Regulator says trustee mistakes are behind majority of its case work

(26 October 2012)

Over half of the investigations completed by the Charity Commission in 2011-12 involved basic failures of trusteeship, according to a report published today by the charity regulator.

Charities Back on Track 2011-12 reveals that 73 out of the Commission's 85 investigations involved concerns about poor governance or poor trusteeship, including concerns about breaches of governing document (17), unmanaged conflicts of interest (16), and concerns about fundraising governance (9).

Concerns around fraud and financial crime also featured heavily in the Commission's serious case work; around a third of serious incident reports (RSIs) submitted by trustees (364 of 1,027) and over half of whistleblowing reports about charities (56 of 121) involved concerns about financial abuse.

Concerns about safeguarding vulnerable beneficiaries featured in 11 investigations, and 394 RSIs.

The report also highlights areas the regulator has identified as posing the greatest risk to charities - fraud and financial crime, the abuse of vulnerable beneficiaries and terrorism - as well as the Commission's strategic response to those risks.

For the first time, the report includes a case study highlighting a charity's positive response to a serious incident. The report explains how an educational charity responded appropriately to allegations of physical abuse against a child, and was therefore able to reassure the regulator that the trustees were fulfilling their responsibilities.

The report also includes the example of an almshouse charity whose trustees could have prevented problems by making use of the support of their umbrella body, the Almshouse Association.

Michelle Russell, Head of the Commission's Investigation and Enforcement team says these examples demonstrate how trustees should deal with problems arising in their charities:

"These cases show that trustees have the power and the tools to prevent adverse incidents in their charity escalating into serious problems. Most of our case work this year involves serious concerns around trustees' lack of awareness, or failure to comply with their duties and responsibilities towards their charities. Some of our case work could have been avoided had trustees taken more effective steps to fulfil their responsibilities. This report makes clear that trustees can make a difference by taking what are often simple and obvious steps to protect their charity's money, property and beneficiaries."

She emphasised that the Commission's guidance is there to help trustees manage their charities well:

"I would urge all trustees to ensure they regularly remind themselves of the basic duties and core requirements set out in our guidance, including the Essential Trustee (CC3) and Hallmarks of an Effective Charity (CC10). These tools explain what the law expects of trustees and what steps trustees can take to make sure they are fulfilling their legal duties".

For the first time, Charities Back on Track also includes a summary of the case work carried out by one of the Principal Regulators of exempt charities, the Higher Education Funding Council for England (HEFCE), which regulates 110 Higher Education institutions that are charities. HEFCE received 28 reports of serious incidents from charities it regulates between 1 June 2010 and 31 March 2012.

Other key findings of this year's Charities Back on Track include:

• the Commission closed 85 investigations, including 9 statutory inquiries
• the Commission opened¹ 54 investigations, including 12 statutory inquiries
• the Commission used its statutory powers on 188 occasions in 2011-12.
• the Commission closed 1374 and opened² 1252 assessment cases
• charities reported 1,027 serious incidents in 2011-12, up from 849 the previous year
• there were 64 investigations active at the end of the year (April 2012)
• £5m of charity assets at risk was directly protected and £255m of the sector's income was directly monitored by the Commission through investigation work

For further information please contact the press office

Notes to Editors

1. The Charity Commission is the independent regulator of charities in England and Wales. See www.charitycommission.gov.uk for further information or call our contact centre on 0845 300 0218.

2. To be the independent registrar and regulator of charities in England and Wales acting in the public's interest to ensure that:

• charities know what they have to do
• the public know what charities do
• charities are held to account

3. There are over 160,000 main registered charities, some of which have similar names or working names. To avoid confusion, each registered charity can be identified by its individual registration number, which can be checked on the Register of Charities.

4. Some charities are exempt from direct regulation by the Commission. An exempt charity is still subject to the legal rules generally applicable to charities; and the provisions of the Charities Act (unless specifically excluded).

5. Principal Regulators were established by the Charities Act 2006 to promote compliance with charity law by the exempt charities they regulate. There are currently five Principal Regulators: HEFCE for exempt English higher education institutions; the Department for Education and the Welsh Government for those publicly funded schools that are exempt charities e.g. academies; the Department of Culture, Media and Sport for the museums and galleries that are exempt charities; and the Department for the Environment, Food and Rural Affairs for Kew Gardens. The Commission works with these regulators to support them in carrying out their role.

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