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A B C D E F G H I J K L M N O P R S T V W Y

Charities

Misconduct and mismanagement - a catalyst for trustee disqualification
Tuesday 20th June 2017

In March 2016 the Charity Commission exercised its permanent protective powers under section 79(2)(a) of the Charities Act 2011 to remove the “principal trustee” of The Catalyst Trust following misconduct and mismanagement identified within the administration of the charity.

The initial operational compliance case was opened in October 2013, following a complaint from a member of the public that the charity's rental income was being paid to a third party, rather than to the charity itself.

The charity's objects were of a general nature and its activities included the provision of project management and advice, loans, grants and guarantees to charities.

The Commission widened the case to an inquiry on 10 June 2014 as a result of an inspection into the charity's books and records which revealed a series of unexplained transactions in excess of £60,000. This raised significant concerns given that the charity had never declared an income of more than £25,000. The objective of the inquiry was to consider the following specific matters:

  • the administration, governance and management of the charity by the trustees;
  • the management of conflicts of interest;
  • the financial controls and management of the charity;
  • the trustees' failure to maintain and submit adequate accounting records to the Commission;
  • the circumstances surrounding the charity accepting a gift of property; and
  • whether the charity had been used for unauthorised benefit.

The inquiry established that the charity was effectively being managed and administered by only one of its three trustees, and that decisions were not being made collectively. Delving deeper into the charity’s finances the Commission found that out of an income of £71,000 spanning from 2009 to 2013, only £2,217 was spent on charitable purposes, £2,050 of which being paid to a private company for the development of a software project. The Commission concluded, based on the limited information available regarding the project’s business model, that the project was not charitable and the charitable funds assigned to the project were, in fact, a misapplication of the charity’s funds.

The inquiry also revealed that the trustees of the charity had failed to recognise and adequately deal with conflicts of interest. Several investments and loans had been made by the charity to companies in which the principal trustee had either a personal interest or connection with. The trustee in question advised the Commission that the charity lacked a conflicts of interest policy as no conflicts had been identified. The investigation did however find that the principal trustee regularly participated in decision making in relation to loans and investments despite being conflicted.

The remaining two trustees also failed to fulfil their duties to identify and manage these conflicts.

Further investigations found that the charity had entered into a loan arrangement with a private individual in February 2013. It materialised that the loan had been arranged by the principal trustee and was between the charity and one of the principal trustee's associates, it was also secured against the charity’s property. The charity did not have a steady stream of income and failed to partake in fundraising activities which could have enabled effective repayment of the loan. The charity consequently defaulted on the loan during 2015 which resulted in the charity losing half of its property which was valued at £50,000.

Furthermore, the inquiry held that the acceptance of a gift of residential property from the principal trustee was not in the best interests of the charity given that the charity were liable for any repairs to the property and it did not receive any income from the property.

Conclusions

The Commission concluded from the evidence of poor governance and financial management that there had been misconduct and mismanagement in the administration of the charity. The charity failed to operate in furtherance of its charitable objects and the trustees had failed to comply with their legal duties.

The Commission made the decision to remove the principal trustee and dissolve the charity, applying the remainder of its funds to a charity with similar purposes.

As a consequence of the removal order under section 178 of the Charities Act 2011 (amended by the Charities (Protection and Social Investment) Act 2016), the principal trustee is now permanently disqualified from acting as a trustee. Harvey Grenville, Head of Investigations and Enforcement at the Commission, stressed the importance that trustees must “act collectively together and avoid one individual taking sole, or inappropriate control of a charity”. In this case, the trustees failed to recognise and manage conflicts of interest and allowed “improper loans and investments to be made by one individual”. Finally, it was noted, taking into account the wider implications for the sector that a charity’s funds are only ever to be spent in furtherance of its purposes and trustees are under a duty to make reasonable decisions in the best interests of the charity.

A lot can be taken from this case for both current and future trustees and it provides a useful example of how not to behave. In particular, it acts as a warning against allowing a single trustee to dominate the board. Even in cases where a dominant trustee is behaving entirely correctly, such circumstances will almost always lead to difficulties. It is essential that charity trustees are familiar and comply with their legal duties and responsibilities, as set out in the Commission’s guidance – CC3 The Essential Trustee.

