Regulatory round-up – Charity Commission updates
28 October 2024
As 2024 has progressed, we have seen a steady uptick in activity by the Charity Commission, with revised legal updates, blogs, statutory inquiries and press releases being published at pace. In this round-up, we highlight some key updates and developments from the regulator that will no doubt be of interest to all charity trustees.
David Holdsworth speech – Charity Law Association Conference 2024
David Holdsworth was appointed as Chief Executive Officer of the Charity Commission in February of this year. He took up the role on 1 July and, on 10 October 2024, he addressed the Charity Law Association at its annual conference as the closing keynote speaker.
In that speech, Mr Holdsworth outlined the regulator’s priorities for the future of the sector and the ways in which the Commission will seek to work with the wider charity law community to best help charity trustees, charities and their beneficiaries.
Three key themes were outlined, themes which he believed would help shape the future of the sector.
- Housekeeping and maintenance of the sector: the first part of Mr Holdsworth’s speech focused on “getting the basics right”. Predominantly, this related to the Commission’s recent work in overhauling its existing guidance notes for charity trustees, in a move to bring greater clarity to the same. For more detail on this, please see our comments on ‘Revised Charity Commission guidance’ below.
- Strategic work: next, he outlined the Commission’s “horizon scanning and strategic policy work” to best support the charities it regulates. This included its recent monitoring work on AI and cryptocurrencies whereby the Commission has been working with the sector to better understand the advances in technology, the risks it poses, and the risks of not engaging with the developments. Mr Holdsworth urged the sector, legal advisers and his colleagues at the Commission to consider how the developments might be harnessed for the benefit of the sector into the future.
In keeping with the general increase in regulatory action (for more on which please see below), Mr Holdsworth noted that, as part of its strategic work, the Commission is also considering strengthening its powers to address and prevent abuse and mismanagement. This perhaps indicates that the Commission will not be afraid to rely on the full breadth of its regulatory powers where needed.
- Future generations: to conclude his speech, Mr Holdsworth outlined some “blue-sky” thinking, noting that the Commission must have an eye to societal shifts and their impact on the sector. He noted that the Commission and the voluntary sector as a whole must be prepared to adapt to changes, be open to discussion and dialogue, and embrace both the opportunities and challenges which may lie ahead.
A full transcript of the speech can be read here.
Revised Charity Commission Guidance
In a bid to increase accessibility of its resources, the Commission has implemented a programme of simplification of its guidance notes and resources. The move is supported by research published by the Commission earlier this year in which just over one quarter of trustees (26%) confirmed that they access the Commission’s guidance at least once a year. The project to simplify guidance reflects the Commission’s desire to ensure that its guidance is clear, understandable and easily digestible for all trustees of charities.
The Commission has created a new page on its website containing links to some of the recently updated guidance notes. In addition, we’d like to draw your attention to the following notes that have also been updated:
New Trustee Welcome Pack
A new Trustee Welcome Pack has been created by the Commission to help new trustees navigate their “first few months, including what it means to be a trustee.”
The pack will be emailed by the Commission to new trustees upon their appointment (of which there are approximately 100,000 each year). The pack is designed to draw attention to the core duties of charity trustees and their responsibilities, and it is deliberately structured as a short guidance note, written at a high level, to cover the fundamental introductory concepts of trusteeship.
The guide may also prove helpful to charities thinking of appointing or inducting a new trustee, or to provide information to individuals interested in becoming a trustee.
Regulatory action
There are over 170,000 registered charities in England and Wales, managed by more than 924,000 charity trustees. The charity sector as a whole is larger still, with hundreds of thousands of smaller charities not registered with the Commission (i.e. those that are beneath the registration threshold because they have annual income below £5,000) and a significant number of exempt or excepted charities (such as churches, schools or universities) who are not required to register with the Commission.
With the number of charities and charity trustees increasing, it is perhaps unsurprising that regulatory action has also increased. There has been an increase in the use of the Commission’s statutory powers and many statutory inquiries involve issues relating to the mismanagement of conflicts of interest, the mismanagement of charitable funds, and promotion of controversial views.
Last financial year (the period from April 2023 to March 2024), the Commission reported a 25% increase in its regulatory action activity. It opened 89 statutory inquiries (the most serious regulatory engagement action), compared to 72 in the previous year. In the Commission’s annual performance report, it notes that the increase in inquiries reflects its “strong focus on prioritising action in tackling the most serious cases of wrongdoing and harm”.
We have seen a general increase in the Commission using its power of disqualification of charity trustees – 34 trustees were disqualified last financial year (compared with 11 disqualifications in the previous period). This trend appears to be continuing this financial year, including some high-profile disqualifications (Naomi Campbell in connection with Fashion for Relief and both Hannah & Colin Ingram-Moore in connection with the Captain Tom Foundation). For further discussion on trustee disqualification, see our article on ‘Charities, conflicts of interest and trustee disqualification’.
The Birketts view
We have seen somewhat of a shift in focus by the Charity Commission over the past year, with increased resources focused on identifying and addressing wrongdoing. This is reflected in the general increase in statutory inquiries and other regulatory action.
The other key change is the new emphasis on simplifying guidance for charity trustees in a bid to get more trustees accessing and using the guidance to support them in their roles. In general, the updates achieve the Commission’s goal in simplifying the guidance. However, in doing so, some previously helpful information has been removed. Trustees may therefore look to a guidance note for assistance on a particular topic and find that an answer is not immediately identifiable, particularly in relation to more complex areas of charity law.
There is a risk, particularly in relation to more complex matters, that charity trustees might make innocent mistakes that result in difficulties for the charity (including the risk of regulatory action) at a later stage. It is important to remember that the Charity Commission, whilst as helpful as possible to charity trustees, cannot and will not provide charity trustees with advice and its guidance is not comprehensive. It is an important aspect of the duties of charity trustees to seek professional advice where required. This is arguably becoming more important as a result of the slight shift in regulatory landscape that we have seen over the past year.
Should you require assistance with any of the subjects touched upon in the above round-up, please do contact a member of the Birketts Charities Team.
Sectors
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at October 2024.