Firstly, may I thank you for inviting me to speak to you all today. Your organisation is a great example of what can be achieved with philanthropic endeavours and I would like to commend you for the long-standing work in caring and supporting older people across the United Kingdom.
Our nation is marked by our commitment to voluntary action and philanthropy. Last year an estimated 32 million adults volunteered for a charitable cause they believed in. We currently have over 165,000 registered charities. There are a million trustees in England and Wales. This is inspirational and goes to show that we are, as we always have been, a generous and charitable country. You all here today represent this ethos. You enhance the lives of older people to allow them to play an important and unique role in their wider communities. As a country with an ageing population this is vital work.
I would like pay tribute to Richard Carr-Gomm, who embodies what exactly it means to be a philanthropist: “helping those less fortunate than oneself and the love of mankind.” And “to ensure that communities are not forgotten and the most disadvantaged are not left behind.”
You will all know the story of your founder, Carr-Gomm, who became known as “the scrubbing major”. He notably gave up his distinguished career in the Army and convinced the Bermondsey Council to give him work as an unpaid home help to clean council tenancies.
He noted in his memoir Push on the Door that “Wherever I travelled I saw single elderly people sitting on park benches or looking out of windows, coming out of public libraries or walking, it seemed aimlessly, down the streets,” he went on to say “I found that I wanted to know more about them and see if there was anything I could do to help them – if they wanted it.”
In 1956, using £250 of his Army gratuity he bought a house, 50 Eugenia Road, and renovated it with voluntary help. There he housed four old people, two men and two women, with himself as housekeeper. From these humble beginnings the Abbeyfield Society has grown to include over 500 houses and homes with committed staff and over 4,000 volunteers in the UK.
His recognition of loneliness among older people is now widely accepted as a major societal issue which can have devastating health and wellbeing effects. Carr-Gomm was clearly ahead of his time in this regard. Abbeyfield was the first organisation to identify loneliness in older age and recognise the importance of community hubs. According to Age UK and the Campaign to End Loneliness in a study published in 2015, one million elderly people are chronically lonely with many not seeing, or even speaking, to another person in the course of a day.
Since the financial crisis, social care for older people is coming under severe pressure. Spending by local councils fell by 11% in real terms over the past five years despite a surging elderly population. A report by the Kind’s Fund says that there will be a funding shortfall for social care of at least £2.8 billion a year by 2019-20. Consequently, the number of beds in care homes fell by 3,000 last year. In the private sector we are also seeing financial strain. In 2011, Southern Cross Healthcare went bankrupt and another Four Seasons Healthcare has been on the edge for months.
This is where the charity sector plays a crucial role to fill the gap by providing social services when the government and the private sector cannot. Charities soften and humanise the state.
I recently visited such an example, St John’s Winchester Charity, and was very impressed. They provide sheltered almshouse accommodation, day care and residential and nursing care for older people with financial and other needs. The charity is looking to provide wider services to older people, whether housed in alsmshouses, in the charity’s care homes or in their own or privately-rented accommodation. The Commission is working with the charity to broaden their object so that they can provide social services to those in need as the result of ageing, and not solely in financial need.
We recently worked with another charity, St Nicholas Hospital, to enable it to provide financial assistance to beneficiaries when they can no longer live independently in the almshouses. These examples show how we work with individual charities to enable them to operate in an increasingly complex environment.
I was asked to speak on the impact and affect that good governance can have on a charity and how important it is for trustees to support their own governance.
Over the last year, there has been an increased media, public and parliamentary focus on the role of charity trustees, their capability and effectiveness. Successive revelations and high-profile collapses have hit public trust in charities. The public had come to think that the practices employed by some charities did not fit with the values of charity nor of philanthropy.
These recent scandals threaten to undermine all the hard work that charities do across our country to improve the lives and outcomes of their beneficiaries. As Chairman of the Charity Commission, I have seen many charities, seen the incredible work they do and I continue to be humbled by individuals’ generosity, kindness and care for others. Charities and philanthropists make the country a better place.
