Archive for the 'Regulation' Category

Law, regulation and governance – the outlook for charities in 2013

Published January 14, 2013 Charity Commission , CIO , Professional Standards Authority , Public benefit , Public services , Regulation , Social Value Leave a Comment

Third Sector asked me to make some predictions about what’s coming up, and what might sneak up and bite the charity sector from behind on the legal, regulatory and governance front in 2013.  Here’s what I said:

Next year the regulation of charities will polarise.  At one end, the Charity Commission’s activity will pretty much focus on fraud, serious abuse and counter-terrorism, as well as registering the new Charitable Incorporated Organisations.  The jury’s out on whether CIOs will catch on beyond an initial flurry of interest in early 2013 or if, longer term, they’ll prove to have limited appeal.  The charitable company model is familiar to both funders and lenders, so dual regulation is no longer the burden it once was;  it’s likely to remain the most popular and convenient structure. Public benefit cases, such as the Plymouth Brethren’s Tribunal appeal will continue to hound the Commission as well, masking the fact it’s a ‘non-issue’ for most charities.

At the other end of the spectrum, the vast majority of charities will simply submit their annual return to the Commission and  be left alone, providing they don’t get a ‘red mark’ for sending in late accounts.   Instead, there will be increasing emphasis on self or voluntary regulation with, for example, the Professional Standard Authority’s new accreditation scheme for health charities going live in 2013.

Expect also to see William Shawcross, the Commission’s new chair continuing to make strong statements about charities’ independence and to court controversy with those charities who regard themselves as ‘social businesses’.

The personalisation legislation which brings in direct payments to service users has huge implications and will lead to many financial gainers and losers.   Implementing the ‘Social Value’ legislation into commissioning will also bring opportunities and challenges, not least  the temptation for charities to go ‘off-mission’ in  pursuing some of these contracts.  Trustees will need the right skills to ensure that their charity properly understands and makes the most of these changes.  Some charities’ governance structures will clearly need to play catch up with the dramatic changes in the funding environment. For example trustee skills audits will need prioritising to ensure the board has the right financial and new business skills for the opportunities, risks and complexities.

One out of six charities say they may have to close next year so trustees will also need to be equipped to anticipate the options whether that’s collaboration, merger, or winding up.

Lastly, whisper it quietly, but I anticipate many charities continuing to approach the Charity Commission for permission to pay trustees.  The numbers of charities with these arrangements in place will grow, whatever is said at Ministerial level.

A version of Rosie’s blog first appeared in Third Sector on 8 January 2013

Imitation is the sincerest form of flattery – will companies that use ‘social purpose’ as part of their branding affect charities?

Published September 6, 2012 public trust and confidence , Regulation , Uncategorized Leave a Comment

I read the Advertising Standard’s Authority’s ruling banning A4e from describing itself as a ‘social purpose company’ with interest.  I had thought that A4e were being ‘imaginative’, to say the least, when they said, on the home page of their website, “A4e is a social purpose company with one sole aim. To improve people’s lives around the world. We do this by helping them find work, skills, direction – or whatever it is they need”.  I wasn’t surprised therefore to hear that the ASA had upheld complaints about the use of the phrase, because the regulator was concerned that individuals would understand the claim to mean that A4e was a not-for-profit organisation.

My guess is that the ASA’s ruling will have lots of implications for other companies working in similar fields to A4e, providing public service contracts such as the Work Programme.  I imagine that, over the next few weeks, these companies will be making lots of edits to their websites and tender documents.

The Charity Commission’s latest survey of public trust and confidence in charities shows that charities continue to be held in high regard by the public.  It is not surprising then if a company seeks to gain some of that cachet by using ‘social purpose’ as part of their branding.

That said, there are countless examples of profit making companies who are honest and clear about what they do, and who have excellent corporate social responsibility (CSR) credentials.  For example, look no further than those companies featured in the Corporate Responsibility index  published by Business in the Community each year.  These companies are making a genuine and positive contribution to social good.  But it is important to remember they are also profit driven, whether for individuals or shareholders.

At the same time, the professionalization of charities over the last few years, and the drive to improve their efficiency, has led to some charities setting up commercial arms or subsidiaries to generate surpluses (profits) to support, or cross-subsidise, the activities carried out by their ‘parent’ charity. The challenge for these organisations is how best to describe the totality of their offering, with its mix of hard business decisions, and charity values, in a way that the public will understand and support, and which will enable these organisations to continue to attract fundraising income to support their charitable activities.