Rebecca Tucker is a Paralegal in the Charities and Social Enterprise Department at Brabners LLP. If you would like to discuss any of the points raised in this blog please do not hesitate to contact Rebecca on 0151 600 3064 or rebecca.tucker@brabners.com.


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The Cup Trust…5 years on
Friday 16th June 2017

It has been around five years since the The Cup Trust story broke, the effects of which are still being seen today in the form of the Charity Commission’s more “robust” approach to regulation and the introduction of new regulatory powers in the Charities (Protection and Social Investment) Act 2016 (some of which are discussed in an earlier blog available here: http://www.brabners.com/blogs/charities/charities-and-statutory-warnings).

The Cup Trust was a registered charity with a sole corporate trustee (known as Mountstar) established in the British Virgin Islands. It was used as a large-scale and complex tax avoidance scheme. Whilst registered with the Commission the charity received more than £176 million which it used to purchase government bonds. The charity donated only £55,000 to good causes but put in claims for £46 million of Gift Aid. It should be noted that these Gift Aid claims did not succeed.

The Cup Trust case led to significant criticism of the Commission. The then Chair of the Public Accounts Committee, Margaret Hodge MP – now Dame Margaret Hodge – was particularly scathing of the Commission’s role and the National Audit Office queried the Commission’s fitness to regulate charities. This was perhaps the beginning of the road that has led to the 2016 Act and the extensive new powers afforded to the Commission.

Using powers contained in the Charities Act 2011, the Commission opened an investigation into The Cup Trust and appointed interim managers. The Financial Reporting Council (“the FRC”) launched an investigation of its own in 2013. The charity has been wound up and was removed from the Central Register of Charities earlier this year but during the course of the last week, further sanctions have been announced.

  • The Commission has used new powers in the 2016 Act to disqualify Mountstar from being a charity trustee for the maximum permissible period of 15 years;
  • Further steps may also be taken by the Commission in respect of Mountstar’s directors;
  • The FRC has banned one of Mountstar’s directors from the accountancy profession for ten years and fined him £70,000 as a result of his role in the scheme. The director in question has also paid a further £80,000 towards the cost of the proceedings;
  • The charity’s auditor has received a personal fine of £20,000 and his company has also been fined £100,000 in addition to their contributions towards the costs.

Comment:

The Charity Commission’s published report is expected later this year and should make for very interesting reading.

Michelle Russell of the Charity Commission has stated that the Commission’s action here is intended to have sent “a strong message to all those whose actions harm charities: that they will be held accountable and that we will protect other charities from those who pose a risk to them”.

However long it may have taken, a “robust” response from the Commission to the issues that arose in The Cup Trust case was to be expected given the level of tax avoidance that was attempted in the name of charity. It is a matter of interest for practitioners to see the Commission exercising its new powers and we await further examples in the coming months. To date, we are still to see reports of the Commission using the most controversial of its new powers – the official warning – but what we have seen here is that the Commission may, eventually, catch up with charities behaving badly.

Graeme Hughes is an Associate Solicitor in the Charities and Social Enterprise Department at Brabners LLP. If you would like to discuss any of the points raised in this blog or you have any questions concerning your charity please do not hesitate to contact Graeme on 0151 600 3079 or graeme.hughes@brabners.com.


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Payments to charity trustees
Thursday 8th June 2017

It was reported yesterday that The Times newspaper intends to take the Charity Commission to the European Court of Human Rights over a long running dispute concerning freedom of information requests made by The Times in relation to a now defunct charity established by George Galloway, known as The Mariam Appeal. The Times alleges that the Commission has unlawfully withheld information relating to investigations conducted by the Commission into the charity.

It is further alleged by The Times that following the charity’s establishment in 1998, the charity made a series of payments to George Galloway’s then wife totalling £84,000. The Times states that these payments, described as being salary payments, were unauthorised.

So what are the circumstances in which a person can receive payments from a charity of which they are a trustee?

It is a well-established principle in case law that a charity trustee must not put himself or herself in a position where personal interests conflict with the duty to act in the interests of the charity, without clear authority to do so. As the Charity Commission states in its guidance notes, “the concept of unpaid trusteeship has been one of the defining characteristics of the charitable sector, contributing greatly to public confidence in charities”.

There are however a number of circumstances where trustees can receive payments from a charity.

