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Commission loosens restrictions on charities offering core grants to non-charities

New updated guidance from the Charity Commission says charities can do this, ‘provided these are intended only to further the charity’s own purposes’

This story has been clarified, please see final paragraph for details.

The Charity Commission today abandoned attempts to completely prevent charities from offering grants that cover core costs or overheads to non-charitable organisations.

The commission was criticised last year when it published draft guidance that would have forbidden the practice.

The Association of Charitable Foundations, the National Council for Voluntary Organisations and the Charity Finance Group said at the time that the guidance risked fettering the discretion of trustees and threatened the growth of social-purpose organisations, such as social enterprises and NGOs.

The three organisations accused the commission of trying to “draw tight boundaries around how grants may be used to cover the running costs of organisations that are not charities”.

The regulator’s new updated guidance, published today after consultation, is significantly different.

It says charities “can grant-fund the support costs of activities, services or outcomes delivered by another organisation that is not a charity, provided these are intended only to further the charity’s own purposes”.

Carol Mack, chief executive of the ACF, said it was grateful to the commission for engaging with the sector and “addressing the points we raised during the consultation period”.

Mack added: “It’s really important to recognise that grant-making to organisations that are not charities, such as social enterprises and community groups, can be a highly effective way for charities to achieve their aims.”

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The commission promised to release guidance after a High Court case was brought against it by the advocacy group Cage.

The regulator had asked the Joseph Rowntree Charitable Trust and the Roddick Foundation to agree not to fund Cage any more after it emerged that Cage had once been in contact with Mohammed Emwazi, the Islamic State militant and British citizen nicknamed Jihadi John. It described him as having been a “beautiful young man” and blamed MI5 for his radicalisation.

Elizabeth Chamberlain, head of policy and public services at the NCVO, said: “It’s good to see that the commission has learnt from the Cage case and used it as an opportunity to provide trustees with guidance on what can sometimes be a challenging decision.”

Chamberlain said the guidance “allows freedom for trustees to make decisions based on their own judgement”. But she added: “There’s a bit of a risk that this positive message could be lost because the guidance is quite long and legalistic, which could in itself send the message that this sort of funding is risky or not encouraged.”

Jane Hobson, head of guidance and practice at the commission, said: “Our updated guidance makes it clear that making grants to organisations that are not themselves charities can be an effective way for a charity to fulfil its purposes and meet the needs of those it exists to help.

“There will always be limits and conditions on what a charity can fund, however, and our guidance helps trustees ensure that they consider the relevant risks and boundaries when making such decisions.”

This headline of this story originally read “Commission won’t try to stop charities offering core grants to non-charities”. This has since been changed and the word “completely” added to the top line for clarification.

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Local finance infrastructure needs more support to help small charities, says CFG

A report from the Charity Finance Group says there is a big gap between what small charities need and the capacity of accountancy and support providers

Local finance infrastructure needs more support to meet the needs of small charities, a report from the Charity Finance Group has concluded.

The report, which concentrates mainly on the state of small charity accountancy and support service providers, says there is a significant gap between the needs of small charities and the capacity of accountancy and support providers.

The report says that many small charity finance services will struggle to expand to meet growing demand for their services, and the number of accountancy and support service providers has fallen nationally.

There are also challenges in communicating which services are available to small charities and a lack of resources to help small providers keep up to date with developments in complex areas such as tax, the report says.

National bodies could do more, it adds, to meet the needs of these support providers, including promoting better collaboration between them.

The weakest areas for accountancy and support services highlighted in the report are the Midlands, the south east and London, whereas Yorkshire has the strongest area of provision.

The report also highlights skills-based volunteering, digital support and building communication channels to promote services to small charities as ways in which local infrastructure can be helped.

It says ocial investment could be used to help these organisations, recognising the impact they have on the sector while simultaneously realising that it will take time to grow successful business models.

Andrew O’Brien, head of policy and engagement at the CFG, said: “Local infrastructure bodies are the backbone of our sector, providing critical support that enables smaller charities to do their work. The past few years have been challenging for support providers, as it has been for the sector as a whole. But the importance of financial advice and support has never been greater, given the environment in which small charities are operating.

“There are a number of measures that can be taken to support these vital organisations, but it requires a partnership between providers, foundations and government. The CFG will continue to do what we can to help boost the support available to these organisations so that they can, in turn, help small charities to thrive.”

The report was produced as part of the CFG’s small charities programme, which has been supported by funding from the Esmée Fairbairn Foundation.

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Charities urged to give evidence to new Lords committee on citizenship

The Citizenship and Civic Engagement Committee is an ad-hoc committee that will run for one session of parliament only

Voluntary sector organisations have been invited to submit evidence to a new House of Lords select committee that will examine citizenship and civic engagement.

