Authored article

Governance “horror story”

David Walker explains how a charity can end up in more difficulty by not reporting serious incidents to the Charity Commission.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Failure to report a serious incident to the Charity Commission

Trustees should report serious incidents to the Commission as soon as they suspect them. Reporting an incident allows us to assess whether there are further steps we need to take to help protect the charity. It is also an important way for trustees to demonstrate that they are responding appropriately and responsibly to the problem. By failing to report an incident to us, trustees risk further damaging their charity’s reputation, as this fictionalised case study demonstrates.

LiftOff is a youth mentoring organisation offering after school clubs, extracurricular activities and peer-to-peer support for children and young adults in deprived communities. The charity is funded primarily from grants from local authorities and other charities, but also raises funds in the local community.

LiftOff experienced a serious incident when one of its employees was caught stealing a large amount of money from the charity’s petty cash box. The money had been raised in a recent fundraising event and had not yet been banked. The crime was discovered thanks to the charity’s CCTV archive, which was viewed after the loss of the money was discovered. When confronted, the employee admitted being responsible for this and a number of previous, smaller-scale thefts. The managing director followed protocol by reporting the incident to the trustees.

The employee, Natalie, was one of the charity’s ‘poster girls’. Having suffered domestic abuse and drug addiction in her teenage years, she had been supported by LiftOff to return to education, and was eventually taken on by the charity as a mentor for other young people. Natalie had been part of a team that had recently made a successful pitch for a significant grant from another charity, which would allow LiftOff to launch a new project. She explained that she had stolen the money to help repay a loan her boyfriend was struggling with. She was distressed and apologetic and begged the trustees not to dismiss her.

The trustees were shocked and disappointed in Natalie. But they worried that if they reported the incident to the police or the Charity Commission, LiftOff would be exposed to scrutiny which might highlight inadequate financial controls and poor people management, and result in the charity losing the funding. They took internal disciplinary action against Natalie, but decided not to involve the police or make a serious incident report to the Commission.

That strategy backfired. Another staff member reported the incident to a friend, a journalist at a local paper. The journalist wrote an extended article about the chain of events; the story included a comment from the Commission, confirming that we would be urgently assessing the information we had received. The grant-maker thereupon retracted its support and the local authority launched its own review of the funding agreement. The trustees had no choice but to dismiss Natalie. The police launched a criminal investigation, and Natalie was eventually cautioned. The Commission opened a compliance case to assess serious concerns about the charity’s financial management.

This outcome could have been avoided. Had the trustees reported the matter to the police and the Commission, they would have demonstrated to their funders that they were taking the incident seriously and were dealing appropriately with it, including by improving the charity’s internal controls. The journalist may still have written about the theft – there is no guarantee that LiftOff would have avoided negative publicity altogether – but had they responded more responsibly to the incident, the trustees would have been able to protect the charity from the more serious harm that occured.

For more information about reporting serious incidents, please read an alert the Charity Commission issued in September 2014.

This article was first published in Governance, November 2014 by Civil Society Media.

Published 1 November 2014