Corporate report

Dealing with wrongdoing and harm: lessons for trustees

Published 29 January 2019

Foreword

In recent years the Charity Commission has published annually a report outlining the lessons and warnings that trustees might usefully draw from some of the casework we handled over the previous 12 months. This year we have changed the title and the format to make the material more usable and I would like to take the opportunity to place it in a broader context.

Our new five year strategy sets out the purpose of the Charity Commission: to ensure charity can thrive and inspire trust so that people can improve lives and strengthen society.

We cannot achieve that goal by ourselves. The shared benefits of a thriving sector bring with them a shared responsibility to meet popular expectations of behaviour and conduct. It is a responsibility which binds together the regulator and those whom we regulate.

As one the 700,000 trustees who together oversee more than £70 billion of annual income you are the first line of defence in securing the reputation of your own charities and more widely that of the sector as a whole. That is a huge undertaking and the Commission is here to help, not just to step in when things go wrong.

So while we are dealing with more regulatory compliance cases and more reports of serious incidents than ever before as number of charities on the register continues to grow, it is important to recognise the hard work and dedication of the overwhelming majority of trustees. Nevertheless, where things do go wrong, the potential impact of such cases on public trust and confidence when they do come to light also demonstrates how precious and fragile the good standing of charity can be.

That is why we are working on becoming more preventative in our approach, developing the risk-based element to its work so that it can spot potential problems before they occur. This report should be read in that spirit.

Helen Stephenson CBE Chief Executive Officer, Charity Commission

There are lessons in six areas from our work in 2017-18.

Insider fraud

We looked at a sample of cases of insider fraud in 2017-18. We found that almost three quarters of cases are because of:

• too much trust in an individual or individuals
• others in the charity not challenging things

The findings follow some high profile cases of insider fraud in 2017-18.

These include:

• Birmingham Dogs Home, where the former chief executive stole £900,000 from the charity
• NSA Afan, where the finance director went to prison for spending almost £54,000 of the charity’s money for personal gain

Lessons for trustees

You are accountable and must protect your charity and its funds and assets.

You must:

• make sure charitable funds are properly used to further your charity’s purposes
• have strong internal and financial controls
• have robust financial management

This should be a core part of your charity’s culture.

Encourage everyone in your charity to look out for things that do not seem right and to speak out.

Divide financial duties among different people. This should help you to check and verify records and transactions.

Guidance on internal financial controls

Our research report on insider fraud

Safeguarding

We received 1,580 serious incident reports about safeguarding in 2017-18.

This was more than in previous years but under reporting is still an issue. Only 1.5% of charities have submitted a serious incident report since 2014.

Serious incidents will happen. We consider charities that do not report them as higher risk than those who do.

We wrote to 1,700 charities that said in their annual returns that they:

• worked with children or adults at risk
• did not have a safeguarding policy

We told them how important it is for them to address this.

Lessons for trustees

Trustees have a duty to protect people who come into contact with their charity from harm. It is not only something for charities working with children or adults at risk.

Make sure that your charity’s staff and volunteers are safe in the workplace, as well as your users and customers.

You should also protect people who may only come into contact with your charity temporarily. For example, if you host an event where people who you do not usually work with might be at risk.

Create an open culture and listen to victims.

Review your safeguarding policies and procedures if you have not done so in the past year.

Guidance on safeguarding and protecting people

Reporting serious incidents

We received 2,819 reports of serious incidents in 2017-18. Most reports were about safeguarding.

Lessons for trustees

Protect your charity and its reputation by:

• acting early
• reporting things where necessary

Make sure you know when you should report incidents and who to report them to.

It may not be comfortable for your charity, but reporting serious incidents is part of governing your charity responsibly.

How to report a serious incident to the Charity Commission

Counter-terrorism

In March 2018, we confirmed a statutory inquiry into Essex Islamic Academy, also known as Ripple Road Mosque.

We could announce this after the conviction of a former religious teacher at the charity for a number of terrorism offences.

Also in March, we published the findings of our inquiry into Anatolia People’s Cultural Centre.

We found there had been misconduct and mismanagement in how its trustees had run the charity.

Inappropriate images were displayed at the charity’s premises. We concluded that the images would likely lead a reasonable member of the public to think the charity supports terrorism or extremism.

The trustees allowed and did not prevent this. That was not right.

We removed or disqualified the trustees of the charity from being trustees in the future. We also removed the charity from the register of charities.

Lessons for trustees

Compared to the number of charities, the number of proven cases of abuse of charities for terrorist purposes is small. But they can reduce public confidence and trust in charities.

Do not do anything that would reasonably be seen to support or associate with a terrorist organisation or activities that support terrorists and extremists.

Have proper procedures in place to:

• manage the risks of coming into contact with designated entities, groups or persons
• take action quickly if this situation arises

Where a charity’s activities may, or appear to, support, condone or encourage terrorist activity or ideology, take immediate steps to make clear that this is not the case. Watch out for suspicious activities.

Do not let anyone use your charity’s resources for anything that supports, or could appear to support, terrorist activities. This includes staff, volunteers or premises.

More lessons for trustees and what steps you may need to take

Data protection

The EU General Data Protection Regulation (GDPR) was introduced in May 2018. This was a challenge for all charities. This is likely to become a more high-profile risk for charities in 2019.

Lessons for trustees

Trustees should:

• review data protection procedures
• put appropriate processes in place
• follow guidance for charities from the ICO

Trustees should also make sure their charity has an appropriate social media policy in place and be clear on how it applies to them.

Guidance on making digital work for charities

Military charities

We looked at a sample of military charities that:

• registered since 2007
• work with veterans

From this work there were lessons and advice for those charities and some wider lessons for all charities and trustees.

The lack of safeguarding policies and practices to deal with mental health in some of the charities was a concern. There was a need to strengthen policies in most of the others.

In other charities, trustees had not taken appropriate responsibility for the charity’s fundraising.

Lessons for trustees

Think about who your users are.

Make sure that everyone who comes into contact with your charity is safe. If you work with veterans, be aware of any particular needs they may have.

You are responsible for your charity’s fundraising. Operate effective control of any fundraising done on behalf of the charity.

The six principles for trustees are:

• plan effectively
• supervise your fundraisers
• protect your charity’s reputation, money and other assets
• follow laws or regulations that apply to your charity’s fundraising
• follow any recognised standards that apply to your charity’s fundraising
• be open and accountable

Fundraising guidance for trustees

More lessons for trustees in our group report on our sample of military charities