The Charity Commission has taken regulatory action against East London Mosque Trust for failing to responsibly manage charity funds.
The Commission has issued an Official Warning to East London Mosque Trust over an investment deal which resulted in the loss of £1 million. The regulator found trustees failed to have sufficient oversight of the charity's activities and it has given the charity six months to take remedial action or possibly face further regulatory scrutiny.
The charity has existed in some form since 1910, and the mosque is considered one of London's oldest. East London Mosque Trust was established to advance the Islamic faith by maintaining and managing a community centre and mosque, and provides a range of spiritual and community services.
The charity had invested £1 million in an NHS-approved supplier, expecting a 20% return in 6 months, but the supplier was forced into administration, resulting in a loss for the charity. The charity's trustees reported the matter to the Commission in February 2023, which the regulator reviewed as part of wider engagement with the charity.
The Commission found the charity's due diligence regarding the investment deal was not thorough enough. The regulator is also critical of the trustees' lack of effective oversight and failure to properly scrutinise key documents concerning the investment. The regulator would expect any charity to conduct substantial checks on any investment which uses charitable funds, particularly one of this size.
The Commission had previously told the charity to ensure it had sufficient control over its funds and had warned of potential for further action. The trustees' failure to act with reasonable care and skill, which contributed to the loss of the charity's funds, is misconduct and/or mismanagement.
The Official Warning sets out that the charity is 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 charity is now expected to conduct an independent review of the charity's governance, reporting findings to the Commission. The regulator also expects the charity to do all it reasonably can to recover the lost funds.
Charity Commission Head of Compliance Visits and Inspections, Joshua Farbridge, said:
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 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.
