With well over half of 2023 in the rear-view mirror, the pace of change in the charity sector shows no signs of slowing. Welcome to the August charities newsletter!
July was a month of research, with the Charity Commission (the Commission) publishing three(!) major pieces of analysis: its research on public trust in charities; its research on trustees’ opinions; and its customer survey. However, the customer survey’s findings about online engagement are perhaps outdated with the new My Charity Commission Account. On public trust, the Commission has continued to emphasise the relevance of public opinion in a recent investigation on financial hygiene. To maintain good financial hygiene, trustees should also note that the Commission has also updated its investment guidance.
Read on for our employment law update (with news about holiday pay and flexible working), our regular funding update, a few government consultations of interest, reports from the Social Housing Quality Resident Panel and news about significant changes to the regulation of charities in Scotland.
Charity Commission research on public trust in charities
The Charity Commission has published its annual research on how much the public trusts charities, what trustees think the public wants and what trustees think of the Commission. The research has shown a slight increase in public trust since 2015 but levels are still lower than they were historically. The research recommends that charities show good financial hygiene and demonstrate clearly that donations are being used directly to fund their purposes. It notes that this is particularly difficult (but also particularly important) for ‘larger… professionalised’ charities compared to ‘smaller, local’ ones. The research also shows that trustees believe they know and fulfil their function. It also shows that, though they trust the Commission to give balanced advice, trustees are relying on ‘colleagues and other trustees or… the internet’ for advice rather than the Commission.
However, the Commission seems to be getting good feedback from those who do turn to it, according to its customer survey for 2022 which was published last month. The results state that ‘69% of customers rate the service as good’. They also show that most people engage with the Commission online, with concerns being raised about telephone and email wait times. The survey also highlights calls for the Commission to provide a personalised approach, which is more specific for each charity. Separately, the Commission has also published its monthly data on its staff.
If you have any questions about how to ensure confidence in your charity or about working with the Commission feel free to speak to our charities team.
The Commission’s new digital service
The much anticipated My Charity Commission Account service went live on 31 July 2023. This system is set to replace all previous online ways of engaging with the Commission. A major change from the current ways of engaging with the Commission is that everyone (trustees, accountants, solicitors and other people who work for a charity) must now set up a personal account in their own name, rather than simply dealing with the Commission through an account in the charity’s name. These individual personal accounts are then linked to the charity and granted various permissions to engage with the Commission on the charity’s behalf. The Commission has published guidance on the new system. For further details, see our recent blog post.
If you have any questions about the system, feel free to contact our charities team. You can also contact the Commission on 0300 066 9197 (Monday-Friday, 9am-5pm) or at firstname.lastname@example.org.
Charity Commission activity on financial hygiene
There has been some good news for international charities following the Commission’s inquiry into the Jim Ratcliffe Foundation. Concerns had been raised about significant grants by the charity (whose objects include nature conservation, relief of poverty and promotion of amateur sport) to support a skiing club in France, but the Commission’s conclusion, which has piqued interest in the legal press, was that the grants supported the charity’s purposes. The decision is also interesting for sports charities as the Commission found that the grants met the public benefit test even though the skiing club is shared with a membership club which charges a high fee; this was because the grants were to a French charity which offered access to the facilities for young persons at significantly reduced rates and the club was used 96% by the French charity and only 4% by the more expensive club. Separately, the Commission was also reassured by the charity’s commitment to appoint an independent trustee, following concerns that the public may perceive that the trustees were subject to influence by the charity’s founder, even though the Commission did not find such influence.
However, international charities should note the announcement of inquiries into The Telz Talmudical Academy and Talmud Torah Trust and The Gevurath Ari Torah Academy Trust over their financial practices. The Commission is concerned about allegations that one trustee living abroad has been given several blank cheques pre-signed by the UK-based trustees and about an alleged lack of oversight over significant cash transactions outside the UK. The inquiry demonstrates the importance of good financial practices, the risks of cash-based transactions and the particular risks of operating across borders. Further information can be found in reports by Civil Society and Third Sector.
If you have concerns about your charity’s financial management and internal scrutiny please feel free to contact our charities team.
Updated investment guidance
Having completed a road test of its draft guidance (which readers may remember from our May newsletter), the Charity Commission has updated its guidance on charity investments (also known as guidance CC14). The Commission has explained that the purpose of the updates is to make the guidance easier to understand and also to address concerns about how much discretion trustees have when it comes to making investments (e.g. whether they can consider environmental considerations). The Commission has removed some jargon from the guidance (references to ethical, mixed-motive and programme-related investments) and emphasised that acting in the best interests of the charity ultimately means acting for the charity’s purposes.
The update is partly a response to the decision in the case of Butler-Sloss v Charity Commission, which concerned whether charities can refuse investment opportunities which conflict with their objectives (on which see further our December and May newsletters). The guidance now provides a list of things that trustees can consider when making investment decisions. Whilst the guidance consistently says that trustees should consider the financial return that the investment will make, it also allows trustees to consider other factors alongside the financial return, including (but not limited to) the level of risk that the charity wants to take, avoiding conflicts with the charity’s purposes, protecting the charity’s reputation, making good decisions from an environmental, social and governance perspective and using the investment to influence decision-making by the organisation in which the charity is investing.
