Serious mismanagement found at £34m charity

The Charity Commission has found serious mismanagement on the part of the former board of trustees of the charity MA 1985 (formerly Muslim Aid), including financial irregularities, according to the findings of an inquiry set up five years ago

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. At the time the charity reported an annual income of between £24m and £34m.

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 Sudan and Gambia.

Subsequent investigation by the Commission identified significant concerns about due diligence, monitoring and oversight of its field offices. This resulted in the charity being issued with an action plan and, although the trustees made some improvements, an interim manager was appointed in 2016.

The Commission’s report details a number of issues which placed the charity’s assets or reputation at risk. These include 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 and the trustees were unaware of the conflict of interest this represented.

There were examples of 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. The charity held over 100 bank accounts, without sufficient oversight of these, and the 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.

There was 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, the Commission’s investigation identified 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. There were inadequate controls for the use of the charity’s name and logo by third parties.

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: ‘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.’

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’s investigations found ‘systemic failings in MA 1985’s governance, leadership and management structures and personnel, including financial controls, monitoring of project outcomes and expenditure, dysfunctional relationships with country offices, staff distrust of the management structure, conflicts among the trustees’.

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 in January 2018.

Grenville said: ‘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 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.

Charity Inquiry: MA 1985 is here

Report by Pat Sweet

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