Following a consultation in Autumn last year, the Charity Commission has now published its new guidance for charities on reporting serious incidents, in a drive to reduce what the Commission has termed a “significant under-reporting of problems by charities”.
A serious incident is an adverse event (whether actual or alleged) which results in harm to:
- a charity’s work, beneficiaries or reputation;
- the loss of a charity’s money or assets, or
- damage to a charity’s property.
Last year, charities reported over 2,100 serious incidents to the Commission, the majority of which related to safeguarding, but a significant proportion of which (14 per cent) related to fraud or money laundering.
Other types of serious incidents can involve thefts, significant financial losses, criminality, terrorism or extremism allegations.
What does the new guidance say?
The published guidance has been amended from the draft guidance to take into account the responses received from the sector during the consultation. It gives useful examples and checklists to help charities decide when a problem should be reported, and also:
- makes clear that losing significant funding or contracts that the charity can’t replace should be reported to the regulator; and
- confirms that charities need not report a failure to have a safeguarding policy in place as a serious incident, as this information is now considered a risk issue and reported in the Annual Return.
It also clarifies the reporting obligation for trustees. While there is a statutory obligation for trustees to report a serious incident in the charity’s Annual Return to the Charity Commission, it is best practice to report a serious incident promptly.
This should hopefully enable the Commission to provide effective support, with early advice and guidance. The Commission has stated that if trustees don’t report promptly and subsequently fail to manage risks properly, and, in failing to do so, breach their legal duties, this failure to report promptly may be regarded as mismanagement of the charity.
So, what should charity trustees now do when faced with a serious incident?
If a serious incident takes place, the first step to take is to make sure any further harm, loss or damage is either prevented or minimised.
Once this step is taken, the Commission then expects charity trustees to report the serious incident as soon as reasonably possible after it happens, or immediately after the trustees become aware of it.
The actual reporting to the Commission may be delegated to someone else, such as an employee or a professional advisor, but the ultimate responsibility for making sure that it happens (and promptly) lies with the charity trustees.
The trustees will also, of course, need to report it to the police, if they suspect a crime has been committed, as well as to any other regulators to which the charity is accountable.
In addition to reporting the incident, the trustees will need to review what happened and take action to prevent it from happening again. This may involve strengthening internal controls and procedures, or seeking appropriate help from professional advisers.
Finally, charity trustees will also need to work out what to tell the charity’s staff, volunteers and members about the serious incident, as well as the public and the media. It may be prudent to presume there may be some media interest in a serious incident, and to have a response planned, rather than to risk being caught on the back foot.