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    Tag: charity commission

    Lessons for fundraising as a result of a recent breach

    Posted on by Georgia Flatley

    As a result of several complaints from long-term supporters, the Fundraising Regulator began an investigation into poverty-relief charity ‘Penny Appeal’ and has now published its findings. The results could serve as an important reminder for any charities that use fundraising as part of their initiatives.

    The reasoning behind the investigation was due to funds not being used for their intended purposes, reallocation of funds, funds not being approved by donors etc.

    Following further investigation by the Regulator, it found that the charity had breached numerous fundraising codes, including providing misleading information about the length of commitment when setting up monthly direct debits, poor complaints handling, etc.

    These breaches triggered a selection of recommendations from the Fundraising Regulator to assist charities with their fundraising efforts:

    1.Identify who is receiving the funds

    It is crucial for charities to identify from the outset who benefits from the donations on any material related to fundraising activities.

    2.Introduce ‘welcome packs’

    Charities must ensure that any welcome packs or other material for donors makes clear how their donations are being used.

    3.Identify all risk factors

    Charities must state from the outset that in some cases, the charity may remove themselves from certain projects relating to international development due to the type of work involved.

    4.Clearly state when funds are reallocated

    Charities should clearly highlight when funds are reallocated for use anywhere other than where originally stated.

    5.Highlight administrative fees

    Charities should identify when any admin fees will be deducted from the final total.

    6.Seek professional advice around refunds

    Due to complaints from donors around refunds it is essential that charities understand the process around whether to issue refunds and in order to avoid any confusion, seek professional advice from the Charity Commission.

    The PM+M team can help you understand the key areas recommended by the Fundraising Regulator to ensure you don’t fall victim to penalties, and help you prepare for any unexpected changes.

    Contact PM+M charity specialist, and audit partner, Ceri Dixon, by clicking the button below, to arrange an informal chat to discuss your specific circumstances in more detail.

    Charity Commission inquiry focuses on significance of Trustee responsibilities

    Posted on by Laura Bannan

    Charity Commission inquiry focuses on significance of Trustee responsibilities

    Following the Charity Commission’s three year long inquiry into Care4Calais, which concluded in late August, it was found that the former trustees were responsible for numerous instances of misconduct and mismanagement. The Commission found that the charity lacked appropriate governance structures, had poor financial controls, and inadequately handled complaints, dating back a number of years.

    In our blog, we detail the findings of the inquiry, highlighting the significance of Trustees’ responsibilities, and actions for current Trustees to take away to ensure they are meeting theirs.

    Poor internal financial controls

    The Charity Commission’s inquiry was critical of the charity’s financial management, and most notably, a lack of suitable internal financial controls. From October 2017 to August 2020, a now former trustee was reimbursed over £340,000 for charitable expenditure incurred to save the charity approximately £3,000 per year in foreign exchange fees.

    Although the inquiry concluded that while no funds were misused or misappropriated for private benefit, the arrangement was inappropriate, and thus, put the charity’s funds at unnecessary risk.

    Governance failings, poor compliant handling, and dispute

    The inquiry also found that between 2020 and 2021, Care4Calais operated with two trustees, and therefore failing to maintain the minimum number of trustees specified in its governing document.

    The charity’s handling of complaints was also called into question, as Care4Claais failed to demonstrate that complaints were handled in an impartial, fair, open or transparent manner, also failing to maintain records of investigations. On at least one occasion, and in breach of the charity’s policy, a trustee handled a complaint about another trustee to whom they were related, and failing to identify and manage the conflict of interest which occurred.

    Charity structure and conflicts of interest

    Two of the (former) trustees were siblings, and the inquiry found a lack of evidence to suggest that any potential conflicts of interests or loyalty, which may have existed, were managed appropriately.

    The founder of the charity was also a trustee, and the Chief Executive Officer, raising the question of how balanced the distribution of decision-making power was at the charity.

    Campaigning and political activity   

    The Charity Commission also reviewed the trustees’ decision to issue judicial proceedings to challenge the government’s Migration and Economic Development Partnership with Rwanda. The inquiry found the decision was properly made, adequately documented, and within the reasonable decisions open to the trustees of the charity. Ultimately, the inquiry determined it was in line with Commission’s guidance on political campaigning for charities.

    Get in touch

    Following the findings of the inquiry into Care4Calais, it is important for Trustees to review their responsibilities and determine if they are meeting theirs. The Charity Commission signpost their CC8 guidance regarding Internal Controls for Charities and their self-check list for trustees to utilise to evaluate their charity’s performance against legal requirements and best practice.

    If you are ensure if you are meeting your responsibilities as a trustee, or would like to discuss your situation in more detail, get in touch with our charity specialist, and PM+M partner, Ceri Dixon using the details below.

    Charity Commission releases guidance on how to manage financial difficulties due to cost of living pressures

    Posted on by Rebecca Campbell

    The Charity Commission have recently released guidance to recognise the difficulties charities are facing resulting from rapidly increasing costs, as well as direction on how to manage ongoing financial pressures.

    The guidance is aimed at all Trustees and reminds charities of their duties to provide effective financial stewardship and to confirm that any decisions made are in the best interests of the charity, whilst being legally sound. This includes finding a balance between reducing costs now to preserve funds to support beneficiaries in the future, whilst meeting the needs of the charity’s current beneficiaries. It is recommended in the guidance that open communication with beneficiaries, supporters, staff, and volunteers is paramount to find this balance.

    Assessing the risks that arise from making difficult decisions is also vital during periods of financial hardship. Trustees should consider the following:

    • Can the charity continue to safeguard beneficiaries, and protect them from harm, as it goes through a potential significant change?
    • Is it wise to sell investments and other assets to release funds for current expenditure? Sales may raise less money than could otherwise be secured in better economic conditions, however, it may be the best option available to meet your urgent needs. Whatever you decide to do, it is advisable to record clear reasons to support the decision made. You may also be eligible to borrow against your charity’s assets provided you follow the legal requirements.

    A large proportion of the guidance provides advice, considerations and practical steps which can be taken if a charity finds itself in serious financial difficulty. Including:

    • Minimising costs – stopping non-essential outgoings, reallocating employees, or even pausing some of the charity’s activities if needed.
    • Considering whether any of the charity’s funds can be released – this may involve seeking Charity Commission authority to change how restricted funds can be expended.
    • Conserving or improving sources of income – speaking to your funders / regular donors at an early stage is important to make them aware of your situation and plans. You may also consider raising extra funds through an emergency appeal or seek new or increased grants / loans at low or no interest.
    • Addressing financial difficulties in trading subsidiaries – where a non-charitable trading subsidiary is at risk of no longer being financially viable, charity trustees will need to consider if their charity can justify temporarily supporting the subsidiary.
    • Managing fuel costs – charities should ensure they are utilising Government energy bill relief schemes, and paying the correct rate of VAT on the fuel purchased.
    • Considering mergers or collaborative working – financial pressures may mean that charities consider merging or collaborating with one or more other charitable organisations. The Charity Commission have released separate guidance in this area.
    • Seeking external financial support and guidance – organisations such as National Council for Voluntary Organisations (NCVO), Institute of Fundraising and Charity Finance Group can provide help and support for charities struggling with the cost-of-living pressures.

    Get in touch

    If you are concerned about the effect of the cost-of-living crisis on your charity, or would like to discuss your particular situation in more detail, please get in touch with your usual adviser, or email enquiries@pmm.co.uk.