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

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

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

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.

The Camel and Muslim Charities – Risk Management

In a well-known saying Prophet Muhammad (PBUH) advised Muslims to tie their camels before placing trust in God for its protection. This concept has some very important lessons for Muslim charities:

 

1. Charities should recognise their risks like the risk of losing the Camel. Charities face the risk of fraud, loss of reputation; loss of income; loss of key staff, fines and penalties, litigation and most importantly the risk of not achieving the charity or fund objectives… to help those in need. The impact of these risks will depend on the nature and size of a charity; they nevertheless apply to all.

 

2. Recognised risks should be controlled. God will not protect the Camel unless it’s properly tied up. Trustees and Directors of Muslim charities should ensure that adequate and effective controls are introduced to mitigate risks. Application of these controls should be in the context of risk, for example, the Camel can be tied up with a metal chain (expensive and excessive) or a weak rope (camel will break free). Moderation and proportionate risk control is therefore the way forward, and those charged with governance should put in place the capability to allow them to exercise this role effectively.

 

3. Place your trust in God. No control is perfect to eliminate risks. According to the values of Islam, it is because of God’s mercy and blessings that charities are often protected and make a difference to their beneficiaries. It is important however not to abuse this beautiful concept by leaving risks unattended… like that Camel.

 

By Nasir Rafiq (Founder and Principal Dua Governance)

 

An Expert in Governance and Internal Control

Islamic Schools the Untold Story of Governance

I recently visited an Islamic school that had not prepared its last 3 years of annual accounts. The Charity Commission had threatened to take them over, so in response they sought my help. After giving the Chairman a roasting for not giving financial accountability the due importance demanded by the regulators and Islam, I discussed the underlying reasons and explored solutions.

 

This is not the first time, I have come across a private Islamic school in financial difficulty. The same story repeats itself. Having worked as a senior Auditor in the Education sector with KPMG, I have a good understanding on how good governance looks like in the Education sector.

 

With Islamic schools there is an often an untold story – they are criticised when things go wrong but nobody tries to actually understands the underlying issues, never mind coming up with solutions.

 

The reality

Islamic schools are often set up by someone passionate about Islamic education on a voluntarily basis and with the support of the community. Personal funds, donations and Qard-e-Hassan loans are the traditional funds that are used to purchase the building, employ teachers and for other upfront costs.

 

I am yet to find a school where student fees alone cover the running costs therefore reliance is placed on donations and ongoing Qard-e-Hassan loans.

 

The Governors are never fully remunerated from the School due to Charity Commission restrictions. They often dedicate their full time as Chief Executive and give personal guarantees on the personal loans for the school. Their reputation becomes intertwined with the school. The founding Governor is often consumed by the day to day operations and cash flow challenges.

 

It is surprising how some of these schools sometimes achieve good Ofsted reports on their academic achievements despite lack of resources. I put this down to the barakah placed by God due to the sincerity of the Governors, staff and parents.

 

So what does this mean?

These unique features of Islamic schools have some implications. These are symptoms from the issues highlighted earlier.

 

Qualified staff and teachers cannot be afforded by such schools – reliance is placed on staff working for religious reasons and not for money, volunteers, family friends or on inexperienced staff. This directly impacts on the overall governance and standards of the school. As staff gain experience, they often leave for better paid positions elsewhere.

 

Due to personal sacrifices by the founding Governors, it becomes difficult for the Governors to delegate authority to Management giving rise to internal conflict and high senior staff turnover.

 

Cash flow becomes a bigger priority over financial control and accountability due to the loss making situation of the school. Unrecorded debt, the reasons for losses, spend without invoices to avoid VAT is not challenged or addressed. This very attitude contributes to a culture of ambiguity and secrecy.

 

Those among the community that give significant donations or Qard-e-Hassan loans to the school ascertain a position where they start to influence student admissions and staff employment. This compromises quality and standards.

 

So what should be done?

In my view and based on my professional experience, some simple steps can significantly improve this dire situation.

 

1.Before embarking on setting up a school, always prepare a business plan – Good business plans help to explore eventualities, mitigate risk, assess financials at the outset and plan accordingly and helps to ensure stakeholders are engaged in a transparent manner.

 

2.The school must be self-sustaining. If student fees alone cannot help to breakeven then the school must be supported by other reoccurring income i.e. trading activities, grants. Again this should be explored through business planning. Donations and Loans should not be used to fund core activities. This poses financial uncertainty.

 

3.As a Governor the following financial KPIs must not be ignored:

a. Bank reconciliations – never underestimate the importance of this. The Governors should ensure it regularly happens and must be aware of the implications. Bank reconciliations are the back bone of financial control.

b. Always be backed by a good Independent Accountant – Volunteers or sympathisers as Accountants may not be forthcoming in making sure issues are highlighted.

c. Ensure the annual accounts preparing process takes place. This provides a good opportunity to assess the financial health to plan for future.

