The Gaza Crisis, UK Mosques & Muslim Charities

The recent Gaza crisis has affected us all. Thousands of civilians have lost their lives in Gaza. The social media and news coverage of women, children and the vulnerable being killed is heart wrenching. Over 2m of the population of Gaza is deprived of water and fuel and face a dire humanitarian crisis as highlighted by independent UN agencies.

In times like this, many feel obliged to act and campaign – this is not only a natural human response, but also embedded within the faith of many Muslims.

In times like this, many feel obliged to act and campaign – this is not only a natural human response, but also embedded within the faith of many Muslims.

The Muslim international relief charities play a crucial role and provide a valuable service in facilitating this donation to the intended population of Gaza.

Recently I have been contacted by concerned individuals asking various questions relating to donating or raising funds to Gaza. In this blog, I provide some answers to three questions:

Question one: Can my charity raise money for Gaza?

It all depends on the charitable objectives and purpose of your charity. If your charity has an objective to provide relief from poverty and / or to provide relief to disaster-stricken people and it does not restrict to a particular location other than Gaza, then your charity can raise funds for Gaza.

The following consideration are important to note:

1. Due diligence of delivery partner – Hamas proscription

Vast majority of Muslim charities, if not all work through a delivery partner in Gaza. Funds are transferred to these partners to deliver the relief projects. Gaza is governed by Hamas and under UK law it is proscribed as a terrorist organisation. Hence it becomes illegal if any funds of a UK charity end up with Hamas. So, UK charities must satisfy themselves on the following:

  • the delivery partner is not controlled by individuals on the UKs sanction lists.
  • The delivery partner does not use suppliers connected to a sanctioned entity or individual.
  • The delivery partner does not pay rent or taxes to the Hamas regime.

Vast majority of Muslim charities, if not all work through a delivery partner in Gaza.

2. The ability to deliver relief

Charities will also need to check the ability of the partner to deliver the projects in Gaza. This can be checked by obtaining the following: Governing documents, Bank statements, past project reports, organisational charts, policies, project proposals and references.

3. Satisfying the banks

Transferring monies to Palestine generally and Gaza especially is not easy. Banks expect charities to have done their due diligence and will often request evidence to confirm this.

Lack of timely evidence after the bank requests information often results in the UK bank or corresponding bank or banks in Gaza blocking or returning the funds.

4. Disclosing the name of the delivery partner

When preparing the annual financial statements, charities are subject to charity accounting rules called (SORP). These rules require charities to disclose the name of the delivery partner used in that period and the amounts paid to them in that year and in the prior year.

I sometimes find some charities attempting to omit this information in their annual statements giving a false impression to readers of the statements as if the charity directly delivers projects in Gaza.

Overheads paid to separate entities that deliver projects on behalf of the UK charity are not disclosed in the UK charity accounts. This is one of the reasons why for transparency purposes the charities are required to disclose the name and total amount paid to the deliver partner in their annual financial statements.

Overheads paid to separate entities that deliver projects on behalf of the UK charity are not disclosed in the UK charity accounts.

Question two: Can my Mosque raise funds for Gaza?

Yes. and this depends on the charitable objectives of the charity that runs this Mosques. Mosque charities often have objectives that are restricted to furthering the religion of Islam by providing a facility to worship – this may not allow fundraising for international relief projects unless a clear link can be made with the act of worship. For example, Mosques may be able to raise Zakat funds and use a delivery partner in Gaza to execute the Zakat funds to the needy.

Mosques can partner with international relief charities and provide them access to their congregation and facilities to directly raise funds for Gaza. Mosques can enter into agreements with these charities to restrict the funds to specific projects and be compensated on any costs incurred in raising these funds.

Question three: Can Mosques carry out political campaigns and activity for Gaza?

Generally, the answer is No. Charity Commission has detailed guidance on this topic. The link to this detailed guidance can be found here.

The general rule is that a charity can carry out campaigns and / or political activities only if it furthers their objectives stated in their governing document. Mosques seldom have human rights objectives in their trust deeds or constitutions. Therefore from Mosque platforms and / or using Mosque resources to lobby local or central government for a foreign policy change in relation to Gaza may not strictly be considered an allowable activity. This does not mean Mosques cannot or should not voice their concerns or carry out activities in responding to this crisis.

Below is a list of activities Mosque can and should carry out:

1) Educating the congregation on the current situation in Gaza through religious sermons and lectures.

 

2) Making statements that link back to faith, sanctity of life, religious harmony and coexistence with other faiths.

 

3) Providing facilities and access to congregations to activists for education, petitions, protests all for awareness purposes.

 

4) Providing young people safe spaces to discuss the issues with a faith lens and in the context of the society Mosques operate in.

 

5) Inviting local politicians to address the congregations on their positions.

 

6) Trustees or employees in their personal capacity and personal time campaigning and carrying out politically activities. In conducting these activities, the trustees and staff must ensure the associated charity / Mosque is not brought into disrepute.

 

7) Engaging with local councils, police, and central government to ensure safety of congregation and Mosque facilities and compliance to laws.

 

8) International relief / aid charities can make statements and lobby government on humanitarian grounds. Mosques can provide logistics and congregation support to these charities.

 

Author:

Nasir Rafiq BA, FCA is the Managing Partner of Dua Governance Chartered Accountants, an ICAEW firm specialising in charity financial governance and accounts.

