Decision

Syria Aid

Published 3 May 2019

This decision was withdrawn on 18 January 2022

This Inquiry report has been archived as it is over 2 years old.

The charity

Syria Aid was registered with Companies House as a company limited by guarantee (Company Number 8361099) on 15 January 2013 and governed by a memorandum and articles of association of the same date. According to its articles of association, its objects were:

• humanitarian aid from the local community to the Syria Crisis
• to provide children with food and clothes and to meet their basic needs
• to provide children with basic shelters and basic health needs
• to provide education and basic medicines and medical equipment
• to provide tents and food aid to stop starvation
• to help the Syrian people communicate with one another to prevent future wars

The Charity Commission (‘the Commission’) considered that Syria Aid’s objects were likely to be charitable, as the company’s governing document referred extensively throughout to it as a charity and acknowledged the Commission as its regulator. Its website also stated that it was a non-profit organisation and a charity.

The trustees (for the purposes of charity law the directors of the company are its trustees) of Syria Aid never submitted an application to register it with the Commission as they would have been required to do if it had an income of over £5,000. Syria Aid was dissolved and compulsorily struck from the Companies House register on 9 September 2014, no accounts having been submitted.

On the basis of the information available, the Commission considered that Syria Aid (‘the charity’) was a charity as its objects were charitable, the funds it raised were charitable and its income met the minimum requirements for registering as a charity.

The Commission therefore had jurisdiction over the funds it raised and the failure of its trustees to apply to register it as a charity with the Commission.

Background and issues under investigation

If an individual or group of individuals run a fundraising appeal for aims that could be interpreted as charitable and does not specify the charity or charities they wish to support, the individual(s) hold the funds on trust.

They hold the funds on trust to apply them for the charitable aims in the appeal and become trustees of the charity funds and are responsible for applying them to the charitable aims set out in the appeal. Further information on disaster appeals can be found in the Commission’s guidance.

Holding funds on such trust carries with it certain duties and responsibilities. More information about this is contained in the Commission’s guidance Charity trustee: what’s involved (CC3a).

In August 2013, a national media article reported that “police are investigating a charity amid fears that extremists in the UK are channelling money to fighters in Syria who are backed by Al-Qaeda.” Subsequent media reporting in connection with that charity, also made reference to fundraising being undertaken by an organisation named Syria Aid.

The Commission identified a company named Syria Aid that had appealed for funds on local television channels in 2013, for what appeared to the Commission to be exclusively charitable purposes. The Commission further established that one of the trustees of Syria Aid was at that time also a trustee of the other charity.

Given the media interest in the charity and the Commission’s statutory objective to increase public trust and confidence in charities and ensure compliance by trustees and their legal obligations in exercising control and administration of their charities, the Commission opened an assessment case in August 2013 to examine any possible regulatory concerns about the charity and if so, to determine a response.

Over the next four months the Commission tried unsuccessfully to engage with the charity’s trustees, raising concerns about the administration and application of funds they had raised.

The Commission used its information gathering powers to obtain financial information and carried out its own analysis of bank statements and records for the accounts in the name of one of the charity’s trustees, into which the funds raised had been deposited. These raised regulatory concerns in terms of the nature of how the charity appealed for and spent its funds.

Having reviewed the governing document, the Commission considered that the charity was unable to operate in accordance with the terms of its governing document, as it only had one remaining trustee, was therefore inquorate and so unable to make any valid decisions.

This raised additional regulatory concerns in respect of the proper management and administration of the charity. As the charity’s website and social media presence continued to operate, it appeared that charitable funds continued to be raised but with nobody in a position to legally administer them.

Based on the facts and evidence available and the identified risks, there was likely to be significant damage to public trust and confidence in the charity if an inquiry were not opened. This was coupled with significant public interest in the case and a need for public accountability in relation to serious issues of concern in the administration of the charity.

The Commission considered it both appropriate and proportionate to open an inquiry and considered that the concerns above warranted further examination. On 20 December 2013 the Commission opened an inquiry into the charity under section 46 of the Charities Act 2011 (‘the Act’).

In addressing these concerns, the inquiry looked at:

• the governance, management and administration of the charity
• the financial controls, management and application of funds donated to the charity
• whether or not the trustees had complied with and fulfilled their duties and responsibilities as trustees under charitable law

The inquiry closed with the publication of this report.