However, good governance is key to the long-time health and success of a charity. The strategic vision, oversight and evaluation that a Board of a charity and its Trustees provides is not an ‘optional extra’. Without it, trustees put their charities at serious risk of abuse and also risk harming the quality of their service to beneficiaries. The most serious concerns we encounter in charities result from a basic failure of trustees to fulfil their six key duties in CC3 - the Essential Trustee guidance, which if not followed lead to poor governance. Many of these duties are simple and straightforward and trustees must ensure they know what they are.
Our Public Trust research demonstrates that good management, or governance, is one of the three key drivers of the public’s trust in charities. For the first time this year, and since we began tracking trust in 2005, we saw a significant drop in the public’s trust of charities. Time will tell whether this is a long term trend or a short term dip but it is our view that both the leadership of the sector and the regulator must respond to this drop in confidence.
Inadequate governance is at the root of the majority of our compliance casework. Our annual report of our compliance work, Tackling Abuse and Mismanagement, sets out the key themes and lessons from our casework for trustees and consistently highlights unmanaged conflicts of interest, unauthorised trustee benefits, breaches of governing document and other serious problems resulting from failures in governance.
Trustees’ personal and professional connections can bring benefits to the work of a charity. However, they can give rise to conflicts of interest, to which the trustees must respond effectively. Trustees must be aware of situations where there is a conflict of interest, identify them, deal with it appropriately, and record it, so that they are still making a decision as a board which is in the best interests of the charity. The existence of a conflict of interest may not be a problem if it is properly addressed. We often see boards not understanding that there is a conflict of interest in the first place.
Let me share a couple of examples with you; the Commission investigated an anti-poverty, health and education charity, My Community UK, to see whether conflicts of interest including related party payments had been effectively managed. What we found was that £130,000 was unaccounted for and the original trustees were closely related, with payments made direct to their bank accounts and to companies owned by them. As a result of our inquiry the current trustees have now adopted a conflicts of interest policy.
Another serious governance problem we see too often in our case work is unauthorised private benefit. This arises when a trustee or someone connected to a trustee – for example a family member – benefits from their charity in a way that is not authorised. Not all cases of unauthorised personal benefit involve deliberate abuses. Sometimes, the problem arises from good intentions, and the charity in fact benefits from the arrangement, perhaps because it receives goods or benefits at a discount. But even in such situations, the law says that if a benefit is not authorised, the trustee in question may need to account for their profit and repay the sums involved. This is why it is so important to ensure that any benefits trustees receive are authorised.
Our case report into Deaf education charity, Deafinitions, showed that three of the charity’s four trustees were benefiting privately from the charity, contrary to the charity’s governing document. We found the charity trustees were being employed as staff members because no external candidates had come forward. We regularised this situation, and insisted that the majority of the trustees should be unpaid, so they could review payments to trustees and ensure they were in the charity’s best interests.
Collective trustee decision-making that is properly recorded is at the heart of good governance. Good decision-making involves, among other things, acting in good faith and exclusively in the charity’s interests, acting within its powers, managing conflicts of interest and seeking appropriate advice where relevant. Our case work shows that poor decision-making and record-keeping about how a decision was reached can lead charities into serious mistakes or even mismanagement.
However, there are many great examples of organisations with good governance and training, of which, the Abbeyfield Society is one. Having turned around a deficit in 2014 to a surplus of £8.4m in 2015 indicates significant financial progress. Abbeyfield has been able to close and sell unviable houses in order to re-invest in modern, more suitable accommodation. The commitment of the Board and Chief Executive, Natasha Singarayer, to achieve value for money in its overall strategic and business plans is highly commendable. In addition, Abbeyfield was the first organisation in the care sector to pay the living wage and is a leader in dementia innovation. Congratulations to you all for your hard work.
Another notable example of good governance is exemplified in our case report into Volunteering Matters. This charity had a large pension deficit and the loss of a substantial government grant, but had already taken significant positive steps over the last two years to put the charity on a more stable footing. This included taking relevant professional advice and putting in place a transformation plan to streamline the organisation and help build reserves. They had closed a pension scheme to new members, sold assets and recruited new trustees with a strong financial background. The charity’s trustees have shown how to turn around an organisation facing financial disaster by reacting quickly to signs of financial distress and putting measures in place to mitigate risks and improve the long-term financial stability of the charity.
