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Published 10 March 2021
© Crown copyright 2021
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This publication is available at https://www.gov.uk/government/publications/charity-inquiry-under-tree-schools/charity-inquiry-under-tree-schools
Under Tree Schools (‘the charity’) registered with the Charity Commission (‘the Commission’) on 24 January 2007. The charity is now a CIO – Foundation conversion dated 12 November 2020. The charity’s previous Governing Document was a memorandum and articles of association prior to CIO conversion.
The charity funds and operates a school for girls in South Sudan and registered as a Non-Government Organisation (‘NGO’) with the Sudanese authorities on 16 April 2008. At this time Sudan was still one country, South Sudan did not become an autonomous country until 9 July 2011.
The Charity’s accounts for the financial year ending 31 March 2020 recorded an income of £53,592 and expenditure of £37,080.
When the Commission opened the compliance case and, subsequently its inquiry, the charity had 6 trustees (‘the original trustees’): 5 of the original trustees resigned on the 18 January 2020 and on the same date 3 new trustees were appointed. There are currently 4 trustees in post at the charity.
The charity’s entry can be found on the register of charities.
The Commission has been in contact with the charity since January 2019, after the independent examiner for the charity provided the Commission with a Matter of Material Significance Report (‘MOMS’) made pursuant to section 156 of the Charities Act 2011 (‘the Act’). This report raised issues concerning the transfer of the charity’s funds from the UK to South Sudan in United States Dollars (‘USD’), the collection of the charity’s funds by individuals operating on behalf of the charity’s school in Aweil, South Sudan (the ‘School’) and the conversion of the USD to the local currency South Sudanese Pounds (‘SSP’).
On 14 May 2019 the Commission met with the original trustees in Birmingham.
Following this meeting the original trustees provided further documentary evidence to the Commission. Due to its ongoing regulatory concerns the Commission conducted a second meeting with the original trustees on 22 October 2019.
Following the two meetings and the provision of documentary evidence by the trustees, the Commission’s regulatory concerns regarding the transfer of funds to South Sudan and the failure by the original trustees to provide proof of charitable spending of charity funds in South Sudan increased.
On 2 December 2019 the Commission opened a statutory inquiry, under section 46 of the Act into the charity. The scope of the inquiry was to examine:
The inquiry closed with the publication of this report.
The inquiry found that the charity had a properly appointed trustee board who were responsible for the administration and day-to-day running of the charity.
The charity funds and operates a school in South Sudan. The Commission considers this a high-risk country to operate in due to the risks of terrorism, conflict between armed actors and political instability, and has provided specific guidance for charities operating in such countries.
Revd. Joseph Ayok-Loewenberg, one of the original trustees, is a citizen of South Sudan, had previously held a position in the South Sudanese Government and the inquiry found that he had specialist knowledge of South Sudan that the other trustees did not possess.
The inquiry saw evidence that the original trustees held regular trustee meetings and that minutes of these meetings were kept.
The inquiry saw evidence that Revd. Ayok-Loewenberg informed the original trustees in November 2017, that he had been removed from his South Sudanese Government post as Under Secretary at the Ministry of Foreign Affairs. He also advised the original trustees that he had consequently been made Persona Non Grata (PNG) and he was not able to return to South Sudan at that time. Revd. Ayok-Loewenberg has returned to South Sudan since the Commission opened its statutory inquiry in December 2019.
The inquiry found that Revd. Ayok-Loewenberg’s knowledge of South Sudan, his government position and his status within the Anglican church meant that the other original trustees placed significant trust in him, that on occasion they deferred to his view without robust challenge, and that they were not sufficiently inquiring about any information he provided to them. This was particularly so in respect of currency exchange rates and the engagement of individuals who acted as ‘trusted agents’ on behalf of the charity, as set out in more detail below.
The charity had a bank account with a main UK bank. In order to fund the School, the original trustees transferred funds from the charity’s UK bank account to Dahabshill, a money transfer company in London, where they were converted to USD and then forwarded, on behalf of the charity, for collection in Africa. The Inquiry saw evidence that charitable funds were forwarded in this way to locations in South Sudan, Kenya and Uganda.
The inquiry saw evidence that the funds, once transferred from Dahabshill in London were collected in cash in Africa, in the main by Revd. Ayok-Loewenberg, but on three occasions by one of the charity’s agents, appointed on Revd. Ayok Loewenberg’s advice. The original trustees informed the inquiry that the collected funds should then have been exchanged from USD to SSP and then delivered to the School.