Most modern versions of governing documents for charities will include, for example:

  • An entitlement for trustees to have their expenses met from the funds of the charity, provided such expenses are reasonable. Expenses can include travel and accommodation costs, certain meals and even childcare costs incurred as a result of attending board meetings;
  • Authority to recover interest on loans made by a trustee to the charity; and
  • Reasonable rent on premises let by a trustee to the charity.

In addition, the Charities Act 2006 introduced statutory powers for trustees to be paid for the provision of services to the charity. Certain conditions set out in the Act must be complied with, including a requirement that there is a written agreement between the charity and the trustee concerned, but where available, this power can be of significant benefit to the charity in securing specialist services. The power cannot however be used if the governing document prohibits this type of payment.

Paying a trustee for serving as a trustee is a less common arrangement and this requires specific authority either in the charity’s governing document or from the Commission. Such payments can only be made when it is in the interests of the charity to do so and where it provides a significant and clear advantage over all other options.

In some cases, as is suggested to have been the case in relation to The Mariam Appeal, a charity might also employ one or more of its trustees in a remunerated role. This again requires specific authority in the governing document of the charity or from the Charity Commission (or Courts). A charity wishing to employ a trustee would need to be able to demonstrate that the decision to do so is not only in the best interests of the charity but also justifiable taking into account a range of factors, such as whether efforts have been made to recruit appropriately skilled persons and whether it is necessary for the trustee concerned to continue as a trustee whilst employed.

Comment:

Mr Galloway has categorically denied that anyone received unauthorised benefits from The Mariam Appeal. This case does however highlight the risks to a charity when trustees receive payments beyond the accepted norms such as expenses.

Any charity wishing to employ one of its trustees needs to be clear that it has the appropriate authority to do so but should also consider the wider risks, such as reputational damage. In addition to this, the making of payments to charity trustees carries with it inevitable conflicts of interest that charities will need to ensure are properly managed. Charities seeking to pay its trustees should therefore proceed with caution, ensuring that full advice is taken.

Graeme Hughes is an Associate Solicitor in the Charities and Social Enterprise Department at Brabners LLP. If you would like to discuss any of the points raised in this blog or you are considering the making of payments to your charity’s trustees please do not hesitate to contact Graeme on 0151 600 3079 or graeme.hughes@brabners.com.


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Charities and data protection
Thursday 8th June 2017

As many will be aware, the Charity Commission recently opened compliance cases into eleven charities following the issue fines by the Information Commissioner’s Office (ICO) for misusing donor information. The charities in question have been found by the ICO to have breached data protection law through a variety of activities including data sharing, wealth screening and data matching.

The eleven charities affected by the penalties include Cancer Research UK, WWF-UK and Oxfam, with the largest single fine being issued to the International Fund for Animal Welfare for £18,000. That being said, Elizabeth Denham, the Information Commissioner, advised that she had significantly reduced the fines so as not to alienate donors. Denham did however stress the importance that charities follow and abide by data protection law.

The Charity Commission, in a recent statement, has also advised that the compliance cases will look into whether the trustees of each charity have acted in accordance with their duties under charity law. The Commission has published guidance in relation to fundraising, CC20 Charity Fundraising: a guide to trustee duties, which can be accessed at https://www.gov.uk/government/publications/charities-and-fundraising-cc20/charities-and-fundraising. The guidance states that trustees are required understand and comply with the relevant data protection laws, which the ICO have found the charities in question to have breached.

What the law says

The Data Protection Act 1988 (DPA) sets out eight principles that must be followed when processing personal data:

  1. Personal data must be processed fairly and lawfully and, in particular, shall not be processed unless: (i) at least one of the conditions in Schedule 2 of the DPA is met; and (ii) in the case of sensitive personal data, at least one of the conditions in Schedule 3 is also met.
  2. Personal data must be obtained only for one or more specified and lawful purpose(s) and shall not be further processed in any manner incompatible with that purpose(s).
  3. Personal data must be adequate, relevant and not excessive in relation to the purpose or purposes for which they are processed.
  4. Personal data must be accurate and where necessary kept up to date.
  5. Personal data processed for any purpose(s) must not be kept for longer than is necessary for that purpose(s).
  6. Personal data must be processed in accordance with the rights of data subjects under the DPA.
  7. Appropriate technical and organisational measures must be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data.
  8. Personal data must not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of the data.

