Decision

Islamic Global Trust (formerly a registered charity)

Published 4 June 2019

This decision was withdrawn on 29 November 2022

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

The charity

Islamic Global Trust (‘the charity’) was registered on 10 September 2008. It was governed by a constitution dated 13 May 2008, amended 26 August 2008 and 17 December 2012. It had previously operated under the names Pakistan Overseas Alliance Forum Global Trust and POAF Global Trust.

The charity’s entry can be found on the register of charities.

It was removed from the register on 03 February 2017.

Its objects were:

a) to advance education for the public benefit in the UK and Pakistan including the provision of equipment and goods for schools and study centres

b) the relief of financial hardship either generally or individually of people in Pakistan

c) the relief of sickness and the promotion and preservation of good health of people in Pakistan, and

d) to raise funds on behalf of people who are severely affected by natural and economical(sic) disaster, not only for the immediate affects(sic) but also to fund ongoing treatments, education and counselling to help people rebuild their lives.

Issues under Investigation

Background

The Commission opened a Pre-Investigations Assessment (PIA) in May 2013 following concerns raised by Manchester City Council that the charity had incorrectly claimed business rates relief on property it rented.

Rates relief is awarded on the basis that properties are used wholly or mainly by a charity, or trustees of a charity for charitable purposes. It provides charities with between 80 and 100% discount on their business rates.

Generally an application is granted if a charity number is given and confirmation is provided that a charity is in occupation. In this case, the Council had found that there was a lack of charitable activity being carried out at the charity’s premises and consequently, with effect from April 2013 the Council removed the rate relief granted in respect of these properties.

In addition the charity had submitted annual returns to the Commission recording annual income and expenditure figures less than £25,000, which is the threshold above which trustees are required to submit their accounts to the Commission. Even though charities with income below £25,000 per annum do not have to submit their accounts to the Commission they are legally obliged to keep accounts and make them available to the Commission or a member of the public upon request.

Despite numerous requests, the trustees failed to provide the charity’s accounts for inspection and subsequent analysis by the Commission found significant discrepancies between the income and expenditure figures reported by the trustees and the level of funds passing through the charity’s bank.

Income:

Year ending	Figures per annual return forms	Figures per bank analysis	Difference
31 March 2013	25,000.00	1,445.92	23,554.08
31 March 2012	20,000.00	6,464.52	13,535.48
31 March 2011	25,000.00	26,527.02	1,527.02+
31 March 2010	25,000.00	885.00	24,115.00

Expenditure:

Year ending	Figures per annual return forms	Figures per bank analysis	Difference
31 March 2013	25,000.00	1,957.92	23,042.08
31 March 2012	10,000.00	5,968.57	4,031.43
31 March 2011	10,000.00	26,286.81	16,286.81+
31 March 2010	10,000.00	150.00	9,850.00

Analysis of the charity’s bank statements showed some expenditure that was inconsistent with the proper application of charity funds, for example, monthly payments to a gymnasium and payments to Companies House (the charity was not registered with Companies House).

Other unreferenced payments included £6,100 to a digital television channel of which one of the trustees was a director, £14,600 to two debt collection agencies, a transfer of £10,000 and bank charges incurred for cheques drawn on the charity’s account when there were insufficient funds to honour the cheques.

At a meeting with the Commission in June 2013, two of the charity’s trustees advised that limited charitable activity had been undertaken, so it was unclear upon what basis claims for charitable rate relief had been made by the charity.

Furthermore, there was confusion over who the trustees were and that with only two names on the register of charities, the charity appeared to be inquorate and unable to act – the charity’s governing document requires a minimum of three trustees and the quorum is three.

Subsequent attempts to properly engage with the trustees were unsuccessful and the Commission was unable to fully establish the facts and resolve its concerns. Therefore, on 06 March 2014 the Commission opened a statutory inquiry into the charity under section 46 of the Charities Act 2011 (‘the Act’).

The inquiry closed with the publication of this report.

Regulatory concerns

The concerns raised were assessed against the Commission’s regulatory risk framework and in summary these were:

• the charity appeared to have been used by trustees and/or individuals connected with the charity for personal benefit
• the charity had failed, despite numerous requests by the Commission, to submit annual accounts or to provide an explanation of why they appeared to contradict figures taken from the charity’s own bank account records
• there were concerns over the control of the charity and, in particular, who the actual trustees of it were

In its scope the inquiry looked at whether:

• the charity had been utilised by trustees and/or individuals connected with the charity for personal benefit. In particular whether the charity’s status as a registered charity had been used to enable business rates relief to be claimed on properties not properly used for charitable purposes or occupied by the charity
• the general and financial management of the charity was adequate, with specific regard to accounting for the application of charitable funds and the charity’s activities
• there had been mismanagement and/or misconduct by the trustees in the administration of the charity
• the trustees had complied with and fulfilled their legal duties and responsibilities as trustees under charity law

Findings

Use of the charity for personal benefit

Trustees must make sure that their charity is carrying out the purposes for which it is set up, and no other purpose. Trustees must not receive any benefit from the charity unless it is properly authorised and is clearly in the charity’s interests.

