Decision

Save the Needy Worldwide

Published 21 February 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This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.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 results of an inquiry into Save the Needy Worldwide (registered charity number 1160579).

The charity

Save the Needy Worldwide (‘the charity’) was entered onto the register of charities (‘the register’) on 20 February 2015. It was a charitable incorporated organisation (‘CIO’) which ceased to exist following its removal from the register on 15 February 2019.

The charity’s objects were to advance such charitable purposes for the public benefit (according to the law of England and Wales) as the trustees see fit from time to time in particular but not limited to:

• the relief of poverty and sickness by the provision of goods /services which they could not otherwise afford through lack of means
• the relief of financial need and suffering among victims of natural or other kinds of disaster in the form of money (or other means deemed suitable) for persons, bodies, organisations and/or countries affected

The trustees

Mr Yusuf Kenan Oguz (‘Trustee A’) from 20 February 2015 until removal on 4 December 2017.

Mr Eric Lloyd (‘Trustee B’) from 23 April 2015 until resignation on 12 December 2017.

Mr Mahmoud Hatamikia (‘Trustee C’) from 6 April 2016 to 15 February 2019. See regulatory action taken for more information.

Issues under investigation

There has been a history of engagement with the charity. On 2 September 2015, the Charity Commission (‘the Commission’) undertook a compliance visit at the charity’s premises.

The charity was proactively identified for a visit due to its international operations in high risks areas. Charities which operate internationally can be more vulnerable to abuse or harm as a result of where and how they operate.

The visit sought to review the charity’s policies and financial records and to ensure the trustees were complying with their legal obligations in exercising control and management over the charity and its activities overseas.

The Commission also identified that one of the trustees of the charity, Trustee A, had previously been a trustee of another charity, Worldwide Ummah Aid (‘WUA’) which was also registered with the Commission. WUA is subject to a statutory inquiry, under section 46 of the Charities Act 2011 (‘the Act’), by the Commission.

The inquiry into WUA was opened, in part, as a result of Trustee A being stopped by police officers whilst travelling through Heathrow airport with over £12,000 in charitable funds which were subsequently seized and forfeited under the Proceeds of Crime Act 2002. Trustee A was suspended from his position as trustee of WUA by order of the Commission before being removed from his position in the charity by its trustees.

Following a review of the charity’s records during the visit, the Commission identified serious regulatory concerns in respect of:

• carrying out due diligence checks in respect of the charity’s partners
• poor financial management
• lack of records to evidence end use of charitable funds
• poor governance

The Commission therefore issued the charity’s trustees with an Action Plan under section 15(2) of the Act on 15 June 2016 requiring the trustees to complete a series of actions within specific timescales. These actions related to improving financial management, financial controls, governance (specifically concerning due diligence – decision making, interactions with other organisations and use of social media/websites) and considering charitable expenditure in the form of payments/benefit to the trustees.

The trustees were specifically made aware in the Action Plan of the risks associated with transacting in cash including the possibility that funds could be seized by the police.

The Commission had intended to review the trustees’ implementation of the Action Plan in December 2016, however, in July 2016 the Commission was notified by Bedfordshire Police that Trustee A was subject to a Schedule 7 examination under the Terrorism Act 2000 by Ports Officers (‘the Officers’) at Luton airport and that £3,260 was seized from him.

Trustee A made representations that these funds were the property of the charity and intended to support a Syrian refugee school in Gaziantep, Turkey. Information provided by the Officers indicated that the funds carried by Trustee A were concealed and that he did not conduct himself in a transparent and open manner in respect of the funds that he was carrying whilst questioned by the Officers. On 12 July 2016, a cash detention order was obtained by Bedfordshire Police from Bedfordshire Magistrates Court in respect of the £3,260 seized.

In response to this the Commission wrote to the trustees seeking an explanation as to the decision to courier charitable funds in cash. In response Trustee A stated that he had withdrawn £7,000 in cash from the charity’s bank account and attempted to travel to Turkey with £3,500. The remaining amount was left at the charity’s offices. No explanation was provided by Trustee A as to why there was a discrepancy in the amount seized from him versus the amount he stated he was taking out (i.e. £240).