One of the main principles the ICO concentrated on when fining the eleven charities was the first principle, processing information fairly and lawfully.

With regards to this first principle, the law requires that charities are transparent with their donors about what they intend to do with their information and why. This constitutes a key part of the DPA and the incoming EU General Data Protection Regulations (GDPR). Donor’s information should therefore be processed in a way that an individual donor would reasonably expect it to be processed and which does not breach either statute or common law.

One way in which this can be achieved is by way of a privacy note which discloses the way in which a charity gathers, uses and manages donors' personal data. Privacy notes will be required unless a charity can prove that it falls within one of the exemptions set out under part 4 of the DPA. The main point to note here is that regardless of whether personal data is obtained from publically available sources, a privacy note will be required.

Charities are also required to satisfy one of the conditions set out in Schedule 2 of the DPA in order to legitimise their processing, and if they are processing data of a sensitive nature, such as an individual’s physical or mental health, they will also need to satisfy a condition from Schedule 3. However, merely processing personal data for a legitimate interest is not sufficient to satisfy the condition. A charity must further illustrate that processing the data was necessary in order to pursue that interest. Where personal data is obtained through publically available sources for example, Facebook or Companies House, charities must ensure that it is being obtained and used for specified and lawful purposes under the second principle of the DPA. Furthermore, the reason for obtaining the information and its intended use must be compatible.

How the law affects a charity's activities

Whether a charity has obtained information from publically available sources will significantly affect whether their activities comply with the DPA. For example, if charities have not informed their donors that their personal information will be used for activities such as wealth screening, which was the case in a lot of the charities that have incurred fines, they will be in breach of principle one of the DPA.

Wealth screening typically involves activities such as analysing personal data to assess donors’ financial viability so as to establish what a donor’s likely level of donation would be and which donors to target. In relation to the fair processing of information it is highly unlikely that donors would reasonably expect that their donation would lead to the charity profiling their wealth. This cannot therefore be said to be fair. Charities must also illustrate that they have a valid basis for the processing. Although it may be considered legitimate for charities to process personal data in order to properly administer the donations they receive, processing their data for wealth screening is not necessary to achieve this.

Another activity the above charities have been fined in relation to is data matching. This is an activity which involves obtaining personal data from other sources that donors did not voluntarily provide charities with and can include, for example, obtaining a donors address if you find they have moved. By removing the donors' choice in what information a charity holds about them, charities are in breach of principle one of the DPA. Donors would not reasonably expect a charity to contact them using information they had never provided.

What charities need to do in future

In future, charities who want to conduct activities such as wealth screening must inform donors that this is what they intend to use their information for and give them the opportunity to object to their personal data being used in this way. Privacy notes will need to be clear and detailed to enable donors to accurately foresee how their data will be used and should be actively provided to donors. Charities should seek the consent of donors when conducting intrusive activities as in these cases it is highly unlikely that they would be construed as legitimate.

With regards to data matching, charities would have to ensure that the data source was legitimate and that their donors had a legitimate expectation that their details would be passed on for this purpose. For example, where a donor has changed address and has made it clear to a data source by way of a positive action such as ticking a box that they are happy for their new address to be passed on.

Charities should also put in place data protection policies setting out what they need to do to comply with the law and should inform donors of their rights under the DPA. After all, donors are more likely to donate to charities with which they have a trusting relationship.

Rebecca Tucker is a Paralegal in the Charities and Social Enterprise Department at Brabners LLP. If you would like to discuss any of the points raised in this blog please do not hesitate to contact Rebecca on 0151 600 3064 or rebecca.tucker@brabners.com.


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Charity trustees and their financial responsibilities
Thursday 8th June 2017

On 15 March 2017 the Charity Commission announced that it had updated a key piece of its financial guidance – Charity finances: trustee essentials (CC25) (https://www.gov.uk/government/publications/managing-charity-assets-and-resources-cc25/managing-charity-assets-and-resources) in an effort to ensure that trustees are aware of, and understand their basic financial responsibilities when running a charity.