The Citizenship and Civic Engagement Committee was announced last month as an ad-hoc committee for the next parliament, and will consider how best to promote best practice and support civic engagement across the country.

Ad-hoc committees are set up to look at a specific subject outside the remit of the permanent House of Lords committees, and they generally run for one session of parliament.

The Conservative peer Lord Hodgson of Astley Abbotts, who carried out the government-commissioned review of the Charities Act 2006, will chair the new committee.

Other members include the Labour former Home Secretary David Blunkett, Baroness Pitkeathley, the Labour peer who chaired the recent House of Lords Select Committee on Charities, and Baroness Barker, the Liberal Democrat House of Lords spokesperson on the voluntary sector.

The committee will release a report on its findings before the end of March 2018 and has issued a call for evidence, for which the deadline is 8 September.

Last year’s House of Lords Select Committee on Charities released a wide-ranging report in March featuring more than 100 points and recommendations to address issues with the charity sector.

The government is expected to respond to that report in the autumn.

The National Council for Voluntary Organisations has called on charities, especially smaller community organisations, to engage with the new civic engagement committee and provide evidence before the deadline passes.

Chris Walker, senior public affairs analyst at the NCVO, said: “This is a very important opportunity for charities to demonstrate how our sector is leading the way in civic engagement. Charities are often the vehicles with which people engage with society. We are keen for as many organisations as possible, no matter how small, to submit examples of the sort of work they do to foster this.

“Given the subject, the committee wants to encourage those who wouldn’t normally speak out. If you have a good case study that you can contribute, but haven’t provided written evidence to a committee before, it might be worth contacting the committee staff and talking to them about how you can provide what they need.”

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Charity has paid £500k to the Official Custodian for Charities

The Jewish charity the Reb Moishe Foundation has been the subject of a Charity Commission probe, and is appealing two orders to hand funds to the custodian

A Jewish poverty and education charity that is appealing against two Charity Commission orders to hand over funds has so far paid £500,000 to the Official Custodian for Charities, the custodian’s accounts for the 2016/17 financial year show.

The document shows that £500,000 from the Reb Moishe Foundation has been safeguarded since 5 July 2016 by the custodian, a holding service that protects disputed charitable property.

It is the first time the amount of funds received by the custodian from the charity has been disclosed.

The amount received by the custodian is only a partial settlement of the amount requested by the Charity Commission.

The charity’s sole trustee has appealed to the charity tribunal against two orders to hand over funds to the custodian as part of the regulator’s statutory inquiry into the charity.

Since 2015, the Reb Moishe Foundation has been the subject of a Charity Commission investigation of a £2m loan the charity made in 2006 to a company called Gladstar.

The charity’s sole trustee, Jacob Plitnick, is the director of Gladstar. The commission was alerted to the loan in late 2014 by HM Revenue & Customs.

Plitnick was ordered by the commission to hand the funds over, but made only a partial payment, according to the regulator. A further order was made on 21 July 2016. Both orders are being appealed by Plitnick at the charity tribunal.

The Charity Commission’s inquiry into the charity is continuing, and the inquiry is also looking at other issues associated with the charity’s relationship with Gladstar, such as reductions in the interest payable on the loan and the fact that Gladstar was running at a significant deficit.

The charity’s accounts for 2013 – the latest accounts at the time the investigation was opened – showed it was owed more than £2.3m by Gladstar.

The amount owed by Gladstar to the charity rose to £2.6m by the end of 2015, according to the charity’s accounts for that year, with an interest rate of 10 per cent a year.

In contrast, the charity had an income of £213,307 in 2013 and spent £49,180. Its 2015 accounts showed the charity had an income of £181,443 and spent £75,662.

A further directions hearing about Plitnick’s appeal against the order to hand over further funds to the custodian will be heard later this month.

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Most charities unaware of forthcoming changes to cheque processing

According to research by the Cheque and Credit Clearing Company, 70 per cent of charities are unaware of plans to introduce cheque imaging next year to speed up clearing

Seventy per cent of charities are not aware that fundamental changes to speed up the way cheques are processed are due to be rolled out by the end of next year, a survey has shown.

Beginning on 30 October this year, banks will begin moving to image-based cheque processing: a photograph of a cheque is passed between banks and branches, which means the cheque itself does not have to be sent around the country. Rather than taking six working days to clear, cheques will clear by the end of the day after they are deposited.

Research by the Cheque and Credit Clearing Company found that only 30 per cent of charities were aware that the change was coming although it said this was an improvement on last year, when only 23 per cent of charities were aware of the forthcoming change.

The survey of 1,000 charity financial representatives was carried out between 3 and 28 April this year through telephone interviews.

