees on 24 March 2022 where assurances were provided that the accounting information FYE 31 March 2021 would be submitted within a week.

The trustees explained to the inquiry that there had been issues in the past with record keeping which meant that accounting records were poor. The trustees confirmed that they were taking the necessary steps to bring the submission of outstanding accounts up to date and had formalised their record keeping ensuring accounting records were properly managed.

However, the trustees failed to submit the accounting information for FYE March 2021 within their own indicated deadline. The accounting information for FYE March 2021 was eventually submitted on 1 September 2022 (213 days late). The accounting information for FYE 31 March 2022 was also submitted on 12 June 2023 (132 days late).

The trustees subsequently failed to submit the accounting information for FYE 31 March 2023 on time, submitting this on 15 February 2024 (15 days late). Whilst the charity is no longer in default with its reporting requirements, the inquiry finds that this further failure demonstrates the systemic failings by the trustees to prepare and submit its accounting information on time.

Failure to submit financial information to the Commission on time in line with statutory requirements is a breach of sections 162, 163, 164 and 169 of the Act and constitutes misconduct and/or mismanagement in the administration of the charity by the trustees in post at the relevant times. It is also a potential criminal offence under section 173 of the Act.

The extent to which the trustees are complying with their legal duties in respect to the administration, governance and management of the charity

The inquiry found that there was a lack of relevant governance and management written policies and procedures at the charity, for example, in relation to financial controls. The inquiry found that there had been issues relating to the renovation of the mosque which resulted in losses to the charity’s funds after the trustees felt obliged to pay additional costs to those agreed with a contractor, in order for the work to be completed.

In addition, invoices for the renovations were not systematically retained, which meant that records and accounts were not accurately produced. The inquiry found that the trustees were unable to account for large amounts of cash withdrawals relating to this project. The trustees explained to the inquiry that the majority of these withdrawals were as a result of the contractor receiving cash payments for work undertaken.

On 2 August 2022, the inquiry directed the current trustees to take certain specified actions under section 84, which included the review of all the charity’s existing policies and procedures to ensure proper governance and management of the charity going forwards and to improve the trustees’ oversight.

The trustees were required to review the following policies or alternatively create new written policies if these were not already in existence:

• safeguarding
• conflicts of interest, including a conflicts of interest register
• finance
• reimbursements and expenses, including travel and subsistence
• complaints

The trustees provided the inquiry with copies of the new policies on 5 January 2023.

The inquiry found that the trustees were in breach of the charity’s governing document by failing to keep records of their meetings. These are necessary to demonstrate the decision-making process and to show that all decisions made are in accordance with the charity’s governing document. Together with the other weaknesses identified in the charity’s governance and administration, the inquiry found that this constituted misconduct and/or mismanagement by the trustees in post at the relevant times.

The inquiry has seen that the charity has made improvements to its record keeping and governance more generally, but notes that the current trustees filed the charity’s latest accounting information 15 days late. The Commission will monitor the charity to ensure that they are compliant with their filing duties for the next financial year.

Failure to comply with an order of the Commission under section 84

As part of the earlier DDCI, on 30 June 2020 the Commission issued an Order under section 84 of the Act directing the then trustees to prepare and complete the missing accounting information and provide copies to the Commission by 24 July 2020.

The trustees in post at that time failed to provide the missing accounting information by the required date.

Failure to comply with an order of the Commission under section 84 constitutes misconduct and/or mismanagement in the administration of the charity by the trustees.

On 2 August 2022 the Commission issued a further Order under section 84 of the Act directing the trustees in post at the time to prepare and submit accounting information for FYE 31 March 2021 within a month of the order.

Although accounting information was submitted before the deadline on 1 September 2022 this contained multiple deficiencies, the Order having provided clear provisions of what was necessary, for example, a trustees’ annual report (TAR) was not provided.

The TAR helps people understand what a charity does, particularly potential funders and beneficiaries and along with the accounts tell people:

• about the charity’s work
• where the charity’s money comes from
• how the charity spent their money in the past year

The trustees were instructed to submit redrafted accounting information which was eventually received on 15 March 2023. The failure by the trustees in post at that time to comply with the section 84 order issued on 2 August 2022 is considered misconduct and/or mismanagement.

Failure to submit financial information to the Commission on time in line with statutory requirements is a breach of sections 162, 163, 164 and 169 of the Act and constitutes misconduct and/or mismanagement in the administration of the charity. It is also a potential criminal offence under section 173 of the Act.

Conclusions

The Commission has concluded that those trustees in post at the relevant times were responsible for misconduct and/or mismanagement in the administration of the charity. These trustees repeatedly failed to prepare and submit the necessary financial information over a significant and prolonged period, in addition they failed to comply with orders of the Commission and were in breach of the charity’s governing document by failing to keep records of their meetings.

The Commission acknowledges that the trustees faced some challenges whilst striving to comply with the section 84 Order and have taken steps to ensure these issues do not occur in the future. For example, by implementing improved financial controls, ensuring that all the trustees have read the Commissions’ guidance for trustees and by engaging new accountants. However, should the charity be in default of its filing requirements again in the future the Commission will consider what, if any, regulatory action is required.

Regulatory Action Taken

The Inquiry exercised the Commission’s regulatory powers under sections 52 and 47 of the 2011 Act on multiple occasions to obtain further information and copy documents, including from the trustees and the charity’s bank.

On 2 August 2022 the Commission issued an Order under section 84 of the Act directing the then trustees to prepare and submit accounting information for FYE 31 March 2021 within a month of the order.

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the Inquiry 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.

Charity trustees are under a legal duty to submit annual updates, returns, annual reports and accounting documents to the Commission as the regulator of charities depending upon the level of the charity’s income and type of charity. Failure to submit the required accounting information to the Commission is a criminal offence. The Commission also regards it as mismanagement and/or misconduct in the administration of a charity.

Charity trustees must comply with Orders and Directions of the Commission. In some circumstances it may be a criminal offence (or contempt of court) for a charity or a trustee to not comply with an Order or Direction of the Commission.

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. Accurate accounts mean donors 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.

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.