Charity Commission inquiry: Quba Trust

On 19 December the Charity Commission published the results of its inquiry into the Quba Trust (the 'Charity'), a charitable company incorporated in England on 24 January 2014. The Charity's purposes are to relieve poverty or financial hardship and suffering among victims of natural or other kinds of disaster, and to advance the Islamic religion.

Following the inquiry, three trustees of the Charity were disqualified following findings that the trustees poorly managed the Charity and demonstrated a serious disregard for, or lack of understanding of, the importance of proper financial management and controls.  These failures included former trustees being unable to account for over £250,000 that was transferred overseas, with a further £500,000 lacking a satisfactory financial audit trail.

Prior to the inquiry, in 2015 the Charity Commission carried out a monitoring risk inspection owing to the Charity's international operations in a high-risk area, which would increase the risk of a charity being exposed to abuse or harm.  Following its inspection, The Charity Commission issued the trustees with regulatory advice and guidance under section 15(2) of the Charities Act 2011 (the 'Act') after identifying several areas for improvement.  When the Charity Commission re-engaged the Charity in November 2021 to assess the implementation of this advice, the Charity Commission identified serious regulatory concerns, including failure by the trustees to demonstrate that payments made to some of the then trustees were managed effectively and in line with the requirements laid down by the Charity's governing document and internal financial controls.

In May 2022 the Charity Commission opened its inquiry into the Charity under section 46 of the Act to consider the administration, management and governance of the Charity and the conduct of its trustees.  The inquiry found that the Charity was poorly managed and not properly administered by its former trustees.  The then trustees of the Charity failed to demonstrate that they were acting in accordance with the Charity's governing document: They failed to keep adequate accounting records, explain how the Charity's funds were being spent, or ensure that the Charity was being properly managed and administered.  The Charity's then trustees also failed to comply with its article requiring the trustees to hold at least four meetings each year.  These failures to adhere to the Charity's governing document were a breach of trust and were deemed misconduct and/or mismanagement in the administration of the Charity by the Charity Commission.

On 15 April 2024, the Charity Commission sent formal notification of intent to disqualify three trustees under section 181A of the Act. An action plan was issued to the trustees of the Charity under section 15(2) of the Act to strengthen the Charity's administration and management, requiring the Charity to:

1. review and, if necessary, update the Charity's governing documents;
2. appoint additional trustees;
3. review and establish adequate financial controls;
4. consider seeking restitution of lost or unaccounted funds from the Charity's current and former trustees; and
5. assess the Charity's future viability.

Three of the Charity's trustees were disqualified for periods of 10, 7.5, and 5.1 years respectively, taking effect on 1 July 2024. The longest disqualification period was imposed on a trustee who was a practising accountant and 'charity sector expert'; by virtue of his professional qualifications, the Charity Commission considered that the trustee should have demonstrated a greater level of knowledge and met higher standards than the other trustees and was therefore culpable to a greater degree.

Trustees are representatives of the charity they govern and are responsible for the proper use of the charity's funds and assets.  This inquiry serves as a reminder that trustees must be aware of and act in accordance with their legal duties, including duties to follow their governing document.  Charities should have appropriately tailored internal policy documents which address the specific risks associated with the activities undertaken by the charity.  Failures to implement and follow these policies can put the assets, beneficiaries, and charity's reputation at risk.  In instances where the trustees of a charity cannot account to the Charity Commission for expenditure by the charity, the trustees may be collectively liable for the repayment of these funds.