The inquiry saw evidence that Revd. Ayok-Loewenberg advised the other original trustees that the ‘official’ currency exchange rate was 3.9 SSP to 1 USD and that they must use this when calculating the amount of money to send to South Sudan. The charity’s independent examiner informed the inquiry that he could find no evidence of any such ‘official rate’ and noted that the commercial rate at the time was between 130-160 SSP to 1 USD. The original trustees have not been able to produce any documentation showing any transactions made at the exchange rate quoted, i.e. 3.9 SSP = 1USD.
The inquiry found publicly available information that provided details of the currency exchange rates which could have been used by the original trustees at the time of the transfers and that would have provided them with more accurate information about how much the money they were transferring to South Sudan would generate in local currency. Similarly, the inquiry found information that stated the Government of South Sudan abandoned the official exchange rate referred to above in December 2015, before any of the transactions occurred. The inquiry found that by following the advice of Revd. Ayok-Loewenberg the original trustees sent far more money to South Sudan than was required.
The inquiry has seen evidence of several money transfer transactions where large sums of USD, normally around $10,000 – $15,000 per transaction, were sent to Uganda and/ or Kenya and collected by Revd. Ayok-Loewenberg throughout 2017 to 2019. The amounts sent to both Uganda and Kenya in this period total $165,141.68 USD. The original trustees explained that they believed these funds would then be cash couriered into South Sudan and converted to SSP for use by the School. However, no documents have been produced to the inquiry to confirm the end use of these funds.
In relation to this, the inquiry has identified that:
Following the Commission’s initial intervention in January 2019, and prior to the second meeting with the Commission in October 2019, the original trustees as evidence of an improved currency transfer process produced what purported to be three Western Union (‘WU’) transaction receipts detailing currency exchanges.
The receipts produced appeared to be crudely written and showed the exchange rates as:
However, all the WU receipts lacked any terms and conditions, or a correct transaction number as would normally be expected with a cash transaction receipt. This process involved transferring funds from the United Kingdom via Dahabshiil to Juba where the new trusted charity agent, appointed on the advice of Revd. Ayok-Loewenberg, would collect the funds in USD and then go to the WU office in Juba and have the funds transferred to Aweil, close to the School, and converted to SSP during the process. It was not clear to the inquiry why the charity did not transfer funds directly to Aweil from the UK via WU. The original trustees admitted they did not conduct any further due diligence on the WU receipts after Revd. Ayok-Loewenberg had produced them as proof of the transactions.
The inquiry was informed by the original trustees that Revd. Ayok-Lowenberg provided the WU documents as proof of transactions conducted in South Sudan by the agent. The Commission directed WU to provide information about the transaction documents and as a result the Commission is satisfied that these documents cannot be relied upon and that they are not genuine WU transaction receipts.
Following the inquiry directing Revd. Ayok-Loewenberg to answer several questions, he explained that he is closely related to both of the charity’s trusted agents. The inquiry has seen no evidence that the original trustees knew of this conflict or that if they did, they took account of it when they decided to use them as trusted agents who were allowed access to the charity’s funds
The inquiry found that the original trustees failed in their legal duties to account properly for the expenditure of the charity’s funds, they failed to monitor charitable funds and to verify their end use and by accepting the suggested very poor exchange rate, which was used to calculate how much money to send to South Sudan, and therefore failed in their fiduciary duties.
The inquiry found that there has been misconduct and/or mismanagement by the original trustees and that this has resulted in the charity losing funds that would have benefitted the School and the charity’s beneficiaries.
The inquiry found that the original trustees of the charity:
To address the concerns outlined and to protect the charity’s funds the Commission used its regulatory powers as detailed in the section below.
On 14 December 2019, the original trustees commenced action to remove Revd. Ayok-Loewenberg as a trustee, in accordance with the charity’s Governing Document, following a trustee meeting held on the same date. His removal was confirmed at the trustee meeting date 18 January 2020. As mentioned in detail below, the Commission took regulatory action against Revd. Ayok-Loewenberg and disqualified him from acting as a trustee for a period of 15 years. During the trustee meeting held on 18 January 2020 a further 4 trustees resigned, and 3 new trustees were appointed, meaning that only one of the trustees who had been in post at the start of the inquiry remained. The inquiry found this significant as the serious misconduct and/or mismanagement regarding the use of a poor exchange rate and the inability to account for the end use of funds had taken place during the period when the original trustees were in post.