The Charity Commission’s Chief Executive, Paula Sussex, explained that “trustees’ legal duties regarding financial management have not changed but the Commission is making a conscious push to ensure that trustees are best placed to protect their charities assets and resources”.As a part of this drive, trustees are being encouraged to read and familiarise themselves with the updated guidance which is now more accessible. The ultimate aim being that charities will be more able to meet the needs of their beneficiaries, in turn increasing public confidence in the sector as a whole.

Sussex advised that weak financial governance can be destabilising for charities, as is evidenced from the Commission’s case work. Not only can it affect their ability to operate, but it can also leave them open to both fraud and abuse. It is therefore essential that trustees understand their financial duties, ensure that the correct procedures are in place and are able to ask the right questions.

The Commission confirmed “we are making a concerted and deliberate effort to support trustees where we identify weaknesses” and updating financial guidance is a key part of this. It is vital that trustees are provided with sufficient support to enable them to carry out their role efficiently and responsibly. As trusteeship is a voluntary role, the Commission have made a conscious effort to ensure that the guidance is more readable and easily understandable, recognising that most trustees do not have the time to be reading through lots of lengthy documents. Financial professionals such as accountants have also been urged to take a leadership role in the rejuvenation of financial governance within the charity sector.

Rebecca Tucker is a Paralegal in the Charities and Social Enterprise Department at Brabners LLP. If you would like to discuss any of the points raised in this blog please do not hesitate to contact Rebecca on 0151 600 3064 or rebecca.tucker@brabners.com.


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Commission's poor handling of a case amounted to 'maladministration', says ombudsman
Friday 20th May 2016

The Charity Commission’s handling of a case over more than 20 years was “so poor as to amount to maladministration”, according to an ombudsman’s report published this week.
 
The report, from the Parliamentary and Health Service Ombudsman, upholds a number of complaints by the Coal Industry Social Welfare Organisation (CISWO), which delivers welfare services for miners. It upholds a number of complaints relating to lack of clarity, unhelpfulness and delays, and recommends that the Commission apologise to CISWO and pay around £20,000 to compensate the charity for legal costs, staff time spent, and travel expenses.
 
The report was handed down in September last year, but made public earlier this week by law firm Brabners, who acted for CISWO.
 
The ombudsman assesses complaints about the management of cases by public bodies. It does not judge whether complaints have merit in law, but assesses whether an organisation has not acted properly or fairly or has given a poor service and not put things right.
 
Its 29-page report covers the Commission’s handling of a dispute between CISWO and the Newbold Verdon Institute, another miners’ charity, over the closure of Newbold and the sale of its property. The Commission was involved in handling the issue between 1992 and 2014.
 
CISWO sought advice on whether Newbold needed its permission to sell property, and the ombudsman judged that the Commission had not fulfilled its role properly.
 
“It is clear to us that the Commission failed to explain their views and reasons for their decisions properly,” the report says.
 
“They contradicted themselves, they sent confusing letters, they refused to clarify issues and they sent mixed messages to CISWO on a continuous basis. We consider that the Commission’s service was so poor that it amounts to maladministration.”
 
The report says that the Commission provided advice to CISWO on several occasions, but that this advice was frequently unclear, and contradicted what it had previously said.
 
It said: “The way the Commission conveyed its views was extremely poor and so unclear as to have caused CISWO a decade of dissatisfaction.”
 
It said the regulator’s actions “could go against the Commission’s core role to protect the public’s interest in the integrity of charity and the public benefit”.
 
It also said the Commission lacked a “corporate memory” which allowed it to understand how it had reached legal decisions in the past. The report said the regulator took too long to respond to queries and did not provide clear reasons for its decisions.
 
However the ombudsman did not uphold a CISWO complaint that the Commission had allowed the proceeds of the sale of Newbold’s property to go to an organisation CISWO did not approve of.
 
Commission response 
 
The Commission has apologised and said it has already changed its systems to avoid a similar situation and has agreed to compensate CISWO.
 
A Commission spokesman said: “We welcome the ombudsman’s thorough and careful report. We accept that our service in this case fell well below our usual standard and was unacceptably poor. The substantive part of this reports relates to actions taken by the Commission some considerable time ago, but we would like to repeat our apologies to those involved and reassure charities and the public that we have already changed our systems and processes to avoid similar problems arising again. When customers request us to reconsider our position, we now conduct quicker internal reviews led by non-conflicted senior staff members, and no longer operate the outcome review panel, which we accept was sometimes slow to respond to the customers’ needs.
 