Trustees should also ensure that only necessary and authorised purchases are made and that funds exist within approved budgets to meet the expenditure.

The inquiry found that one of the trustees had authorised a number of cheque payments for which there were insufficient funds in the charity’s bank account. The inquiry was unable to establish on what basis the cheques had been issued and why they had been issued without sufficient funds to cover them.

The trustees’ failure to properly manage the charity’s finances by incurring unnecessary bank charges, compounded by their failure to provide an explanation, was mismanagement and/or misconduct in the administration of the charity.

The inquiry found that charitable funds had been withdrawn from the charity’s bank account for the purposes of gymnasium membership in favour of five individuals but was unable to establish the identify of these individuals or locate them.

The inquiry was also unable to establish on whose behalf payments had been made from the charity’s bank account to Companies House, as the charity was not a registered company.

Likewise, £10,000 paid to two debt collection agencies, as well as payments totalling £6,100 to a digital television company that had subsequently gone into liquidation, of which one of the trustees was a director.

The trustees also failed to explain to investigators how potential conflicts of interest regarding payments to the television company were avoided, which was mismanagement and/or misconduct in the administration of the charity.

The inquiry attempted unsuccessfully, to establish what charitable activity the charity’s premises had been used for and it remains unclear whether premises rented by the charity, on which Business Rates relief was claimed, had been used for charitable purposes or activity.

In September 2014 the local authority had obtained a Liability Order against the trustees for £22,645.08 for Business Rates on the basis that the charity did not fulfil the criteria for charity business rates relief.

Furthermore the inquiry found that no representative from the charity had attended court to contest the Order and later established that one of the trustees had settled the Order.

The inquiry has seen no evidence of any charitable activity being undertaken by the charity and, in the absence of any information from the trustees to verify the extent to which charitable activities were carried out at these properties, the inquiry found that the trustees’ failure to demonstrate any charitable activity was mismanagement and/or misconduct in the administration of the charity.

Failure to submit annual accounts or provide an explanation

Trustees must comply with statutory accounting and reporting requirements. They should be able to demonstrate that their charity is complying with the law, well run and effective and ensure accountability within the charity. Failing to produce a charity’s annual accounts and returns within the statutory timeframe is a breach of the trustee’s duty to comply with the law and a failure to do so may constitute a criminal offence by virtue of section 173 of the Act.

In addition, Clause 11 of the charity’s governing document states:

“the executive committee shall comply with their obligation under the Charities Act with regard to i) the keeping of accounting records for the charity, ii) the preparation of annual statements of account for the charity, iii) the auditing or independent examination of the statements of account for the charity, and iv) the transmission of the statements of account of the charity to the Commissioners.”

The inquiry established that there had been no online social media activity by the charity since 2013 and that the charity’s website had closed by August 2015. In addition the charity’s bank account was closed down by its bank on 06 February 2017.

Investigators made numerous attempts over a 22 month period to meaningfully engage with the trustees, serving four Directions under section 47 of the Act to provide information relevant to the inquiry; however, no records or financial accounts were forthcoming.

The charity also failed to submit its annual accounts and returns to the Commission in respect of the financial years ending 2015 and 2016 within the required timescale and had therefore not met its legal requirements.

The trustees’ failure to produce their charity’s annual accounts and returns within the statutory timeframe was in breach of their own governing document, in breach of their duty to comply with the law and to co-operate with the Commission as regulator in its statutory inquiry, and was therefore mismanagement and/or misconduct in the administration of the charity.

Control of the charity and identity of the trustees

Registered charities must keep their details on the register of charities up to date including the details of trustees.

During the course of the inquiry the trustees changed.

On 16 October 2015 two trustees’ details were removed from the register by the charity and three new trustees were added. The new trustees were appointed by the charity on 01 August 2015 and each had addresses overseas.

Efforts to contact and engage with the new trustees were made by letter, with relevant translations, on 20 July 2016. When this met with no significant response, investigators attempted to trace them through sources in the public domain and other agencies, neither of which enabled the inquiry to confirm their existence.

A tracing company was subsequently engaged but was also unable to locate them, satisfying the inquiry that the trustees could not be found.

Whilst trustees being resident outside of England and Wales would not necessarily be an issue, here their absence and failure to act throughout the period that they were registered as trustees had impeded the proper administration of the charity.

Furthermore, the tracing company engaged by the Commission advised that the two former trustees in place at the outset of the inquiry could not be found.

