Welcome to the October edition of the charities newsletter!
This month has been a whirlwind of change – after just 45 days in office the prime minister has resigned and before that, there was the release (and retraction of most) of the ‘mini-budget’ and further information on how the Government’s energy support scheme is intended to work, which again appears to be a moving feast in the most recent announcements.
Away from the Government (and possibly not quite so exciting!) we have reviewed some recent decisions made by the Charity Commission and the Charity Tribunal and the impact that these may have on the conduct of trustees.
As always, if you have any questions or would like to see a particular focus in next month’s newsletter, please do let us know.
In last month’s newsletter, we highlighted that the Fundraising Regulator had released its five-year strategy, which included a proposed review of the Code of Fundraising Practice from Autumn 2022. The Regulator has now issued a public call for information as the review of the Code commences. They are interested in feedback from anyone with relevant knowledge or experience in charitable fundraising and responses are due by Friday 25 November 2022. The intention of the review is to assess how the Code can be updated to future-proof the regulatory framework, providing greater protection to donors and the public without being unduly restrictive on fundraisers.
In more fundraising news, the Chartered Institute of Fundraising has also released its organisational strategy for the 2023-25 period. Their new strategy will include opening up organisational membership of the institute to smaller charities (with income under £50,000) for free and establishing a ‘championing fundraising committee’ which will steer the Institute’s work, with applications for the committee open from across the membership. The new strategy will commence in January 2023.
Cost of living and mini-budget reactions
In news that will not have escaped many, late September brought with it the announcement of the Government’s ‘mini-budget’ and mid-October and another new chancellor, the undoing of many aspects of this.
Reactions across the sector generally agreed that the measures when announced, would fail to protect the poorest in society and that there would be tough times ahead for communities. Representatives from a number of organisations also acknowledged that their areas of specialism will suffer, with Trussell Trust’s chief executive stating: “We are deeply concerned this will fail to protect people from needing a food bank” and Shelter’s chief executive saying no measures had been taken “to help the 2.5 million private renters who are already behind or constantly struggling to pay their rent”. More reactions from charity leaders can be seen here.
As communities are expected to lean on charities even more for help and support, the release of the policy paper on the Energy Bill Relief Scheme is a small but welcome reprieve until April next year at least. Looking beyond April, it has been announced that a treasury-led review will be launched to consider how to support households and businesses with energy bills after that time. The objective of the review is to design a new approach that will cost the taxpayer ‘significantly less’ and the Chancellor also said that any support for businesses will be targeted to those most affected, so we wait to see what this will mean for both individuals and the sector.
In other government news, this month has also seen the appointment of Lord Kamall as minister for civil society (responsible for charities) and Felicity Buchan as exchequer secretary to the treasury, with responsibility for charity tax issues. We continue to watch updates on government policy to see if the impact of these appointments and otherwise, will result in further measures to support the charity and voluntary sector.
Charity Commission opens inquiry into housing charity
The Charity Commission has opened an inquiry into My Space Housing Solutions following an inspection of the charity’s accounting records.
My Space, which houses vulnerable individuals and was recently subject to a BBC Panorama investigation, has been found to have made payments of over £1 million to nine of its trustees since April 2015. These payments raise concerns about conflicts of interest and this matter is a continued reminder of the requirement for charities and their trustees to appropriately manage, protect and account for use of their funds and ensure that conflicts of interest are adequately managed and declared within their organisation. The Commission will now go on to assess whether there has been mismanagement within the charity resulting in financial loss, which could have further implications for the charity and its trustees.
Former trustee ordered to pay over £100,000 for misuse of charitable funds
Continuing that theme, the Charity Commission has been successful in a claim against a former sole trustee of a cancer charity where charitable funds were misused. The High Court ordered that the sum of £117,100.32 be repaid by the sole trustee (Mr Wingett) where charitable funds had been misused to support the creation of a 210ft Welsh dragon statue as a tourist attraction. This project had no connection to the charity’s purpose, which was to relieve patients in Wrexham and District hospitals, particularly those suffering from cancer and allied diseases, through raising funds for medical and surgical equipment and facilities. Whilst the statue has not been built, this is clearly not medical or surgical equipment or facilities and the use of funds for such a project was not permitted and had to be repaid.
The Charity Commission said: “Charity trustees hold important positions of trust. We – and the public – expect trustees to ensure financial decisions are taken in the best interests of the charity and those it serves to benefit. Mr Wingett’s significant misuse of funds was an abuse of the trust placed in him by the many donors to the charity. This ruling will ensure the charitable proceeds raised are now directed to the benefit of those in the local community they were intended for.”
In addition to the repayment, the Commission also disqualified Mr Wingett from acting as a trustee or senior manager of any charity for a period of ten years. The Official Custodian will now oversee the recovery of the funds which will then be distributed by the Charity Commission to local charities that support those suffering from cancer.
