An east London Bangladeshi charity lost almost £836,000 to gross financial mismanagement and alleged fraud over a two-year period, the Charity Commission has concluded.
A commission investigation into the Bangladeshi Parents and Carers Association found the charity’s reserve account had dwindled from £812,486 to £80,933 and it had made unauthorised expenditure of a further £104,296 with no evidence to explain why, according to the commission’s statutory inquiry report, published today.
Concerns that the charity’s then chair and its former finance manager were guilty of financial mismanagement and possibly of fraud were raised after the charity and its main funder, Tower Hamlets Council, both carried out reviews of the charity’s finances.
In February 2012, they submitted a serious incident report to the commission, which opened its inquiry in May 2012.
"There was gross financial mismanagement, which occurred at the charity during 2009 to 2011, and there appear to have been one or more occasions of fraud," the regulator’s report concludes.
Third Sector understands that until December 2011, all trustees and staff except for the chair and the finance manager were denied access to the charity’s accounts and financial information.
But when the finance manager left the country on holiday in October 2010 and never returned, leaving cheques and invoices unpaid, the trustees and the centre manager, Shamim Ara Choudhury, who is now the charity’s chief executive, demanded access to the accounts.
It was at this point that unauthorised payments, largely made to companies not known by the charity’s current staff, were discovered, Third Sector understands.
The commission’s report says the trustees removed the chair, who had directly line-managed the finance manager, and reported the alleged fraud to the police, but were unable to identify any financial records connecting him to the alleged fraud.
This lack of evidence and the fact that the finance manager had left the country means it is unlikely that the charity will be able to recover any of the missing money, the charity’s legal advisers said, according to the report.
The report says that the charity’s staff and trustees had taken appropriate steps by launching an investigation, contacting the police and seeking legal advice as soon as they were aware of what had happened.
Choudhury told Third Sector that because the chair had been involved it had been very difficult to work out what had been happening.
"But we’re very glad that the investigation has ended and that the charity is now working well," she said.