“More generally, we are focused on improving the Commission’s service to customers and we are confident that the changes we are introducing, including to prioritise complex and high risk work and automate lower risk work, will improve charities’ and the public’s experience of our services. Indeed, we hope that charities are already noticing these improvements. The most recent NAO report, published in January 2015, acknowledged the Commission’s 'positive first steps' in regulating more effectively and we continue to build on that.
 
“We are working closely with the Coal Industry Social Welfare Organisation (CISWO) and all cases involving coal community charities and CISWO are now dealt with by a specialist senior case manager to ensure consistency and speed.
 
“We have agreed the consolatory payment and recompense for wider costs incurred by CISWO, as the Ombudsman recommends.”
 
Article taken from civilsociety.co.uk

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The Fundraising Regulator
Thursday 5th May 2016

Those who attended our Charity Law Annual Update seminars back in February may recall that I spoke at some length about the headlines generated throughout 2015 as a result of the fundraising practices of a number of high profile charities.

A very detailed account of this can be found in Issue 20 of our Charities and Social Enterprise newsletter, available via the following link: http://www.brabners.com/articles/charities-and-social-enterprise-news.

The various incidents and subsequent reports resulted in the establishment of a new regulator for charity fundraising, The Fundraising Regulator, and since the turn of the year steps have been taken to get the new regulator up and running, with a view to it being fully operational by the summer.

Last week, the new Fundraising Regulator launched its website and branding. The new website can be accessed via the following link: http://www.fundraisingregulator.org.uk/.

The website contains some very useful information for charities, including a helpful FAQs section which provides answers to some of the questions that charities might have in relation to their existing memberships of the Fundraising Standards Board (FRSB) and some introductory information about the proposed Fundraising Preference Service.

Comment

The current chief executive of the new regulator, Stephen Dunmore has described the new logo as being a “clear and straightforward design which reflects the way we intend to work with all of our stakeholders”. Having little by way of brand design experience,

I have no particular view upon the logo or its effect but it the commitment to a clear and straightforward approach is promising given the very muddled and complicated regulatory landscape that has previously been in place.

As stated in our seminars and other publications, we at Brabners are actively keeping tabs on developments relating to the Fundraising Regulator and the next couple of months are likely to be an interesting period, particularly for charities that engage in public fundraising.

In our next issue of CSE News, I will include an article looking into recent developments more closely along with suggestions as to the steps that charity trustees should take in respect of their organisation’s fundraising activities.

The range of services offered by the Charities and Social Enterprise Department can be viewed here: http://www.brabners.com/practices/charity-law.


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Kids Company – The fallout continues…
Friday 29th April 2016

The government has published its response to the PACAC Report on the collapse of Kids Company and as expected, the majority of the recommendations of the Committee have been accepted. One such recommendation catching headlines this week is that the government has committed to undertaking greater scrutiny before making grants to charities.

As most will be aware, the government came in for heavy criticism in the aftermath of the Kids Company collapse, mainly as a result of a £3 million payment made to the charity shortly before its collapse.

The government has announced that it intends to introduce a register recording all grants it makes and increase transparency about which charities it is funding. An annual report to Parliament will also be provided setting out the government’s grant making activity.

In addition to this, a Grants Efficiency Programme has been launched and those responsible are currently in the process of consulting with departments upon the establishment of new guidance designed to ensure that a grant “represents value for money”. Efforts are also being made to ensure that government departments are aware of each other’s grant making activity – leading to a more joined up approach.

Comment:

Given the criticism levelled at the government (and indeed senior political figures who appeared to override the advice of civil servants), this news comes as no surprise.

Charities in receipt of government funding can now expect to be more closely scrutinised than ever before and it has been suggested that comprehensive annual reviews will become a requirement attached to grant funding.

The government is also considering requiring charities in receipt of grant funding to be able to demonstrate the existence of a minimum level of reserves. Rob Wilson, the current Minister for Civil Society is in the process of a review of the PACAC findings and this, along with other recommendations are expected to follow later this year.

If you would like to discuss any of the points raised in this blog please do not hesitate to contact Graeme on 0151 600 3079. 

