SMALL CHARITIES - PRINCIPLES OF COMMISSION POLICY OG200A1

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OPERATIONAL GUIDANCE

SMALL CHARITIES - PRINCIPLES OF COMMISSION POLICY

OVERVIEW

OG 200 A1 - 5 July 2006

Purpose

The purpose of this guidance is to set out the general policy approach to be used in dealing with small charities – that is, charities with annual incomes of £20,000 or less. It acts as a first point of reference for caseworkers dealing with issues such as dissolution and removal of charities, acceptance of amendments made by charities, remuneration and trustee indemnity insurance, on which more specific policy guidance is available.

Functional responsibility

For action

Charity Services

For information

Legal Division

Contents

1. Introduction
2. What is a small charity?
3. What evidence do we need that a charity is "small"?
4. Applying proportionate regulation to small charities
5. The "Fast Track" approach
6. The "de minimis" or materiality principle
7. Exceptions to the de minimis principle
8. The Commission's accountability
Glossary of Terms used in this Guidance

Index to further related information


The Law	Refer to a lawyer	Refer to an accountant

1. Introduction
	Almost 110,000 charities in England and Wales fall into the category of "small charity". By taking an approach which is appropriate to the size and assets held by these charities, we aim to give their trustees much more freedom in taking straightforward, but important decisions, freeing them from the need always to justify their actions to us in detail. They are then able to concentrate more of their resources on charitable work in their own communities.
	There are specialist units for NHS charities (Liverpool), Armed Forces charities (Taunton) and Welsh charities (Newport) which handle work for small charities within their own remits.
	Information for small charities is available on our website.

2. What is a small charity?
	For our purposes, we broadly define a small charity in terms of its income.
	If a charity has an annual income of £20,000 or less recorded on CDB in its last full financial year we will consider it to be a small charity for the purposes of this guidance.
	There are very few exceptions to this. OG 202 (Dissolutions and removal from the Register) explains the position where a charity that owns land wishes to wind up. Cases involving the Reverter of Sites Act 1987 are also not counted as small charities cases, whatever their income.

3. What evidence do we need that a charity is "small"?
	In assessing whether to regard a charity as a "small" charity, it will in most cases be obvious. Where the income cannot be established from our records, the unit receiving the correspondence should contact the charity to confirm its income, or, where no accounts are available, get the charity's estimate. No action should be taken until the charity's income has been established.
	We should use any reliable evidence we have in determining whether or not a charity should be considered small.
	However, in all cases, a charity should complete an Annual Information Return each year, which it will submit to us (with its Annual Return for charities with incomes between £10,001 and £20,000). This contains details of its income for the previous financial year, and is used to update CDB.
	This information can be found by looking at the Charity Database, and going to Register/Display/View Registered Charity/View Quick Summary.
	If in doubt about whether or not to treat a charity as a small charity, consult your mentor or senior officer.

4. Applying proportionate regulation to small charities
	With limited resources, we look to apply proportionately more regulatory resources where we have identified the greatest risks. Because small charities collectively pose fewer risks we devote fewer resources to small charities casework, allowing more resources to be devoted to the fewer, but larger, charities which between them have 99% of the charitable sector's income.
	The Charity Commission operates in a way which enables staff to deal with substantial volumes of work, while at the same time sufficiently discharging our role as a regulator. This includes the general function of promoting the effective use of charitable resources by encouraging better methods of administration and giving information and advice.
	Applying proportionate regulation or a "lighter touch" to small charities consists of a two-tiered approach, with each tier designed to be proportionate and framed so that trustees can run their charities with the minimum involvement of the Commission:
	a "fast track" approach (see 5 below) for small charities where the figures involved are higher than the "de minimis" levels (see below);
	an approach based on the "de minimis" or materiality principle (see 6 and 7 below) for the smallest of charities (ie those with an annual income of £1000 or less).

5. The "Fast Track" approach
	The aim of the fast track approach is to provide a quick and proportionate response to matters arising in small charities that are above the "de minimis" or materiality threshold.
	This approach is designed to regulate in a way which is fit for purpose, instead of our previous approach which has been to provide a fully bespoke response regardless of whether or not this is proportionate to the issue or to the charity.
	Wherever and whenever we can, we should aim to provide trustees with clear guidance and instructions, which will enable them to act directly themselves (where the trusts allow this), without further involvement of the Commission. This may be by letter or publication, or by directing them to our website.
	Where action from the Commission may be necessary, we will require, in appropriate cases, the trustees to provide us with a completed checklist or declaration. We will normally accept that what the trustees tell us is accurate without further questioning, and proceed to give the trustees what they need to enable them, without delay, to get on with their work, so that our part can be kept to the minimum.
	Charity trustees may, from time to time, make minor mistakes, or act pragmatically to get things done, whilst still acting in the best interests of the charitable beneficiaries. Where we find something which is not quite right from a technical point of view, we can generally discharge our duty as regulator by providing an appropriate instruction informing the trustees what they should have done, and giving advice about future conduct if appropriate.
	But as with the de minimis or materiality approach, there will be some exceptional cases, where in the public interest, it may be necessary for us to consider intervention.
	By giving trustees the tools, and expecting them to carry out their responsibilities properly, we minimise Commission involvement and avoid unnecessary checks to verify the facts as presented by the trustees. The trustees remain accountable for their decision, and for complying with any Order or Scheme of the Commissioners.