The Commission exercised its power under section 52 of the Act to obtain copies of the charity’s bank statements. Analysis of these identified a number of cash withdrawals. Whilst expending charitable funds in cash is permissible, it is high risk and more difficult to audit and account for without sufficient controls in place. The Commission was concerned by such transactions, particularly given the cash seizure and that a sizeable sum of the charity’s funds were withdrawn and held in cash at its premises.

On 13 October 2016, as a result of the Commission’s findings during the review, 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 and whether its funds have been properly expended solely for exclusively charitable purposes and can be accounted for
• the conduct of the trustees
• whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under charity law

After opening the inquiry the Commission exercised a range of its regulatory powers. Further information is provided under regulatory action taken.

Findings

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

The inquiry found that the charity was poorly managed and not properly administered by the trustees and that they failed to fully comply with actions specified in the Commission’s Action Plan issued to the trustees of the charity in June 2016.

On 18 July 2017, the inquiry interviewed the charity’s other trustees, Trustee B and Trustee C. During the interviews Trustees B and C demonstrated a very limited understanding of the charity’s activities and admitted that they deferred decisions to Trustee A. Overall, Trustees B and C were unable to provide sufficiently detailed information to demonstrate that he had been actively involved in the decision making in the management and administration of the charity.

The trustees were notified that the Commission would review their compliance with the Action Plan in December 2016. The inquiry’s review of the trustees’ compliance identified that 5 of the 6 specified actions were not complied with by the trustees.

These actions related to the charity’s (i) internal financial controls, (ii) due diligence procedures, and (iii) use of the charity’s social media accounts.

The trustees also failed to fully comply with a legal direction, made under section 47 of the Act, both in terms of the specified timeframe for compliance and what was required to be provided. The direction required the trustees to provide information, explanations and documentation with regards to the trustee’s management of the charity.

Trustees are expected to cooperate with the Commission and its requests for information and its legal directions and orders. Failure to comply with the direction is misconduct and/or mismanagement on the part of all of the charity’s trustees.

The financial controls and management of the charity and whether its funds have been properly expended solely for exclusively charitable purposes and can be accounted for

The inquiry found that payments to Trustee A, which were also authorised by him, conferred an unauthorised benefit contrary to the charity’s governing document. The payments related to insurance and other related costs for the running of his personal vehicle which was also occasionally used on activities purportedly for the benefit of the charity.

During an interview with the inquiry, Trustee A accepted that those payments to himself were unauthorised and that he would return the funds to the charity if the other trustees asked him to. However, the funds were not repaid to the charity, see regulatory action taken for further information.

The inquiry shared the concerns of the Police, as set out in the forfeiture proceedings, that funds from the charity were being used to fund Trustee A’s lifestyle.

An analysis of the charity’s bank statements and other financial records from January 2015 to September 2016 showed that over £43,000 was withdrawn in cash from the bank account in which the charity’s funds were held. During their interviews, Trustees B and C, both confirmed that they were unaware of the sums withdrawn in cash and how they were used; they both confirmed that they deferred to Trustee A to manage the charity’s finances.

The charity’s entry on the register shows that the charity’s accounts and annual return for the Financial Year End (‘FYE’) 31 December 2015 were filed 77 days and 51 days late respectively. During an interview with Trustee C the inquiry was informed that Trustee C had no knowledge that these were filed late. At the time of the charity’s removal from the register, the charity’s accounts and annual return for FYE 31 December 2017 were showing as 107 days overdue.

The trustees’ failure to ensure that the charity’s accounts, reports and annual returns (‘statutory returns’) were filed on time is a breach of the charity’s governing document and the requirements under the Act (sections 162, 163 and 164). This is misconduct and/or mismanagement in the administration of the charity and is also a criminal offence under section 173 of the Act.

Failure to comply with the charity’s governing document and the Act is misconduct and/or mismanagement in the administration of the charity for which the trustees were jointly and severally responsible.

On 4 January 2018, in the Bedfordshire Magistrates Court, an amount of £3,260 (being the cash seized from Trustee A on 8 July 2016) was forfeited under section 298 of the Proceeds of Crime Act 2000 upon an application by Bedfordshire Police. The application was not contested by the charity.

