Charities Back on Track:  governance lessons learnt from       Charity Commission          investigationsDave WalkerInvest...
The Headlines• The overwhelming majority of charities are well governed  & well managed• We assessed & dealt with 1,413 se...
Key Themes• Poor Governance (serious failings in trustee  duties and responsibilities)• Inadequate financial controls• Saf...
Common Issues - what are weseeing?• Pre investigation assessment cases:  –   Breach of Governing Documents – 591  –   Repo...
Reporting Serious Incidents                           2011-12     2010-11   2009-10Reports of Serious Incidents   1,027   ...
Our impact• Protected £3.9m charity assets at risk• Monitored over £254m of the charity sector’s  income• Published 55 inv...
Key regulatory risk areas• Our Risk Framework Application Guidance  identified 3 regulatory risk areas where we  should ha...
Case study 1Safeguarding vulnerable beneficiaries
Beneficiaries at risk• ‘A charity which supports disabled people’• Anonymised case study of an inquiry• Objects – to enabl...
Issues examined by theinquiry• The inquiry examined:  – The suitability of ‘A’ to be an employee of the    charity  – The ...
Our findings• ‘A’ was unsuitable to hold the position of CEO• Mismanagement in the administration of the charity  in relat...
Regulatory action and outcome• We suspended ‘A’ from the charity• ‘A’ has now resigned his post as CEO• We provided extens...
Wider issues• Trustees have primary responsibility for  safeguarding in their charity• They must always act in their benef...
Case study 2Poor governance in charities
Poor governance in charities• Anonymised case study of an inquiry• The charity runs a day care & respite centre for  sever...
Issues examined by theCommission• The inquiry examined:  – Misuse of charity resources  – Unauthorised trustee benefits, r...
Our findings• The Chair had misused the charitys invoices  resulting in two police cautions for fraud• The Chair had recei...
Regulatory action andoutcome• We appointed 7 additional trustees• We provided the existing & newly appointed  trustees wit...
Wider issues• Trustees have equal responsibility & so must act  jointly• Trustees must act solely in the charitys  interes...
Wider issues• Trustees must manage their charity according to  the provisions of its governing document• Generally, a trus...
Case study 3Delivery of aid overseas
Delivery of aid overseas• Criminal investigation in UK underway, raising concerns  about a trustee• Commission’s role conc...
Delivery of aid overseas• Charity using local partners to deliver aid, seemingly  unchecked• The Inquiry took into account...
Outcome:• No evidence to indicate that the trustees diverted  charitable funds for unlawful or non-charitable  purposes• B...
Outcome:• Unable to account for funds & did not follow  processes & checks when spending money• This placed the assets of ...
Wider issues• Due diligence and monitoring is part of trustees’  duties to protect assets & their duty of care• Financial ...
Case study 4Charitable appeals: trustees’ duties
Charitable appeals: trustees’duties• Anonymised case study of a Regulatory Compliance  Case• On-air appeals made by radio ...
Issues examined by theCommission• The investigation had two aims:  – To examine whether those responsible for    organisin...
Our findings• The trustees had not considered at the time of  the appeals how the funds were to be used &  whether this wa...
Regulatory action andoutcome• We used our regulatory powers to obtain banking  information about the appeals’ account• We ...
Wider issues• Funds raised for charitable purposes fall within  the Commission’s jurisdiction• Those who manage such appea...
Charities Back on Track:    governance lessons learnt from         Charity Commission            investigationsDavid.Walke...
Upcoming SlideShare
Loading in …5
×

Governance learned from Charity Commission investigations

724 views

Published on

A look at serious issues investigated by the Charity Commission over the years.

