East London Mosque Trust Hit with Damning Charity Watchdog Warning
The East London Mosque Trust has been issued with an official warning by the Charity Commission for failing to responsibly manage charity funds, resulting in a loss of £1million. The charity watchdog found that the trust had failed to manage the charity’s resources responsibly in relation to a huge investment, which resulted in a significant loss of funds.
According to the Charity Commission, the East London Mosque Trust failed to conduct adequate due diligence checks on the investor, personal guarantors, and connected parties leading to the loss. The commission also found that the trustees at the time failed to act with reasonable care and skill by not exercising adequate oversight of the charity’s activities in relation to the investment. As the Charity Commission’s Head of Compliance Visits and Inspections, Joshua Farbridge, noted, "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. 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 had invested £1m in an NHS-approved supplier, expecting a 20% return in six months. However, the supplier was forced into administration, resulting in a loss for the charity. The trustees did report the matter to the commission in February 2023, which the regulator reviewed as part of a wider engagement with the charity. The commission found that the charity’s due diligence regarding the investment deal was not sufficiently thorough and that the trustees lacked effective oversight and failed to properly scrutinise key documents concerning the investment.
The Charity Commission has given the East London Mosque Trust six months to take action, or it may face further scrutiny. The trust is expected to ensure financial controls are put in place and that there is oversight of the charity’s funds to protect the charity’s assets going forward. The regulator also expects the trust to conduct an independent review of their governance and report back to the commission. Furthermore, the commission expects the trust to do all it reasonably can to recover the lost funds, although it admits that it is unlikely that the trustees will be able to recover the charity’s funds.
In response to the warning, the East London Mosque Trust released a statement claiming that the trust and other investors were the victim of a sophisticated fraud. The statement alleged that the company they invested in is the subject of an ongoing police investigation. The trust also stated that it had put in place a stricter investment policy and strengthened its governance and processes following an independent review. As the trust noted, "ELMT made an investment, in the same way as some other large companies and individuals, into a company that later went into liquidation. Despite conducting due diligence at the time, ELMT and the other investors were the victim of a sophisticated fraud, and that company is the subject of an ongoing Police investigation."
The Charity Commission’s decision to issue an official warning to the East London Mosque Trust highlights the importance of charities managing their resources responsibly and with due care. As Joshua Farbridge emphasised, "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."
The East London Mosque Trust, founded in 1910, manages the famous East London Mosque and is committed to serving the local community. The trust has assured that there was no interruption to the Mosque’s services or activities and continues to invest in the community. The incident serves as a reminder of the importance of effective governance and oversight in charities, and the need for charities to be transparent and accountable in their management of funds.
The Charity Commission’s warning to the East London Mosque Trust is a significant development in the charity sector, highlighting the need for charities to be vigilant in their management of funds and to ensure that they are acting in the best interests of their beneficiaries. As the charity sector continues to evolve, it is essential that charities prioritise good governance and transparency to maintain public trust and confidence.
In conclusion, the East London Mosque Trust’s experience serves as a cautionary tale for charities on the importance of effective governance, oversight, and due diligence in managing charity funds. The Charity Commission’s warning and guidance provide a timely reminder of the need for charities to be responsible stewards of their resources and to prioritise the interests of their beneficiaries.
The article was originally reported by 5Pillars.