Nasir works and deals with a large portfolio of Muslim charities and Mosques in UK advising them on accounts and governance issues.

Nasir is the former Finance & Corporate Services Director of Islamic Relief Worldwide and holds many senior positions within the Muslim community.

Email: info@duagovernance.com

End –

Bank Account Closures & UK Muslim Charities

 

The Nigel Farage’s bank account closure with a bank for the rich has hit a nerve for the Government and the media. The calling of the banking leaders to Downing Street and the resignations of the Group CEO and its subsidiary Banks CEO shows this was no little crisis.

This whole saga as it played out questioned the role of banks in our lives and wider society.

I deal with banking issues regularly for my charity clients, large and small. I have seen many examples, good and bad, so it’s imperative to understand the role each plays to understand the real issues.

 

The Banks and their role in business and society

Banks are private businesses, set up to make money for their shareholders. They are not politically aligned (we think so). Yes, during the banking crisis of 2008, the Government stepped in and now owns 39% of the NatWest Group – this is rare and did not change the business objectives of the bank.

Banks are subject to stringent anti money laundering and government sanctions regime with hefty fines when it goes wrong. All designed to regulate the banking conduct to the government domestic and international needs hence international events and wars make this a constant changing environment for sanctions. The introduction of the Politically Expose Person (PEP) protocols to stop corruption by people misusing public office adds another dimension to banking responsibility and risk management.

Nigel Farage was picked up by his bank as a PEP but what made the story interesting is that after he made a subject access request, he found that his political views were also considered as a reputation risk for this niche bank and its niche clientele.

 

“The Nigel Farage story has shaken the very foundations of trust in the wider banking system”.

 

This has shaken the very foundations of trust in the wider banking system. Given the control banks have on individuals and entities, this very notion that banks consider political views when not obliged by regulations, becomes problematic.

 

So where do the Muslim charities in the UK fit into all of this?

 

 

The impact of 9/11 was a game changer for Muslim charities operating in the West. Muslim charities suddenly found themselves working in high-risk countries subject to sanctions or where sanctioned entities operated. The resulting sanctions regime instantly choked many international charity banking facilities without explanation.

No regard was given to any legal or illegal activity as the “perception” of the “ability” to breach sanctions started to dictate the banks risk management process and de-risking. The Muslim sector became guilty until proven otherwise. The International relief sector already had inherent risks of money laundering, aid diversion and fraud for banks to consider, for the Muslim charity sector, it became just that more challenging to convince banks in this new environment.

 

“As a result of de-risking of banks, many individuals unfairly paid the price and their associated charities despite having done nothing wrong or illegal”

 

Another dark side of this additional scrutiny by banks was the spotlight on Trustees. Their social media profile and historical news coverage on the web searches started to become a vital part of the bank’s due diligence. The banks started to de-risk charities based on unfounded risks and perceptions relating to trustees. Many individuals unfairly paid the price and their associated charities despite having done nothing wrong or illegal.

Despite this, the Muslim charities in UK generally responded positively. Charities improved their due diligence processes and vetting of partners and responding to banking queries. Many Muslim charities now use the same due diligence software to vet their partners and staff as the banks.

Despite the pressures since 9/11, the Muslim sector in UK has exponentially grown with talks of annual income reaching £1bn in UK. This could not have been possible without the partnership Muslim charities have with their banks. However, in transferring money abroad charities continue to face blocks and funds returning. In some instances, and surprisingly, banks have been trigger-happy in closing banking facilities without any explanation. Even charities with just UK operations also affected.

 

So, what should be done, a question I am often asked. My response:

 

1. Financial Standards must not only be improved, but they should also be exhibited.

The Muslim community bruised by constant unfair and malicious media headlines, at times feels as if the whole world is against them. So, when a bank asks legitimate questions, some wrongly see this as an attack on their faith, creating an “us and them” narrative. This approach risks undermining real issues relating to good governance, compliance systems, proper due diligence, and effective audit trails for “end use of funds”.

 

“Muslim sector should confidently and boldly market and exhibit the progress made in addressing compliance and governance issues”

 

Muslim sector should confidently and boldly market and exhibit the progress made in addressing compliance and governance issues. Muslim organisations should sign up to a standard that works for banks and helps to demonstrate good financial governance.

Sometimes the race to raise monies creates pressure to look good before donors with emotional marketing material in the year-end financial statements, ignoring the needs of other key stakeholders like banks.

Muslim charities like all charities should learn from the mainstream charities that practice good governance. Often such charities, in their annual audited financial statements, will discuss their governance or when it fails against their actions plans and risk management extensively. They do this to assure their stakeholders that they understand the risks relevant to them and how they mitigate these risks.

 

2. Effective or meaningful third-party check or oversight over the banks decision to close an account.

When a charity finds itself with a bank closure notice, it finds limited alternative options for new banking facilities. This has a devastating impact on the vital and often life and dignity saving work charities deliver.

 

“There is no effective or meaningful third-party check or oversight over the banks decision to close an account”

 

There is no process to ensure the decision was fair and risk driven. It becomes easy for the banks to close an account instead of spending resources to manage their risks by requesting and assessing relevant information to satisfy themselves.

Charities should lobby the Government and the Charity Commission to address this gap in the system on the back of Nigel Farage’s high-profile case. The banking sector should be subject to detail regulations and guidelines that are shared with the wider public and charities so that all know what is expected of them.

