Under The Charities (Protection and Social Investment) Act 2016, the commission has been granted the statutory power to issue official warnings, and to disqualify individuals from trusteeship. Consultations on these powers resulted in a number of requests for clarification on how the commission would issue warnings, the notice period and process for representations, and the approach to the publication of warnings.
In its clarification document, published last week, it states that it does not need to open a statutory inquiry before it can issue a warning, but that it may consider opening an inquiry and using its other powers if trustees subsequently fail to rectify a breach specified in an official warning.
It also states that the commission will follow the principles in its risk framework in deciding what regulatory action is appropriate, and is likely to take action when it considers a charity to:
- have acted recklessly or without due care, resulting in a breach of trust, misconduct or mismanagement
- have failed to take appropriate steps to rectify a breach of trust, misconduct or mismanagement despite engagement with the commission
- have failed to discharge legal duties in the administration of the charity or a charity has failed to discharge its legal duties in connection with charity activities)
- have displayed a pattern of repeated misconduct or mismanagement
- have committed deliberate or wilful wrongdoing resulting in a breach but it would not be proportionate in the circumstances for the commission to use other powers
It is unlikely to issue a warning when:
- the breach, misconduct or mismanagement is minor or technical in nature (such as a breach of administrative provisions in the governing document)
- it does not demonstrate a repeated course of conduct
- the trustees have acted honestly and reasonably and are taking appropriate steps to put matters right and prevent a recurrence
- the loss or risk to the charity or to public trust and confidence in the charity is minimal
According to the document: ‘In all cases where the commission… intends to issue a warning, it must give statutory notice of its intention and give each of the trustees (in the UK) and the charity the opportunity to make representations first. So you will be aware of the commission’s concerns and will have the opportunity to respond before the commission decides to proceed with issuing or publishing the official warning.’
Once a charity has been notified of a proposed warning, it will normally have 28 days to respond.
While the commission is willing to consider a range of representations, it must consider representations about ‘the content of the proposed warning’, including:
- the factual accuracy of what the breach, misconduct or mismanagement being warned of is and the commission’s understanding of the circumstances – what happened, who was involved
- who the warning is being made against
- any action the commission considers needs to be taken to rectify the breach, misconduct or mismanagement
The commission has also clarified its position on the publication of warnings, and on what trustees must do in response to an official warning. The full Q&A document can be downloaded from the commission’s site.
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