The UK has far better transparency when it comes to charities than we have in Canada. It is interesting to read a report by the Charity Commission on England and Wales into a charity – Care4Calais.
As we know, in the UK, there is a lot of divisiveness over Brexit, immigration, etc. Care4Calais – a charity assisting refugees, not surprisingly, got a lot of attention and scrutiny.
Here is what Care4Calais says on its website they do:
Care4Calais is a volunteer run charity delivering essential aid and support to refugees living in the UK, Northern France and Belgium. We believe in a fair and tolerant British society and advocate for a welcoming and inclusive attitude towards refugees.
Operating year round, our focus is to provide warm clothing, bedding, food and medical assistance to people in desperate need. We also provide social support and interaction, including language lessons and sports and music workshops.
We are not politicians; we are ordinary people like you who believe that everyone deserves to be treated with dignity. We are on the ground with the refugees every single day and are respectful of their common humanity and responsive to their needs.
We use our on-the-ground presence and relationship with the refugee community to provide the much-needed help that other organisations are not able to.
The headline from the Charity Commission was “Regulator’s inquiry into Care4Calais finds serious historic misconduct and/or mismanagement – GOV.UK”. Sounds very serious. In fact, there were definitely some problems, namely conflicts of interest, poor internal controls and inadequate response to complaints.
Unfortunately in 2023 tolerance, dignity, refugees – even librarians just wanting to provide books – are lightning rods for trolls and their supporters.
But on what most would have thought to be the most contentious issue – namely, political activities by the charity relating to its work – the Charity Commission said they acted appropriately.
Campaigning and political activity
As part of its inquiry, the Charity Commission reviewed the trustees’ decision to issue judicial review proceedings to challenge the UK government’s Migration and Economic Development Partnership with Rwanda.
It found the decision was properly made, adequately documented, and was within the range of reasonable decisions open to the trustees of this charity. The activity itself served to further the charity’s objects, and the inquiry determined it was in line with the Commission’s guidance on political campaigning.
This is good news for UK charities – when a government acts inappropriately (my words, not that of the Charity Commission) and it could have an impact on the work of a charity – a charity should speak up and challenge the government.
The Chair of the Charity Commission noted:
I am very aware that this charity’s work has generated attention and controversy. We will not shy away from examining concerns raised about any charity and will take strong action where necessary. However, as a fair, balanced and independent regulator we will not be influenced by political debates, nor should we stop charities from furthering their purposes in line with the law set down by Parliament. It is for the Commission to assess whether trustees are meeting their responsibilities – and that is what we have done.
The Charity Commission was looking at:
As a result, the Commission opened a statutory inquiry under section 46 of the Act into the charity on 12 August 2020 (‘the inquiry’) to examine:
1. The implementation, maintenance and effectiveness of the charity’s financialcontrols.
2. The implementation, maintenance and effectiveness of the charity’s safeguarding and complaints policies and procedures.
3. The trustees’ responses to the Commission’s previous requests for information and the regulatory advice and guidance provided.
4. Whether there has been mismanagement and/or misconduct in the administration of the charity by the trustees.
5. The extent of the impact of any of the factors at 1 to 4 above on the charity’s property, including its reputation.
As an aside, after an extensive investigation, it does not appear that any funds were misappropriated.
Some of the governance concerns included:
In line with Clause (3)(a) of the GD the quorum for making valid decisions is two trustees or one third of the total number of charity trustees, whichever is greater. The inquiry has seen trustee meeting minutes that demonstrate that the quorum was not always met. Additionally, the trustees could not have been validly taking decisions as the overall minimum number of validly appointed trustees had dropped below three.
The situation was further complicated by the family relationship between Trustee A and Trustee B and the limited evidence available to demonstrate that conflicts of interest and/or loyalty were being appropriately managed. There was additionally an ongoing dispute between the trustees of the previous trustee board and despite the efforts of the inquiry and a mediator, the previous trustee board was unable and/or unwilling to resolve the dispute and appoint the minimum number of trustees to validly operate the charity.
In any case, as the charity did not have the minimum number of trustees to operate, there are significant doubts and questions about the validity of any decision taken in relation to the charity throughout 2020 and 2021.
…
The failure to keep adequate records of trustee appointments and resignations and to ensure that trustees were appointed properly, in line with the GD, is misconduct and/or mismanagement in the administration of the charity by the previous trustee board. The failure to ensure that the minimum number of trustees were appointed was a risk to the charity’s operations/business and is also misconduct and/or mismanagement in the administration of the charity.
…
Lack of appropriate governance structures
In respect of the charity’s governance and decision-making, the IM report concluded that there had not been any robust challenge of Trustee A in her position as CEO, that the charity placed an unhealthy reliance on her, and that it focused on operational matters to the detriment of strategic governance.