Published in: Business
0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
724
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
13
Comments
0
Likes
3
Embeds 0
No embeds

No notes for slide

Governance learned from Charity Commission investigations

  1. 1. Charities Back on Track: governance lessons learnt from Charity Commission investigationsDave WalkerInvestigations & Enforcement Team
  2. 2. The Headlines• The overwhelming majority of charities are well governed & well managed• We assessed & dealt with 1,413 serious concerns, of which 28 were escalated to investigation• We completed 85 investigations (of these, 9 were statutory inquiries)• We completed 215 Monitoring cases• But, many charity trustees are – still making too many basic mistakes in managing their charities, which leads to serious problems – failing to report serious incidents to us
  3. 3. Key Themes• Poor Governance (serious failings in trustee duties and responsibilities)• Inadequate financial controls• Safeguarding vulnerable beneficiaries• Dealing with allegations of links to terrorism• Failures in fundraising• Political activity and campaigning• The damage of disputes• Problems with stakeholder consultations
  4. 4. Common Issues - what are weseeing?• Pre investigation assessment cases: – Breach of Governing Documents – 591 – Reports of Serious Incidents – 393 – Fraud & Theft – 113 – Management & Maladministration – 65 – Alleged Serious Criminal Activity – 54 – Beneficiaries at Risk – 53• Monitoring cases: – 66% related to poor governance• Investigations: – Trusteeship issues – 56 – Accounting issues - 25
  5. 5. Reporting Serious Incidents 2011-12 2010-11 2009-10Reports of Serious Incidents 1,027 849 451Whistleblowing reports 120 35 53
  6. 6. Our impact• Protected £3.9m charity assets at risk• Monitored over £254m of the charity sector’s income• Published 55 investigations reports• Used our regulatory powers on 188 occasions
  7. 7. Key regulatory risk areas• Our Risk Framework Application Guidance identified 3 regulatory risk areas where we should have a public strategic response: – Strategy for dealing with Safeguarding Children & Vulnerable Adults Issues in Charities – Strategy for dealing with Fraud, Financial Crime & Financial Abuse of the Charity Sector – Counter-terrorism strategy
  8. 8. Case study 1Safeguarding vulnerable beneficiaries
  9. 9. Beneficiaries at risk• ‘A charity which supports disabled people’• Anonymised case study of an inquiry• Objects – to enable disabled people to be fully included in all aspects of society• Allegations from two Councils that the trustees had knowingly employed as CEO a convicted sex offender (‘A’) & refused to carry out CRB checks• Also alleged that ‘A’ was awaiting trial for a similar past offence. ‘A’ was subsequently acquitted of this charge
  10. 10. Issues examined by theinquiry• The inquiry examined: – The suitability of ‘A’ to be an employee of the charity – The circumstances of the recruitment & employment of ‘A’ – The charity’s safeguarding policies and procedures – The trustees management of risk to the charity’s reputation & assets caused by the involvement of ‘A
  11. 11. Our findings• ‘A’ was unsuitable to hold the position of CEO• Mismanagement in the administration of the charity in relation to the employment of ‘A’• A serious lack of effective governance of the charity• The trustees had failed to discharge in full their duties & responsibilities to the charity & its beneficiaries given their failure to have effective safeguarding policies and procedures
  12. 12. Regulatory action and outcome• We suspended ‘A’ from the charity• ‘A’ has now resigned his post as CEO• We provided extensive regulatory advice & guidance to the trustees• We required the trustees to implement a number of actions relating to the charity’s governance & the development of safeguarding policies and procedures
  13. 13. Wider issues• Trustees have primary responsibility for safeguarding in their charity• They must always act in their beneficaries’ best interests & take all reasonable steps to prevent any harm to them• Trustees also have duties to manage risk & to protect the reputation & assets of the charity• They must develop & put in place appropriate safeguarding policies & procedures & undertake on-going monitoring
  14. 14. Case study 2Poor governance in charities
  15. 15. Poor governance in charities• Anonymised case study of an inquiry• The charity runs a day care & respite centre for severely disabled adults• The Commission was anonymously informed that the Chair was being investigated by the police for alleged fraud against a public body• The Chair was also the paid CEO
  16. 16. Issues examined by theCommission• The inquiry examined: – Misuse of charity resources – Unauthorised trustee benefits, relating to the way the charity employed & paid its CEO – Governance of the charity – Non-co-operation with the Commission
  17. 17. Our findings• The Chair had misused the charitys invoices resulting in two police cautions for fraud• The Chair had received unauthorised trustee payments as the CEO of the charity• The trustees had not followed our regulatory advice on how to manage the unauthorised trustee payments & the suitability of the Chair• The trustees had exerted insufficient management control over the charity• The charity was inquorate