The inquiry notes that after the current trustees were appointed, they implemented a more stringent financial control policy and provided evidence of this to the Commission. The current trustees have also ensured the School staff undertake training in, and are aware of, the importance of obtaining proof of charitable spending. This was partly facilitated by one of the current trustees visiting the School. Several third-party receipts were supplied after spending by the School staff in February/March 2020, whereas before the appointment of the current trustees the inquiry had not been provided with any third-party receipts or invoices for the supply of goods or services. The new controls have been created so that the current trustees can be satisfied the charity’s funds have been properly expended in furtherance of the charity’s purposes.
The Commission found that in respect of the governance arrangements within the charity, the original trustees were too reliant on one trustee, Revd. Ayok-Loewenberg. The original trustees were not robust in their questioning of both the exchange rates Revd. Ayok-Loewenberg insisted upon and the individuals he recommended were used to collect, exchange and transfer the charitable funds to the School. The Commission concluded that there was no evidence any due diligence had been conducted by the original trustees in relation to the suggested exchange rates nor the transfer of charitable funds to Africa, its collection and use thereafter.
The Commission concluded that due to the unfavourable currency exchange rate used to calculate the amount of charitable funds to send to South Sudan, the original trustees were unable to account for significant charitable funds and were unable, on some occasions, to provide evidence of funds reaching the School or being expended as they should have been, in agreement with the charity’s purposes.
The Commission concluded that there has been significant misconduct and/or mismanagement in the administration of the charity by the original trustees over an extended period from April 2017 to March 2019. This action led to the charity losing charitable funds of approximately £218,000.
The inquiry concluded that the original trustees who were collectively responsible for the charity’s administration had, over an extended period, between April 2017 and March 2019:
The inquiry found that this is evidence of misconduct and/or mismanagement by the original trustees in the administration of the charity.
During the inquiry new trustees have been appointed and they have improved the operation and governance of the charity including establishing a more controlled and robust method of transferring funds to South Sudan, and implementing stricter recording of charitable funds expended at the School.
The Commission remains concerned over any future relationship the charity may have with the former trustee Revd. Ayok-Loewenberg.
The Commission concludes that the changes made by the current trustees, together with the actions taken by the Commission, mean that the current trustees are now in a better position to administer the charity and its funds properly and that the charity is in a stronger position going forward.
The Commission used its information gathering powers under sections 47 and 52 of the Act on multiple occasions to obtain information and copy documents from various sources, including from the trustees.
On 10 December 2019 the Commission used its powers under section 76(3)(d) of the Act to prevent the trustees from parting with any of the charity’s property. The Commission also exercised its power under the same provision to place a freezing order on the charity’s bank account, to protect the charitable funds. This Order was revoked on 29 June 2020.
The Commission made an Order under section 84A of the Act on 17 December 2019, instructing the trustees not to send any of the charity’s funds to South Sudan. This Order was discharged on 5 March 2020 allowing the charity to recommence sending charity funds to South Sudan.
On 29 June 2020 the Commission made an Order under section 84 of the Act which compelled the current trustees to follow the charity’s new Financial Controls Policy, to review the currency exchange rates available to them, and to record their decisions when instigating currency exchanges. Again, on 30 June 2020 the Commission made an Order under section 84 of the Act, requiring the current trustees to take actions in line with the charity’s financial control policies when conducting transfers of charitable funds to South Sudan.
On 10 December 2020 the Commission disqualified Revd. Ayok-Loewenberg from acting as a trustee and consequently from holding an office or employment with senior management functions at any charity in England and Wales under section 181A of the Act for a period of 15 years.
The purpose of this section is to highlight the broader issues arising from the inquiry of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the charity in addition to the findings and conclusions set out in the earlier sections of this report but is included because of their wider applicability and interest to the charity sector.
The trustees are those responsible for controlling the work, management and administration of a charity on behalf of its beneficiaries. Trustees are collectively responsible for their charity and ultimately accountable for everything done by the charity and those representing the charity. Trustees must actively understand the risks to their charity and make sure those risks are properly managed; the higher the risk, the greater the expectation and the more oversight is needed.
Trustees are under a legal duty to ensure funds are used only in furtherance of their charity’s purposes and are legally responsible and accountable for their proper use. Trustees must be able to demonstrate that funds have been used for the purpose for which they were intended. This means that they need to take reasonable and proper steps to ensure that any money or resources have reached their intended beneficiaries. Trustees must take steps to monitor the specific use of their charity’s funds, this will always include verifying their proper end use. Due diligence is the range of practical steps that need to be taken by charities in order to be assured of the provenance of charitable funds and be confident that they know the people and organisations the charity works with and are able to identify and manage associated risks. When choosing partners to work with there must be proper due diligence checks relevant to their charity and the risks to ensure that they are appropriate partners for them to work with.
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