Conflicts Between Transparency and Your Charity’s Reputation

Transparency

Ensuring Your Reputation is at the Forefront of all Your Activities

We expect you well remember the ugly headlines generated by scandals at Oxfam, Save the Children and the Presidents Club Charitable Trust. The reputation of charities has taken a beating in the years since the collapse of Kids Company and these recent events, and the size and profile of the charities involved has sent shock waves through the sector. As the news about misconduct on Oxfam projects broke, the charity didn’t just come under fire over the actual events, but also how it handled the news once it became public. High profile casualties followed, with the CEO of Oxfam GB stepping down at the end of 2018 in order to allow someone else to ‘rebuild’ the charity (and public confidence). Whilst the original misdeeds are important, a main criticism of Oxfam from the Charity Commission was that, although Oxfam reported the incident to them, it didn’t provide enough detail of the full circumstances.

This all emphasises that, as a charity board of trustees, or as a charity leader, you need to think about how you will guard your charity’s reputation both with the public and with the Charity Commission. Often there is a conflict between wanting to keep things private and the expectation to be open and transparent, particularly with the Charity Commission.

Reputation with the Public – Different Expectations

If the public’s trust in charities falls, then it’s feared that a general fall in donations will follow. In the Charity Commission’s recent study into the key drivers of trust in charities, high up this list were transparency and good governance.

This is in stark contrast to the commercial world where transparency is not the norm. Aside from the biggest companies, there is no desire to disclose too much information – comparing the detail in the trustees’ report for a charity with £1 million income to the Directors’ Report for a similar size company shows the reality of this. The introduction of the Strategic Report for medium and large companies has gone some way to redress this balance, but the fact remains that the public judges charities more harshly than the commercial sector.

In recent cases where companies have disclosed frauds or inaccurate financial statements, aside from a couple of high profile resignations, it seems these can be largely brushed under the carpet. The impact for charities is more serious. Oxfam and Save the Children are having to work with their major institutional donors to rebuild trust in order to secure future funding. The Presidents Club Charitable Trust was wound up in light of adverse publicity and loss of reputation. The charitable sector needs to be taking action, and this is where the Charity Commission is acting.

Reputation with the Charity Commission – Report any Incidents

The regulator has been vocal in its criticism of the sector for not reporting serious incidents to them. When trustees have reported an incident, then the Charity Commission say they can add their support to ensure that appropriate action has been taken – as they were apparently unable to do with Oxfam.

Why Should you Report?

When an incident occurs, the onus is on a charity to take action quickly to reduce the risk of further harm and to show that it’s taking the matter seriously. This will demonstrate that it’s protecting its assets, reputation and beneficiaries. The Charity Commission is responsible for ensuring charities comply with their legal duties and manage the incident responsibly, and therefore needs to be informed of threats.

Telling them in a timely manner means that the Charity Commission may be able to offer advice or guidance which could help you. Where a matter is more serious, the Charity Commission may need to intervene (using protective powers) to help you get back on track. The act of reporting gives the Commission the information that they need to be able to manage the risks to you and the sector as a whole.

What Should you Report?

The Charity Commission needs to be told the details of a serious incident. This is broadly defined as any adverse event (actual or alleged) which causes significant loss of (or risk to) a charity’s assets or money, damage to a charity’s property or harm to a charity’s work, beneficiaries or reputation. Examples include frauds, theft, significant financial losses or safeguarding issues.

It’s worth noting that significant financial losses include ‘losing significant institutional donors, public funding or key delivery contracts and being unable to replace these in order to ensure the charity’s survival.’ It’s ultimately the trustees who are responsible for reporting serious incidents and there should be clear planning to make sure it happens. New guidance on this was issued by the Charity Commission last year (How to report a serious incident). This includes how to make the report and what to include.

Reports of serious incidents should be made as soon as possible after they come to light. Make sure that enough detail is included and that the actions taken are specified. The most important thing is to report on what has happened and what you have done about it. You need to report to the Charity Commission even if you have already told other authorities.

Take Action – Have a Plan

If something does happen, you need to have a plan in place to manage the incident and to communicate it. This should include:

  • How you will take immediate action and who is responsible for taking it.
  • Who is responsible for reporting the incident and what will be included in the report.
  • How staff, the public and the press will be informed and who will be responsible for this.
  • What form an internal investigation will take and whether additional skills will be needed.
  • What will be done to prevent it from happening again.

Before it Gets This Far

Prevention is of course better than cure and you can take steps to reduce the risk of incidents happening:

  • Review your governance – Charity Commission guidance called ‘Charity Governance, finance and resilience: 15 questions trustees should ask’ is a good starting point for this. This could lead to some interesting discussion at all levels. The Charity Governance Code is also well worth considering.
  • Consider fundraising practices – especially if you use third party fundraisers or dedicated websites. Trustees are responsible for the practices used by these agencies and you will need to make sure they comply with the Fundraising Regulator’s code and GDPR. Registering with the Fundraising Regulator yourself can send a strong message that you are committed to best practice.
  • Keep up to date – donors rely on your website and the public record to gather information about charities, so make sure that your details are up to date at the Charity Commission and Companies House.

This list is not exhaustive and this is certainly an area that all charities should discuss at board, executive and staff levels.

Further Reading

Public trust and confidence in charities​

How to report a serious incident in your charity

Charity governance, finance and resilience: 15 questions trustees should ask

Charity Governance Code

If you would like advice on any of these areas, or if you feel that your board or staff would benefit from training, please contact Hannah Farmborough or call on 0207 429 4147 to be put in touch with a member of our Not for Profit team.

This article is from our Using Conflict as a Catalyst for Change report, a guide to help you embrace, manage and mitigate conflict within your charity.