Memorandum from Mr John Gibson and Mr
Richard Birnie (DCH 200)
1. re Clause 5
1B The Commission's regulatory objectives
(2) The regulatory objectives:
1. The public confidence objective—this
objective is intended to increase public trust and confidence
in Charities. Charities therefore need to be open to involving
their stakeholders (eg donors, beneficiaries, and general public)
in their decision-making processes at all levels at which the
charities operate. The exclusive manner in which some charities
make decisions results not in public confidence but suspicion
as to a charity's managers and trustees' motives.
Well-Run charities do involve their stakeholders—at
least in a consultative capacity—as a valuable part of their
decision-making process. This applies at all levels in which these
enlightened charities engage with their stakeholders. We hope
that the new Charity Law will oblige all charities to at least
consult with stakeholders, to both account for the results and
how such consultations are carried out.
2. The resources objective—the
resources of a charity must not be invested in companies whose
aims and methods conflict with the charity's objects.
4. The accountability objective—we
have three principle recommendations to make, which also relate
to both public confidence and resources:
(1) Disclosure of the charity's Investment
portfolio
At present, SORP regulations oblige the annual accounts
of charities to give a total figure for Investments. There is
no obligation to disclose to stakeholders or other enquirers any
details of the content of the investment portfolio.
However, as we are sure you are aware, sometimes
when stakeholders get to see the portfolio they discover—to
their absolute horror—that the charity [with full knowledge
of the trustees] has been investing in companies whose raison
d'etre is totally incompatible with the stated aims of the
charity eg where a charity's aim relates to Healthy Living or
Cancer Relief—and the charity has shares in a tobacco company,
or where a charity concerned with the relief of poverty has shares
in a loanshark outfit. The only "protection" which stakeholders
have from their charity profiteering from such companies is through
Charity Law obliging charities to make their portfolios available
on request. This is an essential aspect of transparency.
(2) Stakeholders right to information
SORP is a set of rules which govern charities at
their global level in terms of accountability, but it does not
concern itself with the detail of charity units/branches. Therefore,
there is no obligation on charities to reveal to stakeholders
the details of the local branch of the charity which they support.
In this day and age this is no longer an acceptable situation.
Some stakeholders do have a personal obligation to, or dependency
on, the particular charity. It is so unjust twhen intransigent
trustees refuse to make available the accounts of a branch to
which stakeholders may have faithfully supported for years. ALL
we ask for is that Charity Law requires branch/unit accounts to
be made available to stakeholders on request.
(3) These above two recommendations will certainly
help to fulfil the stated objective "to enhance accountability".
The Charities Bill also needs to accord to the Charity Commission's
publication entitled "The Hallmarks of a Well-Run Charity"
the same status as is given to the Highway Code, which may be
used as evidence in any court proceedings under the Traffic Acts
to establish liability and resulting in prosecution. The "The
Hallmarks of a Well-Run Charity" publication therefore
needs to be elevated from merely an advisory document to that
of a Code of Good Practice.
1C The Commission's general functions
(2) 3. re misconduct—this
general function is to identify and investigate "apparent
misconduct and mismanagement". We particularly pick up on
the term used "apparent"—as our experience with
the Charity Commission is that its officers refuse to investigate
on the basis of "apparent" evidence, but they insist
on the complainants producing actual evidence first. Complainants
often, from reliable inside information, may know very well that
abuse is taking place but do not posess the actual evidence themselves.
This results in the Charity Commission refusing to investigate
such serious complaints. We therefore ask that the text of the
Bill makes clear what it means by "apparent" and that
it applies to such circumstances.
Where stakeholder complainants have well-founded
and/or inside knowledge sufficient to demonstrate a prima facie
case of such abuse, but are unable to present personal, proven
or direct evidence, than the Charity Commission should not be
either inhibited, prevented, or precluded from instigating a Section
8 investigation.
2. re Clause 6
2B Practice and Procedure—re Charity
Appeal Tribunal. We ask that the Bill makes clear as to what level
or degree of evidence is sufficient for this trubunal. We note
in part (3) that the Lord Chancellor may set the rules:
(a) regulating the right of appeal to the
tribunal; and
(b) regarding practice and procedure.
We ask that "apparent" evidence relating
to "apparent misconduct" be made eligible.
3. re Clause 16
This clause needs to deal also with the following
two matters, which can have a serious affect on public confidence
in a charity:
re: CHARITY TRUSTEES
(1) Dominant Trustees—this
occurs where a trust deed allows for one trustee to have a dominant
role over his/her fellow trustees eg he can act unilaterally,
or that decisions by the other trustees must be agreed also by
the "dominant" trustee. This privilege needs to be phased
out from existing charities, and excluded from future charities
because it results in the "fellow trustees" not being
proper trustees, and it is really not in keeping with the way
that charity trustees should operate, nor even in accordance with
the recommendations as set out in Charity Commission`s own publication
"The Hallmarks of a Well-Run Charity".
(2) Suspending trustees—We
are very much aware that when a worker for a charity (paid or
voluntary) does something which the charity officers feel requires
invoking disciplinary procedures then the worker is often suspended,
while the matter is being investigated. However, should it become
public knowledge that a trustee of a charity is subject to police
or other investigation (whether that matter concerns the particular
charity or not) there is nothing to oblige the trustee to stand
down, albeit temporarily. We believe that, in the interest of
the charity, the new Charity Law should oblige all trustees, in
such situations to be relieved of their involvement with the charity
until the matter has been resolved.
4. re Clause 18
re: Publicity requirements for schemes and
orders—We feel that it is particularly important that
when such schemes are advertised that the advertisment carries
sufficient information to indicate the nature of the scheme etc.
It is common that advertisments give no clue as to what the intentions
are about. This needs to be remedied.
5. re Clause 20
re: Charity Commission giving advice/guidance—This
clause needs to be extended to stakeholders (eg donors, beneficiaries,
and general public—in matters relating to the particular
charity) of charities and not only to charities themselves. The
clause needs to ensure that the advice is unprejudiced and even-handed
to all parties.
We trust that under the Commission's regulatory
objectives that adequate resources will be made available to advice
etc for stakeholders.
6. re Clause 22
re required annual audit—This clause
needs to include a requirement that all auditors are expected
to be familiar with the terms laid out in the charity's governing
document and also the charity's own internal regulations. This
places a duty on the auditor to ensure that payments are made
in accordance with the charity's objects and regulations.
7. re role of the Office of the Independent
Complaints Reviewer—the draft bill makes no reference
to this office. Is this because its role is to be taken over by
the Tribunal? If this Office is to continue to receive complaints
in relation to the Charity Commission, then it needs to be able
to have some leverage in order to obtain satisfaction. At present
the Office is at pains to point out that it has "no powers".
8. Responsibilities of Trustees of Charities—we
would welcome the Bill listing the responsibilities of trustees
of charities.
9. re Public Benefit—as the main
basis of an organisation qualifying as a charity has to be public
benefit, we would therefore welcome a definition of public benefit
which so far has been omitted from earlier Acts of Parliament.
June 2004
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