Charities monthly round-up February 2022

Welcome to our February newsletter!

This month we consider the Charities Act 2022, Charity Commission inquiries, police investigations and Covid-19 guidance. 

Charities Act 2022
This month, the Charities Bill received Royal Assent and was passed into law as the Charities Act 2022. The changes being brought in by the Act are technical in nature and are designed to deal with complex issues in charity law that have previously been problematic or burdensome for the sector. For further information regarding the changes please see our e-briefing series.

At present, it is unclear when the changes will be implemented and Charity Commission have commented that:

“We will not be able to make all of the necessary changes in one go – not least because some of the changes require secondary legislation and others changes to our systems and processes. We have developed a plan that will see us aiming to gradually implement the changes between now and the autumn of 2023 (not all the provisions though are dependent on the Commission and may be brought into force earlier)… We will let charities know when each of the relevant provisions come into force and we have consequently updated certain pieces of guidance or amended an online service.”

We will keep you up to date in the coming months and will be running a webinar for trustees on the significant changes brought about by the Charities Act 2022.

Charity Commission inquiry into Keeping Kids Company
The Charity Commission has published its long-awaited report into Keeping Kids Company following the charity’s high-profile collapse into insolvency in 2015. Whilst their report notes that Keeping Kids Company was “involved in highly challenging work amongst the most vulnerable children and young people in the UK”, it concluded that the charity operated a high-risk business model due to its heavy reliance on grants and donations, reliance on its CEO as a key fundraiser, lack of reserves and demand-led service. The Commission believes that the trustees were aware of the risks of this model but continued to operate under it for several years.

In 2021, the High Court rejected the official receiver’s request to disqualify the charity’s company director Camila Batmanghelidjh and the judge found that there had been no personal gain, dishonesty or personal gain by Batmanghelidjh or any of the trustees. Batmanghelidjh has stated that she wishes to seek a judicial review of the Commission’s report.

In its report the Commission recommended the following approaches for the wider sector to avoid the problems faced by Keeping Kids Company:  

• Trustee boards must avoid power imbalances by ensuring that checks and balances are in place and the right blend of skills and knowledge are recruited for.
• Charities should consider setting agreed terms of office for trustees, to avoid complacency and bring in fresh perspectives.
• Diversity should be sought at board level.
• Charities must identify and balance the risks of operating an innovative business model and evidence of the benefits.
• Charities should carry out financial planning and recording, this includes maintaining a reserves policy.
• Contribute to core costs to build the resilience of the charity.
• Implement transparent decision making and policies.
• Ensure that governance, resources and infrastructure keep pace with the growth of the charity.
• Prepare thoroughly for expansion.
• Charity trustees must manage the charity’s income, planning and monitoring.
• Develop contingency plans, including for a delivery successor should the charity close.

The Commission’s report is available here. If you have any queries about the issues raised, please contact your usual contact at Anthony Collins Solicitors.

Concerns raised about the Captain Tom Foundation
Over the last year the Charity Commission, Information Commissioner’s Office and the Fundraising Regulator have looked into the Captain Tom Foundation. The Commission has launched a case into the Foundation and has been working with it on the charity’s set-up and governance arrangements. The Information Commissioner’s Office has examined alleged GDPR breaches, and the Fundraising Regulator has raised several concerns about the Foundation’s website. In response to the release of this information, there has been widespread negative media coverage of the charity; with particular scrutiny on salary arrangements and consultancy fees.

Sir Captain Tom’s admirable fundraising activities during the pandemic gained wide support and donations. His family wished to build on this momentum and set up the Foundation to continue his good work. However, this case has highlighted that whilst the registration process to set up a charity is comparatively easy, the hard part begins once it is up and running. Charities must be compliant with charity law and are subject to regulatory oversight from several regulators including the Commission, the Fundraising Regulator, HMRC, the police, the Health and Safety Executive and the Information Commissioner. Navigating the various duties and responsibilities of a charity can be challenging, particularly for those without experience in the sector. Further, charity trusteeship is not a role to be undertaken lightly, prospective trustees need to ensure that they have a thorough understanding of their responsibilities before becoming trustees, as ultimately, they are responsible for the charity.

