Both regulators have concluded that the actions of the trustees of the Presidents’ Club fell below the standard of care required of charity trustees and that they had therefore breached their duties, despite having acted in good faith in what they thought were the best interests of the charity.
The investigations were launched following significant media attention surrounding an annual black-tie fundraising event hosted by the Presidents Club, at which it was alleged that members of the all-female event staff were harassed by the all-male attendees.
The Charity Commission found “that there were significant failures at the Presidents Club Charitable Trust and that its trustees were in breach of a number of their key charity law duties”. Although the Commission found that the trustees had acted in good faith throughout, they had breached their duties by failing to exercise reasonable care and skill in relation to the company that organised and ran the event.
The Commission pointed to a number of facts which might have alerted the trustees to the potential for risk to the charity’s reputation, including the fact that it was an all-male event with an all-female staff and especially the fact that the staff had been selected according to criteria based on their appearance and issued with instructions on how to dress. The Commission found that the trustees had failed to keep themselves sufficiently informed and had therefore not been able to take into account these factors and mitigate any risk.
In addition, the Commission found that the trustees had failed to exercise proper oversight when it came to managing the event itself. For example, there were comprehensive privacy measures in place for the attendees of the event (the staff were required to sign a five-page non-disclosure agreement) but there were no procedures or policies in place to protect the event staff.
The Charity Commission published a strategy for dealing with safeguarding issues in charities in December 2018, which prioritises the need for trustees to proactively safeguard and promote the welfare of the charity’s beneficiaries. In particular, the strategy aims to ensure that charity trustees take steps to ensure that the charity provides a safe environment for staff, volunteers and anyone who comes into contact with it. It is clear that the Commission will judge the decisions of trustees with reference to this strategy, and the alleged physical harassment at the party falls far short of the Commission’s requirements.
The Charity Governance Code, which sets out standards of recommended best practice for charities, is voluntary. However, the Commission makes clear in its report that it is a standard that will be taken into account when deciding whether or not charity trustees have breached their duties. The Code includes within the section on ‘integrity’ guidance on maintaining a charity’s reputation; in particular it requires that the trustees consider “how the charity is perceived by other people” and ensure that “the charity operates responsibly and ethically, in line with its own aims and values”. Here, the Commission found that the trustees exposed the charity to undue risk in relation to its reputation.
The trustees of the Presidents Club plan to wind up the charity. The Commission has therefore given the charity guidance on how to return to donors funds raised at the event should they wish to withdraw their support. The Commission has also issued formal regulatory advice to the trustees under section 15(2) of the Charities Act 2011 in relation to the breaches of their duties.
The Fundraising Regulator found that there had been a breach of the Code of Fundraising Practice, as “the charity did not have a process in place to monitor the activities of the third party that organised and staffed the event.” There was no evidence that the trustees had intentionally ignored the Code. However, the Fundraising Regulator nevertheless criticised the trustees for their failure to acquaint themselves with the expectations of the Code in relation to fundraising events. The report suggests that the Regulator expects trustees to put in place a policy or process to monitor fundraising where it is outsourced to a third party.
The scandal and the two regulatory reports underline the importance of taking care when entering into arrangements with third parties in respect of any fundraising activities. Both the Charity Commission and Fundraising Regulator expect high levels of responsibility from charity trustees in relation to fundraising, safeguarding and protecting the reputation of the charity.
If you have any concerns about any arrangements with third parties in relation to your own fundraising activities, or would like to request a copy of our free guide to fundraising with commercial partners please get in touch with Liz Brownsell or another member of our Charities and Social Enterprise Team. Law covered as at July2018.