Now there is much work to do on governance and improving the quality of trusteeship. The Commission, as regulator, has a clear role to play in improving governance in the sector. We have the primary responsibility for recognising trustees through the register of charities, for setting out their responsibilities and duties under the law in our guidance and enabling them to run their charities effectively and comply with the law, and for holding trustees to account where there has been misconduct or mismanagement. We also have a general statutory function to encourage and facilitate the better administration of charities, and a general duty to act in a way which is compatible with encouraging voluntary participation in charity work. However under the Charities Act 2011 the Charity Commission is specifically not authorised to be directly involved in the administration of a charity.
Our response to poor governance depends on individual circumstances; we take a risk-based and proportionate approach: often, trustees recognise that poor governance or failures on their part have brought about problems and are eager to work with us to put matters right. However, when trustees have been negligent leading to significant loss or risk to the charity, or are unwilling or unable to respond appropriately, we may use our compulsory powers to protect the charity and indeed the beneficiaries with which they work.
We believe that the challenges of stewarding charities in today’s context have increased and that the sector therefore requires a higher quality of trusteeship. That is created by making coordinated improvements on three fronts: the regulatory and governance framework, the availability and quality of guidance, training and support to trustees and the adequacy of the supply of trustees.
The Commission already undertakes an extensive programme of work to provide advice and guidance to trustees, to increase their understanding of how to run their charity effectively and to promote trusteeship. We publish a suite of core guidance for trustees on their duties and responsibilities. We have been working to revise our guidance and make it easier for everyone to read and access, from our core publication The Essential Trustee (CC3) last year to key pieces of guidance this year on fundraising and financial resilience. We have been writing in a simpler, more direct style to make it easier to understand, and we are doing more to promote our guidance directly and with partners in the sector to increase reach and awareness of guidance. Parliamentary direction would be required for any fundamental and wholesale changes to governance and the role of trustees. There are some areas which might merit examination. For example, there has been some debate recently regarding the principles around remunerating trustees and the distinction (or not) between the role of chair and trustee.
Other institutions, both within and from outside the sector, also set governance standards that guide trustees in their roles. We support a number of sector-led initiatives to set standards and promote effective governance. We support the Good Governance: a Code for the Voluntary and Community Sector (the Code), jointly owned by a number of charity umbrella and membership bodies, and have observer status on the Code Steering Group. We very much support and endorse the review of the Code announced in February 2016 which the Chair of the Code Steering Group set out as ‘a big conversation and debate about the standard of governance our sector needs to aim for in the coming decade, what it will take to make a measurable shift and how we can use the code to raise the bar.’
Through communications channels such as the Commission’s blog, articles and speaking engagements we promote our guidance and other resources for trustees to meet their responsibilities. Our transformation programme is designed to increase our reach and impact with fewer staff, largely through effective digital communications such as social media, podcasts and webinars to promote our guidance and tools. We are reviewing and improving our digital ‘induction pack’ for trustees of new charities, signposting them to the Commission’s guidance and other sources of advice and support, and we will begin sending it to newly appointed trustees of existing charities where we have email contacts. Ultimately our aim is to create a one-to-one relationship with each of our 165,000 charities through a dedicated charity services portal.
We work with sector bodies to increase the reach of our guidance and messaging, using their network of contacts, and supporting and endorsing tools and products designed by the sector to augment the Commission’s guidance for trustees, such as NCVO’s Good Trustee Guide or the guidance produced by the Small Charities Coalition tailored for smaller charities. We also work with sector bodies to help them develop and promote quality standards in charity governance.
We also continue to work closely with other government departments and sector bodies on matters concerning charity governance and the legal framework in which charities operate so that this is understood and the integrity of charity is not undermined.
We will be using Trustees’ Week in November as a focus for resources and support for trustee learning and development, with the theme of this year’s Trustees’ Week being “Stronger charities through good leadership”. We will work with partners to use the Trustees’ Week website as a permanent digital hub for events, information and learning resources. We also support and endorse training programmes, qualifications and products which include mandatory modules on The Essential Trustee (CC3), such as the ICSA Certificate in Charity Law and Governance, IOD’s Role of the Trustee course and the Trustee Academy.
