Thursday, April 27, 2006

AFIC Under The Microscope – Part I

Australian-based Muslim e-mail lists have been running hot with copies of a forensic accountant’s report dated 21 September 2005 and conducted by Worrells Forensic Accountants. The Worrells Report runs into 38 pages and seeks to investigate a range of matters concerning the financial systems and general corporate governance of the Australian Federation of Islamic Councils (AFIC), Australia’s peak Muslim body.

AFIC set up a committee to appoint and oversee an Independent Consultant following repeated allegations of financial mismanagement and systemic incompetence. The committee consisted of Dr Ameer Ali (then AFIC president) as well as Dr Muhammad Akmal from Canberra and Mr Suliman Sabdia from Brisbane.

In reading the Worrells Report, it should be remembered that the Report makes certain recommendations for changes to AFIC’s operations. In some places, the Report’s recommendations may have already been adopted. In the case of other recommendations, AFIC may be in the process of obtaining professional advice. Any comments, therefore, can only be made cautiously.

Among the issues raised in the Report is whether the system of payments complies with the AFIC Constitution. The Report suggests that the AFIC Constitution requires the President to also act as Chief Executive Officer. In the absence of such an arrangement, AFIC’s payment systems will breach the requirements of its constitution.

The current AFIC CEO is Mr Amjad Mehboob. If the provisions of the AFIC’s constitution are followed to the letter, it seems Mr Mehboob’s continued employment as CEO would be untenable. Mr Mehboob would therefore be made redundant, be dismissed or be found an alternate position.

Mr Mehboob has been with AFIC for over 2 decades. I doubt anyone in Australia would have as much knowledge of the history, systems and workings of the organisation as Mr Mehboob. One would hope that he could at least be kept on, even if only temporarily as some kind of consultant.

It is a matter of grave concern that until the release of the Report, AFIC’s system of payments did not comply with the requirements of its own constitution. One would have expected the auditors, the CEO and/or the accountant have brought this to the attention of the Executive.

Given that compliance would almost certainly have required Mr Mehboob’s removal from the role of CEO, one wonders whether self-preservation was deemed more important than compliance with legal and constitutional requirements. I would find it hard to believe that someone of Mr Mehboob’s education and experience would not at least suspect that this may be an issue AFIC would need legal advice on.

It also reflects poorly on successive Executive Committees of AFIC that they were unable to address this issue earlier on. Such a fundamental issue of corporate governance must surely be a matter important enough for Executive Members to deal with at the earliest opportunity.

The Worrells Report goes onto discuss the adequacy of the current payments system. It concludes that the system relies heavily on the CEO being “diligent in his duties to his employer”. The Report also mentions the role of the Office Manager and the Treasurer.

Clause 76 of the Worrells report states that the “current approach may not provide management with a high level of assurance that fraud will be prevented or detected in a timely manner”. The Report recommends that AFIC appoint “a suitably qualified fraud prevention expert to review AFIC’s authorization and accounting systems and make recommendations on strengthening that system.”

In the next instalment, I will examine those sections of the Report which touch upon AFIC’s audit reports for 2005 and the previous 2 years. In particular, I will focus on the allegations published in The Weekend Australian recently concerning the relationship between AFIC and the Malek Fahad Islamic School.

© Irfan Yusuf 2006

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