Decision

Ghulam Mustafa Trust

Published 7 March 2019

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

A statement of the inquiry results for Ghulam Mustafa Trust (registered charity number 1157588).

Published on 7 March 2019.

The charity

Ghulam Mustafa Trust (‘the Charity’) was entered onto the Register of Charities (‘the Register’) on 25 June 2014. It was a charitable incorporated organisation governed by a Constitution dated 1 October 2013. The Charity ceased to exist when it was removed from the Register on 28 February 2019.

The Charity’s objects were the prevention or relief of poverty or financial hardship in Pakistan by providing or assisting in the provision of education, training, healthcare projects and all the necessary support designed to enable individuals to generate a sustainable income and be self-sufficient.

Issues under Investigation

On 22 July 2015, the Charity Commission (‘the Commission’) undertook a compliance visit (‘the visit’) at the Charity’s premises. The Charity was identified for a visit following receipt of complaints regarding a post on the charity’s Facebook page of a video (‘the video’) that the complainant considered to be inappropriate and offensive. The video suggested that certain mobile phones contained a hidden tracking chip with the implication that this was the responsibility of the Jewish community. Disparaging remarks were made about the Jewish community at the same time which the Commission determined were wholly inappropriate and offensive. The video was removed following the Commission’s intervention.

The posting of the video called into question whether the then trustees were discharging their legal duties and responsibilities to the Charity and whether they were carrying out activities that were in furtherance of the Charity’s objects for the public benefit.

During the visit, the Commission established that one of the trustees, Mr Ghulam Mustafa (‘Trustee A’) was responsible for creating, featuring in and posting of the video. It was also confirmed that the Charity did not have a social media policy or any rules governing who could post messages on the Charity’s social media pages. The Commission also identified other posts on the Charity’s Facebook page which were offensive or derogatory about Jewish people.

From a review of the Charity’s records and activities during the visit, the Commission established that the Charity worked exclusively in Pakistan and that its trustees had travelled to Pakistan to monitor spending of funds there. The Commission established that the methods for transferring charitable funds to Pakistan included the trustees carrying cash personally while travelling to Pakistan. Carrying or couriering charitable funds in cash is inherently high risk and the Commission’s published guidance cautions against such practice. This is because it is known to be an activity by criminal and terrorist groups to move money but also because it exposes a charity and the individual(s) carrying it on their behalf at increased risk of seizure, loss or forfeiture.

The Commission’s visit identified that whilst some records were kept to demonstrate how the Charity was spending its funds abroad, these were not sufficient to show and explain all of the Charity’s income and expenditure. The trustees were under a legal obligation to account for all of the Charity’s income, and perhaps more crucially, its expenditure. From its review of the Charity’s financial records during the visit the Commission identified a payment which benefitted Trustee A and which he personally authorised. The payment, of approximately £100, did not further the Charity’s purposes or otherwise relate to its activities. The Commission considered this payment to not be properly authorised by un-conflicted trustees and a misapplication of the Charity’s funds which the trustees must recover or repay.

From the Commission’s review of the Charity’s records during the visit it was clear that the Charity had no written financial controls. The Commission concluded that without the Charity’s trustees adopting formal written financial controls and following them, the trustees would not be able to discharge their legal duties to account for and safeguard the Charity’s funds.

Following the visit the Commission made requests for additional information before issuing a report to the Charity’s trustees and an Action Plan under section 15(2) of the Charities Act 2011 (‘the Act’). The Action Plan was issued in September 2015. This required the trustees to complete certain actions within specified timeframes – including introducing social media and financial controls policies, conducting a review of material posted on the Charity’s social media account and removing any which did not further the Charity’s purposes or which were other offensive or inappropriate and addressing various governance failings in the Charity’s administration.

After the first actions set out in the Action Plan were due to be completed, the Commission engaged with the then trustees to seek evidence of the actions that they had taken in compliance with the Action Plan. Although some action had been taken – and confirmed by the trustees – the Commission had concerns as to the ability, willingness and competence of the trustees to comply with the actions. One of the actions required of the trustees was to review all of the Charity’s previous social media postings and remove any that did not further the Charity’s objects and/or likely to bring the Charity into disrepute. Whilst a review was completed and certain posts were removed these were limited to posts identified by the Commission by its own review and which were included to illustrate the Commission’s concerns. The responses provided by the trustees did not provide the necessary reassurance or otherwise, consequently, on 18 November 2015, a statutory inquiry (‘the Inquiry’) into the Charity was opened under section 46 of the Act.

The scope of the Inquiry was to examine a number of issues including:

• the administration, governance and management of the Charity by the trustees
• the financial controls and management of the Charity
• the conduct of the trustees
• whether or not the trustees had complied with and fulfilled their duties and responsibilities as trustees under Charity law

On 21 December 2015 the Inquiry exercised the Commission’s legal powers under section 84 of the Act by directing the then trustees to take specified action within set timeframes – further information is provided under ‘regulatory action taken’.

