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You have been warned!
The Charity Commission now has the power to issue official warnings to charities or individual trustees, where it considers there has been a breach of trust or duty, or other mismanagement at a charity.
The power is likely to be used where there has been misconduct or mismanagement, which isn’t sufficiently serious to warrant more formal regulatory action by the Commission.
The Commission has now issued formal guidance, which lists some examples of conduct which might lead to a warning, including:
- acting recklessly or without due care, resulting in a breach of trust, misconduct or mismanagement.
- failing to take appropriate steps to rectify a breach of trust, misconduct or mismanagement despite engagement with the Commission (for example by complying with default notices for failing to submit accounts and returns).
- failing to discharge legal duties in the administration of the charity.
- displaying a pattern of repeated misconduct or mismanagement.
- deliberate or wilful wrongdoing resulting in a breach.
Trustees need to be aware that only 28 days’ notice is likely to be given to allow for representations to be made on the charity’s behalf before a warning is issued.
The warning, once issued, is not appealable at the charity tribunal, and can be made public.
We suspect the Commission will want to publicise the warnings in most cases as it will suit the Commission to be seen to be carrying out its regulatory role and promoting compliance.
There remains significant concern that publicising an official warning could be very damaging to a charity’s reputation in cases of relatively minor non-compliance. In their draft guidance the Commission suggested warnings will remain on a charity’s record for 2 years.
We still feel more concrete practical examples are needed from the Commission as to when warnings are likely to be issued, so charities have greater certainty.
But the new power is all the more reason why charity trustees should be ensuring they have a clear plan and a dedicated response team -in place, linked to PR and legal support, ready to respond rapidly to ‘bad news’ stories when they arise take steps to protect the charity’s reputation.