Findings

The governance, management and administration of the charity

Charity trustees are legally responsible for ensuring that their charity’s resources are properly managed and that they fulfil their legal obligations. They must act reasonably, honestly and exercise sound judgement, making sure the charity’s assets are only used to support or carry out its purposes and avoid exposing the charity’s assets, beneficiaries or reputation to undue risk.

The inquiry had identified that there was one remaining trustee of the charity since 27 July 2013. In order to gain a proper picture of how the charity was being governed, managed and administered, the inquiry sought to engage with the trustee on numerous occasions over a period of two years. The inquiry identified that for some of the period that it had been attempting to contact the trustee, the trustee had been out of the country.

The Commission contacted the trustee by letter and using the charity’s email address. Only one response, in December 2013 prior to the opening of the inquiry, was received. It was from an unidentified source purportedly acting on behalf of the trustee who reported that the trustee was abroad, held in custody by militant forces.

Given that there was only one trustee and that for a period of time they were out of the country, it was unclear how they were able to and had been administering and safeguarding the charity’s assets and had carried out their responsibilities to the charity.

On the basis that there were no current trustees available, the inquiry sought the engagement of one of the former trustees to enable the charity to operate but this also proved unsuccessful.

In May 2015 the inquiry established that the trustee had returned to the UK at some point during 2014 and therefore renewed its attempts to contact them by letter and telephone, in order to gain a proper picture of how the charity was being governed, managed and administered. Through liaison with their legal representative, a voluntary interview was arranged for September 2015. The trustee failed to attend.

The trustee’s then current address remained unknown but the inquiry identified that they could be using the address of their estranged spouse. The inquiry established that the trustee had notified their bank of a change of address to that of their estranged spouse in August 2014.

The inquiry made an unannounced visit to this address in November 2015, where they met with and sought to arrange a further formal meeting with the trustee. The trustee said they could not provide a permanent residential address to the inquiry but agreed to a second interview to be held in February 2016. The inquiry used its powers under section 47 of the act to direct the trustee’s attendance. The trustee failed to comply with the direction, citing ill health.

Through their legal representative, the trustee later offered to provide some material showing that donated funds had been expended on charitable purposes. The trustee failed to do so and again, through their legal representative, declined to be interviewed by the inquiry.

The inquiry established, that the trustee did not make or keep any minutes of appointments, proceedings at meetings, annual general meetings or meetings of trustees, as required by the charity’s governing document. The inquiry saw no evidence of any basic strategies, policies or procedures in support of the charity’s aims and activities or any financial or administrative controls to safeguard funds intended for the charity.

In terms of activities, it was not possible for the inquiry to establish whether any charitable activity had taken place. Even though the inquiry tried to correspond with the trustee, the trustee failed to evidence that the charity was governed, managed and administered properly.

The inquiry concluded that there had been misconduct and/or mismanagement by the trustee, in the governance, management and administration of the charity.

The financial controls, management and application of charitable funds donated to the charity

Irrespective of whether the charity was registered with the Commission, the trustee still had a legal obligation to protect and properly account for the charitable funds raised. It is a basic requirement to keep receipts and records of spend and income to be able to account for money raised and spent. This basic requirement also applies in company law. It would also be normal for appropriate financial policies and procedures to be in place.

These basic requirements are all the more important when charitable funds are raised from members of the public and used for humanitarian needs, in conflict zones.

Due to the fact that the inquiry’s concerns related to issues regarding the financial transparency of the charity, the inquiry sought to further scrutinise the charity’s financial records and determine how the charity’s funds had been raised, safeguarded and applied.

Records and Policies

The inquiry established that the trustee was unable to provide any financial records for the charity. In addition the inquiry was not provided with any financial policies or procedures and there was no evidence of any proper accounting procedures or processes for the charity.

Funds raised and held in bank accounts

The inquiry established that the charity had appealed for funds on local television channels in 2013. However, those broadcasts had not been monitored by the providers and it could not be established through this line of enquiry how much may have been raised in the name of the charity for charitable purposes.

Through its own enquiries, the inquiry was not able to identify or locate any bank accounts held in the name of the charity. It was able to identify three separate bank accounts in the sole name of the trustee. The trustee told the inquiry that they had been denied high street banking facilities in the name of the charity and had instead opened accounts in their own name and deposited charitable funds raised into these accounts.