Standard complaints to the Financial Ombudsman Service does not address this issue, given the urgent and devastating impact on bank closures.

 

3. Covid crisis caused the banks to prioritise businesses over charities.

The Covid crisis placed a significant burden on banks for opening bank accounts for businesses as Government grants were restricted to having a bank account. As it transpired many in their thousands did not. To address this need, mainstream banks prioritised businesses over charities.

 

“Some high Street banks stopped opening charity bank accounts or gave extraordinary long processing times”

 

As a result, some high Street banks stopped opening charity bank accounts or gave extraordinary long processing times. Muslim charities were hit the hardest as requirements for that additional bit of scrutiny meant it was no longer commercially viable to entertain them. This is unacceptable as the same banks have been making huge profits.

The Government should make it mandatory on banks to address the requirements of the charity sector as part of their business, so it is not ignored or undermined for commercial reasons- there is no better corporate social responsibility than this for the banks.

Muslim Charities play a vital role in addressing the needs of the most vulnerable, often stepping in when governments fail. This vital service is not possible without the banks facilitating this.

It’s time real issues are discussed and resolved on both sides for betterment of mankind, society, and country. It is in the Government and wider society’s interest to do so and the sector should lobby on this basis.

Nobody wins with the blame game on both sides ignoring the real issues.

 

Author:

Nasir Rafiq BA, FCA is the Managing Partner of Dua Governance Chartered Accountants, an ICAEW firm specialising in charity financial governance and internal audit.

Nasir works and deals with a large portfolio of Muslim charities in UK and has been advising them with their banking issues, working with many high street banks.

Nasir has directed treasury functions in large UK Muslim charities with operations worldwide.

Email: info@duagovernance.com

The Power and Art of Mediation

In the past two decades, I have been involved with many high profile mediation’s. This has become a key feature in many of my past and present engagements.

 

Be it, disputes between trustees, disputes between employee and trustees, issues with regulators or between family business partners. Each time, I came in when all options have been exhausted and there is a stalemate, risk of self-destruction or Charity Commission intervention.

 

With Allah’s blessing, I have always prevailed and have been able to resolve the matter amicably. My suggested solutions and plans achieved satisfaction by all parties and a “win win” solution for all with a clear way forward, Allhumdulillah.

 

Although the outcomes were satisfying, the journey to it was often bumpy with lots of grit, patience, and sacrifice involved.

 

My approach to mediation is not conventional. Often the traditional culture forces the disputing parties to accept each other’s demands. Emotions and Islam is used to exploit each parties guilt and force corporation on moral grounds. This seldom results in long term and lasting solutions.

 

My approach is far, from it.

Mediation should be about justice, fair judgement and agreeing on what is right and fair, in the context of the overall objectives of the organisation and its expected destination.
 

For me, mediation is about justice, fair judgement and agreeing on what is right and fair, in the context of the overall objectives of the organisation and its expected destination.

 

This should not be about personal wins. Mediation or compromise should be about both parties winning, not the strong overcoming the weak which is often seen in traditional mediation.

 

In each mediation, I employ the following same principles:

 

Mediation requires a SMART overall objective

 

I determine the overall SMART objective. Something, I can visualize and touch. Something that makes both parties stronger and win. This is the utmost important part of any mediation. Weak or no objectives, results in outcomes that are weak and at times unfair.

 

Empathy is the ingredient to success

 

I place myself in each parties’ shoes and explore the pressure points. Having empathy is the key ingredient for building trust. Empathy should be the starting point for any mediation.

One must see wood from the trees

 

Once the pressure points are identified, I iron them out against the overall objective. It is at this stage; I separate out the noise and the wood from the trees.

 

Baggage needs offloading

 

People carry baggage that they need help with offloading

 

People carry baggage that they need help with offloading. Sacrifices and compromises must always be for a bigger objective and cause.

 

I make an effort to identify and offload this baggage which is often built up over a longer period based on personal experiences and perceptions. Often brushed under the carpet and ignored – never dealt with and it becomes the monster that stops common sense to prevail.

 

Once I am left with the genuine concerns and risks, I build bespoke solutions, based on my professional judgments and experiences – Again, against the overall objectives of the mediation.

 

Closure needs work

 

The mediation is then “closed” by all parties agreeing to “my solution”. By this time, I have earned the trust, strong emotions are ironed out and the focus for both parties is on the “win win” solution. The details are agreed and then signed off.

 

All the above is accompanied and peppered with hard work, difficult discussions, listening, patience, moments of quiet meditations and a hard resolve from me with no compromise.

 

Mediation is most relevant at the top

 

People in positions of responsibility often end up carrying lot of baggage – this builds up over time, much depends on them being able to work effectively with each other. This is not always possible, and this inability of being able to work together often risks bringing the whole building down with years of “building” and “achievements” to a dramatic loss.

 

This is where mediation then becomes that tool that can put the train back on its track.

 

Mediation is not about making people love and hug each other – its about achieving objectives and making sure the train gets to its destination.

 

Mediation is not about making people love and hug each other – its about achieving objectives and making sure the train gets to its destination.

 

End –

 

Author: Nasir Rafiq is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

He is the Managing Partner of Dua Governance, a Charity Governance specialist accountancy firm.

 

Nasir has held many senior finance positions within the UK charity sector and continues to advise many charities on governance and leadership matters.

