Tag: charity regulator

Regulator intervenes to strengthen governance at international aid charity

Penny Appeal has been subject to extensive regulatory scrutiny resulting in an Official Warning

The Charity Commission has closed its regulatory compliance case into Penny Appeal, and set out its findings and ongoing expectations of the charity’s trustees.

Penny Appeal was set up in 2008 to provide poverty relief, emergency aid and healthcare across Asia and Africa. The charity also works in the UK to help homeless people and women who have experienced domestic abuse.   

The Charity Commission opened a compliance case into Penny Appeal in June 2020 following several complaints and concerns raised about how the charity was being managed. Concerns included failure to manage perceived conflicts of interest, poor record keeping and inadequate management of major supplier contracts. 

The Charity Commission has reviewed evidence supplied by the charity’s trustees and is satisfied that progress has been made to improve the charity’s governance and management. However, it has been made clear to the charity’s trustees that there is still further work to do.  

The Commission’s announcement follows last week’s publication by the Fundraising Regulator, which detailed findings of its investigation into Penny Appeal’s compliance with the Fundraising Code of Practice.

Earlier this year, the Information Commissioner’s Office issued the charity with an Enforcement Order over its marketing activities.

The Charity Commission has now closed its case, setting out its expectation that the charity’s trustees act upon recommendations by all three bodies. 

Official Warning  

The Charity Commission issued an Official Warning on 29 September 2023 after several meetings with the charity’s trustees and an inspection of the charity’s records and financial accounts. It found that the charity failed to maintain proper trustee meeting minutes to record decisions in relation to the purchase of a property, consideration of an unsolicited offer received to buy a property as well as decisions around retaining and redeveloping a property.

The charity failed to review a contract with its major supplier, thereby failing to act in the charity’s best interests. The regulator also found that the charity had failed to manage a perceived conflict of interest relating to its relationship with its major supplier.  

Impact of regulatory intervention 

Through its intervention, the regulator has secured several improvements to the charity’s governance. This includes advising the trustees to appoint a minute taker and to record conflicts of interest, which they have evidenced. The trustees have set dates to review third party contracts, and have appointed an external consultant to review the charity’s existing contracts and advise it on best practice. The charity will also terminate its contract with the major supplier that caused a perceived conflict of interest. 

The trustees have mainly complied with the actions required of them and the Commission notes and welcomes their commitment to complete the outstanding actions promptly. 

The trustees have been advised to make further improvements to the quality of meeting minutes. They must also promptly complete an outstanding review of governance and contractual relationships and arrangements with third party organisations established overseas, which forms part of an internal action plan set by the charity’s solicitors.   

The Commission has now closed its compliance case and is monitoring the charity’s progress. It has informed the charity that any failure to complete the outstanding actions or failure to comply with any action required by the Information Commissioner’s Office and/or the Fundraising Regulator may also result in further regulatory action. 

Tracy Howarth, Assistant Director for Casework at the Charity Commission, said: “Improvements have been made at Penny Appeal after several years of engagement about a series of weaknesses and shortcomings in the charity’s governance.  

“This is a charity which receives significant support and donations from the public – it is extremely important that its governance is fit for purpose.  

“The actions already taken have strengthened how the charity is run, and we are following up on the outstanding actions, which the trustees have assured us will be promptly addressed.”

Charity insurance specialist advises long-term planning for success

16 new charities launch in The Lothians this year

In 2023, 629 charities were established across Scotland, an increase of 25 compared to the previous 12 months. Of these, 116 were registered in The Lothians*, signifying a growing trend for people keen to make a meaningful difference in their communities as well as society at large.

The research was conducted by Ansvar, an expert insurer for the charity and not-for-profit sectors, using data available from the Office of the Scottish Charity Regulator. It reveals a shift in the philanthropic landscape, indicating that more people are actively seeking ways to contribute positively.

This is prompting Ansvar to extend its support and guidance to those aspiring to establish charities and community organisations.

Martyn Fletcher, Deputy Managing Director at Ansvar, said: “The increase of charitable registrations is definitely something to be celebrated.

