The Charities (Protection and Social Investment) Act 2016 has been long awaited by the sector since the government announced its plans to increase the Charities Commission’s powers in the near future. With the act set to roll out this summer, I wanted to discuss how the proposed amendments may impact charities and how you can minimise your chances of being effected.
On 20 May 2016, we saw the Cabinet Office release a comprehensive, provisional schedule of the changes to be made to the Charities Act. The main changes focus predominantly on granting the Commission with new and higher powers, including:
- New Powers to Disqualify and Grant Warnings
The Commission will discuss how it can use its authority to dismiss trustees and senior staff from their position where necessary. The consultation will also push for an effective procedure in which this will be carried out.
- Social Investments
The current guidance on social investments will be updated to allow more charities to receive a financial return when investing. The government plan for the changes to be made in July 2016. The aim of this is to help charities to grow and also be in a better position to fulfil their charitable purposes.
With heavy discussion around the topic of fundraising, the Commission will introduce a new fundraising agreement with the intention of reducing malpractice. Charities that produce audits will be expected to produce evidence on their fundraising practices and how they are protecting the public in their annual report.
- Protective Powers
Giving the Commission the ability to instruct charities on their participation in certain activities and force charities to close down, will also be discussed. However, most charities will not be affected by this as in most cases a statutory inquiry will be required in the first instant.
- Disqualification Changes
From April 2017, the Commission will focus on strengthening its current powers on preventing and allowing individuals to take on the role of trustee. Moreover, the plans will focus on the power to remove those in a senior position, such as a chief or high level member of staff.
Although these changes will help to push the sector in the right direction, many remain in dismay as the Commission fails to address more pressing matters, such as: clauses in the Lobbying Act, tougher fundraising controls and also plans to safeguard warnings. As a result, the sector fears that the Commission expects the industry to rely heavily on their verbal promises as opposed to written. Director of policy at the Directory for Social Change, Jay Kennedy, stated “we need to work to get that guidance to be sensible and proportionate… It will be interesting to see how it works in practice”. The next step looks at how the commission plans to fulfil their new obligations. With the timetable released, all elements of the Act will come into fruition within the next three years.
What can my Charity do in the meantime?
Although the government has stated that only a small proportion of charities will be affected, there are a few things that all charities should be implementing, ahead of the commissions’ announcement:
- Finance: It is important that you are compliant with legislation surrounding financial reporting. Both large and small charities should ensure that they are compliant with the SORP and charity financial standards. Always seek advice in advance where necessary.
- Trustee Recruitment: You should ensure that trustees recruited are compliant with the commission standards. To find out more on recruiting new trustees, read the Charity Commissions guidance. Although the government are yet to enforce these new powers, poor trustee practices can still lead to a statutory inquiry or a wind up.
- Fundraising: The past year has seen the charity sector face a meltdown due to poor fundraising and marketing practices. Be sure that you have in place reliable fundraising practices. Click here to view the Commission’s guide on this. Our Top ten Marketing tips and donor mistakes can also help guide you and your employees further.
If you would like to discuss any of these areas in further detail, please feel free to contact myself, Suda Ratnam, directly at firstname.lastname@example.org.
- Charity Commission:
- Civil Society: *http://www.civilsociety.co.uk/governance/compliance/analysis/content/21480/what_does_the_charities_act_2016_entail