Article:

Stronger charities for a stronger society

29 March 2017

The report focuses primarily on small- and medium-sized charities in England and Wales and was compiled following consultation with charities and the regulator.

We welcome the recommendations and conclusions within this report which  highlight the challenges that individual charities and the wider sector are facing. Against the backdrop of Brexit and the wider economic uncertainty, the real benefit of this report and the recommendations made, is however dependent on how quickly and efficiently any changes in practice and Government policy can be implemented. To anticipate or expect radical shifts in either practice or policy may be optimistic although for many charities and sector bodies, the findings certainly provide a focus for debate and discussion.

In summary:

The report concentrates on:

  • The history and the shape of the charity sector (Chapter 2)
  • How to improve the governance of charities, in particular the skills and support for trustees, and how to make them more accountable and transparent (Chapter 3)
  • The funding challenges for charities as a result of the move from grants to contracts, and  how to support charities accessing public funds (Chapter 4)
  • Issues relating to the sustainability of the sector, including fundraising, volunteering,  infrastructure bodies and support, and mergers (Chapter 5)
  • The challenges and potential for charities as a result of developments in digital technologies (Chapter 6)
  • Alternative forms of charity finance, such as social investment (Chapter 7)
  • The role of government and the Charity Commission (Chapter 8)

The report includes 100 conclusions and recommendations. Given this large number we have summarised some of the main recommendations below:

Recommendations

Improve governance and accountability

  • Charities should regularly undertake skills audits of their trustee boards (annually for large charities)
  • Charity trustees should undertake training and development activities
  • All new trustees should undertake inductions (a free template induction process for small charities should be introduced)
  • The government should take measures to get more senior business leaders directly involved with charities

Board diversity and turnover

  • Boards of trustees should be diverse with a range of skills, experience, ages and backgrounds
  • The government should launch a public consultation on introducing a statutory duty to allow employees time off work to perform trustee duties
  • There should be a time limit for individuals to serve as trustees and a maximum term of office (except for family foundations)
  • Charities should regularly review the operation of their boards and the tenure of their trustees and chair (annually for large charities)

Transparency, accountability and impact

  • It is important for all but the very smallest charities to have a simple website or public social media page
  • The Governance Code Steering Group should set out best practice for governance reporting (e.g. including a statement in the annual report)
  • All charities should be seeking independent evaluation of their impact
  • The Office for Civil Society (OCS) should develop guidance on how to set up contractual impact reporting
  • Charities should provide regular information to stakeholders that enables them to measure its success

Funding: Grants, contracts and commissioning process

  • The Government should provide support for the development of a voluntary sector bidding consortia and promote commissioning based on impact and social value rather than on cost
  • Local authorities and public service commissioners should adopt a partnership approach to service design and provision
  • Public service commissioners should also be encouraged to commission different types of services together e.g. whole systems commissioning and whole person commissioning
  • More should be done promote the implementation of the Public Services (Social Value) Act 2012
  • The sustainability of organisations should be considered when awarding Payment by Results contracts
  • Realistic and justifiable core costs should be included in contracts
  • Services should be commissioned over a longer period whenever possible so charities can plan for the future
  • Commissioners should refrain from setting overly-detailed requirements for service delivery
  • Local authorities should maintain or revive grants wherever possible.

Fundraising

  • Given that the new Fundraising Regulator has only recently been established, no further changes are proposed to the regulatory landscape

Economic and tax policy

  • The Office for Civil Society should work closely with HMRC to help charities maximise the value of Gift Aid and minimise bureaucracy and ensure that the needs of charities are high on the agenda in relation to future changes to VAT and the National Living Wage

Role of volunteers

  • Funders need to be more receptive to requests for resources for volunteer managers and co-ordinators
  • The government should encourage greater flexibility for employees to take time off for volunteering and charitable work

Mergers and closures

  • The Charity Commission should take a positive approach to assisting charities that choose to merge and assist in removing any barriers that may exist (e.g. pension liabilities)
  • The Charity Commission should include options for time-limited structures in the model governing documents that they produce to prompt new charities to consider their lifespan from their inception

Charities and digital technology

  • Charites should embrace digital technology and actively consider including a digital trustee role on their boards
  • Infrastructure bodies should share knowledge and best practice on innovation and digitisation and co-ordinate training opportunities

Alternative forms of charity finance

  • The Government’s focus on Social Impact Bonds has been disproportionate to their potential impact
  • Future public funding should be reoriented towards financial products with application to a wider range of charities and beneficiaries

Devolution, compacts and engagement within the sector

  • It is noted that charities rarely feel fully consulted about proposed new laws and regulations (particularly small charities)
  • The Government should review its approach to engagement with the charity sector before policy announcements are made, with a view to ensuring that charities feel better informed
  • Central Government needs to understand better, and take account of, the implications of devolution for charities and civil society. There needs to be a proper dialogue between charities and new regional administrations at every stage of the devolution process, and voluntary sector representatives should be involved in leadership structures and decision-making where appropriate
  • It is recommended that, where compacts do not currently exist, they are re-established in consultation with the sector
  • National and local government should review their compacts in collaboration with the voluntary sector to ensure that they continue to be fit for purpose, reflecting the changing role of charities

Impact on charities of the UK’s departure for the European Union

  • The Office for Civil Society should undertake an audit of the potential impact of Brexit on charities which should include the impact of loss of funding as well as on research collaboration (by the end of 2017)
  • It is estimated that charities receive around £200 million from the EU each year

Regulation in the charity sector

  • Charity staff and trustees who have concerns with regard to their charities should be encouraged to report them to the Charity Commission where appropriate
  • The Charity Commission should make clear that those charities which are proactive in reporting issues to them will be supported to help put things right
  • Concern is expressed about the Charity Commission proceeding with any proposal to charge charities. It should make clear how a charge would benefit charities and strengthen the sector overall
  • The Treasury should maintain adequate direct funding of the Charity Commission, irrespective of any proposal to charge charities

The full text of the report can be accessed here.

Please do get in touch if you would like to discuss further.