On 4 January 2016 the Inquiry received a dissolution form from the Charity’s trustees. The trustees were advised as to how to dissolve the charity and that until such time as the charity was legally dissolved the Commission’s Order under section 84 of the Act must be complied with.

The Inquiry closed on 7 March 2019 with the publication of this report.

Findings

The administration, governance and management of the Charity by the trustees

The Inquiry found that the Charity was poorly managed and had little to no governance infrastructure in place or other policies or controls to assist the trustees to manage the Charity. The trustees failed to demonstrate that they were acting in accordance with provisions in the Charity’s constitution and that the Charity was otherwise being properly managed and administered.

The trustees failed to comply with the Commission’s Action Plan and implement relevant policies and procedures – most notably a social media policy and financial controls policy – to ensure that similar offensive and inappropriate posts on the Charity’s social media account(s) were not posted in the future and that the Charity had appropriate financial controls in place to protect and account for the Charity’s funds. The posting of the video, and other images and comments by Trustee A were wholly inappropriate and offensive, however, there was a collective failing on the part of the trustees to ensure that in utilising social media adequate controls and safeguards were in place.

The Inquiry was concerned by the response of the trustees to the opening of the Inquiry and the submission of an incomplete dissolution form. Despite regulatory advice and guidance as to the correct process to follow to dissolve the Charity and reminding the trustees of the requirement to comply with the Commission’s Order under section 84 of the Act, the trustees failed to comply with the section 84 Order or submit a completed dissolution form.

The Inquiry found that the trustees were unwilling or unable to properly administer the Charity.

The financial controls and management of the Charity

The Inquiry found that the Charity did not have adequate financial controls or policies in place and that over £10,000 of the Charity’s funds expended in Pakistan were not accounted for. Similarly, although other expenditure was supported by invoices or receipts there was little other information provided to the inquiry which showed the charitable application of those funds and how the expenditure furthered the purposes of the Charity.

It was evident from the records held by the Charity that, in practice, Trustee A completed the majority of the Charity’s financial transactions with little or no evidence of oversight by the Charity’s other trustees.

The trustees failed to maintain and preserve accounting records in accordance with the Act (sections 162 to 169) and the Charity’s constitution. These require that the trustees ensure that accounting records were kept and submitted to the Commission. In response to a direction compelling the trustees to answer questions and provide copy documents, Trustee A confirmed that the records provided to the inquiry were incomplete with some records being held in Pakistan; further records were subsequently provided to the Inquiry by Trustee A however, these did not change the Inquiry’s finding that the trustees failed to maintain and preserve full accounting records.

The conduct of the trustees

The Inquiry found that the conduct of the trustees fell below that which the Commission expects of trustees. The Inquiry found that in addition to making, featuring in and posting the video, Trustee A was also responsible for posting other offensive or inappropriate posts on the Charity’s social media account and that such posts were labelled provocatively and/or in a way which would clearly cause offense to those of the Jewish faith. In addition to collective failures of the trustees, the Inquiry considered that action to address Trustee A’s mismanagement and misconduct was required. See regulatory action taken for further information in respect of Trustee A.

As set out above, the trustees failed to properly administer the Charity. The Inquiry was concerned by the trustees’ response to the opening of the Inquiry and efforts to dissolve the Charity shortly thereafter. Trustee A advised the Inquiry that he would only communicate with the Inquiry if legally required to do so. The Charity’s other trustees’ correspondence and engagement with the Inquiry was minimal.

The Commission and the courts expect trustees to cooperate with it as regulator and during its investigations into charities, it is difficult to see why a prudent body of trustees would not cooperate with the Commission as regulator. The public would expect trustees to act reasonable and responsibly and that the Commission will intervene to take action against those who do not, particularly where there is further evidence of failings on the part of those trustees.

Whether or not the trustees had complied with and fulfilled their duties and responsibilities as trustees under Charity law

The Inquiry found that the trustees failed to comply with their legal and duties as trustees under Charity law. These failures included not complying with provisions of the Charity’s governing document, orders of the Commission, and preparing and filing of statutory returns with specified timeframes.

Conclusions

The Commission concluded that there was misconduct and/or mismanagement in the administration of the Charity as a result of failures on the part of the former trustees and in some instances as a direct result of the sole conduct of Trustee A.

Regulatory action taken

The Commission issued a number of orders and directions under sections 47 and 52 of the Act to obtain copy documents and answers to questions.