  18. 18. Regulatory action andoutcome• We appointed 7 additional trustees• We provided the existing & newly appointed trustees with regulatory advice on their legal duties & responsibilities• The Commissions involvement ensured that the Chair resigned from the board of trustees & from the position of CEO• The charity elected new trustees & a new Chair of the board
  19. 19. Wider issues• Trustees have equal responsibility & so must act jointly• Trustees must act solely in the charitys interests & not for personal advantage• Trustees personal interests must not conflict with their duty to act solely in the charitys best interests & they must be able to demonstrate this
  20. 20. Wider issues• Trustees must manage their charity according to the provisions of its governing document• Generally, a trustee cannot become an employee of their charity, nor can an employee become a trustee• Trustees have a duty to ensure their charitys reputation is not brought into disrepute because it fails to manage risks or complaints properly
  21. 21. Case study 3Delivery of aid overseas
  22. 22. Delivery of aid overseas• Criminal investigation in UK underway, raising concerns about a trustee• Commission’s role concerned with trustees & any indication of misconduct or mismanagement• The Inquiry examined: – whether funds of the charity, or funds raised on its behalf, had been used unlawfully – financial management of the charity & the supervision of overseas activities – governance of the charity
  23. 23. Delivery of aid overseas• Charity using local partners to deliver aid, seemingly unchecked• The Inquiry took into account in its investigation – the charitys particular size & income level – that the charity often needed to act quickly to respond to a disaster situation – the practical challenges the charity faced as a result of working internationally, & in particularly remote & volatile regions
  24. 24. Outcome:• No evidence to indicate that the trustees diverted charitable funds for unlawful or non-charitable purposes• But, the trustees were unable to satisfactorily verify the end use of funds overseas• Insufficient measures to control, monitor & document the use of charitable funds (in this case by third parties overseas)
  25. 25. Outcome:• Unable to account for funds & did not follow processes & checks when spending money• This placed the assets of the Charity at risk & was mismanagement by the trustees in the administration of the charity• Issues arose from operation of overseas bank account• The trustees fell short of duties• But they were committed to future good governance
  26. 26. Wider issues• Due diligence and monitoring is part of trustees’ duties to protect assets & their duty of care• Financial transparency is crucial to help maintain the confidence of the public who give money to charity• It may be more challenging for charities working in challenging areas overseas to maintain the same standards of transparency & accountability as would apply in the UK, but they must strive to do this
  27. 27. Case study 4Charitable appeals: trustees’ duties
  28. 28. Charitable appeals: trustees’duties• Anonymised case study of a Regulatory Compliance Case• On-air appeals made by radio stations after the 2004 Indian Ocean tsunami & 2005 Pakistan earthquake• The radio stations are not charities, but because the appeals were made for charitable purposes, the funds held fell within the Commission’s jurisdiction• The signatories to the bank accounts were therefore trustees of the funds• Complaints that the funds had not been applied for the charitable purposes for which they were raised
  29. 29. Issues examined by theCommission• The investigation had two aims: – To examine whether those responsible for organising the appeals acted appropriately in respect of their retention of the funds raised – To ensure the proper application of the funds
  30. 30. Our findings• The trustees had not considered at the time of the appeals how the funds were to be used & whether this was clear to donors• The trustees were under a duty to apply the funds within a reasonable period given the urgency of the crises• They had not acted appropriately in their delay to apply the funds• Donors would have expected funds to have been applied quickly, not 5-6 years after the disasters
  31. 31. Regulatory action andoutcome• We used our regulatory powers to obtain banking information about the appeals’ account• We provided regulatory advice & guidance about charitable appeals & the legal duties and responsibilities of trustees• The funds (in excess of £180,000) have been awarded to two charities working in the areas affected by the tsunami & earthquake
  32. 32. Wider issues• Funds raised for charitable purposes fall within the Commission’s jurisdiction• Those who manage such appeals are trustees & have legal duties & responsibilities• Public expectation that funds from disaster appeals will be quickly applied• Need to consider whether they have the capacity to deliver/ better to raise funds for another better placed organisation• Donors must be able to give confidently
  33. 33. Charities Back on Track: governance lessons learnt from Charity Commission investigationsDavid.Walker@charitycommission.gsi.gov.ukInvestigations & Enforcement

×