Charity Commission
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“Trustee put charity at risk”, says regulator, after terrorist financing allegations

Regulator finds trustee board had ineffective oversight of trustee that misused position

An inquiry has found that serious misconduct and/or mismanagement by one trustee was likely to have caused significant damage to the Foundation for Relief and Reconciliation in the Middle East’s (FRRME, charity number 1133576) income and reputation, and that there was mismanagement of that trustee by the other trustees.

The Commission investigated FRRME after the charity reported that a trustee and employee (Trustee A) was believed to have, in a personal capacity, transferred $17,500 raised at a fundraising event for the charity’s sister organisation FRRME US, to proscribed terrorist organisation, Islamic State, to secure the release of two hostages.

Soon after opening the inquiry, the regulator used its powers to suspend Trustee A as a trustee of the charity, and they subsequently resigned from their position. Investigators shared information with the Metropolitan Police Service (MPS) who carried out their own investigation into allegations of terrorist financing*. Trustee A was interviewed under caution but later informed that no further action would be taken against them.

However the inquiry found that, overall, Trustee A’s actions fell well below that expected and required of a charity trustee.

Conduct of Trustee A

Today’s report details emails scrutinised by the inquiry, which confirm that it appeared, on the balance of probabilities, that Trustee A had intended to secure the release of individuals from Islamic State. Despite Trustee A’s intent, the Commission has not seen any evidence that terrorist financing occurred, or that if it did, it was financed with charitable funds.

However, Trustee A repeatedly failed to abide by financial controls put in place by the trustees. The inquiry found evidence of numerous breaches as set out in the report, including that:

  • Trustee A, and sometimes their assistant, used a charity credit card in Trustee A’s name for charity work, but statements identify frequent personal expenditure on this credit card. The trustees recovered this personal expenditure on a monthly basis when it was identified but failed to address this repeated pattern of behaviour.
  • Only 5% of Trustee A’s £38,521 charity credit card expenditure could be supported by evidence. The remainder of charitable expenditure was not supported by financial records.
  • Trustee A repeatedly attempted to commit to payments or liabilities such as staff hiring without seeking authorisation from trustees.

The inquiry says that Trustee A’s failings are made more concerning by the fact that they were a senior employee of the charity receiving significant funds for their work. When the other trustees suspended Trustee A as an employee, Trustee A breached the conditions of this suspension by making statements on Facebook advising the public of the suspension and soliciting funds for their own personal expenses.

The inquiry concludes that Trustee A’s conduct amounted to serious misconduct and/or mismanagement, likely to have caused significant damage to the charity’s income and reputation.

Ineffective oversight by trustee board

The inquiry concludes that these problems developed, in part, because the other trustees had ineffective oversight of Trustee A’s actions, and financial controls were not consistently applied robustly.

The other trustees put a number of remedial steps in place such as assigning staff to travel with Trustee A, instructing venues that funds raised at events should be paid to the charity, reminding Trustee A of the correct procedures, and requiring new projects and recruitment to be approved by the trustees, however these were often done in response to Trustee A’s failure to comply with an existing control.

The inquiry also found gaps in the charity’s record-keeping, including relating to donations made to churches overseas. The inquiry established that the trustees had been aware of the Commission’s guidance on Internal Financial Controls for Charities and had used the Commission’s checklist to implement improved financial controls, but failed to ensure Trustee A complied with them.

Concerning patterns of behaviour by Trustee A were not effectively dealt with, despite trustees having opportunities to do so.

Overall, the inquiry concluded that this lack of effective control represents a collective failure by the trustees at the time, which is considered mismanagement of the charity.

The trustees cooperated with the inquiry and improvements have already been made to the management of the charity, including the appointment of 3 new skilled trustees and an experienced CEO, the use of board sub-committees to allow closer oversight, and updated policies and procedures including with regards to management of staff.

Tim Hopkins, Assistant Director of Investigations, Monitoring and Enforcement at the Charity Commission, said:

Our inquiry has uncovered a pattern of concerning behaviour from one trustee who put this charity at risk, demonstrating a disregard for the standards and behaviours expected of them. Trustees should honour their responsibility and legal duty to act in the best interests of their charity at all times.

Although the charity’s other trustees were clearly let down, they failed to intervene effectively as we would have expected. Trustees have a responsibility to safeguard and protect their charity.

I welcome the significant progress that has been made here. I hope that these improvements will enable the charity to make a positive difference for the people it was set up to help.

The full report is available on GOV.UK.

Notes to editors:

  1. *The Commission was unable to progress its inquiry during the course of the MPS investigation so as not to prejudice any criminal charges, contributing to the length of the Commission’s inquiry.
  2. Based on information reviewed, the inquiry notes that some of Trustee A’s conduct and behaviour could have been related to ill health. Some of these matters may have made it harder for the trustees at the time to anticipate and manage Trustee A’s conduct.
  3. Trustee A is not currently a trustee of FRRME or any other charity registered with the Commission.
Channel website: https://www.gov.uk/government/organisations/charity-commission

Original article link: https://www.gov.uk/government/news/trustee-put-charity-at-risk-says-regulator-after-terrorist-financing-allegations

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