The lack of transparency and accountability in the charity’s statutory returns about its expenditure and the proper control of and accountability for the charity’s funds was further evidence of the trustees’ misconduct and/or mismanagement in the charity’s administration.

The conduct of the trustees

The inquiry found that there had been misconduct and/or mismanagement on the part of the trustees of the charity. Overall their conduct displayed a failure to discharge their trustees’ duties, which are set out in the Commission’s guidance The essential trustee: what you need to know, what you need to do (CC3).

Whether or not the trustees have complied with and fulfilled their duties and responsibilities as trustees under charity law

During the course of the inquiry, the charity’s trustees were reminded that they are collectively responsible for the charity’s proper management and should collectively make decisions in accordance with the requirements of the charity’s governing document and the general law, and that they must always bear in mind their overriding duty to make decisions that are in the best interests of the charity.

The inquiry found that the trustees did not fulfil their duties and responsibilities as trustees under charity law. The trustees failed to comply with:

1. provisions of the charity’s governing document
2. the Commission’s June 2016 Action Plan
3. a legal direction issued by the inquiry to obtain information and copy documents
4. the statutory duty to file statutory returns with the Commission for the FYE 31 December 2015 and FYE 31 December 2017

Conclusions

The inquiry concluded that there was misconduct and/or mismanagement by all of the trustees in relation to the administration and management of the charity and the charity’s property was placed at risk for the following reasons:

• the trustees failed to comply with the Commission’s Action Plan of June 2016
• the trustees failed to comply with a legal direction under section 47 of the Act
• the charity’s funds were placed at risk and subsequently lost as a result of Trustee A’s conduct
• trustees B and C were not sufficiently aware of the activities of the charity and of Trustee A thereby facilitating his misconduct and/or mismanagement
• the charity’s funds could not be fully accounted for in accordance with charity law
• trustee A derived an unauthorised benefit from the charity by virtue of payments made to himself from the charity’s funds, which were not repaid to the charity

The inquiry made repeated requests to Trustee C (who from 12 December 2017 to 15 February 2019 was the sole remaining trustee) in relation to the direction and future of the charity.

The inquiry concluded that the charity no longer operated, under section 34(1)(b) of the Act. It therefore took regulatory action to dissolve it – as set out in regulatory action taken below.

Regulatory action taken

During the inquiry, information was exchanged with Bedfordshire Police, in accordance with the statutory gateway, under section 54-56 of the Act.

The inquiry exercised its information gathering powers under sections 47 and 52 of the Act on numerous occasions to obtain information, copy documents and answers to questions. On 18 and 19 July 2017, the Commission interviewed the three trustees of the charity.

On 26 October 2016, the inquiry exercised its legal powers and made an order under section 76(3)(f) of the Act restricting the transactions that the trustees could enter into without the prior authorisation of the commission.

The order prohibited the trustees from entering into, without prior written approval of the Commission, any of the following transactions:

• withdrawal of charitable funds in cash from the charity’s bank account(s)
• appealing for, collecting, soliciting or otherwise raising cash either directly or indirectly in the name of or on behalf of the charity, unless such cash is deposited into the charity’s bank account within 1 working day
• causing or inviting another to appeal for, collect, solicit or otherwise raise cash either directly or indirectly in the name of or on behalf of the charity, unless such cash is deposited into the charity’s bank account within 1 working day

On 1 November 2017, the inquiry used its temporary and protective power under section 76(3)(a) of the Act to make an order to suspend Trustee A as a charity trustee pending consideration being given to his removal, under section 79(4) of the Act. On the same day, the Inquiry issued formal notice to Trustee A, under section 89(5) of the Act of its intention to remove him as a charity trustee, under section 79(4) of the Act.

The inquiry also gave notice to Trustees B and C of the charity of its intention to remove Trustee A pursuant to section 82 of the Act. The Commission did not receive any representations in response to its notice of intention to remove Trustee A and therefore, on 4 December 2017, issued an order removing Trustee A as trustee of the charity under section 79(4) of the Act.

On 11 January 2018, the inquiry received confirmation that Trustee A was appealing, to challenge the removal order, to the First Tier Tribunal (General Regulatory Chamber) Charity (‘the Tribunal’). The case was heard by the Tribunal on 21 June 2018 and the decision was published on 20 July 2018.