The Commission is also participating in the Funders’ Collaboration on Leadership, which brings together 50 individuals from funders, umbrella bodies, social sector organisations and government to develop new initiatives to tackle key priorities in the sector: one working party is looking at improving the standard of governance by informing and upskilling trustees, and will bring forward a pilot proposal later this year.
At the moment the Charity Commission encourages charity boards to consider appropriate board turnover and succession planning, the need for appropriate trustee skills and capability, and the importance of diversity in supporting effective decision making. Where we have regulatory concerns, we can give a charity regulatory advice to regularise its governance arrangements. However we have no legal power to mandate boards in matters such as trustee terms of office, capability or turnover.
A key consideration is the pipeline of supply of new trustees, where many charities – particularly small and medium sized organisations – tell us they struggle to recruit trustees at all. Ensuring that trusteeship is recognised as a skilled volunteering opportunity with benefits for the individual and his or her employer, as well as for the charity, is key. Private and public sector organisations should be encouraged to recognise the benefits of their employees becoming trustees. Should the Government bring forward legislation to create a new statutory right to volunteering leave, we would want to ensure that trusteeship is supported and recognised within that. This is an exciting one to watch and will have many great benefits.
We already work with a number of charity and commercial organisations providing trustee recruitment services through the Trustees’ Week initiative. We will continue to promote better recruitment practice based on skills, needs and diversity (including under-represented groups such as young people). We are also examining the feasibility of supporting the development of a sector-led recruitment hub or portal, or enabling charities to advertise trustee vacancies on the public register of charities. Ultimately charities cannot survive without these vital volunteers so is something we must continue to support.
The commission has also been transforming the way it works. We are over one year into a three year process and at the end, we will be able to identify and resolve more effectively high-risk cases. Importantly, users of our services should also notice improvements from registering and updating their charities’ details.
We are, however, only 300 people - a reduction from nearer 600. The commission’s budget has been reduced by 50% in recent years. This naturally limits what we can do when regulating those million trustees and their undertaking of nearly £70 billion.
Adequate and stable funding of the commission is, I believe, the only way we can achieve an appropriate level of resource to regulate effectively. We will be, therefore, consulting on the concept of asking charities to contribute to their regulator. This is common in other sectors, such as energy or the media.
Any moves must of course not hit small charities and we would only seek contribution from larger charities. I call all of you here, and all beyond this place, to engage with the consultation and help us design a sound and fair system.
I know this will meet with some resistance but I am confident that charities will understand that they will only continue to enjoy public support if the public has confidence that charities are well regulated.
Let me put it on record that I wholly agree with the importance of charities being involved in advocacy in relation to their activities. Charities have a long and distinguished history of involvement in public debate leading to significant legislative and social changes in society. Such advocacy is a crucial element in a thriving democracy. However, as you know, the law sets limits on such involvement and it is the Commission’s responsibility to issue guidance to help trustees be aware of the relevant law.
Ultimately, however, we are just the regulator. It must be for charities themselves to demonstrate to the world that they are worthy of their privileged place in our society. The vast majority of charities all do. Now is the time for them to pull together, ensuring all charities live up to this ideal.
A strong and vibrant charitable sector is a vital part of civil society. The charitable sector in England and Wales has an income of over £70 billion and holds charitable assets of more than £150 billion, all overseen by just under a million trustees – almost all volunteers.
As I have covered today- good trusteeship and governance, and accountability for the management of charity funds and assets, are crucial to the effectiveness of charities and the sustainability of the sector going forward. We welcome the Government’s scrutiny of current efforts to improve the quality of trusteeship, governance and accountability of charities and further recommendations, to the Commission and to others for improvement.
In the meantime we will continue to work to ensure that charities are supported to undertake the invaluable work they do.
I want to leave you with some comments from my predecessors. In 1869, in a letter to the Prime Minister, William Gladstone, the Charity Commissioners complained:
at the cost of severe and unremitting labour to ourselves and our principal subordinates. We have no counsel to search out the Law…no solicitors to investigate the facts and put them into shape…our only pleadings are frequently ill-written letters and memorials proceeding from ill-educated persons destitute of any advice or assistance not supplied them by ourselves.