6. The "de minimis" or materiality principle
	"De minimis" is short for "de minimis non curat lex" which is a legal term which loosely translated means that the law does not concern itself with very small matters. It is a principle that has been firmly established by the Courts, and is operated by other Government Departments.
	We apply the following approach in considering whether or not the de minimis principle can apply to a particular issue:
	Where the issue is one relating to the day to day running of the charity, the de minimis principle is applied if the amount in issue is £1000 or less. This would typically include cases where our consent to specific transactions is needed, like remuneration, ex-gratia payments and failed appeals where the donors cannot be identified.
	Where the issue is one that might fundamentally affect the very nature of the charity, the de minimis principle is applied if the total value of the assets of the charity is £2500 or less. This would typically include cases involving, for example, dissolution, and changes of objects.
	In principle, the de minimis approach means that unless the case falls within the list of exceptional cases contained in section 7, we are not generally concerned with mistakes and breaches of trust arising in the course of conducting a charity's affairs. Instead, we provide basic advice in information sheets or direct trustees to relevant guidance on our website.
	If however a charity within the de minimis bracket approaches us for advice, we will provide the same level of service in terms as advice and guidance, as we would for small charities falling outside the de minimis bracket (see section 5 above on the fast track approach).
	Section 7 lists those areas that we regard as material, and where we do not apply the de minimis principle.

7. Exceptions to the de minimis principle
	It is important that there is clarity about when we will not apply the de minimis principle to small charities, ie events that we regard as material or significant. Unless a senior officer decides otherwise we will not apply the de minimis principle in the following situations:
	Where there is tangible evidence of crime or wilful misconduct, and we may need to inform the police;
	Where the problem forms part of a recurrent pattern of mismanagement or misbehaviour either within a charity, or by an individual trustee or body of trustees;
	Where there are factors (like national or regional press interest or the involvement of an MP) which mean that the cost to the Commission in terms of resource and reputation in not picking up the issue outweighs the cost of doing so;
	In the case of failed appeals where donors can be identified, and their rights thus easily established (s.14(3) of the 1993 Act defines property belonging to unidentifiable donors, so donors who can be identified are defined by implication);
	In the case of charities disposing of interests in land, trustees must continue to comply with the regime set out in ss. 36 and 37 of the 1993 Act (see OG 204).

8. The Commission's accountability
	Although our approach to smaller charities is justifiable on proportionate regulation grounds, we must remain accountable for the service we provide and the decisions we make.
	This should be particularly noted in the following three main areas:

	8.1 Complaints about charities 8.2 Complaints about us and requests for Decision Reviews 8.3 Applications to Court

	8.1 Complaints about charities
	We are under no obligation to take action in every case of a complaint that we receive about the conduct of a charity or its trustees. We do not take up cases which are trivial or where we feel the trustees have made mistakes while trying to act reasonably and in good faith, or where our intervention would be a disproportionate response.
	However, in exceptional cases where the issue is serious and fundamental, we may choose to take a concerned interest having regard to our general criteria for evaluation and investigation.

	8.2 Complaints about us and requests for Decision Reviews
	Our complaints (see OG 93) and Decision Review (see OG 94) processes are open to our customers (as defined in the relevant guidance) irrespective of the size of the charity concerned. These processes enable customers to complain about the way we have dealt with them (complaints) and enable customers to ask us to take another look at a decision (Decision Reviews).
	In relation to small charities we apply the policies referred to in this guidance (and other guidance specifically directed to small charities). Any complaint or Decision Review request would be considered in the context of this guidance against a framework that involves taking a proportionate regulatory approach. It should be noted that we can decline to carry out a Decision Review on a number of grounds, including that to do so would be a disproportionate response to the issues.
	The handling of complaints and Decision Reviews in relation to small charities should, as a result, become more streamlined and proportionate.

	8.3 Applications to Court
	In cases where a person seeks to question our new approach in court, either by way of an appeal against an Order or Scheme, or by judicial review, the case should immediately be referred to Legal Division for advice.
	In relation to all charities, but small charities in particular, the expense of litigation can rarely be justified. By careful case handling in accordance with our policies we should be in a strong position to consider refusing any application under s.33 of the 1993 Act, to take charity proceedings.

Glossary of Terms used in this Guidance
	1993 Act
	CDB
	de minimis
	trustees

Index to further related information