The Charity Commission has found serious mismanagement on the part of the former board of trustees of Muslim Aid.
The Commission opened a statutory inquiry into Muslim Aid in November 2013 over concerns about 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 Commission said its engagement escalated when it became aware of the sheer scale of concerns about the charity’s financial management, specifically its due diligence, monitoring and oversight of its field offices.
The former board of trustees were Manazir Ahsan, Dr Suhaib Hassan, Dr Muhammad Abdul Bari and Saleem Asghar Kidwai.
- Unmanaged conflicts of interests in one country’s field office – a pharmaceutical company part-owned by the charity’s country director supplied the charity with medicines.
- 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 said that 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.
On the other hand, the investigation recognised that Muslim Aid 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 (Muslim Aid) 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.”
New leadership team
The Commission appointed Michael King of Stone King LLP as the interim manager in September 2016. 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.
A new senior leadership team was also recruited and the charity was incorporated into a new charitable incorporated organisation, also named Muslim Aid, with assets and liabilities transferred from the old organisation to the new one.
The old Muslim Aid organisation 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 said it recognises the significant progress which has been made to address the governance and improve oversight and control by the new trustees.
Muslim Aid operates in over 20 countries and has an annual income of around £30m.
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.