 

4. It is not sufficient for Management / staff of schools to demand one way delegation – Management / staff should also introduce sufficient checks and balances to provide independent assurance to Governors that delegated authority is not abused.

 

5. Regular self-assessment against readily available checklists or by professional can help to high light issues before they are picked up by external regulators. These assessment should cover financial and non-financial aspects. Regular self-assessment is common feature among good governed organisations.

 

These simple steps can instantly make a difference and promote Good Governance in Islamic schools. There is no such thing as a perfect organisation.

 

In my view gaps are not issues as long as these gaps have action plans against them. Issues and Gaps are growing sins without action plans.

 

By Nasir Rafiq BA ACA – Governance Expert

 

Managing Director Dua Governance Chartered Accountants and Business Advisors

The Barakah of Consultation (Shoora)

Consultation (Shoora) within Islamic tradition is a noble act and reflects the way of the Prophet (pbuh) and his companions (RA). Shoora should be an important aspect of Muslim organisations, be it within business or the charity sector.

 

The benefits of shoora or consultation are immense. It helps to arrive at good and strong decisions, promotes consensus and when done with God and the Prophets seerah (pbuh) in mind, then such decisions include the barakah of God. Another well-known aspect of shoora in a life of a Muslim is the concept of Istikhara, where a Muslim directly consults God to clear any indecisions in a person’s life.

 

I sometimes come across organisation within the Muslim sector where despite prolonged time spent consultation / shoora, the decision making process is not effective and unfortunately this results in conflict among decision makers and sometime loss in time and resources.

 

Having spent considerable time reviewing governance within the UK Government sector and the Corporate FTSE 100 sector, I feel something that the Muslim world should have adopted, it is ironic that the West understands and benefits from.

 

The following are some of the common issues with consultation in organisations with solutions – lets not waste the barakah and benefit that comes from a good and effective consultation:

 

Why wait for meetings

Consultation or shoora is sometimes intertwined with formal meetings – this delays the decision making and prolongs the consultation unnecessarily. Consultation should not be conditional on holding meetings.

 

Solution: The decision making process should be broken down and should start well before the meeting where formal decisions are to be made. The process of decision making and consultations should be separated.

 

I know it all

Depending on the decision required, the consultation should include professional input. A mind-set that already portrays ‘We are perfect and know it all’ can never benefit from consultation – it becomes a useless exercise. The Prophet (pbuh) valued this, lets not undermine it.

 

Solution: Consultations should be conducted with respect and an open mind and with the overall objective in view.

 

Scatter gun often shoots the wrong target

The aim of the consultation should be to manage risk, explore opportunities and to plan – when emotions take over then instead of addressing these aims, it becomes a process in which point of views are aired with no clear output – often the case.

 

Solutions: A framework should be agreed for consultations to ensure it does not deviate from its initial objectives. There are many well developed, tried and tested techniques and tools available to support good consultations i.e. six thinking hats is one technique, I endorse.

 

By Nasir Rafiq BA ACA – Governance Expert

Who Controls?

I work with Boards and the CEOs of many large charities and NGOs and I often come across this dilemma between Trustees and CEOs. I was once asked in Board meeting of a large NGO by a Trustee that sometimes, the Board is too controlling and sometimes it is the CEO – how can we find a balance?

 

I feel this is a wrong question and therefore any answer to this question will be a wrong one.

At Board and Executive level, the issue of “Control” should be third in line and should be discussed in the context of two greater issues. Objectives and Risks.

 

Charities are charities and Trustees become trustees because of the stated “Objectives” of the charity / NGO they belong to – the CEO is appointed to help the Trustees achieve these corporate objectives.

 

The utmost priority has to be to achieve the “Objectives” – any activity that harms this, should be considered a “Risk” to the charity. Once the “Objectives” and the “Risks” are clear, it should THEN be about “Control” – for example how are the risks controlled.

 

If the “Controls” requires CEO to take the lead, then be it and if it requires the Trustees to take a lead then be it. As long as the “Controls” reduce the “risks” and helps to achieve the “Objectives”.

Outside the above context, the issue of “Control” between Trustees and CEOs becomes an issue of mistrust or ego and therefore will never result in a compromise and positive outcome.

 

So how do we find the balance?

In the above battle and contrary to what many think, I often find the CEOs on the wrong side. The Trustees were involved in setting up many of the large charities and work voluntarily, having made many sacrifices. Naturally they have “control”. The CEOs often complain that Trustees do not give them control –

 

The question that is often ignored by the CEOs is “What will the CEO give in return to the Trustees for that control?” The solution to all issues in my experience hides in how “effective, compelling and professional” the answer is.

 

By Nasir Rafiq BA ACA – Governance Expert