This is a rare example of the Commission pursuing a claim against trustees in restitution and serves as a stark reminder that trustees hold positions of trust and are responsible for running their charity to achieve its purposes for the public benefit. The Commission used its statement to remind charities of their policy on restitution and the recovery of charitable funds lost in breach of trust (which can be read in full here), which acknowledges that where there is a risk of loss of public trust and confidence, the Commission may bring proceedings.
It also serves as an unusual example of a charity having a sole decision-making trustee; it is ordinarily expected by the regulator that charities should have a collective of experienced trustees who bring a range of perspectives and skills, not least to objectively make decisions and collectively act in the charity’s best interests.
Charity Tribunal – decisions on disqualification
A recently published decision in the Charity Tribunal should act as a further reminder to charities and their trustees of the pitfalls that may result in director disqualification and the powers of the Commission to disqualify. In the recent case of Blacker v Charity Commission, a disqualified trustee of the charity ‘JAFLAS’ (on which we reported in last month’s newsletter) applied to waive their disqualification under section 181 of the Charities Act, wishing to act as trustee for JAFLAS and other charities.
The application was rejected by the Commission multiple times, leading the trustee to bring an appeal to the Tribunal. The Tribunal rejected the claim on the basis that there were limited factors in favour of granting the waiver, influenced by the fact that the trustee had failed to provide the Commission with sufficient evidence that they were a ‘changed man’ following their disqualification. It was noted that they could continue to volunteer for JAFLAS provided this does not overstep any boundaries and that they were eligible to serve as a trustee only when their disqualification expired in 2024.
This decision shows that it continues to be a high burden to persuade the Commission and the Charity Tribunal that disqualification decisions (or waivers) should be overturned. A key focus in these decisions is the public’s trust in charities and the Tribunal deferred to the Commission’s superior knowledge on the question of whether public trust would be harmed in granting the waiver.
Changes to the Charity Governance Code pending?
This month’s edition of Civil Society’s Governance & Leadership magazine was an interesting read when looking at the future changes that may be coming to the Charity Governance Code. The Charity Governance Code steering group has recently appointed Radojka Miljevic as their new chair, with Radjoka identifying key future priorities when looking at the next phase of the Code. These include:
- focusing on a wide range of voices, from diverse advisers
- reviewing how organisations may embed the Code in their governance, but acknowledging that retaining the key themes is good, even where content changes; and
- changing the presentation of the code, assessing what is feasible for smaller charities with fewer resources and whether it should be essential that large charities have to adopt a code of governance.
For now, at least, the current version of the Code, last updated in 2020 continues to be a great resource for charities in reviewing their governance structures and we look forward to seeing if any revisions to the Code are released in the near future.
Charities and political campaigning
The Charity Commission has released a new ‘five-minute guide’ on political activity and campaigning, designed to help charities navigate contemporary issues in the light of the difficult economic climate. Orlando Fraser, chair of the Charity Commission, unveiled the guidance at the Commission’s annual public meeting this month and acknowledged that whilst charities are free to campaign and engage in political activity in accordance with both the law and their objects, they should never stray into party politics nor be seen to promote a political party or candidate.
The guidance (which is a more accessible and succinct version of the CC9 rules previously issued by the Commission) identifies the rules on political activity and how charities should engage if it is right to do so. It also includes general guidance on the best practice rules for engaging with politicians, provided it supports their purpose and the charity remains independent.
Orlando’s speech acknowledged the difficulties that charities face with the cost-of-living crisis and that charities should be part of challenging conversations, giving voices to those who may go unheard in times of turmoil and challenge. He also included a plea for charities to use tolerance and kindness in their campaigning, engaging more positively than can sometimes be seen in political debates.
Fraud Awareness Week and Gift Aid Awareness Day
17-21 October marked Charity Fraud Awareness Week and even if the date may have passed, it is never too late to be aware of the risks and implications that fraud can have on a charity. Preventing charity fraud have a number of useful resources that can be accessed here. Charity colleagues Catherine Gibbons and Amber Sutton also wrote a blog post about Charity Fraud Awareness Week.
6 October also marked Gift Aid Awareness Day, one of the best ways for charitable donors to make their donations go even further, especially in the current economic climate. Our colleague Victoria Jardine has written a blog post on how Charities can use Gift Aid to boost their charity profits.
In other news… Long Covid – a disability?
In a development that may be relevant to charities that have employees or provide advice and support to employees, a recent employment tribunal claim has found that a diagnosis of long Covid will not constitute a disability under the provisions of the Equality Act. Our employment colleagues have written a detailed blog post which assesses the impact of the case, which can be read here.
Should you require any advice on any of the governance-related aspects noted above, or support for your charity generally, please do get in touch either with your usual Anthony Collins Solicitors charity contact or myself, Sarah Patrice. For any queries related to employment matters please contact Jackie Morris or another member of the employment team.
For more information
For more information or advice on the topics raised within this month’s newsletter, please contact Sarah Patrice or your usual ACS representative.
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