Charity Commission: recent reports

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With the draft Protection of Charities Bill currently being considered, we looked at some of the most recent Charity Commission reports to see how it is using its current powers and what areas it is focussing on in its investigations.

Political campaigning

Recent reports into Oxfam and the Institute for Public Policy Research have shown that the Charity Commission is cracking down on charities that cross the line into political activity. Political campaigning is clearly a hot topic this year following the introduction of the Lobbying Act and in the run-up to the general election in May 2015, and the Commission's message is clear: charities need to ensure that they remain independent and politically neutral in all that they do; and it is the duty of trustees to manage and mitigate any risks that may arise if the charity operates within the political sphere.

Serious incident reporting

We have also seen a push by the Commission to encourage trustees to report serious incidents; along with an insistence that any such reporting be done accurately and as soon as incidents occur. The recent reports into Gads Hill School and Bethel United Church of Jesus Christ Apostolic demonstrate this. In the Gads Hill School case, the trustees had concerns about excessive increases in the Headteacher's salary, yet failed to accurately report the problem to the Commission. In Bethel United Church of Jesus Christ Apostolic, the trustees suspected fraud but delayed reporting their suspicions to the Charity Commission and the police. In both cases, the damage to the charities was greater because of the delays. The Commission also published a Governance horror story in November to show the importance of timely serious incident reporting. The message here again is clear: trustees have a duty to report any serious incidents to the Commission as soon as they suspect or become aware of them; and must certify in the charity's annual return that any serious incidents have been reported.

Disqualification of trustees

There are currently some situations in which a trustee can be automatically disqualified from trusteeship, for example if the individual is disqualified from acting as a company director, but the Charity Commission does not currently have the power to disqualify individuals from becoming trustees. This issue is being considered by the draft Protection of Charities Bill but the recent report into the charity Helping Hands for the Needy illustrated how the Commission has dealt with this issue in the absence of an explicit power. This case concerned the serious mismanagement of the charity's funds. The charity's governing document permitted 'reasonable and necessary out-of-pocket expenses' to be paid to trustees, but the Commission's investigations revealed that significant payments of charitable funds had been paid out, directly and indirectly, to one particular trustee and his wife. The charity is now in liquidation, which enabled the liquidator to refer the case to the Department for Business, Innovation and Skills (DBIS). The DBIS opened an investigation which resulted in the disqualification of the individuals involved as company directors and consequently from acting as charity trustees for the period of their disqualification.

These examples highlight the duties placed on trustees to always act in the best interests of the charity and to report serious incidents as soon as you suspect or become aware of them, and also serve as a reminder that trustees should not personally benefit from their involvement in the charity. The Charity Commission guidance provides clear explanations of charity trustee duties including: The essential trustee: what you need to know and Trustee expenses and payments.