“We understand that navigating the complexities of setting up and running a charity successfully can be complicated. It requires careful consideration and planning to ensure long-term success and sustainability.

“We are keen to empower those who want to establish their own charitable organisation in 2024 with the knowledge and resources needed to ensure the longevity and impact of their charitable endeavours.”

With the rise in charitable registrations, Ansvar is providing essential advice and guidance on the often-overlooked aspects of establishing and running a charitable organisation:

Identify the cause and purpose: 

Clearly define the mission and objectives of the charity and what positive impact it hopes to achieve. Find out if any charities are already providing the same services, as working together can be more effective than setting up a new charity and competing for resources.

Legal structure: 

Choose an appropriate legal structure for the organisation, such as a named fund or trust, social enterprise, or Scottish charitable incorporated organisation (SCIO). Each entity type has distinct legal and regulatory obligations, and being registered as a charity may pose limitations on pursuing the desired activities. It is therefore vital to understand the differences and restrictions.

Conduct a comprehensive risk assessment: 

The assessment should include considerations for insufficient funding, governance, compliance, fraud and cybersecurity, and legal and regulatory risks.

Create a business plan: 

Develop a detailed business plan outlining goals, activities, target beneficiaries, and anticipated outcomes. Include a budget that covers startup costs, operational expenses, and potential funding sources.

Registration: 

Register your charity with the appropriate regulatory body, such as the Scottish Charity Regulator, and ensure understanding and compliance with legal requirements for registration.

Insurance considerations: 

Assess the insurance needs of the charity, considering the size and nature of the operations, particularly in relation to staffing, volunteers and fundraising activities. Explore insurance options and work with a provider that understands the nuances of the sector.

Financial management: 

Explore potential funding sources, such as grants, donations, and fundraising activities.

Martyn Fletcher added: “Many people embarking on the journey of setting up a charity or community organisation may not be aware of the intricacies involved.

“By carefully addressing each of these steps and risks, aspiring charity founders can lay a solid foundation for their organisations and increase the likelihood of making a positive and sustainable impact in their communities.”

* Data as per charities registered by the Office of the Scottish Charity Regulator between 1st January 2023 and 30th November 2023.

Views sought on Bill to strengthen charity regulator

Proposals that would see the powers of Scotland’s charity regulator strengthened are to be considered by the Scottish Parliament’s Social Justice and Social Security Committee.

Under the proposals in the Charities (Regulation and Administration) (Scotland) Bill, the Office of the Scottish Charity Regulator (OSCR), would have wider powers to investigate charities and charity trustees. Rules around who can be a charity trustee or senior office-holder in a charity would also be tightened.

The proposed changes to the law were developed following suggestions from OSCR. Some of the changes are intended to ensure Scottish legislation is in line with updated legislation in England and Wales.

The Committee wants to understand what impact the changes in the Bill might have. To make this as easy as possible for all charities to respond, no matter their size, the Committee is inviting people to share their views either through a detailed consultation, or a short survey.

They hope to get an insight into how the charity sector has changed since the Charities Act was passed in 2005 and get a better idea of how the updated laws might impact the Scottish public.

Natalie Don, Convener of the Social Justice and Social Security Committee said: “Charities are a cornerstone of public life in Scotland, with millions of people across the country supporting, or benefitting from their work. It is important that the public can have faith in the often vital work that they do. We’re keen to understand the extent to which the Bill might strengthen that accountability and transparency.

“We also want to understand what administrative impact the Bill might place on charities and their trustees. We understand that many people volunteer for charities and we want to know how these changes might impact on the way that they are able to perform these roles. 

“There are more than 25,000 charities in Scotland and we would like anybody who has a role working or volunteering for one to share their views on the Bill, either by completing the detailed call for views, or the shorter survey.”

The Committee’s survey and detailed consultations will both close on Friday 3 February 2023. Following the closure of the consultation, the Committee will undertake several public evidence sessions before producing a report commenting on the principles of the Bill in the spring.

