Charities: when things go wrong

In the past few years we have been rocked by scandals about fund-raising, appalling sexual abuse in the overseas aid sector and the Kid’s Company affair. There have also been hostile media campaigns, largely without any foundation, about chief executive pay.

All this suggests that it is not enough to do good, which is every charity’s DNA, it is just as important to do it right, and to be scrupulous about every aspect of governance.

Scope caught up with Frances McCandless, chief executive of the Charity Commission Northern Ireland to ask the regulator about how local charities are faring.

To date the commission has received just over 800 complaints about charities. That’s around 100 a year. From the outside this seems like a high number. A majority come from the general public: evidence perhaps that there is now high awareness of the commission, and also that scandals elsewhere have had an impact on trust.

These are then assessed into four categories:

Those that require no action because they are not in breach of the Charities Act. This will either because they have no substance or else what is alleged is a matter for a separate authority, the PSNI for example.

The second category is the most common. This is where concerns do need to be acted upon but where it is deemed that the charity can deal with it itself. The Commission issues the organisation with advice and guidance and the charity is expected to put its house in order.

The third is where the Commission makes a regulatory enquiry of the charity. This will often result in the organisation being issued with recommendations and a timetable for implementation which will then be monitored for compliance. Examples might be where self-regulation has not worked, where there are a high number of failings, or quite serious issues such as a charity’s social media account appearing to endorse a specific candidate in an election campaign.

Finally, in the most serious of cases a Statutory Inquiry can be initiated. This is where there is a substantial  risk to the charity’s assets or beneficiaries. This might include where individuals are abusing charitable status to make private gains, or where charities are involved in unlawful activity. To date there have been 13 of these, five of which are open.

So what are the commission’s most pressing or common concerns about charities in Northern Ireland? What should organisation be especially alert to?

Ms McCandless cites conflicts of interest.

She said: “Conflicts of interest are very common and poorly understood. Boards can often appoint people from stakeholder groups, these might be local authorities or members of an organisation with a relationship with the charity. It is critical to understand that where this happens these individuals have, in law, a fiduciary duty to that charity only. They are not there to represent the group to which they belong.”

Northern Ireland is a small place and people are often appointed to boards without a formal interview basis. This can lead to perceptions of conflicts of interest (even where none exist). It is therefore imperative for organisations to keep a register of interests and to manage any potential conflicts with appropriate rigour.

Two other inter-related areas are also of significant concern: dominant individuals within a charity and internal disputes.

She said: “A dominant individual could be a chair, or a chief executive – sometimes one or the other is a founder of the charity - and the result can be that one person is taking all the decisions. Yet every trustee is jointly and severally liable.”

This, of course, requires a strong chair who ensures that all trustees are heard, they are empowered to challenge and to probe and to make themselves completely satisfied as to the governance of the organisation for which they are legally responsible. This can be testing, especially when a chief executive is being overly controlling, not least because she/he has control of management information and trustees are unpaid and may be time poor. That can’t be an excuse for poor governance, if and when it happens it is a challenge to be overcome.

Trustees and chief executives of charities are often passionate, driven people with strong ideas. This is usually healthy, but where internal disputes break out these very qualities can make them extremely difficult to resolve which, in turn, can lead to serious governance issues.

Another area is one which is simple to fix, but still all too common, according to Ms McCandless. This is where trustees are not familiar with the governing documents of their own organisation.

“This is the bible,” she says. “Trustees need to follow their own procedures. If they don’t they are in breach. This is not rocket science.”

The recent international aid scandal has raised serious questions about the robustness of safeguarding policies and practices for the vulnerable. Earlier this year the Commission invited 350  organisations that work with children and vulnerable adults to a seminar on best practice. There is a plan to hold a further seminar Beyond Safeguarding for all charities which will challenge them to ensure that they are aware of all risks and have the right cultures in place.

The Charity Commission has a heavy workload. Yet budgetary constraints are biting. As a result it is to start a consultation next week on how best it can operate at a time when its budget is being cut in real terms. A number of proposals are contained in its new strategic plan which charities would do well to study and respond to. The consultation opens on Wednesday 19 September.