The Charity Commission has closed a two-year inquiry into Muslim Aid after trustees completed work to improve governance and financial controls.
But the regulator criticised the charity for missing earlier deadlines to make those changes, arguing that it could have avoided suspected fraud and serious reputational damage if it had acted sooner.
The inquiry report concluded that concerns about Muslim Aid’s financial survival had been fully addressed, four years after auditors raised questions about whether it could remain solvent. The charity’s trustees have always insisted that the charity was a going concern.
Muslim Aid welcomed the conclusion of the inquiry and said the charity was “much stronger and more robust than ever”.
Muslim Aid was created in 2017 after the Charity Commission advised that another charity, Muslim Aid 1985, should be dissolved and its assets transferred to a new organisation.
The regulator’s engagement with Muslim Aid started the same year to try to ensure issues with safeguarding, finances and overseas governance at the previous organisation would “not be replicated” at the new charity.
As part of this process, Muslim Aid agreed to an action plan in 2018, which would implement 66 reforms inside the charity by April 2020.
The commission said that, when it met trustees in 2020, it had “serious ongoing regulatory concerns” about the progress towards these reforms.
“At that time the trustees accepted that their oversight of compliance with the 2018 action plan had not been as effective and robust as it should have been”, the commission’s report said, and the board acknowledged that the charity still “faced significant challenges”.
When Muslim Aid sent its final progress report to the regulator in April 2020, trustees admitted that the charity had implemented just 15 of the 66 actions agreed with the commission two years before and requested another year to complete the work.
The commission concluded that trustees “had not fully complied” with the commitments made in 2018. It opened a statutory inquiry in September 2020 to investigate finances and management at the charity.
Trustees appealed this decision to the charity tribunal but later agreed to withdraw their appeal.
By October 2021 the commission said it had “serious concerns” that some actions agreed by the charity in 2018 were still outstanding and ordered that they must be completed by November 2022.
This order was replaced with “advice and guidance” to Muslim Aid after a further appeal to the tribunal was upheld.
The regulator found that all outstanding actions had been carried out by August 2021, including addressing concerns about the charity’s finances.
But the inquiry also identified “repeated concerns in respect of the management and control of the charity’s overseas country offices”, including allegations of fraud, financial loss and safeguarding issues. Some of these questions had first been raised with Muslim Aid 1985 nine years ago, the commission said.
The report said: “During the 2020 inquiry, the trustees reported a serious incident and launched an internal investigation following the discovery of suspicious cash withdrawals at one of its country offices. These suspicions were detected as part of a regular review of bank statements.
“The internal investigation found weaknesses and failures to follow financial policies and procedures, which had allowed an in-country member of staff to falsely draw cheques for cash, resulting in a loss of approximately £4,000.
“The member of staff concerned was dismissed as a result.”
The report added that financial controls at the country office were “weak”, despite “an internal audit and investigation the year prior which identified similar weaknesses and made recommendations for improvement”.
It added: “Had these recommendations been applied it may have prevented the subsequent £4,000 loss.”
In a separate incident, the commission said that one of Muslim Aid’s offices overseas was subject to a legal challenge over the alleged failure to pay a partner and was ordered to pay £600,000.
The report said: “The 2013 inquiry [into Muslim Aid 1985] had identified issues with this particular country office but the trustees had not fully complied with the action set out in the 2018 action plan aimed at rectifying these issues, including oversight and control of country offices.”
The commission also reported that an intern working in a different overseas office was dismissed after giving “suspected fraudulent documentation” to an institutional donor.
The donor raised the issue with the country director but it was not reported to the charity’s trustees, who only found out that the donor had withdrawn from a programme when told by the regulator.
A spokesperson for the charity said: “Muslim Aid is pleased that the Charity Commission has closed its statutory inquiry without any further regulatory action, thereby bringing an end to almost a decade of regulatory intervention into the charity.
“The final report shows no findings of mismanagement or misconduct. The commission did not find the need to impose sanctions on Muslim Aid or any of its dedicated trustees and staff, both past and present, who have worked tirelessly throughout such challenging circumstances to affirm the integrity of one of the UK’s oldest Muslim charities.
“We are very grateful to the charity tribunal whose assistance was sought twice by Muslim Aid and the Charity Commission’s internal review process, which upheld a challenge to a Commission decision in Muslim Aid’s favour.
“Muslim Aid is now much stronger and more robust than ever. It is looking forward to a positive future focusing on the needs of our beneficiaries and delivering on the donors’ trust in our charity.”