Coronavirus and charities: latest information from OSCR

The Scottish Charity Regulator (OSCR) is currently open during our standard operating hours.  This is in line with advice from the Scottish Government.  Our services are still available but we are operating with fewer resources, so it will take longer than usual for us to answer queries and process any applications.

The coronavirus (COVID-19) situation is fast moving and developing regularly.  This web page will be updated to reflect any changes that occur so please revisit it regularly to be kept up-to-date.

OSCR, the Association of Chief Officers of Scottish Voluntary Organisations (ACOSVO) and the Scottish Council for Voluntary Organisations (SCVO) are committed to working together to support the sector through the COVID-19 pandemic:

What is Coronavirus?

There are many sources of information about COVID-19.  All charities should read this guidance from the Scottish Government.

The guidance includes advice for non-healthcare settings, and has tips that apply to people working in hospitality settings, leisure facilities, entertainment venues and premises used by community groups.  NHS inform will give you the latest public health advice.

One of the most important things is the basic hygiene measures that you can take to help prevent the spread of the infection.  These include:

  • routine cleaning and disinfection of frequently touched objects and surfaces such as telephones, keyboards, door handles, desks and tables
  • basic hand washing is highlighted as the most effective way of preventing the spread of infection.  Hand hygiene promoted by ensuring staff, contractors, service users and visitors have access to hand washing facilities and alcohol-based hand rub, where available
  • crockery and cutlery in shared kitchen areas should be cleaned with warm water and detergent and dried thoroughly
  • ensuring food such as crisps and sandwiches should not be left open for communal sharing unless individually wrapped.

Gathering information for the sector

To help influence and shape support for the sector, SCVO is asking organisations to share information about the challenges they are facing as a result of COVID-19 and the potential impact.  Please email a summary to experience@scvo.org.uk. Any information would be greatly appreciated.

FAQs

For charities, there are some specific concerns that we have become aware of, and we will cover those briefly below. General frequently asked questions are available here

What if I have to cancel my AGM or other key events/meetings?

The COVID-19 pandemic is likely to have an impact on a number of events over the next while.  This might include the holding of your AGM.  This might make it difficult for you to finalise your annual reports and accounts.

Wherever possible, we would ask you to try to get these to us on time.  All you need to do is log on as usual and scan us your reports and accounts.  However, we understand that it might be difficult for some and we will take an understanding and proportionate approach to this.

It may be that by postponing your AGM, you are not fulfilling what it says in your governing document.  However, we would be understanding and proportionate about that.  We would still ask you to send as much as you can by your deadline, where possible.

While we are currently not planning to extend filing deadlines, we will continue to look at this issue and see how we can best support the sector at this difficult time.

Can we hold our important meetings virtually?

Where it isn’t going to be possible to get together face-to-face, holding meetings virtually could be a good option.  Some charities have specific provisions in their governing documents to allow meetings to take place over the phone or using digital solutions.

However, in the current situation, we are happy that charities hold their meetings in this way even if the governing document doesn’t say anything about this.  This will allow charity trustees to have important discussions and to take decisions at this difficult time.  Where you decide to take this virtual route, you should record that they have done this, thus demonstrating good governance of your charity.

What if my charity could do something to help people directly in our community, but our governing document would prevent us from doing so?

It is a great sentiment to want to do everything you can to help your communities.  However, it is one of the basics of charity law to follow your governing document and make sure that your charity is working within its purposes.  There are many charities who might be better placed than your own to respond in particular circumstances.

On the other hand, you may be uniquely placed to deliver a service or support to a particular community, and a temporary change to your purposes would allow you to do so.  For such cases, we will put in place a process aimed at approving such changes as quickly as possible.  If you feel you fall into this category, you should get in touch with us as soon as you think you want to make some changes.

Can we change our charity’s purposes so we can use our resources to help with the COVID-19 pandemic?

Charities should still apply for consent to OSCR to change their purposes. In this instance, charities need to mark on the application form that the change is in relation to the COVID-19 pandemic so that we can prioritise those applications.