This requires sophisticated messaging, as the Commission’s survey also suggests that there is some evidence to suggest that the public already finds the boundaries between charities and other organisations blurred and confusing.  If charities cannot describe the totality of what they do, I wonder what the longer term impact will be on public trust and confidence.   Does it also make it easier for commissioners and funders, when faced with a ‘social purpose’ company or a charity ‘business’, to focus in the main on price?

Longer term, I think the ASA’s ruling will make companies delivering public services think twice about how they describe themselves.  Hopefully it will also act as a reminder to charities working in the same arena to reassert one of their most cherished characteristics – that any money they generate is used for public benefit, not private gain.  It is public benefit that after all that makes charities unique and special, and that’s a powerful ‘USP’ well worth guarding.

Rosie’s blog first appeared in the Guardian Voluntary Sector Network  

Great expectations – the Charity Commission’s new regulatory approach

Published March 21, 2012 Advice , Charity Commission , Regulation Leave a Comment

Regulation doesn’t hold much fascination for many people, and it certainly isn’t a glamorous topic.  Perhaps that’s why the Commission’s new regulatory approach attracted so little comment when it was published a few weeks ago.

However the publication does signal a significant change at the Commission, which will affect all charities.

Accountability rests with trustees

As its starting point, the Commission makes clear that responsibility for administration and management of charities rests with trustees; it is trustees who are accountable.  The regulator says it will set out the basic principles all trustees should follow to help trustees in this task.  Beyond this the Commission makes clear that, unless it has a regulatory concern, it will not intervene except where it is legally required to grant a permission or to give a consent.  The one exception it quotes is where advice is needed on complex charity mergers and restructures. Instead, put simply, trustees will be expected to ‘get on with it’.   I think that we will now see the Charity Commission being very hard headed about when and how it will engage with charities.

Charities getting their own legal guidance

The extent of the regulatory engagement that the vast majority of charities have with the Commission is, and will continue to be, through completing and submitting an annual return, along with their trustees’ annual report and accounts.   Those organisations which are operating along established lines may experience little change.  However, those charities who were used to contacting the Commission for advice and help, or simply because they viewed the regulator as an important ‘stakeholder’ could be in for a shock.  In particular, many charities are engaging in innovative work, some of which pushes at the boundaries of their charitable purposes.  These charities should no longer look to the Commission to providing a ‘comfort’ to their proposals.  They will be expected to seek their own legal advice if they have doubts about whether they should be undertaking a course of action or funding a piece of work.  Where the proposed initiative is risky, it will also be up to the trustees to ensure, if required, they have carried out a proper risk assessment in reaching their decision.

There will, of course, be a few instances when a charity will still require the Commission’s consent or permission, for example where it wishes to make a change which is outside the trustees’ powers.  The example quoted in the Commission’s publication is where a charity wishes to employ a trustee.

‘First Contact’

The Commission will expect any requests for a permission or consent to be directed through the Commission’s ‘First Contact’ team.  Straight forward work will be dealt with by that team with only complex issues going through to the operational team.

This Large Charities team has been disbanded and the Commission has now reorganised into four operational teams, with each team specialising in particular areas of charitable activity.

Transparency and signposting

The Commission has plans to develop the information that’s made available about charities on its website and the red banner, which signals a charity is late in submitting its accounts, will remain.  The Commission is promoting the merits of this feature as a preliminary piece of due diligence for funders.

Alongside these changes, the Commission has said that it will signpost charities to other organisations, including membership bodies, who can better assist charities with specific advice and guidance.    This aspiration isn’t new, as the Commission’s website already has a list of useful organisations.   However, the emphasis is now on charities supplementing the Commission’s online general guidance by seeking specialist advice and support – not from the Commission – but instead from an infrastructure, umbrella or membership body or, if necessary, from a lawyer.

Prevention rather than compliance?

No discussion of regulation would be complete without looking at the Commission’s compliance or investigatory role.  Here the Commission has signalled that in deciding whether to engage in an issue it will look at whether it needs to be involved (for example whether the issue is within the Commission’s remit), as well as the nature and level of the risk involved.  Whilst the regulator will continue to deal with serious abuse and non-compliance, it has signalled that, in future, it will only use its formal investigatory powers, including opening a statutory inquiry, in a limited number of cases.  It will instead “place an emphasis on preventing problems” by identifying risks early and by providing web-based guidance.

No doubt there will be some tweaks and tests as the Commission’s new approach beds in.  I also suspect a number of wrinkles will need ironing out over time, and it will be interesting to see how the Commission keeps abreast of issues affecting charities.  For now though, trustees should simply ‘get on with it’ so that they benefit their organisation and its work.

This post is based on a longer article which first appeared in the March edition of Trust and Foundations News.

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