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Charity update – February 2016

Posted: February 19, 2016

At the start of this month the long awaited Charities (Protection & Social Investment) Bill passed through the House of Lords and is expected to receive Royal Ascent shortly. Jim Leeves, Associate at Burgess Hodgson, summarises below some of the latest developments at the Charity Commission and the impact of the Bill.

Charities (Protection and Social Investment) Bill
The new Bill follows a consultation back in December 2013 and aims to strengthen the powers of the Charity Commission in a number of areas.

New disqualification powers have been introduced to enable the Commission to ban people with convictions for serious terrorism or money-laundering offence

s from becoming Trustees. This is further to existing powers relating to automatic bans for people with unspent convictions for criminal offenses involving dishonesty or deception.

In addition, the Commission now has new powers to disqualify individuals from being Trustees, on a discretionary basis, where they are deemed unfit to act and to issue statutory warnings against charities or their trustees. The Commission have stated that this power is only likely to be exercised when there is noted to be a failure in matters relating to honesty and integrity, competence or credibility and should not put people off from becoming Trustees.

The Bill also covers other areas, including; power to direct charities not to take certain actions; power to prevent a disqualified trustee holding another position of power in a charity; power for charities to make “social investments” ie to make investments which are aimed both at raising funds and furthering the charity’s purposes; guidance for housing associations and the “right to buy”, and finally, tackling the hot topic of preventing aggressive fundraising by charities, or their appointed professional fundraisers, of which there have been numerous cases covered in the media in recent years.

Campaign targets charities in default
The Charity Commission announced in January 2016 a campaign to target charities who fail to file their Annual Return or accounts to the Charity Commission by the relevant filing deadline.

Charities have 10 months to file their accounts with the Commission following the end of their accounting period, together with the relevant independent examiner’s or auditor’s report required. (Although note that this is only 9 months for charities who have to submit accounts to the Scottish Charity Commission OSCR).

The Commission’s recent research, carried out in 2015, concluded that a shocking 32 percent of accounts submitted were not of ‘adequate quality’ based on a random sample. With significant changes to UK accounting standards for periods commencing after 1 January 2016 and numerous changes to the Charity SORP (Statement of Recommended Practice) impacting on the preparation of accounts for all charities, Trustees should make sure that they ensure they are aware of the new regulations and ensure that their compliance obligations are met.

At Burgess Hodgson we would be happy to speak to any Trustees concerned about the quality of their existing reporting and ability to meet their statutory deadlines. If you

are the Trustee of a charity in default we recommend that you ensure that compliance matters are brought up to date as quickly as possible.

Governing Documents – A reminder
The governing document is the ‘rulebook’ for your charity. All voluntary organisations should have a governing document that clearly outlines why the organisation exists and what, in broad terms, it intends to do. The most common types of governing document that organisations have are a constitution, a trust deed or articles of association.

A well-written governing document will tell you many of the things you need to know about your charity, and should contain the answers to many frequently asked questions, such as:
• what the charity exists to do (its purposes, as explained in its objects clause)
• the kinds of activities that it can undertake to further those purposes, what powers it has and any limits on them
• who the trustees are, how many trustees there should be and how they are appointed and removed
• how to call meetings and what notice periods to give to call an annual or special general meeting (AGM or SGM)
• how to change the governing document, and which rules can be changed
• whether the charity has members and, if so, who can be a member and what their rights and responsibilities are
• how to close the charity down

The Charity Commission says people often contact it with questions such as these, but that their governing document contained the answer all along. Sometimes the Commission can only find out the answers by reading your governing document, so it makes sense to look at it yourself first.

The governing document is essential to your charity. You and your co-trustees may need to review it from time to time to ensure that it continues to meet the charity’s needs. Changes to a governing document usually require approval from the Charity Commission and may be required particularly if the charity was set up a number of years ago and the original aims were narrowly drawn.

Newly appointed Trustees should also make sure that they have a copy of the document so they know what they are trying to achieve what rules may apply.
By ensuring you understand your governing document, you can feel confident that you’re running your charity in a legal and effective way.

• Jim Leeves has been with Burgess Hodgson since September 2006 and was awarded with the ICAEW’s Diploma in Charity Accounting in January 2013 based on his experience in the sector.
If you would like to discuss any of the matters above, contact Burgess Hodgson on 01227 454627 or email jpl@burgesshodgson.co.uk