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Key issues facing charities in 2022

Mark Lewis reflects on a meeting of charity representatives, who discussed the key issues facing their charities in early 2022.

Mark Lewis, Lodders Solicitors, Charity and not for profit solicitor, Partner, Stratford upon Avon

Lodders’ charity law expert Mark Lewis reflects on a meeting of charity representatives, who discussed the key issues facing their charities in early 2022.

A continuation of virtual working as a result of Covid continues to dominate the agenda for many charities and, unsurprisingly, the need to maintain both team cohesion as well as relationships with beneficiaries and others associated with charities.

Charity representatives also shared the need to focus on the aims and purpose of each charity and also to take account of the changing needs of beneficiaries, for example where individuals have been affected by Covid.

It was agreed that it might be appropriate to review the objects of a charity, and the possibility of a change to the objects becoming easier when the Charities Bill passes through parliament.

There have been two very high profile charities recently which have been in the news.

The first is Kids Company (Keeping Kids Company, (“the Charity”) in connection with the extensive report published by the Charity Commission on 10 February.

This raises a considerable number of issues in relation to the running of charities generally.  These include the following:-

That this demand led charity failed to maintain sufficient reserves to enable it to withstand difficulties, and in particular it did not carry the reserves to enable it to either continue or conduct an orderly wind down.

Emphasis placed in the report on having the right blend of skills and knowledge and in this particular case it was pointed out that some trustees and the chair had been in post for a long period and that a rotation of roles, which would have allowed for an injection of new ideas and challenges to the way in which the Charity operated, would have been sensible.  Also that this would assist with regard to challenging the senior executive who had been in post for many years.

Reference is made to the mention in the report of the Public Administration and Constitutional Affairs Committee Reports of a failure to refresh the leadership of the Charity.

The need for board decisions to be documented carefully, in particular in relation to evidence of financial planning, to assist both donors and funders and also to protect trustees.

The need to build a sustainable business model which does not disproportionately rely on government funding, nor a key individual for fundraising, which were particular issues in this case.  It was pointed out that governmental or other similar granting models are present in other charities.

Also experience on the board of how reserves are dealt with in charities with similar business models would have been helpful.

It was recorded that the High Court judge’s findings in relation to the Official Receiver’s application for a disqualification order included that the conduct of the trustees did not amount to incompetence of a high degree.  Emphasis was placed by the judge on the need to ensure that individuals are not dissuaded from becoming trustees because of sanctions which might be imposed.

Notwithstanding this the Charity Commission’s investigation was on the wider test of whether there had been misconduct or mismanagement.

There are lessons here for charities of all sizes and the report produced by the Charity Commission is designed to highlight issues for the sector as a whole, and the lessons to be learnt from this case namely:-

  • the importance of checks and balances, with the right mix of skills and experience on charity boards;
  • operating models to reflect the nature and scale of charities;
  • the need for a proper reserves policy and financial planning; and
  • the need for a consideration of issues arising when charities get bigger.
  • Turning to The Captain Tom Foundation it would appear that there have been concerns raised by three regulators, the Fundraising Regulator, the Charity Commission and the Information Commissioner’s Office.

This highlights the need for transparency and care with regard to legal compliance in relation to fundraising.  Once again we have a case which shows that damage may be caused to an individual charity and to the charity sector as a whole as a consequence of issues raised – whether perceived or real.

Here it is understood that this charity has sought to work with the regulatory bodies.

It is important to make sure that statements concerning fundraising contain the necessary details – to include compliance with statutory requirements in relation to amounts received by commercial organisations connected with it.  Also to ensure that data protection issues are properly addressed.

This is a high profile charity which has raised a lot of money and so it is extremely important that concerns are seen to be dealt with seriously, which does seem to be the case, so as to maintain trust and confidence in the charity and indeed fundraising in relation to charitable causes generally.

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Mark Lewis is a charity law expert. He specialises in advising charities and not-for-profit clients, including setting up and incorporating charities, mergers and restructuring, governance issues, and drafting commercial agreements.