 

Email: info@duagovernance.com

Important Lessons from Strawberry Picking

Strawberry picking is a fun day out for all ages. This outdoor activity has it all, sweet fresh berries, a walking exercise and a family fun activity of picking various fruits from their plants.

 

In this innocent activity, one can also “pick” many lessons for individuals and organisations. As I walked through the various fruit lines, I started to pick many of these lessons and came across the following four valuable lessons:

 

Lesson 1: Sweet fruits are on branches that hang down

 

Branches full of fruit are the ones that hang down with the weight of their fruits. This is also true in real life. Individuals that are humble and flexible are the ones that attract people and affection like that branch full of fruits.

Individuals and leaders that are arrogant and inflexible tend to find themselves like those branches pointing in the air with no fruit – nobody likes them or entertains them. Its not the branch that matters but the fruit on it – In real life we forget this.

It’s not the person but the personality and personal conduct matters.

It’s not the person but the personality and personal conduct matters – both define qualities the person and make it so that people benefit.

 

Lesson 2: Size, colour, and design does not matter

 

Many strawberry farms, also grow many other berries as well. From strawberries to raspberries and blueberries. Each berry is different in size, colour, plant, and taste. When ripe and juicy each of them energises the taste buds and gives immense pleasure.

 

The key word here is “ripe” and “ready to eat”.

In real life we focus too much on size, colour, ethnicity, and political affiliations, like the farm the world is full of variety – what should matter is maximising the ability and impact of individuals and organisations.

 

When ready the fruit will taste the best on their own plant – it’s wrong to expect the blueberry to grow and taste good on a strawberry plant or vice versa.

Like plants, individuals are at their best in their own environment and identity – this should be respected, celebrated, and protected for them to “ripe” and excel.

Like plants, individuals are at their best in their own environment and identity – this should be respected, celebrated, and protected for them to “ripe” and excel in all walks of life and organisations. Where this is ignored, it’s the organisations and leaders that lose out from the potential talent and resource those individuals could have offered.

 

Lesson 3: It’s the picking that dictates the quality of the basket

 

The fun in strawberry picking comes with holding the basket and picking the fruit into it. The thousands of plants have thousands of fruits hanging on them at different stages of their life, some ripe and some not as ready. They hang in groups and on different branches. Depending on their position on the plant and branch – they can taste different, sweet, or bitter.

 

It is how and when they are picked determines, the quality of the fruit in the basket. A farm full of fruit that looks unripe may still generate a basket with ripe and colourful tasting fruit. This requires effort and time for the picker to dig deep in finding the ripe fruit.

 

Organisations that have good quality staff have impeccable recruitment practices – they reach out and plan carefully to find and retain the right talent. These organisations then stand out and achieve their objectives – It is then the basket of fruit gives the right pleasure and visuals.

Those that go on a “picking” spree influenced by numbers and digits (nothing more) tend to end up with the wrong mix of fruits in their basket.

Those that go on a “picking” spree influenced by numbers and digits (nothing more) tend to end up with the wrong mix of fruits in their basket. The basket will eventually cost them at the counter and the fruit will be of no use, leaving a bitter taste. I see this often in organisations, especially charities.

 

Lesson 4: Season and gardening make the difference

 

As we are walking out of the farm, we came across some berries out of season – their plants were fruitless and resembled wild bushes with no use.

 

We were so wrong.

 

Given the right season, care and effort the farmers will put into them, they are to taste better than the sweet berries in season we were tasting today.

 

In real life, the same mistake is made with individuals and organisations. We are trigger happy to right them off not realising that we may be meeting them in the wrong season or all they require is care and effort to blossom.

Instead of waiting for the right season or investing in care and training, we judge them and leave them with wrong labels. Hence losing out from the ability and impact they could have shown.

 

Like sweets berries, individuals and organisations require the right environment, care, training, mentoring and guidance to grow and bear fruits for many to enjoy.

End –

 

Author: Nasir Rafiq is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

He is the Managing Partner of Dua Governance, a Charity Governance specialist accountancy firm.

 

Nasir has held many senior finance positions within the UK charity sector and continues to advise many charities on governance and leadership matters.

 

Email: info@duagovernance.com Website: www.duagovernance.com

 

Charity Leaders: Why personal conduct matters

The charity sector represents public benefit. Leaders of charity offices often preside over limited resources in the context of the job required of them. They also take decisions on donor funds and their decisions can have a far-reaching impact on the people that work in charities and / or the beneficiaries.

 

Staff may be asked to sacrifice for the greater good, for beneficiaries sometimes this can be a matter of life and death or economic survival.

 

Charity leaders must be able to lead an effective team; their success depends on it.

Charity leaders must be able to lead an effective team; their success depends on it. In doing so leaders often have to take difficult decisions to bring the best out of them. The team must be able to trust and respect the leader. Leaders can train future leaders only when their followers can see them as role models and mentors.

 

In this context the personal conduct of a leader especially in the charity matters. It becomes the difference between success and failure. A leader may move mountains, people and followers will forget that – however the conduct on how those mountains were moved is what becomes the legacy of that leader.

 

It’s the personal conduct that touches people and followers and becomes part of the human memory and emotional history of the leader.

Below are some common leadership characteristics and conducts that I have experienced in the charity sector that are proven to make a difference:

 

Trust requires building

 

People and followers must be able to trust their leader. It is only through the trusting, it becomes easier for the people, followers and teams to sacrifice and backdown at their personal cost. Trust is created by being able to follow through on promises without compromise. Trust must be earned and does not automatically come with positions – The leader can build it or break it.