The range of services offered by the Charities and Social Enterprise Department can be viewed here: http://www.brabners.com/practices/charity-law.


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Charities and the Freedom of Information Act
Monday 7th March 2016

As reported in our most recent Charities and Social Enterprise Newsletter (available to view here: https://t.co/Ixfrav0uBG), the extension of the Freedom of Information regime to charities has been under consideration by an independent cross-party commission tasked with reviewing the Freedom of Information Act 2000.

The extension of the FOI regime to charities could result in charities being required by law to release information that was otherwise considered to be internal or confidential to the trustees.

The cross-party commission has now released its final report and the commission’s comments in respect of this point are interesting.

The commission has refrained from making any explicit recommendation. However, it has stated that in their opinion that the FOI regime should apply to all providers of public services, including charities with:

  • one, single contract worth £5m;
  • multiple contracts with a single public authority that total £5m in value over one financial year. 

The commission also stated that it “has not received persuasive evidence that the Act should be extended to charities in their own right”.

Small and medium sized charities can be heartened by the commission’s comments ahead of any debate that might occur in Parliament as a result of the ten minute rule bill previously discussed (https://t.co/Ixfrav0uBG).

However, larger charities that deliver public services under contracts with local authorities should keep a careful eye on developments. The commission has stated that any changes should only be applied to future contracts and therefore charities may consider seeking to factor in and budget for any additional costs that a change might cause.

Comment

It has been suggested on a number of occasions that charities should be susceptible to FOI requests because they receive public donations and enjoy tax benefits, including Gift Aid. It appears that there is very little appetite to extend the FOI regime to charities simply because they are charities and this is good news for the sector.

However, for larger charities providing public services under contracts with local authorities it seems that a change might be on the horizon. Further developments can be expected during the year but at some point, large charities may wish to consider seeking advice upon what the impact of a change to the legislation might mean to them.

The range of services offered by the Charities and Social Enterprise Department can be viewed here: http://www.brabners.com/practices/charity-law.


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Regulatory charges? Charity Commission to consult
Tuesday 1st March 2016

As discussed in earlier blogs (see the following from 2014 and 2015: http://www.brabners.com/blogs/charities/charities-pay-charity-commission’s-services; http://www.brabners.com/blogs/charities/charity-commission-charges-continue-be-discussed), the prospect of the Charity Commission imposing charges on charities for the regulation of the sector remains on the Commission's agenda and it was reported yesterday that the Commission will begin a consultation process in the spring.

The Commission has suggested that a fixed fee of £140 a year for very small charities will be consulted upon, with a higher charge of £265 for registered charities with annual incomes exceeding £10,000. The Commission hopes that this will raise £23 million in funding for the regulator every year.

Previous proposals to impose charges for charity regulation have been met with signigficant opposition and it has been reported that yesterday's announcement, in a public meeting in Southampton, saw a number of objections raised. Concerns focused upon the level of fees for small charities and the independence of the Commission.

William Shawcross, the chair of the Commission, responded by expressing his concerns over further funding cuts to the Commission, stating that if the Commission's budget was to be cut further "the Commission would simply not be able to do its job".

It is expected that once the consultation process is complete, a proposal will be put to ministers with a view to having any new system in place during 2018 / 19.

Comment:

The Commission has previously stated that progress on this issue will move “at the speed of glacier” and this has certainly been the case.

The consultation can be expected to reflect the charity sector's current resistance to the imposition of charges - previous surveys showed that almost 90% of respondents were opposed to regulatory charges - and it is difficult to see how such an unpopular proposal could come to fruition in the suggested timescales.

Furthermore, should the Commission succeed in introducing charges for its services, might it follow that the next government (quite possibly one still wedded to austerity) will reduce the Commission's budget by the amount that the Commission manages to raise leaving the Commission in exactly the same position that it is now - only with the added burden of collecting between £140 and £265 from the 165,000 charities on the Register!?

The proposals have never been met with anything but strong opposition from the charity sector yet the Commission continues to raise the question on a fairly regular basis. Progress can be expected to be slow however the Commission is very clearly in favour of, at the very least, further investigation into whether charges can be introduced.

The range of services offered by the Charities and Social Enterprise Department can be viewed here: http://www.brabners.com/practices/charity-law.


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