Lords Select Committee on Charities publishes its report

The Report of the House of Lords Select Committee on Charities, Stronger charities for a stronger society, was published on Sunday 26 March 2017: you can access all the Committee’s documents here. The committee received 184 written submissions and took oral evidence from 52 witnesses. It also visited the Charity Commission and held three roundtable events outside London. As promised by its Chair, Baroness Pitkeathley, it produced one hundred conclusions and recommendations – though in the case of some of them words like “apple pie” and “motherhood” came to mind and I suspect that the people who produced the draft may have struggled slightly to reach the magic number. The Committee made 42 concrete recommendations, some of which are more obviously relevant to religious charities than others.

The recommendations

The most important recommendations for religious charities are as follows: references in brackets are to paragraph numbers in the Report.

Trusteeship, trustee skills and training

1. The Committee was clearly concerned about trustee training and recommended that the charity sector’s infrastructure bodies should review the training opportunities for trustees, identify shortcomings in provision – particularly for small charities – and take action to address them. They could help charities by publishing collated information about available training. (97)

2. The Committee welcomed the fact that the draft Charity Governance Code calls for appropriately-resourced inductions for all new trustees. Smaller charities would benefit from free access to a template induction process and the Committee suggested that grant-making bodies should consider applications to develop a best practice template. (98 & 99)

Board diversity and turnover

4 & 5. The Office for Civil Society should work with other departments and business leaders to develop a new initiative to promote trusteeship to employees and employers and encourage greater participation and diversity. Employers should be encouraged to give greater recognition to trustee roles in recruitment and progression of their staff (107) and the Government should hold a public consultation on a statutory duty to allow employees of organisations over a certain size to take a limited amount of time off work to perform trustee roles. (108)

6. There should be a time limit for individuals to serve as trustees and a maximum term of office, as proposed for the revised Governance Code. The materials and draft articles of association provided by the Charity Commission should include a suggestion of time limits (113) – though that might not be appropriate for family trusts. (114) Charities should, in any case, regularly review the operation of their boards and the tenure of their trustees and chair to ensure that their governance is sufficiently robust. For large charities, this should be an annual occurrence. (115)

7. The Charity Commission should look at issues of diversity in its own board and be mindful of the example it sets to the sector: in future, it should explicitly seek to recruit individuals with a range of skills, charity experiences and characteristics such as age, gender, ethnicity and geography: “We expect to see the results of this approach in the next set of board appointments.” (119) (There were some fairly sharp exchanges on the issue of diversity when the Chair of the Commission, William Shawcross, gave oral evidence to the Committee.)

Executive leadership and payment of trustees

9. The Governance Code should reflect the importance maintaining a clear separation between executive and trustee roles and responsibilities. (134) The voluntary principle is important: trustees should not normally be paid except in highly exceptional circumstances and any payment must be explained and justified in the charity’s annual report. (139) Trustees should, however, be able to claim relevant expenses. (140)

Transparency, accountability and impact

11. The Governance Code Steering Group should make best practice suggestions for governance reporting by charities: that might involve charities including in their annual report a statement that they follow the Governance Code (or a similar specialist governance code) and report any resulting actions taken over the year. (163)

12. All charities should seek an independent evaluation of their impact on their beneficiaries – though the form of that evaluation may vary considerably, depending on the size of the charity and the type of work it is engaged in. (174)

A revitalised role for grants

23. The Committee recognises the significantly reduced funding available to local authorities but, nevertheless, recommends that local authorities should bear grant funding in mind as part of their financial planning and maintain or revive grants wherever possible. (268)

Fundraising

24. Given the sector’s concern about the voluntary levy to fund the Fundraising Regulator, the Regulator should continually monitor the impact of the levy, particularly on small- and medium-sized charities, and make changes if appropriate. (276)

25. The Committee welcomed the Government’s changes to Gift Aid but recommended further work on possible improvements to help charities maximise the value of Gift Aid and minimise bureaucracy. (283)

26. The Office for Civil Society and HMRC should ensure that the needs of charities are kept in mind in relation to future changes to VAT and the National Living Wage. (284)

Volunteers

29. The Office for Civil Society should work with other Government departments, the public sector and businesses to encourage greater flexibility for employees to take time off for charitable work. (312)