 

Trust must be earned and does not automatically come with positions – The leader can build it or break it.

Trust is built by being transparent in public and private communications. Consultations promote trust especially when the followers / team members know that they will be consulted – this builds trust within the team. Trust grows in humility by accepting mistakes when they are made, and all leaders make them. All this requires consistency and patience by the leader.

 

Fairness come what may

 

Leaders enjoy powers entrusted to them over those that follow them. How they use these powers for the greater good of the office they represent identifies their conduct.

 

Those leaders that don’t compromise on fairness tend to be more powerful and effective than those that compromise to benefit family, friends, or personal business interests – A leader may have favorites on a personal level – this must not skew the balance of fairness in the organisation.

Nepotism eats personal conduct like termites eating wood

Nepotism eats personal conduct like termites eating wood. One the face of it the wood has structure, the termites eat it from within. The wood sound then becomes hollow when tapped, just like the leaders that constantly compromise on principles over nepotism. When these leaders are tested, their teams abandon them over their hollow rhetoric.

 

Being fair and more importantly the perception of being fair (as important) is a crucial conduct that effective leaders often display. This requires the leader to stick to policy and process and become a role model in doing so.

 

Justice is not for the weak

 

Humans are not angels – they make mistakes or do wrong. Teams and followers are not immune from it. An effective leader when confronted with wrong, deals with it. As not dealing with it promotes it, grows it, spreads it – there is always a limit on how much dust can be swept under the carpet. Whenever (and it will) the carpet is removed, all is laid bare, and it is then reflected on the conduct of the leader.

 

Justice has its value when it can be felt and seen. This sets the standards and creates an environment where mistakes and wrongs are less made and discouraged. It becomes the moral compass for leaders and their followers / teams – with this compass they cannot go astray.

 

Being just becomes the moral compass for leaders and their followers / teams – with this compass they cannot go astray.

 

The good practice that is practiced

 

Leaders that tend to take personal conduct seriously, often lead organisations with:

  • effective HR and operational policy and processes that are followed,

  • good and consistent performance management processes,

  • effective organisational structures that achieve good quality consultation and accountability,

  • fair and effective recruitment policy and processes – the right person the right job,

  • a skillful rotating board that appoints the leader on merit and holds the leader accountable.

 

End –

 

Author: Nasir Rafiq is former Interim Finance & Corporate Services Director of Islamic Relief Worldwide (2016-2019). He has held many senior finance positions within the UK charity sector and continues to advise many charities on governance and leadership matters.

 

Nasir is the Managing Partner of Dua Governance Chartered Accountants and Business Advisors. A firm specialising in the charity sector.

 

He is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

Email: info@duagovernance.com

Dua Financial Standards for (all size) Charities

During the past decade the number of Muslim charities raising funds has increased. Smaller charities have become large and larger charities have become more complex. As the size and reach of charities increases, the need for better and robust financial governance significantly increases. It is only through this, donor monies can be protected and spent properly on charity projects the donors intended for.

 

In addition to donors, the banks and the Charity Commission take financial governance and anti-money laundering risks very seriously as well. When things go wrong, interventions from both can have an effect of impairing charity operations significantly.

 

Charity Commission interventions have sanctioned Trustees and CEOs and when Banks feel unfordable with financial governance they have closed bank accounts and / or stopped bank transfers to vital operations.

 

What does good financial governance look like in a small or large charity? – this is where wrong questions can result in wrong answers – Trustees, managers and donors sometime fall prey to this.

 

What does good financial governance look like in a small or large charity – this is where wrong questions can result in wrong answers – Trustees, Managers and Donors sometime fall for this.

 

Low or no overheads does not mean good financial governance and neither does a good marketing pictorial report on beneficiaries nor a slick emotional video shown by a fundraiser.

 

Donors have the right to ask questions as it is donor money at the end of the that becomes management salaries, admin costs and relief to beneficiaries.

However, these questions must be the right ones to ensure charities prepare the right answers.

 

The Dua Financial Governance Standards do exactly that – they provide a comprehensive and meaningful framework for the right questions and for charities a relevant standard through which they can demonstrate their governance.

 

The Dua Financial Governance Standards does that – provides a comprehensive and meaningful framework for the right questions and for charities a relevant standard through which they can demonstrate their governance.

 

There is lots of guidance already available online – the problem with much of this guidance is the lack of knowledge and experience how they should be applied. Not one size fits all. These various guides are often not tailored to the size or the charity risks. They often have an effect of identifying gaps the charity already knew existed.

 

Dua Standards

 

The Dua Standards helps charities demonstrate responsibility, create trust and transparency, and reduces risk of fraud, error & inefficiency.

 

The standards focus on four clear outcomes:

  1. The Trustees are adequately involved and accountable.

  2. High level financial controls are in place.

  3. The staff and skill dealing with finance are suitable

  4. The charitable spend including Zakat spend is adequately controlled

 

The outcomes are matched to a total of 18 criteria tailored to four different income sizes of charities. This ensures the standards remain relevant to income size and underlying risks of the charity.

Approach

 

The approach to assessing compliance to the standard is designed to also produce / recommend credible action plans where gaps are noted. These action plans help those charged with governance to steer the management and charity in the right direction.

