Charity Commission updates its guidance on reporting serious incidents

In the past six months the Charity Commission has launched or concluded a number of statutory inquiries where a charity has failed to report a serious incident. Then in September it updated its guidance on when and how to report a serious incident.

What is a serious incident?

The Charity Commission’s new guidance sets out what it regards as a serious incident. These mainly revolve around the following key themes:

• financial crime: fraud, theft and money laundering
• other significant financial loss
• unverified or suspicious donations
• links to terrorism and extremism
• safeguarding beneficiaries
• other significant incidents e.g. insolvency, forced withdrawal of banking services or criminal activity

In June 2017 the Charity Commission announced that it had opened a statutory inquiry into the Youth Development Summer Camp the previous year. The inquiry was launched after the police informed the Charity Commission that a trustee had been arrested under the Safeguarding Vulnerable Groups Act 2006.

None of the trustees submitted a serious incident report to the Charity Commission. Furthermore, the charity’s annual return for 2014 onwards indicated that the charity had no written safeguarding policy in place despite the charity running summer camps for children. This raised serious regulatory concerns for the Commission resulting in the statutory inquiry being opened.

This follows two other inquiries, into ANO and The Grail Trust, where in the first case UK Ports Officers stopped a trustee carrying £19,300 in cash and seized the money; and in the second case an overseas authority had begun an investigation into allegations of child abuse at a children’s home previously operated by the charity. Neither charity reported the incident in question.

Problems with serious incident reporting

The Charity Commission has for a long time expressed concern that charities are not reporting serious incidents in the way that they should. This is one of the reasons why in October 2016 the Commission consulted on revising its guidance. The new guidance How to report a serious incident in your charity was published in September 2017.

The new guidance is particularly helpful for its clarification of what the Charity Commission means when it talks about fraud or theft being a serious incident.

On the other hand, the new guidance also places greater (excessive?) emphasis on operational incidents (e.g. the loss of a significant contract, the loss of banking services) as well as negative media reporting. It also extends the reporting requirement where an incident involves someone external to the charity (e.g. a delivery partner) being placed on a UK or international terrorist list or subject to an asset freeze.

In any event, if the trustees are unsure whether an incident is sufficiently “serious” or “significant”, the Charity Commission recommends that trustees should nonetheless report it as if it were a serious incident. The Commission would prefer charities to err on the side of caution in this regard.

Whether a charity’s trustees decide that the current situation constitutes a serious incident or not, they should fully consider the Charity Commission’s guidance and summarise their deliberations in the minutes so that there is a clear record.

When should you report a serious incident?

The Charity Commission is keen that registered charities report any serious incident as soon as possible.

This might create a significant burden for those registered charities where beneficiaries sometimes become injured, ill or worse as a largely unavoidable part of their activities e.g. amateur sports clubs, care homes, independent hospitals, hospices, etc.

The Commission is therefore content for such charities to submit periodic or bulk reports (rather than separate reports for each incident), and for these to be based on the internal monitoring and reporting (rather than having to modify the Commission’s own form) provided that certain key information is included.

In addition, the charity’s annual return includes a declaration that the trustees have reported all serious incidents to the Charity Commission during the year or within the annual return itself. However, the Commission is clearly trying to  encourage charities to report more promptly rather than waiting until the end of the year.

Reporting the incident

If the trustees do decide to submit a serious incident report, the Charity Commission’s guidance document sets out what information it will want to know in different circumstances. The Charity Commission will also want to know what steps the trustees have taken, or are taking, to learn lessons and to reduce the risk of future harm.

Charities should also be aware that, unless a statutory exemption applies, the Charity Commission may be required to publicly disclose any communications on request under the Freedom of Information Act 2000.

The Charity Commission’s response to a serious incident report

Part of the Charity Commission’s role is to ensure that the trustees are discharging their legal duties as trustees, including as to whether they respond appropriately to, and effectively manage, any risks and serious incidents that may arise.

Reporting a serious incident serves to demonstrate to the Charity Commission that the trustees have identified a risk to the charity and are taking appropriate action to deal with it. Where it is clear that the trustees are handling serious incidents appropriately and the risks are being managed by them, the Charity Commission is more likely to take no further action.

If, however, it is not clear that:
(a) the incident and risks arising from it are being dealt with
(b) the trustees are acting responsibly the Charity Commission may need to engage further with the trustees, including potentially some form of regulatory intervention.

In particular, if a serious incident that has not been reported becomes known to the Charity Commission at a later date, the Charity Commission may consider taking regulatory intervention against the trustees for mismanagement or breach of duty, particularly if further abuse or damage has occurred as a result of the trustees not dealing with the incident(s) appropriately. The Charity Commission also considers any failure to follow its guidance without good reason potentially to constitute mismanagement or breach of duty which could, in principle, result in some form of
regulatory intervention.