1. Charities Back on Track 2011 – 2012
The Charity Commission has published a report on its recent casework detailing lessons for trustees.
Over half of the investigations completed by the Charity Commission in 2011-12 involved basic failures of trusteeship.
The report reveals that 73 out of the Commission’s 85 investigations involved concerns about poor governance or poor trusteeship, including concerns about breaches of governing document (17), unmanaged conflicts of interest (16), and concerns about fundraising governance (9).
Concerns around fraud and financial crime also featured heavily in the Commission’s serious case work; around a third of serious incident reports (RSIs) submitted by trustees (364 of 1,027) and over half of whistle blowing reports about charities (56 of 121) involved concerns about financial abuse.
Concerns about safeguarding vulnerable beneficiaries featured in 11 investigations, and 394 RSIs.
The report also highlights areas the regulator has identified as posing the greatest risk to charities – fraud and financial crime, the abuse of vulnerable beneficiaries and terrorism – as well as the Commission’s strategic response to those risks.
For the first time, the report includes a case study highlighting a charity’s positive response to a serious incident. The report explains how an educational charity responded appropriately to allegations of physical abuse against a child, and was therefore able to reassure the regulator that the trustees were fulfilling their responsibilities.
The report also includes the example of an almshouse charity whose trustees could have prevented problems by making use of the support of their umbrella body, the Almshouse Association.
Michelle Russell, Head of the Commission’s Investigation and Enforcement team says these examples demonstrate how trustees should deal with problems arising in their charities:
“These cases show that trustees have the power and the tools to prevent adverse incidents in their charity escalating into serious problems. Most of our case work this year involves serious concerns around trustees’ lack of awareness, or failure to comply with their duties and responsibilities towards their charities. Some of our case work could have been avoided had trustees taken more effective steps to fulfil their responsibilities. This report makes clear that trustees can make a difference by taking what are often simple and obvious steps to protect their charity’s money, property and beneficiaries.”
She emphasised that the Commission’s guidance is there to help trustees manage their charities well:
“I would urge all trustees to ensure they regularly remind themselves of the basic duties and core requirements set out in our guidance, including the Essential Trustee (CC3) and Hallmarks of an Effective Charity (CC10). These tools explain what the law expects of trustees and what steps trustees can take to make sure they are fulfilling their legal duties”.
For the first time, Charities Back on Track also includes a summary of the case work carried out by one of the Principal Regulators of exempt charities, the Higher Education Funding Council for England (HEFCE), which regulates 110 Higher Education institutions that are charities. HEFCE received 28 reports of serious incidents from charities it regulates between 1 June 2010 and 31 March 2012.
Other key findings of this year’s Charities Back on Track include:
- the Commission closed 85 investigations, including 9 statutory inquiries
- the Commission opened 54 investigations, including 12 statutory inquiries
- the Commission used its statutory powers on 188 occasions in 2011-12.
- the Commission closed 1374 and opened 1252 assessment cases
- charities reported 1,027 serious incidents in 2011-12, up from 849 the previous year
- there were 64 investigations active at the end of the year (April 2012)
- £5m of charity assets at risk was directly protected and £255m of the sector’s income was directly monitored by the Commission through investigation work
2. Two new online tools for newly-appointed trustees
An online Trustees Handbook aims to help charities ensure a smooth handover between departing and newly appointed trustees. The guide also informs new trustees about their duties and responsibilities towards their charities and explains how to make use of the Commission’s online services and guidance.
The handbook is particularly aimed at charities, such as parent teacher associations and community groups that have a high turnover of trustees and see several board members arrive and move on each year.
The pack includes a checklist of documents and information new trustees should either receive from their charity or find for themselves on the Commission’s website, including the charity’s governing document, recent charity accounts, minutes of board meetings, the charity’s conflicts of interest policy and key guidance such as The essential trustee.