 

The result is an improved and enhanced financial governance that protects donor monies and makes the monies reach and travel further for the charity beneficiaries worldwide.

 

Next steps

 

Email the team at Dua Governance info@duagovernance.com for further information and timings for an independent professional review. This will include a certification with a credible action plan for any gaps identified.

Charities and Banks – A difficult relationship

Banks are the most important stakeholder for charities with international operations. The relief they provide saves lives and protects dignity of beneficiaries in the most remote and desperate places worldwide. However, they can do this properly only when the banks allow them to do so.

 

The role of banks is often misunderstood – is it a regulator? is it an evil business? is it a money transfer agent? or is it a government spy? The answer is No, it can be all of that and more.

The role of banks is often misunderstood – is it a regulator? is it an evil business? is it a money transfer agent? or is it a government spy? The answer is No, it can be all of that and more.

Banks are private or public limited businesses and have all the pressures a business has – Yes, they can go bust and as we saw during the 1990s banking crisis, size did not matter. The failed banks had an effect of destroying livelihoods and dreams of many.

 

We live in a digital world; no activity be it a noble or a criminal can exist without it. ALL use banks and the banks then suddenly become the conduits in promoting the good and the bad – this is where the government regulation comes in, mainly aimed at stopping the bad as defined by the government and backed by hefty penalty regimes and licenses.

 

To stop the bad and to avoid penalties, the banks adjust their business practices. Each bank will have its own risk appetite, and this will dictate how they manage their customers, be it a business or a charity.

 

International charities can be a risky business for banks as they can and have been used to launder money to fund terrorist activities, evade taxes and used to hide personal wealth.

 

International charities can be a risky business for banks as they can and have been used to launder money to fund terrorist activities, evade taxes and used to hide personal wealth.

 

Banks design their systems to pick up the bad and money laundering – these systems are often sophisticated and based on artificial intelligence (AI) reflecting decades of banking transactional behavior.

 

To ensure business and commercial conflicts are managed by banks, many banks have in recent years centralised their anti money laundering checks and related decision making. As a consequence, local bank managers and relationship managers no longer have a say or control like they had in the past.

 

International money routes

 

Another layer of complication for international charities is the international nature of bank transfers.

 

In between the charity’s own bank and the bank receiving funds in another country, there are different intermediary banks subject to different regulatory regimes.

 

Each banking side (i.e. sending and receiving) does not necessarily control the banks in between. International transfers are only made possible when the intermediary banks allow them.

To understand this point, staying within your own country, we don’t need visa or custom and bag checks, however travelling outside the country, we are subject to all sorts of checks and regulations and depending on what passport you hold, your treatment will differ.

 

This is also the case with international bank transfers, like roads and flight paths there are various international money transfer routes with different intermediary banks in between. Each route is subject to its own compliance regime, regulator and political sanction regime.

 

It is in this context of money laundering risks, international charities can struggle to open a bank account, transfer money internationally or in extreme cases have their accounts closed (de-risked) with no recourse or remedy. I see this too often.

 

In my opinion, this necessarily is not because of a personal, an anti-charity or an anti faith agenda by the banks. It’s often a simple matter of compliance to anti-money laundering rules set by regulators and political governments.

 

Know Your Clients (KYC)

 

Banks need to update their systems with KYC (Know Your Client) details and below are the three main questions that they need to answer for money coming in and going out the banks:

  1. Who is donating to the charity? Does the charity itself know and make checks to ensure this is not dirty money?

  2. Who is the money transferred to? Is the bank account receiving money owned and controlled by a locally registered charity that has the permission to receive the monies by the local government or regulator?

  3. The money that is being transferred to a country, project or beneficiary – are there any sanction implications?

Once the money is in the banking system and transferred abroad, the bank becomes a facilitator, so they need to know and be satisfied that these questions can be answered.

 

Many times, charities fail to understand the importance of these questions and often lack the policies, systems and processes that can help them answer the banking concerns.

 

In the banking world, the banks do not wait for charities to develop their system, they expect them to have all the answers before any money is put into the banking system –

 

Banks are businesses and take a business approach to due diligence and anti-money laundering checks. If the bank feels the charity business is more risk than benefit in commercial terms, then it will simply fail the transactions or de-risk the charity. Banks are not obliged to give their custom to charities.

The impact of the pandemic – worst for charities

 

The pandemic has had the effect of escalating the move to a cashless economy.

 

Government Covid19 grants required businesses to have bank accounts, many small businesses did not. All this created a significant backlog in banks for business accounts. With staff shortages, working from home, closed bank branches and fewer staff, this all together has compounded the issue for charities specifically.

 

Unfortunately, it seems the banks have put charities way down down in the priority order. What was cumbersome and difficult in normal times has become impossible after the pandemic and this is most likely to stay like this for years to come.

 

Unfortunately, it seems the banks have put charities way down down in the priority order. What was cumbersome and difficult in normal times has become impossible after the pandemic and this is most likely to stay like this for years to come.

 

Charities need to up their game to stay relevant

 

In this environment, my advice to individual charities with international operations is as follows:

 
  1. Partner with charities that have proper systems in place that meet the banking anti money laundering requirements

  2. Invest in your back-office operations and do not underestimate the importance of treasury advise and protocols, especially in relation to anti money laundering processes and due diligence processes.

  3. Treat your finance function as a compliance function and not just a money transfer function. Recruit finance professionals with this in mind and relevant experience.