Trustee meeting minutes prior to the appointment of the IM were poor and focused mostly on operational matters. Most minutes reviewed by the inquiry were short and consisted only of a couple of action and bullet points. They also fail to demonstrate that the trustees had any collective consideration or control of the charity’s financial position and contained few elements of strategic review or planning. Overall, they reflected the limited attention matters of good governance and compliance were given at the charity prior to the IM’s appointment.
There was also no regular schedule of meetings and they were called on an ad hoc basis, often with only a few days’ notice, which further demonstrates the absence of any planned approach to governance and decision-making.
The IM report also noted that further action to bring the charity’s governance and management in line with best practice and legal requirements was also necessary in relation to complaints handling, obligations as an employer, financial controls, safeguarding, and GDPR/ Data Protection matters.
In the charity’s early years, the delivery of its activities relied heavily on volunteers and this pattern continued even as the charity and its activities expanded. However, as the organisation grew, insufficient priority and attention was given to hiring permanent staff to manage and organise volunteers and to adapt the charity’s structure.
Trustee A founded the charity and acted as a trustee and CEO (unpaid) and continued to remain directly involved in the management of volunteers and the delivery of the charity’s activities even as the charity significantly expanded. Her dual role would have required careful balancing to ensure she could fulfil both her roles appropriately and in the best interests of the charity. However, as the size of the charity grew, the situation led to an inappropriate blurring of the lines between the two roles and created a lack of accountability of Trustee A to the trustee body. This was exacerbated by the fact that the minimum number of trustees were not appointed, the family relationship between Trustee A and Trustee B, and the absence of a job description for the CEO function or any form of clear delegated authority between the board of trustees and the CEO.
The inquiry found that, the lack of properly defined roles for the CEO coupled with insufficient oversight and scrutiny by the trustee board led to Trustee A dominating the charity and going unchallenged for some time. These governance issues and associated risks were also brought to the attention of the charity by previous trustees and complainants, before the IM appointment however, no action was taken by them to rectify the situation.
To ensure a more balanced distribution of decision-making power within the charity, the IM recommend, that Trustee A ceased acting in her dual role as trustee and CEO and that the charity recruits a full-time paid independent CEO to head up and direct the operational side of the charity. This, their report notes, would “allow proper separation between the trustees and the operational side of C4C enabling the trustees to focus on their strategic governance role whilst holding the CEO to account in relation to operational matters” and reduce the charity’s overreliance on Trustee A.
The absence of appropriate governance structures and proper collective decision-making as well as the poor record keeping in relation to trustee decisions is mismanagement and/or misconduct in the administration of the charity. The fact that the previous trustee board was made aware of the lack of collective decision-making and unequal distribution of power and did not take any steps to address them is also misconduct and/or mismanagement in the administration of the charity.
The 2022 action plan directed the charity to carry out an open and fair recruitment process to hire a full-time paid CEO to head up and direct the charity’s operational activities. The campaign was successful, and a new CEO joined the charity on 10 April 2023.
When reviewing the charity’s compliance with the 2022 action plan, the inquiry found that the new trustee board met regularly after the IM was discharged in 2021 and had implemented the 2022 action plan. This resulted in significant improvements in the charity’s overall governance and more balanced decision-making processes. Meeting minutes since the IM appointment, which were reviewed by the inquiry, are comprehensive and reflect the improvement in relation to governance and compliance matters. With the new and independent CEO, further improvements are expected to ensure proper and meaningful separation between the charity’s operations and the governance function.
What can Canadian charities learn from this:
- Lack of transparency, as we have in Canada, means that the CRA cannot actually deliver a report like this, and therefore, the public is just left to wonder when there are allegations like these whether they are true or not. Here is a recent submission on transparency in Canada that we made to the Finance Committee of the House of Commons on improving transparency in the non-profit and charitable sector:
Blumbergs’ Pre-Budget Submission for the 2024 Canadian Federal Budget - Poor internal controls can result in a multitude of problems. Many charities need to improve their internal controls. This is especially problematic with rapidly growing charities. What works when you are a $20,000 per year charity in a small village probably is not going to work when you are a $2 million per year charity operating internationally.
- Contentious charities. CRA divides the charity sector into 252 different areas. Some types of charity work can be contentious ie. some people legitimately or illegitimately have an intense interest and dislike for your work. Not every charity is picking up trash on the side of a highway or saving sea turtles. If you are a contentious charity, not that you should be, but you should realize that likely the scrutiny that you will be under will be greater than another similarly sized charity. As I have discussed in this note on political activities – you should, therefore, have better systems and better governance than another similarly sized charity.
- Allegations can hurt and undermine your work. If there are allegations against your charity, some true and some not true, it can create many problems for a charity. Try to deal effectively with complaints. Have good governance and internal controls. It is actually easier to run a charity properly than to try and pick up the pieces later of a poorly run charity. For some individuals, their reputations may not be easily rectified.
Here is a more detailed report from the Charity Commission. Also, here is a PDF of the more detailed report Charity Commission of England and Wales Inquiry into Care4Calais August 2023.