Please do this by adding “(Coronavirus-related change)” next to the Charity name box. Examples of purpose wordings can be found in our guidance.

What if the current situation has a negative impact on my charity?  Should I be reporting it to OSCR as a notifiable event?

Our notifiable events regime was set-up in order that we might play a role in minimising the impact of serious problems and issues on charities.  By hearing about serious problems at a relatively early stage, the aim was to play a more preventative and facilitative role.  Notifiable events do not cover every incident, only those that may have a significant impact on your charity.

The same would apply in the current situation.  We would only need to hear about something if it was likely to have a serious impact on your charity in the longer term.  It might be that your significant fundraising activity for the year takes place at a time, which means it has to be cancelled.  This might be significant in terms of you being able to carry on with your activities and you would want to report that to us.

However, don’t worry.  Reporting does not need to be at the very top of your list.  Making sure you have the time and space with your fellow trustees to make the right decisions for your organisation is the main thing to be thinking about.

As always, make sure you are recording the decisions you make and the reasons for them.  And, if your trustees do think it is going to have a significant impact on your charity, then let us know as soon as you can.

I have heard that people are using the crisis as a way of trying to defraud people?  Is that true?  What can I do to prevent it?

A crisis is a great time to try to exploit people’s fears and vulnerabilities.  This crisis is no different.  There have been some attempts by cyber-criminals to target industries and individuals, usually for short or longer-term financial gain.  A recent BBC article highlighted some of these campaigns, and it is worth a read.

We produced a ‘Fraud and Cybercrime’ factsheet, which outlines some of the basic things you need to be thinking about to avoid becoming a victim of scammers.

Anything else I should be thinking about?

We will continue to review information and analyse the different queries and worries that are coming into us.  Where we think it will help, we will publish extra information.

In the meantime, keep reviewing the Scottish Government information.  This is updated daily and will give you a good overview of what you should be thinking about as charity trustees.

Further sources of information

England’s equivalent charity regulator The Charity Commission issued the following information yesterday:

Understandably, charities are concerned about what to do during the Coronavirus (COVID-19) outbreak, so we have set out our response to the most commonly asked questions.

We want to assure charities that our approach to regulation during this uncertain period will be as flexible and pragmatic as possible in the public interest, whilst helping trustees to be aware of and think about the wider or longer impact of their decisions on their charity.

We will update this page with responses to further questions on an ongoing basis.

Can I cancel or postpone my charity’s AGM or other key meetings?

Coronavirus is having a major impact on charity events and the government’s health advice may lead to some charities having no choice but to decide to cancel or postpone their AGMs and other critical meetings.

If as trustees, you decide it is necessary to do so, you should record this decision to demonstrate good governance of your charity. This is particularly important if it is not possible to hold your AGM which may make it difficult for you to finalise your annual reports and accounts.

Wherever possible, we would ask you to try to get your annual reports to us on time. However, where the situation impacts on the completion of annual returns and accounts, charities with an imminent filing date can call us.

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In the current situation, it is becoming increasingly difficult to hold face-to-face meetings. Some charities have clauses in their governing documents that allow them to meet virtually or to use telephone facilities, so we advise trustees to check their governing document and see if they can make amendments themselves to facilitate changes as to how or when meetings are held.

Where there is no such clause in your governing document and you decide to hold meetings over the phone or using digital solutions, we will understand but you should record this decision and that you have done this to demonstrate good governance of your charity.

What do I need to report to the Charity Commission?

We appreciate that during the coronavirus pandemic the charity sector will face extremely demanding and ever-changing challenges. Charities’ primary interest, and ours, must be looking after the public and the communities that we serve.

It is ultimately the responsibility of the charity trustees to continue to report serious incidents using our current guidelines, and we will continue to ask trustees to use their judgement in deciding whether an incident is significant in the context of their charity and should be reported to us.

We will continue to prioritise those incidents that place individuals at risk, or incidents that have had a significant impact on a charity’s operations and therefore serious harm to the charity’s work.