posted by Christopher W. Holton

The United Kingdom’s Charity Commission, which regulates charitable organizations in the UK, has released a statement condemning the former management of Muslim Aid for failing to safeguard against funding “illegal groups.”

Curiously, Muslim Aid folded not long ago and his been replaced by a new organization of the same name.

The full statement from the Charity Commission follows below…

The Charity Commission has found serious mismanagement on the part of the former board of trustees of MA 1985 (formerly Muslim Aid), as set out in an inquiry report published today.

The Commission opened a statutory inquiry into what was then Muslim Aid in November 2013 over concerns of significant financial loss to the charity, serious governance failures, poor financial controls and loss or misuse of charitable funds for improper purpose.

The inquiry was prompted by a serious incident report from the charity in 2012, setting out financial irregularities and unmanaged conflicts of interest in two of the charity’s field offices in Africa. The concerns were originally dealt with as part of a regulatory compliance case, but the Commission’s engagement escalated when the charity’s own reassurances to the regulator served instead to highlight the sheer scale of concerns about the charity’s financial management, specifically its due diligence, monitoring and oversight of its field offices.

The regulator issued the charity with an action plan in 2015, directing it to implement a number of actions aimed at improving governance and financial management. Although the former trustees showed a willingness to resolve matters including successfully recruiting an experienced CEO, they failed to do so in full, successfully complying with only a small number of actions.

The investigation recognised that the charity did carry out vital relief work around the world, sometimes in very difficult conditions. And while the inquiry found no evidence of any illegal funding of any proscribed organisations, the trustees could not demonstrate to the inquiry that they had ensured the charity had adequate due diligence and monitoring arrangements in place which evidenced that all of its funds had been properly applied.

Harvey Grenville, Head of Investigations and Enforcement at the Charity Commission, said:
The public rightly hold charities to higher standards of behaviour and conduct. And when they donate to charity, the public have a legitimate expectation that their monies will be carefully protected and applied in the best interests of the people the charity is set up to help.

Our inquiry into MA 1985 demonstrates that the former board of trustees of that charity fell short of those expectations, and indeed of their legal responsibilities. Our inquiry found systemic failings of oversight, management and governance such that there was insufficient detail to properly evidence the end use of some charitable funds. These findings would be concerning in any charity – but they are especially worrying given the size, importance and reach of Muslim Aid.

I am pleased that the new charity, is making significant progress. But there are no quick fixes to the systemic problems our inquiry identified. The new trustees will need to continue their hard work in providing robust oversight and control of the charity’s operations if they are to meet our expectations as regulator and the expectations of the public who support Muslim Aid’s aims.

The Commission will continue to hold the new trustees to account for putting things right.

The report details a number of other issues which placed the charity’s assets or reputation at risk including:

• unmanaged conflicts of interests; for example, in one country field office, a pharmaceutical company part-owned by the charity’s country director supplied the charity with medicines; the trustees were unaware of the conflict of interest this represented.

• inadequate controls for the use of the charity’s name and logo by third parties
loans paid to staff in field offices, contrary to the charity’s policies and without relevant documentation to evidence repayment or enforce recovery in the event of non-payment

• over 100 bank accounts held by the charity, without sufficient oversight of these, and private accounts of overseas staff were used where local banking facilities were not available to the charity

• the charity’s assets were not properly recorded on asset registers and where registers did exist, they were poorly maintained without sufficient oversight by the charity’s headquarters, increasing the risk of abuse of property owned by the charity

• evidence of field offices being paid in sterling so profiting from favourable currency exchange rates that enabled them to either spend excess funds or create reserve accounts without the knowledge or consent of the charity

• in some field offices, significant issues of non-compliance with the charity’s policies, guidance and frameworks which also exposed the charity to the risk of loss of assets or risk to reputation.

The Commission used its powers in October 2016 to appoint an interim manager (IM), who worked alongside the newly appointed CEO to complete a full governance and infrastructure review of the charity. The IM concluded that there were ‘systemic failings in MA 1985’s governance, leadership and management structures and personnel’.

Following the appointment of a new CEO, and the subsequent IM appointment, a new senior leadership team was recruited. The charity was incorporated into a new charitable incorporated organisation, now named Muslim Aid, with assets and liabilities transferred from MA 1985 to Muslim Aid. MA 1985 has since ceased to exist and has been removed from the charity register. In addition a new trustee board was appointed on 31st January 2018.

The inquiry recognises the significant progress which has been made to address the governance and improve oversight and control by the new trustees, including reconstructing the charity into a new CIO. Further work remains to be done, however the positive improvements made in respect of management and organisational procedures have been significant enough to enable the inquiry to close. The Commission welcomes the commitment of the new trustees to oversee this transition.

The Commission issued a new action plan to the trustees of the recently registered charitable incorporated organisation in April 2018 to resolve concerns about the charity’s management and administration, and ensure the new trustees comply with their legal duties and responsibilities. The Commission will continue to monitor the new charity over the next 24 months to ensure it achieves these objectives.

The full report of the inquiry is available on GOV.UK.

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