The inquiry was not provided with evidence to support this claim but did identify that the charity’s social media page stated that due to difficulties in opening a bank account, the charity would be replaced from September 2013 by a new entity.

In an effort to establish the whereabouts of any charitable funds, the inquiry’s investigations led it to the registrant of the new entity’s domain name. The registrant confirmed that the new entity was their own idea and that whilst they had previously been a volunteer working alongside the trustee in 2013/14, they themselves were not involved with the new enterprise, which they said was discontinued shortly after domain name registration and had undertaken no charitable activity.

The registrant confirmed that no funds had been transferred from the trustee or the charity to the new entity. The inquiry saw no other evidence of any connection between the charity and another organisation with the same name as the new entity.

The inquiry had a reasonable belief that charitable funds had been deposited in the personal accounts of the trustee and therefore obtained records of them, using powers under section 52 of the Act. In terms of income, the inquiry identified that the bank statements, covering the period 2013-2015 showed a total income of £40,784.88, of which £21,394.95 appeared to be charitable donations, bearing references such as “Syria Aid”, “Zakat Syria”, “Fitra” and “Lillah”.

The inquiry identified that there were 52 separately-named individuals who were paying those deposits into the accounts between February 2013 and March 2015, with a particular concentration around the period July to August 2013. A further £16,500 in unreferenced cash deposits was paid in over the entire 2013-15 period - the inquiry was unable to establish whether these were charitable funds or not.

It is clearly not acceptable to use personal bank accounts as a working charity bank account. A bank account should be opened in the name of a charity to keep funds safe. This is because trustees are under legal duties to safeguard the charity’s money and assets and to act prudently, which include avoiding activities that may place their funds, assets or reputation at undue risk.

Funds spent

Correspondingly, in terms of expenditure, the inquiry established that a series of withdrawals in the bank account statements appeared to be attributable to publicity and/or campaigning, foreign travel and in particular, the transfer of £7,824.00 to the bank account of a second charity for the purchase of two ambulances.

The Commission’s position is that, where charity funds are mixed with personal funds, it is for the trustee to prove which are personal funds and those which are charitable.

The trustee could not and did not produce evidence to show that the charity’s assets were only used on charitable spend and to support or carry out the purposes for which the funds were raised. In the absence of any financial controls or records it was not possible to show that the remaining expenditure was for spend which was exclusively charitable.

The inquiry made enquiries through another charity, and confirmed that the sum of £7,824.00 of Syria Aid’s funds were used to purchase two ambulance vehicles from them in July 2013. These vehicles were then reportedly transferred to a third charity engaged in an aid convoy to Syria, of which the trustee of Syria Aid was also a trustee at the time.

The inquiry was also provided with some invoices and receipts that appeared to relate to the charity, which were seized by police in relation to a routine port-stop. These records related to routine expenditure by the trustee claiming to be on behalf of the charity but were of little value in verifying expenditure shown on the trustee’s bank account records.

The Commission accepts that on the face of it purchasing ambulances for humanitarian purposes may be legitimate charitable spend, providing the ambulances are put to lawful humanitarian purposes. However, the trustee failed to show that the purchase of the ambulances and spend on the other items were for proper humanitarian and/or other charitable activities.

Apart from the bank account statements recording amounts in and out, the inquiry saw no other sufficiently verifiable records or evidence relating to the spend of charitable funds raised in the name of or otherwise belonging to the charity. This, together with the absence of other supporting documentation or evidence of proper charitable spend, meant it was not possible to conclude that the funds raised and held for the charity were expended lawfully and properly for charitable purposes.

In the inquiry’s view, the trustee needed to account for the balance of charitable funds in the personal account and spending from the accounts which was said to be spent for exclusively charitable purposes but could not be evidenced.

During the course of the investigation, the inquiry was informed by one of the banks that it had decided on its own initiative to terminate its services to the trustee and closed the trustee’s personal bank account in October 2015. The account was, by the date the inquiry was notified, empty of funds. The inquiry established that the trustee’s two other bank accounts had been closed by the trustee in 2013 after all funds had been withdrawn.

In summary, there were no basic financial controls or policies in place to account for and safeguard funds coming in and being spent. Funds were put at risk by managing them in personal accounts and mixing them with personal funds for a significant period of time. Although some of the funds on the face of it may have been applied for charitable purposes for the ambulances, the trustee could not account for other funds; some funds may have been spent, but could not be shown to be spent properly on exclusively charitable purposes, and other income received could not be accounted for. The inquiry therefore found there had been misconduct and/or mismanagement by the trustee in managing the finances of the charity.