  4. Don’t take risks with money transfers, always assume each transfer will be questioned. Taking risks can backfire with the whole charity operation ending up in jeopardy. Ensure proper paperwork is in place before transfers are made.

  5. Anti-money laundering checks must be made on large donations (i.e. £5000 and above).

  6. Use the mainstream banking system and avoid using cash transfer agents. The audit trail often fails with cash transfer agents and increases the risk to banks.

  7. Work with local partners that have proper local registrations and due diligence in place.

  8. Large charities should establish a good working relationship with their bank relationship manager by treating this position as a key stakeholder of the charity. A transparent relationship should be forged with ongoing issues and future plans. This all helps to keep the bank informed with update to date KYCs.

 

In short, international relief should not be a about a mad rush for raising money and spending money abroad irresponsibly. It has to be done properly with proper policies, systems and processes for it to be sustainable and impactful for the beneficiaries in the short and long term.

 

Unfortunately charities can’t change banking behavior, they need to adapt to the new reality to ensure the lifeline they provide to the most desperate for their sake continues.

 

End –

 

Author: Nasir Rafiq BA, FCA is the Managing Partner of Dua Governance Chartered Accountants, an ICAEW firm specialising in charity financial governance and internal audit.

 

Nasir has directed treasury functions in large UK charities with operations worldwide.

 

Email: info@duagovernance.com

Lets take a risk

Things can go wrong in many of the most well run organisations. As humans this shows our imperfections and limitations.

In modern times and especially in the West as management sciences developed, “how to manage risks” became one of the main tools for planning and good governance in organisations. This is why some of the best governed organisations have the best “risk management” in place.

One thing is clear taking risk is not an issue, many successful businesses, organisations and people took risks that brought them success they then enjoyed. Its how this risk was managed helped to keep their heads above the water and avoid the real and present circling sharks.

Another important aspect of risk management is that all risks cannot necessarily be managed to a point where they cant materialise. Even when they are best managed, they can still occur. Only difference being that good management of them means, the organisation is better placed to weather the storm when it comes. This may not be the case without managing them.

 

Trained in Big 4 accountancy firms in risk management, I had the opportunity to audit risk management in local government, housing associations, central government agencies and education sector. After leaving the Big 4, I moved to a FTSE giant where as a senior Internal auditor, I reviewed risk registers of EMEA region countries and led risk workshops of complex large businesses, such as the North Sea business. As I now work in the charity sector, strengthening good governance in organisations, disseminating my professional learning, I am pleased to see many INGOs recognising the need to manage risks. Be it very much behind the government and corporate sector for various reasons, they try to punch above their weight. In dealing with risk management in the charity sector, especially the INGO sector, I have the following observations:

Where do risks come from

I too often see a misunderstanding of “relevant” risks. Organisations too often led by academics and theory or with the desire of simply copying “others” often fall in this trap.

Identifying risk becomes, a tick box exercise and most of the time risks end up outwardly looking, ignoring the internal and external needs of organisations.

 

Risks become very much focused on weaknesses and threats, ignoring strengths and opportunities. As I mentioned above sometimes organisations need to be bold to succeed. This may require taking risks.

Every organisation like humans can be different from each other. How the organisation was formed, the recruitment, HR practices, type of CEO and trustees, ethos, stakeholders, business relationships, contracts and brands, can make organisations unique. The associated risks should reflect this. The controlling of risks

In risk registers, I see listing of controls against risks and then a sense of content from organisations that the box is ticked and risk is managed. This is not risk management instead this can turn into a false sense of security. The process of matching risks with controls requires a robust assessment of the controls. This should lead to identifying gaps with meaningful action plans.

An effective risk management process leads to more work, more strengthening, more investment, more focus and more hunger to succeed. This cannot be just a tick box. The INGO sector has a long way to go. Being able to manage risks, can mean a difference of life and death, a full belly or an empty belly for the beneficiaries of INGOs.

 

The funds raised can travel further in meeting objectives that the most vulnerable depend on. In all this, my work with INGOs continues. Nasir Rafiq is a financial governance expert and the founding director of Dua Governance Chartered Accountants, specialising in the charity sector and internal audit.

 

Succession – When is the best time to let go

Its hard to let go when you have grown an organisation, be it a business or a charity with personal sacrifice, commitment and / or investment

Sometimes this question leads to breakdown of relationships, disagreements and even legal fights or regulatory action. Humans are mere mortals, and this question always hangs over every Leader, Founder and Owner. This question can be answered in many ways successfully and sometimes unfortunately by force.

In my professional capacity, I have worked to answer this question in the business and charity sectors. My starting position has always been to question and understand the motive of the question as the answers lies therein.

Succession should be about success of the business or charity

Succession must always lead to success – this is when it becomes utmost important to define what that “success” actually looks like.

Does success mean becoming a bigger business or profitable one? Is it about becoming a larger charity or better governed one? Is it about changing the way the organisation is run or just about retiring and passing the mantle?

In defining the parameters of success, the timing matters as it focuses the minds and rewards.

When the question of “succession” is considered without working out the question of “success”, it risks leading to the wrong answer. Not all business successes require successions. And if not careful, unnecessary successions can lead to disasters and failures due to losing history, commitment, and profile of the leader internally and externally. Artificial term times don’t always work, especially when copy / pasted from other organisations.

What success looks like may even require other solutions other than succession. For example, advisors / new positions under the leader, more delegation or just good and better business planning or resources.