In addition the inquiry considered restitution proceedings against the trustees, however this was considered to be disproportionate given the sums involved and the difficulty in locating the trustees.

Conclusions

The Commission found that the trustees had failed to demonstrate that all of the charity’s funds and property had been used solely for charitable purposes and it remains unclear what charitable activity if any, was undertaken.

The trustees failed to explain their expenditure on gym memberships, unattributed payments of £10,000, payments to two debt collection agencies, to Companies House and payments to a digital television company.

Furthermore, the trustees were unable to explain how a potential conflict of interest, regarding payments to a television company of which one of the trustees was a director, was managed.

The Commission found that the trustees failed to properly manage the charity’s finances, incurring unnecessary bank charges and a Liability Order regarding Business Rates relief. This was compounded by their failure to meaningfully engage or provide an explanation to the inquiry.

The Commission considers these actions and omissions collectively constitute an abuse of charity and serious mismanagement and/or misconduct in the governance and administration of the charity.

The Commission also found that the trustees failed to provide annual returns and accounts within the statutory timeframe and failed in their duty to keep their charity’s details up to date and to maintain current and accurate contact details on the charities register.

The Commission concluded that this was also mismanagement and/or misconduct in the administration of the charity. The Commission further concluded that their failure to provide an explanation and in breaching four Directions made under section 47 of the Act to provide relevant information was further mismanagement and/or misconduct.

As the trustees could not be found and/or were unable to act, they all three were removed as trustees of the charity under section 80(1) of the Act.

Consideration was also given to the disqualification under s181A of the Charities (Protection and Social Investment) Act 2016, of former trustees who were in place when the inquiry was opened. However, the absence of any meaningful records and lack of clarity about who was even a trustee, led the Commission in this instance to decide not to exercise the power to disqualify persons from acting as trustees.

The names of individuals who failed to co-operate with the inquiry or to clarify their role in the charity’s governance and administration have been noted on the Commission’s records, in the event that they should seek to become trustees of charity in future.

The charity was removed from the register of charities under section 34 of the Act on 03 February 2017, as the inquiry could find no discernible charitable activity, beneficiaries, property or trustees and considered that the charity had ceased to exist or did not operate.

Regulatory action taken

During the course of the inquiry the following regulatory action was taken:

Six Directions under section 47(2) (a) and (b) of the Act to the trustees

Six Orders under section 52(1)(b)(i) of the Act to the charity’s bank

Three Orders under section 80(1)(e)(i) of the Act to the charity’s trustees.

Issues for the wider sector

Trustees must act only in the best interests of the charity and actively manage any conflicts of interest. They should step back from or avoid any situation where a conflict exists or is likely to arise if it is clear the conflict cannot be adequately managed, even if this means, for example, that additional disinterested trustees are appointed or that the affected trustees resign.

Trustees carry ultimate responsibility for the management of their charities. Ensuring there are sound financial controls in place and implemented is a crucial part of trustees’ duties. Such systems help prevent financial crime, ensure the charity is reporting accurately to the public and help protect the charity’s reputation.

In this case, the charity’s trustees failed to keep adequate oversight of the charity’s financial management and failed to account for significant sums of money.

Controls also need to be in place for payments made by cheque. Some governing documents require two signatories on cheques. Where practicable bank mandates should require two signatures, one of which being that of a trustee.

In all cases there are a number of basic controls that should be in place, including regular review of bank mandates and authority limits, prompt recording of payments including details of the cheque number, nature of the payment and the payee and obtaining documentation to support the validity of the payment including relevant invoices and confirmation that the goods or services have been received.

Trustees are required to keep accounting records for their charity. In order to show that they are complying with their legal duties, trustees must keep records and an adequate audit trail to show that the charity’s money has been properly spent on furthering the charity’s purposes for the benefit of the public.

There are legal requirements for charities relating to the preparation of charity accounts and annual reports, the audit or independent examination of accounts and the submission of these to the Commission.

The duty to file accounts and the trustees’ annual report with the commission applies to all registered charities whose gross income exceeds £25,000 per year.

Trustees are responsible for the overall management of the administration of their charity. All decisions by the trustees concerning a charity should be taken by the trustees, acting collectively.

A charity is entitled to the independent and objective judgment of each of its trustees, acting solely in the interests of the charity. Charity trustees must not put themselves in a position where their personal interests conflict with their duty to act in the best interests of the charity.

The onus is on charity trustees to be able to demonstrate that they have acted solely in the interest of the charity. A trustee’s primary duty is to act in the best interests of the charity and, in the interests of transparency, to be able to demonstrate that they have done so.

The Commission expects charity trustees to engage appropriately with the Commission as regulator and to co-operate fully when it is exercising its statutory powers. This is particularly relevant where the Commission has opened a statutory inquiry.