There were “systemic failings of oversight” at Muslim Aid which meant former trustees could not show how charitable funds were used, the Charity Commission has found.
Yesterday the Commission published the findings of its investigation into Muslim Aid and said that the former trustees “fell short” of public expectations and legal responsibilities, but that the new ones are making “significant” progress.
The regulator has been engaged with Muslim Aid since 2010 when a regulatory compliance report made a number of recommendations to trustees, including about working with partners abroad.
In 2012 the charity submitted a serious incident report regarding financial irregularities in two African field offices.
A statutory inquiry was opened in November 2013 because the regulator was concerned about “the sheer scale of concerns about the charity’s financial management”.
The Commission issued trustees with an action in plan in 2015, but in October 2016 an interim manager was appointed because the Commission felt that the trustees had not made enough progress.
An entirely new board was appointed and a new body was established as a charitable incorporated organisation to take over Muslim Aid’s work. The original organisation was renamed MA 1985 but subsequently ceased operating.
The inquiry report said the Commission found unmanaged conflicts of interest, inadequate controles for the use of the charity’s branding, insufficient oversight of more than 100 bank accounts, non-compliance with policies and guidance in some field offices.
Muslim Aid operates in over 20 countries and has an annual income of around £30m.
Harvey Grenville, head of investigations at the Charity Commission, said: “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.”
Interim manager cost charity £170,000
The Commission appointed Michael King of Stone King LLP as the interim manager in September 2016 after determining that there were “deficiencies against most actions” it had asked trustees to take.
He was in post until 5 February 2018, which was paid for by charity funds. This comprised of £141,896 for acting in the role, £537 in expenses and VAT of £28,379.
King carried out £120,000 of work pro bono.
‘There are no quick fixes’
New trustees have been issued with a fresh action plan and warned that if they do not meet deadlines set by the Commission they could face further regulatory action.
“The new trustees have also been put on notice that we will be monitoring the new CIO’s progress against the 2018 action plan and we will expect the new trustees to be able to evidence that they have taken steps to ensure compliance with these action points,” the inquiry report said.
The Commission will monitor Muslim Aid for 24 months.
Grenville added: “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.”
Committed to working effectively
Muslim Aid’s new board and senior management said that they are committed to moving forward.
Iftikhar Awan, chair of Muslim Aid, said: “We see the past issues with Muslim Aid 1985 governance and its time in interim management as challenging, albeit valuable. We are now moving forward with a renewed Muslim Aid with much greater accountability and transparency, to ensure that good governance underpins the new organisational structure.”
Jehangir Malik, chief executive, added: “Muslim Aid is committed to ensuring it works effectively and transparently for the purpose in which it was created. After a challenging period, the board and the senior leadership team have initiated a new governance structure which has put in place model checks and balances to ensure the highest of professional operating standards.
“Muslim Aid has a 30-year legacy of excellent field work, serving humanity. This is a strong foundation and the improvements put in place, under the supervision of this inquiry process, will ensure that the future of the charity is robust.
“Muslim Aid has emerged a more transparent organisation, more fit-for-purpose for the current strategic requirements of donors and beneficiaries alike. Muslim Aid is entering an exciting new phase.”
The former charity’s accounts for the year ending December 2016 have been published on Muslim Aid's website and show had a total income of £37.2m and expenditure of £42m.
Accounts for the first year of the new charity are due to be filed with the Commission by 31 December 2018.