Trustee A’s appeal was dismissed and the removal order was upheld. Also, as a consequence of the order, Trustee A is disqualified from acting as a trustee or holding an office or employment in a senior management function in any charity in England and Wales, unless he obtains a waiver. It is a criminal offence to act as a trustee whilst disqualified.

On 6 December 2017, the inquiry exercised its power under section 76(3)(d) of the Act to order the charity’s bank not to part with any property held in the account in which the Charity’s funds were held, without the Commission’s prior consent.

On 12 December 2017, the inquiry received correspondence from the Charity that Trustee B had resigned from his position as a trustee of the charity.

On 19 June 2018, the inquiry issued notice of its intention to disqualify Trustee B from taking on a role as a trustee and/or holding an office or employment in a senior management function for a period of 5 years, under section 181A of the Act, in all charities in England and Wales (this includes charities which are not registered with the Commission).

On 18 July 2018, the inquiry, having not received any representations from Trustee B in relation to the notice of disqualification, issued an order under section 181A of the Act disqualifying Trustee B.

Since March 2018 Trustee C, the sole remaining trustee of the charity, has failed to respond to any of the inquiry’s correspondence. On 11 January 2019, the inquiry issued notice of its intention to disqualify Trustee C as a trustee of the Charity, taking on a role as a trustee in all charities in England and Wales and/or holding an office or employment in a senior management function, for a period of 6 years, under section 181A of the Act. Public notice was also given on the Commission’s website for a period of 3 months.

On 6 February 2019, Trustee C made representations to the Commission to challenge his proposed disqualification. The representations will be considered outside of the inquiry in line with the Commission’s decision review process

As there was no evidence that the charity was operating, the inquiry issued notice of its intention to dissolve the charity in accordance with section 16 of the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations (‘the Regulations’). In accordance with the Regulations the Commission issued notice of its intention to the registered address of the charity as well as directly to Trustee C.

As no representations were received, on 15 February 2019, the charity was dissolved and removed from the register. The representations will be considered outside of the inquiry in line with the Commission’s decision review process

Prior to its removal from the register, the inquiry exercised its power under section 85 of the Act to apply the remaining funds held in the name of the charity to another charity to apply. The sum of the funds applied were £3,805.09.

Trustee A and Trustee B were entered onto the register of removed trustees in accordance with section 182 of the Act.

On 18 February 2019 the inquiry discharged its orders under sections 76(3)(d) and (f) of the Act.

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the inquiry 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.

Trustees jointly and equally responsible

Trustees are jointly and equally responsible for the management of their charity. To be effective and to meet their statutory duties as charity trustees they must contribute to the management of the charity and ensure that it is managed in accordance with its governing document and general law. They should be able to devote sufficient time to enable them to play a full role.

A charity is entitled to the independent and objective judgment of each of its trustees, acting in the best interests of the charity.

Financial controls

Trustees of charities with an income of over £25,000 are under a legal duty as charity trustees to submit annual returns, annual reports and accounting documents to the Commission as the regulator of charities. Even if the charity’s annual income is not greater than £25,000 trustees are under a legal duty to prepare annual accounts and reports and should be able to provide these on request.

All charities with an income over £10,000 must submit an annual return.

Failure to submit accounts and accompanying documents to the Commission is a criminal offence. The Commission also regards it as mismanagement and/or misconduct in the administration of the charity.

Trustees must ensure that their charity has adequate financial controls in place, It is important that the financial activities of charities are properly recorded, and their financial governance is transparent. Charities are accountable to their donors, beneficiaries and the public. Donors to charity are entitled to have confidence that their money is going to legitimate causes and reaches the places that it is intended to, this is key to ensuring public trust and confidence in charities. In this case there was no clear audit trail of cash donations from donor to bank, or to expenditure.

The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. Internal Financial Controls for Charities (CC8) is available on the Commission’s website. There is also a self check-list for trustees which has been produced to enable trustees to evaluate their charity’s performance against the legal requirements and good practice recommendations set out in the guidance.