Mergers and closures

30 & 31. The Committee welcomed the Law Commission’s work on the legal and technical barriers to charity mergers. The Law Commission is to publish a draft Charities Bill in the summer with proposals for the reform of charity law in England & Wales; and the Committee called on the Government to bring forward the Law Commission Bill at the earliest opportunity. (344) It also recommended that the Charity Commission should consider what support and guidance it can offer to charities seeking to merge, suggesting that a merger should not be seen as a sign of failure. (345)

The role of charity advocacy

37. The Government should implement Lord Hodgson of Astley Abbotts’ proposals for a review of the rules set out in the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014, (488) The Committee welcomed the Government’s decision not to proceed with a restrictive anti-advocacy clause in public sector grant agreements. (492)

Impact on charities of Brexit

39. The Office for Civil Society should undertake an audit of the potential impact of Brexit on charities – including the impact of the loss of funding and research collaboration – and report by the end of 2017.

Regulation of the sector

41. The Committee recognises the resource pressures that have led the Charity Commission to consider charging charities an annual fee to be on the register but believes that any charging model must not unduly burden small charities. (530) It also warns that, if charging is mishandled, there will be significant risks for the strength of the charity sector, its relationship with the Regulator, and overall public confidence and trust in charities. (532): “Because of these issues, we have grave concerns about the Commission proceeding with any proposal to charge charities.” (533)

42. The Treasury should maintain adequate direct funding of the Charity Commission, irrespective of any proposal to charge charities. (Paragraph 535: emphasis added)

Comment

The Committee’s recommendations about training trustees should be taken to heart by all charities. As suggested on previous occasions, people often find themselves in a trusteeship role in a religious charity because of their belief and commitment, not because they want to be trustees. Trusteeship can sometimes be thought of as a legal technicality subordinate to what people see as the “real purpose” of a religious charity: holding services, providing a community space, ministering to the local residents, running the local food-bank – or whatever. Unfortunately, it is not. I have often wondered how many members of the average Anglican PCC have ever read the Charity Commission’s The essential trustee: what you need to know, what you need to do: I suspect the answer is “very few”.

More generally as to governance, calls for diversity and a suitable range of skills within a charitable trust are very appropriate in the case of a large charity – but religious charities must often take what they can get. If no-one has any accountancy skills or any acquaintance with charity law, it is difficult to see how that kind of expertise can be brought in. (Or bought in: but the Committee – quite rightly, in my view – set its face against routine payment of trustees.)

Similarly, in an ageing congregation there simply might be few younger people with the time to devote to trusteeship. Done properly – as it should be – the role of a trustee is becoming increasingly onerous. The Charity Commission is constantly wringing its hands about the difficulty of attracting new trustees: unfortunately, there is little that it can realistically do to lighten the load.

On charging for registration I remain agnostic – though I share the Committee’s concerns. Given that the Commission’s funding has been so drastically reduced, it has to find the money from somewhere. On the other hand, because of its budget constraints, the Commission has increasingly had to concentrate on regulation at the expense of advice and support. The Lords Committee seems to suggest that, if the Charity Commission starts charging, charities might start asking, in return, precisely what they are getting for their money – and whether it is time for them to be represented on the Commission’s Board (531). It’s a good question – and one without a satisfactory answer.

Frank Cranmer

Cite this article as: Frank Cranmer, "Lords Select Committee on Charities publishes its report" in Law & Religion UK, 27 March 2017, https://lawandreligionuk.com/2017/03/27/lords-select-committee-on-charities-publishes-its-report/

2 thoughts on “Lords Select Committee on Charities publishes its report

  1. I personally believe that religious charities are all doing a fantastic job in their respective communities. i.e feeding the poor , education, teaching their respective cultures, health issues with the old and helpless etc. It is not incumbent upon the government to deal with the massive influx of people from abroad and here is where the charity groups are ready and willing to help. All praise to the charity groups and long may they continue to function.

    • Most probably are: some clearly aren’t. The Charity Commission’s list of inquiry reports under s 46 of the Charities Act 2011 from 2014 onwards includes a number of religious charities. Some of those, admittedly, were investigations of late filing (which is unacceptable but not positively harmful) and others were for sheer incompetence. Others, however, were much more serious: see, for example, the report on Saint Stephen the Great Charitable Trust.

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