Towards the end of last year, the Charity Commission (the Commission) published its inquiry into the Quba Trust, finding that there had been misconduct and mismanagement in the administration of the charity, which was set up to provide disaster relief and advance the Islamic religion in the UK and overseas.
The Commission proactively carried out a monitoring inspection of the charity, due to its international operations in a high-risk area. Charities which operate internationally can be more vulnerable to abuse or harm as a result of where and how they operate.
A number of lessons for the wider charity sector, and particularly for trustees, can be taken from this inquiry.
Firstly, every charity should have an appropriately tailored risk assessment policy which addresses the specific risks associated with the activities it undertakes. Failure to implement policies (and follow them) can put assets, beneficiaries, and a charity’s reputation at risk. Trustees should ensure their risk register is regularly reviewed and updated to reflect changes or emerging trends.
The Quba Trust inquiry is also a reminder that trustees must ensure the financial activities of their charity are properly recorded, and their financial governance is transparent. Charities can delegate the day-to-day operation of financial controls to, for example, a finance officer or chief executive, but retain ultimate responsibility for actions taken.
The Commission has produced guidance for trustees on implementing robust internal financial controls that are appropriate to their charity; ‘Internal Financial Controls for Charities’ (CC8) is available on the Commission’s website. Additionally, there is a checklist for trustees to download, which has been produced to help them evaluate their charity’s performance against the legal requirements and good practice recommendations set out in the guidance.
Finally, due diligence is an important part of trustees’ duties. It is essential to knowing where charity funds have originated from and which people and organisations the charity is working with, empowering trustees to identify and manage associated risks.
Trustees must have robust due diligence processes which are consistently implemented. For example, monitoring is a crucial step in ensuring a charity’s funds and/or property reaches its designated destination and is used exclusively in the intended way(s).
The type and depth of monitoring may vary, depending on the type of project, the location, and the sums of money involved. Important monitoring processes to have in place include careful filing of documentation, such as reports, receipts and invoices, in addition to photographs and video.
Sarah Clune
Associate and Professional Support Lawyer
Stone King LLP