In the short term, people will still write, send and pay in cheques in the traditional way, but in the future some banks and building societies might offer their customers the option of paying in by sending an image of the check taken on a smart phone, rather than having to physically deposit the cheque in the bank.

Cheque usage has been in decline. In 2009, the payment trade body Payments UK announced that cheques would be phased out over the next nine years. The plans were abandoned after a public outcry.

According to the Cheque and Credit Clearing Company, 477 million cheques were written in 2016. Its survey found that 29 per cent of charities said they received more than half their income from donations by cheque.

Andrew O’Brien, head of policy and engagement at the Charity Finance Group, said more education was needed, particularly for smaller charities, to raise awareness of cheque imaging. But he said the move would have benefits for the charity sector.

“It’s a positive move in that it is one of the ways to keep banks in the game with cheque issuing,” he said. “If they had stopped using cheques, that would have affected a lot of charities.

“Many charities use cheques to collect donations from older donors, many of whom prefer to use them. It is also important for financial controls, particularly in smaller charities, where having to have the signatures of certain people on cheques can provide quite a lot of security.”

A spokeswoman for the Institute of Fundraising welcomed the move to cheque imaging.

She said: “We are pleased to hear that the new cheque-imaging process will significantly reduce cheque clearing time. This will make a difference for those charities that are able to benefit and is a very welcome initiative.”

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Supreme Court ruling on employment tribunal fees ‘not great news for charities’

Lawyers say the ruling that the fees are unlawful will lead to increasing numbers of ‘try-on’ claims

The Supreme Court ruling that the fees charged for people to bring employment tribunal claims are unlawful will lead to an increase in the number of cases brought against charities, lawyers have warned.

In 2013, the government introduced fees of up to £1,200 for people to bring employment tribunal claims in a bid to reduce the number of spurious cases faced by employers. There was previously no charge for bringing a case.

The fees, which led to a dramatic fall in the number of claims dealt with by employment tribunals, were yesterday ruled unlawful by the Supreme Court after a challenge brought by the trade union Unison, which said they prevented workers from accessing justice.

William Garnett, a partner in the employment department at the law firm Bates Wells Braithwaite, said he thought the ruling would lead to an increase in the number of spurious “try-on” claims against charities.

“This is not great news for employers in the third sector,” he said. “The reason is that, arguably, people on lower rates of pay were disproportionately disadvantaged by the fees regime. The third sector has a lot of low-paid people.”

Garnett said charities might be seen as soft targets for employees trying to bring employment tribunal claims because organisations would be keen to protect their reputations and therefore more likely to want to settle cases.

“It is a sector that does get taken advantage of,” he said. “Of course there are a lot of genuine claims, but there are a lot of spurious ones also.”

Nick Le Riche, a partner in the employment team at the law firm Bircham Dyson Bell, agreed that the ruling would lead to an increase in the number of claims against charities and said the ruling might result in people trying to bring claims that were otherwise out of time.

They might argue that under the old fees structure they could not afford to bring the case in the time allowed, he said, and argue that the claim should be allowed in the new environment.

But both Garnett and Le Riche said they thought the government would try to reintroduce a new charging regime.

Garnett said the Supreme Court had not ruled that any fees were unlawful, just the fee structure previously implemented.

“This is not the end of the story,” he said. “I’m sure the government will be back with a new fees regime.”

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Fundraising Regulator will name charities that have not paid its levy

Of the 1,768 charities that have been asked to pay the voluntary levy to fund the regulator’s costs, 200 have either refused or ignored requests for payment

The Fundraising Regulator will, at the end of August, name the charities that have so far failed to pay the fundraising levy, it announced today.

The regulator said it would publish a list at the end of next month, the close of the first levy year, disclosing the names of the eligible charities that have and have not paid the levy. All charities that spend more than £100,000 a year on fundraising have been asked to pay the voluntary levy, which covers the regulator’s running costs.

The regulator said today that of the 1,768 charities eligible to pay, 1,344 had paid or committed to paying, 224 were in negotiation with the regulator about payment, 35 had declined to pay and 165 had not replied.

The decision to name the organisations that have not paid comes after Sir Stuart Etherington, chief executive of the National Council for Voluntary Sector Organisations, called on the regulator to “name and shame” the non-payers. Etherington conducted a review of fundraising self-regulation in 2015, which called for the creation of a new Fundraising Regulator after the national press criticised fundraising practices.

On 10 July, the regulator published a list of all those organisations that had registered with the Fundraising Regulator, but it did not include the names of the eligible charities that had not. The existing register includes charities that have paid the levy and those which, because they spend less than £100,000 a year on fundraising, fall outside the levy but have registered their support.

The Fundraising Regulator said in statement today that its board had concluded it would be in the interests of transparency and fairness to disclose the complete list of those charities that had and had not paid.

