Charity Trustees' Reporting
Trustees have an obligation to report serious incidents or other matters relating to their charity. This should be done when the incident occurs but can also be brought to the Charity Commissions attention when submitting the annual report.The guidance also reminds charities above the statutory audit threshold that they must report on their risk management arrangements in their Annual Report.
For a charity with income over £25,000 as part of the Annual Return, the trustees must sign a declaration that there are no serious incidents or other matters relating to the charity over the previous financial year that you should have brought to the attention of the Charity Commission attention but have not. The Charity Commissions Reporting Serious Incidences – guidance for trustees states, “If an incident has taken place but you have not reported this to us, you should do so when you submit the Annual Return.” It goes on to state “If you are unable to make this declaration then the Annual Return will not be complete and you will have defaulted on your statutory requirement under section 169 of the Charities Act 2011.”
The guidance goes on to provide information about the approach taken by the commission when dealing with individual charities. It also highlights the following as issues they have identified as being higher risk.
• significant financial loss to a charity
• serious harm to beneficiaries and, in particular, vulnerable beneficiaries
• misuse of a charity for terrorist purposes
• serious criminality and/or illegal activity within or involving a charity (including fraud and money laundering)
• charities set up for an illegal or improper purpose
• charities deliberately being used for significant private advantage
• where a charity's independence is seriously called into question
• other significant non-compliance, breaches of trust or abuse that otherwise impact significantly on public trust and confidence in the charity and charities generally
These are generally the type of high level risks that Trustees would expect to review. However Trustees need also to look at the type of incident and how it should be reported. The guidance states that “arising out of these higher risk issues, we have identified areas where the matter in question causes such serious concern that we will always give it our immediate attention because of the impact on the charity if true, and on the reputation of the charity, even if not true. Where such high risk issues arise in charities, we would always regard them as serious incidents that you should report to us.” The areas are:
1. Fraud and theft
2. Other significant loss
3. Significant sums of money or other property donated to the charity from an unknown or unverified source
4. The charity (including any individual staff, trustees or volunteers) has any known or alleged link to a proscribed (banned) organisation or to terrorist or other unlawful activity
5. A person disqualified from acting as a trustee has been or is currently acting as a trustee of the charity
6. The charity has no vetting procedure to ensure that a trustee or member of staff is eligible to act in the position he or she is being appointed to
7. The charity does not have a policy for safeguarding its vulnerable beneficiaries (eg children and young people, people with disabilities and older people)
8. Suspicions, allegations and incidents of abuse or mistreatment of vulnerable beneficiaries
9. The charity has been subject to a criminal investigation, or an investigation by another regulator or agency; or sanctions have been imposed or concerns raised by another regulator or agency such as the Health and Safety Executive, the Care Quality Commission or Ofsted
The guidance also states that the Commission expects trustees to report an incident if:
• the incident is also reported to the police or other statutory agencies
• the charity, or individuals associated with the charity and in connection with their role within it, are the subject of a police or other statutory agency investigation
• you decide that the incident presents a serious or significant risk to the charity, its beneficiaries, reputation or assets
• the internal risk assessment of the incident concludes that the charity should act to avoid a serious or significant risk to the charity, its beneficiaries, reputation, services or assets or
• your professional advisers have advised you to notify us of the incident
There is also the catch all “report it to us anyway” statement. The general conclusion is that if in doubt send in a report. However there is a balance to be struck between timely reporting and investigation and guidance recognises that trustees may need time to gather information to establish the facts following an allegation or incident before reporting to the commission., But concludes by reaffirming that where an incident is serious the report should be immediate.
When updating the risk policies and reporting for charities the guidance provides useful references within its explanation of higher risk issues. For example for other Significant loss the guidance helpfully states that “for this type of incident, we would expect you to report any loss of funds or other property with a value of 20% or more of the charity’s income, or £25,000, whichever is the smaller amount.” It also makes it clear that this type of reporting would “not include a decrease in the value of investment funds occurring in the ordinary course of investment business or losses such as impairments, asset write downs, pension deficits and bad debts.”
In the guidance on Significant sums of money or other property donated to the charity from an unknown or unverified source the other legal obligations are highlighted reminding Trustees that the Finance Act 2011 section 27 requires trustees to consider, whether the charity is in receipt of tainted charity donations.
The guidance should be read by Trustees and professional advisers. It should also be considered alongside CC8 Internal Financial Controls.