Nottingham charity criticised for poor financial management

The Charity Commission has published a highly critical report on the management, governance and administration of a Nottingham-based charity, and disqualified a former trustee for a ten-year period

The regulator’s investigation into Muslim Foundation UK, which runs a place of worship with educational facilities for Muslims and non-Muslims in Nottingham, has resulted in the disqualification of an individual as trustee over death threats and incitements to murder.

Pir Afzal Qadri praised the murder of a Pakistani politician, called for violent uprisings against the Pakistani government, and issued ‘edicts of death’ against judges in the country.

Following the disqualification, the Commission conducted a compliance visit which identified serious regulatory concerns regarding the governance and administration of the charity and opened a statutory inquiry in January this year. 

The subsequent report sets out that the trustees, many of whom had personal links to the former trustee, failed to recognise the seriousness of the comments, and did not take appropriate action.

It is highly critical of the management, governance and administration of the charity, finding its trustees failed to comply with their legal duties and responsibilities in a range of areas, including safeguarding and establishing an adequate child protection policy.

There were also criticisms of the charity’s financial management. The inquiry found that the trustees had failed to submit an annual return and annual accounts within 10 months of the financial year end for the financial years ending 30 November 2016 and 2017.

During the Commission’s investigations, it found the charity owed £100,440 in Qard E Hasana (Interest free loans) to members of the community. The accounts for the financial year ending 30 November 2017 record that the charity repaid £10,000 of these loans.

However, the Commission established that no loan agreements or other records related to the loans exist. It was not clear how repayments could be made and administered in the absence of loan agreements or other records.

The regulator said that in June, during the drafting of its report, a one-page document showing names and loan amounts was supplied. This document suggests £65,000 is owed but is undated and contains insufficient information to ascertain with certainty who has lent money to the charity.

The inquiry found that the charity has insufficient liquid assets to repay all, or the majority, of the Qard E Hasana loans. If all or the majority of the loans were called-in, however unlikely this may be, the charity may have to sell its property in order to raise sufficient funds and this would curtail its ability to operate and be detrimental to the beneficiaries.

The Commission found that the trustees have not managed the Qard E Hasana loans and repayments appropriately. Whilst most of the loans have been or could be converted to donations, the charity has made some repayments but relevant documentation has not been created and maintained.

In addition, the Commission found that the charity expended funds overseas in Malawi (£704), Nigeria (£2,506), Pakistan (£2,844) and India (£125) during the financial years ending 30 November 2016 and 2017.

The Commission was told, during the visit, that records pertaining to overseas transfers and expenditure existed but despite repeated requests for the information, it was not provided to the Commission or the investigative stage of the inquiry.

The Commission also found that transfers of funds overseas were made outside of the regulated banking sector by individuals with links to the respective countries.

The Commission found that an individual, described as a volunteer, was responsible for the charity’s funds in Pakistan. No further information was provided in respect of this person, their role, how they were identified and what records were provided to the trustees to account for the overseas expenditure and application of the charity’s funds.

The Commission strongly discourages the transfer of funds outside of the regulated banking sector due to the associated risks of loss or misuse.

The Commission is critical of the trustees’ engagement with its inquiry, finding that they failed to comply with repeated requests for evidence and documentation.

In March, it ordered the trustees to take action in a number of areas to address these failings and to ensure compliance with their legal duties and responsibilities, including by conducting a governance review, reviewing the charity’s child protection policy, and agreeing and implementing new policies around finances, conflicts of interest and the monitoring of application of funds.

The charity will remain under statutory supervision until the Commission is satisfied that its order has been complied with in full.

Tim Hopkins, Charity Commission assistant director for investigations and inquiries, said: ‘This charity has been mismanaged by its trustees over a number of years.

‘They failed to take seriously the reprehensible public statements made by one of their fellow trustees, and have since been unable to provide evidence of having complied with some of their most basic legal duties and responsibilities.

‘The trustees must now enact significant improvements to their systems, policies and processes. We will be monitoring their compliance with these actions and they are required to report to us on their progress.’

Charity Inquiry: Muslim Foundation UK

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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