If you need advice about registering a charity, please contact your usual contact at Anthony Collins Solicitors or alternatively Katie Crosbie.

Metropolitan Police investigate The Prince’s Foundation
A cash for honours investigation has been opened by the Metropolitan Police following allegations against The Prince’s Foundation. The investigation is being carried out under the Honours (Prevention of Abuses) Act 1925. Staff at the charity are alleged to have offered honours in exchange for donations. No arrests or interviews under caution have been made by the police so far.

Clarence House has issued a statement saying that the “Prince of Wales had no knowledge of the alleged offer of honours or British citizenship on the basis of donation to his charities.” Graham Smith, the charity’s chief executive, has said that “we hope the investigation will be carried out without fear or favour and be as thorough as it needs to be.”

Allegations such as these can cause severe reputational damage to a charity and undermine public confidence in the organisation. Commission guidance includes harm to a charity’s work or reputation as a serious incident. Should a serious incident occur, trustees must make “prompt, full and frank disclosure to the Commission.” The seriousness of an incident will take into account the context of an individual charity including its operations, staff, finances and reputation.

Commission guidance on serious incidences can be found here and here.  If you need advice about a serious incident at your charity, please contact your usual contact at Anthony Collins Solicitors or alternatively Edwina Turner.

Inquiry into the Hindu Community Society
The Charity Commission has removed the Hindu Community Society from the register after a finding of misconduct and/or mismanagement in the charity’s administration. Despite previously having been subject to a statutory inquiry to submit accounting information, trustees failed to file annual reports and accounts within ten months of the year-end for three consecutive years. Trustees also failed to comply with a section 84 Order to file the outstanding accounts which were subsequently issued. The Commission also had concerns about trustees’ decision making regarding expenditure on property leased by the charity as decisions were made by individual trustees, rather than collectively. Professional advice was also not sought before purchasing property or before taking out loans.  

In light of the Commission’s findings trustees should be mindful of their legal duty to submit annual updates, annual reports and accounting documents to the regulator. It is a criminal offence to fail to submit accounts and accompanying documents. Trustees’ duties include managing their charity’s resources responsibly, reasonably and honestly. They should not expose assets, beneficiaries or the reputation of the charity to risk and are collectively responsible for the charity. If trustees are considering high-risk decisions, especially relating to large sums of money, then independent professional advice should be sought and considered. Failing to do so exposes the charity to significant risk.

The Commission’s decision is available here. If you have any queries about the issues raised, please contact your usual contact at Anthony Collins Solicitors or alternatively Catherine Gibbons.

Updates to Charity Commission Covid-19 guidance
The Commission has updated its Covid-19 guidance in advance of the ending of restrictions. It acknowledges that charities can gradually move back to face-to-face meetings and that outstanding annual general meetings (AGM) can be held. However, the Commission cautions that Covid-19 will continue to impact charity events and that trustees should consider how and if meetings can be held.

The guidance recommends that trustees check whether their charity’s governing document allows them to hold virtual meetings and if it does not, take steps to amend their governing document where possible. Changes to the provisions introduced by the Corporate Insolvency and Governance Act 2020 are also outlined with a discussion of their impact on charitable companies and charitable incorporated organisations (CIO). Additionally, the guidance also recommends that whilst the Commission is appreciative of the extremely demanding operational environment created by the pandemic, trustees must continue to report serious incidents to the Commission.

The updated guidance is available here. If you have any queries about amending your governing document or safeguarding concerns, please contact your usual contact at Anthony Collins Solicitors or alternatively Catherine Gibbons.

