The Charity Commission has given an East London charity an official warning over the loss of £1m.
The commission announced today that it would be taking regulatory action against East London Mosque Trust for “failing to responsibly manage charity funds".
The official warning concerns an investment deal, which resulted in the loss of £1m. The commission found that the charity’s trustees had “failed to have sufficient oversight of the charity’s activities”.
Following the official warning, the regulator has given the trust six months to take action, or it may face further scrutiny.
Charity invested £1m in now-defunct NHS-approved supplier
The charity, which was founded in 1910 and manages a mosque, which is among London’s oldest, had invested £1m in an NHS-approved supplier, expecting a 20% return in six months.
However, this supplier was forced into administration, resulting in a loss for the charity.
The charity’s trustees reported the matter to the commission in February 2023, which the regulator reviewed as part of wider engagement with the charity.
The commission found the charity’s due diligence regarding the investment deal was not sufficiently thorough. It was also critical of the trustees’ lack of effective oversight and failure to properly scrutinise key documents concerning the investment.
The commission had previously told the charity to ensure it had sufficient control over its funds and had warned of the potential for further action.
Following the official warning, the trust is now expected to conduct an independent review of its governance, reporting findings to the commission. The regulator also expects the charity to do all it reasonably can to recover the lost funds.
Regulator: Trustees ‘did not do appropriate due diligence’
Joshua Farbridge, the Charity Commission’s head of compliance visits and inspections, said: “When people donate to a charity, they put their faith in those running it to manage those funds with care and in line with its aims.
“In this case, we found the trustees lacked the oversight we’d expect of such a large investment, nor did they ensure thorough due diligence had been undertaken.
“The East London Mosque Trust has been advised on more than one occasion about having appropriate oversight of funds and so we have now issued a formal warning. We expect all charities to promptly act on steps provided in an official warning and will be monitoring this charity’s progress.”
In a public statement, the trust said: "ELMT made an investment, in the same way as some other large companies and individuals, into a company that later went into liquidation.
"Despite conducting due diligence at the time, ELMT and the other investors were the victim of a sophisticated fraud, and that company is the subject of an ongoing police investigation.
"ELMT has already put in place a stricter investment policy and strengthened its governance and processes following an independent review. ELMT is fully committed to implementing any directions or further recommendations from the Charity Commission."
Editor's note: This article has been updated to clarify that the Charity Commission found that the charity had undertaken due diligence, but it was not sufficient
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