It said that before doing so it would contact all non-respondents again and had asked the NCVO and the Institute of Fundraising to contact the small number of those that are their members to encourage them to pay the levy. The list will also be shared with the Charity Commission.

Lord Grade of Yarmouth, chair of the regulator’s board, said: “The public generously supports charities, so their commitment to good fundraising practice is of vital importance. For charities spending more than £100,000 a year on fundraising, paying the levy is a very clear sign of their commitment to ensuring the maintenance of excellent fundraising standards and professionalism.”

Etherington said that paying the levy demonstrated a commitment to good practice and showing the charities that had paid and the small proportion that had not was fair to all concerned.

Peter Lewis, chief executive of the Institute of Fundraising, said: “Fundraisers absolutely want the Fundraising Regulator to succeed. I would encourage all fundraising charities to sign up to support the regulator and pay the levy as appropriate.”

The proposal to name and shame organisations has faced opposition within the sector.

Earlier this month, Jay Kennedy, director of policy and research at the Directory of Social Change, told Third Sector: “Naming and shaming is at best premature and at worst will just damage the sector’s reputation further with more crappy headlines. It could also damage the reputations of any charities that are unfairly castigated in print.”

Kennedy said some charities might not have paid because choosing to do so was a strategic decision for the board that they might not have been able to make yet.

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Charities ‘underestimate value of public trust’

An article in a series published by the think tank NPC, written by Jill Halford and Neil Sherlock of PwC, says improving and maintaining public trust should be deeply concerning to charities

Charities are underestimating the value of public trust and they should all be working to improve it, a new article claims.

The article, co-authored by Jill Halford and Neil Sherlock of the professional services firm PwC, says trust is “often an overlooked asset for charities”.

Trust typically features on the agenda only when things are going wrong, the article says, with research showing that nearly a third of charity leaders think a loss of trust in the sector would have no effect on their organisation.

“But trust matters deeply to people, and so it should matter to the organisations that serve them,” it says.

“Trust is considered a fundamental prerequisite of effective human interaction and meaningful, constructive relationships. It is the ‘glue’ that binds society and the economy together. There is a clear need for all organisations to take a broader view of trust.”

In order to build trust with the public, Halford and Sherlock say, charities should focus on such areas as “engaging with their stakeholders and the public in an authentic way” and ensure that they are consistent in their communication with the public.

Charities should also engage in what the authors call “radical transparency”, meaning they should demonstrate their willingness to be open about their operations and be honest when things have not gone to plan.

“Trust is precious and fragile, so building and maintaining trust with the public needs to be at the heart of any charity’s strategy and operations,” the article says.

“Just as businesses are considering their wider societal impact and purpose, charities too need to consider their impact and the relevance of their actions.”

The authors say charities should be leading the way in measuring and demonstrating their impact.

“Engaging with the public proactively, communicating clearly and authentically and considering your total impact will not only help in times of crisis, but also form critical building blocks to continued success,” the article says.

The essay is one in a series of provocative articles about the voluntary sector published by the think tank NPC last week.

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Charities less trusted than hairdressers and scientists, research finds

A study of 2,000 people by Pro Bono Economics, finds that charities are trusted by 26 per cent of respondents

Charities are less trusted by the public than hairdressers, scientists and television newsreaders, new research indicates.

Research with a representative sample of more than 2,000 UK adults commissioned by the charity Pro Bono Economics found that 26 per cent of respondents said they trusted charities compared with 28 per cent for newsreaders, 45 per cent for hairdressers and 52 per cent for scientists.

Participants were asked to choose which from five possible responses best described their attitude towards 20 professions or sectors. Possible responses were trust, cautious of, suspicious of, distrust or hate.

Doctors came out top with 69 per cent of respondents saying they trusted them, followed by teachers on 56 per cent.

Politicians scored lowest, with 4 per cent of people saying they trusted them.

Charities ranked higher than members of the clergy, who were trusted by 23 per cent of respondents, civil servants, on 19 per cent, and economists, on 14 per cent.

Pollsters were trusted by just 9 per cent of those surveyed, slightly ahead of journalists on 7 per cent.

The survey found that 45 per cent of respondents said they were cautious of charities, 18 per cent were suspicious of them and 10 per cent distrusted them. Only 1 per cent of people said they hated charities, well behind social media stars and politicians, who were hated by 14 per cent and 13 per cent of respondents respectively.

Julia Grant, chief executive of Pro Bono Economics, said charities should look to rebuild trust by demonstrating their impact with independent evidence.

“They are accountable to the public, who are the people who support them, so they need to communicate their impact in a way that engages with the public as stakeholders,” she said. “Essentially, charities’ future stability and sustainability relies on their capacity to prove the importance of their work.”