Trustees’ compliance with their duties and responsibilities under charitable law

Trustees have a legal duty to act reasonably, openly and honestly to ensure that the charity’s assets are used for their correct purpose without exposing the charity, its reputation or beneficiaries to unnecessary risk.

Individuals who take on or assume the role of trustee over charitable funds and who raise more than £5,000 income, must register their charity with the Commission. The inquiry established that the charity had received £21,394.95 of what appeared to be charitable income and that the trustee, in charge of and with custody of those funds failed in their legal duty to register the charity.

It appeared to the inquiry that at some point in 2014 the trustee used their estranged spouse’s address as their UK correspondence address. The trustee was under a legal duty to report this change of address and the resignations of the other directors/trustees to Companies House but did not do so. The company was also dissolved and compulsorily struck from the Companies House Register on 9 September 2014, having failed to submit any annual accounts. The trustee failed to comply with basic company law requirements.

The trustee mixed restricted charitable funds raised through public appeals with those in their own personal bank accounts and in doing so put those charity funds at undue risk and for a significant period of time. Trustees are under legal duties to safeguard the charity’s money and assets and to act prudently, which include avoiding activities that may place their funds, assets or reputation at undue risk. The trustee failed in this duty.

According to the charity’s governing document the minimum number of trustees and the quorum for trustee decision making was three. In practice from July 2013, there was only one trustee. The inquiry was not provided with any evidence to show that the trustee had made efforts to recruit any new trustees after the last person resigned in July 2013. From that period onwards the trustee continued to operate the charity on their own. Any decisions which were made were inquorate and in breach of the governing document.

The inquiry had serious concerns about the trustee’s lack of willingness to meet or co-operate with the regulator. The Commission’s publication Statutory inquiries into charities: guidance for charities (CC46), makes clear that a failure to comply with a Commission direction will be regarded as mismanagement. The trustee failed to comply with a legal direction to attend interview or provide records to the regulator, which they should have been expected to hold and produce.

The inquiry was also concerned that at a time the trustee told us they were out of the country, the Commission found out they had been stopped at port by the police leaving the country.

Even though the trustee did not register the charity, they were a charity trustee and failed in their legal duty to ensure that all charitable funds raised by the charity were expended on their intended charitable purpose. The trustee failed to protect those funds, and to account for them.

The inquiry found the trustee failed in their basic duties and responsibilities as a trustee under both charity and company law.

Conclusions

The Commission concludes that there has been misconduct and/or mismanagement in the management and administration of the charity, in particular as follows:

The trustee

• failed in their statutory duty to provide any financial accounts, in breach of the charity’s own governing document and the legal duty under both company and charity law

• failed in the legal duty to register the charity with the Commission when it clearly met the financial threshold of £5,000 income and in breach of the charity’s own governing document

• failed in their legal duty to co-operate with the Commission during the course of its investigation including failing to comply with legal directions to provide information and attend meetings to provide evidence

• failed to discharge their legal duties to safeguard the charity’s money and assets and to act prudently, which include avoiding activities that may place their funds, assets or reputation at undue risk:

  • they failed in the basic requirement to keep receipts and records of income and spend and so be able to properly account for charitable funds raised and spent - these basic requirements are all the more important when charitable funds are raised from members of the public and used for humanitarian needs, in conflict zones
  • there were no basic financial controls or policies in place to account for and safeguard funds coming in and being spent
  • funds were put at risk by managing them in personal bank accounts and mixing them with personal funds for a significant period of time

In terms of activities, it was not possible for the inquiry to establish with any certainty whether some or any charitable activity had taken place. In summary, the charity was not properly governed, managed or administered by the sole trustee and charitable funds donated by the public were put at risk.

Regulatory action taken

Various Orders were made under section 52 of the act to 16 banks on 23 December 2013 in an effort to establish the whereabouts of the charitable funds raised by or in the name of the charity. Four Orders were made under section 52 of the Act in connection with the trustee’s personal bank accounts for the period 15 January 2013 to 16 November 2015.

Two directions were made under powers in section 47(2)(b) of the Act to independent local broadcasters on 31 December 2013 and 26 March 2014.