If you are concerned about your charity’s financial decision-making please feel free to contact our charities team for help with drafting or advising on investment policies. We can also assist with drafting or advising on other policies that your charity may require (e.g. policies on social media, on which see further our March and April newsletters).
Employment law update
In her recent blog post, Sarah Harnett discusses a recent case on how to deal with holiday pay at the end of an employment contract. Her key learning point from the case is that payment in lieu of holiday accrued but not taken at the end of an employment contract must be no less than the holiday pay the worker/employee would have received had they been working, even if the payment in lieu is set out in the employment contract. She notes that the case was important enough to go to the Employment Appeals Tribunal even though the amount in dispute was only £53.90.
Meanwhile, following our discussion about flexible working in our June update, Libby Hubbard discusses the Employment Relations (Flexible Working) Act 2023 in her recent blog post. In summary, she explains that the legislation gives employees greater rights to request flexible working and puts greater obligations on employers responding to such requests.
Third Sector has reported on concerns about the impact that changes to inheritance tax could have on charitable donations made in wills. UK Fundraising reports on the backlash by the organisation Remember A Charity to government plans to scrap inheritance tax. In parallel, Remember A Charity has launched a campaign to encourage charitable donations in wills – Willanthropy – on which see our recent blog post.
In terms of funding opportunities, the National Lottery Community Fund’s Community Organisations Cost of Living Fund is open for applications until 12pm on 16 October 2023. The Fund can offer £10,000-£75,000 and is open to those organisations that provide food, emergency supplies, emergency shelter, safe spaces, warmth or financial and housing advice to their local communities who are facing increased demand or costs. Organisations seeking funding of £300-£10,000 can also apply for the National Lottery Awards for All England which are open all year round.
The Churches’ Legislation Advisory Service (CLAS) has also highlighted that the Home Office’s protective security scheme for places of worship is now open for applications until 23:59 on 5 September 2023. The scheme is designed to provide funding for security measures (such as security cameras or alarms) at places of worship that are vulnerable to hate crimes. It is worth noting that the scheme is particularly focused on addressing hate crimes rather than other criminality. The funding is only available for properties that are used for worship (so do not cover, for example, school rooms or community cafes). Applications can be made via an online form, and the Home Office has provided guidance on how to make an application. CLAS also highlight a free online webinar on how to apply for funding.
The Government has opened a consultation on ‘domestic consumers who receive their energy via a non-domestic contract’. In simple terms, this means people whose energy is supplied in ways normally used for businesses or charities. This would include people whose energy is supplied by their landlord where their landlord is a charity and certain people in religious groups (e.g. nunneries and monasteries). The consultation is open not only to tenants but also landlords and organisations that represent the tenants and has been publicised by CLAS. The consultation is open until 23:59 on 18 September 2023. Further details, including how to submit evidence, can be found here.
In addition, CLAS pick up on a government consultation on the provision of unisex toilets in non-residential buildings. This consultation is open until 23:59 on 8 October 2023. Further details, including how to submit evidence, can be found here. CLAS also highlight the Scottish Government’s consultation on relationship, sexual health and parenthood education in schools which is open until 23 November 2023 and on which further details can be found here.
News for social housing providers
The Government has published summary reports from the Social Housing Quality Resident Panel, as publicised by CLAS. The panel was established as part of major changes to the regulation of social housing in the last year. These reports cover the panel’s discussions on access to information, complaints processes and finding information and advice. Whilst the discussion on access to information is more social housing specific, the discussion on complaints processes offers insights that are useful for all charitable organisations.
If you have any questions about your complaints processes or would like assistance with drafting a complaints policy please contact our charities team. If you are a social housing organisation our specialist social housing solicitors can assist on a range of matters.
Changes to regulation in Scotland
Since our update on changes to Scottish regulation in our June newsletter, the Charities (Regulation and Administration) (Scotland) Bill became law on 9 August 2023. The Office of the Scottish Charity Regulator (OSCR) has helpfully summarised the effects of the legislation. This includes changes to the information published on the Scottish Charity Register such that it will include trustees’ names (but not their contact details), unredacted annual accounts and a list of any trustees who have been prevented from acting by court order. However, as the summary explains, the legislation includes several other important changes to the regulation of charities in Scotland.
The OSCR is also seeking feedback on the way charities submit annual returns to the Scottish regulator, as picked up by CLAS. The consultation is open until 6 October 2023 and is in light of changes to the process which were introduced on 25 July 2022. The OSCR is also consulting on changes to its guidance on the public benefit test for charities in Scotland.
For more information
For more information about the topics raised in this month’s newsletter, please contact Phil Watts. Phil is a senior associate in the governance, funding and corporate team and advises charity and education clients on a wide range of governance and commercial matters. He specialises in governance arrangements for charities and academies.