Fundraising guidance updated in response to Covid-19
The Fundraising Regulator and Chartered Institute of Fundraising have also updated their Code of Fundraising Practice (the Code) in response to the relaxation of restrictions. However, they warn that “it is vital that organisations continue to fundraise in a safe and responsible way and that managing the risks of Covid-19 remains part of their planning process”. The updates to the Code follow national government guidance so as to avoid creating unnecessary burdens and distinguish between the different requirements currently in place across the UK.

The updated Code hopes to reassure both fundraisers and the public that it is “appropriate and valid” to return to in-person fundraising if done responsibly. It also includes detailed guidance on digital fundraising, recognising that these methods will stay, and increase, beyond the pandemic.

If you have any fundraising queries, please contact your usual contact at Anthony Collins Solicitors or alternatively Natalie Barbosa.  

Flexible working: is it time to implement new practices in your organisation?
Voluntary sector membership bodies NCVO and ACEVO have called for flexible working to become the default option in the charity sector; suggesting that all roles should be advertised as flexible. They recommend that organisations build on the shift in working patterns and practices triggered by the pandemic; rethinking their workplaces to retain staff and recruit the best new talent.

Together they have produced The Time to Flex report which contains case studies, resources and tips to implement flexible working for employees and management. The report recommends that those in the voluntary sector openly share their flexible working stories to develop best practices and that organisations “embrace a position of trust- where individuals are more empowered”.

If you have any queries about these issues, please contact your usual contact at Anthony Collins Solicitors or alternatively Catherine Gibbons.  

Challenges for the sector in 2022

The Charities Aid Foundation (CAF) has conducted a survey of charity leaders to assess the challenges faced by the sector. Their report found that 58% of charity leaders believe financial sustainability to be their ‘number one’ challenge, with an increasing percentage of charities planning to cover income shortfalls by using their reserves. Combined with this, 86% anticipate demand from their organisations increasing this year, following the rising demand throughout the pandemic. The progressively digital charity landscape was also highlighted as both a challenge and an opportunity for charities, with only a quarter of leaders believing that they have the knowledge to conduct truly effective online fundraising.  

CAF recommend that “charities need to invest in resilience measures such as good governance and leadership, digital transformation, and staff development. Many changes will have been made in response to the pandemic, and charities should take stock of what measures will make the biggest difference over the long term.” The report is available here.

Should you have any governance concerns about how your charity can manage these challenges, please contact your usual contact at Anthony Collins Solicitors or alternatively Catherine Gibbons.

Delays to the appointment of new Charity Commission chair
In the two months since Martin Thomas resigned from his position as chair of the Charity Commission, there have been no updates on the appointment of a new chair. It will now be over a year since the Commission has had a permanent chair, with Ian Karet continuing his interim role. Despite calls from charity leaders for a timeline, the Department for Digital Culture, Media and Sport (DCMS) has declined to confirm when the appointment will be made and whether they intend to begin the selection process again or if a candidate will be selected from those interviewed when Martin Thomas was appointed.

Funding Opportunities
Recovery Loan Fund

Government-backed loans of up to £100k-£1.5m are available for charities and social enterprises who have been impacted by Covid-19 from the Recovery Loan Fund. To be eligible organisations need to be “improving people’s lives, or the environment they live in, across the UK”. The application deadline has been extended until 11.59 pm on Friday 20 May 2022. Details on how to apply are available here.

British and Foreign School Society

UK registered charities with an income between £25,000 and £2.5 million can apply for grants between £30,000 to £100,000 for projects which “improve the educational outcomes and life chances of young carers and care experienced young people under the age of 25 living in the UK”.

The funding is only available for new or pilot projects and cannot be used to fund existing programmes. UK based and state-funded, schools, academies, colleges and other educational establishments are also encouraged to apply if they can demonstrate that their project has a network effect beyond one individual school.

Details on how to apply are available here.

For more information

If you would like more details about anything in this newsletter please speak to your usual ACS contact or contact Catherine Gibbons.

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