On 21 December 2015 the Commission issued an order under section 84 of the Act directing the trustees to take specified actions within set timeframes, these included:

• conduct a review of all of the Charity’s previous social media posts and remove any which did not further the Charity’s purposes or which were otherwise likely to bring the Charity into disrepute
• draft, approve and implement a social media policy
• draft, approve and implement a trustee code of conduct
• draft, approve and implement a financial controls policy
• ensure that the trustees comply with the Charity’s governing document

On 12 December 2017 the Commission issued notice of its intention to disqualify Trustee A from trusteeship and senior management function under section 181A of the Act for a period of 3 years. The Commission received representations from Trustee A to its proposed disqualification of him; these were considered in accordance with the Commission’s decision review procedures. The independent reviewer agreed that the statutory grounds for disqualifying Trustee A under section 181A of the Act were met, specifically:

• one of the conditions set out in section 181A(7) of the Act were met – in this instance that Trustee A had been a trustee, officer or employee of the Charity when there was misconduct or mismanagement in the administration of the Charity and that they (i) were responsible for the misconduct or mismanagement, or (ii) knew of it and failed to take any reasonable steps to oppose it, or (iii) the person’s conduct contributed to the misconduct or mismanagement
• they were unfit to be a trustee
• the disqualification is desirable in the public interest in order to protect public trust and confidence in charities

Although the reviewer acknowledged that Trustee A expressed remorse for his conduct, they did not consider that this was sufficient not to proceed with the proposed disqualification.

On 20 April 2018 the Commission made an order under section 181A of the Act to disqualify Trustee A from trusteeship and senior management functions for a period of 3 years. The Commission’s order under section 181A of the Act took effect on 2 June 2018. Trustee A was entered onto the Register containing disqualified individuals in accordance with section 182 of the Act.

In April 2017 the Commission’s records were updated to reflect the resignation of two of the Charity’s original trustees, leaving Trustee A as the remaining trustee. On 18 April 2017 Trustee A appointed three new trustees to the Charity. The three new trustees, appointed in April 2017, are not responsible or accountable for the misconduct and mismanagement of Trustee A or the Charity’s former trustees.

Following Trustee A’s disqualification the Commission met with the new trustees of the Charity. In July 2018 a meeting with the Charity’s new trustees took place, the Commission queried whether the charity was operating and viable. The new trustees considered the Commission’s guidance and subsequently confirmed their decision to dissolve the Charity. In November 2018 the Commission received an application from the new trustees to dissolve the Charity. In accordance with section 7 of the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012. In December 2018 the Commission gave public notice of its intention to dissolve the Charity and remove it from the Register. As no representations were received, the charity was dissolved upon its removal from the Register on 28 February 2019 at which point it ceased to exist and this remains the case at the time of this report.

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the Commission’s assessment of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the charity in addition to the findings and conclusions set out in the earlier sections of this report, but is included because of their wider applicability and interest to the charity sector.

Every charity needs an effective trustee body which has control over the administration of the charity and acts as a whole, especially because all trustees are equal in responsibility. Trustees must ensure that their charity has adequate financial and administrative controls in place, and that the funds of their charity are applied for the benefit of the public for which it has been set up.

Trustees are representatives of the charity they govern or the charitable funds they are responsible for, in the charity sector. Trustees must be aware of and act in accordance with their legal duties. The conduct of trustees can be a key driver of public trust and confidence in the charity sector. When the conduct of trustees falls below the standards expected there can be damage to the reputation of individual trustees, the charity and possibly the wider charity sector.

Monitoring: whatever the size and complexity of the proposed arrangement, trustees should ensure that they properly consider the risks involved to make certain that these have been sufficiently considered and where appropriate, managed.

Monitoring is important to ensure that trustees are able to account for the proper use of the charity’s funds and that they maintain donor confidence.

Monitoring will take a variety forms depending on the charity’s work, the particular project, the amount of charitable funds involved and the outcome of a risk assessment. However, it will usually involve steps aimed at ensuring:

• the charity’s funds can be accounted for, that there is an audit trail showing the expenditure of funds by the charity, checking the funds were received by the partner and, if the partner forwarded those funds on, that there is an audit trail to show this
• the partner has actually delivered the project and charitable work expected
• the charity’s funds have been used for the purposes for which they were intended, and for the beneficiaries identified
• that any concerns that need to be dealt with are identified
• the partner continues to be appropriate in all respects for the charity to work with

Monitoring may also be broadened to fulfil other purposes, for example:

• assessing the impact and value of the project and charitable work
• assessing whether the charity’s funds are being put to their most effective use
• as a tool to gauge customer and stakeholder satisfaction with the charity
• helping to benchmark standards across a number of the charity’s projects
• helping to assess and review risks to the charity

For a variety of reasons monitoring may not be easy and may present practical challenges. This is particularly so in certain parts of the world where access to the areas in which the charitable work is being carried out may be restricted.

Failure to carry out proper due diligence and monitoring, particularly where the risks are higher, may mean a trustee does not discharge their legal duties and this failure may be regarded by the Commission as evidence of misconduct or mismanagement.

Further information can be found in the Chapter 2 of the Commission’s Compliance toolkit – Charities: due diligence, monitoring and verifying the end use of charitable funds.