Charity trustees should ensure that adequate records are kept of their decisions so that they can demonstrate that they have acted in accordance with the governing document and with best practice. Such records ensure that trustees can demonstrate that they had:

• acted honestly and reasonably in what they judged to be the best interests of the charity
• taken appropriate professional or expert advice where appropriate
• based their decisions on directly relevant considerations

Trustees are jointly and equally responsible for the management of their charity. To be effective and to meet their statutory duties as charity trustees they must contribute to the management of the charity and ensure that it is managed in accordance with its governing document and general law.

All charities should have appropriately tailored internal policy documents which address the specific risks associated with the kind of activities that are undertaken.

Trustees should ensure that these policies are implemented and reviewed at appropriate junctures. A failure to implement internal policy documents could be evidence of misconduct and/or mismanagement in the administration of the charity and can put assets, beneficiaries and a charity’s reputation at risk.

Charities working internationally

Many charities are based in the UK and send money to projects, charities, not for profit organisations and direct to beneficiaries in other countries - these charities carry out invaluable work, in challenging circumstances, often helping the neediest in society.

Trustees of such charities may need to take additional steps to ensure that charitable funds are properly used and reach intended beneficiaries. In some cases, the risks will be significantly higher. Sometimes these risks arise because the charity is not on the ground to check funds have been spent properly, requiring trustees to consider carefully what specific due diligence and monitoring steps they need to undertake. These steps may be more time-intensive than for other charities.

When working internationally, charities often operate through local partners rather than establishing their own delivery infrastructure in their country or region of operation. Working through or with a local partner can be an effective way of delivering significant benefits direct to a local community.

It does not, however, shift or alleviate responsibility for ensuring the proper application of the charity’s funds by the local partner. That responsibility always remains with the charity trustees, forming part of their duties and responsibilities under charity law. The need to implement risk strategies therefore remains critical.

Cash Couriering

In February 2017, the Commission and the Metropolitan Police Service (‘the MPS’) issued a regulatory alert strongly advising charities against the use of cash couriers.

The Commission recognises that charities which work or support activities internationally need to move money across international borders. Most countries have formal banking systems in place. Using formal banking systems is a prudent and responsible way to ensure that charity funds are safeguarded, and that there are appropriate audit trails of the sort which trustees must keep for the receipt and use of money.

This is the case even if transferring funds through such channels incurs an administrative cost to the charity. The Commission’s position is that formal banking systems should always be used where they exist as they provide the safest and most auditable means of transferring charitable funds.

The Commission would remind trustees considering the use of a cash courier of their duty to account for their charity’s income and expenditure by maintaining and preserving accounting records and to act prudently and responsibly to safeguard their charity’s assets.

The MPS advice to all charities is to send money safely and not to use a cash courier. If a cash courier is used there is a real risk that without proper documentation and a clear explanation of the source and destination of the cash, the cash will be seized by the police and ultimately lost to the charity.

The Commission accepts that in exceptional circumstances, where other means of transferring funds are not available, that cash couriering may be the only option available. However, this should only be considered a viable option if all other methods have been exhausted.

Where exceptional circumstances exist, the Commission expects as a minimum that trustees will have put in place the following safeguards:

• obtaining insurance in the event of loss of the cash being couriered – individual travel insurance may not provide adequate cover
• the cash courier carries documents evidencing the source and destination of the funds and their association with the charity
• charity records such as trustee meeting minutes recording the trustees’ decision to use a cash courier and a detailed risk assessment including the use of a cash courier, the particular context such as the country the cash will be transferred to, and the value of cash to be transferred in relation to the size of the charity’s total income are maintained
• ensure that cash being transferred with a value of €10,000 or above is declared to the authorities. This can now be done online before you go. Alternatively, it must be declared at the port. Amounts of cash being carried under €10,000 can still be seized by the police or ports officers even though they legally do not have to be declared
• contacted the Police for advice as appropriate, including notifying the police in advance of plans to courier cash. SO15 officers working at ports are available on 07775 036 444
• that the safety of the individual carrying the funds has been considered, assessed and managed
• when using an agent or partner ensure that appropriate due diligence is carried out on the cash courier, and that reasonable steps are taken to safeguard the money. As a minimum, we would expect trustees to have agreed in writing what is expected from the agent, how much money is being carried and in what currency, when it is to arrive by, and who it is to be paid to and how at the end destination. This should be in place and agreed before the money is handed over