The guide also explains the basics of online reporting and accounting and includes a suggested timeline for preparing the accounts for a charity with an annual income of over £25,000 – the threshold at which charities are required to submit their accounts online to the Charity Commission. Trustees of charities below that threshold are required to prepare accounts but do not have to file them with the regulator.
New guide for Governors of Academies, Foundation and Voluntary Schools
Separately, the Commission has joined with the school governor recruitment charity SGOSS and the Department for Education to produce an introduction to charity law for governors of academies, foundation and voluntary schools.
There are over 2,000 academy schools and 8,000 foundation and voluntary schools that are charities and are exempt from regulation by the Commission. However, their trustees, school governors, have the same responsibilities as trustees of registered charities. The new guidance summarises their responsibilities and explains where they can find further information.
Sam Younger, chief executive of the Commission, says:
“Trustees carry important duties and responsibilities for their charities and have a wide discretion to make decisions on behalf of their charities. These new guides will help trustees get to grips with their role and help charities develop their inductions for new board members. These packs are not designed to be exhaustive – trustees will have to refer to the Commission’s more detailed guidance when making decisions on behalf of their charities – but they do serve as starting points for inexperienced trustees.”
David Butler, chief executive of the Parent and Teacher Association (PTA-UK), says of the Trustee Handbook:
“Trustees are at the heart of charity success. With its trustee handbook, the Charity Commission for England and Wales has crystallised into one fabulous new resource the essential information every trustee needs to know. Whether experienced or completely new, this is a must have for every trustee with its clear guidance, helpful checklists and introduction to the Commission’s own services. PTA-UK recommends you get your copy now”.
Nina Lemer, Contract Manager of the Pre-school Learning Alliance, says of the Trustee Handbook:
We know from our members that trustees can find charity reporting and compliance daunting if their expertise lies in the delivery of the charity’s services. The Commission’s Trustee Handbook is easy to follow, clear and concise and will become a valuable resource for our members.”
The new guides come as part of the Commission’s commitment to extending and improving its online guidance for trustees, aimed at supporting its wider strategic aim of developing charities’ self-reliance.
Social Outcomes Fund launched
The UK is leading the world in the use of Social Impact Bonds. They have become an established and powerful tool to reform public service delivery. This innovative new top-up fund aims to create many more social impact bonds that will make a difference to people’s lives.
The Fund operates only in England, and will accept expressions of interest by commissioners, service providers, intermediaries or investors. It will look favourably at Social Impact Bonds involving the social sector.
Do contact the Social Outcomes Fund Secretariat at firstname.lastname@example.org if you have any questions about the Fund.
Charities Urged to “be good and do good” – says Chair of Charity Commission
William Shawcross highlights good governance during first speech as chair of Charity Commission:-
Charities should not take public trust and confidence for granted, the new Chair of the Charity Commission has stressed.
Speaking at the annual conference of the Association of Chief Executives of Voluntary Organisations (ACEVO) at the end of November 2012, William Shawcross highlighted the importance of good governance in upholding public trust in charities.
He pointed in particular to independence as a key driver of public confidence and a fundamental principle of charity law.
“Public confidence is vital. Indeed, it is why the Commission exists. The public expects charities not only to do good in the ways that I have described, but to be good. To represent, in their form and their management, our better natures.
This is especially important given the enormous diversity of charities on the register. Diversity implies a level of disagreement and dissent. And in a pluralistic society, this is as it should be. The fact that an organisation is a charity does not mean everyone will support it. But the public expects that all charities meet certain basic standards of integrity and probity. So if charities are part of the glue that holds society together, then good governance is the glue that binds charities.”
He went on to highlight accountability and independence as two key elements of good charity governance.
“Independence is about making decisions only on the basis of the best interests of the charity and its beneficiaries. Not the interests of funders – including government.