However, when the succession discussion is underpinned by the need of a clearly identifiable success then difficult discussions become easier to digest and problems turn the mind to “win-win” solutions. Succession planning becomes meaningful and desirable.

 

Good strong successors don’t grow on trees

In a family business or a family / friend run charity, the perceptions of control can dominate the succession discussion over the need for real organisational success. Not all seats on the board table mean control – the wrong successor can compromise success – without the real success, control means nothing.

However once succession is on the cards, finding the right successor can become an impossible task. The identified success parameters should determine the type of successor required – Leaders don’t grow on trees and may not be just plucked out of thin air. Promoting an amateur and / or choosing an untried hand can be a risky affair – this is why a timely succession planning is always a cornerstone of good governance.

Below are some examples of how succession planning works in good governed organisations:

  1. Delegation nourishes leadership. This can be achieved in a controlled and a phased manner. The delegation matrix should be meaningful and there should be succession planning thought behind it – This should not just be a HR tool to use when things go wrong.

  2. Input leads to outputs. Every great leader started from a junior position and worked their way up. Never underestimate a good effective recruitment strategy at junior grades. These are the stones that can be carved into eye-catching statues of tomorrow. Graduate recruitment of great corporates is designed with this in mind.

  3. Mentoring should not be accidently achieved – it should be planned. This is a fruit that can be produced through an effective HR function and through good performance management protocols. Effective leaders budget their time for mentoring – these are the seeds that can grow into the trees of tomorrow.

  4. Nepotism can be costly. It comes at the cost of achieving real success. It suppresses real leadership and opportunity. Organisations that keep nepotism in check make succession planning work effectively. These are the organisations that are designed to succeed in their organisational objectives. Those that don’t, lose in the long run.

 

End –

 
 

Author: Nasir Rafiq BA FCA is a widely experienced Finance Professional and Governance Expert. He works with organisations of all sizes and complexities.

 

Nasir is the Founder Director of Dua Governance Chartered Accountants and Business Advisors. A firm that specialises on governance advisory services to the charity sector.

When assumptions don’t work

Those that run organisations are expected to make decisions. These can be trivial and some with significant long-term impacts. They are often presented with scenarios where they are required to make decisions for the betterment of their organisations. These decisions could relate to appointments, procurements, ending or starting partnerships, strategic direction or related to communications.

How these decisions are taken determines how risk is managed and disasters averted within an organisation. Bad decisions can indicate Bad governance.

The quality of decision is based on the quality of the source. Is it based on assumptions or assurances? The difference between both is crucial and can be explained by how a surgeon conducts surgery.

A surgeon when conducting lifesaving surgery must also make decisions. How these decisions are made gives us a glimpse on how assumptions can differ from assurances.

A surgeon regardless of his skill and experiences must rely on assurances provided by test results, machine sounds, camera, touch, tools and importantly opinion of other professionals. The more complicated the surgery, the more assurance is needed. This is how risk is managed.

All these together give the experienced surgeon assurances on how much risk he/she can take and/or if the surgery is on track.

Just imagine, if the surgeon decides to ignore all and just uses “assumptions” based on past experiences or what he/she may have heard or read from elsewhere to conduct the complex and life-saving surgery. One can imagine, this surgeon is playing with life and risking death on the table.

The more experienced the surgeon, the keener he/she will be on relying on assurances from data, test results, tools, and opinion of other professionals. This is not about being weak or being undermined. This is about quality of professional decision making to save lives.

Those that run organisations can learn from this example.

 

Those charged with governance that rely on assurances tend to get it right compared to those that rely on assumptions and hearsay. Personal experiences of founders and leaders can be important but also dangerous when ignored over other means of assurances when making important decisions.

 

The larger the organisation, the more need for robust assurance mechanisms. Below are some examples of assurances that can be used in decision making context:

 

Comparing and Contrasting is a skill that leaders must have

Management regularly reports to their Boards. The Board members in their positions should have the ability to compare and contrast that information with other sources of information. Sometimes these alternative sources must be created for this purpose. For example:

  1. Does the reported finance information agree back to independently audited accounts?

  2. Does the HR report agree back to staff surveys or outcomes of tribunal cases / HR compliant investigations?

  3. Does the operations reporting agree back to independent evaluations and client / beneficiary feedback surveys?

  4. Is the Management submission on a matter supported by robust legal and finance advice?

  5. Do Management individually report to the Board and are these position holders consistent in their representations?

  6. Is there an independent and competent Internal Audit function that provides a robust professional assurance to the Board on ALL aspects of the organisation?

 

If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur

 

Professionals can be individuals or firms. A good widely experienced professional can provide an independent assessment beyond the organisation’s internal politics and embedded assumptions.

 

Home truths from independent professionals can do wonders for cleaning up an organisation. Those leaders that surround themselves with “Yes Men” tend to fall in their own dug holes as they miss them when they eventually appear.

 

Good Governance is about how organisations are run in achieving their objectives. Decision making is part of this. It therefore matters how these decisions are made using assumptions or assurances.

 

End –

Author: Nasir Rafiq is the Founder and Director of Dua Governance Chartered Accountants and Business Advisors, a firm specialising on financial governance.

 

Nasir is a widely experienced Fellow Chartered Accountant (ICAEW) and a Charity Financial Governance Expert.

 

Email: info@duagovernance.com