A direction was made under powers in section 47(2)(c) of the Act to the trustee to attend an interview on 3 February 2016.

The Commission worked with a number of other agencies during the inquiry to establish whether there were any wider concerns with the trustee.

The trustee was formally requested through their legal representative to submit a framework for restitution of the charitable funds for which the trustee had failed to account. The inquiry established that the trustee had no discernible income or assets. In light of this, the Commission has considered its published policy on restitution and has decided it is not proportionate to pursue restitution at this time.

The Commission considered using its powers to remove the trustee but this was not possible as they had ceased to be a trustee in law because the charity had ceased to exist as an entity.

In view of this, on 22 November 2017 the Commission made a Disqualification Order under section 181A of the Act disqualifying the trustee from being a charity trustee and from acting in a senior management function within a charity for a period of ten years. It is a criminal offence to act when disqualified.

Issues for the wider sector

Charity trustees are under a legal duty to co-operate with the Commission, particularly where the Commission has opened a statutory inquiry and the courts have been very clear about this. Whether they do so or not may be a relevant factor in assessing whether misconduct or mismanagement may have taken place in a charity and considering whether any regulatory action is proportionate.

The Commission has a duty to maintain an accurate register of charities. Where it has an annual income of over £5,000 the duty to register a charity rests with the trustees of the charity. Failure to register a charity where there is a legal obligation to do so does not exclude the charity from the Commission’s jurisdiction.

For the purposes of charity law in England and Wales, a charity is any institution, corporate or not, established for charitable purposes and for the public benefit and subject to the control of the High Court.

Where a charity or charitable appeal is established for a short time and not of significant value the Commission will not normally enforce the duty to register where the criteria for registration is met. However, the trustees must still keep records of income and expenditure of charitable funds and prepare accounting statements. In addition, given the benefits of registration the trustees of the charity may wish to register it with the Commission.

Trustees should familiarise themselves with their charity’s governing document and ensure that at all times the required number of trustees is in place. Trustees are jointly responsible for the overall management and administration of a charity and must ensure that they act at all times within the provision of their governing document.

Funds raised for charitable purposes in England and Wales, even if they are not raised by a charity, fall within the Commission’s regulatory jurisdiction. People who manage and are responsible for appeals for charitable purposes (including those created by non-charitable organisations) hold the position of trustee and have the legal duties and responsibilities of a trustee.

Funds given to charity are impressed with charitable trusts: they must only be used in furtherance of the charity’s purposes and not for any other purpose. Charity trustees hold those funds on trust for the charity and are under a legal obligation to ensure they are used properly. It is a clear breach of trust if charity trustees divert charitable funds to be used for their own benefit.

Trustees have legal responsibilities to keep accounting records, and to prepare an annual report and accounts with the appropriate level of external scrutiny. Trustees must also safeguard their charity’s assets and take steps to ensure the charity is protected against financial abuse. Accounting records must be kept for at least six years (or a minimum of three years if a company charity). Trustees have a number of legal duties that must be met in relation to accounting and financial reporting. These include:

• keeping ‘sufficient’ accounting records to explain all transactions and show the charity’s financial position
• preparing an annual report and statutory accounts meeting legal requirements
• considering the need for a reserves policy, managing the level of reserves held and the disclosure of any reserves policy in the Trustees’ Annual Report
• ensuring that the Trustees’ Annual Report, accounts and annual return are filed on time with the Charity Commission where filing is required by law and, if the charity is a company, also filed with Companies House
• safeguarding the assets of the charity and ensuring the proper application of resources.

For more detailed Charity Commission guidance on Internal financial controls for charities (CC8).

All bank accounts should be held in the name of the charity and never in the name of individuals. The charity may have a policy about its accounts and this should be checked by trustees to ensure they are acting in compliance with it. Appropriate controls and safeguards should be in place as to their use and access to them. Controls are recommended to help prevent the unauthorised opening or closure of bank accounts and to help ensure the reliability of accounting records for cash.

For more guidance see chapter 4 of the Compliance toolkit Holding, moving and receiving funds safely in the UK and internationally.

All registered charities are required by law to provide annual returns and accounts to the Commission and to keep their information on the public register up to date. The duty to file annual accounts and the trustees’ annual report with the Commission applies to all registered charities whose gross income exceeds £25,000 per year.

Further information about Charity reporting and accounting (CC15d) can be found on the Commission’s website.