Charities operate in a complex environment and are in ever fiercer competition for funding and contracts to deliver services. This competition is not a problem in and of itself. It may help drive innovation and keep charity trustees on their toes. But I wonder whether this development also places great strain on trustees to make decisions on behalf of their charities. These decision must be independent and reflect the interests of the charity only – not the interest of funders. Partnerships with government enable many charities to stay in the mainstream of policy and to improve their services. But charities should not become the junior partner in the welfare state; whether or not they provide services funded by government or indeed receive grants from government, they must remain independent and focused on their mission. “
William Shawcross also reassured delegates that the Commission recognises the historic and continued contribution charities advancing faith make to British society.
“People of faith – particularly Christians – have formed the backbone of civil society and charitable giving in this country for at least a thousand years.
Not only are millions of individuals motivated by their faith to give of their time and money to charities right across the register. There are also tens of thousands of registered charities with the specific purpose to advance religion. If you search our register by charities that carry out religious activities, you’ll get over 31,000 results.
And that won’t include the many thousands of charities with wider objects that are based on or linked to a religious tradition. The suggestion some have put forward that the Commission is seeking to overturn centuries of law and culture by questioning the charitable status of religious charities is, quite simply, wrong.
One MP asked me recently if the Commission was part of a plan or even plot to secularise British society. Absolutely not, I said. I repeat that emphatically today.”
Big Board Talk – 15 Questions Trustees need to ask
The Charity Commission has issued an updated version of ‘Big Board Talk’.
The Charity Commission has designed this checklist to be suitable for all charities to use when looking at what they do and how they do it. The 15 main questions will not all be relevant to every charity – it will depend on your charity’s size and how it operates. The checklist reflects a good practice approach your charity should use when regularly reviewing the way it operates, and this approach becomes especially important in a changing or uncertain economic climate.
The checklist is a template which can be used to help structure a discussion as an agenda item at your trustee meeting, away day discussion or planning meeting. It will also help you to develop a plan and timetable for action. The Charity Commission strongly encourages trustee boards of all charities to use this checklist.
If your board works through the areas in this checklist that relate to your charity, it will help to demonstrate that your trustees are responding appropriately to current and potential changes in your charity’s working environment.
To help focus the discussion, the checklist is organised into four broad areas:
- Strategy – opportunities and risks (A)
- Financial health (B)
- Governance (C)
- Making best use of resources (D)
Some excerpts from the guidance are set out below:-
Strategy – opportunities and risks
1. What effect is the current economic climate having on our charity and its activities?
- What is the impact of the economic climate on the environment in which we operate?
- What do we see in the future? How can we best reflect this in any scenario or forward planning that we do?
- Are we focusing on the right things, or have we drifted into activities that are over and above our core charitable aims? If we have, is it justified?
- Are there opportunities of which we could take advantage? For example:
- an increasing pool of volunteers, including those with different skills
- collaborating with others to provide accommodation or equipment
- opportunities to re-negotiate contracts
- opportunities to take on public service delivery contracts
- Are there particular risks we should consider? For example:
- increased or reduced demand for services, or changes in the type of services needed
- reduced income from investments
- funding uncertainty in some areas
- Do we need think about whether we want to, or are able to, continue operating?
4. Do we have any reserves?
- Do we have a reserves policy? If not, why not?
- Do we know the level of our reserves?
- In what circumstances do we intend to use our reserves – is now the right time?
- Have we considered:
- new priorities or needs which have arisen because of the economic downturn?
- spending from our reserves in order to reduce the impact of the downturn on our beneficiaries?
- a longer term strategy to replenish reserves, or spending them in their entirety?
- using reserves to restructure our work?
10. Are we an effective trustee body?
- Have we recently reviewed our performance as a trustee body?
- Have we recently reviewed the skills, knowledge and experience we have as a trustee body? Have our needs changed?
- Are we aware of the importance of effective communication and negotiation with those with an interest in our charity, including our staff?
- Do we have the guidance we need to ensure that our decisions are made in the best interests of our charity and its beneficiaries?
- Do we need to monitor the charity’s affairs more closely, for example by meeting more frequently?
- Do we feel able to take difficult or unpopular decisions if needed, for example on:
- ending or changing some activities?
- changing staffing levels?
- changing staff benefits?