Why compliance matters for charities?

The regulatory environment for charities is complicated. Perhaps too complicated. And it’s changing all the time. So as long as trustees’ hearts are in the right place they don’t need to worry, right?

Well, no, not really.

It is true that the Charity Commission does not expect trustees to know everything or to be perfect. But as the quote below makes very clear, the Commission does expect trustees to do their best to comply with their duties; to take their responsibilities seriously.

“The Charity Commission expects trustees to take their responsibilities seriously... The Commission recognises that most trustees are volunteers who sometimes make honest mistakes. Trustees are not expected to be perfect – they are expected to do their best to comply with their duties. Charity law generally protects trustees who have acted honestly and reasonably”

— The Essential Trustee: What you need to know, what you need to do. Charity Commission for England and Wales

Therefore, it is not enough simply to say, “our intentions are righteous”.

Nor is it acceptable (or safe) to rely on the regulator never finding out about lack of compliance. While it is true to say that the Commission doesn’t generally to look too closely at the activities of individual charities once they have been registered, it is an increasingly high risk policy to rely on not being caught out. Anyway, that would be just downright unethical.

A recent Charity Commission report showed that whistleblowing complaints to the Charity Commission are at all time high; up 72% year on year in 2023/24 and over 6 times the level seen in 2015/16. The increase is relentless and accelerating.

Can any charity believe they are immune from this type of attention?

Have you ever had a disgruntled trustee, beneficiary, volunteer or member of staff?

Are you confident your charity will never experience a serious incident such as fraud, a safeguarding issue or an externally induced crisis (such as a pandemic)?

Does anyone really understand all the intricacies of the public benefit rules for charities?

Moreover, the Commission does, from time to time, launch proactive investigations. A good example being the long running “double defaulter” class inquiry, which sees charities that have filed accounts late two or more times in the last five years proactively investigated for compliance in all that they do. With more information being gathered through Charity Commission annual returns, it’s not fanciful to think the Commission might analyse these (e.g. policy compliance data) and embark on more class inquiries.

Furthermore, the recent Budget announced plans for further sanctions to be imposed on charities and trustees who abuse charity rules, including withdrawal of tax relief and/or disqualification of trustees/senior managers for not meeting filing or payment obligations.

With an ever more complicated and escalating risk environment it is more important than ever that trustees understand their duties, periodically review their governance to make sure their it is fit for purpose and take action to improve things where they can.

If they do that then, it is reasonable to assume the spirit and letter of the Commission’s guidance will be met.

This is where we at Almond Tree Strategic Consulting can help. We provide various levels of training to help trustees understand their duties and good governance practice and we conduct several charity governance reviews every year.

If you would like to find out more about the governance support and training we offer, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.