The Charity Commission is issuing this alert to charities as regulatory advice under section 15(2) of the Charities Act 2011.
Charity trustees need to report actual or suspected serious incidents to the commission and should do so as soon as they are aware of them.
In the course of the Charity Commission’s investigations and operational casework with charities into matters of regulatory concern, we are still seeing too many instances where serious incidents that have occurred in charities have not been reported to us.
What is a serious incident?
A serious incident is one that results in, or risks, significant:
- loss of your charity’s money or assets
- damage to your charity’s property
- harm to your charity’s work, beneficiaries or reputation
Serious incidents include:
- fraud, theft or other significant loss
- a large donation from an unknown or unverified source
- suspicions, allegations or incidents of abuse or mistreatment of vulnerable beneficiaries
- known or suspected monetary/finance based links to a proscribed (banned) organisation or to terrorist or other unlawful activity or the misuse of charity to foster criminal extremism
- any actual or suspected criminal activity within or involving your charity or if your charity has been subject to an investigation by another regulator
- a disqualified person acting as a trustee
- not having a policy to safeguard your charity’s vulnerable beneficiaries
- not having ‘vetting’ procedures in place to check your prospective trustees, volunteers and staff are eligible to act
Trustees must comply with the legal duty of trustees in the administration of a charity. They have a general duty to take reasonable steps to assess and manage risks to their charity’s activities, beneficiaries, property, work or reputation. Reporting serious incidents to the commission as regulator, demonstrates to us that they are properly complying with this duty and their responsibilities as trustees, and taking appropriate and effective action to deal with them.
Trustees of charities required to file accounts (those with an income of over £25,000) must also confirm, in their annual return, that the charity did not experience any serious incidents or other matters that should have been brought to our attention but that were not. Serious incidents should be reported to us as soon as reasonably possible, not just on completion of the annual return. When an incident is very serious, we expect this to be reported to us immediately.
If trustees fail to declare any serious incidents in the annual return they will be making a false declaration to the commission which is criminal offence under section 60 of the Charities Act 2011.
The responsibility for reporting serious incidents to the commission rests with the charity’s trustees, even if they delegate work to others.
Reporting serious incidents is important
If trustees fail to report a serious incident and it becomes known to us at a later date, we may consider this to be mismanagement and take regulatory action, particularly if further abuse or damage has arisen following the initial incident.
The consequences of trustees failing to report a serious incident may have other detrimental impacts such as affecting public trust and confidence in their charity, affecting its reputation generally, and future grant-making decisions by funders.
Serious incidents within a charity may generate media attention and result in their contacting the commission for comment. If we are warned in advance about the serious incident, then the statement we make to the media will be more favourable to the charity, as it will reflect that trustees have acted correctly and responsibly in informing us about the incident. This will reassure the public that the trustees have responded appropriately by informing and involving the regulator.
How does the commission handle serious incident reports?
Our regulatory interest focuses on the trustees’ response to serious incidents and on the way in which they manage risk. Where it is clear that they are handling serious incidents and managing risks appropriately, we are unlikely to take further action. If it is not clear that the incident and risks arising from it are being dealt with and that the trustees are acting responsibly, or the trustees are not able or willing to act properly to protect their charities, we will need to engage further with them. In some cases we may need to use our legal powers to protect the charity.
The commission has a statutory duty to identify and investigate misconduct and mismanagement in charities. Serious incident reporting by trustees helps focus our resources where the risks are highest. It allows us to provide help, where needed, at the earliest opportunity. Serious incident reports are an important way for us as regulator to identify and assess the nature and scale of risks facing charities. This information allows us to make trustees - and those providing advice to trustees - aware of common risks and to alert them where action needs to be taken.
We will not proactively disclose to the media or the public the list of names of charities that have made serious incident reports. It is important that charities have confidence to report sensitive information to us and know that it will be handled properly and carefully. However, if approached by the media about an incident in a charity, we will confirm whether or not the incident was reported to us by the charity.
How to report a serious incident
Trustees should report an actual or suspected incident by emailing the Charity Commission as soon as they are aware of it, to email@example.com. They should explain what happened and how they are dealing with the incident. They need to do this even if they have already reported it to the police or another regulator.