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The Charities (Protection and Social Investment) Act 2016 gives the Charity Commission the power to issue official warnings to a charity trustee or a charity where it considers there has been a breach of trust or duty or other misconduct or mismanagement of the charity.
This new power is an important tool for the Commission but its introduction has been controversial. The Commission may publish a warning it has given ‘in any way it considers appropriate’ and simply publishing a warning could greatly damage the reputation of a charity. Funders or other potential supporters may assume there is no smoke without fire. Before the power was introduced many in the sector raised concerns about the potential for the power to be used inappropriately. It could damage the reputation of charities or the sector as a whole if the power is not used in a consistent, targeted and proportionate way. This problem is exacerbated by the fact that charities can not appeal to the Charity Tribunal against the decision to issue a warning.
The Commission has introduced draft guidance on how it will issue warnings or publicise them and is seeking feedback. The Commission recognises that there is concern in the sector about the new power and the way in which it will be exercised.
Sarah Atkinson, the Commission’s director of policy and communications has said "We are keen to ensure that the sector understands our approach and the important safeguards for charities". To help ensure this power is used in an effective and proportionate way, respond to the online consultation by 5pm on Friday 23 September.
Charity sector figures and representative bodies such as the CLA have expressed significant concerns about the new guidance. These include:
- The short notice period: as things stand, trustees may receive just 14 days notice that the Commission will be issuing a warning. Most charity trustees are volunteers giving their time for nothing and many boards will struggle to respond to the Commission within 14 days, particularly if they need to take professional advice or corrective action.
The CLA has recommended a minimum notice period of at least 28 days to give charities more time to consider concerns raised by the Commission and explain why it should not issue a warning or should not publicise any warning it does issue.
We anticipate that many of our clients will endorse that recommendation. If that applies to you, question 6 (of 10) in the consultation allows you to tell the Commission.
- Publicising warnings: the Commission will usually publish warnings. The guidance identifies five circumstances in which a warning would not be published and places the onus on trustees to identify when those circumstances apply and inform the Commission. The guidance could make clear that the Commission should be satisfied there is no evidence that any of those criteria apply before a warning is published.
- Clarity: the guidance says little about how representations may be made. It could, for example, make clear that in appropriate circumstances the Commission will consider publishing a warning on an anonymised basis.
For more information
We will be responding to the consultation. If you would like to contribute to that response, please contact Shivaji Shiva or your usual ACS contact.
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