Regulator warns charities about the risks of ‘dominant individuals’
The Charity Commission is urging trustees to guard against dominant individuals taking inappropriate control of their charity’s management.
The regulator of charities in England and Wales has today published its annual report of compliance and investigations case work, Tackling abuse and mismanagement. This year’s report highlights the risks that arise when trustees fail to take collective decisions, because individuals or small groups of individuals take on excessive levels of control or dominance.
The regulator says this problem is often at the root of serious mistakes in charities and is urging trustees to ensure that they make important decisions collectively, fulfilling their 6 core trustee duties.
Michelle Russell, the commission’s Director of Investigations, Monitoring and Enforcement, says the regulator is helping charities identify the root causes of poor governance:
Our case work shows that serious problems often arise because of basic failures of governance. So it is important that we identify the cultures and behaviours that prevent trustees collectively from doing a good job, and share these insights with trustees. The impact of dominant individuals is one of those underlying factors that we know can hinder good governance. Strong leadership is important, and often charities rely on the passion, drive and volunteer time of key individuals but when they are allowed excessive power or influence within a charity, the other trustees are likely to disengage, fail to contribute to or challenge ideas or decisions. They are not given the opportunity to use the skills and expertise they have and are not fully discharging their legal duties. This can also lead to serious problems for the charity, including unmanaged conflicts of interest or unauthorised personal benefit.
The report also shows that concerns about financial abuse, financial crime and financial mismanagement continue to feature heavily in the commission’s compliance case work. Concerns about financial abuse or financial mismanagement featured in 42 of the 53 investigations concluded in 2014-15 and concerns about financial management featured in 398 completed compliance cases (of a total 1,125 cases).
Michelle Russell says the impact of poor financial management and abuse can be devastating:
Financial abuse and mismanagement continues to be prominent in our case work. The effect of these problems is almost always that money intended to help beneficiaries is lost or misapplied. We know that the public cares passionately about their donations reaching the end cause. So it is vital that trustees follow the simple steps in our guidance to ensure they have good financial controls in place to protect their charity’s money and ensure it is used properly. In the meantime, we as regulator are doing more to proactively identify concerns about financial mismanagement in charities, for example through our programme of themed reviews of charities’ financial accounts.
Tackling abuse and mismanagement sets out the commission’s wider work to prevent and stop abuse and mismanagement in charities, including by:
- improving its proactive monitoring of charities that fall into certain risk categories, opening over 400 new monitoring cases in 2014-15
- increasing the number of inquiries into charities; up from 15 in 2012-13 to 103 in 2014-15
- using its powers more swiftly, robustly, and effectively (the commission used its powers 1,200 times in 2014-15, compared to 216 times in 2012-13) including 154 uses of our power to make a direction
Other key figures from the commission’s compliance case work in 2014-15 include:
- £44.6 million - charity funds directly protected by the commission, on an income for the regulator of £22 million
- 1,125 - operational compliance cases concluded
- 1,097 - reviews of charity accounts undertaken
The report is accompanied by a summary of cases involving concerns about potential inappropriate political activity or campaigning in the run-up to the 2015 General Election. Most of the issues raised were lower level and dealt with swiftly by the charities and the commission.
The commission has changed the format and updated the content of this year’s report, to make it a more useful, accessible and effective tool and reference point for trustees. The report includes infographics and video content, aimed at helping trustees prevent problems arising in their charities. A full statistical analysis of the commission’s case work is also published as an annex to the report.
The full report is available on GOV.UK.
Notes to editors
- The Charity Commission is the independent regulator of charities in England and Wales.
- We are the independent registrar and regulator of charities in England and Wales, acting in the public’s interest, to ensure that charities know what they have to do; the public know what charities do and charities are held to account.
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Published: 17 December 2015
From: The Charity Commission