Governors and senior management teams in schools will have seen the regulatory role of the Charity Commission change quite radically over the last couple of decades. Many changes have been imposed by a succession of Charities Acts that create a regulatory regime based on filing documents with the Commission each year. Charities have to file annual returns that collect certain information about charities to enable the Commission to carry out a basic health check and to spot any significant compliance issues.
One feature of this regime is that the Commission can decide each year what information it will ask for in the annual return. The Commission has used this to focus its monitoring activities on those aspects of charities’ operations that it considers are likely to represent a risk. Thus, in some years, there has been a focus on benefits received by trustees or on whether charities with vulnerable beneficiaries have appropriate policies and procedures in place to protect them from harm.
The Commission’s role is not simply to protect individual charities, but also to increase public trust and confidence in charities – indeed this is now one of the Commission’s formal objectives under the Charities Act 2011, alongside identifying and investigating apparent misconduct or mismanagement in charities. This is a rather broader remit than schools will have been accustomed to and the way in which the Commission pursues it raises some interesting practical issues for schools, in particular since the Commission adopted its current policy on the reporting of what it calls ‘serious incidents’.
The reporting of serious incidents is not a new requirement, but it is worth rehearsing the mechanism that the Commission has used to make it a serious compliance issue for schools and other charities. The Commission takes the view that it is not just breaches of charity law that are of concern to it, but that many other types of incident can present a real risk to the beneficiaries, assets and reputation of a charity and to the reputation of charities generally. It has a regulatory interest in being informed of any incidents that present such a risk and has published guidance on reporting serious incidents (see https://www.gov.uk/how-to-report-a-serious-incident-in-your-charity) which sets out the sorts of incidents that it considers it should be told about, how the report should be made and what might then happen.
The guidance is not in itself legally binding, and the Commission has no direct means of ensuring that it hears about all incidents about which it might be concerned. The Commission has therefore devised an indirect means of ensuring that incidents are reported to it: the annual return now requires the charity to confirm that no serious incidents have occurred that have not been reported to the Commission. Because it is a criminal offence knowingly or recklessly to make a false or misleading declaration in the annual return, the Commission has something with which to threaten governors who might not otherwise regard filing a report with the Commission as a top priority.
This also means that a failure to report an incident becomes, in its own right, a cause for concern. We have seen, both from the Commission’s website and from our involvement in advising schools on such matters, that the Commission is taking a hard line where they learn about an incident through some other route. This could be because of media coverage of the incident or because someone makes a complaint to the Commission. In such cases, we have seen the Commission’s initial concern about the governors’ handling of the incident broaden into a scrutiny of the governance of the school and even of the extent to which the school is able to demonstrate public benefit.
It is therefore of practical importance that governors and staff have a clear idea of:
• what incidents need to be reported
• how much information can or should be supplied to the Commission
• when it might be appropriate to delay the report to the Commission
What incidents need to be reported?
The guidance defines a serious incident as one that “has resulted or could result in a significant loss of funds or a significant risk to the charity’s property, work, beneficiaries or reputation”. That extremely broad definition is supplemented with a list of matters that the Commission will always regard as a serious incident:
• fraud and theft
• other significant loss
• significant donations from an unknown or unverified source
• financial links between the charity and proscribed organisations or terrorist activities
• disqualified persons acting as trustees
• inadequate systems for vetting trustees or staff
• inadequate safeguarding policies
• suspicions, allegations and incidents of abuse or mistreatment of vulnerable beneficiaries
• a criminal investigation or sanctions imposed by another regulator or agency
This list is not exhaustive, and the Commission will expect to be told about any incident where:
• a report is made to the police or other statutory agencies (this will presumably include any report to the LADO)
• the police or other statutory agencies open an investigation into the charity or its personnel
• the trustees determine that the incident presents a serious risk to the charity, its beneficiaries, reputation or assets
• the trustees reasonably suspect that a serious incident has happened
• the charity’s professional advisers advise the trustees to notify the Commission of the incident – and you will want your lawyers to be up to speed on this topic, as the possible repercussions of filing a report mean that it is not necessarily helpful to have someone advising you to report to the Commission just to be on the safe side
What information needs to be provided?
There are a couple of key points to bear in mind in relation to the information that is reported to the Commission:
• some information relating to the incident is likely to be of a sensitive nature and may include personal data. Governors and/or staff may need to seek specialist advice on the disclosure of personal data and on the steps they can take to prevent information from being disclosed by the Commission under the Freedom of Information Act
• our experience tells us that the Commission’s handling of the case will be influenced by any information that the school is able to provide about the measures that were already in place to manage the risk of an incident of the kind being reported and about the steps that have been taken in response to the incident that has arisen
When does the report need to be made?
The Commission recognises that, even in serious cases, time may be needed to gather information about a suspected incident or to make initial investigations into an allegation. However, the expectation is that reports will be filed as soon as reasonably possible and any unjustified delay may be seen as a cause for concern about governance in the school and as justification for a more extensive investigation of the school’s affairs.
It is definitely not a good idea to leave an incident unreported until the time comes to file an annual return; this will give the Commission the impression that, until that point, the school was unaware of the need to report the incident. Having said that, if a school handles the matter with care and can demonstrate to the Commission that, despite the technical failure to report, it has handled the incident competently and properly, it may be possible to reassure the Commission that all is well and that there is no need for them to get further involved.