The Charity Commission has issued an official warning to the charity East London Mosque Trust over an investment deal which resulted in the loss of £1m.
The charity has been given six months to improve its financial controls and oversight of charity funds following the loss. It will face “further regulatory scrutiny” if action is not taken, says the Commission.
The regulator experts the charity to conduct an independent review of its governance and report its findings to the Commission. The charity is also expected to “all it reasonably can to recover the lost funds”.
A concern raised by the regulator is that “trustees failed to have sufficient oversight of the charity’s activities”.
In announcing the official warning the regulator details how the charity invested £1m in an NHS approved supplier anticipating a 20% return in six months.
But the supplier was forced into administration resulting in the loss. The charity then reported the matter to the Commission in February 2023.
During its probe the regulator found that “the charity’s due diligence regarding the investment deal was not thorough enough” and there was a “lack of effective oversight and failure to properly scrutinise key documents concerning the investment” by trustees.
“The regulator would expect any charity to conduct substantial checks on any investment which uses charitable funds, particularly one of this size,” it added.
The Commission says that it had previously told the charity to ensure it had control over its funds and that trustees “failure to act with reasonable care and skill, which contributed to the loss of the charity’s funds, is misconduct and/or mismanagement”.
“When people donate to a charity, they put their faith in those running it to manage those funds with care and in line with its aims,” said Charity Commission head of compliance visits and inspections Joshua Farbridge.
“In this case, we found the trustees lacked the oversight we’d expect of such a large investment, nor did they ensure thorough due diligence had been undertaken.
“The East London Mosque Trust has been advised on more than one occasion about having appropriate oversight of funds and so we have now issued a formal warning.
“We expect all charities to promptly act on steps provided in an Official Warning and will be monitoring this charity’s progress.”
Recent Stories