A Charity Commission investigation into the overseas aid charity Crescent Relief, which was accused of having links to a failed terrorist plot in 2006, has found no evidence that trustees diverted charitable funds for unlawful or non-charitable purposes.
The regulator’s report on its investigation into the charity, published today, says the commission opened a statutory inquiry after it became aware of allegations in the media both here and abroad that the charity was linked to a conspiracy to commit terrorist offences on aeroplanes leaving the UK.
Police examined the charity as part of a criminal investigation called Operation Overt, but no one linked to the charity was convicted of terrorist offences.
The commission’s investigation, opened in 2006 to examine governance and financial management at the charity and to assess whether the charity’s funds had been used unlawfully, closed today with the publication of the report.
The document says that, although there was no evidence of funds being used unlawfully, there was evidence of inadequate procedures to verify the use of the charity’s funds in Indonesia and Pakistan.
It says that the charity bought land in Indonesia after the tsunami of 2004 and funded the building of an orphanage by transferring £83,000 to a local partner’s bank account between May 2005 and May 2006.
It says, however, that there was no evidence of a partnership agreement with the partner and no evidence that trustees had carried out any due-diligence checks.
The report says that during a meeting with the regulator the charity’s trustees could not answer any questions about its activities in Indonesia and could not identify the orphanage from a selection of photographs.
Documents to show the charity’s spending in Indonesia were written in Indonesian, says the report, and none of the trustees understood the language.
It says: "Although the trustees informed the inquiry that they had translation support, they did not appear to have used this in relation to the documents that they produced to the inquiry, and so were unable to understand or explain their contents.
"It was therefore hard for the inquiry to see how the trustees could be satisfied that these documents evidenced monitoring by the trustees of Indonesian activities and expenditure."
The commission froze the charity’s bank accounts in August 2006 so that no money could be withdrawn without its permission. It removed the freezing order in April 2011.
The report says the charity’s trustees decided to end proactive fundraising while the investigation was taking place. As a result, the charity’s income fell from £353,457 in the year to October 2005 to £16,184 in the year to October 2007. It was £4,976 in the year to October 2010.
The regulator’s report says it has ordered the charity to carry out a review of its administration and management and to report to the commission on how trustees have ensured the charity’s assets are protected.
It says: "If the trustees act to make improvements to policies and processes, the risk of the charity's assets being misapplied will be reduced."
Dr Shabir Choudhry, a trustee of the charity, said he was pleased that neither the commission nor the police had found evidence of links to terrorism.
Asked about the commission's conclusions about administrative failings, he said:"When you deal with people in third world countries, they do not always have high standards of record-keeping. But we don't give money to people without a reliable reference.
"We have submitted a new policy document to the commission and we will follow their requirements. We will make sure the charity is run in accordance with the law."