The Charity Commission has issued an official warning to the East London Mosque Trust, a charity based in East London, after it lost £1m due to a failed investment deal. According to Civil Society, the regulator found that the charity’s trustees had “failed to responsibly manage charity funds” and had not conducted sufficient due diligence on the investment.
The official warning concerns an investment deal in which the charity, founded in 1910 and manager of one of London’s oldest mosques, invested £1m in an NHS-approved supplier with the expectation of a 20% return in six months. However, the supplier was forced into administration, resulting in a significant loss for the charity. The trustees reported the matter to the Charity Commission in February 2023, which reviewed the case as part of its wider engagement with the charity. Civil Society was first to report on this issue.
The Charity Commission’s investigation found that the charity’s due diligence regarding the investment deal was not sufficiently thorough. The regulator was also critical of the trustees’ lack of effective oversight and failure to properly scrutinise key documents concerning the investment. According to Civil Society, this lack of oversight and due diligence led to the significant loss.
The Charity Commission had previously told the East London Mosque Trust to ensure it had sufficient control over its funds and had warned of the potential for further action. In response to the official warning, the trust is now expected to conduct an independent review of its governance and report its findings to the commission. The regulator also expects the charity to do all it reasonably can to recover the lost funds. As Civil Society reported, the trust has been given six months to take action, or it may face further scrutiny.
Joshua Farbridge, the Charity Commission’s head of compliance visits and inspections, emphasised the importance of trustees exercising due diligence when managing charity funds. “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,” he said. “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.” Farbridge also stressed that the commission expects all charities to promptly act on steps provided in an official warning and will be monitoring the East London Mosque Trust’s progress.
The East London Mosque Trust has been contacted for comment, but it is clear that the Charity Commission takes the management of charity funds very seriously. As Civil Society reported, the regulator is monitoring the charity’s progress and expects it to take immediate action to address the concerns raised. The official warning serves as a reminder to charities of the importance of responsible financial management and the need for effective oversight and due diligence.
In order to prevent similar incidents in the future, charities must prioritise robust financial management and governance. The Charity Commission’s official warning to the East London Mosque Trust highlights the potential consequences of failing to do so. As reported by Civil Society, the regulator’s actions demonstrate its commitment to ensuring that charities operate in a responsible and transparent manner.
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